Aenza SAA (AENZ) 2022 Q2 法說會逐字稿

Good afternoon, and welcome to the Aenza Second Quarter of 2022 Earnings Conference Call. (Operator Instructions) Please note that this event is being recorded.

Presenting today on behalf of the company are Andre Mastrobuono, CEO; and Oscar Pando, Vice President of Corporate Control and Planning; and Fredy Chalco, VP of Corporate Finance. I would now like to turn the conference over to Andre Mastrobuono. Please go ahead, sir.

Good afternoon. It's a pleasure for me to address you for the first time as the CEO of Aenza. I will present the highlights of second quarter of 2022. Afterwards, Oscar Pando, Vice President of Corporate Control and Planning, will present the consolidated results for the same period. At the end of the presentation, we will have a moment to answer your questions. Fredy Chalco, Vice President of Corporate Finance, will join us for the Q&A session.

But first, introduction, during the year's second quarter, our projects have developed normally, complying with high environmental, social, safety and governance standards. In addition, our business units have increased their activity, reaching pre-pandemic levels. Likewise, we continue to work on consolidating the corporate management systems that lay the foundations for the company's future growth at the regional level.

Regarding the filing of the Form 20-F on May 16 of this year, Aenza filed the Form 20-F with the Securities and Exchange Commission, which contains the company's annual report for the fiscal year 2022 - 2021, sorry. This document incorporates the new strategic vision of transforming Aenza into a concession development platform in Latin America.

Regarding restructuring the corporate finance area, on May 25, we announced the resignation of Mr. Dennis Gray Febres as the Chief Financial Officer of the company, which became effective on May 21. Both the Board of Directors and management of Aenza acknowledges and appreciates Dennis' contribution to the company's transformation process.

Following the corporate restructuring process, the corporate financial area at Aenza has been reorganized in 2 segments, effective June 1: first, the Vice Presidency of Corporate Control and Planning, led by Oscar Pando; and second, the Vice Presidency of Corporate Finance, led by Fredy Chalco. Mr. Pando assumed his new position after serving as the Regional CFO for our Engineering and Construction business unit since 2019. On the other hand, Mr. Chalco has served as a corporate financial manager since 2018.

Regarding the S&P/Bolsa de Lima and Peru General ESG Index on May 26, at a public event, 17 Peruvian companies, including Aenza, were recognized for being part of the S&P/Bolsa de Lima Peru General Index -- ESG Index. This index originates from an alliance between S&P Dow Jones Indices and the Lima Stock Exchange and aims to recognize the companies with the best environmental, social and governance performance.

Regarding external audits, as announced at the General Shareholders' Meeting held on March 21, 2021, Caipo y Asociados S.C. de R.L., a member of KPMG, was appointed as external auditor for Aenza for the period of '22 and '24. On June 2, Caipo y Asociados started itself in its own work.

Regarding the plea agreement, the company is closely working with the Peruvian authorities on the last details before the judicial approval assignments. On the financial planning, following the conversion of 100% of the convertible bonds issued by Aenza on March 22, 2022 and the signing of a bridge loan agreement for $120 million, that represents a recovery of the company's debt capacity, we are now working on the analysis of various alternatives to refinance existing indebtedness into finance CapEx.

Finally, we will continue working to strengthen our business units while maximizing our positive economic, social and environmental impacts.

Thank you, Andre. Results for second quarter 2022. Consolidated revenues at the end of the second quarter 2022 reached PEN 2 million, 16.3% higher than the figure reported at the end of second quarter 2021.

Regarding the Energy business unit, sales increased due to higher prices for oil, liquefied petroleum gas and compressed natural gas. In the Infrastructure business unit, sales increased mainly due to an increase in Norvial's traffic and Line 1 additional kilometers traveled as well as tariff indexation.

Likewise, in the Engineering and Construction business unit, sales increased due to the higher production volume in the projects under execution, mainly in Quellaveco, the construction of the second runway and airport terminal for the Jorge Chavez International Airport in Lima, the project with Gases del Norte in the north of Peru and finally, in the MAPA project in Chile.

Consolidated gross profit increased 17.5% in second quarter 2022 compared to that of the same period of 2021, mainly due to better margins in Norvial and Line 1 as a result of more traffic and additional kilometers, respectively and in Energy as a result of higher oil prices. These better results have been partially offset by lower margins in the MAPA project in Chile as a result of lower productivity.

Gross margin is similar in the second quarter 2022 versus that of second quarter 2021, 10.5% and 10.4%, respectively.

Administrative expenses decreased 17.5% in second quarter 2022 compared to that of 2021, reaching 3.3% of sales. Same figure for second quarter 2021, is 4.7%. This situation is mainly due to several reorganization processes implemented during 2021. As a result, operating income reached 7.3% of sales in second quarter 2022, higher than the 5.6% reached in the second quarter of 2021.

Net financial expenses increased by 44.9%, from PEN 97.5 million in the second quarter of 2021, to PEN 141.3 million in the second quarter of 2022, mainly due to interest payments related to the convertible bond and the bridge loan.

Dollar exchange rate reached PEN 3.83 per $1 at the end of second quarter 2022, PEN 0.04 lower than the last year in the same -- for the same period. Considering the company's net position of assets and liabilities in dollars, this situation generates a positive impact of PEN 4.3 million in results.

Consolidated net loss in second quarter 2022 is PEN 24.8 million, which represents a net loss margin of 1.2%, 200 basis points better than results of second quarter 2021. Adjusted EBITDA increased 24.2% compared to that of second quarter 2021, going from PEN 224.2 million, to PEN 278.5 million.

Regarding backlog, consolidated backlog amounted $2 billion, of which $816 million corresponds to recurring businesses. This figure represents a ratio of backlog plus recurrent businesses to revenues of 1.87 years. The increase in recurrent business of $799 million in second quarter 2021 to $816 million in the second quarter of 2022 is mainly due to the new sales estimated for the Energy business as a result of current oil prices.

Lastly, regarding that, consolidated financial liabilities at the end of the second quarter 2022 are $466 million, up 1.2% increase when compared to that of 2021. Consolidated financial liabilities breakdown as follows: $27 million corresponds to working capital associated to clients' accounts receivables and leasings for the acquisition of machinery and equipment; $260 million corresponds to Infrastructure Project Finance, which is debt without recourse, with guarantees and cash flows from each project itself; $119 million corresponds to the bridge loan disbursed in April 2022, the proceeds of these loans were used among other corporate purposes, to execute the amortization of Cumbra's financial obligations and the final payment of the class action; $44 million corresponds to the accounting record of sale of economic rights of 48.8% of shares of Norvial; and lastly, $15 million corresponds to leases.

Thank you for your attention, and we can start now with the Q&A session.

(Operator Instructions) And this will conclude the question-and-answer session -- or apologies, one moment please for the first question. And our first question will come from [Michael Mahia] with [Calpa].

Could you give us some guidance regarding revenue growth and EBITDA margin in 2022? Specifically, which business units do you think would be the main drivers for the remainder for the year?

Hello. It's Fredy Chalco. And unfortunately, the policy of the company to not give some guidance about the results for the year, however, I can indicate that we are with good prices in oil and gas markets and the order in construction -- Engineering and Construction, we are continuing improving our backlog and profits. Thank you.

(Operator Instructions) And this will conclude our question-and-answer session, also concluding today's call. We would like to thank you for attending today's presentation. And at this time, you may now disconnect your lines.