Aenza SAA (AENZ) 2022 Q4 法說會逐字稿

Good afternoon, and welcome to the Aenza Fourth 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; Oscar Pando, Vice President of Corporate Control and Planning; Fredy Chalco Aguilar, VP of Corporate Finance; and Fernando Rodrigo, VP of Business Development. I would like to turn the conference over to Andre Mastrobuono, CEO. Please go ahead, sir.

Good morning all, and thank you for your participation. First, I will present the relevant events from the last quarter of 2022 and the first month of 2023. Afterwards, Oscar Pando, our Vice President of Corporate Control and Planning will present the consolidated results of 2022. At the end of the presentation, we will have a moment to answer your questions. Fredy Chalco, Vice President of Corporate Finance; and Fernando Rodrigo, Vice President of Business Development, will join us for the Q&A session. So let's start.

By the end of 2022, our projects were developing normally. In the infrastructure area, our Norvial concession extended prepandemic traffic levels and the line of the Lima Metro operating at 100% capacity is recovering prepandemic passenger levels. Likewise, the energy business began the first drilling campaign for Block III in 2022. Finally, the -- in construction area increased the production volume of its projects and the real estate business increased the sale of industrial lots.

Let me give you some highlights on specific topics. On Slide 4, on Gasoducto Sur Peruano on September 22, the creditors meeting of Gasoducto Sur Peruano, GSP, a company of which we are shareholders through our subsidiary, (inaudible), decided the appointment of its authorities and approved the dissolution and liquidation of GSP in accordance with the Peruvian bankruptcy law. As of today, GSP is in the process of liquidation and Aenza chairing the Board of creditors. The approval of the liquidation agreement, which provides the framework for the liquidators' work is still pending.

On Vesur project on December 2022, our subsidiary, Concesionaria Via Expresa Sur and the metropolitan municipality of Lima signed an act of termination by mutual agreement of the concession contract of the Via Expresa Sur of August 8, 2013, as a part of the commencement of the preagreements.

On Slide 5, on new contracts. During the last quarter of 2022, we announced two new contracts. In October, our Colombian subsidiary Morelco, signing an EPC contract, engineering, procurement and construction, with Ecopetrol to develop the integrated solution for treatment facilities and auxiliary service of the Santa Monica plant. The contract amount is $212.5 million plus value-added taxes and the execution period is 22 months.

In November, Lima Airport Partners and the Inti Punku Consortium, of which Cumbra, Peru is a member, signed an addendum to an already existing contract for the execution of the works related to the new passenger terminal of the Lima International Airport. The addendum amount is $350 million plus value-added taxes and the execution term is 36 months. Cumbra's participation reached 49% in the Inti Punku Consortium.

These new contracts show the market's confidence in our experience and technical capacity to execute complex projects. The change in ratio of our shares on November 2022, we announced a change in the ratio between our American Depository shares at ADS and common shares ADS ratios from the ADS ratio of 1 ADS to 5 common shares to a new ADS ratio of 1 ADS to 15 common shares, the change in ratio. The same month, the ADS holder exchange 3 existing ADSs for 1 new ADS.

On Slide 6, on December 2022, our restate subsidiary, Viva, signed a low agreement for up to $25 million with Corporación Interamericana de Inversiones IDB Investments. This facility comprises two tranches, and will mature on the 10th anniversary of the signing date. This financial operation implied Viva's committee to implement a robust environmental social management system aligned with international standards. This system is currently in the process of implementation, making a baseline to strengthen our corporate process related to social and environmental issues.

On Slide 7, on the management team. In December 2020, Ms. Zoila María Horna Zegarra joined the company as Corporate Legal Vice President. Ms. Horna has extensive and successful experience in corporate financial civil, administrative and regulatory law. In the short time, she has been with us. She has proven to be a valuable team member. On February 2023, we announced the resignation of Mr. Fredy Chalco Aguilar as Vice President of Corporate Financial Market Representative of Aenza. He will stay on here with us until March 31, 2023, when Mr. Fernando Rodrigo, former Vice President of Business Development, will replace him. The Board of Directors and management of Aenza expresses their gratitude to Mr. Chalco for his valuable contribution to the company's transformation process and for his dedication and professionalism in performing his duties.

On Slide 8, on relevant legal issues on January 2023, our subsidiary, Red Vial (inaudible) fire request for arbitration before the International Center of Settlement of Investment Disputes, ICSID to solve the dispute with the Peruvian government regarding the payment of the tariff warranty and other conservation and maintenance costs, being approved the presentation of the request for arbitration in the Board meeting of Red Vial on January 10. In March 23, we reached an agreement with the adhoc Public Prosecutor's Office to comply with the provisions outlining the final agreement on settlement and corporation of September 15, 2022, as a precondition for its homologation, whose hearing will take place in the following weeks.

On Slide 9, in March of 2023, we announced that Aenza and our business units, (inaudible) and Cumbra obtained the ISO 37001 certification granted to organizations that establish a management system with mechanisms to prevent, detect and deal with bribery in compliance with the applicable laws, regulations and voluntary commitments. It is important to note that in this system -- that this system is part of the corporate compliance program implemented in the organization since 2018.

The international certifier, global standards, grants decertification recognized and are credited by North American organization, ANSI National accreditation Board. Through this certification obtained Aenza reinforces its commitment to fight against bribery and to promote the culture of integrity, transparency, honesty and compliance.

Final message, we will continue to work to send our business units in order to become one of the leading Latin America concession development platforms while maximizing our positive economic, social and environmental impact. Thank you.

Thank you, Andre. We call for fourth quarter 2022 revenues. On Slide 11, consolidated revenues at the end of 2022 reached PEN 4.4 billion, 11% higher than the same figure reported in 2021. The increase is mainly due to higher prices for oil and compressed natural and gas that increased our Energy business unit sales by 17% and due to the sale of an industrial land in Almonte, a subsidiary part of our real estate business unit, which increased the business unit sales by 53%.

In the Infrastructure business unit, sales increased 16%, mainly due to higher traffic and tariff indexation in Norvial Line 1 and in Survial and UNNA Transporte due to higher execution of maintenance works. Regarding the Engineering & Construction business unit, the increase in sales is 4% due to higher production volume in our project Quellaveco Airport Terminal for the Jorge Chavez International Airport in Lima and in Vial Y Vives for the Quebrada Blanca project.

Gross profit, consolidated gross profit increased 8% in 2022 compared to same figure of 2021 due to the real estate business from the sale of industrial land in Almonte. The sale of industrial lots has a substantially higher margin than that of the housing units and no land was sold during 2021. Likewise, part of this gross profit increase is explained by higher oil prices as well as better margins in Norvial and Line 1 as a result of traffic increase and tariff indexation mentioned before. The aforementioned improvement were offset by the settlement agreement between Cumbra and Tecnicas Reunidas de Talara in relation to the Talara refinery modernization project with a negative impact of $25 million and the cost provision of $11.2 million as a result of a core decision that declared and founded our claims for partial annulment of the arbitration ruling filed by Cumbra against EGESMA in relation to the Machupicchu Hydroelectric Power Plant project executed from 2009 to 2014.

Operating income, administrative expenses decreased by 9.8% in 2022 compared to 2021, reaching 3.7% of sales. This figure are the result of several reorganization processes implemented during 2021. Regarding other operating expenses, on September 15, the company signed the final agreement on settlement in cooperation with the adhoc Public Prosecutor's Office and the Attorneys General office. As a result of the situation, the company registered the remaining balance of the provision related to this agreement of PEN 258 million. In line with accounting standards in the previous quarters, this provision was reduced using the discounted value method.

As of December 31, 2022, total provision recorded in Aenza in this regard is PEN 489 million, which sol and U.S. dollar breakdown is $333 million and $40.7 million. Additionally, other operating expenses registered a provision related to Chavimochic project of PEN 14.5 million for the impairment of this investment. As a result, operating income decreased in 2022 by 100% compared to that of 2021.

Financial expenses, net financial expenses increased by 9.1% compared to 2021, mainly due to interest payments related to the convertible bond and bridge loan. Also, it includes the present value adjustment for the account receivable related to Gasoducto Sur Peruano with a negative impact of PEN 63 million. Dollar exchange rate reached PEN 3.82 per dollar at the end of 2022, PEN 0.18 lower than the same rate at the end of 2021, considering company's net position and liabilities in dollars, this situation generates a negative impact of PEN 0.3 million in results.

Consolidated net loss in 2022 was PEN 455 million, which represents a net loss margin of minus 10.4%. Adjusted EBITDA increased 24.4% compared to that of 2021, increasing from PEN 463 million to PEN 576 million.

Backlog. On Slide 16, consolidated backlog amounted $2.3 billion, of which $859 million corresponds to recurring business, that is oil and gas segments and the Norvial concession. The figure represents a ratio of total backlog to revenues of almost 2 years.

Debt. On Slide 18, consolidated financial liabilities at the end of 2022 are $458 million, breakdown as follows: $23 million corresponds to working capital associated to clients' accounts receivables and leasing for the acquisition of machinery and equipment, $255 million corresponds to infrastructure project finance, $121 million corresponds to bridge loan disbursed in April 2022. $43 million correspond to accounting records of the sale of 48.8% of shares of Norvial according to IFRS Interpretations Committee. This operation includes the transfer of political rights to Aenza with an option to repurchase the shares. Finally, $16 million correspond to the leases according to IFRS 16.

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

(Operator Instructions). We have no questions at this time. Therefore, we will conclude the conference. Thank you for attending today's presentation. You may now disconnect. Thank you.