Motiva Infraestrutura de Mobilidade S.A. (MOTV3) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the CCR S.A. conference call to discuss the results regarding the Second Quarter of 2022. [Operator Instructions] Before proceeding, we will like to clarify that any statements that may be made during this conference call regarding the company's business prospects, projections and operational and financial goals constitute beliefs and premises of CCR's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions since they refer on future events and depend on circumstances that may or not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could affect the company's future results and could lead to results that differ materially from those expressed in such forward-looking statements. I would now like to turn the floor over to Mr. Waldo Pérez, CFO and Investor Relations Officer. Mr. Pérez, you may proceed.

Thank you, operator. Good morning, everyone. Thank you for participating in this conference to present the second quarter '22 results. I would like to inform that Flávia Godoy, who is our IR Superintendent; Douglas Ribeiro, Caue Esteves and Caique Moraes are also here with us and they are from the Investor Relations team. Before starting, I would like to thank all shareholders and market analysts for the confidence and trust of the votes we received in the Latin American Executive Team's 2022 ranking, published by the institutional investor. We feel honored by the prestige and recognition, and we will continue to strive to better serve you. In Q2 '22, we continued to generate value to our shareholders with the announcement of the sale of Total Airport Services, TAS on May 9. On July 25, we concluded the sale of all our equity interest, corresponding to 70% of the capital stock of TAS to the company AGI-CFI Acquisition Corp for the amount of $143.5 million plus debt and other liabilities assumed. The transaction marks CCR's departure from the United States and demonstrates CCR's capital and strategic discipline. Another important delivery was the signing of TAM 21/2022, and the term of withdraw in which we extended the term of Renovias concession agreement until July 10, 2023. This execution reflects CCR group's respect for its longstanding partnership with the state of São Paulo and its commitment to the development of infrastructure in the state. We communicated on July 7 that our [indiscernible] Board of Directors published in official Gazette of the state of São Paulo, the decision to fully comply with the determinations of the São Paulo state Department of Logistics and Transport, which recognizes the need to rebalance the contract confection of date highway concessionaires, including those that are part of CCR Group, AutoBAn, SPVias, ViaOeste, RodoNorte and Renovias due to the absence of a tariff readjustment as of July 1, 2022. The decision also establishes that the tariff readjustment must be implemented by December 31, 2022, and that the respective concession contract will be rebalanced through financial compensation with bimonthly payment until the readjustment takes place with the first payment to occur on the last business day of August 2022. Also in the month of July, we announced on the 28, the celebration of TAM 21/2022. SPVs, which establishes new investments related to the work to extend the duplication of the urban sector of the municipality of [indiscernible] and the implementation of advice on the [indiscernible] Highway as well as the costs of routine maintenance, and the conservation special for the stretch. And it also promotes the economic and financial rebalancing of the concession through next extension of 368 days scheduled to end on the September 21, 2029. The new concessions are already in operation. As you know, in 2021, we won several projects whose results were partially consolidated in the first quarter of 2022. However, in the second quarter of this year, we could already see the contribution of net revenue ex construction of BRL 650 million corresponding to the EBITDA of BRL 322 million. And we are just at the beginning of the investments that will bring complete improvements that will increase even more the potential to generate results from these projects. As a highlight, I would like to talk a little bit about the recovery, a trajectory that remains consistently and steadily as demonstrated in the most recent data. when comparing the data on the same basis, the highway segment grew by 8%. The airport model and urban mobility showed growth in passenger numbers of 93% and 61%, respectively, in the second quarter of 2022 when compared to the same period of the previous year. On August 9, we reported our monthly performance for July 2022, which when compared to the same period of the previous year, showed growth on the same basis of 10.3% for light vehicles and 5% for commercial vehicles. And yet in the consolidated numbers, the positive variation was 7.5%. For other models, the data continue to indicate a strong recovery when compared to 2021 with a growth of 41.1% and 46.2% for urban mobility and airports, respectively. This corroborates the trajectory of operational recovery and the resilience of our portfolio. Another highlight for the quarter is our strong and robust financial position, which allows us to continue implementing our growth and value creation strategy. We ended another quarter with comfortable cash position and preserved leverage, which is the net debt over EBITDA of 1.8x. It's worth noting that in 2021, we started anticipating several refinancings for 2022, which -- and we have been able to complete with great success with the aim optimizing the debt management, increasing the debt expansion. We would like to emphasize that the company remains optimistic about the extensive pipeline, and we'll continue to act diligently with capital discipline in the opportunities that we see ahead of us. In highways alone, bidding and rebidding processes are underway for 12 federal highways by 2023, in addition to BNDES package, which has more than 6,000 kilometers in length including the 6 highways that make up Paraná package and BR-381. Within the scope of São Paulo state highways, we have launched [indiscernible] with an auction scheduled for September 15 and the expectation of the publication of the public notice of the [indiscernible]. In relation to the state projects in [indiscernible], we have [indiscernible] and [indiscernible] and [indiscernible] and the highway concession program in the state highways of [indiscernible] which are in the bidding process. We have 850 kilometers of highways divided into 2 lots. In the airport sector, next week on August 18, we have the auction of the seventh round of concession of federal airports. In addition, NACC intends to rebuild this year, the airport of Sao Goncalo do Amarante and Viracopos for 2023. We have the eighth round of the concession of federal airports composed by Santos Dumont and Galeao. In Urban Mobility in São Paulo, the bidding document for the concession of Line 7 of CPTM together with the intercity train in Campinas, which is called the TIC. The concession of CBTUMG, Metro Bahia and other projects are under analysis as well as Metro from the Federal District and the VLT W3, both in Brasilia. I would like to point out that ESG is one of the 5 pillars of our strategic ambition for 2025. We remain committed and motivated on this journey. We were recognized by [indiscernible] magazine as benchmark and sustainable development in Brazil. We also started the second cycle of supply assessment through CCR [indiscernible] program, which is a supplier performance award, which seeks to consolidate and strengthen the company's supply chain based on clear criteria and relevant thematic access. In diversity, we continued our diversity and inclusion agenda. We have structured priority actions in the construction of a more than first and inclusive culture in a transversal way such as the implementation of the Diversity and Inclusion Commission. Finally, it's worth emphasizing that we continue to work in a structured way to define well-founded medium-term goals for those KPIs as well concrete action plans to achieve them. We hope to have news on this topic during the CCR Day that will be held on September 9 this year. I will now give the floor to Flávia Godoy, who present the results of the second quarter of 2022 in more detail.

Thank you, Waldo. Good morning, everyone. Good afternoon, everyone. I would like to highlight that the main of our FRS for 2022 are as follows: Bearing in mind that for the same base numbers, we exclude new projects and nonrecurring effects, as we provided in details in the earnings release. Starting with the highlights for the quarter. We would like to point out that vehicle traffic grew by 4% when compared to the second quarter 2021. If we exclude the traffic from vehicle's data RodoNorte, NovaDutra and Rio SP, the growth was 8%. This performance of traffic on the same basis was a result of the growth of 15% in the months and 3% in the traffic of heavy vehicles in relation to the second quarter of 2021. With this, the net income same base reached BRL 2.4 billion in the second half of 2022, accounting for an increase of 24.3% in relation to the same period of the previous year. Adjusted EBITDA same base increased 21.5% and reaching -- reached BRL 1.4 billion. Providing more details, total cost had a reduction of 5.7% in the second half of 2022 in relation to the previous year, reaching BRL 2.1 billion. In the same comparison, cash flow on the same base, they amounted to BRL 987 million, an increase of 28.5%. The EBITDA margin adjusted same base reached 59.5%, a reduction of 1.3 percentage points in relation to the previous year. In relation to the slight drop that we observed in our margin, EBITDA margin. I would like to mention that this variation was driven especially by the reversal of variable provision of BRL 29.3 million in the second quarter of 2021. And also to the receivable of BRL 59 million in the second quarter of 2021 related to the benefit of Care Act by TAS, which did not happen in the second quarter of 2022. Excluding those effects, which are nonrecurring that impacted in a positive way, the results of the second quarter of 2021, the EBITDA margin same base for the second quarter of 2022 increased by 3.2 percentage points. The robust result shows the effort that we have made to control costs and maintain the operational efficiency in a business with mostly fixed costs. Net income reached BRL 291.3 million compared to a loss of BRL 44 million in the second quarter of 2021. On the same basis, income was BRL 171.8 million in the second quarter of 2022, which represented a decrease of 51.8% when compared to the previous period, same previous period. The decrease in the same base net income was mainly due to the increase in interest on loans, financing and debentures driven by the higher average annual CDI which had an increase of 91 percentage points between the compared period and also to the higher net indebtedness of the company driven especially by the addition of new projects. In the second quarter of 2022, we reached BRL 21 billion in net debt, accounting for increases of 0.4% and it 47.4% in the comparison with the first quarter of 2022 and the second quarter of 2021, respectively. In the second quarter of 2022, we invested BRL 452.8 million. The concessionaries that invested the most in the quarter were ViaSul, Lines 8 and 9, and ViaOeste. At ViaSul, there were disbursements mainly with the duplication of stretches of BR-386 pavement recovery and implementation of safety devices. At ViaMobilidade, Line 8 and 9, investments were mainly made in the revitalization of the permanent way. ViaOeste's investments were focused on the duplicating several sections of [indiscernible] Highway. I would like to conclude by highlighting that the company has been able to deliver solid results as we can see from the complete analysis in the earnings release. We would now like to open the Q&A session. Operator, you may proceed.

[Operator Instructions] Our first question comes from [ Lucas Steves ] with Santander Bank.

Congratulations on the results. I have 2 questions. First, could you make some comments on the dynamics of the review of investment for the future? You know the commitment line -- we understand that this is reviewed by inflation every quarter. Is there any periodic review based on other basis? And what would be -- and how often would that be? I'll ask my second question later.

Lucas, this is Flávia speaking. Thank you for the question. This remaining balance of investments is compulsory investment that we have to we have to make as an obligation. So it follows the rate of adjustment of the fees, the tariffs. It's not something that is performed every quarter, but it depends on the anniversary of each collection.

The other one is related to the pipeline commented on by Waldo. What would be your expectations for the second round? And if you could make some comments about the other projects that are being prioritized by the company.

Thank you for the question, Lucas. In relation to the seventh round, we are focused on the analysis of different concessions that are included in this round of bidding process, and we are analyzing different risks considering each portfolio we are looking at the margin of risk and return in order to define how to go about it. So it's a strategic project. However, there are many points that need to be studied in relation to the competition. It's difficult to say who -- or to tell who can participate. We understand that there are some operators, international operators who are strategic and they are also considering the opportunity. So next week, we are going to check on that on the date of the auction.

Perfect. Waldo, what about the other projects that are in our pipeline that would become a priority for you?

Yes, perfect. As we have already mentioned in the past, our focus is clearly on Brazil. We are always analyzing all the opportunities considering all the models where we operate, we are looking at opportunities in urban mobility and highways. What we have planned for the short and medium terms in the next 12 months, we have Line 7 with a TIC and we have been concerned about this or looking at this for some time, considering that this concession has synergy with our operations in São Paulo. Clearly, it's a project with that we are observing, considering the [indiscernible] highway is also very interesting for us. We are evaluating how we are going to take part in the auction in September. And we're also considering the future, we also have highways in Paraná, 6 highways, which are going to be part of a bit by the federal government. And in the best case scenario, there is 1 for the end of this year. And most of them are for the first half of 2023, and all of them are being considered and maybe 2 of them are more interesting for us. This would be the medium-term scenario that we are evaluating now.

Our next question comes from Victor Mizusaki with Bradesco BBI.

I have 1 question in relation to funding strategic funding for new projects. Waldo, you mentioned that with the sale of TAS has been completed. So I would like to know if -- would it make sense to divest any assets. And even considering the auction of [indiscernible], as you said as a priority, would it make sense to be -- involve consortiums for those assets?