Syn Prop & Tech S.A. (SYNE3.SA) Earnings Call Transcript & Summary

[Interpreted] Good morning, ladies and gentlemen. Welcome to Syn's video conference to the discussion of the results referring to the second quarter of 2025. This conference is being recorded, and the replay can be accessed on the company's website. The presentation will also be available for download. [Operator Instructions] Before proceeding, I would like to emphasize that forward-looking statements are based on the beliefs and assumptions of Syn's administration and in the current information available to the company. These statements may involve risks and uncertainties, given that they relate to future events and, therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should take into account that events related to the macroeconomical environment, the segment and to other factors may cause the results to be materially different from those expressed in the respective forward-looking statements. With us here today, we have Mr. Thiago Muramatsu, CEO; and Mr. Hector Leitao, CFO; and IRO. Now I would like to hand over to Mr. Thiago Muramatsu, who will begin with the presentation.

[Interpreted] Good morning. Thank you for being here with us in our earnings release. We're going to begin this presentation with the realizations of the second quarter. The first one is the anticipation of XP installment. When we concluded the transaction, the deal in June last year, the payment -- an installment had been paid and accorded for the agreement until the end of '24. And there was until another installment of BRL 550 million for December 2025, and we opted for anticipating these installments. So the value -- total value was BRL 593.5 million updated by the CDI. And the cost of this deal equivalent to the CDI plus 0.7%, we had a discount of 1.32% on this anticipated period from April until December '25. We chose to do so because we brought cash in anticipation to the company. So we could do this. Also we had a reduction in capital, and also this resulted in gains in tax efficiency. So this offsets the discount. So due to this anticipation, we were able to do the prepayment of the 12th debenture amounting to BRL 377 million. It was almost at the same time because the original maturity would be in December '27, and we did this. Also we paid BRL 70 million in dividend. This is around BRL 0.45 per share. And we are going to use this to do the reduction in equity. It's about BRL 2.16 per action as informed through our communication to the market and the payment date, okay, we are still in the legal term. And we have this payment date that is not yet decided. It is open and to be done until October 15, but we have a next date that is September 18, 2025. Also we announced the intention of selling the Shopping D. We are selling it in conjunction with XP [indiscernible]. We are selling our entire stake in a value -- in a total value of BRL 8.9 million. There are still some conditions that are ongoing, including CADE's approval. And also regarding still the subsequent events, we are receiving the payments of the Brasílio Machado. We have received almost the totality. There were 6 installments. We've received them at the [indiscernible] then we had 3 more, and we have still 2 remaining installments that are going to be paid in September and in November. Now regarding our operational performance, I would like to explain about our physical occupation. We had a reduction regarding the second quarter of '24 concentrated on a big store that it is very representative in our portfolio. And if we took out this effect of this store, it would be another result. The problem with it is the definition of mix. We have several proposals, okay? We expect to close the deals until the end of the year. And when we compare the reduction of financial occupation and physical occupation, you can perceive that the financial occupation is much less. It's because of this store whose square meter is less representative than the area. And now talking about sales evolution. We had an increase of 6%, so we had BRL 1.400 billion and now we have total sales of almost BRL 1.5 billion. So we had the same-store sale of 6.3%. And compared to the first quarter, we can see that there was a considerable increase. When we talk about the same-store rents, we amounted to an increase of 8.3%. And if we look at the entire half, we see this 5.5%. It's a little bit higher than the same-store sales. Now talking about corporate buildings. We have almost 100% of our place Class A buildings occupied. The vacancies due to the Brasílio Machado whose sales is not yet finished. But looking at the portfolio as a whole, we are flat. But when we take out the effect of Brasílio Machado, we go the occupation up to 89%. Regarding the financial occupation, the increase was even better because of the rent in some areas that were higher. So we are now amounting to a little bit more than 90% regarding the financial occupation. And regarding warehouses, our third arm of businesses, so now we have the CLD delivered the Phases 1 and 2, and we are developing now the Phase 3. That is already pre-rented. So although it is not concluded yet, this has a linking with the Phase 2. So the Phase 2 and Phase 3 is already 100% rented. Phase 4 is a little bit delayed. It's not rented yet. And our total participation in this entrepreneurship is 17%. So we have the direct ownership in the active and also indirect participation through FIP together with SPX. It's more than 8.5%. Now regarding the financial performance, I would like to invite Hector.

[Interpreted] Thank you for being here with us today. So let's talk about the same properties pro forma results. We grew 8% in the half, closing the first half in BRL 49.6 million. It's a sound and solid growth. And now a breakdown. In malls, we had 33.6% in the first half. This is an increase of 3.8% compared to the first half last year. And then we see an effect of a vacancy that we have of a big, large area. And due to this, we have a bigger expense because of this vacant area. But we understand that this is very common in the first quarters and second quarters. So it's seasonal. And then also, we have a very good opportunity of reinforcing our mix. Our portfolio is concentrated in consolidated assets. So when a store is not performing well, and then it leaves, we have the opportunity of improving. So this first effect is not really concerning. Second, in the accounting year, we don't take into consideration some cash effects. We had the full delinquency that was very low in our portfolio in this period. If we consider the delinquency rates from 1 year to the other, we should say that we had a very good surprise regarding the performance of the stores, and this is a reflection of our very healthy customers portfolio. Well, regarding offices now, we grew 10% in the half, and 93% of it is because of the towers, JK [ D, E ]. Since last year, we have a high volume of reviews in the building, and the rent is now around 35% increased in those reviews. So we had a very excellent performance of our commercial team in increasing the rents. And this shows how the market for office's rent is doing well in Sao Paulo right now. Now regarding warehouses, we have an evolution of the locations of the rents. Last year, we had almost 70% of the assets rented. Now we have more. So we are going to see a very sound growth in the CLD in the next quarters, naturally, because of this delivery of the warehouses and the rental of them. Now we have the main indicators, EBITDA, net income, FFO. We still have a distortion regarding last year because we had a bigger portfolio of malls. And we had the sale done in the last -- in last year. So we closed the half with BRL 66.1 million of EBITDA. And when we take out the nonrecurrent effects, even comparing with the bigger portfolio that we had, we had an EBITDA -- adjusted EBITDA of BRL 39.6 million, a fall of almost 50%. Adjusted net income was growing in -- almost 70%. Because of our financial results, we decreased the leverage. And also we have the effect of the depreciation. So when we exclude this effect, we look at the adjusted FFO and we see that there is a decrease of 1.3%, aligned with last year. So we arrived at these results even with the smaller portfolio and with the distribution of equity last year. So we delivered a very good results for our shareholders, and the cash is very aligned even with a smaller portfolio. And now regarding our debt, we paid our 12th debenture. So our gross debt decreased. Also we closed the half with BRL 553 million in cash, and our EBITDA was BRL 86 million. So our net cash is a little bit lower than 1x EBITDA. And here we have our amortization schedule. After our amortization of the 12th debenture, we have now a very comfortable situation for this year, '27 for the next 2 years and a more important refinancing for 2028. Related to the indexers, nothing has changed. We have now 85% of our debt in IPCA, and only 50% in the CDI. So we have a debt profile that is very interesting. Average cost of 86% of the CDI. Okay. Now we can open for the Q&A session.

[Interpreted] [Operator Instructions] Our first question comes from [ Reinaldo Verissimo ].

[Interpreted] How do you see the second half and 2026? Any updating about the expansion of the Cidade Sao Paulo Shopping Mall?

[Interpreted] Well, we are now in the second semester and if things continue the way we have seen so far, we have a very positive prognosis regarding the malls. There was a decrease in the commercialization demand at the end of the first half, but now we are seeing a rebound. So I think we are going to solve soon the vacancy that we have in our portfolio. It is still in the second half. In the case of the buildings, we have also some revisions to be done still this year. They are under negotiation, but we see it very positively. Also we are paying attention to some opportunities, but we don't have any novelties to tell you yet. In 2026, well, we have been trying to change our mix, improving our mix, so we are doing this very interesting job of qualification to offer our clients a more interesting mix. And throughout the time, this has given very positive reflex. We expect to see the good results in 2026. The second half of 2026 is very positive for us. Regarding the Cicade Sao Paulo shopping mall, we don't have anything concrete to share with you right now.

[Interpreted] [Operator Instructions] Our next question comes from [ Ricardo Grosse Fernandez ]. Our next question comes from [ Jose Guilherme Melo ].

[Interpreted] Can you hear me? Well, my question is you -- like that, well, my intention is to be an investor of your company, but I would like to understand this equity reduction that was done.

[Interpreted] Thank you. Thank you for your question, Jose Guilherme. Well, in the last few years, we have been doing a series of dividend distribution and capital reduction. We don't have any more distribution of dividends and reduction of capital forecast, and we cannot give guidance right now regarding these 2 topics. So what I can tell you is that, okay, we have -- I really cannot give you more details into the future.

[Interpreted] And this reduction in the equity is because you have too much debt and you don't have cash or you just want to invest in new assets and to have a more sound cash.

[Interpreted] No, it's the opposite. We have a higher cash. So we are giving this money back to our shareholders. So we are more balanced in our cash. As Hector showed in the presentation, we have only one need for cash, and it is in 2028. So from now until there, we have a recurrent flow, that inflow of cash. So we don't have this obligation in the short term that would demand us to have this higher amount of cash. So we are returning this cash to our shareholders because of that.

[Interpreted] Okay. So you had this equity reduction, okay? The cut date is until the 15th to the 20th of September. So let me ask you, is there a chance of this not happening? Or is this already defined?

[Interpreted] No, this is already approved in -- by the Board. So we are just waiting for the declaration of our creditors.

[Interpreted] Our next question comes from [ Guilherme Fejas ].

[Interpreted] Can you hear me?