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

Good afternoon, and welcome to the AENZA First Quarter of 2024 Earnings Conference Call. [Operator Instructions] And please note that this call is being recorded. [Operator Instructions] Before we begin, I would like to remind all participants that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. If you need any assistance, please contact AENZA's Investor Relations team. Please be advised that AENZA's management comments today will include forward-looking statements -- it should be noted that a variety of factors could cause the company's actual results to differ materially from those anticipated results or expectations expressed in these forward-looking statements. For a complete discussion of these risks, please refer to the disclaimer located in this presentation on Page 13. The company assumes no obligation to update or revise any forward-looking statements to reflect new or changed events on circumstances. Presenting today on behalf of the company are Andre Mastrobuono, CEO; and Renzo Temoche, Vice President of Corporate Control and Financial Planning. I would like to turn the conference over to Andre Mastrobuono, CEO. Please go ahead, sir.

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, VP of Corporate Control and Financial Planning will present the results for the first quarter of the year. At the end of the presentation, we will have a moment to answer your questions. [ Mr. Andres Restrepo ], Vice President of Corporate Finance, will join us for the Q&A session. First, on Slide 4, the issuance of the corporate bond on May 14 this year for $2,220 million was made in the international market under the Rule 144A and regulations as of the U.S. Securities Act of 1933 as amended. The proceeds from the issuance of the notes will be used to repay financial obligations, pay transaction costs, finance the company's organic and inorganic growth and for the other specific corporate uses. The senior notes due May 14, 2029 with an interest rate of 12% per annum and will be listed with the Singapore Exchange Securities Trading Limited. In line with the issuance on April 2024, we received the rating report issued by Fitch ratings, which are BB- rating and a stable outlook. The rating reflects our leading position as the largest infrastructure concessions conglomerate in Peru and one of the main contractors in South America with a long record of operations. The rating also incorporates the success of the bond issuance, which improved our liquidity, extend our debt maturity profile and supports our growth strategy. The successful execution of the issuance of the corporate bonds in the international markets is a key step in AENZA's transformation process and paves the way for the company's growth strategy. Second, on Slide 5 regarding our ESG strategy, the S&P, Dow Jones Indices and the Lima Stock Exchange announced the results of the rebalance of the S&P/BVL Peru General ESG Index, which highlights the 16 stocks that stands out for their sustainable practice in the local stock market. We are pleased to inform you that AENZA has been included in the index for the period 2024, 2025 for the third consecutive time. The S&P/BVL Peru General ESG Index is the only index of this -- its kind in Peru. It utilizes a globally recognized methodology to measure the sustainability performance of Peruvian companies listed on the S&P/BVL Peru General Index. This indicator aims to represent a group of most sustainable and investable companies for investors on the Peruvian Stock Exchange. This recognition demonstrates AENZA's strong dedication to operational excellence and sustainable growth. AENZA systematic and strategic approach to sustainability is an integral part of our business operations, ensuring long-term value generation for our stakeholders. On Slide 6, regarding our E&C business unit on April 26 of this year, Costa del Sol S.A. and Consorcio Inti Punku formed by Sacyr Construcción S.A. and Sucursal del Perú, Sacyr Construcción Perú S.A.C. and Cumbra Perú S.A. signed a contract for the construction of 2 Costa del Sol hotels at Jorge Chavez International Airport as a complement to the new terminal. The project in its entirety, we occupy a land area of 4,900 square meters for the development of an upper scale 5-star category hotel and a limited service 2-star category hotel. The amount of the contract in the first stage for the upper scale hotel amounts to $24.1 million without VAT, and the execution term is 13.5 months referentially. And the amount for -- and the term for the second stage for the linked service hotel, we will be agreed once the first stage conclude. My closing remarks, as we conclude this quarter, I would like to highlight the key milestones of our transformation journey. Over the past 2 years, AENZA has focused on generating efficiencies, restraining our organizational structure and improving our processes. The issuance of this corporate bond is pivotal achievement following the pre-bargain agreement, the capital increase and our corporate reorganization. These steps reinforce our regional growth strategy and our vision of becoming Latin America's leading infrastructure development platform. AENZA remains well positioned to contribute to critical infrastructure projects, improving the quality of life for citizens in Peru and other countries in the region. 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.

Results for first quarter 2024 revenues. On Slide 8, consolidated revenues reached PEN 1 billion, 17.3% million higher than figure reported at the end of the first quarter 2023. In the Engineering and Construction area, the increase in revenue was due to higher production volume in the project under execution, mainly in Cumbra Peru for the project with LAP for the construction of the new Jorge Chavez airport terminal and in Morelco for Santa Monica project with Ecopetrol in Colombia. Likewise, in infrastructure area, the increase is mainly explained by higher revenues in Survial and UNNA Transporte due to higher execution of work related to the El Niño Phenomenon and higher traffic in Norvial. In Real Estate, higher revenues are explained by higher units delivery for social housing and industrial loans during the first quarter 2024 and in energy by higher revenues in the accounts plan related to the maquila service with Petroperu. Gross profit. Consolidated gross profit increased 58.2% mainly due to better margin related to: one, in the Real Estate business to save industrial loss and higher social housing deliveries in Comas; two, in infrastructure to higher traffic in Norvial and lower operating costs in UNNA Transporte compared to the first quarter 2023 related to the Line 1 and Survial; three, in Engineering and Construction due to higher profit record in Cumbra Peru in the project with LAP for the construction of the new Jorge Chavez airport terminal, in the San Gabriel project and in the EPC project in the Talara Refinery; and four, in energy due to better results in the cash plan related to the maquila service to the terminals business due to higher storage. Operating income. Administrative expenses increased by 8.5% in first quarter 2034, reaching 5% of the revenues compared to 5.4% of the revenues in first quarter 2023. Other operators incomes and expenses in first quarter 2024 mainly record an adjustment was the provision for the INDECOPI fine of PEN 2.2 million for the update of the tax unit Cumbra Peru. As a result, operating income increased in first quarter 2024 compared to the first quarter 2023, with a margin of 7.7% in first quarter 2024 versus 4.2% in first quarter 2023. Financial expenses. In first quarter 2024, net financial expenses increased by 86.3% compared to the first quarter 2023, mainly due to higher interest on the bridge loan in holding due to the increase in the interest rate and interest related to the civil reparation included since December 2023. The exchange difference is mainly explained by the dollar position of assets and liabilities and the depreciation of the currency. Net income. Consolidated net income in first quarter 2024 was at PEN 15.5 million. The net margin went to minus 2% in first quarter 2023 to 1.6% in first quarter 2024. EBITDA. Adjusted EBITDA in first quarter 2024 increased by 31% compared to the first quarter 2023 from PEN 109.1 million to PEN 143 million. Backlog. On Slide 9, consolidated backlog plus the recurrent businesses amounted to a total backlog of $1,948 million at the first quarter 2024, which represents a ratio of backlog plus recurrent businesses between revenue of 1.62 years. Recurrent businesses are the Oil and Gas segment and the concession of the toll road Ancon-Huacho-Pativilca in Norvial. Debt on Slide 11, consolidated financial liabilities at the end of the first quarter 2024, $437 million. Debt on the end of first quarter 2024 decreased 1.4% compared to the end of the 2023, mainly due to amortization of the Norvial bonds according to the payment schedule. [indiscernible] follows. $35 million correspond to the working capital associated to the clients' account receivables and leasing for the acquisition of machinery and equipment. $245 million correspond to the infrastructure project finance. $8 million correspond to the debt derived from performance bond granted to the secure Concesionaria Chavimochic's obligations under the concession contracts, which was executed by the Peruvian state by virtue of arbitration ruling issued in October 2022, which declared the caducity of the concession. $103 million correspond to the bridge loan disbursed in April 2022 and standard for the [indiscernible] October 2023. There is $37 million correspond to sale 48.8% of the share of Norvial according to the International Financial Reporting Standards Committee. This operation includes the transfer of political rights to AENZA, with an option to report that shares. Finally, $10 million correspond to the lease according to the International Financial Reporting Standards 16. Thank you for your attention. We can start now with the Q&A session.

[Operator Instructions] We do have a question actually from [ Marco ] [indiscernible].

How do you see the backlog generation for the coming quarters as we had seen $600 million in backlog in first quarter of this year?

Thank you for your question. Our backlog in the construction area in this moment is growing in a consistent way. We expect to continue to get a backlog according to our plans. The backlog we get, we will expect to develop in the next 3 years.

[Operator Instructions] We are showing no further questions. Therefore, we will conclude the conference. Thank you for attending today's presentation. You may now disconnect. Thank you..