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

Good afternoon, and welcome to the Aenza's First Quarter of 2025 Earnings Conference Call. [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's 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 at the end of this presentation. 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 Dennis Fernandez, Vice President; and Renzo Temoche, Vice President of Corporate Control and Financial Planning. I would like to turn the conference over to Dennis Fernandez, Vice President. Please go ahead, sir.

Good morning, and thank you for joining us. Before I hand it over to Renzo to present our financial results, I would like to briefly comment on some relevant developments that took place during the first quarter of 2025. After the presentation, we will open the floor for questions. Anti-bribery certification for VIVA. In February, our real estate development subsidiary, VIVA, obtained ISO International Standard Organization, 37001 2016 certification for its anti-bribery management system. With this milestone, all of both Aenza's business units are now certified under ISO 37001, reinforcing the company's commitment to the highest international standards in ethics transparency and anticorruption practices. This certification strengthens VIVA's internal control environment, contributes to the prevention of integrity-related risks and supports the consolidation of a strong compliance culture across the group. We believe this achievement will continue to build confidence among our stakeholders and strengthen the credibility of our compliance and governance systems. $40 million financing for Terminales del Peru. In March 2025, our subsidiary, UNNA Energia S.A together with [ O ] in Peru, S.A. Acting on behalf of Terminal del Peru, obtained a financing agreement for up to $40 million. The financing was granted by BD Credito, Sociedad Anónima de Capital Variable, Sociedad Financiera Objeto Múltiple, ENR y Banco BCI Perú. S.A. The agreement establishes that the financing will be disbursed over a period of up to 24 months and will be repaid within 7 years from the date of the first disbursement. The obligations derived from the financing and secured by a cash flow trust, which warranties compliance with payment terms and offers an additional layer of security for the lenders. The proceeds of this financing will be allocated to continue funding additional investments to be executed by Terminal de Peru until 2026 within the framework of the operating contracts for the North and Central terminals, which were signed with Petroperu. These transactions marks a significant development in the consolidation of Aenza's constructions and infrastructure platform and reflects the capacity of our assets to secure competitive and long-term financing in the private credit market. On the shareholders meeting. On March 27, we held our Annual Shareholders Meeting for fiscal year 2024. The following resolutions were approved. The audited separate and consolidated financial statements, the annual report, the corporate governance report and the sustainability report for 2024. Shareholders also approved the appointment of M&H Associados is [indiscernible] member firm as external auditors for the 2025, 2027 periods and the delegation of powers to formalize the approved agreements. This decision reflects shareholder support for the company's governance model and it's strategic direction. Safety Excellence Award. A few days ago, we were pleased to receive news that Cumbra Peru and Cumbra Ingenieria, both part of our Engineering and Construction business unit were selected as the winners of the 2025 Excellence in Safety Award granted by MAPFRE Peru. This recognition highlights the outstanding performance of both subsidiaries in occupational health and safety management and reflects the strong safety culture embedded across our projects. We are proud of this achievement, which reinforces our commitment to ensuring safe working environments. Closing remarks. This quarter marked continued progress in the consolidation of our compliance and governance systems as well as in the development of our concessions platform. Our strategic focus is to expand our infrastructure and energy concessions platform, businesses that generate long-term predictable revenues and offer the most consistent opportunities for sustainable value creation in Peru and the region. These operations are central to our long-term vision and ongoing investment priorities. In line with this strategic direction, we have initiated a comprehensive review of our engineering and construction unit. This process reflects the current challenges in the sector, such as slowdown and investment activity and a limited pipeline of new projects. In this context, we are evaluating all possible paths to successfully address the situation, including selective participation in specialized segments, where we have proven capabilities on a strong track record. We are also working on a review of our internal processes and structures to generate efficiencies. We remain focused on disciplined execution, long-term value creation and strengthening the foundations that support Aenza's transformation. Now I will hand it over to Mr. Renzo Temoche, who will walk us through our financial performance and key metrics for the first quarter. Thank you.

Thank you, Dennis. Results on the first quarter 2025, about the revenues. Consolidated revenues reached PEN 619 million, 37.9% lower than the fuel rate reported at the end of the first quarter 2024. In the engineering and constructions area the decrease in revenue was used to the level progress in [ '21 ] in the projects and their execution mainly in Morocco for the Santa Monica project with Ecopetrol completed in 2024. In Vial y Vives-DSD for the Quebrada Blanca project and Cumbra Peru for the San Gabriel project Buenaventura. 71% of the project completed as of March 2025 and to be concluded during the third quarter 2025 under [ Parques de Comas ] for the construction of the new Jorge Chavez Airport Terminal, [ 91% ] of our completed as of March 2025 and to be concluded during the third quarter 2025. And Vise in the effects of [indiscernible] revenues related to the lower execution of the [ world ] for the catastrophic events ending a phenomenon. This was partially offset by the increase in revenues in the energy business, mainly due to the higher production in the upstream business and the higher liquid sales in the gas business. Upstream service revenues in first quarter 2025 were 7.6% higher than those reported in first quarter 2024. The average oil price per barrel decreased $82.19 in first quarter 2024 to $76.29 in first quarter 2025, offset by higher production from 10,818 barrels per day in first quarter 2024 to us 4,662 barrels per day in first quarter 2025. Gross profit. Consolidated gross profit decreased by 34.7% in the first quarter of 2025, mainly to the E&C business due to the reduction in the volume of the warm executed and the lower margin recorded in the Cumbra Peru and Vial y Vives - DSD. The energy business due to the higher costs associated in the upstream business related to the higher servicing wells and [indiscernible ] due to the lower emergency execution. In first quarter 2025, Cumbra Peru register cost overruns related to the engineering and higher construction costs in the contract within that. Operating income. Administrative expenses decreased by 19.2% in the first quarter 2025, reaching 6.5% of revenue compared to 5% of the revenue in the first quarter of 2024. The decrease was mainly related to E&C due to the reduction in personnel costs in Cumbra Peru, Vial y Vives - DSD [indiscernible]. Other operating income and expenses in first quarter 2025 records the update of the tax unit for the penalty imposed in Blocks 1 and 5 for PEN 1.1 million. The other operating income and expenses line in the first quarter of 2024 mainly records the adjustment of the provision for the [indiscernible] PEN 2.2 million due to the update of the tax unit in Cumbra, Peru. As a result operating income decreased in the first quarter of 2025 compared to the first quarter 2024 with a margin 6.7% in the first quarter of 2025 versus 7.7% in the first quarter of 2024. Financial expenses the first quarter 2025 net financial expenses increased by 18.4% versus first quarter 2024, mainly due to the financial interest in the corporate bonds and interest related to the pre-agreement included since December 2023. The exchange difference is mainly explained by the dollar position of the assets and liabilities and the appreciation of the sole currency. Net income. Consolidated net loss in the first quarter 2025 was PEN 46 million. The engineering and construction business reported a net loss of PEN 60 million, mainly explained by the Peru and Colombia businesses. The decrease in the execution of [indiscernible] during the period has a direct impact on dollar levels and absorption of fixed costs, which is reflected in lower operating profitability. Additionally, Aenza Holding reported a net loss of PEN 46 million related to the financial expenses of the corporate bonds and interest related to the preagreement. The net margin went for the minus 1.6% in the first quarter 2024 to minus 7.5% in the first quarter 2025. Adjusted EBITDA in the first quarter 2025 decreased by 16.3% compared to the first quarter 2024 from the PEN 143 million to PEN 120 million impacted mainly the engineering and constructional time [indiscernible]. Capital expenditures. As of first quarter 2025, $35 million CapEx related to the [indiscernible] energy business corresponds mainly to the drilling of wells in Blocks 3 and 4. The investment related to the line 1 for the infrastructure and [indiscernible] are including the financial assets related to the construction agreement in the cash flow for operating activities. Likewise investment associated with the land purchase in real estate [indiscernible] happening. consolidated bank loan [indiscernible] businesses, amounted for the total of $1,443 million, as for the first quarter 2025, which represent a ratio of value nice recording businesses, of our revenues of 1.5 years. $90 million of total bank correspond to the generating construction business mainly related to the Cumbra Peru $40 million from the [indiscernible] project with for the contract with [indiscernible] and generating supply and construction on the new terminal at and [indiscernible] 2024. [indiscernible] businesses are the oil and -- segment on the [indiscernible] they're all go sessions. Consolidated financial abilities at the end of 1st quarter 2025, while $507 million there at the end of the first quarter 2025, increased 2.4% compared to the end of the 2024. To be the first quarter 2025, own an energia, includes [indiscernible] connected to the - as follows: $45 million corresponds to the working capital associated to the clients' accounts receivables and leasing for the acquisition of machinery and million correspond to the project finance $191 million correspond to the corporate bonds. This amount doesn't consider $21 million of the initial issuance discount. $34 million for the strong deals sales of 48.8% for the share for [ vordernal ] according to the international Financial Reporting Standards. This operation includes the transfer of rights to [ our shares]. Additionally saving $45 million [ ionrespond ] rise of the [inidiscernible] rise of U.S. liabilities and [indiscernible] lease in 2024 is due to acquisition of the corporate building for $19.5 million. Thank you for your attention. We can start now with the Q&A session.

Our first question comes from Diego Espinosa with BTG.

I just have 2 questions. Can you provide us some color about the current status of the [ Nobial ] construction? How are the negotiations there with the authority and that's it from my side. And second one, if you can provide us some color about the backlog for the Engineering and Construction business. What are the plans there?

$90 million of the first quarter 2025, which we executed on the quarter about $78.1 million in 2025. A $11.1 million in 2026. And $1.2 million in 2027. This increase was reflect on our TVD in [indiscernible] We are I think and over think [indiscernible] provision, pretty starting contest with array going from [indiscernible] and more balance contract or competition, what I mean in 2025 not seeing with the current quarter [indiscernible]. There we look it for 2026 is more Dennis -- that subject win is playing even business relying with our size [indiscernible] profitability is amounting for example. [indiscernible] of the 90% infrastructure, historical managing of that 11%. We try to put focus in this kind of sectors with the idea to recover our bank loan, our rentability that we have in the past.

Diego, this is Fernando Rodrigo, I'm the Vice President of Business Development. With regards to your question about Norvial, we continue to work with the Ministry of Transport Communications. Ministry of Economy and Finances and all other stakeholders to move towards an extension of the concession. We hope to have this done ideally by first half of 2026. Both Norvial as well as [ Lima ] now are a critical projects for our growth and the future, and we hope to sign both concessions by first half of next year.

Next question from Marco Mejia with Kallpa Securities.

I have just 1 question. It is about what is the strategy of the company regarding the -- your potential guidance about the E&C unit. My question is about, if we -- could we expect similar quarters in terms of revenue like the first quarter in the next quarters of the year?

Yes, regarding your question, yes, we actually we have initiated a rightsizing process also in the E&C business with an expense cut program to align the possible cash requirements from this business unit. The program actually began last April and will be fully implemented next July, implies a recognition also of a particularly adverse sector environment in recent quarters, investment activity in Peru and the region where we operate that actually has slowed down all our backlog. We -- actually, our project pipeline has been limited in this last quarters, but we also expect this sector to recover. I mean, we are expecting the defense changes in 2026, when all the political situation and all the different political level lose up again and began to go public or go to the market again.

We have no questions at this time. Therefore, we will conclude the conference. Thank you for attending today's presentation. You may now disconnect. Thank you.