Wilson Sons S.A. (PORT3) Earnings Call Transcript & Summary

Good morning, and welcome to Wilson Sons' Earnings Call for the Fourth Quarter and Year 2021. Today with us, we have Fernando Salek, CEO of Wilson Sons; Fabricia Souza, CFO; and Arnaldo Calbucci, COO. As a reminder, this conference is being recorded, and we will have simultaneous translation for those who wish to listen to the English version. [Operator Instructions] Before proceeding, we would like to mention that Page 3 of the presentation contains the usual forward-looking statements for your reference. Now I would like to turn the conference over to Fabricia Souza.

Thank you. Good morning, everyone. I hope you are safe and healthy. Welcome once again to the earnings call for the fourth quarter and year 2021 from Wilson Sons. 2021 was a year of many and great achievements for the company, not only here in Brazil, but also around the world. For the same reason, we were very pleased and satisfied with the company's results for the year. We're talking not only about solid financial results, but also achievements and advances in the sustainability agenda. That's one of the priorities that the company and our Board have. We can mention several examples of these achievements, like the beginning of construction in our shipyard of new tugboats suitable for the IMO Tier III standard, which will be equipped with pioneering solutions in Brazil and reduce nitrogen oxide emission levels by more than 75% in addition to being more energy efficient. We also joined the world's largest companies by joining the Carbon Disclosure Project. We received the Gold Seal qualification of the GHG Protocol Program for the first time. We were recognized as a Great Place to Work, a standard of excellence in work environment. We're among the leading corporation in open innovation by the 100 Open Startups ranking. And in 2021, our shares also migrated to the B3 Novo Mercado, a listing segment of the Brazilian Stock Exchange for companies that adopt the best governance practice among other accomplishments. All achievements are aligned with our purpose, and we're extremely proud of the accomplishments of the year and of the entire Wilson Sons team. Together, we work to transform realities and deliver better futures. Moving to the safety topics. The very high vaccination rate of our employees, together with the prevention measures of the -- of our HSE, ensure the safe and consistent continuity of our operations during COVID. Our lost time injury frequency rate finished 2021 at 0.63 incidents per 1 million manhours worked, which is above the level achieved in 2020. The last 2 years have been quite challenging for safety management due to the measures adopted to face the pandemic. Given this scenario, containment measures are being implemented to reverse the year's performance with a focus on the prevention of serious accidents. We understand that we are in the right direction with our actions on account of improved results in the last quarter of 2021. Turning to Slide 5. Let's talk about our environmental, social and corporate governance practice. On this slide, we'll present a summary of our financial results for the last quarter and year-to-date. Solid operating activity drove an outstanding result in the towage division, and despite the limited availability of empty containers and worldwide logistics bottlenecks, container terminals were resilient. In the quarter, net revenues increased 18% to BRL 577 million. Our EBITDA increased 10% to BRL 190 million. This was impacted by higher operating volumes and a better revenue mix. Profit after tax this quarter was BRL 42 million. It was lower than the same period in 2020, and this was the result of the negative effects in exchange variation during this period. Excluding foreign exchange effects, the company would have shown a net profit of BRL 56 million in the quarter, almost [ 103 ] above the last quarter of 2020. The full results for the year were also resilient and higher than 2020 with an 18% increase in the net revenues and a 21% increase in EBITDA. Profits also improved significantly this year, almost 85% higher than the same period last year, reaching BRL 223.8 million due to better operating results. We now move to Slide 6. Here, we highlight the improvement in operating financial performance against the same period in 2020. Despite the bottlenecks in the global supply chain, which have limited the availability of empty containers and increased vessel call cancellations and emissions mainly in the Rio Grande terminal, container terminal revenues increased 15% due to an increase in transshipment volumes in addition to a strong warehousing revenue that increased by almost 41% during this quarter. For this year, our revenue remained solid, a 13% increase versus 2020. We also reached a record of cargo handling at Tecon Salvador container terminal with 376,000 TEUs, the highest volume ever handled since the beginning of its activities more than 2 decades ago. In spite of the challenging scenario in 2021, the terminal volumes increased by almost 10% compared to 2020. This was supported by the new berth structure and increased efficiency. We can highlight the transshipment and import volumes with a strong contribution from the renewable energy sector. Towage revenues, on the other hand, rose by 16% with burgeoning revenues from special operations, which increased 38% in the quarter. In addition, we had a 15% increase in average revenue per harbor maneuver in the quarter. This year, the results of special operations were even more solid, 50% higher than last year. The offshore support vessel division continues to recover slowly. Operating days increased 3.4% when compared to the same period last year due to the start of new contracts, which positively impacted the revenues by 21% in the quarter. Our expectations for 2022 remain conscious in view of the possible effects of the Ukraine war on trade flow. We also expect that logistics bottlenecks will remain a challenge for container terminal volumes in the first half of 2022. They should return to normal only by 2023. In towage, we have a positive expectation that the trade flow that is mainly commodities will boost results throughout the year. In addition, the recovery, albeit still gradual, of the oil and gas sector, can improve the performance of the special operations as well as our offshore support segment. Moving on to Slide 7. On this slide, we can see some of our liquidity and leverage ratios, which remain strong, with a strong operating cash generation in the quarter. As a result, the company ended the quarter with BRL 374 million in cash and cash equivalents. As we mentioned in the last quarter, we incorporated BRL 72 million, which was in the Wilson Sons Limited cash and cash equivalents before the merger that took place on 22 October 2021. There was a disbursement of BRL 90 million for the financing of the construction in progress. We also had debt amortization of BRL 73 million and capital expenditures of BRL 115 million. It's worth mentioning that the construction of new vessels at our shipyards in Guarujá by the towage division. In terms of our debt profile, funding linked to the FMM continues to offer the best options of cost and term, with an average cost of 2.76% per year through 2035. Our leverage ratio remains low and stable, with our net debt-to-EBITDA ratio at 1.8x. Moving on to Slide 8. Regarding capital expenditures in the last 10 years, the company went through a strong investment cycle up to 2016 with investments in the main business units. From then on, lower capital expenditures were needed even during the expansion works at the Salvador container terminal, which took place mainly in 2019. With the slower level of capital expenditures in recent years, we were able to strengthen our cash position. For 2022, we forecast a slightly higher value due to the construction of 3 tugboats in addition to the civil works for key reinforcement and dredging activities in the Salvador container terminal. Moving on to Slide 9. One of the positive consequences of this year's achievements has been the performance of the company's shares, which showed resilience compared to other infrastructure peers, with the share price closing the year at BRL 55.7, an increase of 24% in the year. This was, in fact, higher than the small cap variations from B3, which were 16%. In 2022, some initiatives have helped to increase the liquidity of shares such as hiring BTG in January as market maker, the beginning of the entry in 3 indexes mentioned in this slide. We understand that this is a great beginning, and we intend to do more in other initiatives to accelerate this growth, including the share split from 1 to 6 already proposed for the extraordinary general meeting. Through this action, we seek not only to improve the liquidity of the shares, but also to enable an adjustment in their quotation, making the price per share more attractive and accessible to a greater number of investors. All the presentation ends here, and I'd like to invite you to the questions-and-answer session. Thank you.

[Operator Instructions] We received a question from Lucas Facury from Larus. He's asking what is our expectation for the price dynamics in towage and Tecons for 2022 considering the current high inflation. He's asking us to talk specifically about towage and freight in -- and I'll pass it on to Arnaldo.

The impact of the inflation has been foreseen in our budget. What happens is that we have a high level of uncertainty now with the Ukraine war and an unforeseen increase in fuel prices, which is still uncertain. I mean we still don't know how much it will go up. About the expected inflation, our prices and price readjustments are in line with inflation. So we've been able to increase our average price in towage, and we really don't see any problems there. Obviously, with higher fuel prices, we can have an impact on our cost matrix, and that may reduce our profitability. But we're going to try to pass on these increases to the clients that -- well, in which we can be successful with that. This is connected to a special operations that may appear during the year, and we hope to have a lower level this year than in 2021 with better allocation and a reduction of the number of dockings that we might -- that we're going to have in 2022. So we believe that it's going to reduce.

Lucas asked a couple of questions, and I'm going to read them to Arnaldo. Does the company expect its special operation revenues to go up in 2022? And his second question is about Tecons. He asked, if box rates are going up with shipowners in 2022, and if so, if you can tell us how much increases the company is seeking? Arnaldo?

Well, about special operations in tugboats, we had a high volume in 2021. Many special operations are unpredictable, especially assistance activities. And we are not expecting special operations to grow in 2022, but that can always happen. Considering Tecons and box rate increases, we have been negotiating. We've negotiated increases in contracts with shipowners that would be enough to cover for inflation, which really has been high in the last few months, but we've been able to get increases that cover the effects that -- of inflation.

[Operator Instructions] We received another question here, and it reads, can you tell us a bit about the partnership agreement you signed with Subsea 7? Arnaldo, would you like to say anything?

Yes, I can comment on that. We signed a very important contract with Subsea 7 to operate 2 PLSVs, which are line launch vessels. And this was signed with our Brazilian flag. So the first vessel will start operations in the next few days and the second one over the next quarter. It's a contract that will have a 3-year term, and of course, it can be extended further. That's a very important contract because it represents monetization for our tonnage. It's our first initiative there.

[Operator Instructions] This concludes our questions-and-answer session. We will now pass it on to Mr. Fernando Salek for his closing remarks. Mr. Fernando, you may proceed.

Thank you. I'd like to thank the entire Wilson Sons team for the results in 2021 despite such a challenging year. There were countless achievements during the year, and we had great results, and we had great quality. None of them would have been possible without the extremely committed team that we have at our company. I'm extremely proud of the path we're following, and I'm confident about our future perspectives. I'd like to reaffirm our commitment to the safety and well-being of all of our employees. We're always seeking to ensure their well-being as well as the well-being of their family members and other stakeholders. I'd like to thank everyone for participating in our conference call. I hope you're well and safe. Thank you, and have a good day.

This concludes Wilson Sons conference call. Thank you, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]