Good afternoon, ladies and gentlemen. Welcome to the Orizon VR first quarter 2024 earnings results conference call. This conference call is being recorded, and the replay can be accessed on the company's website, ri.orizonvr.com.br. The presentation is also available for download in the results center of the company's IR website. We would like to inform you that all participants will be in a listen-only mode during the company's presentation, after which we will begin the Q&A session when further instructions will be provided. Before we proceed, let me stress that forward-looking statements are based on the beliefs and assumptions of Orizon VR's management and current information available to the company. These forward-looking statements may involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur.
Investors, analysts, and journalists should note that events related to the macroeconomic environment, to the industry, and other factors may cause results to differ materially from those expressed in such forward-looking statements. Joining today's conference call, Mr. Milton Pilão, Orizon's CEO, and Mr. Leonardo Santos, CFO and IRO. Now, I would like to turn the call over to Mr. Pilão who will start the presentation. Mr. Pilão, you can proceed.
Well, good afternoon, everyone. I would like to thank all of you who have joined us for this earnings call. We will now disclose the results for the first quarter of 2024. Let us move now to our highlights, and then I will turn it over to Leonardo to talk about financial highlights. Let us go over Q1 2024 highlights.
Once again, it was a very positive first quarter with growth in our EBITDA and cash generation vis-à-vis 2023, and also the work conducted in 2023. Beyond the growth itself, let us discuss where it is coming from. It is coming from the maturing of the waste treatment and disposal segments. We all know how the ramp-up has allowed us to improve the results, also biomethane, biogas, and carbon credits. With regards to current results, that is because of the maturing of the waste treatment and disposal, especially improving gate fee and also improving our cost efficiency. We were already discussing the acquisitions that took place over the last three years, and over time, that they would bring about actual results in price and also price efficiency. Leonardo will certainly discuss the numbers and the main factors responsible for this growth in this quarter are coming from these areas.
Besides that, we know that has an impact on our net revenue, also on our margin by segment, whereas keeping a strong cash generation with a net revenue. We saw also an increase in volumes in different divisions of waste, energy generation, biogas capture, and carbon credits, and also a strengthening of our capital structure. Leonardo will also discuss that. We are closing with a very strong net cash also with improvement of our also the payment terms of our debt, which are very comfortable and also deleveraging. Moving on to the next slide, please allow me to discuss operational highlights. I would like to add some comments. First, waste volume. We see an increase by 4% year-over-year.
In this first quarter of 2024, we see 2.2 million tons, and annualized, that represents approximately 9 million tons of waste per year, which is a very good result. I would like to clarify that there is still room for growth considering the assets that we have today in our portfolio. Considering our 16 assets, we still have many landfills that are undergoing ramp-up and maturing regarding waste volume due to the closure of open dumps. We expect to see over the next two years, to see increasing volumes. We can see there is a leap because every time a dump is closed, we see a strong impact on that specific asset. Over the next two years, we will see continuous and actual growth regarding waste volume because of the maturing of such assets.
Some 2 million tons on top of the 9 million that we will operate this year. As for energy generation and biogas capture, you can see growth in both of them. It will be qualitative growth. When we go over the operational highlights, we will see that revenue and EBITDA coming from biogas and energy did not increase. When you check these numbers, you can see 16% increase of biogas. You may ask, why does it not translate into increased revenue? Because this biogas capture is not generating revenue yet because we are not selling biogas. In order to do that, we need to have installed biomethane production. You can see here this improvement and considering market prices, if we were selling it, that would also add additional EBITDA of approximately BRL 20 million. This is not included in our results.
That will happen as soon as the biomethane plant starts its operations. You can see, we see a ramp-up, which is good. That means that the molecule is there. As soon as the biomethane plants are operating, that will be accounted for. As for carbon credits, we also see increase. Once again, we will discuss that with also pro forma EBITDA. Out of the BRL 104 million EBITDAs for the first quarter, just BRL 1 million coming from carbon credit yet. If we consider the 843,000 and multiply by 5, which is the foreign currency, we would have BRL 25 million in EBITDA. That was not also included because we are still finalizing the process of migrating other carbon credits. We will discuss that later on, and also the accounting of those that have already been migrated. These are the highlights.
I would like to turn it over to Leo so that he can go over financial highlights.
Thank you very much, Pilão. Good afternoon, everyone. It is really a great pleasure to talk about financial highlights. Slide 8. Total net revenue, we can see that it went up by 11%, closing this quarter with BRL 209 million. The gross profit of BRL 122 million, also 31% increase year-over-year, and with a gross margin of 8.9 percentage points year-over-year. Just as discussed at the very beginning, this is a chart comparing margin per segment. We can see that we see a strong result in the more mature division. We always say that there is still growth for the final processing, final disposal, but the projects are maturing. There is still a lot to increase in different areas.
We already have the landfills and operations also with good volumes and also average price that are okay and also cost. We gained 25 million, you can see. We can see that we went from 71 to 96, and you can see increased volume, also significant increase in average price, and also the reduction of cost per ton of destination. Slide 10. We focus on the treatment and final disposal division. You can see net revenue that went up by 19%, and also the average price, BRL 10.3, better. Approximately 0.7 of this average price refers to revenue coming from previous periods. We had the adjustment from previous periods, and that related to months coming from 2023. You can see the average price, 75, better than what we had in the first quarter of 2023.
You can see that we have been growing quarter-over-quarter regarding average price. As for cost, considering also the inflation rate, it is adjusted by the Brazilian index, IPCA. We see also cost improvement by 1%. I would say a very fruitful quarter regarding our landfills and Ecoparks. As for our company's EBITDA, we can see also strong growth year-over-year, increased by 45%, and quarter-over-quarter, we are also improving the pro forma EBITDA, also adding carbon credits and also the price of recent transactions. If we were to do the same calculation now for the first quarter of 2024, our pro forma EBITDA would go to BRL 129.5 million and annualized pro forma above BRL 580 million. Slide 12. We have now already talked about the CapEx, BRL 62 million. Two-thirds of it coming from expansion activities.
We also see a strong expansion CapEx, especially in Barueri and also Jaboatão, in which we consolidate the second quarter of 2024. These projects are 100% on track, just as our plan. Jaboatão will start operations at the turn of this year and Barueri in 2026. This CapEx, we expected to see it on the first quarter, but we will start to see it in the second quarter. You can see that it is also very strong because of the expansion CapEx in this first quarter of 2024. With regards to leverage, we also reduced debt, and that had an impact in reducing our debt net and the ratio debt net to EBITDA. Over the last 12 months, you can see there is a leverage of 2.26 and also the average term above five years.
If we consider the carbon credits and EBITDA of the first quarter, we see a pro forma leverage of 1.721. I believe that a company with such opportunities to invest in the future, you can see a very healthy leverage for investment and also to take advantage of future opportunities. I would like to turn it over to Pilão so that he can talk about the perspectives, and then we open for questions.
Thank you, Leo. Let us talk about future perspectives. I would like to highlight six issues. First, as mentioned, the maturing of current landfill projects. What does that mean? That means that we have improved on our cost efficiency. As for that, we need to consider cost per OpEx per ton. I do not see much to be done, but there is still an upside with regards to price and volume.
This maturing landfill agenda will be continued, both with regards to price increase and volume. Our goal is to add 2 million tons that can certainly fit our current portfolio without having to acquire new landfills. So, 20% increase in volume, and that is very significant because once the landfill is operating, that also adds a great deal to our EBITDA, more than the regular margin. Also increase of our average price. Part of that has already been seen in this first quarter, but along 2024, we will see more actual gains in average price regarding landfill. What you just saw for this first quarter will carry on in the future quarters. Let's talk about CapEx of biomethane plants. Just to give you a follow-up, we are also on track regarding CapEx of the two biomethane plants and also of our waste to energy plant.
The construction schedule is also according to our plans, and we expect to see results and have them going into operations in 2025 and 2027 respectively. They will add BRL 50 million in our EBITDA. It's important to say that the construction schedule is running just as planned. The second plant of biomethane in the second half of 2025 and waste to energy in January of 2027. We also have a new biomethane sales contract. We build the new plants as soon as we sign a sales contract, take or pay. Right now, we have two contracts for two new landfills, and we should announce that in 30 days. We are now just finalizing the agreement, so in the next 30 days, we will announce two new sales that are important for the next 10 years.
As for the two landfills, we are also now in the discussion phase. We should see these new contracts in the next four months. Then we will move to the other landfills and we will sell all biomethane we have coming from our assets in the next 12 or 18 months, so that at every sale, we can also start constructing that plant. Then I'd like to talk about our carbon credit. First project already migrated to Gold Standard, and we are also on track regarding that agenda. It seems that now it is more accordingly to what we expect vis-a-vis some delays we saw in the past. We must see the migration of the registration of two more landfills, as mentioned before, of Ecopesa and São Gonçalo, to the Gold Standard. That should generate an additional revenue coming from carbon credit.
The next quarter, we will already see a significant revenue coming from the João Pessoa landfill. For the third and fourth quarter, we will also see new revenues coming from carbon credits, coming from Ecopesa and São Gonçalo. As for strategic and opportunistic acquisitions, we carry on with the acquisition process in different maturity states. It's very likely that we will see some acquisitions taking place in the second quarter and some others in the third and fourth quarters. We continue to follow our strategic acquisition plan. Finally, strengthening the environmental attributes agenda. We switched some of the management. We also included trading of carbon credit. We also created a regulatory department in order to follow this agenda and also reverse logistics.
We are being very active and present regarding this agenda, and it may also add some upsides that have not been accounted for or that had not been considered in the past. Considering projects that are now being discussed at the National Congress of Brazil, be it the view of the future or recycling, that will have impact on reverse logistics, also the minimum participation of recyclables in packaging content. That will be also very important to our company, considering the upsides that may help us and also improving our results. That is it for today. Now, I would like to once again thank you all for joining us and let us open for questions.
Now we will open for questions for analysts and journalists. If you have a question, please click on reaction and then click on raise hand. If your question has been answered, just lower hand.
First question from Fillipe Andrade with Itaú BBA. Please go ahead, sir. Your microphone has been already unmuted.
Good afternoon, everyone. Milton and Leo. I have two questions. First, about contract negotiations with some municipalities that could certainly add to your gate fee. If you can please share a bit about such negotiations, and if we can expect gains in the gate fee in the second quarter of 2024. My second question is about monetization of carbon credit from João Pessoa. I have just mentioned that you expect to see that in the second quarter, just as you had mentioned in the previous call. Can you please add more color and can you talk about volume, about the tons of carbon credit that can be traded, please?
Thank you very much for your question.
There are many negotiations taking place, and when you talk about actual price gain, that can only take place on the date that those contracts have been signed. We will only actually include those gains when that happens. We have a one-year contract or a five-year contract. The date in which they were signed. Then for the next quarters, including the second quarter, we should see the impact on actual gains regarding price coming from such contracts. Because we have some contracts that will mature, and that will see the gains in the second, third and fourth quarters. Sometimes you will see, for example, negotiations of contracts at the end of that quarter, and then you may just sign it in the following quarter. I do not know if you see there was only 0.7 BRL coming from previous quarters.
I expect to see an actual price gain in the future quarters. You also asked about carbon. Carbon from João Pessoa brings us the possibility to add, I do not know the exact number, but approximately 330,000 tons of carbon from João Pessoa for the part that has already been registered and audited. Now we will see that regularly, the audit, I mean. But for João Pessoa, volume that was recorded as 350,000 tons. The sales price, approximately $6 per ton. The expectation for the second quarter is that we can add six times 350, so $1.9 million, $2 million approximately to our revenue coming from carbon. That would add our EBITDA by BRL 10 million in the second quarter. This first quarter, that was just BRL 1 million. This will be a recurrent fact. Also, for Ecopesa, we also have recorded and migrated that.
The volumes for Ecopesa are much bigger, and that will be also included in the third and fourth quarter. Thank you very much.
Our next question comes from [audio distortion] from Whitmore Capital. Please, sir, you can proceed. You have been unmuted. I cannot hear you. Mr. Chen, you can proceed. Your microphone has been unmuted.
Our next question is from Mr. André Sampaio with Santander. Please go ahead, sir.
Good afternoon, everyone. I have two questions. Can you please add some color regarding waste disposal? Is there any non-recurring fact? Based on what you shared, my impression is that the answer is no. My second question is about the waste CapEx. Is that number a good number for us to follow?
My first question is about waste, but I would like to say that also for SG&A, I would like to know if there is any non-recurring fact.
André , thank you very much. This is Leo. Regarding price, that has already been discussed, our waste price. As for cost, there is nothing relevant. Of course, you can ask something about the rain level, but I believe that these assets are more mature, and this is what you should expect. That is the first point. As for CapEx regarding waste, yes, I agree that this is something to be checked in the future. We expect to see that improving in the future regarding biomethane and also waste to energy that are not part of the rationale that you mentioned.
Okay. If I can take this opportunity, can you talk about your expectation regarding biomethane contracts to be signed in the short term? What about the price? Are the prices that we are used to?
Yes, we are working along the same levels or even bring good news to all of you. It is not a promise regarding price, but please consider same level of what we have seen. Thank you.
Our next question comes from Alexandre Fernandes with Trafalgar Investimentos. He says: What about how much of carbon credit and what is your expectation regarding monetizing it? What is the inventory of carbon credit?
Thank you for your question. As for inventory, just to remind you, in 2021, we generated 1.6 million considering those that had already been traded.
In 2022, 2.3 million carbon credit, and out of that, 500,000 have already been sold, also with the registration Gold Standard. So, we have now 1.8 million to be traded in 2023, 3 million carbon credit generated. Adding to that, we have 4.8 million, and now for the first quarter of 2024 has not been sold yet. Today is approximately 5.5 million carbon credit that have not been traded. As for monetization, Pilão just mentioned. We expect to see sales now in the short term. Pilão, if you can add.
I agree with you, Leo. I do not know if it is clear. The volume of what we have today is above what we projected for this year, because Leo just mentioned total volume generated. We do not expect to see migration of every single project.
Leo gave you a macro. If all projects were to be migrated, although 500,000 have been sold, they were not entered into our revenue. We have 5.3 million tons of carbon credit to be sold from 2023, plus what will be generated in 2024, approximately 3.5 million. By December of 2024, almost 8 million tons of carbon credit if all the process of all plants were to be migrated. That is not going to happen. That said, today we expect to see three projects that will be migrated. Once that happens, we will also not sell their carbon credits until December because we need to carry out audit, and that happens three months after migration. Best scenario, by September or August of September of that year will be then accounted for.
I'd say that the scenario would be considering the three projects that have been migrated and also the timing. We will probably 2 million tons or 3 million tons will be accounted for this year with an average price of $6 per ton.
Our next question comes from Mr. Tiago Lima. He says: Does the company still foresee opportunities to acquire new landfills or is your priority to really gain profit from the current assets?
Well, I believe they go hand in hand. I'd say that one option is not more important than the other. The company has discipline, and that is shown through our results. We always improve our efficiency in cost, improving price, and also increasing volume. That is the most profitable way to improve our income, considering that all CapEx has already been done.
We don't have any additional CapEx to increase 10 or 20 BRL in the average price or no additional CapEx in order to improve our efficiency. Well, actually, we may have some additional CapEx. You can see that for the recurring CapEx for landfills, we also have the expansion of a leachate treatment plant. When that happens, you decrease the cost because you stop sending that to other parties. We also will benefit from that. I believe that the priority is very strong considering the efficiency of achieving our results and also considering the upside regarding cash. This is a multiple gain considering the organic fronts. But we are always paying attention to inorganic growth. The Brazilian market, and I'm actually attending a conference in New York, and that's what I hear from U.S. funds.
The Brazilian market is one of the last ones worldwide that presents the opportunity of having consolidation regarding landfills. It is a highly profitable market because considering the Brazilian population, we generate a large amount of waste, right? But that is really disseminated. We need to pay attention to that. That scenario may change, and we cannot miss the opportunity to consolidate assets in a market in which there are still opportunities that will bring about important, relevant results. We are paying attention to these two fronts.
With that, we close the Q&A session. We'd like to turn it over to Mr. Milton Pilão for his final remarks.
Thank you very much. Once again, I'd like to thank you all for joining us and to say that our IR department is open to answer any questions you may have in the future.
I wish you all a very good afternoon. Thank you very much.
With that, we close Orizon's conference call. Have a great afternoon.