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

Thank you. Welcome to Wilson Sons earnings conference call for the first quarter of 2022. We start with one of the most relevant topics for our company, safety. In 2021, after the impacts of COVID-19, our safety results fell short of our benchmark. This led the company to take numerous actions. These actions have proven to be assertive and we have already noticed a recovery in our performance with the last lost time accident occurring in September 2021. Thus, our lost time accident frequency rate at the end of the quarter was 0 incidents per 1 million hours worked. And the accumulated results for 12 months was a rate of 0.23, reinforcing our commitment to this agenda. Another important achievement was the celebration of 10 years with no lost time accidents at our offshore support bases. There were 5.5 million hours worked without any accidents. This record is a milestone in the oil and gas sector and is a direct result of the practices and investments made by the company in security over the last decade. Now talking about our environmental, social and corporate governance practices. The relevant highlight is the publication on May 5, 2021, of our first sustainability report for the year 2021. This report is another step towards increasingly transparent and consistent disclosure of the company's environmental, social and governance performance. Still on this agenda, in the coming weeks, we will deliver the first of a series of 6 80-ton bollard pull tugs built at our shipyard in Guarujá. The vessels are IMO Tier III certified, which attests to the reduction of nitrogen oxide emissions, in addition to presenting an innovative concept for tugs in the country. The new design allows an estimated reduction of up to 14% in greenhouse gas emissions. All these actions contribute to the development and continuous improvement of our ESG practices, strengthening one of our strategic pillars. Turning to Slide 5, let's talk about our financial results. On this slide, we present a summary of our results for the last quarter. Despite the operational performance of some business units having been impacted by the supply chain crisis as we will discuss later, the financial performance was consistent and solid, surpassing the same period in 2021. We can highlight several positive points: an increase in storage revenues at the terminals; a surge in exports and imports at the international logistics division, Allink; and an increase in average revenue per port maneuver in towage; and also, new contracts in offshore support bases. In the quarter, net revenues rose more than 4% to BRL 529 million. EBITDA also increased by more than 4% to BRL 239 million, with a better revenue mix and contract renegotiation despite the impact of rising inflation on personnel, maintenance, fuel and energy expenses. Profit after tax was BRL 143 million in this quarter, more than 400% higher than the same period in 2021. Profit benefited from the foreign exchange rate variation in the quarter, as the Brazilian real appreciated by 15% in the first quarter against a 10% devaluation in the first quarter of 2021. The overall impacts of the appreciation of the Brazilian real was around BRL 64 million in the company's results, of which BRL 28 million are monetary impacts on taxes from the balance of loans in foreign currency. But it is important to point out that even excluding FX movements, the company would have shown a robust net profit of BRL 80 million, 71% above the first quarter of 2021. Let me now move to Slide 6. Here, we highlight the financial performance of the main business units in the quarter. Logistics bottlenecks in the global supply chain have generated a limited availability of empty containers and significantly affected our operation at the terminals. From March onwards, we experienced the effects of the pandemic in China, leading to both new closures and worsening congestion at numerous ports. The Rio Grande container terminal was the most impacted by this environment, registering an increase of almost 46% in the number of vessel call cancellations and emissions. At the Salvador container terminal, despite the impacts of the lack of availability of empty containers, there was an increase in revenue due to price adjustments and higher storage revenues as the average dwell time increased in the quarter. A highlight in the Container Terminals segment was the outstanding performance of Salvador and Rio Grande terminals according to the Global Container Port Performance Index released by the World Bank and IHS Markit. The 2 terminals are the only Brazilian container facilities to be among the 50 most efficient terminals in the world. Towage revenues, on the other hand, rose by around 3% to BRL 254 million, with an increase in average revenue per maneuver, which was around 10% higher when compared to the same period last year. We had a slight decrease in port maneuvers, mainly in the container segment, which were partially offset by higher volumes of commodities. The offshore support vessel business continues to recover. Revenues were up to 26%, with an increase in operating days by 12% in addition to higher average daily rates when compared to the same period last year. Another highlight this quarter is international logistics division, Allink, which recorded an increase in net revenues of around 73%, reaching more than BRL 41 million as a result of the high levels of demand and also better revenues from both shipowners and terminals. Now our expectations for 2022. We expect that impacts on container terminals could remain this year and may extend to 2023, given the worsening supply chain crisis with disruptions in Chinese ports. In our businesses related to the oil and gas sector, we expect a recovery with new contracts for our joint venture, WSUT, and the Offshore Support Bases. In the Towage segment, we saw an M&A deal announcement with the acquisition of Starnav by SAAM. We see this transaction as positive for the towage market, which could generate new opportunities for the sector. We can continue on Slide 7. On this slide, we can see some of our liquidity and leverage ratios, which remain solid as a result of a resilient balance sheet and business performance. In terms of cash flow, the main outflows in this period were the debt amortization of BRL 59 million and capital expenditures of BRL 68 million and it is also [indiscernible] of new vessels at our shipyards. Continuing with our strategy to reduce debt in our offshore support vessel joint venture, we performed a capital increase of BRL 27 million per partner. As a result, we ended the period with almost BRL 344 million in cash and cash equivalents. Our leverage ratio remains low, with our net debt-to-EBITDA ratio at 1.5x. In terms of debt profile, 84% of the total bank debt was long term and 66% was linked to FMM or the Merchant Marine Fund. Moving to Slide 8. To conclude, I would like to highlight the implementation of the six-for-one share split for all shares of the company, which was approved on our last Annual General and Special Meeting held on April 26. With this initiative, we seek not to increase the liquidity of the company's common shares in the market and enable an adjustment in the share price to make it more attractive and accessible to a greater number of investors. Another highlight was the distribution of dividends based on 2021 results in the amount of BRL 2.68 per share, around BRL 196 million, which represents a dividend yield of 4.5%. The presentation ends here. And I would like to invite you to the Q&A session. Thank you.

[Operator Instructions] The first question will be asked by Fernanda Recchia from BTG Pactual.

I have a couple of questions. First, I'd like to hear a bit more about the impacts from the Chinese lockdown on your operations. You've mentioned that this year will be a little bit more challenging. We started hearing some news of flexibility due to COVID. So what will the impact be on your numbers? What should we expect for the next months? When should it peak? And when will we begin to see it simmer down? Also, I'd like to hear a bit more about the acquisition you mentioned. I'd like to understand, if you looked at the estimate, you mentioned [ 9.2 ]. So that's a bit higher than what we saw for this year. Did you see any impact on your price due to higher competition? So if you could give us some more color on that, it would be quite useful.

Fernanda, this is Fernando Salek. I'm going to hand your question to Arnaldo. And I'll make a comment on your second question, but let's reverse this order. First, I'm going to answer your second question on the acquisition. And then I'll let Arnaldo answer your second question. So this market is a bit spread out in Brazil and it suggests a consolidation. Inorganic consolidation is interesting because it does not increase the offer of vessels to the market. We have a positive outlook on that because we have a rational -- excuse me, national player in the market. And we understand that it will not have a major impact on the offer side. And Arnaldo will be able to tell you a bit more about that. And you're right, the transaction came at a multiple that was higher than what we had expected. So that also is a sign that there really is a significant discount that will be received over time. Arnaldo, do you have anything to say on the acquisition? And then we'll answer the next question.

Sure. Fernanda, as Fernando said, we did not see an increase in the number of tugboats in operation in Brazil after the acquisition from Starnav. And it should conclude in the next few months. They're going to have to get all of the legal authorizations and go through that red tape, but we do not expect any important impact on the short or the medium terms, at least not a negative impact. We might have a positive impact since as Fernando said, they are a very rational operator. To answer your next question on the lockdown in China and the situation of the ports there, we've read and heard that the situation is seemingly improving. Of course, there's a big delay between what happens in China and how it impacts Brazil. So it's likely that what has happened and is happening at the ports in China due to the lockdowns will impact us to a certain extent in the next few months. But it's very difficult to say exactly what's going to happen. But all signs point towards an improvement and that should impact us positively, but it's very difficult to measure what's going to happen.

The next question will be asked online by Lucas Facury from Larus.

Congratulations on your results. Here are my questions. Tugboats, what do you expect from the average ticket for maneuvers for 2022? Do you believe that the figures for the first quarter will be sustained for the next ones? Tugboats, can you tell us about your competitive environment after the acquisition of Starnav by SAAM? What are the potential impacts, short and long term? And do you expect to recover volumes in the second half of 2022? Or is that still unknown? Offshore. Can you give us some more color on your expected contributions to the EBITDA from the partnership between WSUT and Subsea 7 in 2022?

Lucas, thank you for your questions. From my understanding, your question on the competitive environment by SAAM has been addressed, has been answered, so I'll focus on the next questions. You mentioned tugboats and what we expect from the average ticket of maneuvers in 2022 and if the figures for the first quarter will be sustained for the next ones. I'll let Arnaldo answer that question. So we consider the numbers for the first quarter of 2022 to be sustainable for the next quarters. We can't really see if we'll see significant improvements, but what we can see is that it is a sustainable figure and we might see a slight improvement on the ticket over the year. Okay. So the question on Tecons. We've talked a bit about the volumes because of the logistics crisis and what is happening in China. And I'll let Arnaldo make any additional comments on volume recoveries for the next quarter.

It's very difficult to foresee anything on volumes because, as I said before, the lockdowns that happened in China in the last months. So that impacts container terminal volumes. And we expect some improvements to appear, but that's very difficult to foresee. Now Lucas, turning to your question on offshore, so you wanted to know what was the impact to our EBITDA in the partnership with WSUT in 2022. The approximate impact of these contracts with them for 2022 should be about USD 5 million. And for 2023, the full benefits will be around $9 million to $10 million.

[Operator Instructions] This concludes the questions-and-answer session. We will now give the floor to Mr. Fernando Salek for his closing remarks. Go ahead, sir.

Thank you. I would like to highlight our satisfaction in presenting this low incident rate for the last quarter. And we're also very happy to present such robust financial results in the first quarter of the year. 2022 is proving to be increasingly challenging with impacts of the supply chain crisis and inflationary pressures. I'd like to thank our customers, our employees, our investors and partners, who always contribute to the best results and encourage us to go further and further. I restate our absolute commitment to the health and safety of all our employees and stakeholders. I'd like to thank everyone for participating in our conference call. I hope you are well and safe. Thank you, and have a good day.

This concludes the Wilson Sons conference call. Thank you for participating. Have a good day, and thank you for using Chorus Call. [Statements in English on this transcript were spoken by an interpreter present on the live call.]