Priner Serviços Industriais S.A. ($PRNR3)

Good morning, everyone, and welcome to the video conference announcing Priner's Fourth Quarter 2025 and Full Year Results webinar. My name is Aline Rodrigues. I am the Investor Relations coordinator, and it is a privilege to be with you this morning. Presenting are Tulio Cintra, CEO of Priner and Taryn Silvestre, Investor Relations Director. We would like to inform you that this video conference is being recorded and will be available on the company's Investor Relations website, where the presentation is also available. We emphasize that the information contained in this presentation and any statements made during the video conference regarding business prospects, projections and operational and financial targets of the company constitute the beliefs and assumptions of management as well as currently available information. Forward-looking statements are not guarantees of performance. [Operator Instructions] Now I would like to give the floor to Tulio Cintra to begin our presentation. Tulio, please proceed.

Okay. Thank you, Aline. Thank you, listeners, for your attention to the company. Let's welcome Taryn, the company's CFO, who started this year. We are still in a transition phase. So the releases will be predominantly done by the CFO and Investor Relations Director, who just arrived here at Taryn. I would like to invite everyone to read the message from management, which will greatly facilitate the understanding of our numbers from last year. So last year, the highlight was the acquisition of SEMEP, which has already been widely announced. But I insist that this is something -- so transformational for the company that you will see the firepower we gained from it. We achieved a pro forma ROIC of 11%, the lowest ROIC in our history since the company's inception, and the adjustment of 14%. The adjustment of 14% is because there are BRL 23 million in this period amortization of intangibles, which are payments from the acquisition. And we also have BRL 82 million in taxes on assets that will now be offset with the co-relation of other companies, such as Real Estruturas, Soegeo and I believe gmaia as well through 2026. So we will start to make use of this. Therefore, it is quite fair to analyze this adjustment. We achieved net revenue of BRL 1.6 billion, almost 26%, 27% higher than in 2024. When I recall 2024 professional, it's because it captures the actual structure between July and December. Our accounting profit was BRL 96 million, and our operating profit was BRL 97 million, BRL 95.7 million. And the adjusted profit here in the adjusted figure I include the amortization of intangible assets because that's not operational. But I think it's also fair to analyze it without intangibles, was BRL 8.4 million, and the adjusted profit was BRL 31.6 million. This company is extremely unclear, it's actually complete. Our EBITDA was 15% higher compared to last year despite revenues having grown almost 30%, right? On the right here, as you can see, we have a list of the contracts we secured last year. And here, we can already see a little of what happened in 2025, right? You can see the conversion of contracts in 2024 ended up complicating the 2025 revenue, right? We're turning our attention now to net revenue and gross profit comparing between the quarters of '24 and '25 assessed in the year 2024, we achieved BRL 420 million this year. In the last quarter, we had BRL 474 million, so an increase of 12.9%. And in net revenue, we had an increase of 26.7%. The difference between having grown revenue by 26% and the gross profit, which I'm talking about here, I always want to think about gross profit the difference between having grown 26% in revenue and only 13% in gross profit was the drop in margins with a smaller margin. Our gross profit naturally reflected this downturn. Consequently, we lack sufficient time to make the necessary adjustments to our expenses to compensate for the lower gross margin experienced last year. Nevertheless, I believe that by examining this graph and separating organic, inorganic growth. We see a substantial increase. Profit and revenue had an organic increase of 21.1%, which is quite significant for a company of our size to grow organically 21%. EBIT increased by 15% compared to 2024. Organic growth was 22.5%. Organic growth refers to activities that have been in the company for more than 2 years. And so long, we've been able to successfully transform acquisitions into organic growth. Any -- the EBITDA margin for the fourth quarter of 2024 was 14.3%. This was the peak of the Real Estruturas acquisition. We just completed a series of assembly project that triggered more revenue from project completion, where courses have been launched throughout 2024, and this resulted in higher revenue at the end of 2024, and we took the margin to 14.3%. When we look at 2025 now, we arrived at similar absolute numbers, BRL 60 million to BRL 60 million, but obviously, we had a loss of EBITDA margin, mainly due to the drop in gross margin, right? Net profit in the fourth quarter of 2024 was BRL 21 million, this year was very low. It was a value of BRL 1 million. We had lowest payments of financial expenses and also amortization of intangibles. So it was really a year where net profit left us quite disappointed, okay? Okay. Looking at leverage, remembering that our leverage, we calculated that when there is any anticipation of receivables, the interest is calculated and deducted from EBT, right. So we reached a value of 2.32% last year. This is the company's focus already underway. And we had actually completed the CapEx in the company's other business units, and it was pretty predominantly the E&E part. And regarding the capital structure, consider the structure quite balanced. Right here, we have to begin with the debt amortization schedule. Our focus this quarter is on achieving a substantial extension of the schedule and work is already progressing. The publication will already show -- the new publications will show the extension of these debts with much more ease than you are seeing on the screen. And here is the reconciliation of net debt between 1 quarter and the other, right? So what is most like is the acquisitions part of. The BRL 247 million yes, right? This BRL 247 million are comprised of BRL 96 million, which was the cash portion paid by SEMEP, the assumption of debt between sellers and vitamin and debt through equipment acquisitions of BRL 146 million plus some price adjustments were higher values from previous acquisitions, which amounted to around BRL 5.4 million. So acquisitions are dominant with the acquisition by SEMEP, divided between cash and sellers. When we look at the variation in working capital, it was around BRL 10 million. I remember that site from our assembly operations, the remaining units experienced substantial growth. Infrastructure grew almost 23% and a -- almost 30%. And our industrial services grew almost 25%, which generated a real increase in working capital. We then concluded the fourth quarter with a net financial position of our BRL 638 million. Now moving towards the final points. I present this graph here. We've now started showing only compound growth from 2022 onwards because looking at the years of the pandemic was always a bit doubtful about whether that calculation was worthwhile. So we started calculating growth from 2020 onwards, which was the post pandemic period, okay? In reading either organic or inorganic receipts, we've seen growth every year. This shows us our responsiveness, the quality of our ability to grow with quality because this occurred without [indiscernible] winning MPS awards Net Promoter Records and without accidents and still being one of the benchmark companies in construction safety. So here I am moving towards the conclusion, and I wanted to bring up this point from the first presentation, which was the achievement last year or $2.8 billion. If we look from 2021 onwards, what we announced to you in 2021 was an achievement of $400 million more we reached BRL 8 billion in 2023. We reached BRL 1 billion in 2024. And last here, as you can see, here, revenue fell in 2025, right? This was the amount we had to execute in the following year. And it felt -- and here at $2.8 billion last year, it's already an indication that the following year, and it's more in dense 2026, but let's take a closer look at this number in a little more depth. The orange bars are the achievements, okay, and the green bars are the total budgeted for the year. So in 2022, we budgeted BRL 6 billion for the year. In 2023, we budgeted BRL 14 billion. We budgeted BRL 9 billion in 2024. And last year, we budgeted BRL 14 billion. And then there's this light green ball up here, which is what's budgeted BRL 26 billion in February. We see that today, market has almost doubled the proposal value compared to the total value but last year, right, we would have to add '23 and '25 whole years to reach what we have today in negotiation discussions in bids in just 2 months of work. So I want to highlight is that you heard observed that in that debt-to-equity charter we made close to 25% of the company capitalization and investment in the mining operations area, and this was done in a way to transform the company today. These bids and the prices offered have combination of services that includes infrastructure, geotechnics, structure, recovery and assembly. This has been very worthwhile. I also want to draw attention to the performance of the Industrial Services unit, which many considered a mature unit. I'm tired of reading that and all that. It is cool. It has been growing above 20% and grew 25% last year. Furthermore, our inspection experienced growth last year, achieving significant expansion and introducing new subsidized services during that period. So I'll end this part here and open the questions with the message that it has been very difficult to create a company with this size of services, this quality, and we need more scale. The scale has been coming, but it has come at the cost of leverage. And I'm sure that from 2026 onwards, the company will deliver good and well and recurring results. Our part in forming and creating this company is consolidating. Thank you very much.

[Operator Instructions] The first question is from Pedro Tineo from Itau BBA.

Can you hear me well?

Yes.

Yes.

Perfect. Two questions here, folks. I think the first one may several comments here throughout the release about the expectations you have, right, of recovery here, especially in the assembly area for 2026. I just want to get a second opinion with you, okay, on how this should happen here throughout the year, okay? Just to do a quick comparison, okay? Just so we understand more or less how this recovery is coming. And then second point, mining operations, right, temp this year should already contribute quite a bit to your results, just to get a little color. Also on the off-roads side, on the off-road, how they already start to impact here your result is on your results is if we already see this year or next year, I think those are the 2 main points folks.

We will always provide some qualitative data on the business units, but we will, as far as possible, reduce the quantitative aspects of services and focus more on the qualitative aspect of [indiscernible] treating the segment only as offshore mining. But I think that we really must answer your very good question today. We are going to see a ramp-up in the mining operations area already this year. We have the expectation that we might reach by the end of 2026, we run a run-of-the mining operations area of almost double the company that we acquired. I'm seeing it truly seeing the numbers, the tenders and the accomplishments we are currently achieving. It's very possible that this will happen within this year that we will have revenues that will be close to double or more than what you saw throughout 2024, '25 for this company. The assembly area has been able to replenish its backlog because today, the assembly area also has a little more assembly in the OpEx world, which is plant operation and maintenance in OpEx instead of just exposure to CapEx. So I think bottom, the trough of assembly passed last year -- at the end of last year, we managed to build a more suitable backlog, and we are seeing the positive results now with a good number of new contracts secured during these first 3 months. I don't know if there will be enough time for assembly to return to BRL 500 million in revenue, but I think it will return to the BRL 400 million minus something million in revenue this current year. The sum of our other services, such as industrial services and everything else is going well, as is the infrastructure or infrastructure area has also been budgeting projects where the average ticket price is transformational compared to what they previously budgeted. Our average ticket price and geotechnical activities and structural rehabilitation when this company started was around BRL 5 million, BRL 10 million, we started budgeting things at BRL 80 million, BRL 100 million. We started budgeting. And today, we have budgets of hundreds of millions for services where we previously had smaller ticket prices unlock. So Pedro, without going into detail, but already going into detail, we will talk less about segmentation because the consolidated results will answer whether it will be more infrastructure or more in construction or much more in mining operations. You will see a consolidated result on the rise, both in revenue and value generation.

Can I just add something here? Pedro. Regarding the off-road equipment, our expectation is to start receiving the first batch at the end of September, okay? And then we should have some off-road operations this year in the fourth quarter, okay? Still small, but already in the fourth quarter. We have something coming in for off-road this year.

He mentioned off-road, but the Internet went down here, Pedro. I didn't hear you talking about that part. I understood. You just wanted to know what the unit's expectations are. Isn't that right? We bought the first batch. It arrived in September, October, November, December, the last to arrive in January and Julian I should go to Japan. Now in May, we're going to install the second batch. The second batch arrives throughout next year as well from July onwards, and it's a very assertive decision by the company. And -- the company will continue in this off-road direction.

Next question is from Joao Ramiro from XP.

Well, here on my side are 2 questions. I think this is also a follow-up to Pedro's about the top line. I think the Integrity and Inspection segment has also experienced some headwinds throughout 2025, mainly coming from the sugar sector. Some companies, I think, have announced extra judicial recovery more recently. I wanted to get a little more of your perspective on this segment throughout 2026. What measures are you saying to try to mitigate this somewhat more challenging scenario? And the other, I think, is the issue of M&A, over the last few years, we've seen you do M&A that generates a lot of value, right? I mean, I think the biggest ones were the real ones in 2024. And now SEMEP in 2025. I'd like to get a little more of your thinking. Is there room from -- or through 2026, should you focus more on the integration of SEMEP? Is that a strategy we can continue to look at over the next few years?

Okay. The inspection unit, the unit that fills us with so much pride is responsible for activities that are activities that are very high tech, very advanced for many of us. They develop their own software, the prince system, probably the only one in the world with the features they developed, it's the most complete inspection company in Brazil, a company with 7 and 3 inspectors, which is the highest level we can have in this category. They now started developing inspections in subsea milk and pipelines under the sea bed using organic methods as well. So no, despite the ethanol shakeup from sugarcane, that's not what's going to shake this unit up. They're getting into corn ethanol. They're expanding diversification into other segments and the sugarcane ethanol part despite the drop in demand due to our bad customer base has had less activity. They're paying normally. We haven't had any problems receiving payments from that area. And this unit, these services, talking more about the service and the units, they diversified and done what they've always done innovating all the time.

Good. Super clear. If you could also give a brief overview, please.

And then we still have a P from ML under analysis. We completed valuations of 2 companies. One in the infrastructure area, which we like a lot and another in the inspection area, which we also like a lot. However, considering the focus we just place on, our goal is to dramatically reduce this leverage. These things rely entirely on a decrease in our overall leverage. There's also the fact that we currently have a significant organic pipeline that will require more working capital, ready and also demands area also demands more equipment, some of which can be leased, leaving the demand for caps. While other more specific ones, we will have to acquire, right? So our MM pipeline is going well. There are others in the valuation phase. Our pipeline always has to have a queue because some work out. Others don't -- we would very much like these 2 if leverage allows.

The next question is from Samuel Alkmim from BTG.

Just a follow-up on leverage. How do you see the leverage trajectories over 2026? And what level are you looking at, at the end of the year? Another one about Q1, in what way did you see the Q1 situation given all the strain, how did they perform on the margins?

In the first quarter Q1, there was another rain with particularly heavy rainfall in Minas Gerais, wouldn't you say? So we have a lot of operational interruptions because it's impossible to operate with that intensity of rain. I observed that other companies also suffered during the rainy season, right? We do suffer during the rainy season. Yes. I'm not seeing a first quarter, obviously, every first quarter in the company's history will be will be worse than the fourth quarter. It will all be worse because of the intensity of the rains. We work with the weather, right? Right. In the first quarter, we're expecting to maintain our margins comparable or a little higher than what we achieved last year that our projection for this initial period. Revenue falls, but we've been able to compensate for that. I've already entered the first quarter with 9%, 7% more revenue, that doesn't happen anymore, right? We're already talking about entering the first quarter above 12% and trying for or more than that, right. That was much more difficult in the past. So our first quarter is lower than the fourth, but it's not as bad as it was in the past. We've been able to compensate for that. You also see the strength of diversification, right? The inspection area is having its best quarter, probably in history because it's working underwater and there's no problem with rain there.

And regarding leverage, we see 2 scenarios here. The first scenario is with low SEMEP growth, and then leverage what should significantly far below 2x sort of 1.8, 1.7. Well, what happens is we have a lot of mining projects, right? And then the probability of us allocating capital, remembering that SEMEP is needs its call to allocation. So we should go back to allocating capital to SEMEP and that will bring more growth and the leverage will be a little higher than the pace that the company should or organically have right? Therefore, when considering leverage, we aim to stay below a level of 2x or 2.1, okay? So I think we can think more or less in that range in my company. No, no, no. Not to talk too far from that by end of the year. And then you regulate SEMEP growth based on that.

Super clear.

Just remembering, one point, we have the option of using funding via leasing for SEMEP's growth as well, okay? So the balance sheet isn't necessarily a limiting factor for SEMEP's growth. We have the option of leasing the machinery and continue to grow for more strongly at SEMEP, okay. So I think it's wrong to assume that given leverage, but I -- our growth will be limited at SEMEP. I don't believe that the assumption is accurate, and our pipeline is strong. And we have the capability to simply lease the necessary equipment, allowing us to grow using external capital okay? So we just have to be careful with that.

That's a very good point, Taryn. Not worth considering the limitations of SEMEP's capital portion because the off-road and on-road equipment, the A4s, the Scania and the road equipment, there's the option of leasing. That's not our preferred approach, though that option exists for you to address the growth. And regarding the off-road equipment despite the first purchase being made, we're not taking on that debt now. This debt should come with what the second half of the year, and I'll pay the cash in 2027. And the second purchase that, that should come throughout 2027 and I should pay the cash in 2028. So the company has been doing a good job with its equipment suppliers to shuttles to extend these payments, allowing the sweat of the equipment, the sweat of the works to also contribute to the first installments of these equipment diamond. I brought Taryn on this point. I see that there's a question from [ Juan Pedro ]

As I wanted to see if you could give a little more background regarding off-road at SEMEP, what return are you seeing? And how will you finance this higher capital, debt leasing?

Explain here.

Let's go. What happens with off-road equipment, it's equipment that as a rule has a useful life of 30 years, okay. However, it's very difficult from an accounting perspective to appreciate this and this using this assumption, right? So what are we going to do? We're going to depreciate this asset in an accelerated yet conservative way. So we're going to depreciate it over 7 years, we're going to appreciate the entire asset to 10% of its residual value over 7 years. And then this asset will be depreciate 90% of its value in the first 7 years. And from year 7 onwards, we'll have an asset with 10% residual value, from year 7 to year 30, it will basically be a business asset light. In years 10 and 20, there's a 15% resale value of the asset base value, which is to perform a technologic revamp of the asset you replace the tires, you replace the engine, you replace the suspension, you replace all the mechanical part of the asset, the shell vehicle remark on may. Well, because this asset isn't a vehicle easy. It's like a building and you replace all the mechanical parts in year 10 and in year 20, so you do this revamp and then you depreciate linearly this marginal CapEx that you made from year 10 to year 20 from year 20 to year 30. And then you have very large marginal costs. So it's kind of like this unit economics later if you want, you can give us a call, we can go together to economics. We have this very well modeled now, the calculation of how economics looks, right? So the ROIC in the first year and the first 7 years is between 8% and 20%, then the ROIC becomes quite high because there is very low capital employed, right? So that becomes a business of practically pure service with low capital employed. Regarding the funding for this, we'll be looking at part equity and part financing from rental companies, right? The rental companies are looking at this business because we believe this business has a life span of 30 years. It's an industry that works globally, it's not business -- a business that has a liquid global industry and has existed for a long time we would be willing to give this residual value to the rental company in year 7, okay? So the rental companies are genuinely interested in how this lease in providing us with a substantial capital buffer. So it would make sense to think of a hybrid model where for the first 7 years, we could operate with rental capital and from year 7 to year 30 with equity, okay? So that would be the unit economics of the off-road business.

[Operator Instructions]

I think to ask -- there's one more question.

Joao Ramiro.

Congratulations on the results. And while the administration's message was quite inspiring. You also announced that starting this fourth quarter, you're going to change the way you report the units right? I think it will be separated by unit of operation, oligarchies and the rest, right? So what's really interesting in short, are the sectors where Brazil has a comparative or competitive advantage, I think that regardless of the scenario, as a great indicator of where the P&L is going as well. But I wanted to ask, what exactly will change in the way we view the penalty from this point on, right. Could you give us some tips on how we should be looking at this from now on regarding this new division that you're going to present to us starting in the first quarter of this year, please?

Yes. Joao, we've noticed that over the course of time that each of our business units exhibit a certain level of volatility, the Industrial Services unit is like a Swiss watch. It's been 20 quarters with minimal fluctuations in its margin and continuous growth as well with that infrastructure also has a large fluctuation in margins, but always with very high margins, but they fluctuate. So when you compose the public by segments, the sell side and buy side and facing each other. Let me see if I -- I'll project it here for you to try and explain this. What will happen is something like this. You -- the stability for Industrial Services and it's one score and in industrial dismantling is another stability score. What we were doing, therefore, was bringing a world of volatility, be business units so that other models could replicate this that was so. We were spending 80% of our time explaining a drop in a particular vertical. We're dropping in a particular quarter instead of explaining the rise in the consolidated results or whatever. This will greatly facilitate our work as Investor Relations. The other thing is that we no longer disclose the results images in services that you bid on in the market that's a mistake we made in the past, and we don't want to make that mistake again. What you should study now in the consolidated figures, just like to do modeling for GPS, VIG, which has energy power, right, or other details, but they don't have the complete disclosure of all the services they provide. But you will have all the company's numbers revenue gross margin, allocated capital depreciation and everything else, just segmented by these 2. You can anticipate the mining industry to grow at a significantly faster pace than other sectors. Alternatively, it is a world with a very large total addressable market, we still have little participation in pulp and paper, a little participation in Southern Brazil and little participation in sanitation, railways and highways. All of this will fall into other sectors and these other sector is also being addressed by M&A. So you should expect other sectors with rising margins and a larger volume than offshore, oil and gas. Considering the growth rate, the mining and steel sector will see considerably higher expansion than other sectors over the next few years due to the exceptionally long-term nature of the current mining cycle. I think we are living through a super-mining cycle, and this shouldn't stop. I think that's our final consideration. I wanted to point out the following, you observed in our debt composition section in the third and fourth quarters, 25% of the company was allocated to mining operations. And at the end of the presentation, we show that I have in the company's project today, the sum of the previous 2 years in just 1 month, so as. This shows the strength and assertiveness of our decision. There are budgets for mining operations alone and certain budgets include contributions from assembly, geotechnical engineering, drainage and decommissioning services. We have -- we started offering -- we have assembly works with inspection by also in mining and which we'll probably also include the operation part. So we brought to the company a glue that unites several services that we have within the mining world. And the size of these contracts changes, and we now have a continuous flag, continuous site within Minas Gerais where we will probably sell until the exhaustion of these mines. So the models from now on, input band asset, but the results are very good and generate a lot of value in the equipment in this allocated capital. This will transform the company's future models. Now I'd like to conclude our meeting today by saying that we actually succeeded and created an impressive company inside Brazil to serve the key sectors in which Brazil has competitive advantages.

There's 1 more question from Matthew Suarez of Market Makers.

I understand that RTI of vehicle is not an easy task. How comfortable are you with the assumptions of off-road modeling, any technological disruption factor into the calculation?

No, you can't create a technological disruption, if you're going to mine you have to blast the benches and transport the rock from one place to another. That's not what you're doing with ROIC for 30 years. You can do it for just 5, if you do it for 5, it will be 20%. If you do it for 10, it will be much higher because the capital intensity will decrease. And regarding liquidity, this is one of the most liquid pieces of equipment on planet earth. It has a very low price drop. It's very easy to sell this equipment. You have 2 premium sellers in the world, Caterpillar and Common. These are pieces of equipment that are sold at very significant values in the market. And you have worldwide liquidity. So you don't need to do the calculation of 30 years, no, you can do it in 5. If you're already going to like the business.

I wanted to add a point, which is the following. This product is for itself in the first 7 minus year cycle okay. So the economic liability occurs in the first 7 years and then it's upside return. So if you want to be conservative and simply kill the project in year 7 and it become worthless. The project continues to be viable in your model. That's a matter of your modeling, you understand no problem. It continues to be viable. We are employing an assumption which we believe to be accurate. However, when analyzing economic viability for 7 years alone justify the project.

That's if the residual value is 0, right? In fact, the residual value of a 5-, 7-year piece of equipment is very high.

No further questions, we conclude the Q&A session. The video conference on results for the fourth quarter of 2025, the financial year is now closed. The Investor Relations department is available to answer any further questions. Thank you to all participants, and have a great day.