Grupo CCR S A : Transcript 1Q23

Conference Call Transcript

1Q23 Results

CCR S.A. (CCRO3 BZ)

May 5, 2023

Operator:

Good morning, ladies and gentlemen. Thank you for waiting. Welcome to the earnings release call of CCR S.A. for the results of the 1Q23.

We would like to inform that it's being recorded and simultaneously translated. Translation is available by clicking on the button Interpretation. If you are listening in English, there is an option of muting original audio.

Before moving on, we would like to clarify that forward-looking statements that may be made during this conference call with respect to business prospects, forecast, operational and financial goals of the Company are all based on beliefs and assumptions of the Executive Board of CCR as well as currently available information. They are no guarantee of performance. They involve risks and uncertainties since they relate to future events and therefore, depend on circumstances which may or may not occur. Investors should understand that general economic conditions, the market and other operational factors may affect the future performance of the Company and lead to results which may differ materially from those expressed in these forward-looking statements.

I would like now to hand it over to Waldo Pérez, CFO and IRO. So you can start now.

Waldo Pérez Leskovar:

Thank you very much, operator. Good morning, everyone. I would like to thank you for your participation, where we are going to present the earnings release of the 1Q23. I would like to let you know that I have Flávia Godoy, our IR Superintendent; Douglas Ribeiro and Caique Moraes, also from our Investor Relations team.

But before moving on with the results of the 1Q, I would like to thank the Board of Directors of CCR of trusting me during the whole time that I played as Interim CEO and all the top management of CCR for the partnership during this time.

I would like to welcome our new CEO, Miguel Setas, who is going to carry on with the successful implementation of CCR. Miguel has over 25 years of experience in different leadership roles in energy and infrastructure. He has broad experience in regulated industries. He has worked in Brazil for 13 years, most of the time as CEO of EDP Brasil. For the past 2 years, he was the Chairman of the Board of Directors of EDP Brasil, and he also worked as Executive Board of Directors of EDP multinational company being responsible for the business of infrastructure in Portugal, Spain and Brazil.

I have now the honor to invite him to start our earnings release.

Miguel Setas:

Thank you, Waldo. I would like to start by saying that I am very glad to be here. I started on April 24. And I am really honored to take over this challenge, this new mission of leading the Group in Brazil and abroad.

I would like to start by telling you what our strategic positioning is in a conceptual session. First, we are fully focused on creating value to our shareholders. And there are 5 components, which are very important. First, profitable, sustainable growth. That's part of the Group and gives us a long-term understanding. That's our growth agenda.

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Conference Call Transcript

1Q23 Results

CCR S.A. (CCRO3 BZ)

May 5, 2023

Secondly, a constant pursuit for premium or superior operating efficiency, which allows us to be a reference in the area in terms of cost of our operations. Associated with that, there is also CAPEX execution. We have very important economic and financial commitments and investments to be done in the future, and they have to be done with excellence, understanding the financial and all the operation we are having in hand.

Finally, controlled risk, which is the fourth point. It's a vision that the Company as part of a complex diversified operation should have a very precise controlled risk policy. And finally, a clear policy of dividends, giving us a very clear understanding of how we are going to have our dividend sharing.

The second dimension concerns a clear strategy with very well-defined capital allocation. This is something that adds value to our shareholders, of course. So we have very clear capital allocation strategy. Finally, financial discipline and optimized capital structure, which is part of our journey at CCR, and we have to keep on adopting this kind of vision.

The fourth dimension, we want to give an active management of our business portfolio in a flexible way so that we can constantly analyze our portfolio with flexibility leading to capital recycling whenever necessary, leveraging further our growth agenda.

And finally, something that we are always recognized for, which is to take a leading position in ESG. So we are going to maintain our actions in environmental, also governance and society.

So considering all the vision of our strategic position, I would like also to share with you a very clear message about our commitment with our strategic plan.

We have an approved ambition. It has been approved by the Executive Board and the Board of Directors defined in 2021. And we are fully committed with it focused on 3 main areas: in toll roads, urban mobility and airports. These are the 3 main areas of focus in our business, the core of our business, and we are fully concerned there.

And they form our vision to organization structure and also considering ESG, client, employee and shareholders. Here, we have also the enabler. So we need an agile, simplified organizational structure that provides really efficacy, the culture of the Group management model based on building value and the use of data and technology so that it can be a competitive advantage to all of us.

I am joining the Group now, and I hope that I can promote a strategic update of our vision in 2023. Things are somewhat different from what it used to be in 2021 when this vision was first conceived. So I think it's time to reanalyze everything towards the future of our Company.

I would also like to tell you that together with our CFO and our IR team, led by Flávia Godoy, we are going to keep on analyzing the relationship of our IR team and the market. And in upcoming months, I am planning to have closer personal interactions with all our investors, analysts and the market at large.

Thank you very much for listening to me. I would like to hand it over to Waldo Pérez, and once we get to the end of the session, I will be here to answer the questions.

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Conference Call Transcript

1Q23 Results

CCR S.A. (CCRO3 BZ)

May 5, 2023

Waldo Pérez Leskovar:

Great. So now let's go into our highlights. We have been focused on delivering recently achieved projects, and we are going to focus on capital allocation with discipline and selectivity.

In Urban Mobility, we focus on training teams and making investments in modernizing our infrastructure, especially of Lines 8 and 9. We have received the first of the 36 new trains that have been acquired for the concessionary, very important for modernization and improvement of ongoing actions in all the infrastructure of our 2 lines. This package of nearly R$4 billion will be executed in the first years of concession, which is a 30-year plan.

In RioSP, we started our free flow operations in BR-101. It is the first electronic toll pay system in Brazil, which really shows how much we can innovate. In that specific toll road, 60% of the cars already have a tag, and we can see compliance increasing.

In airport operations, we have been increasing safety in our operations, offering a more pleasant experience to our customers and developing the potentialities of each market. In the 1Q23, 5 airports, which are part of Bloco Sul and Bloco Central, have more passengers than what we used to have before the pandemic, Bloco Sul, Uruguaiana, Pelotas and Navegantes; Bloco Central, Goiânia and Palmas.

We are also going to sign contracts with partners to start the investments in the upcoming 18 months. In addition, it's important to highlight that we were awarded +Brasil in Imperatriz as the best regional airport in the Northeast and the best regional airport in Brazil. And we have added the route of Confins to Curacao, connecting 2 airports operated by us.

In the 1Q, we have also made important announcements. One was the celebration of the third amendment to our contract with MSVia, which extended for 24 months, the first amendment to our concession contract. As such, the new tender period will be until March 25.

Another important action was the signature of the agreement between Barcas and Rio de Janeiro. The main purpose was to acknowledge the nullity of the concession contract, to make sure that we can keep on providing public service through the concessionary, also define that the 24 months granted to the state will be preceded by 12 noninterrupted months as of February 23, and some additional time frame if required. Defining value and payment terms of the operating cost in providing this service, and also defining conditions to go back to concession to the state and all the private assets part of the concession in the state where it is.

With this very important result, Barcas will get R$697 million as of December 2022, which will be paid between 2023 and 2024 as an indemnification for previous work of obligations of the State of Rio de Janeiro, which are part of the concession contract.

In March 2023, we have already received R$288 million, and in May, we are going to get R$60.5 million as the second installment.

We have also had the announcement of the partial return of the land, which corresponds to 29.76% of the total area where a new airport would be implemented in the metropolitan

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Conference Call Transcript

1Q23 Results

CCR S.A. (CCRO3 BZ)

May 5, 2023

region of São Paulo known as NASP Project. There was no approval that allowed this implementation of a private airport in the region.

And considering market conditions, CCR has decided to discontinue project NASP. And this decision is part of our continued strategy of rational capital allocation. And the Company is paying close attention to the opportunities of valuing and using the remaining portion of the land.

We have closed one more quarter with a very solid balance sheet and comfortable cash position. Our rate reached 2.9x, which is stable when compared to the indicators of the 4Q22.

To optimize the management of indebtedness and increase the debt duration, it's important to say that we have maintained our actions to work on long-term refunding of 2023 and 2024, primarily for those that were part of projects from 2021. Well-controlled leverage has provided appropriate growth strategy implementation.

We are very optimistic about the perspective of new projects in our pipeline. And any new project will follow the diligence that we normally provide to studies with appropriate capital allocation discipline.

Finally, at the end of the quarter, we have very successfully held the second ESG forum, where we shared with our shareholders our goals in 2022: the governance structure of CCR, the strategy of our ESG master plan, all the main achievements and goal for 2023. Fully aligned with our best governance practice and transparence, CCR has published the integrated report of 2022 based on the GRI standard guidelines and CVM Resolution 14 about integrated report. We have also presented some KPI of the Sustainable Accounting Standards Board, showing value generation in all the different types of capital. So manufactured, intellectual, natural, social.

So with that, I would like to hand it over to Flávia Godoy, who is going to go into details of the results of the 1Q23.

Flávia Godoy:

Good morning. Thank you very much for being with us once again for the earnings release sharing. I am going to start with our operating highlights.

Our Company has reached levels in equivalent vehicles and also transported passengers for urban mobility and airports. So starting from toll roads, we had 6.3% performance in the 1Q23 over the 1Q22. The growth was driven by light vehicles, which had 12.1% in performance over the same quarter last year. The performance resulted, primarily from trips that took place during the 1Q23.

Heavy-duty trucks had 1.6% performance in the 1Q23 over the 1Q22. And this performance was primarily due to the MSVia concessionary, which had very atypical export of corn between January and February and also the movement of heavy trucks in the concessionaries of the state of São Paulo.

There were 2 concession areas in ViaSul and ViaCosteira in the south of Brazil, which had the traffic partially affected by some interruptions of the roads, 101 and 367, some areas located in the state of Santa Catarina.

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Conference Call Transcript

1Q23 Results

CCR S.A. (CCRO3 BZ)

May 5, 2023

Now speaking of Urban Mobility, our performance was 31.4%. The performance resulted primarily from transported passengers, and we have been observing a more regularized performance in all the different modalities.

Last year, in the 1Q22, passengers' movement was affected by Omicron variant of covid. We have been observing some picking up in this segment, very important recovery. When we compare against pre-pandemic in Urban Mobility, there is about a 10% performance below what used to be before the pandemic.

When we compare that to airport, there speaking about a demand of about 3% below what we used to have before the pandemic. But as you can observe, there has been a significant increase following that trend of recovery that the Company has been showing in previous quarter with a variation of 132%.

Two concessionaires had relevant variations within this 1Q23, which is Quiport and Aeris, both of them showing consolidation in international routes and a load factor which was greater than what had been presented in the 1Q22.

Now going into EBITDA. We reached an EBITDA close to R$2 billion in the 1Q23 with a 19% variation. EBITDA is a combination of revenues plus inflation. Our business is protected by inflation.

And on the cost side, the cost is adjusted basically on the inflation rate. So reaching relevant levels plus very efficient cost control have driven a margin expansion of 1.2 p.p..

Now going into evolution of costs, where we can see the main variations in the 1Q23. It's important to highlight that during 2022, the Company consolidated important projects, which have been obtained in 2021. So Lines 8 and 9 of ViaMobilidade, RioSP, Bloco Sul, Bloco Central and Pampulha's airport.

Excluding from the costs nonrecurring effects, there was an increase of 13.4% in the variation of the 1Q23 over the 1Q22. The main variations in the quarter that I would like to highlight are construction cost, which is 140% variation resulting from the investment schedule, investments that we have made in Lines 8 and 9 and RioSP totaling approximately R$300 million.

Another highlight that I would like to make is the provisions for maintenance. There was also an increase compared to the 1Q22, especially resulting from the final agreement that the Company has made with new provisions of maintenance for concessionary AutoBAn and concessionary SPVias.

Another important highlight shown here is the line of other costs. Under the line of other costs, the Company has experienced 2 nonrecurring effects. One, it is the provision for return of 29.76% of NASP land plus all the taxes over title transfer totaling R$121 million. We are calling it nonrecurring effect, so it's been adjusted in our EBITDA.

The second nonrecurring effect that was experienced and was part of under cost lines was the investments in ViaOeste totaling R$165 million. We are speaking of investments that do not generate future economic benefit. Therefore, they were recorded as costs.

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