Wilson Sons Holdings Brasil SA

BOVESPA:PORT3

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, everyone. Welcome to the Wilson Sons Earnings Conference Call for the Second Quarter of 2023. Today with us we have Mr. Fernando Salek, the company's CEO; Fabricia Souza, the CFO; and Arnaldo Calbucci, the COO.

This conference is being recorded. We will have simultaneous translation for those 2 which are listed to the English version. [Operator Instructions]

The financial results are expressed in Brazilian Real and presented in accordance with International Financial Reporting Standards unless otherwise stated.

Before proceeding, we would like to mention that each 2 of the presentation contains the usual disclaimers on forward-looking statements for your reference.

Now I would like to turn the conference over to Fabricia Souza.

[Fabricia de Souza, executive]

Thank you. Good morning, everyone. Thank you for joining us, and welcome to our earnings conference call.

We will begin on Slide 4 by talking about safety and sustainability. Because of the relevance and strategic importance of these 2 topics, they are talking points that will always be present in our conversations about the company's performance. In the first half of 2023, we registered a lost time injury frequency rate of 0.3 incidents per 1 million hours worked, again, outperforming the world-class benchmark, and this was a 33% reduction from the rate recorded in 2022. We understand that our efforts and attention to the agenda have ensured what for us is one of the pillars of our operations, the safety of our employees.

In May, the Salvador container terminal received 12 fully electric terminal factors as part of the first project of its kind in the Americas, which will contribute to reducing our carbon emissions. Also in May, we signed a contract to purchase fully renewable energy for the Rio Grande container terminal. From 2024 onwards, all the energy used in the terminals operation will come from wind, solar or small hydropower plants.

During the quarter, we published our diversity, equity and inclusion policy, reaffirming Wilson Sons link with society and its purpose to transform realities and deliver better futures. This policy emphasizes our work, always in compliance with legal progress, valuing our employees and their singularities and also promoting respect, inclusion, dignity and fair treatment to all people. These initiatives are part of our process of continuous improvement in our ESG practices and operational excellence, which strengthens one of our strategic pillars.

Turning to Slide 6. Here, we present a summary of our consolidated results. Net revenue went up 10% in the second quarter of the year to BRL 594 million. This mainly reflects higher volume and a better revenue mix in towage; also higher revenues from container handling and ancillary services at the container terminals; increased operational activity in the offshore support basis; increased conversions and dry docking for third parties at the shipyard and also higher shipping agency revenues.

EBITDA was 28% higher than the second quarter of the prior year at BRL 257 million, mainly due to the excellent towage results that we had, but also growth in container terminal operational volumes and a strong recovery in offshore energy linked services.

Net profit for the quarter came at BRL 111 million, registering a relevant growth against the comparative. This year, there was a strong foreign exchange gain of BRL 22 million compared to a negative impact of BRL 50 million in the second quarter of 2022. The main factors this quarter were the BRL 15 million exchange variation on deferred taxes, the BRL 6 million impact on Brazilian Real-denominated monetary items of the offshore vessels joint venture, and the BRL 3 million exchange gain caused by balance sheet translations of Brazilian Real-denominated net monetary assets in subsidiaries with U.S. dollar functional currency. Even excluding these effects, profit for this quarter would have presented a 35% increase, reaching BRL 89 million.

We now move to Slide 7. On this slide, we highlight the financial performance of our main business divisions. Container Terminal revenues rose 7% in the quarter to BRL 200 million. This reflects an increased operational activity and revenues from ancillary services, such as container scanning and power supply for Reefer Cargo. EBITDA increased by 4% to BRL 94 million, reflecting volume growth and higher container handling costs. Volumes increased 8%, driven by higher flows of exports, empty containers, habitage and inland navigation. During the quarter, the reliability of the shipping lines served by the terminals continue to improve substantially as a result of reduced vessel call cancellations. This continues the recovery trend to reach prepandemic levels in the short term.

Towage revenue rose a solid 16% in the quarter to BRL 304 million. This was benefited from higher volumes, increased average revenue per maneuver and growth in special operations, which doubled year-over-year. The group's revenue mix reflects the increase in maneuvers on vessels carrying grain and oil, which generally have higher tonnage. EBITDA grew 4% to BRL 124 million, driven by higher revenues and increased margins.

Nonconsolidated joint ventures comprised mainly of the offshore support vessel operation saw a significant recovery in demand. Revenue rose 20% in the quarter, supported by a 12% increase in operating days and a 7% increase in the average daily rate of the fleet. With that, net profit, which is accounted for in the company's results via equity income was BRL 18 million.

Moving to Slide 9. On this slide, we present some of our liquidity and leverage ratios, which remain solid. Bank debt decreased 5% compared to March 31, 2023, due to amortization and the appreciation of the Brazilian real against the dollar in the period, reducing the U.S. dollar-denominated debt when reported in real. And the cash flow for the first half of the year, we highlight the BRL 82 million from operating activities in the quarter, as well as BRL 77 million in investments, mainly for the construction of tugboats and the acquisition of new equipment and construction works in the Salvador container terminal, as well as BRL 133 million in bank loan amortizations. Additionally, the company paid BRL 138 million in dividends in the quarter. As a result, we ended this half year with BRL 143 million in cash and cash equivalents. The bank leverage ratio reduced slightly to 1.6x EBITDA for the last 12 months. At the end of the quarter, 84% of our bank debt was long term. And 66% was financed by the Merchant Marine Fund with fixed interest rates.

Moving on to Slide 11. Here, we would like to comment on our operational performance in the year through July, which we believe adequately demonstrates the upward trend of improvement in the pace of our operations and the resilience of our business. In the first 7 months of the year, our container terminals and towage divisions benefited from the growth and continued normalization of trade flows. At the terminals, with the increasing reduction in vessel call cancellations, aggregate volumes recorded a 9% increase in the period, driven by higher inland empty container export and cabotage flows.

In Rio Grande, volumes were 15% above the comparative, while Salvador recorded a stable performance. In Towage, harbor maneuvers increased 3% in the period, and the average size of ships attended rose 2%, mainly due to the strong flow of commodities and oil transshipment. In the Offshore Energy segment, the demand for our services has shown a significant recovery. Operating days of the offshore support vessel joint venture increased 18%, while [ offshore ] support vessel rose 68% in the period.

So with that, the presentation ends here, and I'd like to invite you to the Q&A session. Thank you.

[Operator]

[Operator Instructions] The first question comes from Andre Ferreira of Bradesco BBI.

[Andre Ferreira, analyst]

Congratulations for your results. I'd like to hear a little bit more about tugboats and towage, specifically margins. I see that the gross margins have dropped. And I'd like to understand a couple of things. What impacted your margins during the first half of the year? And what should we expect for the future?

[Fabricia de Souza, executive]

Thank you, Andre. I'll pass it over to Arnaldo Calbucci who will answer your question.

[Arnaldo Calbucci, executive]

Andre, we had an operation that impacted the cost of towage this quarter. So maintenance went up because of 2 vessels that have problems in a single month, and there was an impact connected to insurance. So this won't affect us, but the maintenance and insurance effects will be seen in the next few months. So we'll probably see a reduction in these costs.

[Operator]

[Operator Instructions] We received a question and I'll ask it to you. In the offshore segment, the company has been very competitive in new calls for bids from Petrobras. Is the company looking at other opportunities to optimize Brazilian tenants?

[Fabricia de Souza, executive]

I'll pass it over to Arnaldo Calbucci.

[Arnaldo Calbucci, executive]

Yes. The offshore segment as Fabricia said during her presentation is filling some signs of improvement which have been significant. We've been very competitive with all of these calls for bids and tenders and Petrobras and we've been successful with these pitches. All of our vessels are operational and contracted, and we have 2 vessels which are being reactivated and will go into operation until the end of the year.

Concerning tonnage, we still have available tonnage, and we're going to use it in the best way that we can according to the needs and demands that we receive from the market.

[Operator]

[Operator Instructions] We received a question here from Marcelo Arazi from BTG.

The question is, after a recovery from Tecon Salvador, how do you believe that it will perform from now on?

[Arnaldo Calbucci, executive]

Hi Marcelo, this is Arnaldo. We had a reduction in solar power project during the first half of the year. However in general -- and what concerns resins and chemical products, we expect to see a recovery in the second half of the year, which will be stronger. So we expect to see higher volumes.

[Operator]

[Operator Instructions] We received one more question here. They asked to talk about towage performance this quarter and what drove this growth in special operations?

[Fabricia de Souza, executive]

Well, in terms of special operations, what happened was that with a growth in demand in the oil and gas industry, we had a higher utilization rate. Our tugboats had more special maneuvers to support the oil and gas industry. We also had a high salvage effort in June. And these 2 factors connected to -- [ offshore ] vessel docking has allowed us to increase our ocean tug volumes or ocean towage volumes, excuse me. So this was an expressive growth in our special operations that we saw during this quarter.

[Operator]

This concludes the questions-and-answer session. I'd like to invite Mr. Fernando Salek, who will proceed with his closing remarks. Please go ahead, sir.

[Fernando Salek, executive]

Thank you. Overall, the first half performance demonstrates strong organic growth in our business. We remain positive on the fundamentals of our trade flow related businesses, which, together with rebounding demand for our offshore energy linked services will provide the basis for a superior performance of our assets. In the context of a positive market environment, we're confident that our continued focus on safety, growing utilization of assets, cost control and the disciplined approach to capital allocation will yield robust results for clients and other stakeholders of our business.

Thank you all for joining our conference call today, and I hope that you stay well and safe. I'd like to thank our employees and everyone who contributed to these results. Have a good day. Thank you.

[Operator]

This concludes the Wilson Sons conference call. Thank you for participating, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]