CCR S A : Transcript 1Q21

Conference Call Transcript

1Q21 Results

CCR S.A. (CCRO3 BZ)

May 14, 2021

Operator:

Good morning, ladies and gentlemen. Thank you for waiting. Welcome to the conference call of CCR S.A. to announce the results of the 1Q21.

All participants will be connected on listen-mode during the Company's presentation, and then we are going to start Q&A session when further instructions will be provided. Should you require any assistance during this conference call, please request the help of an operator by pressing *0.

Before continuing, we would like to explain you that forward-looking statements made during this conference call relative to the Company's business prospects, operational and financial projections and goals are beliefs and assumptions of the CCR's management and are based on information currently available. Forward-looking statements do not guarantee of performance because they involve risks, uncertainties and assumptions as they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operational factors may affect the future performance of the Company and may lead to results that will be materially different from those expressed in such forward- looking statements.

Now I would like to turn the conference over to Mr. Waldo Perez, CEO and IRO.

Waldo Perez Leskovar:

Good morning, everyone. I would like to tell you that today here with me at the conference call, I have Flavia Godoy, our Investor Relations Superintendent, Douglas Ribeiro, Natalia Fialho and Caíque Morais. They are all part of our Investor Relations team.

I would like to take the chance to announce that Marcus Macedo, who was Head of CCR Investor Relations for 12 years has now accepted a new challenge as Aeris' CFO, which is our operations in Costa Rica. We would like to thank Marcus for the excellent work he did, and we wish him great success in his new position.

Before anything, I would like to say that 2021 is the year that we are still suffering the effects of the pandemic, especially with the worsening of the impacts that we have witnessed in Brazil. However, we are seeing a recovery in the traffic in our concessions.

In a recent press release for the periods between April 23 and 29, 2021, there has been a slight drop of 0.7% in roads as compared to the same period in 2019, before the pandemic.

We should emphasize that in spite of the impacts of the pandemic, the Company is still implementing its qualified growth strategy. Recently, we have had two significant accomplishments in our businesses, in addition to significant advancements in themes that are fundamental for us.

I would like to talk a little bit about those topics and to make a few considerations on them. As a highlight, we have signed two important amendments, the number 6 and 7 on ViaQuatro.

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Conference Call Transcript

1Q21 Results

CCR S.A. (CCRO3 BZ)

May 14, 2021

To summarize, number 6 has established the amount of the economic financial balancing of the concession contract amounting to approximately R$705 million for March 2020, because of the delay in the completion of the construction work. So phase one of the concession and the fractioning of intermunicipal lines managed by EMTU, and the benefit will be implemented in ViaQuatro compensation between January 1, 2021, and January 31, 2037.

Now, the amendment 7 determines the compensation of delays in phase two. It is important to mention that in cash, in April, we have received R$91.6 million regarding the sum of the amounts already due as a compensation for the delay in phase two for Morumbi and Vila Sônia stations.

In addition, I would like to emphasize that this year there have been several state and federal auctions, which we had been analyzing for quite a long time, and as a result of this very well structured preparation process, we won three of them. Starting next year, we are going to see the positive effects in our results.

The first accomplishment was on the sixth round for airports with an auction in April. As I said, CCR had the best bid and won blocks South and Center that comprise 15 airports.

The reasons for our interest in those assets are many. I would like to mention. Number one, with this accomplishment, with strengthened the national presence of CCR in the airport segment. Now with 16 airports under our management in Brazil, we are the largest airport operator in the country, with almost 23 million passengers considering 2019, the second largest operator in the number of passengers.

With this gain, we are gaining critical mass to capture synergies, because now we are going to own a large chain of airports, and this accomplishment will make it possible to have a better competitive positioning to capture future opportunities in this industry.

Still in April, there was the auction of four lines, eight and nine of CPTM, and once again we won. So CCR's victory in these bids is consistent with the Company's strategy. We are selecting projects according to strategic positioning and the financial gains.

So this is due to our competence and competitive advantage in urban mobility, especially in São Paulo, where we already have a strong presence and work.

All the points that I have mentioned made us very happy, especially because we obtained it through intensive preparation, discipline, and with a support of an extremely competent and engaged team. And this makes us even more confident to make the most of future growth opportunities that are yet to come, about which I will mention.

So we should highlight the extensive pipeline that we see ahead of us, reinforcing that we will have opportunities in all segments where we operate.

Just in roads, we are seeing the bids for assets, approximately 30,000 kilometers of extension, federal or state levels. These projects represent about R$140 billion in investments for Brazil, according to BNDES.

There are some projects that may come true this year. As a highlight, we have BR - 163, BR - 381, Rodoanel BH, São Paulo's coast, Dutra, and others.

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Conference Call Transcript

1Q21 Results

CCR S.A. (CCRO3 BZ)

May 14, 2021

In airports, we expect the seventh round expected for next year. All these opportunities confirm our optimistic vision of the good prospects that we see in the future of CCR and for Brazil, too, as I had mentioned before.

Before moving on to the results of 1Q21, I would like to briefly address CCR's leverage measured as net debt over EBITDA. In spite of the challenging scenario, we keep a robust cash position, and we have the leverage of 2.4x, the same level as we saw in the beginning of last year, and below what we had in 4Q20, which was 2.9x. We consider this level very appropriate for the maintenance and the strong growth of the Company.

Even after the attainment, when we won new businesses, we still have very healthy debt levels, and according to our financial policy, we have whitespace to overcome our maximum leverage rate of 3.5x, so long as we have a plan to readapt the rate within 24 months, a period that we consider enough to adapt the Group's leverage if necessary.

It is important to emphasize that CCR has a broad credit offer, both in the banking market or in the capitals market, both Brazilian and international.

I would like to conclude by saying that we are aware of the challenges of the pandemic, and we are aware that they may still continue to impact our businesses until we are more stable in terms of the health scenario. But in spite of that, we are optimistic, and especially with the recent victories that we have had. We will continue working diligently, focusing on capital discipline and promoting sustainable expansion of the Company's portfolio in order to add more and more value to our shareholders and stakeholders.

These are the main messages that I would like to share with you before starting talking about the quarter's results.

In 1Q21, we have seen the traffic in roads demonstrate our resilience, and a trend of improvement as compared to the same period in 2020 because of the worsening of the pandemic that we had in the beginning of this year, as we have been seeing in weekly releases that we publish about traffic.

So the levels of urban mobility and passenger traffic in airports are presenting a recovery trend, although they were lower than before. This is because of the more restrictive measures that were imposed by the government because of the pandemic.

Now, I am going to give the conference over to Flavia Godoy, who is going to share more results of the 2021 performance with you.

Flavia Godoy:

Thank you, Waldo. Good morning, everyone. I would just like to highlight the main numbers, IFRS, in 1Q21. As a reminder, for the same base numbers, we are excluding new projects and assets for which there were changes in the Company's stake, as we detail in our press release.

Starting with the highlights of the quarter, we highlight that car traffic has presented the growth of 1.7% as compared to the 1Q20. Excluding ViaSul, it fell by 0.1% only in the period.

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Conference Call Transcript

1Q21 Results

CCR S.A. (CCRO3 BZ)

May 14, 2021

This traffic performance was the result of the drop of 9.3% for light vehicles as compared to the same period in the year before, and the growth of 7.6% in heavy vehicles traffic, as compared to the same period last year.

At the end of our press release, we have included a chart where you can see that, in spite of the impacts caused by the pandemic, we are in a clear recovery trajectory, as compared to the beginning of the pandemic, whether in roads, and also in the other businesses of the Company.

In this manner, the net revenue adjusted to the same base without the effect of ViaQuatro has reached R$2.3 billion 1Q21, representing a decrease of 3.7% as compared to the same period in the year before.

The adjusted EBITDA on the same basis has presented a reduction of 6.7%. Now the EBITDA margin adjusted to the same base was 59.5%, a decrease of 1.9 p.p. as compared to 1Q20.

Although this has been a quarter still impacted by the effects of the pandemic, these results demonstrate the efforts of CCR to control its costs and to keep operational efficiency in a business with fixed costs, in a pandemic environment that has severely impacted many of our business units.

Going into a little bit more detail on total costs, you can see that same base costs have recorded an increase of 0.8%. This increase is especially due to the impact of higher costs of depreciation and amortization, because of the proximity of the end of the concession agreements or RodoNorte and NovaDutra. And even though they do not have cash effect, they had an impact on the net income of the period.

As to total cash cost on the same base, it has presented an increase of only 1%. Brazilian companies have presented an increase of 3.8%, both below inflation of the period, thereby demonstrating once again our efforts and discipline to hold costs. For further details, please refer to the cost section in our press release.

So net income on the same basis was R$126 million in 1Q21, with a drop of 56.5% as compared to the same period in the year before. The net income was R$688.9 million in the 1Q21, an increase of 137.8% as compared to the same period in the year before, because of the effect of the booking of ViaQuatro's amendment.

The drop in net income on the same basis is a reflection of a higher depreciation and amortization because of the proximity of the end of the contract of concession of RodoNorte, which in 1Q21 was R$208 million.

As to net debt, we have reached R$13.6 billion in 1Q21, which represents a reduction of 1.8% and 0.3% comparing to 1Q20 and to 4Q20, respectively.

The leverage of the Company as measured by net debt to EBITDA adjusted has presented a reduction in a comparison to 4Q20, reaching 2.4x in 1Q21, a reflex of the booking of ViaQuatro's rider, and also the efficient financial management of the Group. This condition is a reflection of a condition that is favorable for us to continue with our quantified growth strategy and financial discipline, as Waldo mentioned before.

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Conference Call Transcript

1Q21 Results

CCR S.A. (CCRO3 BZ)

May 14, 2021

I would like to close by highlighting that if you analyze the Company's performance, you can see that, in spite of the major impact caused by the worsening of the pandemic in this period, in addition to the stricter measures of circulation, restriction and social isolation imposed by the government that as a consequence had an impact in our businesses, the Company has been able to deliver solid results, as you can see in the full analysis of the press release.

Now we are open for questions and answers. Operator, please, you may continue.

Victor Mizusaki, Bradesco BBI:

Good morning. First of all, congratulations for your work in investor relations, and I wish you success on your new challenge. I have two questions. Number one, regarding the leverage of the Group. As Waldo mentioned, you have been able to add two sets of airports. What can we expect in terms of leverage at the end of 2021?

And the second question is about São Paulo's balance. You have closed the contract for the rebalance for ViaQuatro and Ecovias. Can you give us an update about the negotiations on the roads in São Paulo?

Waldo Perez Leskovar:

Thank you, Victor, for your questions. As to leverage, as I said before, our average level of net debt over EBITDA is 2.4x, which is a quite healthy level. We still need to hire loans for the operations, for which we are going to make disbursements when we sign the contract, and EBITDA coming from those operations will start to be booked as of January 2022.

So there are our prospects. We think our leverage level is very appropriate to capturing new opportunities, and we do not give guidance or projections about any of that.

As to the rebalancing in São Paulo, the conversations and negotiations are still very active. The granting power through CCR has a very constructive negotiation. We are evolving more and more, and we hope that shortly we will be able to close those negotiations successfully.

Victor Mizusaki:

Thank you.

Stephen Trent, Citigroup:

Congratulations, Flavia, and best wishes to my friend, Marcus, in Costa Rica. I wanted to ask, if I may, when you guys think about the opportunities in the airports, I had thought you previously didn't sound so excited, stating foreign competition could be intense, but you did very well in the recent auctions.

Going forward, do you see, perhaps, less foreign interest, because maybe these are more local assets as opposed to global assets?

Waldo Perez Leskovar:

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