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Edited Transcript of ITSA4.SA earnings conference call or presentation 23-Feb-21 2:30pm GMT

·35 min read

Full Year 2020 Itausa SA Earnings Call New York Feb 23, 2021 (Thomson StreetEvents) -- Edited Transcript of Itausa SA earnings conference call or presentation Tuesday, February 23, 2021 at 2:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Alfredo Egydio Setubal Itaúsa - Investimentos Itaú SA - Vice Chairman, Chairman of Executive Board, CEO & Investors Relations Officer * Pedro João Zahran Turqueto * Renato Lulia Jacob ================================================================================ Conference Call Participants ================================================================================ * Daer Labarta Goldman Sachs Group, Inc., Research Division - VP * Jason Barrett Mollin Scotiabank Global Banking and Markets, Research Division - MD of LatAm Financial Services ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Itaúsa's Conference Call to discuss 2020 results. (Operator Instructions) As a reminder, this conference is being recorded. The file will be available on the company's website at www.itausa.com.br/en at the Investor Relations section. This conference call and the slide presentation are being transmitted via Internet as well. You can access the webcast by logging onto the company's website, www.itausa.com.br/en. Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Actual performance could differ materially from that anticipated in any forward-looking comments as a result of macroeconomic conditions, market risks and other factors. I inform that during the presentation, the questions can be sent by webcast and will be answered at the section of questions and answers. With us today, we have Mr. Alfredo Egyodi Setubal, CEO and Investor Relations Officer at Itaúsa; Mr. Henri Penchas, Chairman of the Board of Director at Itaúsa; Mrs. Priscila Grecco Toledo, CFO at Itaúsa; Mr. Bruno Salem Brasil, Investor Relations Manager at Itaúsa; Mr. Renato Lulia Jacob, Head of IR and Market Intelligence at Itaú Unibanco; Mr. Pedro Zahran Turqueto, Vice President of Strategy at Copagaz; Mrs. Mariana Espírito Santo, Investor Relations Director at Alpargatas; Ms. Natasha Utescher, Investor Relations Manager at Duratex. It is now my pleasure to turn the call over to Mr. Alfredo. Sir, you may now begin. -------------------------------------------------------------------------------- Alfredo Egydio Setubal, Itaúsa - Investimentos Itaú SA - Vice Chairman, Chairman of Executive Board, CEO & Investors Relations Officer [2] -------------------------------------------------------------------------------- Thank you with -- the pleasure to be here. Thanks for the participation of all. (technical difficulty) We have on Page 2 -- on Page 3, sorry, the agenda of the conference call for -- that we are going to cover in the next hour. First, the scenario; second, the highlights of the Itaúsa's portfolio; third, Itaúsa results; fourth, we have a presentation of Copagaz, the new investment that we started to participate this year. And at the end, the Q&A session. Going to Page 5. We had a very difficult environment last year, especially in the first semester of 2020 due to the pandemic of the coronavirus. But we take some actions in our companies also in the holding. The bank supported clients with BRL 50 billion renewed of loans, especially for the sector of individuals with BRL 38 million and is only medium-priced companies with BRL 12 billion that we renewed for long-term -- for longer loans, supporting the clients during especially the most worst periods of the pandemic. We also support our clients providing credits during this period when the -- our portfolio of credit show some growth especially in big companies and also in vehicles and real estate loans. We, of course, in all the companies, we work hard in terms of costs and expenses to reduce and to preserve margins and be more efficient. From the June and July on, we started to see more results from the companies -- of the companies, the industrial sector, we start recovering. Related to the real estate, Duratex has some very good second semester. Also, the same with Alpargatas. And even the bank, we have more revenues as the economy we started to some level of activity. In all the companies, we accelerate our digital business. E-commerce for the industrial sector, digital for clients of the bank in terms of opening new accounts, new apps for clients. So we improved a lot in terms of digital penetration, in all the business, in all the companies that we have participation. And of course, we have to regauge support to all the employees of our companies, for their families. And fortunately, we had very few cases of the disease among our employees during this period. On Page 6, we show some actions that we took last year to help the country to fight the pandemic. Itaúsa and it's family that controls Itaúsa and all the companies that we have participation, we have combined donation of BRL 1.5 billion for supporting actions against the information, making Itaúsa group the biggest private donator among all the companies and families in the country. We created a corporate governance commission to support the corporate governance of all the companies that we have participation and also at the Itaúsa level. We made adherence to the pact of integrity and against corruption from Ethos Institute, that is most recognized institute in Brazil related to these issues. So we signed the pact. And also, we became part of the Financial Times Index for good -- of companies with good SNG reference index. So we were very happy to also participate in this new index that Itaúsa can show their capabilities. Then on Page 7, we have a challenging year for most of the companies, of course, but we try to have an efficient capital allocation for this period. In the case of the bank, we unlock the investment value, especially related to XP, the company that the bank is giving XP to shareholders of the bank. We had a lot in digital strategy also in the bank to face the new challenges for the competition and also to help clients to use more digital apps and facilitate the use of the bank, digital opening of new digital accounts and so on. In the case of Alpargatas, we continue depository of divestments and focusing our investment in Havaianas brand in Osklen. And we did a big focus on e-commerce both in Brazil and outside Brazil in terms of e-commerce. And then we increased a lot, Havaianas' e-commerce and for example, in the international markets, around 40% of our sales already through the e-commerce in many countries. In Duratex, we continue to increase efficiency. We continue our investment in the dissolving wood pulp unit. The investment is in the schedule, we expect that in March, April next year to start the operation. That is on schedule. So we are very happy that we could maintain the divestment of the investment during the last year, even considering the adverse conditions that we have there. And in the case of Duratex also, we finished the integration of Cecrisa that was the company that we bought at the end of 2019 with Ceusa that we bought some years ago, and we finished this integration with very sound results for the company. NTS continued its constant and predictable cash flow. The company continues to perform very well. On the Page 8, we have allocation of the new investment on Copagaz that we are going to talk more detail of this investment with Pedro that is here with us today to talk about the deal and the company and so on. And we are very happy and confident that it is a good investment, and we have very good results for the coming years with the company. And also, the XP that we are going to have direct investment as the bank restructuring participation on XP, given the investment to the shareholders of Itaú Unibanco as all of you know. And Itaúsa will have 15% of the capital of XP, and we will be the second largest investment of Itaúsa in terms of portfolio just after the bank and above the industrial investments that we have in the portfolio. Going to Page 10, the highlights that we have in our companies during last year. Starting with Itaú Unibanco. We have -- we grew our loan portfolio by 20%, especially in vehicles and small- and medium-sized companies and also in large companies, especially during the beginning of the pandemic for large companies in the first semester of last year. We continue to decrease and control our general expenses. We reduced by 2.3% and continue to invest a lot in reduction of expenses and the use of more technology in our operations. We focus a lot, as I said, in the digital transformation of the bank in terms of digital customers, online opening accounts. We have a huge increase in digital transactions with our new and former customers. We'd bought a company Zouk to accelerate this technology companies that bring us more than 2,000 engineers and people to accelerate our systems and apps for the coming years. So we also increased the chain inside the bank. So we finished the year with more than 3,700 new employees totally concentrated in -- improve our digital technology investments for the bank. In terms of results due to the level of increase of provisions that we made for lower losses and from the reduction of the economic activity during this last year, especially the (inaudible) asset, the result of the bank reduced from 27% from 2019, with a result of 19.1% of recurrent results for the bank. That, at the end, was a good result considering all the diversities that we faced during the year. The loan portfolio increased. As I said, the bank supported the customer base, giving credit and renewing credit. Our portfolio increased 20% and a total of BRL 873 billion in terms of credits for customers. On Page 11, we see the highlights for Alpargatas. We increased in all the regions the volume and the market share of the company. Especially, we use the digital e-commerce to increase our participation. We continue to divest and focusing in Havaianas in Osklen. We finished with the write-off of the investment that we had in Argentina. We've sold all the investment there. We finished the -- sold the Mizuno operation in Brazil. So we are just now with Havaianas in Osklen in our portfolio. We had a difficult first semester, as I said, but we have a good -- very good second semester, especially last quarter was very good. And so we were able to finish almost the same level of net in terms of 2019 around BRL 450 million. And also, we keep the EBITDA of the company at the same level. So also, a good result considering the circumstances. On Page 12, highlights of Duratex. The Duratex had a very difficult second quarter. But from June, July, we started to recover. We have a very good result and all the factories finished the year with full production. The company was the share of the real estate bond here in Brazil. And we are able to increase results by almost 92% compared to '19. We finished the year with a recurring net income of BRL 528 million against BRL 275 million in 2019. With -- EBITDA also increased a lot last year to BRL 1.3 billion, was a record level for Duratex. For both Alpargatas and Duratex and the bank, we continue to see recovers in 2021. So we expect the good results from the second semester to continue in this fourth semester for our investment that we have. In the case of NTS, we have an increase of 6%. We received BRL 232 million from dividends and refund of capital from NTS, 10% above the number that we received in 2019 and continue to be a good investment in terms of cash flow for Itaúsa. On Page 15, we talk about the main metrics and results of the company. And we released net recurring income of BRL 7.2 billion with a reduction of 26% of -- compared to 2019 especially, because the reduction of the results of our main investment that is Itau Unibanco that we -- as I showed before, released reduction of results around 37%. We finished with the stockholders' equity of BRL 57 billion. On Page 16, we see the capital structure. We have debt -- 2% of our -- as debt. It's still low compared to the potential of Itaúsa. We have here at the corner of the right side of this Page 16 the amortization schedule for these debentures that we issued. The last one was December 2020 to face the investment in Copagaz of BRL 1.3 billion, with a very good deal for us. It was a 10 years debenture with the cost that we consider very good of interbank rate plus 2.4%. On Page 17, we continue the practice of distributing the dividends that we received from the bank. Of course, last year, the dividend received by the bank was lower because of the limitations of the Central Bank imposed to the banks of only distribution of 25 process. And we pass-through all these dividends to our shareholders, BRL 1.7 billion were distributed to our shareholders. With a dividend yield of 5.5%, it continues to be one dividend yield highest among the companies that are listed in the history here in Brazil. On Page 18, we see that the sum of the parts of our portfolio values BRL 127 billion at the end of the year. And the market capitalization of the company was almost BRL 99 billion. What means the discount of 22.7% considering the market's value and the sum of the parts. We announced yesterday, we approved the Board of Directors of Itaúsa, a buyback program of 250 million shares for the next 18 months that we consider maybe a big opportunity for the company to buyback shares, considering the perspectives of the companies that we invest and the discount that is very high in our view considering the portfolio that we have. So we open again a buyback program of 50 million common shares and 200 million preferred shares. On Page 19, we see that the company continues to be a very attractive investment, cash recurring for individuals here in Brazil. We finished the year with 886,000 shareholders, hopefully, individuals in this number and we already have more than 920,000 shareholders, individual shareholders by the end of January. We are improving our corporate website to attend the demand for both institutional investors and especially the individuals to attend their demand, we are launching these coming days, a new website, more easy, with more information, more tools and more simulators for individuals, and institutional investors can use the site. And also, we are improving and increasing our social media networks to approach more information, be more close to our base of individual shareholders. Now we pass to the -- the word to Pedro Zahran Turqueto that is the Strategic Vice President of Copagaz, that we talk about the company and the rationale of the acquisition of Liquigás by Copagaz and the investment of Itaúsa in this company. Please, Pedro, go on. -------------------------------------------------------------------------------- Pedro João Zahran Turqueto, [3] -------------------------------------------------------------------------------- Thank you, Alfredo. Good morning, everyone -- everybody. My name is Pedro Zahran Turqueto. I'm VP of Strategy and Markets of Copagaz. Here in the Page 22, I'm going to talk a little bit about Copagaz in Group Zahran that is the holding who used to be the owner of Copagaz before the entrance of Itaúsa. And we -- Group Zahran have 2 branch of business. We had 50 new broadcast in radio stations and websites in the Middle East of Brazil. And we have the energy side that have the Copagaz as the biggest company on that area. The company was founded 65 years ago by Ueze Zahran and his brothers in Campo Grande, state of Mato Grosso do Sul, Brazil. We passed these 65 years without doing any acquisitions. So we grow organically by this time. The year of 2019, we started looking for investors to help us to acquire Liquigás that used to be a company from Petrobras that is a state-controlled company. And we decide that -- the assembly decided to join with Itaúsa, because we thought that we have the same (inaudible) resource, and also our long-term strategy. Here in the Page 23, I'm going to talk a little bit about what we do. So we are a distributor of LPG. We have plans that are nearby refineries and the refineries in Brazil is basically from Petrobras. These plants are linked by pipes to the refineries. We got the LPG from the refineries. And recall, these refineries that are linked by pipes as a primary plant. So in that plant, we transport the LPG for our secondary plants that are not linked by pipes that they are far away from the refineries in cities like Goiânia, Cuiabá, Campo Grande. And on that plant, we have 2 types of business. We sell gas by cylinders and by trucks in the business of cylinders, we have 5,000 resellers for -- from all around the country. These resellers have the look and few of Copagaz or Liquigás, and they do the last mile for the final clients. And in the book business, we build tanks in the companies and the companies could be a restaurant, malls, industries, and we do the logistics of this gas in order to provide the projects for the clients. In the next page, I'm going to talk a little bit about what is Copagaz before the acquisition of Liquigás. We used to have 9% of the market share in the year of 2020. We used to sell 660,000 tons of LPG per year. 76 of these amounts by cylinders and the rest by bulk. Our revenue used to be BRL 2.75 billion. Our EBITDA is to be BRL 138 million and our net profit, about BRL 50 million. In the next page, I'm going to talk a little bit about what is Liquigás before the acquisition. They used to sell 1.5 million tons per year. They used to have 21% of the market share around BRL 60 billion of net revenue and BRL 215 million of EBITDA. On the Page 26, I'm going to tell the reasons why we decided to acquire Liquigás. So first of all, it was a unique opportunity in Brazil. So with 9% of the market share, it is going to be very hard to us to survive in this market because scale is very important here. And the landscape of this market is to open the midstream. So on that term, as a commodity, if you have scale, it's going to be very important to us in order to have a good term to buy LPG. There is an optimization of logistic footprint. So Liquigás operating areas that we don't operate. There is a lot of scales and synergies. So Liquigás used to be a company from Petrobras. So there is a lot -- there was a lot of bureaucracy in order to fulfill what state control company needs. The scale in the industry, as I told before, it's very important as well. So we are going to gain a lot of scale. There is something that we didn't (inaudible) when we bought the company, that there is opportunity of new use of LPG in Brazil. So we have old regulation here that don't allow us to produce energy or use the product energy motors. And there is a fact that Liquigás used to spend a lot in modernization of their plants, so they have state-of-the-art units. So it's very important for us. In the next page, I'm going to talk a little bit what is the company, the Copagaz plus Liquigás, what is the company post acquisition. You can see in the map that Copagaz didn't use to -- have to work in the north of the country. And Liquigás has a good position over there. And the company together, we have -- we sell 1.88 million tons of LPG year. That number make us the biggest player in Brazil with 25% of the market share. In the next page, and then I talk a little bit about the macro highlights of the combined companies. So we are going to have 5,000 resellers from all around the country. 15,000 points of sales, more or less 10 million households served per month, 4 LPG cylinders delivered per second, over 30,000 companies served, more than 90,000 direct and indirect jobs generated, BRL 8 billion in revenue, BRL 1.6 billion in taxes paid. The company is going to be a market leader in Brazil and the largest LPG distributors in Latin America. In the next page, I show the volume of the both companies in 2019 and 2020. Of the companies combined, you can see that in the year of 2020, you have 2.2 million tons sold. This is effect that's originated by the change of consumption during the pandemic. So people started to cook more at home and use more gas. So we have a growth on the consumption. We have a growth also from the net revenue. It went to BRL 8.8 billion. And in 2019 year, this is the number of 2 years ago, the company, together have BRL 350 million EBITDA and BRL 157 million in net profit. In the Page 30, I'm going to talk a little bit about the capturing of synergies and where is that synergies. We have 25% of the synergies in footprint and logistics. We have a 37% of the synergies in SG&A, 25% in procurement, 9% in IT and 2% in administrative costs. In the next slide, I'm going to talk a little bit what's going to be our goal here, long term. LPG is basically a fossil fuel. You can provide LPG from bio refineries as well. But mainly, they -- it came from natural gas or oil. But the burn of LPG is succinct burn. So in our gas, the LPG is going to be the energy of transition, that's going to guide us from the world that consume a lot of fossil fuels for a world that use more renewable energy. As I told before, we reached more than 10 million houses in Brazil, reached more than 30,000 companies. So we have a lot of data here. And we are going to generate these data and try to provide product for these fine -- better products and solve problems to them, analyzing these data. We also have opportunities here in midstream. We have a lack of infrastructure in Brazil in the Northwest and in the north of the country. So there is opportunity here for us to verticalize it and develop LPG terminals, ports and start trading of the gas. In the last page, I'm going to talk a little bit about what we are going to do in the next 1 year. So we are very focused right now in the capture of the synergies. The entrance of Itaúsa changed our governance. So we have improved a lot our governance. We have bought that -- that are in the business and 3 of these Board members are appointed by (inaudible) and 2 of them from Itaúsa. So we are learning a lot about the governance of Itaúsa, and they are improving our internal governance as well. We have a new brand. We are going to launch a new brand, and we are also going to stay with the brand of Copagaz in Minas Gerais. And both brands are very important and have a lot of recognition in the country, and you have to use that correctly in order to have gains for the company. We have this process of digital transformation. We've already started that. But we are going to invest a lot on this subject. And we are hunting for new LPG suppliers, like we know that Petrobras will sell some refineries. We know that these markets will open sometime in the near future. So we already start buying LPG from Bolivia and from Argentina as well. And we are looking for new providers of our raw material. So basically is that, I'm going to pass it over for Alferdo. -------------------------------------------------------------------------------- Alfredo Egydio Setubal, Itaúsa - Investimentos Itaú SA - Vice Chairman, Chairman of Executive Board, CEO & Investors Relations Officer [4] -------------------------------------------------------------------------------- Thank you, Pedro. We're going to the left part of our presentation before the Q&A section. On Page 34, our commitment to long-term and value creation. On Page 35, we see the Itaúsa in the capital markets now because of performance of our shares in the last years. Of course, in the recent periods, more affected by the reduction of results, especially from the bank that is our largest investment. On Page 36, some differentials of Itaúsa. I think we have a very active portfolio management now with the M&A group. And at this end, we work with a very disciplined asset capital allocation and focus on value creation for our shareholders. We have, in our view, our consistent portfolio in terms of substantiality of the business in the long term. We have a long-term vision for the investments that we made. We look for cash generation and consistent results from our company that we invest, and we continue to look for companies that have not only cash generation -- strong cash generation, but also leading brands and leading market shares. In the capital markets, we continue to have a very good payout, very attractive, as I said, 5.5, that puts Itaúsa also in the level of the largest companies that pay out the stock exchange here in Brazil. And we also participate in the main indexes of companies, especially those here in Brazil and outside related to ESG performance. We have very important commitment from a long time along our history for decades on the ESG activities. We have a good important look at human capital and now our companies. We have good corporate governance practices in all the companies that we invest in terms of [AGCO] and strong reputation of our partners. And more on the last page, what we expect for 2021? Economy still volatile with low growth, but we consider that our companies will perform well even though this environment. Duratex will continue to benefit from the real estate bond here in Brazil for Alpargatas. Also, you can continue to get benefits from the consumption area. We expect the company to also like Duratex to have a very good year. And the bank will get the benefit from there to recover from the economy with more credit, reduction of costs and strong growth in terms of digital transformation. We expect in the coming months to end the restructuring of Itaúsa Unibanco investment in XP and Itaúsa will become direct investors of XP with 15% of the shares of XP and this investment will be the second largest in our portfolio. Seeing of that, we pass to the last part of our conference call. There is the Q&A section. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Tito Labarta with Goldman Sachs. -------------------------------------------------------------------------------- Daer Labarta, Goldman Sachs Group, Inc., Research Division - VP [2] -------------------------------------------------------------------------------- My question on the stake that you'll be getting in XP. I just wanted to get your thoughts on your intentions with that stake, if you would plan to keep that or sell it down over time. And then also, how you think about the potential share class swap where you would receive Class A shares instead of the new cost shares you have and the potential loss of voting rights? Just kind of your thoughts on that, if that's a concern for you. Any color you can give on that would be helpful. -------------------------------------------------------------------------------- Alfredo Egydio Setubal, Itaúsa - Investimentos Itaú SA - Vice Chairman, Chairman of Executive Board, CEO & Investors Relations Officer [3] -------------------------------------------------------------------------------- Thank you for your question. It's a very interesting question. I think the deal that Itaú Unibanco made with XP in the past when we came through the bank shareholders of XP, the view was that at the end after many years, the bank will get the control of XP. This view was changed by the Central Bank at the end of the approvals. And the Central Bank prohibit the bank to assume the control of XP in the future. That condition changes of the business or the rationale of the business. Of course, we accept this, and we keep the investment in XP, even though we are not going to get the control of XP at the end. So when the bank decided this -- to change this and Pedro just the shares of XP to reach shareholders. It doesn't make sense anymore for Itaúsa and for the shareholders of the bank to maintain these multiple voting shares of the XP. So we accept and we approved with XP in shareholders' agreement that we made with them last month that we will accept the proposal of XP, and we vote favorably in the shareholders' meeting of the XP company to have the shares absorbed by XP in the common shares in multiple voting shares. And why is that? Because we -- Itaúsa and (inaudible) level. We don't see these investments as strategic. So we don't need the multiple voting shares. And we prefer also to have a share with more liquidity in the market, in the NASDAQ market. So we have to remember that Itaú has almost 500,000 shareholders. So all these shareholders will receive shares of XP and at the end of XP. So it's important for them to have liquidity to sell at the time they want to sell this investment in the market. So that's the main reason that because we negotiate with XP to receive all the common shares of XP after all this incorporation of the new -- the XPart in XP, Inc. -------------------------------------------------------------------------------- Daer Labarta, Goldman Sachs Group, Inc., Research Division - VP [4] -------------------------------------------------------------------------------- That's very helpful. So -- and just to clarify, and I think you have a lockup, I think, until October, you mentioned this wouldn't be a strategic position in XP. I mean do you think it's something that you would sell right away, you would sell over time? Just how you would view that investment, I guess, as a minority passive investment or how you would think about potentially getting rid of that stake over time? -------------------------------------------------------------------------------- Alfredo Egydio Setubal, Itaúsa - Investimentos Itaú SA - Vice Chairman, Chairman of Executive Board, CEO & Investors Relations Officer [5] -------------------------------------------------------------------------------- We consider XP a very good investment. We like the case. We think XP will continue to grow in the market to continue to grow its profitability. So we see XP as a very good investment for Itaúsa shareholders, and we are very happy to have the part of our portfolio. But at the same time, we -- in our material fact, we wrote that XP is not a strategic investment for Itaúsa, because we are making investments and diversification in sectors not related to financial services companies. So the idea that we have is that in the coming years, without any rush to do that, we can reduce or even sell all the participation that we have in XP and use this capital to buy new companies or to buyback shares of Itaúsa or to pay debt or to pay dividends. I think we can use this investment. The capital result from the sales in many ways that will benefit our shareholders through investments, through reduction of debt or repurchasing shares. I think we have no hurry to do that. We -- as I said, we believe that XP is a very good investment, and we will help XP in their performance and to help them in the Board of Directors that we have 2 members there. We continue to have 2 members there. So we will continue to help XP to have a good performance, to be a lead company in the investment sector. And we will reduce, as we think, the price is correct, or we have other opportunities to use this capital in benefit of the value creation of our shareholders. We have a question here related to this XP, also, investment, that came from the web. Asking, how the shareholders of Itaú will get these shares. What will happen is the first step after the restructuring of the bank, a new company will be created that this new company will be XPart. XPart will have the same shareholders of Itaú Unibanco. This is almost 500,000 shareholders that I mentioned before. The second step is the incorporation of this XPart company in XP, Inc. So at the end, all the shareholders of Itaú Unibanco will receive shares of XP, Inc. that is tradable in the NASDAQ, and probably XP also view established EBITDA problem here at B3 for these shareholders can be able also to sell the XP shares here at B3. So it's like a bonus or it's like a dividend that the shareholders of Itaú Unibanco will receive. I don't know, if Renato Lulia can complete this explanation. -------------------------------------------------------------------------------- Renato Lulia Jacob, [6] -------------------------------------------------------------------------------- Absolutely. Thank you very much, Alfredo, and thank you for the question. Just clarify the second part of the question of that Labarta asks whether it would be a dilution or a bonus issuance from Itaú. It's neither/nor, which means that it's not going to be either a dilution of the current investor base of Itaú Unibanco nor the bank will issue a bonus in order to give its current shareholders a participation in XPart. What's going to happen, as Alfredo just explained, we're going to -- as soon as we get the regulatory approvals, Itaú Unibanco will spinoff its participation in XP, which means that for every share that you hold on Itaú Unibanco, you're going to also have one share on XPart. Important to mention as well that until the moment that, as Alfredo mentioned, that either XPart is listed in B3 or XPart is consolidated within XP. And therefore, the investors on XPart get an XP share. The participation on XP still will be traded inside Itaú, which means if you hold an Itau share, even post-spinoff, Itau's going to be traded at B3, including XP. When we had clarity about either the date that XPart will be listed on B3 or XPart will be consolidated in merging within XP, we're going to announce to the markets with what's going to be ex date. And from that moment on, you're going to have one share of Itaú Unibanco and one share of XPart. I hope I clarified, but just to be absolutely clear, there will be no dilution nor a bonus issuance for Itau. It's simply a spinoff of XP participation on the bank. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Our next question comes from Jason Mollin with Scot Bank. -------------------------------------------------------------------------------- Jason Barrett Mollin, Scotiabank Global Banking and Markets, Research Division - MD of LatAm Financial Services [8] -------------------------------------------------------------------------------- Well, I'll stick on the same theme for now. I just wanted to ask about tag-along rights for Itaúsa shareholders in XP. And how that would work? I did read something about tag-along rights. And secondly, about the strategic outlook for the portfolio, the investment portfolio at Itaúsa. I mean you've mentioned for some years now, particularly when you were making some of the more recent acquisitions that the strategy would be to maintain Itaú at about 90% of assets. Now post XP spinoff, we calculate using market prices that Itaú Unibanco would be around 69% of NAV and XPart would be around 20%. So indeed, as you mentioned, the second largest. And then we have Duratex at around 4.5% and Alpargatas at about 6%, 5.8%. So is that -- and I think from what you were saying about strategically, XP is not a long-term investment or they don't -- you don't see it strategically in the long-term being held. I guess another option that you didn't mention, but I think indirectly, I see the discount that Itaúsa is trading at to its NAV. But could this also -- this cash, at some point, be used to actually increase the stake in Itaú Unibanco? And would it just be a matter of what the discount to NAV, if that makes sense, for Itaúsa? Because there are some tax issues, et cetera, that justify some discount in my opinion. But maybe you could provide some color. Tag along, and how do you see the long-term positioning of Itaú Unibanco as part of the asset base at Itaúsa? And should it go back to 90%? -------------------------------------------------------------------------------- Alfredo Egydio Setubal, Itaúsa - Investimentos Itaú SA - Vice Chairman, Chairman of Executive Board, CEO & Investors Relations Officer [9] -------------------------------------------------------------------------------- Jason, thanks for your question. We signed already with XP, Inc. a shareholders' agreement. And in this shareholder agreement, we released, we have some opportunities to sell parts of the stake that we have at XP, if we wanted to do that. For example, we had some block trade opportunities. I think it was 6 per year. If we decided to sell, and we think we have a good price or a good opportunity to use that money. So we have this opportunity to sell-through block trades. And also, we have the opportunity if XP decides to make an offer in the international market, we can participate with them in the secondary basis. And then in the primary basis. So we have both ways to sell if we decided and when we decided to sell any stake than XP, through the XP deals in the market or through block trades that we can do stand-alone if we decided to do that. In the case of the dilution, yes, the stake of the bank will reduce, as you said, to around 70%, 75%, depends on, of course, on the quotations of the shares. But we believe that are coming -- in the coming years, only by the growth of the bank, the results of the bank, and the bank is so huge, it's so big that compared to the other -- all other stakes that we have together, that we believe that along the year, this stake in the bank will also be around the 90% that we have before. Of course, we will not be very, very soon. But we believe that this probably will have, in some years, organically only by the results of the bank will take us back to this level of around 90%. I don't know exactly when, but we continue to invest in other companies. We are not considering increasing our participation in the bank. This will depend a lot on price opportunity that maybe we can have. But we don't see increasing our portfolio at this moment and shares of the bank. As I said, we believe in XP. We will have XP through the Board of Directors to continue the pace of growth in the investment area. We think XP is a wonderful case that the reason the bank bought XP in the past some years ago. But of course, as we mentioned, XP is not a strategic investment for Itaúsa that we want to diversify outside the financial service companies because we have this concentration already in the bank that will continue to increase the concentration, as I explained before. And also, because we see that we, as controller of shareholders, in the long term, it's very difficult for us to remain shareholders of XP. Because XP and Itau Unibanco are competitors in the markets -- of investment market and investment banking. And XP have the bank and probably will increase their shares in other banking products. So the conflict of interest between Itaúsa and XP will increase along the year. So that's another reason that we think is important to reduce and even to sell all the investment that we have in XP in the coming years. I think that's all. I answered all your 3 points, I think so. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- This concludes today's question-and-answer session. Mr. Alfredo, at this time, you may proceed with your closing statements. -------------------------------------------------------------------------------- Alfredo Egydio Setubal, Itaúsa - Investimentos Itaú SA - Vice Chairman, Chairman of Executive Board, CEO & Investors Relations Officer [11] -------------------------------------------------------------------------------- Thank you all for the participation. I think we have a very good conference call. We are very confident in the investment that we have. I think all the companies will have a very good year. We recover the economy with all the actions that we took and are taking in these companies. And so we are very confident that we are going to have a very good year in terms of performance of our companies. And probably we are going to receive more dividends from the companies, from the bank, and we'll continue that practice of passing through the dividends that we received from the bank to the shareholders of Itausa. We are confident that our dividend yield will continue to be very good compared to most of the companies in the B3 that are traded here in the market. So we are very confident that we are going to have a very good year, and we are very confident in the investments that we made and that we have, and we continue to look for more investment. This appears a good investment that makes sense and a good price that makes sense to the value creation of Itaúsa for our shareholders. Thank you for your participation. And see you in the next conference call related to the fourth semester of results of Itaúsa. Thank you. Bye-bye. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- That does conclude our Itaúsa's 2020 results conference for today. Thank you very much for your participation.