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

Good morning, everyone. Welcome to the Wilson Sons Earnings Conference Call for the Fourth Quarter and Year of 2022. Today with us, we have Mr. Fernando Salek, the company's CEO; Fabricia De Souza, the CFO; and Arnaldo Calbucci, the COO. This conference is being recorded, and we will have simultaneous translation for those who wish to listen to the English version. [Operator Instructions] The financial results are expressed here in Brazilian reals and presented in accordance with International Financial Reporting Standards unless otherwise stated. Before proceeding, we would like to mention that Page 2 of the presentation contains the usual disclaimers on forward-looking statements for your reference. Now I'll pass it over to Fabricia De Souza.

Thank you. Good morning, everyone, and welcome to our earnings call. Let's start on Slide 4 by talking about safety and sustainability, two of the key material priorities for our company. In 2022, we registered a lost time injury frequency rate of 0.45 incidents per 1 million hours worked, outperforming the world-class benchmark and a 29% reduction from the rate recorded in 2021. This performance evidences our relentless commitment to the safety of our employees. In September, our sustainability report was elected the winner among 13 entrants in the services category of the ESG Investing Reporting Awards 2022. In total, over 300 reports were evaluated. In October 2022, for the second year in a row, our greenhouse gas emissions inventory received the gold seal in the Brazilian GHG Protocol program. This is the most used tool by companies and governments to assess, quantify and manage their emissions. This award reinforces our climate-oriented agenda and attests to our continued commitment to the environment. In November, the company came in the industry's top quintile in the S&P Global 2022 Corporate Sustainability Assessment. 85% of companies achieved an equal or lower ESG score. In this assessment, our performance was above the sector average across all ESG criteria. During the year, we delivered WS Centaurus and WS Orion, the first two of a series of 6 tugboats with over 90 tonnes of bollard pull joining our fleet by 2024. This will take us to the milestone of 150 vessels built at our shipyards. Both vessels are already in operation, serving the largest bulk carriers currently calling Brazil parts with capacities reaching 400,000 tonnes deadweight. Furthermore, the new tugs follow the highest sustainability standards of the international maritime organization with a hydrodynamic design that improves whole efficiency for a reduction of up to 14% in greenhouse gas emissions. Together with the terminal electrification program and the prioritization of waterway cargo transportation in Rio Grande, these actions contribute to the development and continuous improvement of our ESG practices and operational excellence, strengthening one of our strategic pillars. Turning to Slide 6. Here, we present a summary of our consolidated results. Net revenue increased slightly in the fourth quarter to BRL 584 million, mainly reflecting the increase in operational activity in the offshore support basis, higher shipping agency revenue, favorable volume conditions for the international logistics business, Allink, and also increased conversions and dry docking for third parties at the shipyard. EBITDA increased 32% in the quarter to BRL 251 million, mainly benefiting from the solid towage and logistics results. Net income rose 169% in the quarter to BRL 113 million driven by the revenue increase. Exchange rate impacts were positive at BRL 25 million as the Brazilian real appreciated 3.5% over the U.S. dollar against a devaluation of 2.6% in the comparative period. The main factors here were the positive impact of BRL 14 million on Brazilian real denominated monetary items of the offshore support vessel joint venture. Another BRL 9 million of exchange rate variation on deferred taxes and the exchange gain of BRL 5 million caused by balance sheet translations of Brazilian real-denominated net monetary assets in U.S. dollar functional currency subsidiaries. Excluding these effects, profits would have increased 56% in the quarter. For the year, EBITDA was 9% above the comparative in Brazilian reals and grew 14% in U.S. dollars, reflecting robust towage and logistics results also seen in the fourth quarter. Profit increased 51% to BRL 339 million and was 57% above the comparative in U.S. dollar terms. We now move to Slide 7. We highlight here the financial performance of our main business divisions in the quarter. Container terminal revenue totaled BRL 199 million, remaining in line with the comparative period due to the decline in operational activity despite an increase in warehousing revenue. EBITDA grew 4% to BRL 106 million as cost reductions more than offset flat revenues and we're 10% above the comparative period in U.S. dollar terms. Volumes were impacted by the shortage of empty containers and global logistics bottlenecks, particularly in Rio Grande. However, the situation has started to improve with aggregate volumes up 5.2% in the first 2 months of 2023. Towage revenue was in line year-over-year at BRL 295 million as the improvements in operational activity and higher average revenue per maneuver mix were offset by lower special operations revenues. A better revenue mix reflects an increase in maneuvers of carrying grain and break bulk cargo, which generally have higher tonnage. EBITDA increased 5% to BRL 145 million supported by cost reductions and was 11% above the comparative in U.S. dollar terms. Nonconsolidated joint ventures comprised mainly of the offshore support vessel operation saw a significant recovery in demand. Revenue grew 58% supported by the 21% increase in operating days and a 30% improvement in the fleet average daily rate. Profit, which is accounted in the company's results via equity income was BRL 27 million against a loss of BRL 8 million in the comparative quarter. Moving to Slide 9. The slide, we present some of our liquidity and leverage ratios which remained solid, reflecting a robust balance sheet and resilient businesses. [indiscernible] debt decreased slightly compared to December 31, 2021 due to amortization of the period. In terms of cash flow movements, we highlight this BRL 333 million in CapEx mainly for tugboat construction and for the acquisition of new equipment for the Salvador container terminal as well as the payment of BRL 278 million in dividends. As a result, we ended the year with BRL 261 million in cash. At December 2022, the company distributed its first interim dividend totaling BRL 69 million, which were equivalent to approximately BRL 0.06 per share. In addition, we've proposed to shareholders an annual dividend of approximately BRL 0.31 per share which currently totaled approximately BRL 137 million based on shares outstanding to be made in May 2023 in addition to interim amounts already distributed. [indiscernible] results is consistent with gains made in the last 4 years. The bank leverage ratio would increase slightly to 1.7x EBITDA due to the earnings increase. At year-end, 81% of our bank debt was long term and 68% was financed by the merchant Marine Fund with fixed interest rates. The presentation ends here. And I would like to invite you to the Q&A session. Thank you.

[Operator Instructions] First question comes from Victor Mizusaki from Bradesco.

I have two questions. First is, if you can tell us a little bit about the trends you're seeing in container movements in both terminals for 2023. If you could give us a little bit more information on your investment plan for 2023 as well. Thank you.

Victor, thank you. I'll pass your question on movements to Arnaldo Calbucci.

Victor, good morning. Continued movement in terminals started positive in the last -- well, in the first 2 months of 2023. There were many empty container repositioning movements and transshipment. This is positive on the medium and short term because it shows the ship owners are positioning containers to be loaded for exportation and [indiscernible] are able to use our [ river weight waterways ] with these margins. So this is at [indiscernible] We see that the number of [indiscernible] has gone down significantly along the year. And in March, we also saw a number of service with those aligned to the pre-COVID levels. So it's positive news. Obviously, we have to wait a little bit to see how it will go for the next months, but it's a promising start.

Victor, about your second question on investment plans, I'll pass it over Fabricia De Souza.

Victor, good morning. Considering our CapEx plan for 2023, we don't foresee any major changes. We will probably keep our sustaining investments at the same pace. Our construction plan for new [indiscernible] also will be maintained to keep with the same fleet, but we're not seeing any major changes for the next year.

[Operator Instructions] We've received a question from Alex from [indiscernible] He asking in English and I'll translate into Portuguese here. He's asking if we have a target level for our net bank debt over EBITDA and he continues by asking what sort of initiative or what sort of action we would take if our leverage were to go down below this ideal level. So asking if we would increase our dividends, if we would consider share buybacks or we would increase our investments.

So I'll pass this over to Fabricia De Souza.

Alex, thank you for your question. We're at a very comfortable indebtedness level right now. We also believe that it could go up to about 3x if we think this is necessary in our investment plan or in our expansion. So currently since we manage things like that, Alex, it's not by setting an indebtedness target. But obviously, if we have cash availability, that's not directed towards a new project or an expansion project. If we have greater investment needs in any of our businesses, this excess value will definitely be back to shareholders at the best way possible, whether it is through dividends or share buybacks. We actually have a share buyback program currently and its support for stock option [indiscernible]. So these strategies are already used by the company, and they will continue to be in the future if we believe it's the right moment for this fair value transfer. I hope that answers your question, Alex.

We got two questions on [indiscernible] First one is about [indiscernible] asking us to discuss our participation of the [indiscernible] tugboats with our competitors. And we have a second question, which is very similar about the offshore marketing -- offshore vessel marketing. And he's also asking us to talk about our competitors, existing capacity, and I'll pass this over to Arnaldo Calbucci.

Thank you for your question. So the question on tugboats, our share has remained flat with a small growth in 2022. We estimate that this share will continue flat in 2023. There's a lot of competition in the market. There are many companies that are well-known. So there was a significant movement from [indiscernible] acquiring tugboats from [indiscernible], which will make a modest number of tugboats in the Brazilian market. And we consider that to be very positive. I'd say consolidation, and we don't see a significant increase in companies are growing organically. Two tugboats are being built in a [indiscernible], so that this is the [indiscernible] operations, but in the event that [indiscernible] this is not something that [ impacts a significant ]. We believe that the market will remain flat with some improvements in prices in 2023 as well. To answer your question about offshore, this is a market that is -- has faced some difficulties in the last few years with a weaker demand. Also demands were going up. There is a lot of competition. Client, the biggest client, as you know, is Petrobras. We don't see our fleet expanding. So we don't see many new vessels being built. But this market is recovery or we have a positive outlook [indiscernible] but it's still a challenging market.

[Operator Instructions] This concludes the question-and-answer session. We'd like to invite Mr. Fernando Salek for his closing remarks. Please go ahead, sir.

Thank you. I'd just like to wrap up by saying that we're very happy to report robust growth in our financial results and [indiscernible] has made some important achievements such as [indiscernible] increasingly powerful and sustainable tug boats and positioning ourselves at the forefront of the ESG and innovation agendas in our industry. Looking ahead, while the effects of geopolitical conflicts and the face of the global economy on trade flow do create some uncertainties, we're confident in our strategy and the long-term growth of Brazil's Maritime trading and we're committed to playing our important role in the country's socioeconomic development with excellence. We will continue to pursue a world-class performance and our infrastructure, maintaining the safety levels of our operations and consistently seeking opportunities to leverage our market position. This reflects the resilience of our business model and the versatility of our services. And we will continue to make an effort to challenge and transform maritime transport for the benefit of all of our stakeholders towards an increasingly sustainable future. Thank you all for joining our conference call. And I hope you stay well and safe. Have a good day.

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