Facing debt and market woes, Dexco intensifies restructuring, shedding assets and optimizing product offerings

Dexco, the powerhouse behind brands like Deca, Portinari, Hydra, Duratex, and Castelatto, is navigating an extensive business overhaul in 2025, marked by a strategic reduction in its product portfolio, the closure of manufacturing facilities, and significant asset divestitures. This comprehensive restructuring aims to bolster profit margins and alleviate a substantial debt burden that has eroded recent financial performance, casting a shadow of uncertainty among market analysts and investors. Following the release of its fourth-quarter 2025 earnings last Thursday (5), Dexco’s shares experienced a nearly 5% decline, positioning the company among the day’s largest losers on the stock exchange.

The arduous task of stabilizing operations is compounded by a sluggish construction materials market and persistently high interest rates, which have considerably escalated the company’s borrowing costs. These external pressures have intensified the urgency for internal efficiency and strategic realignment across its diverse segments.

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The company’s efforts are being closely watched, particularly regarding its financial health and the long-term viability of its current strategy. Key concerns include:

• The pace of debt reduction and its impact on financial health.
• The effectiveness of operational adjustments in boosting profitability.
• The market’s perception of value creation and future growth prospects.

Financial results signal restructuring urgency

Dexco recorded a net profit of R$63 million for 2025, representing a 64% decrease compared to the previous year. Excluding non-recurring gains and losses, the contraction was a more modest 47%, bringing the figure to R$107.5 million. Concurrently, the adjusted and recurring EBITDA remained stable at R$1.6 billion, while net revenue also stagnated at R$8.2 billion, reflecting a challenging operational environment.

This financial performance, coupled with the immediate stock market reaction, underscores the critical need for Dexco’s ongoing restructuring. Analysts and investors are closely scrutinizing the company’s ability to translate its strategic shifts into tangible improvements in its financial health and market valuation.

Mounting debt: a top deleveraging priority

The company’s net debt stood at R$5.51 billion in the fourth quarter of 2025, a slight decrease of 1.2% from the preceding quarter. Consequently, the leverage ratio, measured as net debt to EBITDA, saw a marginal reduction from 3.48 to 3.35 times. However, the weight of this debt is significant, with Dexco disbursing R$936 million in net financial expenses throughout 2025, an increase of 54% year-over-year. Ricardo Monegaglia, an analyst at Safra, views accelerated asset sales as fundamental for Dexco to enhance cash generation and rein in its indebtedness. He emphasizes the continued necessity for the company to divest assets to lower its debt and associated financial expenditures, a sentiment echoed by the company itself. Dexco has publicly set an ambitious target to reduce its leverage from 3.35 times at the close of 2025 to approximately 2.7 times by December 2026, driven by improved cash generation and the sale of both operational and non-operational assets.

Operational shifts reshape core divisions

Dexco has experienced a prolonged cycle of investments that unfortunately coincided with a downturn in construction material sales across the country and a surge in interest rates. These factors significantly impacted the business, prompting a thorough review of its operational strategy aimed at improving efficiency and profitability.

In response, the group has implemented targeted changes. For the sanitary ware division, Deca’s factory in João Pessoa, Paraíba, ceased operations in July 2025, consolidating activities at the Cabo de Santo Agostinho unit in Pernambuco. This move, alongside a renewed focus on products with higher added value and greater profitability, is expected to lead to a gradual improvement in margins throughout the current year. Similarly, the ceramic coatings division has suspended some production lines in the Southern Region, a measure taken to reduce excess inventory and pivot towards more “premium” items with better margins. While this has initially led to reduced scale and increased production costs due to idle industrial capacity, the long-term goal is to enhance overall profitability.

Leadership confronts performance gaps

Raul Guaragna, Dexco’s president, acknowledged the urgency of the situation during the earnings presentation. He emphasized the necessity to “accelerate internal adjustments: reduce complexity, address idleness, and elevate execution in critical areas, from go-to-market strategies to industrial efficiency, including factory development and productivity capture,” recognizing that the company’s financial indicators are currently “below potential.”

Forest assets unlock critical capital

Beyond the restructuring within its manufacturing facilities and product lines, Dexco is actively divesting forest bases not slated for use by its wood panels division. In January 2025, the company announced the sale of 1.2 million cubic meters of forest assets, though the transaction’s value was not disclosed. This move highlights a strategic effort to optimize asset utilization and generate liquidity.

Further demonstrating this strategy, Dexco secured R$200 million in January 2025 by selling a minority stake in its subsidiary, Jatobá Florestal, to an investor through the subscription of new shares. Jatobá operates in the exploration and commercialization of forest assets and land leasing.

To further enhance value creation from its extensive forest base, Dexco also established a new business arm, Duratex Negócios Florestais (DNF). This entity is tasked with expanding ventures related to the company’s forest assets and wood production, signifying a broader approach to natural resource management.

The creation of DNF is expected to drive more strategic and profitable engagement with Dexco’s vast forest resources, aligning with the company’s overall restructuring objectives. These initiatives are crucial steps in bolstering the balance sheet and supporting the company’s financial recovery.

Expanding strategic growth avenues

Lucianna Raffaini, Dexco’s Director of Administration and Finance, affirmed the group’s intention to generate greater value from its diverse asset portfolio. She detailed new strategic growth avenues for DNF, including the trading of wood, the monetization of forest residues like woodchips, and the expansion of the company’s forest footprint.

Raffaini also reiterated that deleveraging stands as the “highest priority” for Dexco. This focus underscores the importance of these asset monetization strategies in significantly reducing the company’s debt load and strengthening its overall financial position for sustainable long-term growth.

Analyst confidence remains guarded

Analysts Leonardo Correa, Marcelo Arazi, and Rodrigo Gotardo from BTG Pactual have observed that Dexco has made gradual progress in reducing its leverage through the sale of its forest assets. However, they caution that these sales do not offer a definitive solution to the company’s underlying challenges.

They further highlight that the restructuring efforts within the ceramic coatings and the metals and sanitary ware lines remain limited. This suggests a need for more extensive overhauls in these key segments to achieve the desired operational efficiencies and margin improvements.

The analysts conclude that the market will require greater evidence of sustained improvement and a more comprehensive execution of its turnaround strategy before fully committing to Dexco’s investment thesis. They anticipate that confidence will gradually build as the company continues to demonstrate tangible progress in its ongoing restructuring initiatives.