SABESP(SBS) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2019, net income reached R$3.4 billion, an increase of 18.8% from R$2.8 billion in 2018 [10] - Net operating revenue was R$18 billion, up 11.9% from R$16.1 billion in 2018 [11] - Adjusted EBITDA for 2019 was R$7.5 billion, a 14.8% increase from R$6.5 billion in 2018, with an adjusted EBITDA margin of 41.8% compared to 40.7% in the previous year [12] Business Line Data and Key Metrics Changes - Total volume billed in 2019 grew by 3.5%, with water volume increasing by 0.2% and sewage volume by 7.7% when including Guarulhos and Santo André [8] - In retail, the public category saw a 4.6% increase, followed by residential at 2.7%, commercial at 2.4%, and industrial at 1.7% [9] Market Data and Key Metrics Changes - The company added approximately 2.5 million people to its service population in 2019, including the incorporation of Santo André and Guarulhos [26] - The number of contracts increased from 307 to 324, with its share in total revenue rising from 84.8% to 92.2% [27] Company Strategy and Development Direction - The company is focused on improving sanitation and health, especially during the COVID-19 pandemic, emphasizing the importance of clean water [5] - The company aims to maintain investments in regular water supplies and has started producing reused water for cleaning purposes [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in facing the challenges posed by the pandemic, citing previous experiences with crises [7] - The economic recession caused by the pandemic is not expected to significantly affect revenues, with residential consumption likely to remain stable [32] Other Important Information - The company signed a significant contract with the municipality of Santo André, contributing R$1.3 billion in revenue [13] - Adjustments in costs were noted, with administrative and commercial expenses increasing by 12% mainly due to services and electricity [11][18] Q&A Session Summary Question: Revenue and Cost Adjustments - Inquiry about the expected tariff hike and the level of returns for the upcoming rate review [38] - Management confirmed that tariff adjustments are anticipated, but the situation is being monitored due to the pandemic [42][44] Question: Rate Review Concerns - Questions regarding risks in the rate review process, particularly concerning the regulatory asset base and operational expenses [48] - Management indicated optimism about the discussions with regulatory bodies and the potential for recovering asset bases [55] Question: Foreign Exchange Debt Exposure - Inquiry about the company's strategy to reduce foreign exchange exposure and the cost of local currency funding [57] - Management confirmed ongoing discussions to negotiate changes in contracts to minimize foreign currency exposure [59]