Bombril — the cleaning products company best known for its steel wool — has just raised BRL 300 million in a credit line that will allow it to extend its debt and drastically reduce the cost of debt.
Funding was carried out with a BS Factoring fund, a manager specializing in credit rights based in Itu.
The company will use the proceeds to pay off debts. clean taken just over a year ago and which are prohibitively expensive.
“We will be able to reduce the cost of these debts by 30%, and with the lower cost we will be able to use the resources we spent on interest to invest in the operation,” Bombril’s CEO, Ronnie Borges, told the Brazil Journal.
Next week, Bombril should receive around R$ 100 million from BS Factoring; the remainder will be disbursed as current debts mature.
The amortization of the new debt will be in 48 monthly installments through the assignment of receivables from Bombril customers, such as supermarkets, wholesalers and distributors.
Bombril has a gross debt of R$ 401 million, with an average cost of 24% per year. Around 77% of this debt matures within the next 12 months – which underlines the relevance of the new credit line.
With the new funding, long-term debt now accounts for more than 50% of the total, said the CEO.
Bombril’s indebtedness is not high for the company’s size: leverage is around 2x EBITDA for the last twelve months.
“The company’s biggest problem was really the cost of debt and maturities, which have now been resolved,” said Ronnie.
Bombril has gone through troubled times in recent years. In 2021, the company struggled to pass on prices with rising inflation, which affected the company’s profitability and liquidity.
“The operation wasn’t paying off anymore and we started taking credit lines to get it back on its feet,” said Ronnie.
In 2020, the company’s gross debt was BRL 270 million. In 2021, it grew to BRL 392 million.
Despite a 2022 that started out difficult, Bombril ended last year with gross revenue of BRL 2.1 billion, up 26%, and an EBITDA of BRL 190 million, the highest in the history of the company, founded in 1948 .
Net income closed at BRL 23 million, compared to a loss of BRL 63 million in 2021.
The operational improvement had to do with some measures taken by the company, which owns 16 brands, including Limpol, Pinho Bril and Mon Bijou, in addition to Bombril, which is category leader.
“We’ve adjusted our pricing positioning across several categories,” said the CEO. “We saw some that were very cheap and that’s why people had the perception that it was a poor quality product. When we raised the price a little, sales improved. Others, which had higher margins but sold little, we lowered the price a little so that they could sell more, and the higher margin started to contribute to the whole result.”
As for costs and expenses, Ronnie negotiated with the main suppliers to obtain better conditions for the purchase of raw materials, in addition to reducing the company’s structure, reducing the number of boards and making decisions more agile.
In the fourth quarter, cost of goods sold represented 63% of net revenue, compared to 71% a year ago. Operating expenses grew 10% in the quarter, half of revenue growth.
Bombril has been listed on the stock exchange since 1984, but the stock’s liquidity is practically nil, with a good part of the capital in the hands of controller Ronaldo Sampaio Ferreira and a few funds and investors.
The company is worth just over BRL 300 million on B3.
Peter Arbex