Aenza SAA (AENZ) 2021 Q4 法說會逐字稿

Good afternoon, and welcome to Aenza Fourth Quarter of 2021 Earnings Conference Call. (Operator Instructions) Please note, the event is being recorded.

Presenting today on behalf of the company are Juan Revilla, Chairman; and Dennis Gray Febres, CFO.

I would like to turn the conference over to Juan Revilla, Chairman. Please go ahead, sir.

Thank you, Cecilia, and good afternoon, everyone. It is a pleasure to address you as the Chairman of Aenza for the first time. I will present a summary of some relevant highlights of the last quarter of 2021. Afterwards, as Cecilia said, Dennis Gray, our CFO, will present the consolidated results of 2021.

The last quarter of the year has been the first full quarter under the government of the new Board of Directors and under the management of the company's new administration. In this period, we have implemented a new governance model and a new corporate structure, and we have begun to implement a culture of accountability and management by process necessary for the company's turnaround. These changes will allow us to centralize decision-making and monitor and control business with.

We are aware that we have a significant challenge ahead of us, but we are optimistic. We believe that Aenza is in a privileged position to carry out the vision of becoming a leading Latin American infrastructure development platform and to strengthen all of our business units.

As Dennis will elaborate later, Aenza consolidated results for 2021 show a significant recovery at the operational and financial level compared to 2020, the year in which the group's operations were affected by the outbreak of the COVID pandemic.

By the end of 2021, our projects have been developed in a normalized manner with established health safety controls. Our Norvial concession, part of our infrastructure portfolio, exceeded prepandemic traffic levels, and our Energy business recorded a significant recovery in oil and gas prices. In addition, the Engineering and Construction business unit increased productivity on its projects under execution, and the Real Estate business registered an increase in sales and delivered an affordable housing. Finally, at the end of 2021, the sale of our subsidiary, Adexus, was registered.

In terms of governance, as we mentioned in the last conference call, the new Board approved a change in its corporate organization, which now consists of 4 committees: the Audit and Compliance Committee; the Talent Committee; the Finance, Risk and Investment Committee; and the recently created ESG Committee, Environmental, Social and Governance. The first 3 committees started meeting in the last quarter of 2021, and the ESG committee will begin to meet in this first quarter.

In line with our new strategic goal of strengthening our business units and become a Latin American infrastructure development platform, Aenza has organized its portfolio in 4 business units: Infrastructure; Energy; E&C, Engineering and Construction; and Real State.

Regarding the Infrastructure unit, our aim is to generate organic and inorganic growth across the region in order to expand our high-quality portfolio. On the Energy business unit, we will accelerate production in blocks 3 and 4 and our gas plant. For the Engineering and Construction unit, we will expand our position and execute our backlog with utmost technical excellence. Finally, for the Real Estate business unit, we will consolidate our niche leadership in affordable housing.

Also, each business unit will follow its own strategy, manage its risk and size its business opportunities. They will all work under the corporate goal of achieving financial stability and resuming regional growth.

Regarding the financial plan, we have implemented a centralized process to manage the corporate cash flow, generating efficiencies in the short term. We are also working to secure bond conversions from bondholders as we continue to evaluate for the short-term financing alternatives like a bridge loan. Regarding the Plea Agreement, we are still working with the Peruvian authorities to achieve the initial approval of the agreement. We hope that this process will be completed by the third quarter of 2022.

I now leave you with Dennis Gray, our CFO, for the financial analysis of our 2021 consolidated results.

Thank you, Juan. I will describe the fourth quarter of 2021 results based on the nonaudited financials we released on January 31st.

Consolidated revenues for 2021 reached PEN 3.9 billion, 25.5% higher than the figure reported for 2020. This was mainly the result of revenue increases in our Energy and Infrastructure business unit due to higher oil prices and an increase in Norvial traffic and tariffs, respectively. Likewise, Engineering and Construction, E&C, revenue increased on a higher production volume in projects under execution such as Quebrada Blanca and MAPA in Chile, contract extensions in the Quellaveco tunnel construction project in Peru and the contract with Lima Airport Partners for the construction of the second runway of the Jorge Chávez Airport.

Consolidated gross profit increased 34.4% in 2021 compared to 2020, mainly due to better oil prices and higher traffic, increasing gross margins from 9.9% in 2020 to 10.6% in 2021. Administrative expenses at the end of 2021 increased 34.5%, reaching 4.5% (sic) [4.6%] of sales compared to 4.3% at the end of last year. In 2020, the comparative base was lower due to the expansion of projects all along the group due to the pandemic.

Other income and expenses in 2021 include a nonrecurring income of PEN 70.3 million, resulting from the renegotiation of the Morelco Put option, and on the other hand, other expenses include provisions related to the potential fine resulting from the INDECOPI's (foreign language) or construction club process; the impairment of our investment in Adexus; and other impairments related to the contracts in UNNA Transporte being expressed, among others, in the context of the (foreign language) agreements negotiations with the Peruvian authorities. As a result, the operating income increased in 2021 compared to 2020 with an operating margin of 6% compared to minus 0.2% in 2020.

In 2021, net financial expenses increased by 102.5% compared to the previous year. This is mainly explained by the update of the net present value of the account receivable related to Gasoducto Sur Peruano; interest corresponding to indebtedness with Santander and also the convertible bond, which was issued in August of 2021; and the update of the net present value of accounts payable related to the Plea Agreement.

The U.S. dollar exchange rate at the end of last year closed at PEN 3.998 per dollar compared to PEN 3.62 per dollar in the previous year. Considering our net position of assets and liabilities expressed in U.S. dollars, there is a negative impact on the exchange difference.

Consolidated net loss in 2021 was of PEN 131.9 million, and the net margin went to minus 6.9% in 2020 to minus 3.3% in 2021, mainly explained by the nonoperating items described above. Adjusted EBITDA in 2021 increased 5.9% compared to 2020, going from PEN 436.8 million in 2020 to PEN 462.9 million in 2021.

Regarding backlog, 2021 witnessed the award of a very relevant contract in Cumbra Peru, which was the contract with Lima Airport Partners for the design, engineering, supply and construction of the new terminal at the Jorge Chávez Airport for an amount of approximately $700 million, from which 49% belongs to Cumbra.

Vial y Vives was also awarded with a contract with Mina Spence for $50 million, leading to a consolidated backlog of $1.2 billion, which added to the recurrent businesses of $651 million, accounts to a total backlog of $1.9 billion at the end of the year, which represents a ratio of backlog plus recurrent businesses to revenue of 1.96 years. The increases in recurrent businesses is mainly due to adjusted sales estimates for the Energy business, considering new oil prices.

In terms of consolidated debt, the amount of consolidated financial debt as of December of 2021 reached $460 million. The indebtedness at the end of the year decreased by 2.6% compared to previous year, mainly due to the amortization or the scheduled amortization of Norvial and Linea 1's project bond and also the amortization of working capital in the Real Estate business.

$58.7 million of the financial debt belongs or corresponds to working capital associated with clients' accounts receivables and leasings for the acquisition of machinery and equipment. The amount of $256.2 million corresponds to Infrastructure Project Finance, and on the other hand, $89 million corresponds to the convertible bond issued in August 2021. $41.5 million correspond to debt from the dividend monetization of Norvial, and $15 million corresponds -- belong to leasings according to IFRS. The debt the group had with CS Peru Infrastructure Holdings was prepaid with the uses of the convertible bonds.

Thank you for your attention. We can start now with the Q&A session.

(Operator Instructions) This concludes our question-and-answer session. Now I will turn the conference to Mr. Revilla for the final considerations.

Thank you, Cecilia, and thank you, everybody, that was able to attend, and thank you for the time, and we will continue working and delivering all the way that we have ahead of us. Thank you very much. Thank you all. Bye-bye.

This concludes the conference for today. Thank you very much, and have a great day.