Aguas Andinas S.A. (AGUASA) Earnings Call Transcript & Summary

Good morning to everyone. Thank you so much for being connected today, to this new deliveries of outcomes. In this occasion, we are going to be discuss about the outcome of the first quarter of 2024. Antonela Laino and so -- and the Manager of Finance and José Sáez, Director of Strategies and Corporate Issues. I'd like to give a profile about them. He started on 2011, then to take cover in Barcelona and Paris, since that year as he has had assumed for the group in Barcelona. In this position he was up to 2023 when he had run Aguas Andinas. Antonela Laino has been performing in different scope, in the financial industries, on telecommunication field. José Sáez is a director of strategies and corporate issue. He become part of Aguas Andinas 2008 as an expert of sanitation, he has been manager of the following companies and Director of Customer Service of Aguas Andinas. We would like to share with you that these, really have this available starting on the next week and question that you would like to post it in the Q&A with all your concern and then we will discuss all your concerns at the end of the presentation. So I will offer the floor then to Miquel.

Good morning to everyone. Thank you very much to be again with the outcomes of the first quarter. I would like to start with something that is important to enhance. In Santiago this year, we have had the most outstanding amount of rainfall compared to the previous year in 2023 and almost [ 80 liters ] has been rainfall, 80% of this has been due to the rainfall. So it's not really rain but also there's snow melting in the -- on the mountains and this allows us to have a positive perception in relation to the previous year. The rainfall in Santiago has been much higher in volume and also in the operative costs. And following with the metrology of the second quarter, the winter has become -- and temperature has been beneath the low temperatures compared with last year, especially in May, June. So we have been managing inflation in compare to 2023, up to June and Antonela will address this issue. And this has been an increase that has reported very steady inflation even though this is a natural coverage. In terms of costs, it can be analyzed in the first 6 months, this balance, in which we have a index price -- consumer index and in relation of 1.7%. So this adjustment has been corrected and that has been impacted temporarily. And then you can review in the accounts of the semester, we think this context inflation rate, as mentioned, Antonela, has been positive and the results that has been acquired in relation to the new activities. I mentioned that we have overcome this year. So the entire process has following the normal process and covering different milestone through the months of October. On my part, I will leave that part to Antonela to address this point. Thank you so much.

I'm sorry, I was mute and thank you very much. Good morning to everyone. Yes, continuing with the financial figures, I would like to enhance our incomes, revenue has been increasing in [ 1.17 ] with some millions, as you can observe in the screen in relation to the previous year. Then we have Miquel with advancing this news and then we have [indiscernible] that sends to [ CLP 1 million -- CLP 400 some ] as he shared with us today, we will reviewing cost impact and we have a positive figure related to incomes and revenue. In terms of volume on, the second quarter, we have due to meteorological variation we have detrimental consumption. And the reason, important factor of temperature, as we have seen and this has been impacting us to consume part of this growth that we were having on the first quarter of the year. And the impact is still positive, has been less and it's about [ CLP 400,000 million ]. In sanitation, so we were discussing and sharing on the first quarter that we have positive incomes due to the selling of assets and this help us to manage different negative [indiscernible] and the sanitation issues. On the side of costs, it's important to enhance and point out here, this quarter, we have had a reduction of 1.1% in the cost and that is [ CLP 1,800,000 million ]. And this I would like to address from most important to less important and this has to deal with less transfer. So we have less transfer, [ CLP 1,400,000 million ]. And the has been notice positive development. In terms of inflation because due to inflation or type of exchange rate [ CLP 4,800 million ]. And obviously, this comes to counterbalance our plan of efficiency. This has been with our plan of balance plus. And this we have managed efficiencies of [ CLP 400 million ]. One of the extraordinary effects that we have already mentioned in the previous calls, we have certain effect last year because of the climate changes that was impacting us compared -- in comparison. And this has been extraordinary improvement. So we have closed the semester with 2.9% on 2.5% in comparison to the previous quarter. And this is also impacting us positively. All these effects been allowing us, the company, our company to have an increase of 300% with a margin of 42%. And below the EBITDA increase, it's important to enhance that the financial results and outcomes, valuation of our index UF figure has been accompanying us since pandemia, the COVID pandemia. In this opportunity has allow us to has less devaluation, an increase of 1.2% in comparison with the last semester of 2023. And these have been counterbalancing and counteracting the negative impact on the financial incomes because basically, we have less impact of cash and this has been due to reduce of tariff that and this corresponds to reduction of tariff rate that was done by the reserve of Central Bank. All this effect added to some other effects that were discussed within positive impact as a result of selling of real estate properties [indiscernible] and this is earning -- that is impacting and over 8%. So this is the metrological, some that we wanted to point out. I think all of us, we have receive a level of population. In terms of rainfall, this year has been quite rainy. And these has affected mainly the cities, not the Andes Mountains. We are trying to explain you that the rainfall that we are facing in the cities, this has impacted in the consumption. And of course, in the drinkable water demand. As Miquel has commented to us, due to this figure and this has exceed every parameters and in the right side parameters chose temperature from March has been demand that was more ample. And in regarding to the previous year, it was almost 5 degrees less. And we think this is going to mark a 3 degrees of difference. And this impact has been because of the volume. And this is really owing to less temperature and the difference between summer and winter. So continue with the following slide. Cristian has said once, in the record of the first quarters, we have different effects that are related on collections. We didn't have no problem. We didn't face any issue -- any negative situation on the behavior of payment. Really, we have only faced seasonal differences that has been dragged to the second quarter. And this has made that operative range could be about [ CLP 700 million ]. In terms of tax, we have certain tax recurrent that really manage the payment and this allow us to have a positive evaluation. In terms of payment the impact is coming not only because of the cost but on the collection side because we have less stock in cash. In terms of CapEx that is already paid, it's important gap and this is becoming reduced along the time. And this is because of the seasonal investment project that we had. And this has affected us during the first semester. And this is driven to a close of [ CLP 40,000 million ] and with the selling of real estate properties. And obviously and considering the dividend that has been paid this year, this is leaving us with some negative figure, as you may see in the screen. In terms of diversification of different products under different contexts that we have, these are very similar unless the financial in the call -- in the previous call that has to do with a brief financing problem in the total view of the company. This was a bond -- it's a loan that was the first seasonal with some [ CHF 10 million ]. So I just want to enhance that this mission has requests a banking loan and is contributing to the refinancial program of this year. On 2024, we do not need any additional transaction because this has been already [indiscernible]. This gives us about 30% social and this then forces a commitment that we have in terms of all what we have in terms of the indebtedness, they would like -- we would like to continue in the same line. The different currencies that we have used as a company, we have the policy of covering any kind of acquisition to different debt currency variables. So these has been covered. So exposition to a variable rate also, it was during the previous quarter. And then we see the graph on the right side, the terms of valuation of these cash flow, as we were discussing and sharing with you, where, in some cases negative and the rest of the debt has, with amortization of the debt. And this has to do with the income as a result of these financial programs. The valuation of the net debt is about 5%. So the revaluation of the debt also has an impact and this has been really been managed and reduced. This is part of the balance of the debt and the impact of the debt. So in terms of CapEx, so we have put a lot of reinforcement in and the commitment of the company in terms of different commitment of ensuring the commitment to work on these and part of these investments has to do with these, with all credit is related to renewal of net worth, the top line that we have. And we continue working and we hope to continue working in the following months and all replacements of the counters and meters. This is helping us to have a more exact and accurate measurement in terms of a customer consumption. So they are indicators then that are quite healthy on financial terms. In terms of leverage, we have closed the semester with [ 1.78% ] and the net debt to EBITDA [ 8.14% ]. So here we have also shared with you that along the previous week it was important to mention that we can keep maintaining our rating at international level, also we go from plus to less. And the last transaction that we did at the international [indiscernible], we continue working with many and we obtained the classification on this regard. Without any further comment, I would like to give you the floor to José because he will comment and tell with us the new purpose or objective of Aguas Andinas.

Good morning to everyone. Thank you so much for sharing this, revisiting our corporate purpose. In the last reports that we have this needs -- it's -- the need of having and facing the new scenarios. And to see this schematic and how can we certain actions that we are doing in the same line and to go deeper in this diagnosis. From this purpose I would like to comment with you that this is arising from the impact of the result that we have that it has to do with a new scenario. This is a reality that is impacting us in different areas of the company. And we have to report that every line of work, we hope that we will be improving and to assume the commitment of having our corporate purpose, objective and to ensure the sustainability of hydro resources for the customers that we have. And here, a thorough, I'd say, discussion because we could have addressed this reflection only from the point of view of our business. But this was more related to the social approach that the country is taking at level of having a clarity in different zones, such are the basic element that is obligating the company to perform in which we change a little bit in which -- the field we were managing before. So in this way, [indiscernible] hub of operation and as a business cycle of addressing the 3 main line with the clients, with alignment, with a purpose, that relevance. And within this model, we have defined a different territory. And within these territories and among this, we have an environmental territory. And then each one of them have been identify and define it with a scope of certain actions that the company will commit in order to define a materialized purpose, objective, with the aim that we are involved right now. We would like to see because our environment is demanding us to develop in a higher intensity on the way we are delivering the services on how do we approach to our main axis. The way of which -- on the way we, on how we generate sustainability. Also, the sustainability that is together hand by hand with the financial sustainability of the company. We have generate very specific work that designed to identify each one of the services that will be delivered through the [indiscernible] of work or this environment. So this has been mapped and also has been evaluated in our business model, in our management model and prioritized, which are more relevant and generate more impact to this identify areas. In this screen, you will observe that each of the areas define it for each territory, how we are defining the obligation that we are committing and undertaking. And the purpose that we are committing ourself in relation with the community in order to approach the specific objective and which will be the networking, which we will controlling and ensuring that we are reaching the objectives that were defined in one of -- each one. We think this sector in which we are involved today, it generated special conditions that has driven us to look continuously and to pave our national social environment in order to sustain the level and the different lines of work that we have defined and to turn the potable water, the drinkable water as a social benefit. Thank you.

Thank you so much to every panelist and now we open this space on Q&A. [Operator Instructions]. And we have some questions that are already been posed. The first is related to the tariff process, I need to say and it refers to the calendar or timing. Is that possible to see the final outcomes or to the announcement of this tariff modification before the end of this year. Who can respond to this question?

Thank you so much. Effectively, it could be the case in which we have the evolution of tariff, if there is in accordance with the regulator. In case of not reaching an agreement, the figures that are mandatory related to tariff, they will be apply on 2025. This will depend on the negotiation with the regulator authority.

Thank you very much, Miquel. And within the same subject or topic, whether we have to wait, during this regulatory cycle, are we going to include more material assets, for instance, to increase their resilience within the service.

Yes, at the end of last year, we present with some major resilience and also another sources of water. And, of course, during the tariff process, we have to define which are the regulatory modifications are approved. And [indiscernible] response, yes, it should be an increase on those projects that were submitted and which of those projects will be finished. And how are we going to complete the tariff on the following months and that is the complete response to that question.

Thank you so much. We have another question. How do you foresee the balance in terms of CapEx need in the next or following 2 years. So Antonela, maybe you could answer or Miquel could answer.

Yes. I already started, so I will answer. In the part of [indiscernible] these are also related to resilience and new sources. I think for the following 2 years, there should be a very relevant impact because they are going to be approved by the part of regulator, a series of permit. And for the next 2 years, this is the part that is going to be a continuum process and their response to the population will be there and specific for this special project. And if we complete some agreement with regulator, where, we should see that.

We have here another question in relation to the outcome statement. What is happening with nonoperational statement? How do you explain that the income due to the cash interest? Antonela, please, may you answer.

So the financial outcome, as I mentioned, we have a positive effect because of the less revaluation of the index unit, which is UF. And this leaves flat 0.2% that has to do with less income, as it was exposed, then we have less payer of taxes. And then we have a positive impact because of selling of real estate properties, land properties. So these are the 2 effects that we have, then we have this flat result and this -- they 2 are other effects.

Thank you so much. Antonela. This is a question, I would like to direct to José Sáez. And this is related to the capital, which is, how you're tracking climate change. How do you relate it with timely policies, with [indiscernible] of sanitary services and whether the company will increase its operational services.

We have to reach and contribute that the company will become ready to respond to the demand, in our cases, to respond to our customers. And as I was mentioning, we have a response that we did at the end of 2023, we put at the disposition of the authorities. The model that the company was suggesting to ensure that the distribution of drinkable water will have no problem. And this is a key issue within the process that we are living. Sometimes, we are discussing some of the initiatives. And to provide this ability in terms of having a good sustainability so that the company will continue to develop its projects and increasing its reputation as [indiscernible] and as a promotor looking for initiatives, yes and utilizing the different factors of the climate change will not to only be incident [indiscernible] in our performance but also for seeing the consequence that the different climate changes that we are facing a phenomenon that are obligating us to put an emphasis on resilience and to improve our infrastructure on that regard.

Thank you very much José. And within this line and specifically, there is a question, in which status are the main projects? In general, the investment projects as the bio alternative, the use of drinkable water, et cetera.

Thank you very much, Denisse. So the alternative process of capturing water, it's based on the environment assessment impact and see the different process and have a view regarding the basin. And we are giving the initial steps in order to develop that project.

Thank you very much, Miquel. Another questions in terms of financial issues, the level of indebtment at the, as José Sáez said [indiscernible] is 1.78x in terms of the initiatives to develop in the future. How do you plan to manage this? Antonela, I will hand it over, this question to you.

Yes, clearly, it is a recession on that. And we know that the recent inflation impact during the last year and we understand whether this is an effect that is due to [indiscernible] factors of inflation that could be given again as a management, as a member of management of the company, we must be keen on that and work to manage that limit. And within the work and the initiatives that we are evaluating is to diversify the different initiatives of funding that has Aguas Andinas and to decrease this wealth of debt and the restriction we have. This is one of the points. Of course, we have some other points under analysis but the CapEx that the company would like to invest will be along with the soundness, financial soundness and the control of these certain indicators.

I would like to add another point as well. A major part of this CapEx has to do with an additional tariff that we have to respond to the CapEx. And this will contribute to maintain the equilibrium, the balance that Antonela was mentioning right now.

Thank you so much. It seems to be that there are not further questions from the audience. So we [indiscernible] then for having connected yourself to this event. We recall you that we will have on the 25th of November we will have the yearly or annual call. If by any reason you have not received invitation and we would like to reiterate that this event has been recorded and will be online starting from the next week. Thank you so much. And let's see in another or next opportunity. Thank you. Goodbye. Thank you so much.