Aenza SAA (AENZ) 2022 Q1 法說會逐字稿

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

Presenting today on behalf of the company are Juan Revilla, Chairman; 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 Juan Revilla, Chairman. Please go ahead, sir.

Good afternoon. It is a pleasure for me to address you today. I will present the highlights over the first months of 2022. Afterwards, Oscar Pando, Vice President of Corporate Control and Planning, will present the consolidated results of the first quarter of the year. 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 in the Q&A session.

During the first months of 2022, Aenza has strengthened its financial position, taking important steps to assume its growth and regional consolidation strategy. An essential first step in execution of the 2022 financial plan was a conversion of 100% of convertible bonds issued by Aenza in August '21 for an amount of USD 89.9 million.

On late March of this year, in a show of trust towards Aenza's current management, all the bondholders decided to exercise their right of conversion, strengthening the company's capital structure. Due to this conversion, Aenza's capital stock went from PEN 871,917,855 to PEN 1,196, 979,979.

Additionally, during the first quarter of the year, the company signed a bridge loan agreement for $120 million with a group of international financial entities made up both Banco BTG Pactual, the Cayman Branch; Banco Santander, Peru; HSBC in Mexico and Natixis New York Branch. On April 5, the loan was disbursed, and proceeds were used to meet short-term financial obligations in relation to our subsidiary Cumbra and full payment of the class action settlement amount among others. This loan represents a recovery on company's debt capacity as it is first corporate loan made with the banking system since 2017.

Following the resignation of Nicolás Bañados from his position as Director of Finance announced on March 8 of this year, the Board of Directors has appointed Mr. Julio Dittborn as Board member. He currently serves as Managing Director of private equity for Megeve Investments. The Board of Directors has also modified its regulations to allow the appointment of known voting of sovereign members in the Audit Committee pursuant of rule 10a-3 of the Securities Act.

With the incorporation of Julio Dittborn, the Board decided to restructure its committees. Likewise, the Board decided that each committee would be composed of 3 members with the (inaudible) committee, which will also include several members. At general shareholders meeting held on March 31, (inaudible) a member of KPMG was appointed as the external auditor for Aenza for the period 2022 to 2024.

And regarding the Plea agreement, the company is working closely with the Peruvian authorities on last details before proceeding to file application for judicial approval which we hope will occur in the following months. We will continue to build the future of Aenza over the significant achievements that have been made in the first quarter of this year. Our vision of turning Aenza into a Latin American infrastructure development platform while strengthening all of our business units will be achieved by maximizing our economic, social and environmental positive impact. We are designing our business strategy to ensure long-term sustainable growth for all stakeholders and to follow the highest ethical and corporate governance standards.

Thank you, Juan. This is Oscar Pando. And now I'm going to talk to you the first quarter results of 2022. Consolidated revenues at the end of the first quarter 2022 reached PEN 1,049 million, which is a figure 21.3% higher than the figure reported at the end of first Q 2021. In the energy area, sales increased due to higher price of oil, liquefied petroleum gas and compressed natural gas. In the infrastructure area, sales increased mainly due to the increase in traffic volume in Norvial and due to higher additional kilometers travel and tariff indexation in line 1. Likewise, Engineering and Construction sales increased mainly due to higher production volume in projects under execution, such as MAPA project in Chile river and Lima Airport Partners project for the construction of the second runway and the new terminal of the Jorge Chavez Airport in Cumbra, Peru.

Consolidated gross profit increased 5.4% in the first quarter of 2022, mainly explained by the increase in oil prices in the energy business, partially offset by the lower productivity in MAPA project in Chile due to higher costs in relation to longer permanence in the project due to (inaudible) and higher productivity as a result of COVID contingence.

Gross margin decreased from 12% in the first quarter of 2021 to 10.4% in first quarter 2022. SG&A expenses decreased 32.4% in the first quarter of 2022 compared to last year's same period, reaching 2.8% sales compared to 5.1% at the end of the first quarter 2021. The decrease is mainly due to several organizational process implemented during the 2021.

As a result, operating income increased in the first quarter of 2022 compared to that of the last year with a margin of 7.4% and 6.7%, respectively.

Net financial expenses increased by 24.1% compared to that of 2021, mainly due to interest payment related to the convertible bond. Dollar exchange rate ended the year -- the first quarter 2022 at PEN 3.701 per $1 versus the PEN 3.758 in 2021 period. This situation generates a positive impact in the exchange rate difference due to our net position of assets and liabilities in dollars.

Consolidated net loss in first Q 2022 was PEN 30.2 million. Net margin decreased from minus 4% in 2021 to minus 2.9% for the same period in 2022. Adjusted EBITDA in the first quarter of 2022 increased by 18.5% compared to that of the same period of 2021, going from PEN 117.4 million to PEN 139.2 million.

Regarding the backlog, consolidated backlog amounted $2,035 million at the end of the first quarter 2022, of which, $799 million corresponds to recurring business, such as oil and gas segment in Norvial. This figure represents a ratio of backlog plus recurring business to revenues of 1.96 years. The increase in recurring business from $552 million in first quarter 2021 to the $799 million, we have mentioned is mainly due to the new estimate for the energy business as a result of current oil prices. Regarding our work engineering construction business during the fourth Q of 2021, Cumbra started the planning and engineering of the new terminal at Jorge Chavez Airport in Lima Peru.

Regarding that, consolidated financial liabilities at the end of first quarter 2022 are $379 million, which is 17.6% lower than compared to that of 2021, mainly due to the capitalization of convertible bonds of $19 million.

Consolidated financial liabilities breakdown is as follows: $51 million corresponds to working capital associated to clients' accounts receivable and leases for the acquisition of machinery and equipment, $270 million correspond to infrastructure project finance, which is debt without recourse with guarantees and cash flow from each project itself. $42 million corresponds to the accounting record of the sale of economic rights of 48.8% of shares of Norvial according to IFRIC. And lastly, $16 million corresponds to the leases according to IFRS 16.

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

(Operator Instructions) This concludes our question-and-answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.