Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net revenue for the second quarter of 2024 reached BRL1.7 billion, marking a 10.7% increase compared to the same period in 2023.
- Adjusted EBITDA grew by 12.1% to BRL726 million, with a margin increase to 41.4%, 1 percentage point higher than the previous year.
- The company invested BRL901 million in the first half of 2024, a 33.2% increase from the same period in 2023, indicating strong commitment to infrastructure development.
- COPASA's leverage remains manageable with a net debt to EBITDA ratio of 1.6, providing room for future investments.
- The company has successfully renegotiated contracts with municipalities, transitioning from discretionary to contractual regulation, which is expected to positively impact operational efficiency and revenue stability.
Negative Points
- The financial result for the second quarter of 2024 was negative at BRL119 million, primarily due to unfavorable exchange rate variations.
- Gross debt increased to BRL5.1 billion, with a significant portion (14%) being short-term debt, which could pose liquidity risks.
- Non-manageable costs rose by 20.3% in the second quarter, driven by increased electricity costs and other external factors.
- The company does not currently hedge its foreign currency debt, which could expose it to exchange rate fluctuations.
- There is an increase in third-party service costs by 17.6%, which, despite being offset by labor cost savings, indicates a reliance on outsourcing that may affect cost control.
Q & A Highlights
Q: There has been a large percentage variation in the company's debt in foreign currency. Does the company plan to take more loans in foreign currency, and are there hedge contracts for these loans?
A: The company does not plan to take more loans in foreign currency. The exposure will decrease with funds from the BRL1.3 billion 19th debenture issue. Currently, there are no hedge contracts, but the company is assessing the market for future possibilities. - Carlos Augusto Botrel Berto, CFO
Q: With BRL1.5 billion still to be released, how does the company plan to manage its indebtedness and control leverage?
A: The leverage increased from 1.5 to 1.6 times, which is within the company's cap of three to four times. This indebtedness aligns with the company's investment plan for future years. - Carlos Augusto Botrel Berto, CFO
Q: Can you provide an update on negotiations with municipalities and the regulatory impact expected for OpEx coverage?
A: Recent negotiations have led to agreements with municipalities, changing their regulation from discretionary to contractual. This change will result in regular tariff adjustments according to the IPCA inflation rate, positively impacting the company by reducing operational inefficiencies. - Guilherme Neto, COO
Q: Are there good prospects for new concessions in Minas Gerais?
A: Yes, COPASA covers 638 out of 856 municipalities in Minas Gerais. The company is preparing to be competitive in future bidding processes for new concessions. - Guilherme Neto, COO
Q: Could you comment on the volume dynamics for the remainder of the year?
A: Historically, the second half of the year sees improved volumes, especially with potential high temperatures. The company expects a positive outlook due to commercial actions, improved metering, and weather conditions. - Guilherme Neto, COO
Q: What is the status of the tariff review process and prospective investments not included in the last cycle?
A: The tariff review process is ongoing, with the company aiming to address points not met previously. The focus is on future cash flows and recovering BRL700 million not recognized in the last review. - Guilherme Neto, COO
Q: Has there been any progress regarding the federalization of the company?
A: There is no formal information from the government of Minas Gerais about including COPASA in the federalization process. Any developments will be communicated to the market promptly. - Guilherme Neto, COO
Q: What is the dividend policy for the next few years, and will investments increase?
A: The payout is currently at 50%, with estimated investments of around BRL9 billion from 2025 to 2028. - Guilherme Neto, COO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
