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registrant in connection with Rule 12g3-2(b):
CIA. DE SANEAMENTO BÁSICO DO ESTADO DE SÃO PAULO - SABESP
Rui de Britto Álvares Affonso
Chief Financial Officer and Investor Relations Officer
Mario Azevedo de Arruda Sampaio
Head of Capital Markets and Investor Relations
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SABESP announces 2Q18 results
São Paulo, August 9, 2018 - Companhia de Saneamento Básico do Estado de São Paulo - SABESP (B3: SBSP3; NYSE: SBS), one of the largest water and sewage services providers in the world based on the number of costumers, announces today its 2Q18 results. The Company’s operating and financial information, except when indicated otherwise is presented in Brazilian Reais, in accordance with the Brazilian Corporate Law. All comparisons in this release, unless otherwise stated, refer to the same period of 2017.
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SBSP3: R$ 26.70/share SBS: US$ 6.92 (ADR=1 share) Total shares: 683,509,869 Market value: R$ 18.13 billion Closing quote: 08/09/2018  |
1. Financial highlights
¹ Includes Revenue from Regulatory, Control and Inspection Fee (TRCF - Taxa de Regulação, Controle e Fiscalização), in the amount of R$ 15.8 million in the quarter and R$31.3 in the 1H.
² Includes TRCF transfers in the amount of R$13.5 million in the quarter and R$26.9 in the 1H.
* Total shares = 683,509,869
Adjusted EBITDA Reconciliation (Non-accounting measures)
* Adjusted EBIT is net income before: (i) other operating revenues / expenses, net; (ii) financial result; and (iii) income tax and social contribution.
** Adjusted EBITDA is net income before: (i) depreciation and amortization expenses; (ii) income tax and social contribution; (iii) financial result; and (iv) other operating revenues / expenses, net.
In 2Q18, the net operating revenue, which considers construction revenue, totaled R$3,672.2 million, a growth of 5.1% over the same period of the previous year.
Costs and expenses, which include construction costs, totaled R$2,617.5 million, a 4.8% decrease when compared to the same period of 2017.
Adjusted EBIT, in the amount of R$1,055.6 million, increased 41.2% compared to the R$747.4 million presented in 2Q17.
Adjusted EBITDA, in the amount of R$1,382.6 million, increased 29.8% when compared to the R$1,065.4 million presented in 2Q17 (R$5,632.0 million in the last 12 months).
Adjusted EBITDA margin in 2Q18 was 37.7%, against 30.5% in 2Q17 (37.7% in the last 12 months).
Excluding the effects of revenue and construction costs, the adjusted EBITDA margin was 45.5% in 2Q18 (38.7% in 2Q17 and 46.5% in the last 12 months).
In 2Q18 the Company recorded a net income of R$181.9 million, compared to a net income of R$331.8 million in 2Q17.
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2. Gross operating revenue
The gross operating revenue related to sanitation services, in the amount of R$3,249.8 million, which does not consider the construction revenue, increased by R$348.2 million or 12.0%, when compared to R$2,901.6 million in 2Q17.
The main factors that led to the increase were:
• Tariff repositioning index of 7.9% since November 2017;
• Tariff repositioning index of 3.5% since June 2018; and
• 3.1% increase in total billed volume: 2.9% in water and 3.3% in sewage.
The increase caused by the above-mentioned factors was partially offset by the higher recognition with allowance for doubtful accounts referring to wholesale sales in 2Q18, in the amount of R$45.8 million, due to the lower payment received in the period, mainly from the municipality of Guarulhos.
3. Construction revenue
Construction revenue decreased by R$112.4 million or 14.4%, when compared to the previous year. The variation is mainly due to the lower investment in the municipalities served by the Company.
4. Billed volume
The tables below show the billed volumes of water and sewage, in the quarter and year-to-date comparison, per consumer category and region.
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(1) Unaudited
(2) Including coastal and interior region
(3) Reused water volume and non-domestic sewage are included in
5. Costs, administrative & selling expenses and construction costs
Costs, administrative and selling expenses and construction costs decreased by R$131.3 million in 2Q18 (4.8%). Excluding construction costs, there was a decrease of R$19.1 million (1.0%).
As a percentage of net revenue, costs, administrative and selling expenses and construction costs represented 71.3% in 2Q18, against 78.7% in 2Q17.
5.1. Salaries and payroll charges and Pension plan obligations
In 2Q18, there was a decrease of R$35.8 million or 5.0%, due to the following factors:
• Reversal of R$ 73.3 million in the provision for the Conduct Adjustment Agreement (Termo de Ajuste de Conduta, or "TAC"), signed with the Public Prosecutor´s Office of the State of São Paulo in 2009. This reversal is due to the implementation of the Knowledge Retention Program (Programa de Retenção de Conhecimento, the "PRC") launched by the Company in 2Q18, aiming to mitigate the impact of the exit of employees who possess strategic knowledge acquired throughout their career, through the transfer of intellectual capital; and
• Lower number of retired employees in 2Q18, generating a reduction of R$ 50.7 million in the provision for TAC when compared to 2Q17.
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The above-mentioned decrease was partially offset by the following factors:
• Increase of R$90.9 million, due to the provision for employees who joined the PRC; and
• The increase of R$3.5 million, mainly due to the 1.7% increase related to the Career and Salary Plan in February 2018 and the salary increase of 1.29% in May 2018, as well as a reduction of 3.4% in the number of employees.
5.2. General Materials
Increase of R$12.3 million or 29.6%, mainly due to the greater use of materials in the maintenance in networks and connections of water and sewage, in the amount of R$8.1 million.
5.3 Services
Decrease of R$30.3 million or 8.7%, mainly due to the following factors:
• Increased hiring of technical services to reduce water losses in 2Q17, totaling R$7.9 million;
• Reduction of R$5.1 million in telephony expenses; and
• Reduction of R$5.1 million in advertisement expenses.
5.4. Electricity
Electricity expenses totaled R$228.8 million in 2Q18, an increase of R$40.9 million or 21.8% when compared to the R$187.9 million in 2Q17. This variation was mainly due to:
• Average increase of 9.7% in free market tariffs (ACL – Ambiente de Contratação Livre), with an increase of 5.9% in consumption;
• Average reduction of 7.2% in the grid market tariffs (TUSD – Tarifas de Uso do Sistema de Distribuição), with a 15.9% increase in consumption; and
• Average increase of 10.1% in regulated market tariffs (ACR – Ambiente de Contratação Regulada), with an increase of 3.5% in consumption.
In 2Q18, ACL represented 35.0% of the total amount of electric power consumed by the Company, TUSD 34.6% and ACR represented 30.4% of this amount.
5.5. General expenses
A decrease of R$17.5 million or 7.3%, totaling R$222.1 million in 2Q18, compared to R$239.6 million in 2Q17, mainly due to the lower provisioning for lawsuits in 2Q18, in the amount of R$30.5 million.
The above-mentioned decrease was partially offset by the following factors:
• Higher expenses related to charging for the use of water, in the amount of R$3.3 million; and
• Higher provision for transfer to the Municipal Fund for Environmental Sanitation and Infrastructure, in the amount of R$1.8 million.
5.6. Depreciation and Amortization
The expenses with depreciation and amortization increased by R$9.0 million or 2.8%, mainly due to the start-up of intangible assets, in the amount of R$1.0 billion.
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5.7. Allowance for doubtful accounts
Increase of R$22.3 million, mainly due to the lower recovery of unpaid amounts in 2Q18.
6. Other Operating Revenues (Expenses), Net
6.1. Other Operating Revenues
An increase of R$22.4 million, mainly due to the following factors:
• Larger recovery of values, in 2Q18, previously deposited by court order, in the amount of R$10.9 million; and
• Revenue from the expropriation of property in 2Q18, in the amount of R$8.1 million.
6.2. Other Operating Expenses
Increase of R$18.6 million, mainly due to the write-off of real estate in 2Q18, in the amount of R$15.6 million.
7. Financial result
7.1. Financial expenses, net of income
7.1.1. Financial Expenses
Increase of R$24.6 million, mainly due to the following factors:
• Increase of R$18.4 million in interest and charges on domestic loans and financing, mainly due to the lower capitalized amount to the investment in 2Q18, when compared to 2Q17;
• Increase of R$17.8 million in interest and charges on foreign loans and financing, mainly due to the higher appreciation of the dollar and the yen against the real in 2Q18 (16.0% and 11.4%, respectively), compared to the appreciation recorded in 2Q17 (4.4% and 3.5%, respectively); and
• Decrease of R$11.6 million in other financial expenses, mainly due to the lower provisioning of interest in lawsuits in 2Q18.
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7.1.2. Financial Revenue
Increase of R$29.8 million, due to the recognition of interest on the agreement with the Government of the State of São Paulo (GESP Agreement of 2015) in 2Q18, in the amount of R$46.6 million.
The above-mentioned increase was partially offset by the lower recognition of interest on financial investments in 2Q18, in the amount of R$9.4 million, due to the lower CDI variation.
7.2. Monetary and exchange variation, net
The effect of net monetary and exchange variations in 2Q18 was R$561.2 million higher than in 2Q17, highlighting the increase of R$585.2 million in exchange variation on loans and financing, due to the higher appreciation of the dollar and the yen against real in 2Q18 (16.0% and 11.4%, respectively) when compared to the appreciation occurred in 2Q17 (4.4% and 3.5%, respectively).
8. Income tax and Social contribution
The Company recorded a decrease of R$94.1 million, due to the lower taxable result presented in 2Q18, mainly due to the higher appreciation of the US dollar and yen against the real in 2Q18, when compared to the appreciation in 2Q17.
9. Indicators
9.1. Operating
(1) Total connections, active and inactive, in thousand units at the end of the period
(2) In million inhabitants, at the end of the period. Not including wholesale
(3) In millions of cubic meters
(*) Unaudited
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9.2. Financial
(1) 2Q18 data in %
(2) Quarterly average
(3) R$/sales on the last day
(*) Unaudited
10. Loans and financing
11. Capex
2Q18 investments totaled R$757.8 million, including R$129.7 million related to the São Lourenço PPP.
12. Conference calls
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In English August 14, 2018 - Tuesday 01:00 pm US EST / 02:00 pm (Brasília) Dial in: + 1 (412) 317-5486 Conference ID: Sabesp
Replay available for 7 days Dial in: +1 (412) 317-0088 Replay ID: 10121815
Click here for the webcast |
In Portuguese August 14, 2018 - Tuesday 9:30 am US EST / 10:30 am (Brasília) Dial in: +55 (11) 3193-1001 Conference ID: Sabesp
Replay available for 7 days Dial in: +55 (11) 3193-1012 Replay ID: 267246#
Click here for the webcast |
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For more information, please contact:
Mario Arruda Sampaio
Head of Capital Markets and Investor Relations
Phone.(55 11) 3388-8664
E-mail: maasampaio@sabesp.com.br
Angela Beatriz Airoldi
Investor Relations Manager
Phone.(55 11) 3388-8793
E-mail: abairoldi@sabesp.com.br
Statements contained in this press release may contain information that is forward-looking and reflects management's current view and estimates of future economic circumstances, industry conditions, SABESP performance, and financial results. Any statements, expectations, capabilities, plans and assumptions contained in this press release that do not describe historical facts, such as statements regarding the declaration or payment of dividends, the direction of future operations, the implementation of principal operating and financing strategies and capital expenditure plans, the factors or trends affecting financial condition, liquidity or results of operations are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. There is no guarantee that these results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.
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Income Statement
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Balance Sheet
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Cash Flow
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Companhia de Saneamento Básico do Estado de São Paulo - SABESP | ||
| By: | /s/ Rui de Britto Álvares Affonso
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Name: Rui de Britto Álvares Affonso
Title: Chief Financial Officer and Investor Relations Officer |
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This press release may contain forward-looking statements. These statements are statements that are not historical facts, and are based on management's current view and estimates of future economic circumstances, industry conditions, company performance and financial results. The words "anticipates", "believes", "estimates", "expects", "plans" and similar expressions, as they relate to the company, are intended to identify forward-looking statements. Statements regarding the declaration or payment of dividends, the implementation of principal operating and financing strategies and capital expenditure plans, the direction of future operations and the factors or trends affecting financial condition, liquidity or results of operations are examples of forward-looking statements. Such statements reflect the current views of management and are subject to a number of risks and uncertainties. There is no guarantee that the expected events, trends or results will actually occur. The statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, and operating factors. Any changes in such assumptions or factors could cause actual results to differ materially from current expectations.