Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Companhia De Saneamento Basico Do Estado De Sao Paulo (SBS, Financial) achieved a record-high EBITDA margin of over 50% in the first half of 2024, reflecting significant operational efficiency improvements.
- The company successfully maintained government guarantees on its debts post-privatization, a unique achievement in privatization processes.
- SBS has implemented a robust investment plan, with BRL27 billion in projects contracted for 2025-2029, focusing on water and sewage infrastructure improvements.
- The company has made significant strides in customer service, establishing a dedicated customer office and implementing innovative credit recovery strategies.
- SBS has reduced its operational costs, including a 6.7% nominal decrease in OpEx per cubic meter, contributing to improved financial performance.
Negative Points
- The company faces challenges related to regulatory adjustments and potential revenue impacts from reforms and cancellations.
- There is uncertainty regarding the integration and future strategy with the new shareholder, Equatorial, pending regulatory approvals.
- SBS's financial results were negatively impacted by foreign exchange variations, despite hedging strategies.
- The company anticipates potential volatility in bad debt reduction efforts due to changes in processes and contract models.
- There are ongoing challenges in achieving universalization goals, particularly in informal households and areas with high water loss.
Q & A Highlights
Q: What factors contributed to the 5.3% growth in average rate compared to Q1 2024, despite a 6.4% adjustment in May?
A: The growth in average rate was driven by the tariff adjustment and strong demand in Q2, particularly from customers using more than 10 cubic meters, which automatically increased the average rate. Additionally, the full 6.4% rate increase was only partially captured in May, with the full effect in June, combined with increased connections in Q1.
Q: How is SABESP addressing the reforms and cancellations of the 2024 adjustment, and what is the potential impact on future cycles?
A: The regulatory agency is examining the issue, but there is no estimate on value or completion time for the study. Historically, 2% of revenues are allocated to reforms and cancellations, but no specific figures can be confirmed yet.
Q: What are the expectations for company organization once Equatorial becomes a shareholder, and what changes are anticipated in the short term?
A: Due to pending CEDAE approval, interactions with Equatorial have been limited. Once approval is finalized, a general assembly will appoint new board members, who may then appoint new executives. The company is preparing for potential structural adjustments typical of transitioning from a state-owned entity.
Q: How does SABESP plan to close the CapEx gap to meet universalization goals, and what are the challenges and solutions?
A: SABESP plans to accelerate CapEx in the second half of 2024, maintaining the BRL8 billion investment target. The focus is on projects like the Tiete River cleanup, with BRL27 billion allocated for future investments. The strategy includes leveraging relationships with service providers and new contracts to support investment demands.
Q: Can you provide details on the water loss reduction program and its impact on financial statements?
A: SABESP invests heavily in loss reduction, targeting both commercial and technical losses. Efforts include renewing water meters, expanding services, and using IoT and AI for fraud detection. The impact is seen in increased volume and revenue, though it may be offset in annual adjustments. The focus is on aligning revenues with treated water volumes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
