Companhia de Saneamento do Paraná - SANEPAR (SAPR4) Earnings Call Transcript & Summary

Good morning, everyone. This is a presentation for the results of the company of Saneamento do Parana. This presentation is recorded, and we will make it available on our site, where we will have the respective presentation available. For those who will be needing simultaneous translation, you have a globe aspirant in your lower chart, and you can choose your preference language. For those who are listening in English, you have the option of listening the audio in English. For Q&A, for the Q session, we would like you to send your questions and to send your questions after the presentation, we will present your questions. So in case you will not be able to make your presentation online, please write. So at the end of the presentation, we will be able to restand. If by any chance you answer will not be answered. Please forward it to our email. We would like also to highlight that the presentations regarding this presentation and related on business perspectives, covenant, it is the expectations concerns the expectation of the company regarding its future. Future considerations are not a guarantee, especially due to the government change in government rules, the performance of the industry in the Brazilian economy, among other factors in addition to the risk presenters, therefore, subject to change without prior notice. We would like to pass the word to our President, Abel Demetrio.

Good morning to all of you. Thank you for being here today. Today, we have our President, Claudio Stabile, our Director in investment Lucia Conte De and our Manager, IR, Mr. Gonsalves and his team and our accounting manager. The President showing you accumulated until September as highlights in our third quarter in an increase of 8.4% and accumulated of 9.9%. In our third quarter, we had an EBITDA of 3.2% and a retraction of 5.4% as our net profit grew 2.4%. In 9 months, we had a reduction of 5.3%. And in what records water, we had to sanitize it. We had 1,000 new connections in total connections. We had a growing. And also, we have 78% with our collecting sewage. And reminding you that the most, our investments attained BRL 48.3 million in the accumulated of 12 months of 9 months, BRL 1,069,000 are before, 44% in and mine, we closed with 28.4%. We received in Sao Paulo, a trophy transparent 2022 for our work. As to the operating results, we had a measured volume of water above compared to the same period 9 months in what concerns the economic. We had new economies and to the measured volume mill and we had new economies. We closed our semester to quarter with 4.1% with higher compared to the 3.3 million and our losses by default with a rise of 6.7%... Just one moment, please, we will call back to our slides. As to the reservoir levels, we had on the average 9.95% we have this is an integrated system. In October, we obtained 100% in these reservoirs, and this is very good news in relationship to our reservoirs. I would like to talk about our performance indicators and in relation to the covenants and in what concerns our net bank debt that we are still ongoing working. We are following, and we are adjusting our EBITDA adjusted with net financial expense. But in the debentures that were private plus loans from we have a debt service of EBITDA that of 169 and that has to be smaller or the same and other onerous debt that are 0.56. Total with cash economical, we have contracts, our covenants, we have adjusted EBITDA with our net financial expenses. And our next screen we can see other covenants, the ratios. Our debt service, we in September 22, we had 48% in Victor ratios of the EBITDA margin of 38.4%. The Royannualized 11% on BRL 14%. Our next green, we have our financial performance, and we attained a BRL 4.19 billion in 9 months. And our EBITDA attained 1.61%. Our liquid net profit and net margin was 19.1%, and our operating costs expenses attained BRL 2.5087. As for cash generation with a high of 12.2% with concerning the same period of '20, our debt leverage of BRL 558 million, our debt with a total debt of BRL 4 million. In third September, we had equivalent of cash. And with the liquid debt and with a debt 1.7% of leverage. Our weighted average cost of debt we closed with 11.5%. This is a positive impact as the reduction of the inflation, our capital attained with a rise of 37.4% in relationship to the same period of 2021, 40% invested in water and then 52% and 3% and other investments. NAS, we have quarterly results in our income statement at net revenue as a negative, we had a growth of 44% as electricity and financial expenses, these are positive factors in reference to other results. In the accumulated results, we had our liquid revenue growing and personnel growing 15% according to the categories that started in March 22 that had an impact with the hiring of new jobs also impacted by chemical products that represented 75% in the expenses and other volumes consumed as well, we had a raise in what concerns electric energy. But in 9 months, we still have a growth of 11%, reaching BRL 429 in 9 months. I would like to say at this point that we are working according to the inflation plus the raises that we had. And we had other costs and expenses because of municipal funds and new projects that were signed and we had other cost and expenses that reached BRL 94 we had other events we had great relevant events. And then I only would like to mention our provisions for health care and social security, provisions, financial expenses as for revenues, we had a reduction of 15.7% and other cost expenses. Basically, and the net result for these 9 months, we had a reduction of 5.3% EBITDA and we had raise closing with 1,664 million, with a reduction of 38.4%. In our next page, 6. Next page. Nonrecurring items we did not have making we have that or remain the same compared to our previous quarter with nonrecurring items would be from 40% to 44% and 99%, we had these little changes in relationship to non-manageable items, we had accomplished EBITDA BRL 1.611 billion and non-manageable items, BRL 156 billion, electricity, treatment material, fees and charges and this adjusted EBITDA with non-manageable items would represent BRL 1.768. Going back to our balance sheet. We raised, BRL 3.819 million in the quarter of 2022. We had a raise on 9%. We had a net debt and our other assets and our operating working capital and the main thing was the growth on accounts receivables from customers, other assets with stocks for operation, where we had a higher volume of investments that we had a raise with a rate of 38% and with the other assets and our fixed assets. As for the cash flow, our operating activities generated with an increase of 12.2%. The activities consumed less than 33% operational activities. And the financing activities, we reached 34.161. We have a raise of BRL 244 million. And this, we have now BRL 1.474 million. So this is the presentation of the results as for the quarter of September 2022.

[Operator Instructions] Our first question and it's for Maria Carolina.

I have 2 questions. The first one is in relation as to where and the company already forwarded in an agreement. Could you please, first of all, tell us about a little bit what are the expectations and what you have had? And the second question would be on the figures that we have. Are there any data that you really believe are going to generate any kind of disagreement as to the Volume use for the next years to do the database of the company and the level of cost at the debt that was put with the regulator compared to the actual cost with the line of P&B. Could you please comment something?

Thank you for your question. Well, Sanepar concluded the studies of research of regulatory assets and this material was sent to the regulatory agency on October 20, and we are participating as to the checking of this regulatory [indiscernible] did this survey, we already had a couple of meetings with this agency in order to explain our techniques. We had contributions as to know and in what way this evaluation were made and the results. We had a public consultation on what refers to normal techniques as to investments and the revenues and the company had a due date November 18 in order to manifest for itself. But at this moment, we are still evaluating. We have a company that we hired to contribute with these evaluations, and we are still working, analyzing the documents that were put in public consultation so that later on, we will know exactly their results.

Okay. And even the application of the results do you think this would be valid date? Or are we going to have new date?

At this moment, that our due date is April as it always occurs and our agents have a very relevant job in order to check the dates and to finish and make public consultation, but we do believe, yes, that everything will be done on time. But the company, I think that due to our chart, everything is working, and I think we'll be ready by then.

Going on, our next question is from Leandro Aguiar, investor. Leandro does not have a microphone. Therefore, I will read his question. First, I would like to know if we had an evolution in the dispute with Maringa. Number 2, I would like to know also if possible, how is the PPP on the expansion and the percentage of the attending the sewage for the sanitation mark. These were the 2 questions.

Rodrigo, could you please read the second question?

Yes. I would like to know also if possible, how are we doing in the state of the Panama to read the percentage of the sanitation mark?

Thank you for your question. gear. As for Maringa, we have no new updates. It is still being discussed, depending on other discussions. So we have nothing new, nothing more than we already showed. And to the PPPs, our Investment Director…

In relations to the PPP, we launched the public hearing and then and we delayed due to several contributions, we have more than 500 contributions through public consultation. And at this moment, we are evaluating and making the necessary adjustments in order that we could launch to see how we could attend this new benchmark. How we will be launching this public notice.

Continuing the next question is Marcus Antonio, investor.

Are there other studies being studied to change the dividend and what means the balance? And what are the other worries of Sanepar?

Our dividend policies, that establishes 5 per month, and we can reach up to 50% per month. Obviously, the company is always having in mind these policies of the dividend policies, but as well as their business plan, but at this moment, we don't have an ongoing plan studies concerning this because we always have in mind the optimization and attending to the shareholders as to default, yes, especially after the pandemic that started in 2020, the company is following carefully the evolution, the default and the losses that are registered. We have an action plan already ongoing in the sense to lower this level close to what they were before the pandemic. And we understand that even after 2 years, we will still have 40% this showing it with this new policy and also due to economical reasons from our users from Brazil also shows that our default are quite comfortable still. We are still ongoing at this moment. We have a program. We are evaluating all the alternatives in order to ease the payments from our clients and other actions that are planned by the company that will be implemented. So this default will go back to lower levels.

Our question is from Leandro Aguiar, investor. He doesn't have a microphone. I will read the question. On the dams, I know that we reach 100%, something that did not occur for several years. So then could the company tell us about a little bit about the new dam that is under construction. Could you please tell us more or less when these works will be concluded?

Leandro is saying that unfortunately, our dams are for 100% including Passauna, that its recovery was a little bit longer. But for the construction of a dam, this is something that could harm. The dam of Jaguara has a microclimate is a very rainy area. What makes the more difficult work, the construction in the middle of August, we could only work for 3 days. September only 6 working days in the in October, not even one day. So only for days, you can foresee the difficulties that we are facing. We think that we could be the construction until March 23, but this offer will depend in our climate conditions because this will coincide with our rainy seasons. So we hope that is meanwhile, we hope that will have some changes so that we could be evaluated we are still under the first phase, the second phase that would be the rescue of the florist , we are working together with something that would be very important. But to cut the tree would make no sense to do this now because in the sequence, we have, again, the termination, and we have to do everything again. So this is our status at the moment.

So following our next question also from Leandro and he would like to know, could you please talk a little bit about the line of materials we saw that we had a rise in material treatment. What are you doing to mitigate this impact? And as to the negotiation, the supplier, -- this is another question from Leandro.

Thank you for your question. Here in our follow-up of our purchase of materials through 2022. But I would like to explain a little bit better the evolution of these items. We had the growth use and consumption materials of BRL 2 million in this period. And due to a campaign in our company to made with other materials. So we had another BRL 2 million increase. We also had some materials for the operational system for the treatment of such that we acquired due to the operational conditions that we thought were necessary. And this represented a higher cost we had to buy some extra materials for Apucarana. And also, we had an increase of BRL 2 million again. We also mentioned that these materials we represented is 2/3 for treatment material. And this year, we had some reprimated demands do to COVID we could do anything. And then we resume, but of course, we were also impacted. We had a raise because of the turn that we had and this represents a raise in the consumption of construction cost. You also put the question of the dollar. Some important products had a significative raise in their price. We also had some needs to buy some other treatment materials due to environment more effective parameters with chemical products. This is due to our legal legislations in environment. And also, we mentioned of the exchange and the readjustment of the products that are produced that are manufactured in Brazil. Fuels that represent 9% in fuels that we had an increment in expenses around 36%. And mainly in the first semester, we had a more representative volumes. The operational alternatives of the utilization of chemical products and other materials that are consumed by the company are being also followed carefully and chemical products that have to be used, which would be the best treatment. And taking into consideration that the company is aware so all the efforts in having suppliers, deliveries, a stable supply chain that has a lot of competition. And this is made by company and this is due by the company in their bids, but we are also facing a recession in the market. And this also, of course, influences the price. But our company is following very closely with everything that's going on. Our President is reminding us that we had a product other substituting with those that were very expensive and we could substitute them. But we have to fall or we have to comply with all the environmental rules. This is the most important thing.

Our next question from [indiscernible], investor. He doesn't have a microphone so I will read his question. Due to the war in Ukraine, there are news that the European companies are very careful and viewing the cost of energy in their operations. There are news of cost reductions and the reduction costs above 50%. Sanepar due to their improvement and their knowledge, are you aware of all these news or what's going on? And what are you doing to do so?