SABESP(US:SBS)2023-04-25 22:58Operations and Revenue - As of December 31, 2022, the company operated water and sewage systems in 375 municipalities, covering 58% of all municipalities in São Paulo state [562]. - The São Paulo metropolitan region accounted for 71.5% of the company's operating revenue in 2022, with a total population of approximately 21.4 million [563]. - Net operating revenue for 2022 was R$22,055.7 million, a 8.0% increase from R$19,491.1 million in 2021 [621]. - Net operating revenue for the year ended December 31, 2022 increased by R$2,564.6 million, or 13.2%, to R$22,055.7 million from R$19,491.1 million for the same period in 2021 [622]. Financial Performance - Profit for the year reached R$3,121.3 million in 2022, a 35.4% increase compared to R$2,305.9 million in 2021 [621]. - Gross profit margin improved to 34.9% in 2022 from 34.3% in 2021, despite operating costs rising to R$14,350.9 million [621]. - Financial result improved significantly, with net financial expenses decreasing to R$372.4 million in 2022 from R$927.4 million in 2021 [621]. - Profit before income tax and social contribution increased by R$1,102.6 million to R$4,272.8 million, with a profit margin of 19.4% compared to 16.3% in 2021 [637]. Expenses and Provisions - The company's allowance for doubtful accounts increased by 21.5% for the year ended December 31, 2022, compared to the same period in 2021 [570]. - Allowance for doubtful accounts increased to R$782.1 million in 2022, representing 3.5% of net operating revenue, up from 3.3% in 2021 [598][621]. - Administrative expenses rose by R$274.4 million, or 24.4%, to R$1,398.5 million, reflecting increased operational costs [629]. - Income tax and social contribution expense increased by R$287.2 million, or 33.2%, to R$1,151.5 million, driven by higher profits [638]. Debt and Financing - The company had total foreign currency-denominated indebtedness of R$2,775.8 million as of December 31, 2022 [583]. - Total financial indebtedness increased by 7.0%, from R$17,723.8 million as of December 31, 2021, to R$18,958.7 million as of December 31, 2022 [652]. - Long-term indebtedness outstanding as of December 31, 2022, was R$16,712.7 million, with R$2,463.2 million in foreign currency-denominated long-term debt [653]. - The company has outstanding domestic debt of R$16,182.9 million as of December 31, 2022, primarily consisting of real-denominated loans from federal and state-owned banks and debentures [659]. Investments and Capital Expenditure - The company’s capital expenditure program is focused on expanding water and sewage systems in the São Paulo metropolitan region to meet demand [563]. - The company has budgeted investments of approximately R$26.2 billion from 2023 through 2027 for improving and expanding water and sewage systems [701]. - In 2022, the company allocated R$36.5 million to research, development, and innovation projects [706]. Risk Management - Approximately 14.6% of the company's debt obligations, or R$2,775.8 million, were denominated in foreign currencies as of December 31, 2022, exposing the company to exchange rate risks [1005]. - The company estimates potential losses of R$277.6 million from a hypothetical 10% unfavorable change in exchange rates as of December 31, 2022 [1006]. - The company could face a potential loss of R$1,895.9 million from a hypothetical 1000 basis points change in interest rates as of December 31, 2022 [1014]. Research and Development - The company is involved in multiple RD&I projects focused on circular economy principles, enhancing resource recovery in water and sewage treatment processes [710]. - The partnership with FAPESP resulted in a non-refundable financing of R$50 million, equally divided between the company and FAPESP, leading to 17 research projects and 7 national patent applications [719]. - The Pinheiros River Oxygenation System project is in its first year of operation, showing satisfactory results in increasing oxygen concentration in the river [721]. Compliance and Ratings - As of December 31, 2022, the company met all financial covenants for its loans and financing agreements [684]. - The company’s S&P domestic rating was brAAA, and the global rating was BB- as of December 31, 2022 [653].