Aenza S.A.A. (AENZAC1) Earnings Call Transcript & Summary

Good afternoon, and welcome to the AENZA Fourth Quarter of 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. Presenting today on behalf of the company are Andre Mastrobuono, CEO; and Renzo Temoche, Vice President of Corporate Control and Financial Planning. I would now like to turn the conference over to Andre Mastrobuono, CEO. Please go ahead.

Good morning, and thank you for joining us on this earnings call. I will provide a brief overview of the significant events over the past few months. Following my remarks, Renzo Temoche, our VP of Corporate Control and Financial Planning, will present the results for the fourth quarter of the year. At the end of the presentation, we will have a moment to answer your questions. Cristian Restrepo, Vice President of Corporate Finance, will join us for the Q&A session. Before we explore the specifics of this quarter, I would like to take a moment to emphasize the ongoing moment AENZA is experiencing, marked by significant achievements on our path towards executing our ambitions -- our ambitious regional growth strategy. This moment is crucial to our vision of establishing ourselves as the leading concession development platform in Latin America. Each step we take, each initiative we implement is aimed to reinforce our market position, capturing emerging opportunities and ultimately transforming the infrastructure landscape in our region. Let's start with the updates. Update on capital increase. Following up on the announcements we made during our last call, I am pleased to update you on our capital increase initiatives. The process concluded successfully on December 26, with 100% of shares subscribed for $22.5 million. The equity injection, completed in December '23 and with the shares distributed on February 15 from the current year is a evidence to the confidence of our investors have in our AENZA's strategic direction and financial health. Update on New York Stock Exchange Delisting Progress. As mentioned in our previous call, we decided to delist our AENZA's securities from the New York Stock Exchange. On November 16, we formally notified the New York Stock Exchange of our voluntary withdrawal of the ADS and informed the Bank of New York, the ADS depository, of the termination of the ADS program. This strategic move is aimed at optimizing our resources and focusing on the growth and leadership within our regional markets. AENZA intends to file a Form 15F with the SEC to terminate its reporting obligation under the U.S. Securities Act of 1933. Update on the plea bargain agreement. On December 23, as anticipated, the plea bargain agreement process has reached its final step of judicial consent, making a crucial milestone for AENZA. The terms of the agreement came into effect, prompting the payment of the first installment of the civil liability. Furthermore, the culmination of this process has led AENZA to be exempted from the scope of the Law 30737, allowing us to progress with our strategic goals. Update on initiatives of engineering and construction. AENZA's Engineering and Construction units is embarking on several strategic projects, reinforcing our leadership in the construction and infrastructure sectors. First, Cumbra has awarded $95 million contract for the Marina Coast Homebeach Club Peru in Punta Sal, Tumbes. This extensive project covers 62 hectares and includes the construction of breakwaters, a yacht club and a marina for mega yachts and other vessels, along with residential apartments and housing lots. This project is set for a completion of over 25 months, marking a significant nautical and real estate development in northern Peru. Second, our subsidiary in Chile has entered -- Vial y Vives –has entered into framework agreements with BHP Group. These agreements cover construction works at the Escondida, Spence and Cerro Colorado mines over the next 5 years, involving a range of construction activities, with the contract values to be defined by subsequent work packages. And third, on November 28, 2023, Vial y Vives S.A. secured a construction contract with Minera Centinela for the Minera Centinela Development Project in Chile. The contract initially valued at $18.5 million, can be extended to a second phase with a total of approximately $38.7 million. These initiatives exemplify our commitment to expand our engineering and construction portfolio across key sectors, further solidifying AENZA's position as a leader. On new opportunities. We continue to actively evaluate projects that promote the well-being of the population across our -- all our business units. Specifically, in our infrastructure business in Peru, we are in ongoing coordination with the Ministry of Transport and Communications to carry out necessary and strategic works in our Norvial concession to meet the growing traffic demand in the area. Similarly, in Line 1 of the Lima Metro, we are in permanent coordination for the works related to double its transport capacity over current 0.5 million passengers daily transported. AENZA reaffirms its commitment to development of infrastructure projects. And today, we are in an ideal position to contribute to projects that improve the quality of life of citizens in Peru and in the entire region. Updates on the corporate reorganization. On February 7, our shareholders endorsed the corporate reorganization plan, marking a significant step in AENZA's strategic evolution. This plan introduced 2 new holding companies, one focusing on infrastructure and energy and the other on engineering and construction, with VIVA continuing as our real estate development arm. This reorganization will enable us to execute our regional growth strategy through our infrastructure development platform, capturing internal synergies and allowing us to capitalize on opportunities in Peru and across regions. Update on arbitration for Line 1. On February 13, current year, our subsidiary, Tren Urbano de Lima S.A. submitted an arbitration request against the Peruvian State. The claim valued at PEN 107 million seeks to establish that, as per the concession contract, the state bears the responsibility for any pre-existing design, construction, conservation, maintenance or deterioration issues of the concession assets, exemplified by the case of the overpasses, which problems were addressed by the company. My closing remarks. As we close another quarter, the positive results underscore the effectiveness of our strategic initiatives and operational improvements. As we will discuss further, AENZA has recorded net profit for the first time since 2017, a clear demonstration of the impact of our transformation efforts. Moving forward, we remain deeply committed to the regional expansion, operational excellence and sustainable practice. We stand ready to seize new opportunities, supported by a strong organizational framework and a focused strategic direction. Now I will hand over to Renzo Temoche to provide further insights into our financial performance. Thank you, once again, for your attention and continued support.

Thank you, Andre. Results for fourth quarter 2023. Revenues. On Slide 10, consolidated revenues reached PEN 4.3 billion, 2.4% lower than the figure reported at the end of 2022. In the Energy area, revenues increased due to higher oil production in the upstream business. Likewise in the infrastructure area, the increase is mainly explained by higher revenues in Line 1 and the higher execution of maintenance of works related to El Niño phenomenon in Canchaque. This was offset by lower production volume in the projects under execution, mainly in Cumbra Perú for Quellaveco project and Vial and Vives-DSD for the MAPA project, which ended in 2022. Additionally, Real Estate reported lower sales of industrial lots and affordable and affordable and traditional housing units in Real estate. Gross profit. Consolidated gross profit increased 39.2% compared to the 2022, mainly due to the Engineered and Construction area as a result of higher profit recorded in Cumbra Perú in the project with LAP for the construction of the new Jorge Chavez airport terminal and in Morelco for Santa Monica project with Ecopetrol. This was partially offset by the lower profit related to the lower sales of industrial lots in Viva in 2023, and the higher depreciation and amortization of drilled wells and higher associated expenses in Blocks due to the impact of the rains in 2023 in UNNA Energía. Operating income. Administrative expenses decreased by 1.3% in 2023, reaching 4.9% of sales as in 2022. Other operating income and expenses in 2023 registered the adjustment for the provision for the INDECOPI fine in Cumbra for PEN 4 million due to the update of the tax and the tax contingencies of Cumbra Perú for PEN 3 million, offset by income in Holding related to the refund of our insurance policy and the recovery of the provisions. Other operating expenses at the end of 2022 registered the provision related to the plea agreement. In accordance with our accounting standards, in previous quarters, it has been recorded at discounted value. Additionally, other operating expenses recorded a provision in the Chavimochic project for PEN 14.5 million for an impairment of the investment. As a result, operating income increased in 2023 with a margin of 11.6%. In 2023, net financial expenses decreased by 41.3%, mainly because 2022 includes the restatement of the present value of the account receivables related to the Gasoducto Sur Peruano project for PEN 63.3 million. Also, in 2022, an interest expenses was registered for an adjustment for fair value of the loan for BCI to Inversiones en Autopistas S.A. for PEN 16.6 million due to the increase in the discount rate. This last effect generated an interest income in 2023 of PEN 2.4 million due to the decrease in the discount rate. The exchange difference is mainly explained by the devaluation of the Colombian peso. Consolidated net income in 2023 was PEN 92 million, which represents a net profit margin of 2.1%. Adjusted EBITDA increased by 46.4% compared to 2022, increasing from PEN 559 million to PEN 818 million. On Slide 11, consolidated backlog amounted $2 billion, of which $1.2 billion correspond to the recurrent businesses. That is oil and gas segments and Norvial concessions. This figure represents a ratio of total backlog revenue of almost 1.76 years. In December 21, 2023, our subsidiary Cumbra Perú and Mancoraland entered into a construction contract called Marina Coast Nautical Real Estate project in Punta Sal, Tumbes. The contract consists of the construction of nautical and real estate project called Marina Coast Homebeach Club Peru, which will occupy 62 hectares and includes various facilities to accommodate mega yachts and various type of boats as well as the execution of the urban development to house multi=family housing buildings. The contract amounts to approximately $95 million plus taxes, which will be developed in 2 phases. Debt. On Slide 13, consolidated financial liabilities at the end of 2023 are $443 million. Debt decreased 3.4% compared to 2022, mainly due to the prepayment of the $20 million of the bridge loan. Breakdown as follows: $31 million corresponds to working capital associated to the clients' account receivables and leasings to the acquisition of machine and equipment. $249 million corresponds to infrastructure project finance. $8 million corresponds to debt derived from performance bond granted to the secure Concesionaria Chavimochic's obligations under the concession contract, which was executed by the Peruvian State by virtue of arbitration ruling issued in October 2022, which declared the caducity of the concessions. $102 million correspond to bridge loan disbursed in April 2022 and extended for 12 months in October 2023. $38 million correspond to sale of 48.8% of the shares of Norvial according to International Financial Reporting Standards Committee. This operation includes the transfer of political rights to AENZA, with an option to repurchase the shares. Finally, the $15 million correspond to leases according to International Financial Reporting Standards 16. Thank you for your attention. We can start now with the Q&A session.

[Operator Instructions] With there being no questions, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.