Good morning, ladies and gentlemen. Welcome to Orizon Valorização de Resíduos video conference to discuss the results for the second quarter of 2025. This video conference is being recorded and a replay can be accessed on the company's IR website at ri.orizonvr.com.br. The presentation is also available for download at the results center on the company's IR website. We would like to inform that the participants attending the conference call will be in listen-only mode during the presentation. We will then open the Q&A session when further instructions will be provided. Before proceeding, we would like to clarify that any forward-looking statements are based on the beliefs and assumptions of Orizon VR's management and current information available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore depend on circumstances that may or may not occur.
Investors, analysts, and journalists must understand that events related to the macroeconomic environment, industry, and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. Present at this conference are Mr. Milton Pilão, CEO of Orizon, and Mr. Leonardo Santos, CFO and investor relations officer. I would now like to turn the call over to Mr. Pilão, who will start the presentation. You may proceed, sir.
Good morning, everyone. Thank you very much for attending this earnings results call of Orizon Valorização de Resíduos for the second quarter of 2025. I am here with Leonardo, our CFO, and we are going to discuss the results. We divided the presentation into some points. First, we are going to talk about the highlights, and then I turn the floor to Leonardo for him to talk about the operational and financial numbers, and then I will come back to talk about the perspective. Talking about the highlights, once again, another quarter.
By the way, I would like to thank our shareholders, our board members, employees for the consistent results that we have been showing every quarter, especially in the lines of organic growth in the final disposal of waste. This is a quarter with important net revenue margin by segment, EBITDA, everything above 20% year-on-year. Big consistency in the deliveries as I have already mentioned. As for waste disposal, as I mention every quarter, we have been consistent in increasing the average price, 9.8% in relation to the previous quarter, 4.2% above the IPCA. So we maintain our growth journey in the average price.
That impacts directly on our margins in our main business, which is waste disposal, as I mentioned in the previous quarter. We are going to continue showing this consistency in gaining margin and increasing prices. Also, in relation to carbon credit, there is an area that was created that would start bringing results related to carbon credit. We have been showing consistency quarter- on- quarter with good news. Still limited, but very good news in the sales of carbon credit. Every quarter, we have been increasing our revenue in terms of carbon credit. I am going to give more details about Paulínia project. We have been strengthening the capital structure. We have been having a broader reach in the investment, and we had a follow-on months ago in a very complex market with high demand from investors.
We have now a better capital structure, and this provides us with the strength to face the new period of inorganic growth. We are going to show some photographs of the biomethane initiatives. In other words, we are almost getting there in order to start navigating in all those numbers of biomethane. We had several positive highlights in the results. Something that is always discussed is our SG&A, but I would like to remind you that our SG&A is providing support to a company which is much bigger than we can see in the results. The SG&A that you can see is the one that was used two years ago building biomethane Jaboatão, Paulínia plant, investment of BRL 1.3 billion that has been invested for two years.
This is supported by a structure of engineering, supply, legal structures, which is already in our SG&A, but it is not being reflected in results because the results are going to be seen when the plants come into operation. The plant will amount to almost the same size as the company it is now. This is how we have to look at the SG&A. We may have a perception that the SG&A is still high when we look at the margin and the revenue at present, as if we were just a company of waste disposal. The SG&A would be much lower if it were like this. It is important to convey this message, because if we look at the results or the margins and all the revenues, we have to understand that all the divisions have been growing, but the SG&A is not decreasing.
The SG&A will decrease in relation to the revenue as soon as all those plants start operating along the next quarters. Talking about the business evolution, these are the photos related to biomethane. We can see the plants on the right, and on the left, Jaboatão dos Guararapes is a plant which is almost 100% ready. There was an official inspection that was held about 20 or 15 days ago, and we got the permit to operate, and they even complimented. They said that it was one of the best plants they have ever seen. It is already being operating in testing mode. We have been doing the tests already, and in September it will start using or injecting gas into the network. You can also see Paulínia plant.
You can see that the works are on track, and the operation is likely to be delivered by this year. This was built on schedule according to the CapEx. Speaking about biomethane sales, we would like to remind you that the contract that we sold, the latest was Neogás of 150,000 sq m/d . It will have an adjustment according to the IPCA. We are going to have a guaranteed income for years to come. There is a range of 500,000 sq m/d and 660,000 sq m/d . We will have a total potential of 1.3 million that we are going to have along the journey. Half of the biomethane that we produce are already being sold in long-term agreements, and I will provide more details about it. In addition, there has been an evolution in carbon sales.
We would like to mention that the Paulínia project at Verra is ready to be completed. This is the largest carbon project of the company. In addition to being the most important project, it is very important to mention this because it is a project that has been registered with Verra. So it is a new line of registrations at Verra of at least 1 billion tons of carbon per year. This is also going to be applied retroactively. We may reach 1.5 or more of carbon per year. So Jaboatão generated $5 million in revenues. As for carbon, it is important to mention that our strategy of going to the final client and having the commercial structure that will impact the SG&A, of course, but it is a structure that went abroad to sell our carbon credits along the months.
We can see the results now. Today, we have a backlog of imports of millions of tons of carbon, and we have started to convert those quotes into sales. So our expectation is that now carbon will start having recurrent results on a quarterly basis. Every quarter, we are going to show in our results with more resources and sales for the company. I will turn the call to Leo for him to talk about the operating aspects.
Hello, everyone. On page eight, we bring the operating figures. The first one is the volume of waste, a growth of 2% in comparison to the same period of last year. So we maintain a consistency in the performance of waste. The company, we still have Ecopark of Aparecida de Goiânia, Santa Luzia, which are projects.
We are in the phase of maturity, still in the ramp-up process, and we still have lots of revenue to be captured. We also have some projects in Juazeiro do Norte with a great potential in that area. On the right, we can see the energy generation. As we have already mentioned, the volume of energy generated has decreased a little because Jaboatão plant has started operating along the second half. Below, we can see the comparisons of the previous year. We can see the carbon credit is very much in line with the track history, and we can see all the volumes that the company is using. On the next slide, we can see a specific focus on average price. As already mentioned, average price has been consistent in disposal above inflation, not only considering the mix.
We have made great improvements in the adjustment of contracts above the inflation. For this quarter, 4.2% of actual growth. We reached BRL 83.3 per ton. Specifically now discussing the financial highlights, we would like to say the reported net income is 23% above what we reported in the same period of last year. Gross income and gross margin increasing by 5 percentage points and EBITDA, as you can see to the right, 26% higher, BRL 125 million, 26% above the compared year period. On next page, we can focus on CapEx, and that is page 12. This is the CapEx of the company, as Pilão has already mentioned when he mentioned SG&A. We are very active in energy transition, and we invest in Barueri project. We also have investments in the treatment of leachate and final waste, and also looking at the sanitary landfills.
There is a specific slide showing the relevant investment that we have been making, especially in the last quarters, when we started looking more strongly into the biomethane plants. On page 13, we look at the capital structure, the inductive level of the company. It is just natural because we make balances between investment, growth, and the long elongated debt profile, and we are going to be working on this a lot in the next half of the year. We are to expect that company deleveraged and prepared for growth with a very elevated debt profile. The company has an average term of 1.8x . We are ready for this round of investment and we are likely to see the results in the short term. I will turn back to Pilão for him to talk about the perspectives, and then we are going to open the Q&A session.
Very well. I think in terms of perspective, we made a list of five points. The first one is M&A, a new project, of course. I usually say to Leo that we have important moments that we are experiencing at the company where the balance sheet is extremely healthy and we have all the strengths, and we have a high volume of opportunities. This is so positive because we understand that this is going to offer a qualified offer of return to shareholders. We have more opportunities at the table that we can complete. We have choices to make. We have all the strengths. We are prepared for that. That is the best scenario a company can ever have. The company continues growing organically, so we do not need to look at M&As. We have biomethane projects that will bring in even further growth.
We are in a very healthy moment. As I said previously, in the second half of this year, we are likely to bring you good news. Good news to the shareholders with high return. In addition to that, in the M&As, we will bring some new projects that did not involve M&As, but involved the process that the company has already started that are likely to be disclosed in the future. We have good news down the road in the inorganic and organic growth segment. In terms of average prices, people ask me about the actual growth curve. Has it come to an end? No, it has not. I think this curve is going to last up to the end of next year. We have a good growth journey that is likely to happen when we look at the expiration date of our agreements.
The efforts of the commercial area will increase the average prices. You can expect gains in prices above inflation for at least three or four quarters ahead of us until we reach to an average stable price in 2027. We can see that biomethane plants are in the process of ramp-up, ready to become operational. Paulínia is according to the schedule. I think I missed something that we have already started, which is Itapevi initiative. In addition to that, we have already started Itapevi and the neighbor plants, and we have already started the new projects that we sold to Neogás. We have the construction front as well as biomethane carbon credit. I think I have explained well. The backlog is very robust. We have sold projects that have already brought in some revenues, as you can see in the quarter results.
We also have projects that are going to be used in the future that will use biogas in this operation. This was something that we did not mention, but I would like to focus your attention to that. We are having those projects that will generate revenues with biogas. Also, we would like to say that the financial profile is stronger in addition to the follow-on that has impacted the indebtedness. We also have the allocation of the debt. The duration is above six years. So in addition to having a ratio net debt over EBITDA, which is very low, the debt profile is very allocated. This is what I wanted to share with you, and we are now going to open the Q&A session. Thank you very much for your participation, and now we can open the Q&A session.
Thank you. We are now going to start the Q&A session for investors and analysts. If you wish to ask a question, please click on Raise Hand. If your question is answered, you can leave the queue by clicking on Lower Hand. Please inform your name and state your question. Our first question comes from Victor Cunha with Itaú BBA. Your line is open, sir.
Good morning, Pilão, Leo. Thank you very much for the opportunity. Two quick questions on our side. We saw that energy transition has changed, has improved, energy generation had a drop. Could you provide more details on the driver and the details on the purchase? My second question is in relation to manageable costs that we see the difference year against year. Can we consider this to be recurring considering the asset base that we see today?
Hi, Victor. This is Leo speaking. In relation to energy transition, even though there was a drop, we had some PPA agreements that had already been executed, and we got prepared for this drop as a result of what happened in Jaboatão. So we had already purchased energy, and we are delivering the energy. We have been delivering to the project even with the reduction. So we had a good performance of biomethane in Paulínia that meets the PS1. So it is important to mention this.
It is important to mention that plants were purchased in 2024, even if the generation generated has come to a drop. But we got prepared to that, so we can see a positive result. Paulínia has been performing well to meet the thermal power plant. In relation to costs, yes, considering the asset base, we are likely to see this level of cost. We are looking for efficiency. We are also going after better performance in terms of leachate. We are going to gain a scale in projects that are still in the ramp-up phase. So this is a structure of cost that you could assume considering the base of assets that we have. So you can incorporate all this into the overall platform.
Oh, that is very clear. Thank you.
Thank you.
Our next question comes from Andre Sampaio with Santander. Your line is open, sir.
Good morning. I would like to ask two questions. First, I would like to hear from, if anything has been contracted for the third quarter and what to expect for the next quarter. The second question is to understand the rationale of Paulínia and Verra. Is there any rationale why you chose one over the other for each project, or how are you going to work with those assets in terms of Verra?
In relation to price and Verra, we are working on pricing. We cannot assume that anything has been contracted, but there are dates that are going to be used. We are going to wait for the next call in order to disclose what has been used for this half of the year. We have everything to believe that the new quarters are going to be winning quarters. Our perspective should be positive. In relation to Verra, I think we observe that the requirements are very similar, but they are not identical when we compare those.
When some requirements can be applicable to both players, we try to understand what is going to be better accepted by the market when we are going to do the trading. As to Paulínia, we understood that Verra was the most appropriate choice. We do not have any track history to have been using two standards. We did not have any problems in any of the projects. This is a strategy we have been following.
Okay, thank you.
Oh, yes, of course.
To ask a question, click on raise hand. Use the Q&A if you want to send a written question. Wait while we collect the questions. Our next question comes in written by [Tiago] Lima. Please, in the long run, with the consolidation of this expansion phase and new agreements being incorporated into the results, do you think the company will become a benchmark in distribution of dividends at B3?
[Tiago], it is Leo here. Thank you very much for the question. I think that this sector in Brazil and abroad is a good sector for paying dividends. When you look at the profile of the business, you look at the consistency, the recurrence, the nature of the business, the results, consistency. It is a cash flow business, really. I believe so. But we have to look at the company as a clear case of growth.
We have lots of options to invest in our assets. There is a lot of opportunities to consolidate the sector, so we should use our balance sheet and our cash generation to capture the opportunities out there. But in the long term, yes, it is a company which has the profile to be a good dividend payer. But this is something we are going to look down the road. We are looking at the opportunities in the short and medium terms.
The next question comes from André with [inaudible] . Good morning, everyone, and congratulations on the solid and growing results. I have here three questions. Thinking of M&A, is there any negotiation with a company that, in addition to the ecoparks, they will also include the collection of waste? If so, how do you see the company going into this segment?" The second question. At the beginning of the presentation, there was the mention of an additional BRL 400 million up into the EBITDA with the sale of biogas. Does the company have any estimate in terms of cash conversion in this business line? Looking at other companies, we can see that the compensation of officers is connected with the performance of the shares. How does the company see this connection, and what is the compensation of officers system program working?
Andre, this is Leo answering. I am going to try to answer the three questions, and [inaudible] . In relation to M&As, we saw some opportunities, and we converted into our business. We saw that there were companies operating in the collection, but then we segregated the activities, and we focused on final destination. We look at the profitability when it comes to collection, waste collection, but we are looking at contracts, in places where there is no concession activities, and we also look where we have low entry barriers. We usually choose to be better positioned in the final destination because of the entry barrier.
It is very I want to see in the collection and the sweeping something which is less mechanized. This is something that makes us out of this business. Being a benchmark. Some companies have different activities, but we are focused on final destination, and we have some recent acquisitions. In general, we have carved out, and this is how we have been looking at the M&As. The second question is about the EBITDA level generated and the BRL 400 million that you mentioned. The cash conversion of energy activities is very high. Let us talk about the three projects. We have Jaboatão, but we also have Sudene, which has a reduction in the income tax. Biomethane operations is very profitable, and the sulfide in the banks reflected this and captured this potential.
Your last question was related to connection of the officers' compensation and the shares. In the shareholders meeting that we had, there was an approval of 5% to be converted into stock options. The company is about to finish the plans. Just like other companies at B3, in this new cycle as a public company, we have the officers aligned with the shares of Orizon. I would like to add two things. About the first topic, I agree totally with what has been said. That does not mean that we are not monitoring the market, and we see what is happening and evolving in the market.
What is the devolution you are talking about, Pilão?
I am talking about the devolution of collection contracts connected to landfills with revenues which are connected and directly paid to the energy or water bills. When you are doing the collection services, in actual cases, when you are going to receive from the government and you start receiving by means of a waste generator, the collection services are similar to water and sewage activities. We monitor this, we look at that, we study, but at present, we do not see any opportunities. We are going to continue monitoring to be prepared should this reality changes in Brazil.
In relation to how the collection of services are paid, if we are talking about long-term agreement with direct payment by the city, by the one that generated the waste, we may look at this opportunity in a different way. Number two, the composition of officers. I think this is a topic that I have been mentioning in the other call, and it is very important for the company.
The company has a journey since 2013, so it was a turnaround company with a track history of resilience and also of contribution by the employees to come around this journey with going public and with a turnaround story to get where we are now. Nine months ago, we had to come to a stop to look at the five-year plan of the company and the team, and what would be necessary for us to go on this five-year journey with biomethane projects, M&A projects, and also considering our position in the market. It is no news that for this five-year project, is a company that is going to growth at multiple times. It is not an organic growth. As soon as the biomethane plants start operating, and the M&As start being reflected in the results. You have to have a team which is prepared for the journey.
We have the company just as it is now, and we see a company that will growth in multiple times. We are companies that we brought aboard to do the analysis of our team. We closed our five-year plan 30 years ago. We had a gigantic event last week when the leaders were presenting the five-year plan that were built by those leaders. And the board approved the possibility of 5% of dilution for the officers. Now for the next 35 days, 40 days, we are going to close the program called LP. In addition to the compensation of the leaders of the company, we are going to have a short-term incentive based on annual targets.
All the targets are cascaded down the structure, and we always try to provide a bonus to our employees from the results. Now in 40 days, we are going to bring in the targets for the five years connected to the LP plan that will bring talent to the company. We are going to retain the talent that are already here, and we are going to have a total alignment of our executives in relation to the dream that we want to make true within five years.
Our next question comes from Andre Sampaio with Santander. Andre, your microphone is open.
Good morning, everyone. I would like to take the opportunity and listen what you have to say about the opportunities that can come from the government of São Paulo. We recently talked to Natalia, and she talked about the project they are developing for São Paulo. I would like to know what your expectations for the next auction for the second half of next year. I would like you to share with us what would be the structure of this auction, and if that would be interesting for the company.
I think São Paulo, as always, is ahead of everyone else. And this is a bit of what I have already mentioned. We monitor all those possibilities. In the case of São Paulo, we are really thinking about the government offering the services at the regional level. Of course, offering a condition of differentiated, guaranteed pay attached to the water or to other bills. And why do we say we have to monitor? Because Orizon is very well-positioned for the new opportunities, considering that we are the owners of the landfills which are located in many of those regions.
We have to be positioned, and we have to do the evaluation. Good opportunities may come up, but now we have to look at the pacing, the timing of everything. If it is going to be according to the time expected by the government, if it is going to be aligned with government projects, and how long all this is going to take. The important thing is to be prepared. I can say that Orizon is prepared. We are looking closely at the projects that may bring in further gains that we are not even considering in our five-year plan. São Paulo is also looking, which is very interesting to mention. São Paulo is looking at transforming the buses, being powered by biomethane.
We have been taking part in several forums with the government, and they are likely to launch the new project in the short run, and part of the biomethane produced in Paulínia may be used in those projects. We have a lot of expectation. This is nice. In addition to having the biomethane being directed to the industry. Our biomethane may become a benchmark in the most important city in Brazil in energy transition for public transportation. This would be a very nice idea, and this is moving quite fast.
Thank you for the answer.
Our next question comes from Alexandre Souza with Santander Asset. Your line is open, sir.
Hello. Good morning. Thank you for answering my question. I think you have considered the organic growth and inorganic growth in your M&A agenda. I would like to know what you expect. What would be the process for your decision-making. Is there a minimum return on capital that you consider? Is there a specific objective in terms of size, M&A, strategic positioning? Whatever you could share with us.
Hi, Alexandre. This is Leo speaking. Thank you for the question. We try to be very cautious when we evaluate the project. Of course, we consider the return reflecting the capital cost, reflecting the reality of each asset. If from the track history, you can see that the assets have different sizes, and they are also at different phases of maturity. In other words, we are focusing on this agenda, and we are very open to look at different opportunities, and we may not be very conventional at times. There are some assets that we needed to understand the reality before, and we needed to make a loan previously.
We have all the financial discipline that every company has to have. We look at all the positions in comparison to other opportunities for growth. Everything demands resources. You have to prioritize all those actions, considering the opportunities, and which one is more attractive, which one would offer better return, and also the logistics side in this evaluation.
Okay. Thank you.
Our next question comes from Gabriel Francisco with Breeze Capital. It is a written question. Three questions he asks. Could you provide details on the next step to trade biomethane of Sergipe? The second, could you provide more information about the trading of carbon credits in Paulínia? Is there any update on the so-called purchase of biomethane by Petrobras?
Gabriel, this is Pilão now. I am going to start, and Leo may complement my answer. We had intention protocol. We are very enthusiastic with the agenda. We are not connected to Sergás until everything is completed, executed. In the Northeast, in Sergipe, we have other potential clients, not only this one. Of course, we look at this client. We consider it as a good partner. We are developing a good relationship, but this is not the only option we have. In relation to carbon credit in Paulínia, there is a high volume of perspective and stocked carbon.
I think it was clear when we communicated that with the market. We are going to have a very important volume to be traded. Our area is very focused on the sales of the carbons. It's a pipeline of potential transactions, and that involves Paulínia assets. It's important to mention that to have a project at the Verra and other Gold Standard brings a diversification of the portfolio.
It's important. You may have a client looking at the requirements of the Gold Standard unit or the [inaudible] with a different angle. It's very important to have projects registered in both environments because we have more flexibility, we have a bigger portfolio, we have more diversification, and we will have more power to the sales area to meet all types of clients. It's very important to have all this on our radar. But we start with Paulínia/Jaboatão. Now they not only have carbon to be sold and to be traded, but as I say, we can have products on the shelves. We have the products that have been audited, have already been registered. The products are ready to be sold or traded on the spot. In this public call of Petrobras, we've been monitoring this.
As all the markets, we have been interacting with the clients, and we're very enthusiastic, according to the client's timing. We are very enthusiastic about this front. But as I've always said, we have the support of the bank that cover for us. As we have mentioned the previous call, Petrobras is a potential client, of course, a very good client, but it's a potential client, one of many. We have made some agreements with other clients as well.
Our next question comes in writing by Guilherme Rodrigues with [Trigono] Capital. He says, could you give some examples of operational synergies with new M&As and the landfills the company already own?
Of course, you have the standard synergy of using the same platform. But whenever you make an acquisition, for example, in the same region, you have the same permitting process. You're already familiar with that permitting process with the environmental agency. Also those which are adjacent, activities which are adjacent, you may have some synergies with the team. I think the expertise that we have when you explore biogas, you can replicate in the acquisitions, considering what you have already developed in the biomethane process.
The synergies that are going to offer present value are the commercial ones, when we consider the expertise, when we made the development of the circular economy and biomethane projects, and also when you know the project, the suppliers in terms of CapEx. It's much easier for you to replicate all this. And of course, you have a level of synergy with the administrative and financial area, but at a lower degree. The most value is to replicate what you have already done in the previous project in the new acquisitions.
Next question is by Mr. Sergio de Souza Melo, investor. In relationship joint venture with Tera on organic fertilizers, what is the initiative like now?
The initiative is doing well. The joint venture with Tera is not really a pilot plant because it was thought of so that we could have a learning curve in the generation of fertilizers coming from sewage treatment sludge. We have been learning a lot with this initiative. In every time you start a new business, for example, fertilizers coming from sludge, it is something new, not many people do that in Brazil. There is a lot of learnings to be captured. We have been learning a lot. In the beginning, we nearly had to give our fertilizers for free to the farmers.
We had to break those barriers for them to understand that the fertilizer came from waste and you have qualitative gains, cost gains when we execute the fertilizers because of the characteristic of the Brazilian sludge. This joint venture is already generating results. It is not relevant because it is not so big, but it generates results and returns, which is very good considering the investment made. The point here is to have one more avenue for growth, which is already ready for the right moment. This is not our priority to grow on this avenue because we do not have enough structure to follow all those journeys. Now we are focusing on biomethane and M&As.
In the long run, when those other divisions become mature, we are going to give more attention to transformation of the sludge that we receive from our ecopark into fertilizers and give another step ahead together with the sewage treatment companies so that we can establish new partnerships for this purpose.
The Q&A session has been completed. We would now like to thank you and turn the floor to Mr. Pilão for his final remarks.
Once again, I would like to thank for all the people who took part in this call. Thank you very much for the quality questions. Once again, I thank all our employees for having helped us to go on this very successful journey.
Orizon conference call has been completed. We would like to thank you for your participation, and have a nice day, everyone.