1. Conference Call Transcription
1Q06 Results
CCR – Companhia de Concessões Rodoviárias
May 11, 2005
Operator:
Good morning or good afternoon, ladies and gentlemen and thank you for waiting.
At this time we would like to welcome everyone to Companhia de Concessões
Rodoviárias (CCR) 1Q06 earnings conference call.
We would like to inform you that this event is being recorded and all participants
will be in listen-only mode during the Company’s presentation. After the
Company’s remarks are completed, there will be a question and answer section.
At that time further instructions will be given. Should any participant need
assistance during this call, please press *0 to reach the operator.
Before proceeding, let me mention that forward-looking statements are being
made under the Safe Harbor of the Securities litigation reform act of 1996.
Forward-looking statements are based on the beliefs and assumptions of CCR
management, and on information currently available to the Company. They involve
risks, uncertainties and assumptions because they relate to future events and
therefore depend on circumstances that may or may not occur in the future.
Investors should understand that general economic conditions, industry conditions
and other operating factors could also affect the future results of CCR and could
cause results to differ materially from those expressed in such forward-looking
statements.
Now, I’ll turn the conference over to Mr. Arthur Piotto Filho, the Investor Relations
Manager at CCR. Mr. Arthur, you may begin your conference.
Arthur Piotto:
Thank you, operator. Good morning everyone and thank you for taking part of our
conference call. Today we have with us our CFO, Ricardo Froes, and Flávia
Godoy, from our IR team.
The main highlight for this quarter was our strong net income growth of 70.5%
over the 1Q05. The main reasons for this increase were the synergies obtained
from the ongoing operational rationalization and consolidation of ViaOeste and, to
a lesser extent, our financial result.
We understand that the general level of economic activity is the main driver in our
business and therefore, I would like to make some remarks:
In this first quarter we can notice a slight improvement in traffic performance,
except to Rodonorte that had a decrease due to changes in traffic dynamics for
agricultural products, and it was the main reason in the 1Q05 x 1Q06 comparison,
that we registered an increase, slightly around 0.9%. As additional information, if
CCR had ViaOeste in its portfolio during the whole 1Q05, that comparison
between 1Q06 and 1Q05 the traffic performance would have reached 1.5%
increase. In this quarter, we continued to record 1.5%. Finally, we continued to
record a small recovery in light vehicles in our traffic mix - that had the following
distribution: 48% for light vehicles and 52% commercial vehicles.
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2. Conference Call Transcription
1Q06 Results
CCR – Companhia de Concessões Rodoviárias
May 11, 2005
Regarding industrial production we didn’t record any relevant trend change that
impacted traffic in our concessionaires.
The Real had an appreciation of 7.2% in this quarter, compared to a 0.4%
appreciation in 1Q05. A stronger Real is reflecting in the gradual decrease in
exports growth, what negatively contributes to traffic performance in our
concessionaires.
Despite the sequential decreases in Brazilian interest rate, we could not notice any
positive impact in traffic in our concessions, resulting from as expected recovery in
Brazilian economy. Therefore, we keep confident that more decreases in interest
rates can be expected and that we’ll be able to benefit from that new, different
economic scenario.
Now, I would like to point out some operating highlights and then we can reserve
some more time to solving any doubts regarding our results that you may have.
Gross Revenues in 1Q06 reached R$ 556.4 million, or 25.8% higher than the
1Q05. Operating total costs reached R$ 301.2 million in this quarter, recording an
increase of 19.6% over the same period of last year.
Reflecting the Company’s continuous operational optimization, in addition to gains
from ViaOeste consolidation, EBITDA reached R$ 298.6 million this quarter, a
33.3% increase, while EBITDA margin increased 3.6 p.p., reaching 58.0%.
It is important to observe that this better result considers expenses related to an
increase in the number of employees and other costs, mainly because CCR is
currently preparing its staff to perform new projects in Brazil and abroad.
As a result of this afore mentioned factor, the Company’s net income reached
R$ 115.4 million in 1Q06, a 70.5% increase when compared with the same period
last year.
Our capital expenditures program has been implemented in compliance to our
concessions agreements. In this quarter, we invested R$ 110 million, and
R$ 562.2 million is anticipated to be invested in the whole year. The most
important expenditures were in AutoBan – regarding the construction of the fourth
lane of Autoban and side lanes in Anhanguera road. Works in an intersection
located at Km 62 and in the repaving of Bandeirantes. At ViaOeste, capital
expenditures were mainly related to the duplication of Raposo Tavares Road, and
in the paving of Castelo Branco Road, as well as implementation in two
intersections at the same road.
And finally, as you might have seen in our release, during this quarter, we have
prepaid a Via Oeste foreign currency debt amounting to R$ 52.4 million, because
this contract does not allow dividend distributions before 2007.
STP (Payment and Technology Systems), the company that manages all the
electronic toll collection, reached 571,000 users, corresponding to a 40% increase
compared with the same quarter last year.
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3. Conference Call Transcription
1Q06 Results
CCR – Companhia de Concessões Rodoviárias
May 11, 2005
For 2006, CCR continues to work with a traffic assumption of 1xGDP, or
approximately 3.0%. As we have commented in our last conference call, our
negotiations with the granting authority related to the charging suspended axles
are still undergoing.
Regarding to annual tariff adjustments, four out of six concessionaires
administrated by CCR have such readjustments calculated according to an index
basket that, approximately, reflects the IPCA inflation variation. For these
concessions we are currently forecasting a 4% readjustment, while two other
concessions, located in São Paulo state, have their readjustments determined by
a IGPM inflation index. In this case, the Company’s expectation is that this
readjustment will be slightly negative or close to zero. For these concessions our
simulations indicate a potential reduction of around 1% in their gross revenues.
However, it is important to highlight that concession fees are also readjusted by
the same index and on the same date. Therefore, in case of tariff reduction it could
act in the direction of reduction the previously mentioned percentage.
Moving now to our latest corporate developments, on February 2nd, 2006, we split
our shares, so each share would correspond to four shares. We aimed at increase
the liquidity of the stock, and make them more available to the individual investors.
The results were expressive, once the daily number of trades and financial volume
increased by 122% and 48% respectively, comparing January to February.
Our continuous effort involved important decisions, such as hiring a market maker
since two years ago, the implementation of advanced corporate governance
practices, strong result’s track record. As of May 2nd, CCR joined Ibovespa stock
extent index, with 0,8% weight, an important breakthrough for CCR’s history,
showing the success of our efforts in the relationship with several capital markets
agents, like press, shareholders, Granting Authorities, investors, analysts, etc.
Now, we will make some comments on several points of the company’s growth
strategy.
New Federal Concessions. As it is widely known, ANTT, the Brazilian
Transportations Agency, published the draft of the invitation to bid and feasibility
studies for 7 new roads, carried out public hearings to collect suggestions from the
parties interested in bidding. CCR believes that it will only be possible to determine
how financially attractive these highways are, after the government decides on the
suggestions received during public hearings, so, when the invitations to bid are
effectively published.
The new concession for the state of São Paulo. There is no news as to the
publishing date of the invitations for bid for these roads.
The first PPP projects on road sector in Brazil, about the road named MG050. The
government of the State of Minas Gerais made the notice of the bidding of this
road available, and the date for this proposal to be submitted is foreseen to June,
19th, so 40 days from now.
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4. Conference Call Transcription
1Q06 Results
CCR – Companhia de Concessões Rodoviárias
May 11, 2005
Secondary Market. CCR is currently involved in three negotiations, in different
stages, aiming at potential acquisitions. Since such negotiations are under a
competitive environment, the Company is currently unable to make more
comments.
Foreign Market. We continued to prospect investments opportunities in targeted
markets. In the next month, we should take part in 2 biddings: one in Chile and
another in Mexico.
Subway System here in São Paulo. Due to the TCE’s accountant state Court
decision, that caused this bid concerning the change of the minimal capital
required for the bidders ,CCR believes that this subject must be appreciated to this
Court in the next few weeks, which means the retake of the bidding process. We
believe that the proposals should be submitted 40 days after this decision, which
means, at the very end of June.
Well, this concludes our initial remarks, and we are, now, available for any
questions it should be considered necessary.
Luiz Campos, Credit Suisse:
Good afternoon, everyone. My question is related to the growth opportunities of,
first, the 3 negotiations you mentioned in the secondary market. I’d like to
understand if you could provide some more information in terms of just the size of
theses concessions and what it could add to your business. And related to the two
bidding processes in Chile and in Mexico, also if you could provide more
information, first, if it is secondary or primary and also in terms of what it could add
in terms of revenues or EBITDA for the company. Thanks.
Arthur Piotto:
Hi, Luiz, this is Arthur. Ok, let’s start with the outside of Brazil. If we combine the
two opportunities I think the revenue that would be add to our portfolio is in a
range of US$ 120 million to US$ 140 million per year. And IBITDA margin is
around 40%-50%, this is the best assessment I have right now. On the three other
opportunities, here… Ok, just to close this first answer. Both opportunities in Chile
and in Mexico are in primary markets.
In Brazil, the three opportunities are existing businesses and we are expecting to
have something around, between R$ 200 million and R$ 250 million.
Luiz Campos:
Ok, just adding on the two opportunities in Chile and Mexico. What is the kind of
competition that you’re facing there? I mean, do you several players bidding. What
is your expectation in terms of competition?
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5. Conference Call Transcription
1Q06 Results
CCR – Companhia de Concessões Rodoviárias
May 11, 2005
Arthur Piotto:
I mean, the competition is tough in all markets. I think specially as this is a primary
market opportunities, we think we are going to be facing at least ten bidders.
Luiz Campos:
Ok, thank you.
Pedro Batista, Pactual:
Hi, everybody. I have a question also, follow up on these bids for Mexico and Chile
concessions. Basically, I’d like to know if CCR plans to make these bids alone or
with some local partners.
Arthur Piotto:
Hi, this is Arthur. I want to make it very clear that both bids will be three-way
consortium with local companies.
Pedro Batista:
OK, and I don’t know if you are able to say that, but, first, what kind of partners are
those partners? I mean, basically, partners that are already operating in this
regions and what kind of stake would CCR have in these concessions? And these
numbers that you provided, they refer to the consolidated numbers or to the stake
that CCR could potentially have in these concessions? Just to make it clear to us.
Thank you.
Arthur Piotto:
Ok. You know, Pedro, some of these concessions I think are not formally done yet.
What we have right now is a clear understanding. We are also firming the MOU.
So, I cannot tell you, exactly, how much will be the stake of CCR, but one thing I
can say is that it’s a relevant participation. My guess would be between 30% - 40%.
And both partners will be international companies, and as the company has been
saying to analysts or investors, especially in Mexico… it is highly important to have
a Mexican partner to provide some expertise in that market.
And the amount of revenues that I mentioned before was a combination between
the two businesses, the two opportunities.
I just want to make one correction, when I said in the previous answer the amount
of revenue that the three businesses in Brazil can add to CCR, I gave a wrong
information. The amount of money combined the three projects would be
something a little bit higher, R$ 400 million.
Pedro Batista:
Ok, Arthur. Thanks a lot.
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6. Conference Call Transcription
1Q06 Results
CCR – Companhia de Concessões Rodoviárias
May 11, 2005
Luiz Campos, Credit Suisse:
Just in terms of the cost side, we did see some more improvement in terms of third
party service and some other cost components. I would like to understand if you
still see some more potential for cost reduction, or if it is going to be jut the dilution
into higher volumes. Thanks.
Arthur Piotto:
Hi, Luiz. No, I mean, the company still work with a cost efficiency improvement
and as a long-term guidance for that, the company works within four-year time to
reach an EBITDA ratio between 62% - 63%. So, this naturally involves some other
new businesses, but also the same size of improvement can be squeezed out
from the current portfolio.
Luiz Campos:
Ok. Thank you.
Operator:
There are no further questions; I’m now going to turn the floor back to Mr. Arthur
Piotto Filho.
Arthur Piotto:
Again, along with the other executives from CCR, I would like to thank for the time
and interest in the company. Please, do not hesitate in contacting us with any
further question. Our contact information is available in our releases and website:
www.ccrnet.com.br. There you will be able to find additional information on our
company. Thank you.
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