Log Comercial Properties (LOGG3), a company specialized in the construction and development of logistics warehouses, recorded a net income of R$ 111.7 million in the third quarter of 2022, which is 18% more compared to the same period in 2021, when the result is net revenue from the operation reached R$ 94.7 million. Compared to the second quarter, the profit in the period is stable.
Director of Finance and Investor Relations, André Luiz Vitória, noted that the last quarter was marked by a record delivery of gross leasable area (GLA) by the company. During that period, 174.5 thousand m² were made available in three projects in Minas Gerais and Espírito Santo. From January to September, 415 thousand m² were delivered.
Vitória points out that the result is considered positive and shows the strength of the company in its growth theses, especially in offering warehouses with a better structure – the so-called “class A” – outside the more traditional areas. In all, the company operates in 40 Brazilian cities, in all regions, but with a greater concentration in the Southeast (47.5%) and the Northeast (27.2%).
“We are working on diversification, geographical distribution and modulation of the operation. We have a very vertical operation, from the purchase of land to condominiums. In addition, we have virtually no competition in our segment outside the Rio-São Paulo axis,” says the CEO InfoMoney.
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Currently, Log CP has 1.37 million m² of GLA in its land bank, with at least 430 thousand m² under construction at the moment. The group’s goal is to reach 1.5 million m² in GLA.
Diary and FIIs
Another impact on the result comes from the strategy of recycling (selling) part or even all warehouses to real estate investment trusts (FIIs). This quarter, the company is part of the sale of two assets in Minas Gerais for R$429 million to the CSHG Logística (HGLG11) fund, in a transaction announced in July. Gross operating margin was 32.6% above invested and 3.2% above net asset value (NAV).
“We see recycling as one of the most important sources of financing for our business, it is a place where we can create more value. We have healthy leverage [de 2,1 vezes o Ebitda] and we do not intend to increase it”, emphasizes André Luiz Vitória. By the end of September, Log CP’s net debt was R$1.06 billion, compared to R$983 million in June (+8.12%).
In the third quarter, earnings before interest, taxes, depreciation and amortization (Ebitda) reached R$ 130.1 million, which is 35% more compared to the same period in 2021, with a margin of 219.9% (down from 39.8 percentage points). The company’s warehouse occupancy rate continues to decline and reached a level of 1.73% through September, compared to the market average of 11% in Brazil.
Log CP also reports that it was able to pass rents 1.4% above inflation, with an accumulated lag of 0.6% over 12 months. Lease contracts usually last from three to four years for typical models and ten years for atypical ones, which is when Log builds a shed for the interests of a particular company, the so-called.custom built (BTS)“
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Profit from operations (FFO), an important metric for the rental segment, was BRL 21 million (-32.4%), with a margin of 35.5% (-48.5 percentage points). The financial director claims that the decline in indicators is the result of the current macroeconomic scenario, with the increase in the Selic rate, which increased financial expenses, such as loan payments and other financial business needs. “But these are still very positive numbers,” confirms Vitória.
The role of e-commerce
One of the main assumptions for the expansion of Log CP is the growth of e-commerce in Brazil, as companies look for the company’s warehouses to house their distribution centers.
Logo’s main customer in the segment is Amazon (AMZO34), which accounted for 20% of the company’s gross revenue last quarter. Apart from the American giant, the company also serves Shopee, Magala (MGLU3) among others.
André Luiz Vitória says that although the growth of the e-commerce sector has slowed down this year, it is still very strong – the segment recorded a growth of 6% in the first half of the year, according to data from the “Webshoppers” survey, prepared by NielsenIQ.
“The activity has not stopped requiring sheds. The pace has not been the same as in previous years, companies are more selective, but our type of Class A structure is still the difference.”
Another observed demand is in the transition of companies that seek to adopt the strategy “asset light” (lower fixed assets), who have to leave their old warehouses for the Log CP offer.
“We call this strategy”quality flight‘ [busca por qualidade]. Our figures show that only 15% of the existing warehouse supply is of high quality. There is a huge market potential,” he continues.
Despite the optimistic scenario, shares of Log CP (LOGG3) have accumulated a 10.5% decline in 2022, with shares costing BRL 21.74 – the year the price reached a high of BRL 30.60. The CFO admits that investors are afraid of real estate companies, but he relies on indicators that show the solidity of the business.
Founded 14 years ago with around 3000 employees, Log CP is “spin off” (spin off) of MRV (MRVE3), which decided to take the company public at the end of 2018. With an estimated market value of R$ 2.26 billion, the company has more than twice as many assets (R$ 6.12 billion) and also higher than the share capital (3.72 billion R$).
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“We believe there is a discount to our market value, but we understand that, at the first sign of a change in interest rates, the sector regains strength in the equity market. There is nothing we can do, what we have to do is continue to focus on growth”, concludes Vitória.