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

Good morning. Welcome to the results call on third quarter 2025. The information has been published on our website. This conference call has been -- is being transmitted through Zoom, and we have simultaneous interpretation into English. To change your language, you can select the language options in the platform and select English. At the end, we will have a Q&A session please use the Q&A functionality in the platform. Please identify yourself with your name and the entity you represent or what kind of stakeholder group you represent or whether you are independent investors. I will give the floor to the President of Corfi.

Good morning, everyone, and thank you for joining us in this call on results for the third quarter. Let me tell you a little bit about our results, then some relevant facts and then some details on the sectors we operate in. When we see the figures for the close of the quarters, we see consolidated figures for COP 9.3 trillion, a difference with a higher level of revenue in energy and gas, offsetting fewer -- lesser revenue from the previous period. We have COP 9.35 billion of EBITDA, which is marginally less than what we had in the previous period. And the big difference that we have in the differences vis-a-vis what we viewed in the third quarter accumulated year is in the consolidated net where we had a consolidated net revenue with a controlling component of COP 340 billion, which is an increase vis-a-vis what we had last year. We have better treasury margins, and we will tell you a little bit more about this later. With the cumulative for this year, we have COP 380 billion with a substantial improvement vis-a-vis what we had for the same period last year. What were the main drivers for these results? Let me start with the treasury margin. If you remember, we have had a lag in treasury. But for this year, we are turning around and we start to view positive results in treasury. We are arriving at the third quarter of 2025 with a positive margin over COP 26 billion compared to this quarter last year. This is one of the main changes in the results that we are seeing in the cumulative results this year. Second key topic, interest and indebtedness. We have 2 issues here. First of all, the consolidated funding cost has decreased significantly from 12.12% rate to 10.31%. So we are paying less interest. And at the same time, we're doing this over debt balance that is less than what we had last year. So at the close of September this year, we are starting with almost COP 7 trillion against COP 7.5 trillion last year. By the end of the year, we will have a slight increase, but it will still be under the figure that we had last year. This leads us to accumulate bigger cash levels. This leads us with a double leverage indicator of 145.1%, which is an important decrease from what we had at the same period last year. And when we take a look at the interest for the debt that is funding our investments, we can see an important reduction in costs where we go from COP 671.5 billion to COP 555 billion. So the interest is driving the results in the year. Some key facts. Let me start with the world of energy and gas, where expect continues to be an important asset for the country. In September, there's an expansion in our plant. So we make 75 million cubic feet available to the network. This is important when we are requiring imported gas for the national system, LNG regasified by SPEC has accounted for 19% of national gas consumption. So this is a material asset to industries and homes, which are using this source of energy for their electrical needs. From October 10 to the 14, we carried out our scheduled maintenance and our SPEC plant. It took a bit longer than expected, but it was finished successfully. So we fulfilled our maintenance plan for the year. This is something important that we need to carry out every year in order to secure the reliability of the system. We had the 26th edition of the flagship publication on natural gas, analyzing the milestones, challenges and opportunities in the country. We would like to invite you to take a look at it to those of you who are interested in the natural gas market in Colombia. Now regarding energy, we have reached an agreement with Petromil to develop a project with an installed capacity of 1.4 megawatts peak. [indiscernible] has been very active here together with Plaza 90 Shopping Center, photovoltaic solar plant was inaugurated into Rocco Bolivar. So we continue to increase our presence in solar energy. Going forward, this is an area of interest for future investments, which we will continue to do. In terms of infrastructure, the most relevant effect would be what happened at kilometer 18 of the road to the Yanos region. If you remember on November 7, there was a significant land slide by the road. The road was blocked. We worked hard over the following weeks in order to open an alternate bypass in order to open access. However, the bypass is a single lane solution. It's not a structural solution. As with all 4G contracts for infrastructure, the biological risk is shouldered by the nation. So attention should be funded by the state. INVIAS has been carrying out works in order to secure the mountain, clean up what happened with the landslide in open access to the road. Hopefully, during the weekend, the road will be open. INVIAS is paving the roads over the affected segment. So during the weekend, we should have access to the affected road. Now regarding important acknowledgments, Corficolombiana was acknowledged among the top 100 companies with the best reputation in Colombia, climbing 12 positions. Corficolombiana is a participant in Merco Empresas. Forbes Colombia included Corfi in 50 Leading Companies in Sustainability, where we showcase our commitment to sustainability and development in the country. Sustainability to us is our central axis in our strategy. So we are highly satisfied about this accolade, as well as the acknowledgment that we got from equity and inclusion rankings. This is part of our central axis as well. On the 12th of this month, we had our Corfi Sustainable Award where we acknowledged the work of different suppliers, both for Corfi and for our affiliates carrying out sustainability initiatives for the projects. We had 12 companies receiving these accolades, thereby ensuring sustainability, not just from Corficolombiana, but also through the warranty of the value chain of Corficolombiana and its affiliates. It was a beautiful initiative. And finally, in terms of sustainability, 2 weekends ago, the Core Foundation organized the Magic Festival in Ambalema. This is an event that we carry out with Pajonales, Hoteles Estelar and local actors where what we're doing is leveraging Ambalema as a sustainable destination in the country. This is an event that will happen in future years. We hope that you visit Ambalema to be part of this initiative to highlight a municipality by the river, the Magdalena River. We will continue to work on this in future years. And now, Gustavo has the word -- has the floor.

Hello, good morning. This is an overview of our results as of September. We will have the information in detail later, but you might remember last year, we had a lower infrastructure, and this is due to the combination of the building stage in our main concessions. This was offset by the good performance in Promigas and our energy sector through the regasification of the transport sector. And we had higher interest rates. This year, the story is changing. Infrastructure started to increase. And we've seen results so far. We are starting to see the cash out and the cash-ins from the projects that are ending. Promigas had a relatively flat performance last year, it was pretty extraordinary due to what was mentioned before, and there was a significant impact on results for Corfi and its company due to the reduction in interest rates. There was a significant reduction for financial expenses. This is what you can see on this graph. And these are the 3 factors that account for revenue and for profit and what we're seeing in this year. Infrastructure, energy and gas and significant positive impact due to lower interest rates. Let's go into indebtedness. This is one of the most important factors for the results this year. In a consolidated fashion, we can see 2 things. One, consolidated debt is not only stabilized, but decreasing, and this obeys mainly to the effect of receiving cash flow from concessions, which is going to reduce leveraging. This is going to be reflected on the growth of other companies like Promigas. At the consolidated level, we can see that debt is going down. And most importantly, there is a reduction in the average rate, which is 9.26%. We were at 10.61% at the third quarter of '24. So the reduction is about 0.5 percentage points. That has a significant impact on the statement of results. At the left -- bottom left, you'll see the composition of indebtedness. It is relatively stable. There's debt bonds and deposits. In the right, you will see the concentration of maturities where we have the balance for the rest of the year. We have been financing most of this year and the maturities that we have for '26, the strategy that we have at the moment, the maturities that are happening are being sent off to '27 or even beyond in order to reduce volatility that could happen next year since it's an election year. This is what we had in a structure of balance for the corporation and its affiliates. Alejandro will now discuss the results for the companies in the portfolio.

Good morning, everyone. To go over the results, let's go sector by sector. Let's begin with infrastructure. We have the evolution of the graph of concessions within our portfolio. We see growth in traffic performance. It's slightly higher than growth in economy. Whenever we have revisited this graph with you, we've seen traffic in CCFC, which is no longer a portfolio. So we are moving traffic and infrastructures in a healthy manner. Regarding progress, Coviandina ended its construction phase over 2 years ago. Covipacífico finished the works and it's entering operation. We are finishing the punch list with all pending matters for total delivery of the works. This is a process that is in full conclusion, then we will have under 3% of the works that are done by the government once the registries are received. We can see the composition of income reflecting the revenue reflecting this. We have all the revenue where we offset all the lags from 2024, especially from future budget allocations. Covioriente is still under construction. 96% of the works are finished. Some important milestones are payment of DRs happened in 2024, and now we have one in 2025, and we are pending progress in the works so we can release some cash flow. This should happen next year. If we take a look at progress and composition of revenue, this is a recurring graph. In the case of Coviandina, the bar that you can see that's in pink, it's revenue from towables and -- the revenue is about 12%, 12.5% of the total revenue. In Covipacífico, it's concessions that are relying on government payments, whether it's from future budget allocations and the progress is slower and it's coming from maturities coming from the -- sorry, allocations coming from next year. In terms of finance, to reflect what Gustavo was saying, we have a positive effect on the lower expense and interest, we have an increase in net profit and controlling is the total. To add to what Milena was saying, the most publicly visible issue is the land slide on Kilometer 18. We have a photo showing what it entails. What you see in red is the road, the road existing nowadays. The land slide is marked in black and the dotted black line, and that is what fell on the road. What you see in green at the upper part of the image is the bypass that was enabled, which was served by the concession urgently. We are pending the opening of the road. As Milena said, these are works for INVIAS to respond or this is an effect for us. As you remember, the Ministry issued a resolution lowering the fees for the use of road. Once the road is open, as announced by INVIAS, we will have more traffic, and we will be recovering the previous fee levels. In terms of energy and gas, we've seen this in previous sessions. And as mentioned before, in the business of transportation, when you take a look at the graph on the third quarter of 2024 and this year, the most important adjustment is the consumption of thermal electric Industrial has faced some reduction due to reduction in the supply of gas. Residential is basically stable. Transport has been affected by less thermoelectric generation. Distribution and commercialization has been stable and growing. And in terms of regasified at the right, you can see that there is a compression from last year because there's fewer consumption from thermals, but you'll see an increase in spec, which is national permanent supply, which is not depending on hydrological issues. As mentioned, we have an increase in net profit the third quarter of 2024, we have a decrease in operational -- operating due to the smaller volume in transport, but it's offset by less interest and less taxes. Regarding Tourism, we have had better -- marginally better occupancy, 66% versus 65%. Our hotels are always over the average in the country. That has been the case this year as well. And we have maintained a fee that has increased with regard to last year's variable and parts in income for available rooms that has increased. This is reflected on the results for Estelar -- performance for Estelar. We have a reduction in net profit due to lower financial expense. There's a comparison here where you see noncontrolling controlling. As you see side by side, there is the effect of buying Cartagena. So we are controlling and that represents important changes in agribusiness. We have had the same situation as last year. We have different behaviors for palm, rubber and rice. For Palm, we have a sales volume that's over what we had last year, over 10% the palm business is working very well. In the case of rubber, we have a price situation that's under what we expected. This is both for the exchange rate and the international commodity in a production that has been affected by the level of rains where trees haven't been able to produce what we expect. For rice, we have productions that are in line with what we expect, but the price situation for rice, this has been public -- of public knowledge, it has been very adverse to the producers, and this affects the performance of the sector. And here, we can see the results although losses have been less than last year, we're still in red in the sector. If you take the 3 sectors and the agribusiness, we have reductions in operating profit, and that is offset by fewer financial costs and fewer taxes, but the sector is still seeking its balance. That is basically what we have in terms of behavior in the sectors. Thank you.

We would like to invite you all to send your questions. We have received some of them with the Q&A tool. Let's start with some of the questions that we received. We have one from [ Lucas Carbajal ] investor. How do you expect to maximize profit next year, especially when we are expecting the Central Bank not to lower interest rates?

Right. Profit, which has an operating component and a financial component. In fact, we agree with the opinion that interest rates will be flat, relatively flat. Maybe in the context of core fee this year -- and just as we showed, profit will have a double component. There is a reduction in the total amount of debt due to the cash outs from the roads, this trend should be maintained and it should continue to be reflected on lower financial expenses going forward. Each sector has their own dynamics, which justifies the growth and utility in profit.

I would add 2 more components that are important. One, most of our portfolio is focused on roads. Performance for roads is very sensitive to inflation. If inflation goes up, then the tolls go up. There is a correlation there that helps. And second, throughout this year, part of what we see in the performance and the positive performance for treasury is related to a reduction in interest rates, of course, but also with the coverage strategy that has been implemented. And in this sense, we have a more resilient treasury than what we had last year due to many of the coverages that we have implemented.

However, investor is asking about expectations for profit for the close of the year and dividends for next year?

The trends for performance are expected to be maintained for the next quarter. So we expect to have a close of the year with a substantial improvement from what we had last year. So we are doing well over there. Now regarding the composition of dividends, that will be a conversation to be had by the Board in demand.

We have no further questions so far. There's one more. Carlos [indiscernible] is asking what new investment projects does the corporation have in order to renew its portfolio?

We will be announcing the coming projects as they are materialized. But to let you know broadly what we're seeing, we have projects in Energy with Promigas, as you've seen with the things that we've been doing, especially in the world of solar energy and also the projects regarding the expansion of the grid. This is one component. Now regarding infrastructure, we are working on a series of private initiatives that we will be introducing into the world of roads. Some of them are regional, some of them are national in terms of roads. We are structuring projects and looking at alternatives in Central America in terms of roads that is still undergoing -- that's still ongoing. We are betting strongly on the Cali Airport. And additionally, we are reviewing some projects and segments different from what we've traditionally done. Digital structures, for instance, we are taking a look at water infrastructure and some projects would be for city infrastructure. as these projects come to fruition, we will be letting you know. But this is basically the portfolio we've been working on, one important component in Colombia and an important regional component for Central America as well.

We have some questions related to Mineros from several participants in the call. Let me group them. There is a question about the impact of the sale of Mineros on performance.

Yes, the sale that took place this year, it's a minor percentage, but it's still very important. The share was sold this year, and it brought profits over COP 45 billion. This is an important way to finance the portfolio in several senses -- several ways. The investment is strategic. However, this was a relatively large investment, and it was hard to leave it en bloc. And we are reporting profit and performance separated from this year. We have no further questions. Thank you so much for your participation, for your attendance. We hope to have you join us in our next events. Thank you for participating. Thank you so much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]