Release Date: November 12, 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) reported a significant increase in net revenue of around 7%, translating into a 17% increase in EBITDA.
- The company generated operational cash of BRL1.6 billion, which was almost entirely reinvested in the asset base.
- A 6.4% tariff readjustment in 2024 resulted in a net positive effect of close to 5% on revenue.
- The new concession contract extended the useful life of assets, contributing positively to financial results.
- SBS completed BRL1.4 billion in investments this quarter, with plans to accelerate CapEx execution significantly in the coming months.
Negative Points
- The transition from a state-owned to a private company required several management adjustments, incurring additional costs.
- The company faced a net cost increase of around 9%, primarily due to a 12% rise in consumption for reservoir management.
- The inclusion of the Cad Unico in the vulnerable tariff category generated a negative effect of almost BRL30 billion.
- There are challenges in adapting to the new concession contract, which imposes various obligations and quality indicators.
- The company is undergoing a transition period, which has caused delays in some projects and legal proceedings.
Q & A Highlights
Q: We've seen news about the beginning of the gap reduction on commercial programs. Could you update us on the progression, client communication, litigation risk, and expected effects in Q4 '24 and closure by '25?
A: We have notified approximately 500 to 600 clients after a legal analysis and regulatory endorsement. We aim to bridge this gap by the end of '25.
Q: What measures are being taken to promote efficiency, and how do commercial renegotiations contribute to revenue improvement? Also, how will you handle discounts for industrial and commercial clients?
A: We engaged in bilateral negotiations to reduce discounts and are moving forward with debt negotiations. The new concession contract provides more flexibility to manage potential transfers.
Q: Can you comment on the opportunity to add new cities in Sao Paulo, the status of RAB CapEx recognition, and M&A appetite outside Sao Paulo?
A: We are interested in opportunities in Sao Paulo and are in discussions with the regulatory agency about RAB CapEx. We will assess opportunities outside Sao Paulo based on risk-return balance.
Q: Is the new depreciation level recurrent, and how does it affect the tax base and income tax payments?
A: Yes, the new depreciation level is recurrent due to the concession contract extension, impacting our tax base and resulting in higher income tax payments.
Q: Could you detail the decision to discontinue the investment forecast for '24 to '28?
A: The previous forecasts were outdated. We are reassessing investments and opportunities post-privatization, focusing on delivering privatization goals rather than quarterly targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
