Unicasa Móveis - Relações com Investidores

Other Informations / Risk Factors

Major Risk Factors Relating to the Company

Investing in our common shares involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in our reference form and in our financial statements before making an investment decision regarding our common shares.Our business, financial condition, operating results, liquidity, and prospects may be adversely affected by any of these risks, among others. Additional risks and uncertainties of which we are currently not aware or that we now consider immaterial may also materially and adversely affect our business, financial condition, operating results, liquidity, prospects and the market price of our common shares, in which case you could lose all or part of your investment in our common shares.

The risks described below are those that currently believe may affect us adversely. Additional risks and uncertainties not currently known to us or that currently deem immaterial, may also impair our business significantly.

If we fail to maintain the value of our brands, our sales could be adversely affected.

The sucess of our business depends mostly on the value of the brands through which we sell our products. The Dell Anno, Favorita, New and Casa Brasileira brands and their respective images in the market are essential for our business and our growth strategy. Our ability to maintain, promote and position our brands will depend significantly on the outcomes of our marketing efforts and on our ability to maintain the market position of our brands as high value products. Our brands may be adversely affected if we fail to achieve these goals or if our image is impacted by negative publicity. For example, if the dealers do not comply with our quality standards, the reputation of our brands may be adversely affected. In addition, if new products are launched and do not succeed, there may be a change in the perceived value of our brands, which may negatively impact our sales, increase our costs and/or expenses and, consequently, negatively affect our financial and operating results.

We may not be successful in attracting new dealers.

One of our main growth strategies is attracting new dealers, given that we have identified greater potential to expand the number of multibrand sales points for our New and Casa brasileira brands. Our ability to attract new dealers depends on many factors that are not under our control, such as:

(i) our competitors' growth;

(ii) difficulty in locating appropriate locations for opening new stores, as well as competition for such locations;

(iii) availability of qualified labor; and

(iv) economic and market issues that may affect the demand for our products. 

If we do not succeed in attracting new Dealers, our expansion plans may be adversely impacted.

The dealers that sell our products may not maintain their current sales averages, which may adversely impact our current sales margins and volumes, as well as our results.

The average sales margins and volumes of the dealers through which our products are sold may decrease due to several factors, including: 

(i) our competitors' products; 

(ii) lack of demand for our products;

(iii) quality of services offered to our customers;

(iv) exclusive dealers difficulty in finding adequate locations for opening new stores; and

(v) other market changes. 

If our current sales margins and volumes are adversely impacted by these factors, our results may also be adversely impacted.

The dealers selling our products may not be successful in renewing their lease agreements. In addition, we may be unsuccessful in renewing our contracts with such dealers.

The success of our brands depends largely on the locations of the dealers through which our products are sold, especially Exclusive dealers. Most Exclusive dealers, which are responsible for the largest portion of our sales and, consequently, our revenue, are strategically located at points that we believe to be of high visibility. If:

(i) we fail to renew our one-year dealership agreements with such dealers;

(ii) such dealers fail to renew their lease agreements on reasonable terms; or

(iii) such dealers are forced to relocate their stores to locations without the same visibility, the sales of our products could decrease and, therefore, negatively impact our results.

Our manufacturing plants are located at a single manufacturing facility on which we are entirely dependent.

Our products are manufactured at a plant located at a single manufacturing facility in the city of Bento Gonçalves, State of Rio Grande do Sul, Brazil. Any significant interruption in the operations of our manufacturing facility due to any natural disaster, fire, accident, system failure, shutdown, strikes or interruptions caused by our employees or closure due to a lack of municipal or fire department licensing would delay or negatively impact our production capacity and could halt or interrupt our sales.  Additionally, our administrative center is located in a building inside our manufacturing facility.  Any events affecting our manufacturing facility and, eventually, our administrative center, such as a natural disaster or accident, may adversely impact our operations and consequently our results.

We may be adversely affected by the performance of the dealers through which our products are sold if they fail to comply with our quality standards.

We rely on independent dealers to sell our products and offer post-sale services according to our quality standards.  We cannot ensure that they will maintain the same quality standards we deem to be adequate. If the dealers that sell our products fail to meet our customers' expectations with regard to the quality of their stores and services, the image of our brands and, consequently, our sales, may be adversely affected. Additionally, we cannot guarantee that the dealers that sell our products will be able to hire, retain and employ people with the specialized qualifications and experience required to assemble our customized furniture and fixtures. If this occurs, the performance and quality of services rendered to assemble our products may be unsatisfactory and adversely affect our brands, sales and results.

We may not efficiently respond to changes in market trends for customized furniture and fixtures.

We compete with many brands of customized furniture and fixtures with respect to:

(i) price;

(ii) quality;

(iii) trends;

(iv) customer service; and

(v) store locations. 

We believe that offering distinctive products and customer satisfaction are key challenges for our business. Customer preferences and market trends for customized furniture and fixtures are volatile and change rapidly.Our sales success depends on our ability to anticipate and respond to changes and trends in the market for customized furniture and fixtures. If we fail to adapt our products to market expectations, our sales and margins may be adversely affected. Any failure to anticipate, identify or respond to trends and changes in the market may adversely affect the acceptance of our products at Dealers' stores, adversely impacting our business and the image of our brands.

If we lose any of our key executives, our performance may be adversely affected.

Our performance depends on the efforts and capabilities of our key executives, including our president, who are responsible for making most of the key decisions that guide our business.  If we lose any of our executives, our business, our financial and operating results could be adversely affected. Additionally, if any of our executives leave our company for any reason, we would need to attract new highly qualified professionals as replacements. If we fail to attract or retain qualified professionals to manage and expand our operations, we may not be able to conduct our business successfully and, consequently, our results may be adversely affected.

If we fail to retain and hire specialized labor and train our employees, our operations and expansion potential may be affected.

Our business success and our expansion strategy depend on our capacity to hire, retain and employ professionals with specialized skills who have the necessary competence and experience in our various operations. We compete with other producers of customized furniture and fixtures to attract qualified professionals and we cannot guarantee that we will be able to attract qualified professionals in the required time or in a sufficient number to support our expansion. Additionally, we may have difficulties in retaining professionals, which could adversely affect our operations and the expansion potential for our business.

Problems with our information technology systems or a failure to maintain our information technology system up-to-date, could adversely impact our manufacturing process and our operations.

Our operations depend on our information technology systems to manage our resources and the manufacturing of our products. A significant portion of our production process is performed by machines controlled by computer systems specifically designed for this purpose and operate with little or no human interaction. The management of and security issues related to our information systems, together with potential instability or failure to maintain our information technology system up-to-date, could cause temporary interruptions of the system's functionality including eventual interruptions of our production. If we are not able to perform updates or timely repairs and any interruption becomes extended, our manufacturing process and our operations may be significantly impaired, adversely affecting our financial and operating results.

We and the dealers that sell our products may be held responsible for damage or alleged damages to customers or third parties from our manufactured products, which could adversely affect our results.

In Brazil, consumer protection laws are strict. Under applicable Brazilian law, we are strictly liable for any defect in products we manufacture, regardless of fault. Furthermore, consumer protection laws impute to us the burden of proof against the customer's claim. Consumer protection lawsuits may involve individual claimants or class actions and, with respect to class actions, may be filed by state or federal authorities through direct or indirect public administration agencies, including the Public Ministry and the Consumer Protection and Orientation Program (PROCON). Judgments against us involving, individually or collectively, significant amounts in any such lawsuit may adversely affect our financial results and conditions.  In addition, any such rulings against us could adversely affect our image and the image of our brands, consequently affecting our sales.

There are risks that our insurance policies do not cover.

Our insurance policies do not cover certain risks (such as war, acts of God and force majeure or interruption of certain activities). Upon the occurrence of any such event that is not covered by our insurance, we may be adversely affected. In addition, we cannot ensure that, even in case of losses covered by our policies, the insurance reimbursement will be enough to cover all damages incurred from such loss, including labor accidents, death or disability or loss of profits from losses at our factories. In case our insurance policies do not cover certain losses or do not sufficiently reimburse to fully cover any damages suffered or lost profits, our financial results and condition may be negatively affected. In addition, we do not have insurance coverage for civil claims by our customers, which could have an adverse impact on us if we are held legally liable for indemnifications of third parties.

Investigations and legal and administrative proceedings may adversely affect us.

In the normal course of business, we are subject to investigations, audits, suits and administrative proceedings with respect to civil, tax, pension, environmental, corporate and consumer rights matters, among others. As of December 31, 2012, we have R$30.43 million in potential liabilities under legal proceedings, with a provision for contingencies for labor, tax and civil claims totaling R$5.28 million. Depending on the nature of the investigation or the legal or administrative proceeding filed against us, we could be adversely affected. In addition, we are periodically investigated by various regulatory authorities, including tax, labor, social security, environmental and health. We cannot guarantee that these authorities will not institute claims against us, including as a result of the interpretation of accounting, social security and tax provisions or contingencies, or that these investigations will not result in administrative proceedings or thereafter in legal proceedings, nor can we predict the outcomes of any such possible administrative or legal proceeding. Decisions against us in a significant portion of the proceedings we are party to may cause a significant adverse impact on our operating results. In addition, to the extent such proceedings cover our alleged acts of negligence, our involvement in such actions, regardless of the result, could impact our reputation in the market and negatively impact our brands. 

If we fail to legally protect any of our brands, our activities, our financial condition and our operating results could be adversely affected.

We believe that our brands have significant value and play a considerable role in our business.  Currently, our Dell Anno, Favorita, New and Casa Brasileira brands are registered with the INPI. We cannot guaranty that the ownership rights of our brands will not be infringed or that our ongoing applications for registration will be approved by the INPI, or that third parties will not attempt to seek legal nullification of our registered brands. Also, if ownership of our brands is legally contested and if a court rules against us with respect to their use or validity, we could be prohibited from using them. Any of these factors may decrease the value of our brands and cause an adverse material impact in our activities, financial condition and operating results.

We may not be able to fully implement our growth strategy.

Our ability to implement the main initiatives of our growth strategy depends on a series of factors, including our ability to:

(i) protect our brands;

(ii) expand and qualify the base of dealers that sell our products in Brazil and increase sales, with a focus on increasing our productivity and operational efficiency;

(iii) continuously increase our supply of innovative products;

(iv) evaluate complimentary strategic acquisition opportunities for our business; and

(v) increase sales by our corporate business.

We cannot guarantee that any of these goals will be fully or successfully achieved. Any inability to implement our main growth initiatives may adversely impact our activities, our financial condition and our operating results.

The removal or reduction of tax benefits or the increase in existing taxes or the creation of new taxes applicable to our business may adversely impact our company.

In the past, the Brazilian government has removed and reduced tax benefits, increased tax rates, created new taxes and changed tax regimes frequently.  If this occurs again, we could be adversely affected as we may not be able to pass on any tax increases to the Dealers that sell our products. In addition, cost increases arising from taxes that are passed on to dealers may increase the final price to our end customers and reduce the demand for our products or impact our margins and profitability, causing an adverse impact on our results. Further, the granting of tax benefits to our competitors, including those in other states, could adversely impact the competition and product prices we have adopted.

We may be required to indemnify dealers' expenses if their operations are unsuccessful.

The success of the dealers that sell our products depends on many factors outside of our control, in particular, market and economy factors that can impact the demand for our products. The dealers that sell our products make many investments to comply with our standards with respect to each store's visual identity, architectural design and hiring and training of qualified professionals, including architects, builders and salespeople. If the dealers that sell our products do not succeed, they may file lawsuits or arbitration proceedings against us to make us liable for their unsuccessful operations. If we are required to indemnify any Dealers for their expenses, our remaining dealers may be encouraged to file additional similar lawsuits against us and we may be adversely affected.

We are subject to the credit risks of the Dealers that we finance.

We finance some dealers. Such financings are usually intended to provide resources for deployment, expansion and improvements to the stores as well as for changing sales points into more strategic locations, according to our managers. As of December 31, 2014, we had loans granted in the amount of R$6.12 million outstanding from Dealers with respect to these financings (R$3.67 million in 2013, R$7.52 million in 2012) and we don't had non-current trade accounts receivable from Dealers. Accordingly, we are subject to credit risks customarily associated with the granting of this type of financing, which includes the risk of default on the payment of the principal amount and interest. If dealers fail to comply with their financial obligations to us and/or financial institutions, our results may be adversely affected.  

Our management and board of directors are strongly influenced by our controlling shareholders.

Our management ise strongly influenced by our controlling shareholders, who guide various aspects of our business. Death or removal of certain of our controlling shareholders who are part of our senior management may adversely affect us as their influence will no longer be present in the management of our company, who have good existing relationships among them, employees and our main suppliers.  Thus, we may also face succession issues in the future, which can adversely affect our operating results and financial condition. 

The interests of our current controlling shareholders may conflict with the interests of other shareholders.

Pursuant to the Law of Corporations and our Bylaws, our controlling shareholders are empowered to elect the majority of our Board of Directors, exercise overall control over our management, determine our policies, sell or, in any other manner, transfer shares representing control over us held by them and determine the result of any deliberation of our shareholders, including transactions with related parties, corporate reorganizations, sale of all or substantially all the assets, or delisting our shares from the Novo Mercado segment, as well as determine the distribution and payment of any future dividends. Our controlling shareholders may have an interest in acquisitions, disposal of assets and partnerships, may seek funding or take other decisions that could conflict with the interests of other shareholders and which may not result in any improvement in our operating results.

As a result of their participation in any stock option plan that we approve, the interests of our executive officers and employees may be overly tied to our stock price.

The fact that our executive officers and employees can receive stock options whose strike price is lower than the market price of our shares may cause said persons to focus excessively on our stock price, which could adversely affect our business.

We may need additional funds in the future and, consequently, may issue additional shares instead of borrowing, which could result in dilution of share ownership.

We may need additional capital and for this we choose to carry out a public or private placement of bonds, shares or securities convertible into shares. If no public or private funding is available, or if our shareholders so decide, such additional funds may be raised through a capital increase. Our Bylaws allow our board of directors to deliberate on the issue of shares up to the limit of R$500 million without the need for specific approval from the shareholder meeting. Our shareholders may also deliberate on the issue of additional shares above this limit. In accordance with the Brazilian Law of Corporations, the capital increase may exclude the right of certain shareholders to exercise their preemptive rights, diluting the interest held by our shareholders in our capital stock.

Our shareholders may not receive dividends or interest on equity.

According to our Bylaws, we must pay our shareholders at least 25% of our annual net income, calculated in accordance with the Law of Corporations, in the form of dividends or interest on equity. The net income may be capitalized, used to offset losses, or withheld in accordance with the Law of Corporations, and may not be allocated for the payment of dividends or interest on equity. Moreover, the Law of Corporations allows a publicly held company to suspend the compulsory distribution of dividends in a certain year if the board of directors informs the annual shareholder meeting that the distribution would be incompatible with the financial situation of the company.

Developments and the perception of risk in other countries, particularly in other emerging market countries the United States, China and the European Union, may adversely affect the market price of Brazilian securities, including our common shares.

The market value of Brazilian securities is affected by economic and market conditions in other countries, particularly in other emerging market countries, in the United States and in the European Union. Although economic conditions in other countries may differ significantly from economic conditions in Brazil, investors' reactions to developments in other countries may have an adverse effect on the market value of Brazilian securities. 

We may not be successful in generating profits from the operations of our subsidiary.

We are operating our own stores through our subsidiary Unicasa Comércio de Móveis Ltda. We may not be successful in bringing consumers to this operation, due to the pricing policy or location of the stores or lack of specialized manpower or any other variable that is beyond our control, which results in consumers not buying furniture at our stores. Thus, the recovery of investments we made in acquiring and renovating the sales outlets could be jeopardized. If this happens and there is no other entrepreneur to whom we could sell the rights to use the sales outlet, the loss due to the non-recoverability of the residual balances of the investments made will be fully booked in the result.

We may not be successful in renewing the rental agreements of our own stores.

Inflation in the markets where we operate could affect the profitability of our stores and we may decide to shut down a few stores and, if we are unable to sell the store rights, we could incur losses on account of the non-recoverability of the investments made in the store, which is an expense directly booked in the result.

Risks related to our subsidiary Unicasa Comércio de Móveis Ltda could affect our deferred tax assets.

If the risks identified above about our subsidiary Unicasa Comércio de Móveis Ltda do materialize and we still have not recovered the deferred tax asset resulting from the negative tax base arising from the tax loss in the initial years of operations, we will have to write off the balance not yet offset to expenses in the year when the generation of taxable income for the next 10 years is jeopardized to the point of not generating taxable income that enables us to offset the balance.

If we fail to acquire raw materials or if we fail to acquire them at acceptable prices or on acceptable terms, our production, sales and financial condition could be negatively affected.

We order raw materials for manufacturing our products through purchase orders and do not have long term agreements with our suppliers, which can create uncertainties regarding the terms and conditions of our future purchases.  If we fail to maintain favorable relationships with our suppliers or if we are not able to obtain enough high quality raw materials at reasonable commercial terms, our business and operating results may be negatively affected.  In addition, our main raw materials are subject to price fluctuations that may cause adverse effects on our business, financial condition and operating results. Raw material prices are affected by many factors over which we have little or no control, such as climate, international and domestic economic conditions, transportation and processing costs, regulations and government policies and global demand, among others.  We may not be able to pass on to the Dealers that sell our products, in a timely manner or in the necessary volume, increases in costs for raw materials related to the manufacturing of our products.  Any of these may result in a decrease in sales and/or margins, adversely affecting our operating results and financial condition.

We are exposed to default risks of end customers.

We operate in the industry for customized furniture and fixtures and frequently sell our products to Dealers and end customers in installments. Adverse factors affecting macroeconomic conditions, such as decreases in economic activity, currency devaluations, inflation and increases in domestic interest and/or unemployment rates may increase Dealers' and end customers' default rates, which may adversely affect our business, financial condition and our operating results. In addition, on occasion Dealers sell our products for scheduled future deliveries and receive up-front payments without immediately passing on to us either payment or production orders. In most cases, Dealers pass on these payments and orders closer to the scheduled delivery and assembly dates. If the Dealers that sell our products do not pass on to us cash payments and/or orders they receive from end customers, we may be liable for the delivery and assembly of products for which we have not received payment or sufficient advance notice of such order. This may have a significant adverse effect on the perception of our brands and could result in potential legal proceedings against us. Further, our operating results and financial condition may be adversely affected if demand for consumer credit decreases, if the Brazilian government restricts consumer credit or if end customers' ability to pay is hindered due to any eventual credit restrictions.  

The market for customized furniture and fixtures in Brazil is highly and increasingly competitive.

The market for customized furniture and fixtures in Brazil is highly competitive. There is competition affecting all aspects of our business, including types of products, number of stores, advertising, prices, quality of products, services, store locations, reputation, and availability of consumer credit, among others. Our competitors are both regional and national, such as Todeschini, Italínea, Florense e Formaplas. If we do not compete effectively, our market share, operating results and financial condition may be negatively affected.

The market for customized furniture and fixtures is sensitive to decreases in consumer purchasing power and  availability of consumer credit, unfavorable economic cycles and other macroeconomic factors.

The market for customized furniture and fixtures is subject to downturns resulting from factors beyond our control that could lead to decreased demand for our products. Such factors include negative trends in consumer purchasing power, availability of credit and consumer income, inflation, recession, interest rates, sales tax rates, salaries, and employment and consumer confidence levels.  Accordingly, the success of our business is dependent on these macroeconomic factors in the markets in which we operate.  This also means that an economic crisis or recession could cause a disproportionate effect on our customers' demand for our products and therefore an adverse affect on our business, financial condition and  operating results. We expect the demand for our products to continue to be tied to the increasing income of the Brazilian population, the growth of other economic segments, including the development of the real estate industry and government incentive programs, such as Minha Casa, Minha Vida (My House, My Life), as well as any uptick in the Brazilian economy due to the Olympic Games in 2016.  If these factors do not experience anticipated levels of growth, our revenue and operating results may be adversely affected. 

Risks Relating to Brazil

The Brazilian government exercises signi?cant in?uence over the Brazilian economy, which along with Brazilian political and economic conditions, could adversely affect us.

The Brazilian government frequently exercises significant influence over the Brazilian economy and occasionally makes significant changes in policies and regulations.  The Brazilian government's actions to control inflation and other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports.  We cannot predict changes in Brazilian government and regulations, and such policies and regulations are beyond our control. Our business, ?nancial condition and operating results may be adversely affected by changes in policies or regulations at the federal, state or municipal levels involving or affecting factors such as:

(i) interest rates;

(ii) foreign exchange controls and restrictions on remittances abroad;

(iii) monetary policy;

(iv) exchange rates volatility;

(v) changes in labor rules;

(vi) inflation;

(vii) liquidity of domestic capital and lending markets;

(viii) expansion and contraction of the Brazilian economy;

(ix) fiscal policy and changes in tax laws;

(x) import and export controls;

(xi) fiscal policy and changes in tax laws;

(xii) economic and social instability; and

(xiii) other political, diplomatic, social and economic developments in or affecting Brazil.

Uncertainty over whether the Brazilian government will implement changes in policies or regulations affecting these and other factors may create instability in the Brazilian economy and increase the volatility of the Brazilian securities markets, which may have an adverse effect on us and the trading price of our common shares.  See also "Risks Relating to our Business and the Industry for Customized Furniture and Fixtures—The market for customized furniture and fixtures is sensitive to decreases in consumer purchasing power, consumer credit and unfavorable economic cycles, as well as other macroeconomic growth factors" for further discussion regarding the effect of macroeconomic factors on our business.

Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm our business.

In the past, Brazil has experienced extremely high inflation rates and has therefore enacted monetary policies designed to combat inflation that have had adverse effects on the Brazilian economy. In 2009, 2010 and 2011, annual inflation rates in Brazil were -1.72%, 10.78% and 5.1%, respectively, according to the General Market Price Index (IGP-M) and 4.31%, 5.76% and 6.5%, respectively, according to the National Consumer Price Index (IPCA).  Inflation and the Brazilian government's measures to fight it, mainly implemented through the Brazilian Central Bank, have had and may have significant effects on the Brazilian economy and our business. Tight monetary policies with high interest rates may restrict Brazil's growth and the availability of credit. Conversely, more lenient government and Brazilian Central Bank policies and interest rate decreases may trigger increases in inflation, and consequently, volatility and the need for sudden and significant interest rate increases, which could negatively affect our business.  In addition, if Brazil experiences high inflation in the future, we may not be able to pass on to customers all or part of such increase to adequately offset the effects of inflation on our cost structure, which may adversely affect our operating margins.  Furthermore, the values of our debt and other obligations as adjusted for inflation would increase proportionally, which could adversely affect our financial condition and operating results, if we are not be able to pass on all or part of such increase to our customers.

Exchange rate instability may have an adverse effect on us.

As a result of inflationary pressures, the Brazilian currency has been devalued periodically in the past in relation to the U.S. dollar and other foreign currencies.  The Brazilian government has implemented various economic plans and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations (during which the frequency of adjustments has ranged from daily to monthly), ?oating exchange rate systems, exchange controls, and dual exchange rate markets. From time to time, there have been signi?cant ?uctuations in the exchange rate between the Brazilian currency and the U.S. dollar and other currencies.  There can be no assurance that the real will not depreciate or be devalued against the U.S. dollar. Depreciation of the real against the U.S. dollar could create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the Brazilian economy as a whole and harm our ?nancial condition and results of operations.


back to top


Dell Anno Favorita New Móveis Casa Brasileira Unicasa Corporate

Rodovia Federal BR 470, Km 212, 930 - Bento Gonçalves - RS - CEP: 95707-540 - Caixa Postal: 2505 - Phone: +55 (54) 3455 4444 - SAC: 0800 008 9000Developed by Anderson Triacca Ideas Design