Corporación Financiera Colombiana S.A. (CORFICOLCF) Earnings Call Transcript & Summary

Good morning and welcome to our call for results for the Second Quarter of 2025 for Corfi. We are live streaming this meeting and there is simultaneous interpretation available if you would like to select the language of your preference. [Operator Instructions]. We would ask that you please include in your profile name, your full name and indicate which entity you come from. Our results for the second quarter of 2025 is published on our web page on the shareholder and financial results tab. And I will now hand over to Milena who will be sharing the results.

A very good morning to you all, and thank you for joining us for this presentation with our results for the second quarter of 2025. So now let's talk about some relevant results from a holding, and then we will look at our financial cycles, at which point, I will be handing over to Gustavo. When it comes to our holding results, perhaps what's most important here is to highlight the positive impact on our financial results in the funding cost reduction, specifically with the funding that has been assigned to our investments. So, the rate has dropped from 12.43% to 10.43%. So this is almost 2 basis points compared to last year. We have here also a debt reduction. We are now COP 7.12 trillion, which is a drop from COP 7.5 trillion last year's close, which is a positive impact of cost for this quarter and this first semester. We have always sought to have a lower double leverage indicator, and we are getting there. And so we've closed here at 144.89%, and now we are starting to see this reduction. We believe that there will be perhaps -- or there was rather an increase towards the end of last year, but we are here returning to where we would like to get to. And this is mainly due to the cash-outs we received from our concessions, which has enabled us to increase our cash and the annual payments here as well as future provisions. We have received almost COP 1 trillion from our concession agreements. In the second quarter, we passed this over to the holding to reduce our leverage indicators in the holding. We can also see these positive tendencies in our treasury area. And so here, we have seen an important increase of -- now we're at COP 6.9 trillion, and we can see that we were sitting below minus COP 50.9 billion at the end of last year. And so we had here a negative carry for our sales availability. And so here, we have some possible applications for our hedging and funding available for sales. And so this is quite interesting, and these are investments that will, of course, improve our income for this carrying. At the same time, we also have some positive results in our trading portfolio. So this is an important change in our trends. And we hope that this will continue during the rest of the year. I am sure that you've already seen the following: In the news, we've already sold almost all over our participation shares in Mineros, and we received approximately 120 -- sorry, COP 131 billion in cash. And we have a logical strategy that we have applied here. You've already heard this in several calls. Here, we are focusing our portfolio. On the Real Sector, and that's why we saw the corresponding sales in December, and we are focusing on 4 strategic sectors, which are infrastructure, gas, tourism, and agroindustrial agribusiness. And so here, we are making strategic sales or looking where we can be strategic in terms of our significant participation. So of course, when it comes to our mining shares, we would add participation of around 8%, which is not a controlling share. So here, we've been able to ratify AAA rating in S&P. And we have also had 2 important forum already. We have a Longevity Forum, which -- in which we heard a little bit about what we are seeing when it comes to demographic changes here in Colombia. There were more than 80,000 views of this forum on YouTube. And I think this is important not only for us as a country when it comes to our demographic change, but for us internally, this is also a key tool to understand the risks associated with our investments in the medium and long term. Then we participated also in sustainability forum where we participated in conversations which were focused on how to make nature and biodiversity in Colombia into a financial asset. And we had more than 100,000 views on YouTube. And so in Corficolombiana, this will help us to think of significant strategies here for the country. And here, we have some significant milestones in our portfolio. Of course, we were able to sign the regasification contracts in the first quarter. You remember that there was an open season in which we looked at that incremental capacity that we have in SPEC and we here signed a contract in June for regasification of 71 million standard cubic feet per day. And we will start with 25 MMSCFD and an additional 46 in September of 2027. We also have looked at a greater offering for transport capacity with bidirectionality for gas transfer, so an additional 66 MMSCFD, which is, of course, very important for the current situation in the gas market. And we also have been working with Promigas. As you know, they have an important innovation strategy. And as part of that strategy, they have been recognized for their research in hydrogen and bioenergy at the World Gas Congress that was held just a couple of months ago in China, in Beijing. When it comes to infrastructure, we have of course Covipacífico. So we have now started to increase the size of the Amagá toll and we have been able to come to an agreement there with the ANI, the infrastructure agency to progress there. We also, in Proindesa received the Intelligent Transport Systems price for leadership in smart technologies for the 29 tunnels along the Bogotá–Villavicencio road. And lastly, as you've already seen in previous calls, and has also been covered in the media, we also will advance with your version of the Aerocivil process in Aerocali. And so we are working with Aerocivil. And in parallel, we are also working on our private initiatives so that the ANI can publish the relevant call for proposals. So we have consolidated income of COP 6.24 billion for the first quarter, rather COP 6.24 trillion, and we here closed our consolidated EBITDA with COP 2.38 trillion, a little higher than our results that we saw last year. But what's important to highlight here is the change that we are seeing -- that the important difference in results that we're seeing in infrastructure. We are seeing some lower results in energy and gas because as we are seeing a lesser effect from the El Nino system, there is less movement in regasification, but we can, of course, go into more detail there. When it comes to a consolidated net profit here of COP 0.71 trillion, our controlling share is COP 0.32, which is a significant improvement compared to last year's results. And there have been two significant impacts here. The first is a reduction of debt servicing costs, given the reduction in rates as well as the impact of a greater treasury performance margin. Here, we have a separated net profit here of COP 0.32 trillion, compared to results of COP 0.25 in the first quarter of last year. And I will now hand over to Gustavo to talk about our financial results.

Thank you very much. So I'd now like to disaggregate the results that we've just discussed. And I'd like to talk about the differences that we saw for the first semester of 2024 versus the results we've seen for the first semester of 2025 and explain those changes. As you can see here, there has been an increase due primarily due to a recomposition of our operational income, which we have already discussed, but we'll hear about this in more detail from Alejandro. We've also seen better performance in infrastructure, mainly due to the conclusion of the functional units in the Pacifico Uno stage of the project. This has all been completed faster than we had thought. And so this has led to lower income from Promigas because last year, Promigas had an exceptionally good first semester, given the El Nino effect that we saw last year, which is not occurring this year. And so accordingly, we saw extraordinary income last year that we have not seen this year. The other significant impact here is related to our recomposition of our financial business on 2 fronts, mainly that we have had a structural change in our balance this year compared to last year. And here, we, of course, we had to take [indiscernible] to the stock market and the financial cost or there was a significant associated financial cost. And the net effect here has been the impact in treasury, which we've already seen. So in the financial sector, we've seen an overall positive effect and consolidated financial cost has been consolidated by two main mechanisms. We have seen here the cash outs from our concessions as well as low interest rates compared to those that we were seeing a year ago. So now to go into more detail when it comes to our debt. Here, we can see the evolution of our indicators. And so here, this is quarter-by-quarter our consolidated debt. That's in the bar graph. And then in the line graph above, we can see our average costs. So here, we closed here with consolidated debt that was lower than the rate seen at the closing of last year. And perhaps what's most important here is the rate that we are seeing for this debt. So if we look a year back in the second quarter of 2024, we're almost here, 200 basis points below that real cost. And so there, we saw also the reductions in interest rates that led to a better balanced structure and a reduction in our financial costs and accordingly in better P&L results. Here, we can see the evolution of the composition of our debt. Here, we see a reduction in debt -- in a consolidated debt. Here, we can see the deposits in dark blue. And here, that's of course associated with term deposit certificate captures. And of course, we also have here we have costs, we have some of our maturities that we must take into account for next year. So now let's look at the performance of our investments in the first quarter of this year, you will be hearing from Alejandro.

So I'd like to start with the infrastructure sector. As we have seen, we have maintained quite stable traffic in our portfolio. And in previous meetings, we've been able to separate the effect of CCFC, which came to an end in February of 2024. We are currently above last year's average, and that is to say that we have adequate traffic performance in thousands of vehicles. When it comes to our 4G portfolio, you will remember that we entered into operation in 2023 in with Covipacifico and functional units 1 and 2 have now been completed. We will now move into the formal operations. On the right-hand side in the graphs, we can here see the composition of income up to June of this year. Coviandina, had, of course, collected COP 0.18 billion in tolls. In Covipacifico we see significant payments here up to June 2025. These were future funds. And as Milena said, these were received during the first semester of the year, and you can see them here in the graph. In the case of Covioriente most of the cash that was received in 2024 was in [ DS ]. And to June 2025, we there see what was not paid in 2024 for -- in future funds and in [ DS ]. Let's continue, please. We have also, of course, been looking at the proportion of total income versus projected income. And here, you can see the Covipacifico we have here 25.7% fulfillment and we have seen in Covioriente a somewhat slower advance. Our total results here show here more positive performance. Interest expenses had a relatively small impact, although it was negative. And here, we had -- here, net profit of COP 381.496 billion. Here, we've seen a reduction on the left-hand side due to reduction in thermoelectric consumption. As we've already discussed, there has been a change in climatic conditions. And according there has been less gas consumption. When it comes to distribution and commercialization, we have seen quite stable performance and behavior. And on the right-hand side, you can also see the volume of regasified gas. And we've seen here there has been lower demand on the thermal generation area. But here, we see the volume that's regasified by SPEC. And here, we have here 252 MMSCFD and here the thermal group, there is dependence. Here, we see that we have had lower income from regasification and gas transport. And we've seen an impact here, of course, in the holding and interest expenses, leading to a net income or net profit, rather of COP 748.169 billion. In tourism, we have seen that we've had greater occupancy in the Estelar hotels from 61% to 63%. And in the key indicator we have seen that there has been improvement in the two main fronts. And the consolidated sales here for Estelar increased to COP 224 billion, and we've been focusing, of course, on food and beverage to counteract that occupancy risk. In total, we have seen very favorable interest expenses compared to last year and net profit here of COP 19.486 billion for the first semester. In Agribusiness, this is perhaps where we have seen most significant differences. As you know, we have 3 main crops in Agribusiness, and I'm referring of course to palm, rubber and rice. And so we've seen here an increase in palm production that's done quite well. And if you look at the price of sales the commodity price, we've done quite well in palm. In rubber, we have seen an impact from the rainy season in the Llanos as well as hot weather. So we are here below expected production for this year below last year's production levels. However, we've seen quite good resistance. Nonetheless, the most difficult brand here is, of course, rice, where we've had some unfavorable climatic conditions for harvest and the price has also been much lower, which means that our rice line has had a very negative performance in the first semester. In total, if we look at here, the issues with rice and rubber, we have had here negative results. So we've seen net profit of minus COP 7.089 billion. That's what we have from the investment area.

Thank you very much for joining us. As I mentioned at the beginning, you can of course send your questions via the Q&A module, and we will be collecting them to transmit them to those of us here at the table. So amongst shareholders, we have a question from [ Lucas Carbajal ] who has asked how will we recover from the lower value received for the sale of our shares in Mineros which I believe was sold very much below the fair price?

Okay. So Mineros is a company where we did not have a controlling share. So there, we had shares -- shareholding of slightly below 8%, 7.9%, which does give us a seat at the table with the Board, but doesn't give us actually a controlling share. Secondly, this was our shareholding that Corfi has had for many years. And with the sales of these shares, we were able to generate there income of -- or rather profit of COP 40 billion. So that is, of course, a profit for our shareholders. And of course, while the share price may have been higher in the past, it is, of course, the valuation is very much influenced by the price of gold. And so we saw a unique opportunity to sell our full participation in Mineros. It's a very illiquid investment. And so in the, of course, selling an 8% shareholding with these liquidity issues in the market is something that could take more than a year to bring to fruition. So we took the opportunity to generate liquidity at a price that would enable us to realize that liquidity and decided to focus on strategic investments in the sectors that Corficolombiana has declared it to be. Again, strategic and that is infrastructure, energy and gas, tourism and agribusiness. That is where we want to be. And given that this -- we had a minority share, we decided to sell our shares in Mineros to take advantage of this liquidity opportunity. So this is very much aligned with what we have been doing, which is, of course, selling our investments in nonstrategic sectors to focus on investments that we believe in the long term may generate value for us, where we have important growth opportunities and where we may have effective control over decisions made. So that's basically the logic that was behind the sale of Mineros.

We have a question from Katherine Ortiz from Davivienda, who made -- mentioned of the draft of the decree that the government has to reprogram the future funds or [indiscernible]. Could you please tell us your opinion of this decree and the impact that it may have for Corficolombiana? Let me hand over to our legal counsel.

So yes, there is a decree project to regulate Decree 018 on PPPs and we did make observations on the degree project. Our concern or the consent around the decree does not necessarily -- does not necessarily have anything to do with the future funds. The issue is with the ambiguity in the text, where reference is made to need to have consensus for any contractual modification for future funds. Remember that this is a budgetary instrument to enter into future commitments. But it cannot be an instrument for the unilateral modification of the obligations that are entered into with this authorization. Here, the obligations that are entered into by both parties and that are provided for in this contractual instrument would require mutual agreement. The suggestion is that it would be unilateral. So here, we have made observations about the legal nature of these future funds. And if a regulatory law will be issued, then there must be an express mention of the need for contractual agreements for any changes, and that this can in no way affect the flow of the payments that the contract has the right to receive. So these are the observations that we have made, and we are awaiting the response there.

And I think here, we must say that we have some contracts that are in force with the nation and with the National Infrastructure Agency or ANI for national roads projects and the execution of these projects are based on future funds. And this is a state obligation that cannot be changed with a decree. A decree cannot be used to change an existing contract. And so we there have the contracts to ensure that our rights are respected when it comes to these roads projects. And of course, we will continue to conduct activity in our concession agreements based on these agreements.

We have here a question from [ Miguel Ospina ], who has asked us what we will do when it comes to the accumulation of cash and the payment of future funds in the road concessions and with the sale of Mineros? Because we could perhaps think of distributing dividends or would the priority be to continue reducing our debt. And what are the priorities when it comes to the designation or allocation of capital?

The dividend discussion is a discussion that will be held next year in the shareholders assembly. So I don't think that we can say too much right now. Of course, cash could be used for the same, but our current priority is to reduce our liabilities given our high interest rates.

There are no more questions. But of course, the Investment Relations office is -- will be attentive to and ready to respond to any of your questions or doubts. And we will be publishing, as I said all this information on our web page. Thank you very much for your participation today. [Statements in English on this transcript were spoken by an interpreter present on the live call.]