CTT - Correios De Portugal, S.A. (CTT) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the CTT First Quarter 2020 Results Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, the 7th of May 2020. I would now like to hand the conference over to your first speaker today, Mr. João Bento, CEO. Please go ahead.

Thank you. Good morning, everyone. Welcome to the first quarter results presentation. Well, I will start -- say that we were heading for a great quarter until mid-March, clearly above budget and, therefore, above guidance and [ beating ] guidance. And then the crisis came, we were able to set up an agile and problem-solving-driven governance scheme. And the main effect we felt from the beginning was a large decline in Mail, which implied an acceleration on e-commerce initiatives. So coming from Slide 1, despite the very bad end of March, we still managed to show the resilience of our portfolio in the sense that revenues have grown 1.7% driven mainly by banking and financial services. EBITDA was impacted by the extraordinary business interruption in mid-March, mostly associated with decline in Mail, as I said, but still with a short decline vis-à-vis last year. EBIT benefits from significantly lower restructuring costs, the reason why we have almost a 7% growth in EBIT. And net profit remain, as a result of all of these, reasonably stable. So looking at the business lines, as I said, the main sign is the large decline in Mail revenues. International, registered and advertising mail were the most affected by the pandemic. In a way, this is good news because international and registered and even advertising mail, we think, resumed in itself. So this should not be seen as a structural decline. But moving to parcels, we have extraordinary effects in the sense that volumes have shown a huge resilience with a very strong growth in B2C parcels, which compensated the decline -- in fact, in volumes more than compensated the decline in B2B, both in Portugal and in Spain. The bank had another landmark quarter, actually anticipating net -- positive net profit for the first time in its history with a net -- with a EUR 1.1 million result And finally, an increase in Financial Services, driven by a very, very strong January month and, therefore, with very robust public debt placements that was also significantly affected by the reduction in retail when the crisis emerged in mid-March. Moving to Slide #2. I'd like to give you a highlight on how we've managed the pandemic crisis. As I said, we've been able to set up the crisis governance scheme very agile and very intense with a problem-solving stance in -- at the very early stage. Actually, we have set up a formal crisis management team well before the state of emergency was declared in Portugal. And our response was, on top of an agile governance, was, let's say, based on a strategic rationale on the 6 pillars that you can see on Slide #2. The first pillar was, in fact, our main priority: preserving the health and wellbeing of our staff and customers. So I won't bother you with the details, but this implies a significant investment of time and redesign of procedures and also acquisition of materials so that we could limit contact between customers and our delivery personnel. The second pillar of our strategic response was strengthen the operational response. Mostly because all the postal services in Portugal have been declared formally by decree so-called essential services. So we had to remain fully operational, which was, in a way, a good sign because it allowed us to do everything on top of the compulsory obligations of the universal service and, therefore, allowed us to do a lot of the things we did to promote e-commerce and B2C. But in fact, strengthening the operational response meant to be able to have backup teams, also to redesign the teams for lower demand in the Mail and the stronger demand in parcels. There was an extremely important aspect here. We have activated the force majeure clause in our concession contract, also at a very early stage and actually before the emergency state was declared. So a new scheme -- a new operational scheme that revealed to be very sound. We had all sorts of problems with people infected, but we've been able to remain fully operational all the time, and so we remain today. Third pillar of our response was related with the financial position and liquidity. We were very prompt in looking at ensuring liquidity. One of the most visible actions in this line was the proposal that the management took to the Board and was unanimously approved and also unanimously approved at the general meeting to cancel the distribution of dividend. Also, the annual bonus for executive members of the Board has been suspended. And we have put in place a number of defensing -- defensive working capital management and also activated a few credit lines that, in principle, we would not be using, but as a matter of prudence, we decided to activate those. Moving to the fourth pillar of our response, we have launched an extensive OpEx and CapEx reduction program. We have reviewed timing and phasing of noncommitted CapEx for noncritical projects and also for those with a more interesting cash outflow profile. We have renewed fleet, buildings, IT contracts under new conditions, sometimes using also a force majeure situation. And we have temporary frozen our marketing and consulting spend. We have also managed actively unused vacation time and gradually reduced temporary work. So this has been a very thorough movement regarding OpEx and CapEx reduction. The fifth pillar of our response was concerned with preserving the value of the traditional business. So we had, of course, a huge decline in demand, but we have been working with clients to eliminate bottlenecks in mail printing and finishing. Some of our Mail clients use printing and finishing facilities that have been closed. So we replaced some of those. We tried to reopen some of them. We had to use alternative solutions to forward mail to the Portuguese Atlantic islands, and we have also found new routes to receive international mail given the huge reduction in international mail. For example, we've been told by China Post 2 weeks ago that more than 200 tonnes of mail was sent out between China and Portugal. So this is mail that usually came by plane, and this is coming through other routes. I would close this sign with one of the most important pillars, the sixth pillar of our response, which is related with what we call counterattacking, so taking the initiative and taking advantage of the crisis to speed up things. And this is, in fact, most of what is present in the next slide. So I invite you to move to Slide #6. We actually believe we took a leadership role in e-commerce in Portugal. This might sound a little bullish, but we became the partner of preference for everyone willing to be present in e-commerce given the visibility and the impact that some of our initiatives have assumed during the crisis. We have speeded up a number of projects that we're developing. And I'll start with the one that we formally launched on the 19th of March, the launch of the CTT Lojas Online, online stores, devoted to SMEs that are not present in e-commerce. We did this partnering with government and with the main association of commerce and retail in Portugal, and this was a huge success. Since that -- since then, we have more than 900 SMEs that were not present in e-commerce building and selling through online stores, so-called CTT online stores, where we do, of course, delivery, returns and in some -- for some of them, also logistics. Then a week later, on the 26th, we have launched one of the most visible initiatives. We've partnered with the National Association of Pharmacies, which covers 90% of the Portuguese pharmacies, to same-day delivery of medicines. And this was seen both as a very innovative way to protect the population and also to be present in e-commerce. In the same day, we have sent -- we have launched a very large promotion that we've called stayathome, including 20% off Express for Today for urgent parcels delivery. So we brought a number -- a large number of customers that were not the typical e-commerce and online users of our services to become so. On last day of March, we have computed in our marketplace, Dott, 763 vendors, meaning that in this quarter and mostly during the crisis, we have increased in 100 the number of e-sellers present in Dott. But more important than that, Dott got a 5x increase in GMV and a very high and stable conversion rate. So this has been really a different -- an important aspect of what has been done. We have then invested more on same-day partnership. A relevant example, the partnership we did with Uber, that was announced the day after that, on the 1st of April, Express for Today. We have our same-day delivery only in 3 -- the main -- the 3 main Portuguese cities given this partnership with Uber. That was 1 of the 3 partnerships that Uber did globally that -- actually, this was first page on the Financial Times. We managed to open to another 6 or 7 cities in Portugal and so, therefore, affirming our leadership position in e-commerce in Portugal. Then there is a very interesting initiative we have. On the 11th of April, I participated with ministry for agriculture on a live stream -- video stream inaugurating a regional fair on cheese, a particular brand of cheese which is the most famous in Portugal. Why is this important? Because there is -- especially in the summer, there is a huge importance given to regional markets. These are physical markets that, for obvious reasons, this year are -- have been canceled and will be canceled. And we've been able to open an area in our marketplace for these kind of regional shops. And this was a huge success, so much so that in -- after the first week, one of the cheeses became the top-5 product in our marketplace, Dott. So again, this brought huge visibility. We even had last week in Parliament one of the members of government claiming that they acquired cheese in our fair, just as an illustration of what we did. And I will close this slide with the 2 other initiatives that we launched on the 21st of April and 1 week after that with Well's and with Perfumes & Companhia, 2 very significant brands in Portugal that decided to revamp their online offer with partnerships with CTT. So this was a very important aspect and, therefore -- and in fact, is responsible for a changing profile in our parcels business line. I would now move to the next slide and pass the floor to Guy, our CFO.

Thank you, João. Good morning. So in Slide 7, this quarter, we chose to isolate the March results to give more color on the COVID-19 impacts. So starting with Mail, we saw in ordinary mail a significant decline from the minus 9.1% to 15.6% in March. But this being driven by B2B, namely banks and financial service companies. And in registered mail, we saw actually the biggest decline, where we went from minus 3.7% to minus 17.5%. And this is basically driven by the government shutdown, so courts and even the tax authority stopped their operations and -- with this kind of impact. Additionally in international mail, we were reasonably flat during the first 2 months. And then we had a significant decline of 40.6% in March. We don't see here a fall in the demand of these e-commerce flows. We are seeing it's a significant constraint, as already mentioned by João, in our airfreight capacity that are preventing these volumes to get to Portugal, although we get the information of the prenotice that the demand is still there. Registered mail and international mail are actually the most likely categories to catch up in the coming months with resuming of the operations in Portugal. In the next slide, we can see parcels. So we broke down parcels in Spain and in Portugal. Here, we cannot see a very dramatic effect in Portugal. Actually, things are accelerating. But what is not visible here, and I would like to highlight it, we saw a very sudden and abrupt change in mix, where B2B and cargo flows come to a sudden stop. And then we get the designation from e-commerce, and that is continuing throughout April. But a very dramatic change in mix. In Spain, we were falling volumes in the first 2 months. Recall that until March '19, we still had our biggest customer in Spain that was lost during last year. But in the month of March, with these e-commerce flows, we saw a sudden and big increase in volumes that drove the volumes in the quarter in Spain to be flat. In public debt placements, we are having a stellar quarter when we in the first 2 months of the year placed more public debt than the older quarter of '19. But with the lockdown that followed and the declaration of state of emergency and the restriction on people movements, we saw a significant decline in March on the public debt placements. Although, we are trying to tackle this when we activated ways to people -- [ start ] to subscribe this product to -- remotely, and we are seeing, since then, recoveries on these volumes. On Slide 9, we can see the operationals of the Banco CTT. The Banco CTT did not show the effects of the pandemic in the first quarter, was still very, very, very small. Mortgage benefited from a strong pipeline, so remained pretty much resilient in the first quarter with a 9.2% increase on the stock of mortgages. Crédito auto, this with slightly more impact in March because the effects of the loss on the auto dealers have more impact on the Crédito auto but still growing 5% to the credit book. And customer funds, we saw a significant increase in customer funds, especially in the deposits, where people are refraining from consumption, and that was clearly visible in the month for March. Moving to the next section and to Slide 11, starting on the financials. Our first quarter numbers were impacted, as mentioned, by a very challenging month in March, following the current COVID-19 outbreak and the lockdown that was implemented in Portugal and also in Spain. Our numbers showed some resilience on the back of a strong performance during the first 2 months of the year that was partially offset by these recent events. Our revenues are growing 1.7%, supported by the bank and financial services. OpEx growing 2.4% as a result of the incorporation of the 321 Crédito and also the growth of 14.7% in volumes in the Express & Parcels division in Portugal. EBITDA with a small decline of 3.4% (sic) [ 3.7% ] following the Mail impact of COVID-19 and also the performance of our Express & Parcels division in Spain. EBIT growing 6.7% following the lower restructuring costs that João already mentioned, and these were partially offset by D&A and impairments in 321 Crédito to lead to a flattish or broadly flat net income. In next slide, in Slide 12, we can see our revenues details. So revenue is growing by the performance of the Banco and Financial Services, as already mentioned. Mail with a very strong decline of EUR 10.4 million. I would highlight that 80% of this -- more than 80% of this decline is occurring in March, and out of the EUR 10.4 million, EUR 7.1 million are coming from B2B mail and EUR 2.2 million coming from our retail mail following the stores and the country lockdown. In B2B, banks and financial institutions and government explained the biggest part of the decline. Express & Parcels in Portugal with a very strong performance despite March impact, with an increase of 14.7% but with a significant dilution in unit price driven by the sudden change of mix for e-commerce and -- that I already mentioned. The lockdown and the impacts in B2B volumes and cargo put a significant pressure on the average revenue per object. Spain, finally, offsetting the loss of the biggest customer in volumes but suffering also from this high average revenue dilution, namely after the lockdown effect, and this were more significant even in Spain than in Portugal. Banco CTT growing EUR 6.9 million, EUR 2 million organically, with net interest and commission maintaining the significant growth they have shown in the recent quarters. The bank's activity also benefit from the strong pipeline in credit. Financial Services growing 23% and, growing every quarter until COVID-19, placing more than EUR 1.4 billion in public debt. OpEx on Slide 13, we can see that it's growing 2.4% but mainly coming from the incorporation of 321 Crédito and Express & Parcels in Portugal. Express & Parcels in Portugal showed significant growth. We actually managed to reduce the cost per object more than 5%, but this was fully offset by the unit prices as we'll see in EBITDA. As we speak, we are working to adjust our distribution cost structure to adopt our operations to this new reality in terms of traffic. Our routes are -- because of the e-commerce are losing density. We are reducing the numbers of parcels distribution by stop, and this is challenging and needs to be addressed and is being addressed. Mail showing a EUR 1.7 million decline through the savings achieved in IT facilities and G&A that more than offset the [ actual ] gain of EUR 1 million booked in the first quarter of last year. Banco CTT with 500,000 of -- EUR 500,000 of organic growth in OpEx, mainly driven by transaction costs and wages and salaries. Financial Services, broadly flat. In EBITDA on the -- on Slide 14, we can see our EBITDA pre IFRS 16 declining 3.7%. And this is reflecting the effects of COVID-19 in the month of March and especially in the Mail division. Mail in the month of March lost EUR 8.7 million in revenues and due to the lower operational gearing of this division, an -- we saw this significant impact in EBITDA. To offset this impact, we are increasing the network integration with the parcel business to addition -- to use this increased capacity of the mailman distribution network to distribute more parcels and to have some synergies with the Express & Parcels business. Express & Parcels with 2 very different dynamics in Portugal, a strong growth changes -- and -- with the changes of mix in revenues are eroding margin because of this unit price decline that is coming from e-commerce. The unit cost with good progress but remain an area of concern as e-commerce is also driving lower density in distribution of our products. In Spain, this last quarter is where we see the -- it's the last quarter where we'll see the impact of loss of Amazon. Nevertheless, we were able to contain the volume decline in the context of COVID-19, but the changes of patterns to e-commerce affected a lot the unit price in Spain. We continue to implement our turnaround plan. We expect now to return to gross revenues and starting seeing margin improvements as we continue to implement new sorting capacities, namely in Madrid and Barcelona, that will be installed during the summer. And from then onwards, we will start seeing unit price -- unit cost decrease. Banco CTT growing EUR 2 million organically, reflecting the growth of mortgages and fee-based products. 321 contributing with EUR 4.9 million with an underlying growth of 23% in a comparable basis and Financial Services with a significant growth of 47% in EBITDA, and this is due to the fantastic placements of public debt that we already covered. I'll skip the Slide 15, going directly to Slide 16. Our cash flow, this was a very good quarter in terms of cash flow generation. This reflects a stable EBITDA and lower impact from restructuring costs that were broadly 0 this quarter. So our operational cash flow is reaching EUR 11.8 million and free cash flow of EUR 8.6 million, growing, almost doubling in the quarter versus last year. We now have a consolidated cash position of EUR 32 million if we exclude the, like, lease liabilities. If we include the lease liabilities now, our net debt now stands at EUR 50.7 million, reducing from the EUR 60 million that we saw in the end of 2019. So thank you. I'll now -- back to João Bento.

Thank you, Guy. So moving to Slide 18, about the outlook update. Well, our outlook starts with what we've observed in April, which shows what I'd call encouraging signs of stabilization in some of the areas, although Mail and Financial Services remain under significant pressure. Express & Parcels already at peak levels due to B2C growth as has been thoroughly explained although with lower margins. Actually, we've recorded our historic high this Tuesday in Portugal and in Spain -- sorry, in Portugal. And in Spain, we've also doubled volumes in the last week. So very interesting dynamics. And now we are working on readapting our structure to the new mix. So e-commerce adoption increasing at rapid pace in Portugal and in Spain, and we feel that we've been -- we have some responsibility on this -- on creating these dynamics in Portugal. The bank. As of the end of April, with roughly 5% of all mortgages and 7% of all auto loans contracts, have received requests for payment holidays as the applicable decree law or the industry moratoria related to COVID measures. We need to wait and see the outcome. We don't see a problem in mortgages because this is typically, actually, for banks it's the -- is first -- first is home mortgaging and, therefore, is very resilient. And the usage of this holiday payment request is clearly the lower in the sector. And therefore, we feel reasonably comfortable with this. Financial Services. A slight improvement in the subscriptions rate after the peak of the crisis mostly given a new remote selling campaign that we have launched, as Guy already mentioned. This has been showing interesting results, and we'll keep selling remotely, and we've also observed the very interesting first 3 days of reopening because the state of emergency was removed. And as for last Monday, retail -- the retail network resumed normal hours, and we've seen a reasonable return of customers. So we hope that Financial Services in retail will also improve. OpEx and CapEx savings. We are revising the CapEx downwards to EUR 30 million for this year, maintaining our investments in Express & Parcels automation and capacity increase. OpEx reduction is focused on external services, temporary work, marketing and consulting. Regarding OpEx, I would probably stress again that we need to keep in mind we have a different mix in parcels with higher cost per object and lower density of dropped objects per stop, as already mentioned. And this is going to be one, and actually, it is being already one of our main redesign concerns. Balance sheet and liquidity. We will -- we keep ourselves comfortable. We will continue to prioritize cash reserves and treasury flexibility. And actually, we are now in the process of accessing additional credit lines. Finally, addressed mail volumes. We believe that the bottom of the value was certainly in April. And in the last days, we are observing already a slight but steady return to normality. We had significant reductions in letter, international and, especially, with advertising mail. And this will more than certainly drive a double-digit addressed mail volume decline for the year. And it's always difficult to predict how much of this mail will return, but we are reasonably comfortable with international mail and with states and public administration driven mail because it is now starting to resume. For example, the tax authority started -- resumed this week with important emissions of mail that typically would have been launched during April. So well, to conclude, I'd like to share that we entered this crisis ahead of budget -- I should say clearly ahead of budget and, therefore, ahead of others. But we think that we need more time to see where it goes before committing ourselves to a new guidance. So because of the full impact of the COVID-19 on this year's revenues and earnings cannot current -- accurately be quantified, we think that we should wait to be able to provide a new guidance or to update our guidance as soon as we are able to compute with confidence the impacts of the crisis. So in a nutshell, I think we remain resilient. We've been able to show ways to react and to take advantage somehow of the crisis. And we've also been able to benefit from -- in terms of public perception and the relation with people and government, we have very good signs during the crisis. And therefore, it's been also an interesting period, very difficult, very tough but to build up our situation for a good renegotiation of the concession contract. And with this, I would remain -- we will remain available for answering questions. Thank you.

[Operator Instructions] Your first question comes from the line of Marco Limite from Barclays.

I had a couple of questions on the parcel business. Do you think that at EBIT level, the COVID kind of issue was a positive or a negative factor to your EBIT? What I'm trying to understand is that if the cost that you incur because of all the disruption related to the virus were actually higher than all the kind of revenues benefit that you had. And I understand also that in this revenue discussion, there is like a big change in kind of B2B and B2C mix. So I was wondering if you can also disclose how has that changed. So what was the mix before the virus and after the virus outbreak?

Thank you. Well, it's a very interesting question and very clever as we would expect. I should say that in the short term, the -- of course, the change of mix was very, very sudden. And we have basically 2 options conceptually because, in fact, we had no option, either to replace and use the available capacity with the new demand in B2C with the lower unit prices and higher unit cost or -- and compensate somehow some of the fixed costs that we have or go for it as we did. We think that we did the right thing for 2 different reasons. One is that we are -- in some way, we are acquiring new customers that will remain. Actually, we believe that one of the structural changes that the COVID-19 crisis brought is that B2C volumes, which are at historic peaks, will not resume much -- to a much lower level. So B2C parcels will keep growing from a new base. And we wanted to grab that with lower profitability. So somehow, we should -- we could have had some marginal negative EBIT impact on the growth, but all in all, this was overall a positive move. Also because we are now working and already measuring some additional efficiency as we adapt to the new mix, for example, contracting differently the routing and the subcontractors. So we feel that we did the right thing. We're probably yet without a positive impact on EBIT, but it's going to come. And it was -- in fact, let me use this expression, it was a cheap way to acquire customers.

Okay. So you can give a number about the B2B and B2C mix at the moment?

Yes. We now have 64% of B2C in April. It's what we saw. The numbers went up almost 50%.

Okay. And on, if I may, also another question on the Mail division. You are now guiding for double-digit addressed mail volume decline for the year. Is that because like only -- do you think that part of this volume may recover in the second half or in the full year? Or are you actually seeing kind of higher e-substitution, so it's more an underlying change to volume mail rather than just the COVID effect?

Well, actually, we believe we have both. But we have -- in reality, we believe there will be 3 sets of happenings. Some of the mail that was not here will be fully recovered, but some of it will be lost forever because of e-substitution. But there is a third set, that is, mail that was lost for the year but we'll recover. For example, revenues from toll payments or from speed tickets. Because there was less traffic, less tolls, less people being billed for excessive speed, for example, but this will return. So next year, people will pay tolls again. So this is the set of mail that was lost for the year but will come back. Then we have mail that was lost but will be recovered this year. For example, as I said, the tax letters that have been postponed, they are now resuming. They will be sent with a higher density between now and the end of the year. Actually, the tax ones already started this week. And there is also e-substitution. Some of the utilities and the banks have tried to use this as a campaign to further digitalization of their customers. We are actively trying to do the opposite of that. To be honest, and we like to be transparent, we are still -- we still need more time to be able to compute the impact of these 3 components, but we'll do that. And that's one of the reasons why we need a little bit more time to be able to provide updates on guidance.

Your next question comes from the line of Filipe Leite from CaixaBank.

I have 2 questions, if I may. The first one, regarding quality indicators. Because in '19, you missed all the 24 indicators, and I would like to understand what will be the implication. As far as I understand, like in past years, it will have an impact or a penalty in the mail price increase. Can you quantify what will be this impact? And also if this is the reason why the announcement of mail price increase for this year is delayed. And second question, if you can also explain to us the worse working capital performance of this quarter when compared with first quarter and your expectations for full year?

I will start with the quality indicators by saying that we've communicated that. We've received a very, I would say, very good press, actually. This was a very important point. It was thoroughly prepared. I have myself 6 interviews, including all the main business newspapers, and we received an interesting response in terms of the press. And we have a very good surprise last week because both the minister and the secretary of state in an inauguration in Parliament were challenged regarding this. And they basically used our argument saying that, well, the indicators are wrong. Because there are too many, they are reasonably difficult to measure, and that this will -- and these are words that were used by government, I will repeat. This needs to be solved either now or in the new concession contract. So -- and also ANACOM. The first reaction by ANACOM was this week in their site. They basically announced the results and used the same justifications that we have. So I think it was, in fact, one of the positive effects of the crisis, is that I think there is a higher tolerance. In any case, what happens with the price increase is that we have sent the proposal to ANACOM. There were a few -- this was before the -- disclosing the quality indicators. ANACOM has usually a few doubts. They ask for clarification. We have already sent that back, and we are expecting them to first approve the new pricing and then to impose the discount that applies because of the noncompliance with the indicators. As you know, there is a cap for that. It doesn't -- it's very easy to reach the cap unfortunately, and so we will be, for sure, having a price increase affected by the cap, but we don't have those figures yet.

Regarding working capital. As you remember, we had a very strong quarter in terms of CapEx last year. We did EUR 26 million, more EUR 8 million than in '18. And this is namely the investing -- the investments in Mail sorters and Express & Parcels sorters that are paid and that the corresponding bills are being paid on the beginning of this year. And that explains the majority of the increase on -- or the increase in negative working capital. This, as normally, is going to be compensated throughout the rest of the year.

Just a follow-up, if I may, can you clarify what is the cap in terms of penalty for price increase for meeting the indicators?

It's 1 percentage point for the nonreserve mail and 0.5 percentage points for the bulk mail.

[Operator Instructions] Your next question comes from the line of António Seladas from A|S Research.

My question is related with the provisions for the bank. Banco CTT, if you can provide us some color with what should we expect for the rest of the year. And of course, I'm worried about the car loans.

Thank you, António. I'll start and then hand over to Guy. As I said, we are reasonably comfortable with the use of the moratoria that will convert into imperatives regarding mortgages because this is, first, housing. And we see a pattern where some people, as we did, are trying to preserve cash just in case and because it's for free, they decide to activate that. So for mortgages, we are not expecting any significant impairments. For cars, it's different. But it's -- anything that we try to quantify will be a bit speculation at this stage. In any case, I'll hand over to Guy.

Let's say, we -- as you know, the public moratorium enabled us not to do provisioning right now, although we are monitoring very closely any signs of red flags on people that ask to use the moratorium. This is obviously one of our biggest concerns on the bank, but it's still very early days to give you guidance on that. And as soon as we have numbers on this, we'll share with the market.

Okay. Just one second question related with the question before, related with working capital. So as far as I understood, you pay over this -- over the first quarter, you pay several bills related with capital spending done than in the fourth quarter last year, and that is the reason why working capital went down. Is that true?

Yes.

Working capital went up. Okay.

We have no further questions. I will now hand the call back to Mr. João Bento for any closing remarks. Oh, excuse me. We have one more question in the queue now. So I will just open the question for you now. It's from Marco Limite from Barclays.

It's again me, sorry. I have an additional question. Have you used any state aid? Or do you plan to use any state aid in 2020? And will that affect 2020 DPS? So will that prevent you to pay any DPS in 2020?

Thank you. No. I will answer your question and expand a little bit more. We didn't use any state aid. Actually, the only -- the main state aid that could be used was not -- we could not activate it during the first quarter. And this was the so-called simplified layoff because during March, we were not in conditions that would allow us to do so. We have considered all the possibilities. And in fact, nothing happened. What we are looking at is, if under the activation of the force majeure clause, if there is any scope for possible extraordinary price increase because of the crisis. But it's still very, very early days. But coming to your question and answering directly, we have no restrictions whatsoever regarding usage of any kind of state aid, namely regarding dividends.

No further questions. Now back to you, Mr. Bento.

Okay. Well, let me thank you again for being with us during this webcast. Maybe a word of confidence, we feel it's been a tough time. The team is -- and I mean the overall team, which is the roughly 40 people that manage the company with us, are -- feel very strongly. We are using this as an opportunity, both fighting the consequences and taking advantage of the opportunities. So we remain confident. We were having, as I said, 2 most likely -- or for sure, the best quarter for many, many -- for a long time. It's not -- it will be -- it was no longer the case, but we feel confident about the ability of the company to react and the resilience of our portfolio. Thank you, again. Good morning.

That concludes our conference for today. Thank you for participating. You may all disconnect.