EcoRodovias Infraestrutura e Logística S.A. (ECOR3) Earnings Call Transcript & Summary

Good morning, and welcome to EcoRodovias' Fourth Quarter of 2024 Earnings Presentation. With us here today are Marcello Guidotti, CEO; and Andrea Fernandes, CFO. This presentation is being recorded [Operator Instructions]. The slides of this presentation are available on the company's Investor Relations website at ri.ecorodovias.com.br in the Results Center section. After the end of the earnings presentation, the recording will be available in that same section. Before proceeding, we would like to clarify that the forward-looking statements that may be made during this presentation relating to EcoRodovias' business prospects, projections and operational and financial targets are based on the management's beliefs and assumptions as well as on currently available information. They involve risks, uncertainties and assumptions as they refer to future events and hence, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of EcoRodovias and lead to results that differ materially from those expressed in such forward-looking statements. I will now turn the floor to Andrea Fernandes, who will discuss the results. Andrea, you may proceed.

Good morning. Welcome to EcoRodovias' earnings presentation for the year and fourth quarter of 2024. We thank you all for attending. On March 11, we announced the repositioning of our brand and the new purpose that guides us to enable paths never before imagined. Now our 12 highway concessions are renamed Ecovias, consolidating our identity integration and the synergy of our operations. This change strengthens the brand recognition, making it more modern and closer to all our stakeholders. We begin the presentation by highlighting traffic growth of 3.9% in the fourth quarter of 2024 and 5.8% in 2024, mainly due to the increase in heavy vehicle traffic, 5.1% in the quarter and 8.2% in 2024. These results reinforce the quality of our portfolio. For comparison, the ABCR Index posted a 3.3% increase in 2024 compared to 2023. Adjusted EBITDA reached BRL 1.2 billion in the fourth quarter and BRL 4.7 billion in 2024, up 12% and 22%, respectively, compared to the same periods in 2023. Recurring net income totaled BRL 207 million in the quarter and BRL 982 million in 2024. Investments totaled BRL 4.4 billion in '24, which combined with the investments made since 2022, reached BRL 13 billion. The investments represent a strategic growth opportunity for the company, boosting the increase in road capacity, user safety and the attraction of traffic to wider highways with additional lanes or frontage roads in addition to tariff triggers provided for in the contract. The works and improvements carried out by the highway concessions also generate a positive impact on the development of neighboring committees, municipalities and regions spurring the arrival of industries, commerce and services that's contributing to the country's growth. EcoRodovias is proud to share this achievement of growth and execution of our investments in the last 3 years, and the result in 2024 shows that EcoRodovias doubled its EBITDA in 3 years from BRL 2.3 billion in 2022 to BRL 4.7 billion in 2024. Moving to the first quarter of 2025, we highlight the conclusion of the structuring of financing of BRL 11.6 billion, which includes the long-term financing for investments at EcoRioMinas of BRL 8 billion, financing of BRL 2.2 billion for the payment of the concession fee at Ecovias Raposo Castello and the refinancing of the debt of Ecovias dos Imigrantes of BRL 1.4 billion. Therefore, the maturities for the first half of 2025 are equated. In the second half of the year, maturities totaled BRL 2.4 billion, mainly due to the maturity of EcoNoroeste's bridge loan of BRL 2.2 billion, currently in advanced stages of the structuring of long-term financing. Finally, we highlight the beginning of toll collection by EcoNoroeste in the section previously managed by TEBE in March. The signing of the concession contract of Ecovias Raposo Castello with the start of toll collection expected for the end of this current month as well as the signing of the settlement agreement by Eco101 and the publication by ANTT of the bid notice. ANTT, the National Ground Transportation Agency. On Slide 6, we see the operational performance. Comparable traffic grew 3.9% in the fourth quarter and 5.8% in 2024. The highlights include the 25.4% increase in heavy vehicle traffic at Ecopistas in the quarter and 30.4% in 2024 due to the increase in handling at the port of São Sebastião and the 9.5% growth at Eco135 in the quarter and 8.3% in 2024 due to the induction of vehicles due to the delivery of capacity expansion works, 106 kilometers of road widening, 11 kilometers of additional lanes between '23 and 2024. On Slide 7, we present adjusted net revenue of BRL 1.7 billion in the fourth quarter and BRL 6.4 billion in 2024, up 10% in the quarter and 19% in 2024. On Slide 8, we show the adjusted cash costs, an increase of 2.7% in the fourth quarter and 5.6% in 2024, excluding Ecoporto, which the operation is under a transition agreement regime. Note that cash costs over adjusted net revenue in 2024 reached 27.5%, down 1.2 percentage points compared to 2023 and 7.8 percentage points compared to 2022. EcoRodovias' strategic cost management is based on strict cost control and value creation through efficiency initiatives and operational synergies, innovation and digital transformation. Next slide, Slide 9. We highlight the implementation of self-service payment through autonomous toll booths with fully automated collection for payment by digital means and cash. Currently, the Ecovias do Araguaia Toll Plaza in Goias is the first in Brazil to be fully automated, serving light and heavy vehicles. This innovation will gradually be expanded to the company's other concessionaires. In the graph, we show that currently, 85% of toll collection is carried out by digital means. According to the ANTT resolution, since February 1, 2025, the use of the physical toll voucher has been discontinued. And as a result, only electronic devices that tags will be accepted at toll plazas throughout the country. On Slide 10, we show consolidated adjusted EBITDA of BRL 1.2 billion in the fourth quarter and BRL 4.7 billion in the year 2024, a growth of 12% in the quarter and 22% in 2024. I take this opportunity to highlight the representativeness of Ecovias do Araguaia, Ecovias Rio Minas and Ecovias Noroeste Paulista in the consolidated EBITDA of 2024, which reached 35%. This result highlights the relevance of these 3 concessions won in the auctions held in 2021 and 2022 and reinforces EcoRodovias' winning growth strategy. Next slide represent the recurring net income of BRL 207 million in the fourth quarter, positively impacted by the better operating performance, but negatively impacted by the increase in interest rates. In 2024, income totaled BRL 982 million, representing a growth of 26% compared to the previous year. On Slide 13, we highlight EcoRodovias' focus on the execution of investments and delivery of works to expand capacity and improve highway concessions. In 2024, the company delivered 45 kilometers of widened roads, 24 kilometers of frontage roads, the implementation of 7 bridges and overpasses, 1 tunnel and 41 intersections, including accesses, turnarounds and roundabouts. On Slide 14, we ended the year with consolidated leverage of 3.4x. It is worth mentioning that even with the investments made in the last 3 years, leverage has remained stable compared to 2021. Next slide, Slide 15. The pro forma amortization schedule demonstrates the amounts disbursed from the financing structured in the first quarter of 2025 to equate the maturities of the first half of 2025 and for the payment of the concession fee of Ecovias Raposo Castello, as already mentioned at the beginning of this presentation. In addition, we are at an advanced stage of structuring the long-term financing of EcoNoroeste, whose bridge loan matures in September 2025. Finally, on Slide 17, some sustainability highlights. Investments in 2024 of BRL 27 million for community development initiatives and the publication of EcoRodovias' first Human Rights Policy. In addition, for the fifth consecutive year, EcoRodovias was selected for the B3 Carbon Efficient Index portfolio and maintained a B grade in climate change at CDP. We conclude this presentation by reiterating that the company is focused on the execution and delivery of works to expand the capacity and improve the highway concessions and on the opportunities that the current assets in our portfolio offer in addition to operational efficiency, strategic cost management, safety, digital transformation and innovation. We would now like to move on to the questions-and-answer session. Thank you.

[Operator Instructions] First question, Leandro Neto, Bradesco BBI.

On our side, we'd like to address a little bit more about the provision that you had, would like to know from what period that amount is referring to, I mean, when we can have a resolution at the end of this case? And looking forward, what are the other provisions that may be made in this line?

Leandro, this is Marcello. The provision is for the entire period. It's the complete provision. And from now, we are provisioning the correct installments, recognizing them. It's a single value, and now it is recognized for current value. We don't have other provisions in our -- of this type in our portfolio. This is a large area, a concession, a municipal concession and there's a discussion, and we also work on the balancing for the concession.

Next question, Filipe Nielsen with Citi.

Congratulations on your results. I'd like to talk about 2 points. One, about the issuance of debt. We saw that you solved the needs of the first half of the year with different tranches. And I'd like to understand, considering everything that you refinanced, is there still any need for the second half of the year in addition to what Andrea just mentioned of the bridge loan at EcoNoroeste, whether this bridge loan is the only one that's on the second half of the year and how this balance is between issuance and cash generation during the year? And the second point, if you can talk about CapEx expected for the year, how we should see the development of the works and the amount of CapEx maybe going up. I don't know if you can give us more color in that sense.

Thank you for your question. About the financing, the whole has already been done for the payments in the first half of the year, as I mentioned. And the only financing that is very advanced is EcoNoroeste that would be a takeout the longtime debt that will replace this bridge that matures in September. So thinking about our concessions, all of them, and the new ones, Ecovias do Araguaia is already 100% equated with the CapEx financing. EcoRioMinas with this operation of BRL 8 billion is also 100% equated with CapEx. EcoNoroeste is quite advanced in this operation as well to be 100% long-term financing equated Nova Raposo, we've already made the financing for the payment of the concession fee. And remember that the generation of EBITDA for that concession in the first few years is sufficient to make the investment. So in the takeout that we already issued an infrastructure debenture and it is sufficient. So that in the takeout, we can already bring the long-term financing for that project. So we're 100% sorted in terms of the investments, especially for the large projects and the others already have the BNDES financing or market financing. These operations that Andrea mentioned already include and account for the CapEx that we have contracted for 2025 that will be of around BRL 5 billion. So all of this CapEx is already included in the operations that Andrea detailed. So with this one EcoNoroeste and most of the funding for the CapEx execution is already contracted. It's approximately BRL 5 billion.

Next question, Rogerio Araujo with Bank of America.

I have 2 follow-ups here. One, still talking about debt. If you could talk a little bit about the expected cost for this debt at EcoNoroeste and if there's other financing being made at the market? And what would be the cost of the debt expected for the coming months? And the second question, more specifically, on the CapEx budget of BRL 5.9 billion for the year. Does that include the Raposo concession? And does it include the optimized agreement at Eco101 or maybe this amount can still change during the year for Eco101? And should we also include the concession fee for Raposo?

Rogerio, I'll answer your second question. This capital of BRL 5.9 billion is all of the investment obligations that we have, including Nova Raposo and Eco101, it does not include the grant or the concession fee for Nova Raposo. When I talk about BRL 5 billion to BRL 7 billion, is because normally, those obligations come up during the year, and there are some normal delays. So we have the contractual budget, but it's usually lower at around 80%. So we estimate the CapEx disbursement of around BRL 5 billion, already including Eco101 and the initial investments at Nova Raposo, including the road widening only starts from the fourth year. It does not include the concession fee because it has been already financed in a 4-year financing. And about cost, Andrea?

Thanks for the question. In terms of cost, it will be very much in line with the recent operations that we've made. BNDES financing using TLP as the index. And TLP looks at the last 90 days of TNB. So it's also a long-term debt customized for the flows of the project that are coming quite well. So it should be close to those issuances that we made recently, but we will know the actual cost when the operation is finalized.

Excellent. Congratulations for the liability management.

Next question, Fernanda Recchia, BTG Pactual.

I have 2 points to explore with you. First, thinking about new projects, I'd like to understand EcoRodovias' mindset to invest in new assets. Looking at this year 2025, is it to focus only on Eco101? Or are you maybe looking at and analyzing other opportunities? That's my first point. And the second, about Eco101, if you can talk a little bit more about what you're seeing in terms of competitive scenario. Do you think it's going to be a competitive auction? And if you can share the return that you see for this asset, that would be great.

This morning, there was an article published at Valor Econômico, and we're definitely concentrated on the opportunities in our portfolio. Of course, Eco101's auction and next year, the return to auction of Ecosul in addition to the other investments in the contracts in Sao Paulo, at Ecopistas and Ecovias. So we're monitoring the market, of course, and assessing the projects. That's always important, but the priority will be that. So we won't have priorities outside of our portfolio, and that's very clear in the article published this morning at Valor Econômico. About Eco101, it's a competitive process. So we have to be prepared. Obviously, it takes place along with other processes of new auctions, and that may take the interest away from other operators to this asset. But we'll be prepared. This is an asset that already considers the payment for whoever participates that is not Grupo EcoRodovias, the indemnity to EcoRodovias, which is formalized in the notice, more than BRL 450 million that would be indemnification. So that, of course, may remove some of the competitiveness. But anyways, we're monitoring the process, looking into it. The return rate is attractive. The rate of return in the project is 1.2, 1.3 deleverage. So that brings return rates that are attractive. So now we'll monitor the process and keep up with it. And in June, we will be prepared for the auction.

Next question, Rafael Simonetti at UBS.

Congratulations on your results. My doubt is about the tax rate. The operating results came in very strong, and there's an impact of higher interest rates that's out of your control, of course, although we're noticing that the new issuance following very good conditions. But now the tax rate drops year-on-year. It goes from 50% to 47%, 40% average. So I'd like to understand from you what are the next moves in your view for 2025 and 2026 in the take rate aspect?

Thank you for your question. We'll continue during the coming years in this liability management process, but it's important to highlight that as the concessionaires perform their CapEx and do the disbursement of the investments already contracted with the BNDES financing, this number will start to drop. So we're going to work on 2 fronts, the holdings. But as I mentioned, we had BRL 11 billion in hiring. And as I disburse this debt that hiring the contracting with BNDES brings efficiency because it's going to be disbursed at the same time, along with the CapEx execution, this tax rate will reduce. So as much as the debt is disbursed at the different units, slowly, that will bring this index to a better level and this process now will start, and we've seen that reduction already this year.

The question-and-answer session is concluded. I will turn the floor to Andrea Fernandes for her closing remarks.

Thank you all for attending. My team and myself remain available for any doubts. Have a great day.

EcoRodovias' earnings conference call is concluded. We thank you all for attending. Have a great day.