Earnings Call: Q4 2019

Mar 6, 2020

Good morning, ladies and gentlemen, and thank you for holding. At this time, we would like to welcome you to the CCR S. A. Conference Call to discuss the results for the Q4 2019. All participants will be in listen only mode during the Before proceeding, we would like to clarify that forward looking statements made during this conference call referring to business outlook of the company's projections and operational and financial goals are based on the beliefs and assumptions of the CCR Board as well as on information currently available to the company. These statements are no guarantees of performance as they involve risks, uncertainties and premises and may not occur. Investors should understand that general economic conditions, industry conditions and other operational factors could affect the future results of the company and lead to results that differ from these forward looking statements. I would now like to give the floor to Eduardo Toledo, Vice President for Corporate Management. A good day to all of you. It is a pleasure to be here with you in the earnings results call for the Q4 2019. Today, with the call today, we have Valpo Perez, our CFO and IRO Marcos Vinicios Flavia Gozoi and Kaiete Mora is our IR team. Before beginning, I would like to welcome Waldo Perez, who joined CCR at the beginning of the year and will participate in the call for the first time. Now my initial statement is that it is a pleasure to state that we have made significant strides in the 3 value pillars to generate value at CCR, the results, growth and sustainability of our results through time. When it comes to the first pillar that of results, our operational results, I think that those tried to be very clear through the evolution of our EBITDA. Now if we base ourselves on same basis, the growth was 19.6% in the comparison of the Q4 2019 and that of 2018. Now this result is due to our discipline and this excellence at CCR was also reported in the last month and the work that we carried out with Balboni giving us very positive results. The second pillar, which is that of growth, I think the merits a special highlight for the award of the concession of BR101. This is something continues to be our tool and will allow CCR to expose the synergies of both of these concessions. Now the issue of growth for us is fundamental in our strategy, and we continue to adopt measures to enhance our capacity to generate opportunities for growth. And what is emblematic is the arrival of Waldo, who has broad experience in M and As, in structuring financial operations and will be of great help in our search for growth. When it comes to the 3rd pillar, which is generating value, sustainability at CCR, We have worked strongly during this last year with a focus on governance in the company And the work, especially when it comes to decision making levels and others, have come to a very clear conclusion with the approval of the new bylaws of CCR at the General Assembly on January 10. This year, we also concluded the revision and enhancement of our compensation system, and it is ever more aligned when it comes to the compensation of executives and value generation for all stakeholders In the coming days, we're going to send a proposal of management to the ordinary and extraordinary general assembly of the company that will take place soon. And you will be able to observe in this proposal not only the evolutions that I have mentioned in but as other parts of evolution that are part of the proposal. I would now like to give the floor to Baldo, who will present the results of the Q4 'nineteen in greater detail. Thank you, Eduardo. Good day to all of you. First of all, I begin by thanking all of you for your participation and interest in the company. Before making my remarks, I would like to mention that our release for results is available at the company's site, www.ccr.com slash ir. Now to speak about the main highlights for the quarter, we would like to highlight the same basis traffic with a growth of 7.6% visavisQ4 2018. If we exclude Via Sur concessionaire, the growth was up 3%. The recovery of traffic took place for light vehicles as well as heavy vehicles, where we had a positive performance of 3.2% and 2.7%, respectively. We would now like to highlight the main same basis figures for the Q4 2019. That is to say considering the business where we do not have control, where we have joint owned subsidiaries or consolidated according to the stake of TCR in each line item. We exclude nonrecurring effects, new projects and assets, where we have altered our stake and where we have components that did towards the same basis comparison. The adjusted net revenue on the same basis reached BRL 2,700,000,000 in the Q4 2019 with a growth of 13.7% visavisameperiodtheprevious year. Adjusted EBITDA on the same basis increased 18.6%, resulting mainly from a better operational performance. The margin of EBITDA on the same basis was 64.3 percent with an expansion of 2.6 percentage points when compared to the Q4 2018. Net income same basis amounted to BRL 499,200,000 in the 4th quarter, a drop of 3% visavisame period the previous year. Net income achieved BRL392,600,000 when compared to the Q4 2018. This slide drop reflects the greater depreciation and amortization due to the closeness of the termination of concession contracts of Rodonorte and Nova Dutra. In the Q4 2019, investments including financial assets and maintenance amounted to BRL559.7 million. The concessionaires that most invested in the quarter were Biasul, Rodonortes, Nava DUSA and SAM. The total amount of investment of these 4 concessions was BRL370 1,000,000. When it comes to the net indebtedness on IFRS, we reached BRL 13,900,000 in the Q4 2019, an increase of 1.5% 7% visavis 4th quarter 'eighteen and the Q3 'nineteen. The company leverage measured by the net debt over operational adjusted EBITDA has a slight increase when compared to the Q3 2019 going from 2.3 times to 2.4 times in the Q4 2019, which means that this points to a very comfortable situation and backs our growth strategy mentioned previously by Eduardo. We would now like to offer you the floor for questions and answers. Operator, you may proceed. Ladies and gentlemen, we will now go on to the question and answer Our first question comes from Victor Mizozati Bradesco BBI. I have two questions. The first, Eduardo, we were being questioned with by investors on the balance of CCR. And when I look at the results of 2019, the auditing maintains its questions regarding what is happening with the general attorney. I would like to know what is happening. Does this pertain to Sao Paulo? It is something federal. The second question, when we look at your 4th quarter release, there is an expense of BRL140,000,000 BRL150,000,000 approximately, referring to the ISS, the service tax, the Tutra. I would like to know the origin of this expense. Good morning, Ditor, and thank you for your questions. Very well, let's address them. The first question referring to that question in our balance. Now these processes for self composition and plea bargains are based on the permanent cooperation of the company. And whenever a new issue arises, we cooperate, we help and we offer clarification. Now because of this, this process is somewhat difficult to anticipate. We don't know when it will come to a closure. And as this is being managed confidentially, it also limits the scope of auditing. Auditing cannot have full access to everything that is happening because it is mandatory to maintain this process under confidentiality, which means to say that the situation will continue on for some time until we can review these issues. And the only ones that can take the decision to review those issues would be the general attorney, by lifting the confidentiality. Eduardo, another question regarding that. These interactions, have they been very frequent? Have they changed anything? Anything that we could have a reading of that perhaps we're coming closer to the end? I don't know if you are at ease to remark on this. This thought I truly cannot remark on this because of the issue of confidentiality. I cannot make any comment whatsoever regarding this. Thank you. When it comes to the ISS service tax, the ISS is an issue that we have been living with for some time already. The payment that we used to make on the Dutra concession, We withdrew ISS in the municipality at the headquarters of the supplier of the services, and all the other concessions came in with suits against the Novadutra saying that this money should be collected in the different municipalities and not from the headquarter company. And this led to a long debate. And the Eloqua was quite low. They had fiscal incentives at that time. There was a different helicopter tax rate in different locations. And we were forced to withdraw the ISS from these different locations. Obviously, we stood for the interest of the company. We advocated for the interest. But in the end, it remained very clear that this still had not gone through court. We spontaneously withdrew this tax, but there was no outlook for success in this. I understand that. Now when we look at your explanatory note, what we have understood is that this payment, this retention of taxes will now reach a point of balance and that the consortium, the operating consortium, Dutra, is this a company from CCR or is this an outside company now? This company is a company that was created at the point in time when Dutra was created, somebody before the creation of CCR. This company was created with the aim of reducing the volatility of what was happening on the Dutra highway. This is something that takes expect 30 years at least. This was the beginning of the concessions in Brazil. There was that great need to deal with costs to decide how we would manage costs. And that is when we created this mechanism, this company. And in a certain way, this company began to take on any cost variations that could appear on Dutra. And this became necessary to be able to refinance Dutra. And as we're now coming very close to the end of the concession, there was that issue of the ISS as well as other issues. So we took advantage of this moment to rebalance the contract in all of its aspects so that we can have a good closure of this concession. This contract with related parties was done based on our own governance. The entire negotiation was followed up carefully, and we had the approval of the independent members of our Board. I understand that. And Eduardo, is this something specific to Toutra? Or does it also pertain to other highways? Do they have the same highway? And when we look at other concessions, it is my understanding that this contract will no longer exist with related parties. You are right. This pertains only to Dutra, and it is part of the mechanisms that we have defined because of the pioneerism of Dutra. It would make no sense to continue on with this. We can take on all the volatility at present. But at that time, we still did not have that incentive. Very well. Thank you. Our next question in English comes from Citibank. Yes. Good morning, everybody, and thanks for taking my questions. I wanted to, Faust, if you could just remind us, when we think about the commercial traffic flow on your toll roads, roughly what portion of that flow is bound for the export markets? Good morning and thank you for your questions. The well, CCR works with highway concessions in the state of Sao Paulo, Parana, Rio and others. And these are regions that are heavily industrialized with traffic that is very linked to the dynamic of the domestic market. Of course, we have the influence of exports, but I tend to say that this level would be lower compared to other highways in the country, once again, because we are part of that very large market, the producing market of Brazil. Here basically. That's very helpful. And if I may just get one more question in. When you think about the auction calendar in Brazil, with the exception of Medveducro, which I imagine you're going to look at, Are there other kind of 1 or 2 assets that are of particular interest at this time? What I would say is that the entire pipeline that we looked to in the future would be very interesting. We have federal highways. We have the new bid for DUSA, a highway on which we have a great deal of knowledge and expertise through the years. We have found different solutions to increase productivity. Cerradas Araras, which is part of what will probably be included in this new concession, is a project that we have deep knowledge on. And we can be very efficient, especially when dealing with the CapEx for these roads or highways. I think that we would have a competitive edge on Dutra, but there are multiple opportunities. And because of this, we will have very attractive opportunities going forward. The offer of concessions in the coming 2 years will allow us to foresee several opportunities. Now in the sector of mobility, we have a very strong footprint here. And we have a great footprint in the state of Sao Paulo. Sao Paulo is speaking about new footprint in the state of Sao Paulo. Sao Paulo is speaking about new bids, 89, and the highway to Campinas. And here, once again, we would have a significant competitive edge. Additionally to this, the scale of CCR is incomparable when we think about other companies, especially when we speak about competitiveness in cost. I think we're unbeatable in this. With this, we would like to end the question and answer session. We will turn the back floor to Mr. Eduardo de Toledo for his closing remarks. You may proceed, sir. Thank you very much. And before closing, a few remarks regarding our outlook. What we have observed in January and February is that the evolution of traffic has been positive. We had growth in January February when compared to the year 2019, perhaps with less growth at end of Q4 2019, but we do have growth year on year. Now when it comes to the opportunities, and I mentioned this in one of the questions, the pipeline of opportunities is enormous. And besides the opportunities of the new concessions that have been announced and the new round for airports, we also have opportunities in the secondary market With the contribution of Valdo Perez, without a doubt, we will be able to work very well with these opportunities. Finally, I would like to invite all of you for the CCR Day that will be held on May 30 in Sao Paulo. And this is a very good opportunity to enhance our conversations on the axis of growth of the company and an opportunity for all of you to get to know the executives from CCR as we have had significant changes lately. This would be a very good opportunity for you to get to meet our team. I'm fully convinced that this team is well prepared to generate the value that this company can generate. Thank you very much for your participation and for the opportunity to converse with you. Have a good afternoon. The CCR conference call ends here. We would like to thank all of you for your participation. Have a good day, and thank you for using Chorus Call.