Centrais Elétricas de Santa Catarina (CLSC4) Q2 2023 earnings summary

Executive summary

• Consolidated 2Q23 EBITDA was R$392.4M, up 77.3% YoY, and net income was R$215.0M, up 112.5%; 6M23 EBITDA rose 20.7% to R$818.6M and net income increased 19.9% to R$433.0M.

• Consolidated net revenue, excluding construction revenue, increased 11.0% to R$2,291M in 2Q23; billed electricity consumption rose 4.1% YoY.

• 1H23 NOI grew 3.25% to R$5.207bn despite a 5.42% decline in gross operating revenue; higher financial expenses weighed on results.

• Distribution gains and lower losses offset weaker generation profitability and higher consolidated operating costs in 2Q23.

Financial highlights

• Consolidated revenue from goods and services was R$2.600bn in 2Q23 versus R$2.366bn a year earlier; gross profit rose to R$472.0M from R$314.6M.

• 2Q23 EBITDA margin was 15.1%, versus 9.4% a year earlier; 6M23 margin was 15.7%, versus 13.5%. Excluding construction revenue, margins were 17.1% and 17.7%, respectively.

• 1H23 EBITDA increased 20.67% to R$818.6M; EBITDA margin on NOI rose to 15.72% from 13.45%.

• Gross operating revenue fell 5.42% to R$7.925bn, while NOI rose 3.25% to R$5.207bn; net margin increased to 8.32% from 7.16%.

• 1H23 operating cash flow was R$1.042bn versus R$455.5M; investing outflow was R$875.6M, including R$896.5M in PP&E and intangible additions.

Outlook and guidance

• Planned investment through 2026 totals R$4.5bn, including R$3.5bn for grid capacity and infrastructure and R$1.0bn for strategic projects.

• A rural upgrade will replace 500 km of single-phase network with three-phase lines for R$40M; ~20,000 consumers are expected to benefit.

• Generation expansion includes 23 MW at Salto and 5.57 MW at Caveiras; 11 MW of distributed solar projects were under construction or contract, with commissioning planned through 2024.

• The 2025–2035 strategy targets efficient distribution, selective investment to improve returns, regulatory target performance and sustainable service quality.

• Management expected to raise new funds within six months and reported no risk to continuity of operations.