Aenza SAA (AENZ) 2023 Q1 法說會逐字稿

Good afternoon, and welcome to the Aenza First Quarter of 2023 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; and Fernando Rodrigo, VP of Corporate Finance and Business Development.

I would now like to turn the conference over to Andre Mastrobuono, CEO. Please, go ahead, sir.

Good morning, and thank you for joining us on this earnings call. I will provide a brief overview of the significant events that have taken place in recent weeks. Following my remarks, Oscar Pando, Vice President of Corporate Control and Planning will present the results for the first quarter of this year. At the end of the presentation, we will have a moment to answer your questions. Fernando Rodrigo, Vice President of Corporate Financial and Business Development, will join us for the Q&A session.

Let's start with the status of legal proceedings. On Slide 4, as informed in the last earnings call in March 2023, we reached an agreement with Ad Hoc Public Prosecutor's Office to comply with the provisions outlined in the Final Agreement of Settlement and Cooperation of September 15, 2022. The hearings for radical approval process of the settlement proceeded smoothly, and we are now waiting for final verdict.

On May 9 of this year, our subsidiaries, Cumbra Peru and UNNA Transporte received a notification from the National Institute for the Defense of Competition and Protection of Intellectual Property, INDECOPI regarding the conclusion of the administrative sanctioning procedure in the first instance. This procedure addressed the alleged horizontal collusive practice of concerted distribution of suppliers in the construction sector's labor hiring market from 2011 to 2017. The executives involved in this process are no longer part of the company.

In this regard, in November 2022, our subsidiaries made the first installment payment corresponding to 50% of the compensation amounts. The remaining 50% will be paid no later than November 15, 2023, with the necessary provision already in our financial statements. Furthermore, our subsidiaries are fulfilling with their commitment to maintain a compliance program under the supervision of INDECOPI.

Regarding the S&P/BVL Peru General ESG Index. On Slide 5, on May 3, S&P Dow Jones Indices and the Lima Stock Exchange announced the results of the rebalancing of the S&P/BVL Peru General ESG Index, which highlights the 14 stocks that stand out to do the -- due to their sustainable practices in the local stock markets. We are pleased to inform you that Aenza has been included in the index for the period 2023-2024. Given that we were also included in the index for 2022 and 2023, this will be our second consecutive year as a part of the selected group.

The S&P/BVL Peru ESG Index is the only index of its kind in Peru. It utilizes a globally recognized methodology to measure the sustainability performance of Peruvian companies listed on the S&P/BVL Peru General Index. This indicator aims to represent a group of the most sustainable and investable companies for investors on the Peruvian Stock Exchange. This recognition demonstrates the commitment of the Board of Director's, management and entire Aenza team to ensure long-term value generation for our stakeholders.

Regarding the general shareholders meeting. On Slide 6, on May 15, Aenza formally convened the Annual General Meeting of Shareholders to be held on the first call on June 12 of this year, on the second call on June 15 and on the third call on June 19, all at 11 a.m. Lima time. In this meeting, the approval of the annual report, the corporate governance annual report the sustainable report -- sustainability report, sorry and the audited separate and consolidated financial statements for the year 2022 will be submitted for approval. Additionally, the application of the results for the year 2022, approval of the dividend policy and the delegation of powers to formalize agreements will be addressed.

Now Oscar Pando, Vice President of Corporate Control and Planning, will present the results for the first quarter of this year. Thank you very much.

Thank you, Andre. Results for first quarter 2023, revenues. On Slide 8, consolidated revenues at the end of first quarter of 2023 reached PEN 850 million, 7.6% lower than the figure reported at the end of the first quarter 2022, mainly due to lower production volume in projects under execution in the Engineering & Construction business and to lower delivery of units due to seasonality in the real estate business unit.

The aforementioned is partially offset by an increase in revenues due to higher oil production in the upstream business and to higher execution of maintenance in UNNA Transporte and Survial, both part of infrastructure business. Likewise, Line 1 sales increased due to tariff indexation, partially offset by a reduction of additional kilometers. Norvial increased its revenues due to higher execution of works and tariff indexation, partially offset by the reduction of traffic, which was affected by rains in the north of the country and road blockades in line with social protests.

Gross profit. Consolidated gross profit increased 91.6% in first quarter 2023 compared to first quarter 2022 as a result of an increase in oil production in the upstream business and better results in the Engineering & Construction business with higher gross profit in Lima Airport new terminal project in Peru and in Orotoy project with Ecopetrol in Colombia. Also, during first quarter 2022, a lower profit was recorded due to lower productivity in MAPA project in Chile. This was partially offset by lower gross profit in the infrastructure business as a result of higher operating costs in Line 1, Norvial and UNNA Transporte and lower gross profit in Engineering & Construction projects such as Quellaveco and the oil refinery in Talara.

Operating income. Administrative expenses decreased by 6.1% in first quarter 2023, reaching 3.3% of sales compared to the 3.2% of sales at the end first quarter 2022. Regarding other operating expenses, in first quarter 2023, which registered an adjustment for the provision related to the INDECOPI fine in Cumbra for PEN 4.1 million due to the update of the tax unit, partially offset by an exceptional income in Aenza for PEN 3.8 million related to the refund of an insurance policy and recovery of provisions. As a result, operating income increased in first quarter 2023 with a margin of 4.2%.

Financial expenses. In first quarter 2023, net financial expenses decreased by 73.8%, mainly due to interest payments related to the convertible bonds paid in first quarter 2022. Dollar exchange rate went from PEN 3.701 in first quarter 2022 to PEN 3.765 in first quarter 2023. Considering the net position of assets and liabilities in dollars, a positive impact of PEN 11 million on the exchange difference is generated. Consolidated net loss in first quarter 2023 was PEN 17.4 million, which represents a net loss of minus 2%. Adjusted EBITDA increased in 19.2% compared to that of the first quarter 2022, increasing from PEN 59 million to PEN 129 million.

Backlog. On Slide 13, consolidated backlog amounted to $2.3 billion, of which $905 million corresponds to recurrent business, that is oil and gas segments and the Norvial concession. This figure represents a ratio of total backlog to revenues of almost 2.04 years.

Debt. On Slide 15, consolidated financial liabilities at the end of the first quarter 2023 are $475 million with breakdown as follows: $36 million correspond to the working capital associated to clients' accounts receivable and leasing for the acquisition of machinery and equipment. $254 million correspond to the infrastructure project finance. $7 million correspond to the debt derived from performance bonds granted to secure Concesionaria Chavimochic's obligations under the concession contract, which was executed by the Peruvian State by the virtue of the arbitration ruling issued in October 2022, which declared the caducity of the concession. $122 million correspond to the bridge loan disbursed in April 2022. $42 million corresponds to the accounting records of the sale of 48.8% of the shares of Norvial according to International Financial Reporting Standards Committee. This operation includes the transfer of political rest to Aenza with an option to repurchase the shares. Finally, $15 million corresponds to leases according to IFRS 16.

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

(Operator Instructions) We do not have questions at this time, and the call is going to be finished. Thank you for your time, and have a great day. You may now disconnect.