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

Good afternoon, and welcome to the Aenza Second 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 assistance, please conduct Aenza Investor Relations team. Please be advised that Aenza management comments today will include forward-looking statements. It should be noted that virtual factors could cause the company's actual results should 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 the presentation on Page 13. The company assumes no obligation to update or revise any forward-looking statements to reflect new or changed events or 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.

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, VP of Corporate Control and Financial Planning, will present the results of the second quarter of this year. At the end of the presentation, we will have a moment to answer your questions. Christian Restrepo, Vice President of Corporate Finance, will join us for the Q&A session. We have confirmed the general shareholders meeting to be held on August 20 in order to approve a capital increase of up to $55 million. The capital increase is a significant milestone in our strategic growth plan and follows a series of successful steps we have taken since 2021 including the issuance of a corporate bond of [ for 2,010 million ]; the issuance of $25 million loan with Inter-American Development Bank and the execution of $120 million bridge. Additionally, we have raised over $100 million in previous capital increase processes and expanded our letter of credit lines by $200 million with leading industry players. This new capital increase will strengthen our financial structure, enabling us to finance key projects in our infrastructure and energy platform. As a part of the General Shareholders' Meeting to be held on August 20. After the capital increase meeting, we will also appoint the directors of the company for the August 24th to March 27th period. The current Board, which has successfully managed a phase of transformation will conclude its term. The new Board will be responsible for overseeing the new stage of our growth and consolidation, guiding Aenza through this important new phase. As a part of reorganization process approved by our general shareholders meeting dated on February 7 this year. We have already filed waiver requests before the Peruvian government, clients and financial entities and other third parties that need to authorize such reorganization for our obligation and covenants in the agreements entered into by Aenza and its subsidiaries. To date, some of such approvals are still pending. The new corporate structure will not generate a change of control, and will not affect in any way the ability of Aenza to continue to do business as usual, allowing business to be grouped based on their nature, capabilities and risks, keeping Aenza the head of the Economic Group and with it, the support of all its operations will continue to be warranty. The companies will engage with this matter, and we will continue with the reorganization process, we expect to finalize during the third quarter of this year. We are also initiating an international private placement process of the UNNA platform to attract long-term investors interested in the region. The process is expected to strengthen our capital structure and provide the financial flexibility needed to pursue key infrastructure and energy projects. Our medium and long-term goals include positioning UNNA as a regional leading player in concessions, increasing our capacity to generate value and consolidating our presence in the business. Our strategic direction involves exploring both organic and inorganic growth opportunities. We are actively evaluating potential acquisitions and strategic alliances in Peru but also in other countries like Colombia and Chile. These initiatives aimed diversifying our revenue sources, enhance our market presence and align with our long-term vision of sustainable and impactful infrastructure development. The focus on sustainable practices and operational excellence remains at the core of our strategy, ensuring long-term value creation for our stakeholders. Furthermore, we aim to strengthen and grow our business units. This comprehensive approach provide us with synergies and insurers that every aspect of our company benefits from increased investment in strategic initiatives, reinforcing our commitment to overall corporate growth in excellence. As closing remarks, we conclude this quarter by highlighting the key milestones of our transformation journey. Since 2021, Aenza has undergone a remarkable turnaround and financial recovery driven by our new Board of Directors, a new CEO and a renewed management team. During this period, we have doubled our ESG score, reflecting our commitment to sustainability. We have also implemented an internal cultural transformation, adopting a new management style based on account billing and process management. These achievements have allowed us to regain market credibility and trust. The call for a capital increase, the initiation of a private placement process on the UNNA platform. And the strategic direction we have set our pivotal achievements, reinforcing our regional growth strategy and our vision of becoming Latinas America leading infrastructure developed platform. Aenza is well positioning to contribute to critical infrastructure projects, improving the quality of life for citizens in Peru and other countries in the region. Before handing over to Renzo Temoche, I would like to briefly comment on our financial performance. We have achieved solid results this quarter, reflecting our resilience and adaptability in the face of market challenges. Our performance highlights the effectiveness of our strategic initiatives and our ability to navigate through a complex economic landscape. We have maintained steady growth in our core business units, improved operational efficiencies and strengthen our financial position, all of which position us well for the future opportunities and challenges. Now I will hand over to Renzo Temoche, who will provide for the insights into our financial performance and key metrics. Thank you once again for your attention and continued support.

Results of second quarter 2014 revenues. Consolidated revenues reached PEN 2 billion, 4.3% higher than we have reported at the end of the second quarter of 2023. In the Engineering and Constructure area, the increase in revenue was due to higher production volume in the projects under execution, mainly in Morocco for the Santa Monica project we have for Petro in Colombia and [indiscernible] for the construction of the Jorhe Chaves Airport Terminal. The San Gabriel Project with Buenaventura and the [indiscernible] Molina shopping center. Likewise, in the infrastructure area, the increase is mainly explained by higher revenues from Survial due to greater execution for works and from Norvial due to greater traffic and execution of work. Revenues from Norvial increased 7.3% and revenues from heavyweight traffic increased 10.3% in second quarter 2024 compared to the second quarter 2023. In energy, the higher revenues are explained by higher production in price for oil in the upstream business and higher revenues in the gas plant related to the maquila services provide to Petroperu. Gross profit. Consolidated gross profit increased by 13.4% in second quarter 2024, mainly due to better margins related to one, in energy is due to better results in the gas plant related to the Maquila services provided to the Petroperu and to the terminal business due to the growing storage and dispatch and two, in infrastructure due to the higher traffic in Norvial this was particularly offset by lower margins in the real estate business due to lower sales in the industrial loss in Delmonte and E&C due to a lower profit recorded in Morocco for Santa Monica project with Ecopetrol. Operating income. Administrative expenses increased at 1.5% in second quarter 2024 reaching 5.3% of the revenues compared to 5.5% of revenues in second quarter 2023. Other operating income and expenses in second quarter 2024, mainly records in the E&C business the adjustment of the provision for INDECOPI fine of PEN 2.2 million for the update of the tax unit in Kumba Peru, 4 million in second quarter 2023 and the sales of [indiscernible]. And resource operating income increased in second quarter 2024 compared to the second quarter 2023, we are marching 7.1% in second quarter 2024 versus 6% in second quarter 2023. Financial expenses. In second quarter 2024, net financial expenses increased by 91.8% versus second quarter 2023, mainly due to our financial interest of the corporate bond and interest related to the [ plea ] remain included since December 2023. Likewise, in second quarter 2024 and interest expenses was record for an adjustment to fair value of a loan from BCA to the [indiscernible] for the PEN 14.8 million due to the increase in the discount rate. There's change difference in mainly explained by the dollar position of assets and the ability on the depreciation of the currency. Net income. Consolidated net loss in second quarter 2024 was PEN 66.9 million, net margin [indiscernible] minus 1.2% in second quarter 2023 to the minus 3.4% in second quarter 2024. EBITDA. Adjusted EBITDA in second quarter 2024 increased by 4% compared to the second quarter 2023 from PEN 265 million to PEN 275.5 million. Backlog. Consolidated backlog plus the recurring businesses amounting to the total of backlog [ $1,778 million ] as the second quarter 2024, which represents a ratio of [indiscernible] recurring businesses of over revenues of 1.54 years. Direct current businesses the oil and gas segment and the concession of the [indiscernible] from the area. As of June 2024, the [indiscernible] contract was screened from the engineering and construction of [indiscernible] because the client decide not continue with the project. Debt. Consolidated financial liabilities at the end of the second quarter 2024 were $496 million. Debt of the end of the second quarter 2024 increased 12% compared to the end of 2023, mainly due to the issuance of the corporate bond. Breaks down as follows: $33 million correspond to the working capital associated to the clients' accounts receivables and leasing for the acquisition of machinery and equipment. $233 million correspond to the infrastructure private finance, $882.4 million correspond to a corporate bond. This amount does not consider million of initial issuance discount. On May 14, 2024, we made an issuance of bonds in the international market for million with amortization terms of 5 years of maturity. The proceeds of this loan were used among other corporate partners. To execute the amortization of the bridge loan from the reserves on that payment or the next bancoupon, repayment of the sustained financial obligations and the company organic and inorganic [ finance sheet ]. $31 million correspond to sales 48.8% of the share of [ nonreal ] according to international financial reporting standards. This operation include a transfer of political rights to Aenza with an option to report the shares. Finally, $10 million correspond to release according to International Financial Reporting Standards 16. Thank you for your attention. We can start with a Q&A session.

[Operator Instructions]. Our first question comes from Diego Espinosa from BTG Pacto.

Just a couple of questions here to be exactly. And the first one is you said that you are initiating an international private placement. Can you give us some color about the amount that you expect to collect on this placement? If you can give you some color about tenors or what are you expecting there? And second one is related to the capital injections. Can you give us some color if this committed from IDI or if you have been in talks with the pension funds, considering that you the withdraws on the system there? Those are my two questions.

Okay. Regarding your first question on the private placement, we will start the process in the following months. We are not sure about the amount. We will see that with our -- the banks that will help us in the process. So we are not sure right now about the amount. And on the second one, after the shareholders meeting to be held next week, we will be having meetings with our shareholders, and we will see if they are committed to submit to subscribe or not. We cannot give you some color right now about the amount that they will put.

Our next question comes from Marco Mejia from [ Calpa ] Securities SAP.

Thanks for the call. Well, regarding your growth plans, my question is about the energy platform, are you betting on organic or inorganic growth? Could you give us a little more color, please, about that?

Yes. Both. Organic and inorganic. On the organic growth, we have the extension of Norvial and also -- in energy, both. Organic and inorganic. And in infrastructure, in the concession infrastructure, we have Norvial and Line 1 on the inorganic product.

Since there are no questions at this time. Therefore, we will conclude the conference. Thank you for attending today's presentation. You may now disconnect, and have a wonderful day.