SABESP(US:SBS)2020-11-18 00:52Financial Data and Key Metrics Changes - Income totaled R$421.6 million in Q3 2020, down from R$1.2 billion in Q3 2019, primarily due to nonrecurring revenue from an agreement with the municipality of Santo Andre [12] - Net operating revenue decreased by 18% from R$5.4 billion in Q3 2019 to R$4.4 billion in Q3 2020, influenced by the same agreement and a change in tariff mix [13] - Adjusted EBITDA fell from R$3 billion in Q3 2019 to R$1.5 billion in Q3 2020, with the adjusted EBITDA margin dropping from 55.6% to 34.1% [14] Business Line Data and Key Metrics Changes - Total billed volume increased by 4% in the quarter, with residential consumption rising by 3% while non-residential categories fell by 14.7% [11] - Costs, administrative selling expenses, and construction costs increased by 20.5% compared to Q3 2019, with construction costs alone rising from R$683 million to R$1 billion [15] Market Data and Key Metrics Changes - The delinquency rate is expected to rise in line with the economic situation and unemployment rates in Brazil, with a gradual recovery anticipated as the economy improves [36] Company Strategy and Development Direction - SABESP is prepared to expand markets and participate in future competitions, as evidenced by its participation in a bidding process for services in the Metropolitan region [10] - The company aims to maintain liquidity and payment capacity while executing expected investments of R$3.5 billion for the year [9] Management's Comments on Operating Environment and Future Outlook - The management noted that the economic recovery has been slow, impacting revenues due to a shift in consumption patterns towards residential use and higher delinquency levels [5] - Future results may differ materially from current expectations due to risks and uncertainties related to the economic and health crises [3] Other Important Information - SABESP issued R$1,045 million in debentures during Q3, contributing to a total of R$2.5 billion in debenture issuances for the year [7] - The company has taken measures to reduce foreign currency exposure from approximately 49% last year to 25% this year [8] Q&A Session Summary Question: Update on presidential beacons regarding federal sanitation bill - Management indicated that the impact on SABESP would depend on Congress's decisions regarding vetoes, with no major issues anticipated for the company [30] Question: Appetite for new concessions outside São Paulo - Management expressed interest in competing for contracts outside São Paulo, emphasizing a careful approach to partnerships with the private sector [33] Question: Cost impacts and savings from ongoing voluntary plans - Management did not provide specific quantification but acknowledged ongoing initiatives to manage costs [34] Question: Evolution of delinquencies in coming quarters - Management expects delinquency rates to rise with the economic situation but anticipates a gradual recovery as the economy improves [36] Question: Discussion on tariffs and rate base - Management confirmed that the weighted average cost of capital is currently at 8.1% and emphasized the importance of a transparent tariff review process [38][40]