Companhia de Saneamento do Paraná - SANEPAR (SAPR11) Q4 FY2025 Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today. Welcome to the video conference announcing the results of the fourth quarter 2025 for Companhia de Saneamento do Paraná - SANEPAR. [Operator Instructions] Please note that this video conference is being recorded and will be made available on the company's website ri.sanepar.com.br where the full earnings release and presentation materials is accessible. You can download the presentation directly from the chat available in English. The Q&A session will follow the presentation. [Operator Instructions] If your question is not addressed during the event, please feel free to e-mail [email protected]. Please be aware that the information provided during this presentation, including any forward-looking statements regarding SANEPAR's business outlooks, projections and financial targets reflect management's current beliefs and assumptions as well as information available at the time. These statements are subject to risks, uncertainties and changes in circumstances that could cause actual results to differ materially. Investors should consider general economic conditions, market factors and other variables that could impact the company's performance and cause actual results to differ from those expressed in forward-looking statements. Now I'll hand it over to our Chief Financial and Investor Relations Officer, Abel Demetrio.

Thank you, Rodrigo. Good morning, everyone, for participating. We have our Wilson Lipski, our CEO, our Investment Director, Leura Lucia, our Accounting Director and our IR team. I will hand it over to our Wilson Lipski for his initial considerations.

Good morning, good morning, everyone. Very briefly, I would like to contextualize the numbers we will be presenting in this presentation earnings of fourth quarter last year. We are following -- we are moving towards universalization in an accelerated way. We reached 82.4% and if we apply the new resolution using the potentials, we might have additional numbers reaching almost universalization determined for 2023. Our objective is to reach it in 2029. For that, we need a lot of investment. Last year, we had a record BRL 2.7 billion in work which adds to the stocks in works ongoing, it shows how robust this company is in terms of being able to translate this in works, which are complex, but brings results, especially for social inclusion and public health, almost 12 million people that are being served. Something to highlight is the increase of new economies. There were over 100,000 or around 100,000 in sewage economies and 70,000 new economies of water. So if we compare it -- this increase represents the highest average number in Parana, if we compare with the city of Colombo with 70,000 people. So we almost brought new municipality of middle size inside Parana. So this brings and translates an increase in revenue, as you will see, it's quite exponential. We managed to approve the continuity of this universalization, a robust plan of investments in which we have sewage predominantly, but without forgetting the water systems and we are projecting investments of BRL 3.1 billion in the next 5 years. So we might be the few companies in sanitation in mixed companies so robust for this kind of investments and with a lot of tranquility in terms of receiving funds for what is projected. Now of course, with all this increase in this new plant, everything that is added to what we already have, the expenditures tend to increase we are trying to find the right balance between these expenses, these new expenses within the necessary volume to be able to give way to this increase in revenue and investments that we are making in a very accelerated way. But we managed to keep the EBITDA margin close to 40%. And which is very traditional within the company, and we are making some concrete actions. So also we have some workers that agreed to leave the company, and we added new workers more motivated and with lower values in their income, their compensation. And this is demonstrated by our survey as something very well accepted within the company, over 80% approved. Totally this regime that is established in terms of governance within our company. So 80% of our workers approved that. So this is very interesting to understand that the more the pack, the more the operational cost, but we are always trying to find this balance to make it reasonable for everyone. SANEPAR is going through a big moment is national and international highlight, especially in what concerns innovation, operation, investment. And we now recently, we launched SANEPAR 5.0 which is a new version of technology innovation that in the future, we will make our cost -- operational cost cheaper, bringing the best in the market, what we have in the best in the market to be part of our day by day. So these are my initial words. I'm very -- I trust the future, and this transparency is very important in this big moment SANEPAR is going through.

Thank you, President, Rodrigo, we can start our presentation. So now let's go through the highlights of the year 2025 Fourth Quarter of 2025. As our investments or records, we've reached on the fourth quarter BRL 789 million in investments. In 2025, it was BRL 2.652 million, which is an increase for 2024 of 38.8%. Concerning operational efficiency, also default of 0.6% and it's in line with our regulations. It's very important for this to be contemplated in the tariff of the company. And the invoiced volume increased 1% compared to 2024. And on the fourth quarter, we increased 1.1% compared to the fourth quarter of 2024. So we compare in '25 to '25. Concerning sewage, we increased 2.6%. And also 2.6% compared to the year of 2024. Our net revenue increased 6.5% in the fourth quarter '25 compared to 2024 and 5.2% in the year of 2025 when compared to the year of 2025. And the net margin minus 4.1% compared to fourth quarter and plus 6.3% versus 2024 with an average 0.6x EBITDA. And some recognitions and governance like the Transparency Award, some solidarity seal and honorable mention due to our ESG causes which is extremely -- we have at the ESG in our DNA. In the next slide, let's go to the operational results. As we saw in water, we had volume with an increase of 1%, volume increased 1% as well in the invoiced volume. The volumes collect -- the sewage collected and invoice we increased also 2.6%. The number of the connections, we had an increase of 1.3% of which was 46,964 new connections and 1.6% of increase in sewage economies. With over 6,000 new economies, which shows that despite the company's universalized in terms of water since 2007, we continue with an EBITDA robust growth concerning connections, 2.6%, reflecting the universalization, 66,954 new connections and more than 100,000 sewage economies. So what the President said, over 100,000 economies and over 70,000 economies of water, so it's around 170,000 new economies in the year 2025. Now let's see the reservoir levels. we closed the year of 2025 with 84% of our reservoirs with water. So Irai, 70%; Passauna 90%, Piraquara, 96% and Piraquara II 76%. And the most updated level. It's in our site is approximately 87% of the volume -- the reservoir levels today. Our service index, the legal framework, which obliges us to serve 90% by 2033 and 90% is switched by 2022. We are moving towards universalization, which 82.4%, 100% of volume is treated by the company, and we kept this service with 100% with treated water for the population, the urban population. Next slide, let's go through the financial indicators. We saw the default in 2025 was 0.6%. In this regard, I highlight that as important as the default is the level reached in the past 3 years. In 2023, we had a reversion of default. 2024, default 0.7%. And this year, a little lower 0.6%, which is important because we know that the waging invoices that are not paid, they go back to the tariff. So the lower -- default the lower the tariff in the revision of tariffs because losses per connection, we had a reduction compared to 2024. We closed the year of 2025 with losses of 222.7 liters per connection per day less than 223.1 recorded in 2024. Margin EBITDA for 41.1%, in line with 2024, ROE 17.9% and both ROIC annualized of 12%. In the next slide, let's talk about our quarter results. We increased in 2025, we increased 5.2% reaching BRL 7.206 billion in net revenue, and EBITDA increased 0.9%, reaching BRL 2.964 billion. Our net profit reached BRL 2.80 billion, with an increase of 34.6%. The cost and expenses increased with 8.4% with BRL 4,242 million. Our EBITDA margin compared to 2024 was 1.8% lower, 41.1%, and the net margin increased reached 28.9% in 2025. Now let's go through the quarter results. The main impacts we had. So the net revenue increased 6.5% compared to fourth quarter of 2024, a little better than 2024, it increase 4.7%. The cost and expenses with personnel increased 12.7%, reaching BRL 434,988 this 12% are reflected as a result of labor compensation registered in the period, a result of the company's work in terms of judicial settlements. So this labor indemnizations, they refer to a reversion of provisions and we took out from that and launched in the personnel expenses. Taking out this effect, which is close to the result, we would have an increase of 12.56%, excluding these provisions because as we said, they were recorded in the item of provisions. PPR minus 12.5%. This is the profit material reduction of 9.2% and the impact was a reduction of 15% of chemical products. So it's important for maintenance of our operations, the utilization of these products and that the prices of these products are accessible. Third electricity, we had a reduction of minus 7.4% compared to the same period of last year. We reached BRL 114 million as a result of migration of the free market. The issue of electricity, as we saw, has been a constant issue in 2025. Of course, this movement is being consolidated from 2026, we should have stability. When we talk about third-party services, we can open this. It is the PPPs and we had on the fourth quarter of 2024, we have PPPs of an expense of BRL 12 million in the fourth quarter of '25. A variation of BRL 25 million that impacted this third-party services. Excluding the PPPs, we have an increase of 16% increase, especially impacted by maintenance services that increase in technical services that increased over 65% and others have technical services, operational maintenance, which impacted this account. The general taxes a 7.7% increase in line with the usual expense, inflation, plus expense, judicial provisions and regulations, a more positive result, as I said, because of personnel, we had an increase of launching the indemnization and reducing the provision -- judicial provisions. So the number was better. We have more than BRL 47 million against BRL 13 million of the fourth quarter of 2024. The provisions for health insurance and health plans BRL 5.975 million expenses and financial revenue reduction, minus 35.2% and other costs and expenses increased 43%, impacted mainly by the issue of PPD done in December, around BRL 48 million. If we -- the issue of PDD, which is recommended by our independent audit, it was important in the sense of being adherent to the accounting norms and what the audit required from us. When we see the next slide, accumulated results in the personnel account just to review the account, we increased 18%. We have to remember that the provision for internalization of PDD of all the -- of the 500 employees that left, it was a provision and an indemnization of BRL 170 million. So the personnel account was impacted because of these people who left voluntarily in the account of expenses and revenue, we have an adjustment of the asset of BRL 183 million net compared to 2024 due to the increase of the discount rate of interest versus what was actual in 2024. The PDDs, we had BRL 48 million compared to the quarter. But in the year, when we compare to the year of 2024 this account of PDD increased BRL 613 million. So it impacted in other costs and expenses, an amount quite significant compared to 2024. So when we add up PDD, APP and the provisions for -- we have these 3 items, over BRL 400 million, which were registered and impacted in the results. Besides that the civil work provisions around 3 big actions recorded in the year in provisions, which were the provisions of the Itau audit or the piece of land of Gerais province in Ponta Grossa and that added in this amount. So these are some main points reported in the year of 2025. In the next slide, let's take a look at the CapEx. Last year, we invested will be in 2025. BRL 1.912 billion and in '25 BRL 2.653 billion over 38.8% for this year, we are predicting BRL 2.6 billion, again, of investments. So the investments were 31% in water and 54% and 15% in other. The resources 65% own resources and 35% third-party resources of course with a more robust cash money. We did not have to borrow money because now the ceiling is very high, so we did not have the need to look for resources for our investments. The net debt and leverage in the short term the debt that achieved in '26 is over BRL 900 million. It is very in line with 2025. The long-term debt, over BRL 6 billion and the total EBITDA BRL 7.60 billion. So we had a net debt of the BRL 700 billion, 0.6% of the EBITDA of the generation flow, an increase of 154% and a conversion of 238%. So the increase of the cost of third-party capital, it's impacting VP due to the increase of the discount rate reaching 12%. So we hope that for 2026 with the stability or the fall of Selic and the level of -- and if the inflation is stabilized. We might stabilize this increase, which we verify in 2025. Our debt breakdown is well distributed among the indicators with no pressure and 1/3, 33% in TR, which is the biggest part on the right side of the graph, IPCA, 27%. And DI, we have around 30%, which is 27%, which is written DI, but we also have 3% more of gold around 30% connected to DI. IPC and FIPE 4% with low 4%. And so it's a predictable debt with indicators, national indicators, all of them very well aligned. Now our covenants and our obligations with our creditors. So we have with BNDES of the finances with the bank, we have debentures, fourth and seventh issues the 3 covenants established are fulfilled, whether it is the net debt bank less or equal to 3 EBITDA another 1.5 other debts less or equal to 1. So all of them fulfilled our contracts with Caixa, we have contracts that foresee some clauses of covenants, EBITDA adjusted by its 1 -- only higher than 1.5, and we have 1.7. So 0.4 in other debt and 0.3 with EBITDA adjusted. So we are quite comfortable here. We issued in 2025 BRL 375 million, which were obtained through Banco do Brasil for investments for the sewage treatment station. So we have a condition of a debt service coverage ratio of 1.5 and EBITDA adjusted by adjusted EBITDA net financial expense, we have 0.4% meeting these indicators. So in the -- we have the debentures issues 9 to 14 also to indicate the debt is less or equal to 3, we have 0.4. The adjusted -- we have 128.7. The contract KFW we went through all what was mentioned before, the level of debt, the limit is 60% of that. We have 53% by the end of 2025, so reaching this clause predicted in the contract. Now let's go to our balance sheet. The main variation positions in 2025. So the net debt reached BRL 2.219 billion. So it's made up of cash and cash equivalent versus the financial investment versus loans, financing and debentures and dividends and interest on equity. So we had 213.5% and the issue of loans, financials that increased 11.5%. The turnover closed BRL 445.078 million (sic) [ BRL 465.078 million ] a decrease of 45.9%, due to receivables, lower than 2024 of BRL 1.411 billion to BRL 1.283 billion, a reduction of 9.1%. The stocks increased from BRL 73 million to BRL 97 million, an increase of 32.5% and the contractors and suppliers from BRL 336 million to BRL 516 million, an increase of 53% salaries and an increase of 38.1%. Assets and liabilities, a reduction of 89.3% due to the liabilities compared to the rate of payment. In this issue in other assets and liabilities, an important account in assets in the contracts, the ongoing construction, the increase to BRL 3 billion increase of 32.7%. So our net asset was BRL 2 billion and our turnover -- operational turnover, was measured in 23 days of the year of '25 better than the 45 days verified in 2024. The cash flow what we see, as we saw in the previous slide an operating activities of BRL 7.60 billion, an increase of 154% due to the net profit adjusted, a decrease of 36% and the -- so this is the main reflections of operational. The activities of investments with the BRL 2.615 billion and the activities of financing, consuming our cash flow of BRL 637 million. We received over BRL 400 million, and we -- and the loans for finance is BRL 915 million, and other variations, BRL 68.348 million. So there was an increase of BRL 3.8 billion. So with important increase. So that was the presentation of the fourth quarter of 2025. So we are available for any questions and other clarifications that need to be done.

So we will start the question-and-answer session. [Operator Instructions] Our first question is from Ricardo Mello, Banco Safre. Adding to Guilherme Lima, Santander. Concerning the rates of payment, could you give us an update about the expectation of the company concerning the current dealings and the conclusion of the process. Could you comment if the tariff process in 2025, we could see an effect due to the evolution of rates of payment? Or should we wait for next year. These are the questions of Guilherme and Ricardo.

Concerning the rates of payment as publication in the [Foreign Language], the Official Journal was communicated to the market, the regulating agency of Parana. It is analyzing the declared that is analyzing the rate of payment. The company has answered the questions of the agency about the process, and it's awaiting. Right now, we have no definition about the team. As I said, this is in charge of this team of work. If it is inter sectorial, which was constituted by the agency and the company was authorized by the administration council to make adjustments for 2026. This has to be analyzed by the agency by April 17, 2026 because the tariffs they are -- they go into 17 May. They are in force until 17 May. So we don't think the 2 issues are separate issues, rates of payment and readjustments are two separate things, but I cannot say for sure what is the date when they expect to give us an answer. So we depend on the conclusion of the work by the agency in this -- so it depends on the board. So right now, we cannot give a precise answer but we understand that this work is quite advanced. And this first semester of 2026, we should have a definition by the agency.

Now continuing our next question, by [ Joao Vitos, Speech Athena Capital ]. About the line of provision for contingencies in DRI, could you clarify if the company is acknowledging only additions and reversions or if the payments are impacting the results?

Sure, thank you for your question. In this regard, I will hand over to our accountant, Ozires for him to be able to answer.

I thank in the name of the Board to be participating in this event. Yes, well, the effect in the result is integral. So we have a provision -- because it has a provision, it has a value recorded as liability, contingent and the moment it is paid, it is a judicial deposit. So the effect of this payment is reversed and the net impact is in the account, whether it's labor or civil or environmental, the impact is integral.

Next question is Luiz Carlos Ferreira, Investor. The company announced a CapEx for the -- announced for next year, the universe -- the surge universalization will be reached before the deadline. How is the PPPs?

I hand over to our Investment Director for her to be able to answer.

Good morning, everyone. Concerning the service, the meeting our targets, we work with very strong planning. The investments, they are not born without projects, without all the technical elements that we need. So we have been managing to reach our purpose of reaching almost 100% of what we had planned, obviously, we have some problems in the middle of the way. Licensing, environmental licenses that require deep studies by the body to authorize the cut of trees. And so we have the issuance of tenders in some cases. We have not been successful in the first attempt of tender. Many times, we need to review some technical points. So all these issues causes to work and the more planned, the better. So we work strongly with the purpose of reaching universalization before 2033 is quite a big volume of work. It's around 600 different initiatives. So works in the state this year, we are working around this number, more than 250 works of high level. In 2025, we had 3 big works which are very representative for the company, the conclusion of Miringuava reservoir, the cut of the trees, the roads, the building of roads to prevent -- to prevent the people that who live in the area, prevent them from having problems accessing their houses. Now by the end of 2025 and beginning of 2026, we initiated the filling of the reservoir, of the lake. This was over BRL 21 billion invested, and they will have now an effect both in investment and remuneration of capital. We had another work, which is another reservoir, which had an anchor in terms of judicial adjustments. It was signed in 2018, we managed to reach the net phase of treatment in 2025. We continue with the work, but it is in its solid phase, the gas phase and that's why I understand, yes, we will be able to reach the universalization before 2033. This is our main goal. Concerning PPPs, Abel might add something, but we are working strongly. The beginning is always slow because we have 3 batches in the countryside with different companies, each one of them now getting acquainted with the places, developing projects, approving together with the company. How we are going to serve the population, but all of them are ongoing as we imagine, as we projected. So I believe we have a good prognosis to meet the new framework. I think you mentioned 3 works, but you mentioned 2. So yes, that's correct. The third work is estacao de tratamento, which is to date, it must be around 60% or 70% of close to its conclusion. It's more -- it costs over BRL 350 million and it will bring significant gain environmentally speaking, and operationally speaking, it's a region that expands its sewage treatment. And as we saw in the presentation we have treated 100% of our sewage so [indiscernible] has the same purpose, but no less important. Dozens of works that are ongoing and that some are coming from 2025, but there are in their pace of implementation for 2026 and others that will start in 2027. Our plan of investment shows that this is a robust investment for many years, still for us to reach universalization.

And I would like to add something related to PPPs. Remember in 2025, 3 batches in 2 micro regions, the micro regions Center East. They started being serviced by the PPPs companies. And financially speaking, we received payments. So that was a reinforcement. So we reached BRL 95.2 million of paid bills in 2025, which reflects the beginning of the activities in the 3 micro regions where the company may have the tenders for PPPs.

Our next question comes from [ Reinaldo Verissimo ] and I added by [ Renan Ulrich ], both investors, about 18% increase on personnel. What is possible to be done for the expenses not to increase above the inflation indicators. Above PPD, is that any other initiative to reduce costs that in the near future. These are Reinaldo and Renan's questions.

When we look at the personnel costs that increased on the fourth quarter 12.7% as I mentioned one of these aspects of growth was the issue of the labor indemnizations where we had some provision. And the expenses that affected the personnel account and taking out this effect, it will always have an effect in the compensation, labor compensations. But in the period, the increase would be 12%, 56% the company in the past few years due to some actions. The union won a case. So there was an increase, and the company made some actions. The PDV is one of them. It's more than BRL 174 million paid in compensation in the sense that causing this turnover, this necessary turnover for the employees who have been with us for a long time can leave, and we can bring new employees. This was done so much so that the number of employees, which was over 6,000 employees, we have 5,000. So there was a reduction. So this has an impact in the third-party's account because sometimes we have to use the third-party services to make up for the labor. So this is something the issue -- the company has been looking carefully the increase of cost in health care. This has impacted the companies in the past few years. It had -- the cost has been increased above inflation. So we've been talking about our social service that take care of our debt -- take care of this health insurance and they understand the need of looking at it very carefully. We have some initiatives to decrease over time and some actions related personnel we are taking some actions, too, so that this curve or increase in personnel is adherent to the regulatory issues because this has an impact in what [ CEPAL ] grants in terms of tariffs. It grants a tariff that is updated by inflation. So we need to be very aware -- but we believe that as of 2026, it's due to the benefit that PDV must bring since it was quite a relevant PDV, part of it might be reflected in the year of 2026 and the following years.

Thank you. Our next question comes from Luiz Carlos Ferreira, investor. He brings us 2 questions. Yesterday, SANEPAR announced that it requested the adjustment for 2026. What was the percentage requested? Second question, there are 2 great values in nonrecurring items. BRL 55 million of provision and BRL 51 million of some installments. Could you explain this point? These are Luiz Carlos' questions.

Luiz Carlos, thank you for your question. Yesterday, the Council Board authorized the request for the regulating agency by our -- based on our methodology. Last year, we had the tariff review, which was the third review for tariff concluded in 2025. Now we will have 3 years of IRT, so it's an index of adjustment, which is ordinary adjustments, which are requested by the company every year. This is an ordinary issue of the company. The company does not announce the percentage requested because the decision is up to the regulatory agency. It's not SANEPAR that defines the tariff. So in this sense, the company does not create any expectation because, obviously, every calculation we sent to the agency, the agency will make a calculation, and they will determine the adjustment of -- the deadline is April 17 because it needs to publish the results at 30 days in advance, which is May 17. So in -- so right now, when the agency defines, we will communicate the market, informing the percentage and whatever the decision was concerning our request. Concerning our second question, I will hand over to Ozires so that he can add to your question.

Thank you, Luiz Carlos, for your question. You mentioned 2 amounts. In the nonrecurrent effect that we showed BRL 75.9 million in a line of provisions. Actually, this is a complement of our regulatory receivable related to the amount we have recorded -- so we had -- we added something for this amount to be reconstituted until the final decision by [ Gepar ], concerning the other amount that you cashed and BRL 51.5 million this PCLD -- complementary PCLD is expected loss in credits that we realized related to work with it, revisiting our portfolio. In the last quarter, we recorded this amount. It refers to the clients that who has not paid his bills, his current bills and has no installment. So we revisited our portfolio and discussing our independent audit also to meet the CPC 48 norm that rules the asset and liabilities, we constituted this complementary amount and revisited our policy of constitution of losses for clients.

So our next question comes from Felipe Tobias, an Investor. After universalization, can we expect an expressive increase of payout?

Felipe, thank you for your question. This is a future issue. It's hard to answer right now. But obviously, when the company reaches universalization when in its areas of work speaking of SANEPAR that has a high CapEx and have to maintain 100% universalization, 100% of treated water for the population and water resilience that will be important for the companies in the future. We expect the expenses to come to a level of reposition of assets, which is a level close to depreciation, amortization. So obviously, from this point on, we have resources left. So how we will -- what kind of -- we will use this remaining let's say, fund. This depends on the company on decisions because the effort that many companies have made in terms of investments and these objectives that sometimes compete with like investments and distribution of dividends. And so yes. But I think it's a good perspective. But I believe we have a good perspective, but this is a step that in our case, not only in our case, but in the case of the companies, those who are concerned about universalization investments, this will be a discussion, a second step discussion. But of course, it makes sense to question this, but it will depend on future decisions.

Our next question comes from [ Gabriel Zuma ], Investor. I observed the interest of capital -- on capital concerning. Has -- they do not have a defined payment date or come date, even if it after being approved in council or assemblies. Why this is still in not totally defined?

Thank you for your question. The company when we check the release -- the company in the past few years has paid dividends in the months of -- in June every year. It has been paying annually every year. So when you look at the history last year, 2025, we paid on June 26 in 2024 we paid on June 27 in 2023, June 27 in 2022 June 24. Why these days are so -- they coincide because the company according to statute it has 60 days to make the payments of dividends after the GO realization, the ordinary assembly, which is done by April. So once the GO approved the distribution of dividends and interest over own capital the company based on its dividend policy and conform it to statute, it pays after 60 days. This has coincided with the month of June of every year. As a result -- so this is when the company makes its payment.

Our next question comes from [ Mariana Guerra ]. Are the new reservoir is operating. I would like some new -- this was Mariana's question.

As I said previously, it is concluded. The civil work are concluded. All the cuts of 3 destination are concluded. So all this -- the area around the reservoir is. So we had a provision of 10 to 12 months to fill the reservoir. The first month now January, February, they had rain below the average, which is not interesting for us. We still have -- we are expecting the month of March to bring us enough rain so that we reach the level expected level so that we can reserve the water inside the lake to reach the 2,000 liters per second, which was how the project was idealized, but we don't need all this amount right now. So we understand that the reservoir is operating in some situations throughout February. We made use of part of the water, which was there. So we made use of it so that we didn't experience any lack of water, any shortage of water. But our main goal right now is still safe to reserve this water to -- but yes, but we can say that it is in operation.

Next question. Eduardo Lazaretti. CapEx has been increasing in the -- above the revenue in the past quarter. What is your expectation for 2026?

Thank you for your question. Yes, indeed, we have been observing, especially in 2025, an increase above what inflation at least measured by IPCA. Of course, like many companies, we suffered with an issue that is very structural in the sector. The sector is heated. And when we see the ENSCC, which is the labor, the national index when the inflation closing 4.6%. We have around 9% at the end of January 2026 when you talk about pipes and connections, we had an increase of 17%. So the sector brings some challenges for us in the sense that not always inflation that measured by IPCA and is reflected in our contract to our cost. Many times, they are connected to the inflation by Getulio Vargas. We had some nonrecurrent events in 2025, as I said, which impacted strongly in the cost. When we speak of personnel account that is added is increased by a PDV, which was quite robust. This was done with the objective of allow people to leave and enjoy their pensions, bringing new talent to the company, but also reduced the expectation of salary in the next year. So this was done and the price was paid in 2025. We had some in terms of not -- we're not so operational but more financial issues, the APV, which is the contract assets. This was -- we expect it to be reflected in 2026. The PPCs, we always need to observe that it's not a key that you turn off and on. So you don't -- so an operator that is in a station, you cannot just remove him from that and you have a PPP and you have that cost suppressed. So these issues of changes even of change of paradigm in the operation in this case of PPPs, they had a reflection in 2025. What we see that in at least on the fourth quarter of 2025, we have an improvement in what was realized, although the total cost of expenses has increased 11.8% when we take out the effect of PDT, which is a change in politics, something that has always been executed and changed, we would have an increase of 7.6%. So when we take an inflation close to 5% plus the increase in 2%, 3%, we see that it begins to be aligned with what is expected for the company in terms of cost. Obviously, the company has its control bodies, administration, the council, the board and the council is always demanding from the Board. We are engaged in bringing the cost to lower levels to reasonable levels, but some nonrecurrent effect affected essentially the year of 2025.

So now we close the session of question and answer, and we hand over that we hand over to Demetrio Abel.

So thank you. I'd like to thank you once again, your participation. Thank you for your questions. If by any chance, any question has not been clarified, feel free to send your question by mail to the IR channel. You may ask for more clarifications. We are available to answer every answer. Thank you for your participation, for trusting our company. Thank you, and good weekend.

The conference of our earnings results is concluded. Thank you for participants and have an excellent day.