Good morning, ladies and gentlemen, and welcome to Orizon's earnings call to discuss results relative to Q3 2023. This video conference is being recorded, and a replay facility will be made available at the company's website at ri.orizonvr.com.br. The respective slides deck is also available for download central at the company's IR website. All participants will be connected in listen-only mode during the company's presentation. After that, we will start a Q&A session when further instructions will be given. Before moving on, we would like to reinforce that forward-looking statements are based on beliefs and assumptions on the part of the company's management, and also on information currently available for the company. These forward-looking statements might involve risks, uncertainties, as they relate to future events, which therefore depend on circumstances that may or may not materialize.
Investors, analysts, and journalists should have in mind that events relative to the macroeconomic environment, to the industry, and other factors that might lead these results to be considerably different from those expressed in these forward-looking statements. Joining us today for the conference are Mr. Milton Pilão, Orizon's CEO, and Mr. Leonardo Santos, CFO and IRO. I would like to turn the conference over to Mr. Pilão, who will start the presentation. Please, Mr. Pilão, you may proceed.
Good morning, everyone. Thank you for joining us for these results call relative to Q3 2023 for Orizon Valorização de Resíduos. I am here with Leonardo. We are going to be doing this chat, this song and dance, if you will, to cover all the numbers and results. To get this going, Leo, if you could please show the slide for the business strategy.
We have been repeating this, I know, but this is very important. It is important to always show and underline and emphasize these pillars a lot so that our investors, our stakeholders, have a clear understanding of the company's platform. At the end, we circle back and link the current results to future results based on this platform. So, we are organized, as you can see here on this slide. Three main divisions quite well focused on the use of the 16 ecoparks which the company owns currently. On the left-hand side, we have Orizon Meio Ambiente, which holds revenues for final destination, biogas, and carbon credits. Then we have BioE, which invests in the generation of renewable energy, biomethane, and methane credits under this division to reuse biogas coming from landfills.
Under circular economy pillar, we have the mechanized plants, green fertilizers, and the reuse of the waste that gets to our ecoparks. On the right-hand side, waste to energy, which right now has a single plant, in a partnership with Sabesp, which is being built in URE Barueri, close to us here. Basically, highlights of the period, I will be touching upon this first slide and then turn it over to Leo. On the first slide, we all know, but for Q3, we have executed the acquisition of the landfill in Juazeiro do Norte. Along the same lines of acquisitions as we have done for the past few periods, Porto Velho, Cuiabá. It is the only destination option which is licensed in the region. Currently, they are sending waste to different cities in the region, 1.4 million inhabitants, so different landfills or different areas or different dumpster sites.
We have a licensed site to receive the waste from the whole region now. Yet another acquisition which was made to provide a major upside and quick growth. We are moving from a landfill, which was just licensed with a low level of waste in it and with a positive outlook to service 1.4 million people in the region. We also have our deal for the production of biomethane. I am going to go briefly over that. We have already published a material fact about that. Just to reinforce that this deal was very important for the company in the third quarter for a couple of reasons. Number 1, to show our ability to sell biomethane in the long run at very attractive prices with the possibility of upside sharing with an improvement of our capital structure, paying secondary amounts for the holding company.
A combination of benefits coming from that deal. This biomethane division will be a division to play an important role in terms of growth or fast growth for the company in the coming two years. On the right-hand side, we have a map showing the 16 ecoparks where we are present today in several states across Brazil. The company continues to assess different M&A possibilities, options to acquire new assets to further expand its penetration, its footprint in the Brazilian market. On the next slide, Leo will take over in a moment to talk about the IFC finances and the S&P rating as well. Over to you, Leo.
Good morning, everyone. On the left-hand side, we talk about the disbursement of the loan with IFC. It is very important for the company. It is a credit institution that needs no introduction. A private loan arm of the World Bank.
It is a long-term partner of the company, and we expect to count on them for the coming initiatives. That strengthens our common purposes, not only financially, but also in terms of environmental and social development. That funding is linked to a reimbursement of previously made investments, so it is a free resources coming into our cash flow to help the company grow in the midterm. On the right-hand side, we highlight the confirmation of our credit ratings from Standard & Poor's, published in October, once again reaffirming the credit from our fourth debenture issue and also from the economic group. Also, a highlight to our improvement in operational excellence, our liquidity position, which is in line to meet our investment needs in the mid to the long run.
Very good. Okay.
Before going into the numbers, as highlights of the period, I have a list here on the slide I would like to touch upon four different points, and then you will see this when we move to the numbers. Numbers were released last night, as you know. The strength of the final destination business. That is a long-lasting business, a high entry barrier, but which brings stability in terms of EBITDA and of cash generation to the company's core business. That allows for quick growth ramp-up. Yet another quarter where we see strength in the business of final destination. Number 2, also important, a significative improvement in gross margin on acquired assets. We have mentioned that previously. After the acquisitions, we had hard work to do in terms of introducing our practices in the acquired landfills, and that is happening. In this quarter, it was no different.
We see improvement, as OpEx goes down and a significant, as I said, improvement in the gross margin of those assets. Number three, CapEx is in line with our business plan, so once again, showing our corporate responsibility and also our practices, which are very, very strict, spartan, if I will, in terms of meeting our CapEx guidelines in line with budget. Lastly, Leo briefly mentioned, IFC. We tend to have a capital structure which is poised for strong growth as we advance in our projects, adding value to waste under management. We have, as you know, invested in Jaboatão dos Guararapes. We will perform, along with Compass, the acquisition in the coming 30 days of a plant in Paulínia. We are now building the URE Barueri.
All of those are investments of hundreds of thousands of BRLs, and the company prepared for that with a very strong, robust capital structure. As you know, as of 2025, this will generate considerable EBITDA for the company. Those are my highlights. I turn it over back to Leo for the operating highlights, and then I'll be back to talk about our financial numbers. Over to you, Leo.
The first quadrant highlights the waste volume, as you can see. As we had been reporting before, we had a year in 2023 where we adjusted our waste volume. We received some recent assets and a sort of a mix that we deemed not appropriate in terms of optimal point of waste volume, vis-à-vis our value strategy. In comparison with the second quarter, there was an increase in waste volume of about 1%.
We can safely assume that we have a good starting point now for those 15 assets that we have in-house. There's a 16th coming on board, but we have a starting point, and we'll see organic growth coming on and the ramp-up of assets which are not yet mature, but a growth of 0.60 or 260 million tons of waste, vis-à-vis 2 million tons in Q2 2023. So a growth. On the second quadrant, in terms of energy generation, we also see a growth vis-à-vis last year and a sideway move when compared to the previous quarter. As for biogas capture, quite similar to what we had in terms of energy when we compare to the previous quarter.
Very much in line, stable situation, and a considerable growth when we talk about the third quarter of 2022, especially because of the new acquisitions, the new assets which have been acquired. In terms of carbon credits, a growth of 38% vis-à-vis last year, and a growth of about 6% or 7% when compared to the same quarter, or actually to the second quarter of 2023. As for the financial highlights, the company has reported net revenues of BRL 192,500 in this quarter. On the slide, on the left-hand side of the slide, at the same level we saw in Q2 2023 and the third quarter of 2022. A slight drop, but nothing major.
As you can see, in terms of gross profit, the company reported higher margins and reported a growth of 10% in gross profit and a margin up 6% from last year rather, in line with the margin reported in Q2 2023. We can never work on a quarter-on-quarter movement. We may have one-off adjustments, because those numbers vary in the short run. Here, we can already see a margin level, which could be a starting point, a good outlook for the next periods. 54% is what we would expect in terms of margins going forward. Of course, we're going to have biomethane revenues, carbon credits, and other activities that might affect those numbers positively in the coming quarters.
Next slide, you see the large investment numbers, a special highlight for investments already made in waste to energy, a waste to energy line, waste processing and waste to energy, and the Rosário do Catete and Maceió ecopark. They'll start operating in Q4 2023. We've seen those investments in Q3, something to be done in Q4, and we already see biogas coming on board, biomethane and so on, coming from those recently acquired assets. As for leverage, in the company's debt level, the company closed the quarter, with a leverage level of 3 times, and those are the numbers there. If you adjust the running, with the running EBITDA, considering events relative to carbon credits, there are some non-recurring, losses linked to ramp-up. We get to 2.2 times net debt over EBITDA.
On the right-hand side, we see the average term quite long, so quite healthy in terms of average term when you think about a short-term amortization program, which allows the company to have good financial capacity to invest in the mid to the long run.
Now moving on to the last chapter and talking about the company's outlook. We have been showing this very same slide to show a bit of the current status of the company. As you can see on the dark green, there are no numbers, but we can see that the outlook is real, concrete in terms of size, in terms of scale, in terms of share, right? When you compare dark green and light green, dark green is where the contribution is coming from now, the contribution for the EBITDA you see in the balance sheet.
The final destination, of course, is our main contributor right now, waste disposal. A bit of biogas coming from royalties that we received from projects from Jaboatão dos Guararapes and from Rio de Janeiro. In the case of biomethane, just numbers coming from the sale of biomethane at Paulínia. That slide is a snapshot of that outlook that we make to show that within our 16 ecoparks, where we have room to grow. There are no numbers again, but the light green represents five times the EBITDA generation currently generated by the dark green line, and that's where the added amount will come from. All of those dimensions will contribute. Of course, biomethane has the largest share of contribution when you multiply that, to expand the company's EBITDA. All divisions, all dimensions will contribute as we mature those assets.
Waste disposal can contribute some in terms of volumes with those assets where we have volumes not mature yet. We can contribute with price in case of biogas, as you saw in terms of CapEx, by installing plants to recover biogas across all assets. Starting 2025, all of them will start to contribute with biogas sales for the biomethane arm. Carbon credits with the same. We are generating carbon credits to be sold. Biomethane, as I said, with the plants now under investment, we will have more EBITDA coming from, and circular economy. We also have EBITDA coming from the recovery of materials. In other words, we still have way to grow.
That EBITDA that you can see in our balance sheet, there is room to grow and grow significantly to the tune of four to five-fold in terms of organic growth, as can be seen proportionately across all divisions in the coming years. Next slide, please. We zoom in and the carbon credit. This slide was shown in our last meeting as well. We continue with São Gonçalo, Jaboatão, João Pessoa in the final stages of approval. The good news here is that Gold Standard is meeting all the deadlines that we had agreed upon and were expecting for the last call. The three projects responded accordingly in terms of deadline. So at the 8th of October, early November. João Pessoa is slightly ahead because they started first, and then Jaboatão, and then São Gonçalo.
For João Pessoa, we have already had a step forward, so it should be ready by early December. São Gonçalo and Jaboatão, they are now going to be finishing about this week or next week. So, deadlines are being met. That is the good news. Those projects are moving forward towards a final migration to the Gold Standard. On the next slide, and this is worth mentioning, that is why I am doing a Zoom. The company has a very strong agenda now going forward for the coming 20, 30 days in terms of carbon. I am not sure you are familiar, but we are the only Brazilian company which will be present at the COP 28. We have a blue booth there at the COP 28 with a very busy agenda. I will be there in person.
We are talking to Qatar government, Saudi Arabia government, all the major players in oil and gas to discuss the trading of our carbon, in addition to positioning the company as one of the main players in this market, carbon coming from landfill in the country. So, that is why I have this snapshot to share with you here. Throughout the last two years, we have complained about this delay from the NGOs to migrate Gold Standard and so on, Verra. Right now, we had a meeting two weeks ago and I thanked them for the delay, actually, because the regulated Brazilian market, they evolved significantly in the past periods, and this will offer more trading possibilities, allowing us to capture better prices, better than previously anticipated. Now we have short-term expectations for that.
As you can see, number 2, the Brazilian regulated market, you have been reading that in the news. The Brazilian government is saying that they will transfer regulation before the COP, before the end of the month. If that happens, next year, we will have a regulated market to trade our carbon, and the price prediction is way above what we have today in the volunteer market. For the regulated market in Brazil, we have a short-term positive outlook, something we did not have in the past, and that gives us the option to make decisions as to trade it in the volunteer market, the free market and the regulated market.
In addition to that, number 3, we see that again, because again, we are following the news, monitoring the news and of course, you have to wait, right, for the end of the day, but a Brazilian market is going to happen. As for Article 6 of the Paris Agreement, all entities participating in COP 28, they say that the possibility of leaving COP without finalizing Article 6 is close to nonexistent. Close to nonexistent. If that happens, we will have a third option, which is to trade our carbon by the UNFCCC. We have the Nova Iguaçu, Itapemirim projects which had come to a halt. They now have a chance to be traded in 2024, as early as 2024, as soon as Article 6 is approved at COP 28 this month. We are very excited about those three alternatives.
We have seen a movement in the carbon market, which is very strong, very heated. For the first time, we are in advanced negotiations with multinational Brazilian companies to buy our carbon, something we had not done before. We always would sell our carbon to foreign governments or foreign companies.
For the first time, and you will see going forward, you will hear news that there will be contracts with Brazilian multinational companies. We feel that the carbon market is truly heating up, and we should be having good news on that front in the coming months. That is what I had. Let us move on to the Q&A session now, and we are available. Give it back to the operator, please.
We will now start our Q&A session for investors and analysts. If you wish to make a question, please press the button Reaction, and then click on Raise Your Hand.
If your question has been answered before that, you may leave the queue by clicking on the Lower Your Hand icon. The first question comes from Fillipe Andrade . You may proceed, sir.
Good morning, everyone. Thank you for taking my question. I have two questions, actually. Number 1, about biogas. We saw a slight negative variation compared to Q2. I would like to understand if, in your perception, this negative variation is something normal, expected, or it reflects some kind of lack of efficiency in terms of production. Number 2, in terms of volumes, once again, we see a quarter where volumes are a bit more challenging. I would like to understand if, in your perception, we could expect more solid growth in the coming quarters, specifically in Barra Mansa. We saw the volume created in Q3 was quite in line with Q2, but there is an implicit drop, which is relevant.
Are you looking for some alternative to increase the volume for that specific landfill? Thank you.
Fillipe, thank you for your questions. In terms of biogas, the variation is not really relevant. That is the normal cost of the operation for the landfills, the natural evolution of those businesses, those assets. Nothing that really catches our attention negatively. No red flag, not even a yellow flag. Nothing different from our business as usual. As for the volume issue you raised, you said it well. We are talking about having a new starting point for growth. Let us recap that Orizon has some assets which are not yet mature. They are maturing, if I may. Cuiaba, Aparecida de Goiânia, Santa Luzia, Porto Velho, those are assets that will naturally see growth going forward, and which will, of course, enhance waste volume.
Specifically, about Barra Mansa, as you asked, we have a couple of private clients in the region. We are actually seeking to increase that volume, but it depends on bilateral negotiations, which are now ongoing.
Okay, thank you. Have a nice day, everyone.
Our next question comes from Julia Zaniolo from Santander. You may proceed.
Good morning, everyone. I would like to pick up where the last question left off in terms of biogas. With your carbon credit volume growing quarter-on-quarter, how can I link that to that drop in biogas volume? Secondly, you mentioned around costs. If you could explain that cost line, what can we expect in terms of recurring provision amounts for the coming quarters?
Hi, Julia. Thank you for your questions.
I think the question around carbon, even though it is directly linked to the biogas evolution, I think we can have, or I believe we can have. We can check those volumes. Remember, we will have to go through an audit and certification process for that carbon going forward. So, in addition to be intrinsically linked to biogas, it is also linked to auditing and measurement processes. So back, way back, we did not have all the procedures in place to check that carbon to be able to defend our numbers when we have the audit process, but now we do. We are at a much higher level in terms of measurement vis-a-vis the audit process. So, for carbon credits, that is an advance. That is why you had lower volumes before, right? As for specifically your second question, if you could repeat it, please, Julia.
About the provision reversal for landfills. If you could explain what happened on that point, and what can we see in terms of recurring provisions going forward.
So, the provision for closing, in accounting terms, we try to provision the costs of closing of a landfill. Then those costs need to be provisioned when the asset is closed. So at the closing time, you have to have all the costs provisioned. It is true that after closing, you still have biogas activities and carbon, oftentimes generating more results or higher revenue than the previous cost. But in accounting terms, we have to reflect that in our accounting numbers when at the time of closing. As for the reversal, that is an adjustment of the life of the assets which are recently acquired, especially those coming from the UPE, UPI landfill.
And when you extend the life of those assets, you adjust the provision because you will have more time to amortize the initial and the closing costs.
Okay. Thank you.
Once again, to ask a question, please click on the Raise Your Hand icon. Please wait as we poll for questions. The Q&A session is now over. I would like to turn the floor over to Mr. Pilão for his closing remarks. Please, Mr. Pilão, you may proceed. Thank you.
Thank you. We, of course, remain available. If there are any other comments or questions offline, just reach out to our IR team. We remain available. Once again, thank you for joining us today, and have a nice day, everyone. Orizon's video conference is now over. Thank you all for joining, and have a nice day, everyone. See you next time.