SABESP (SBSP3) Q2 2024 earnings summary

Executive summary

• Completed an 18-month transformation, centralizing operations, reducing business units, and improving efficiency while maintaining service quality despite weather challenges.

• Successfully transitioned from state-owned to privatized, retaining government debt guarantees, establishing a new shared service center, and implementing a new dividend policy.

• Net income rose 62.6% year-over-year to R$1,209.4 million in 2Q24, driven by higher revenue and lower costs.

• Adjusted EBITDA increased 35.5% to R$2,970.5 million, with margin improving to 54.2% from 44.8%.

• Operational highlights include increased credit recovery, digital transformation, and expansion of capex delivery capacity.

Financial highlights

• Revenue grew 11.9% year-over-year, reaching R$5,476 million in 2Q24, driven by tariff increases and higher water and sewage volumes.

• Adjusted EBITDA for the last 12 months reached R$10.8 billion, up 52.1% from 2022.

• OPEX per cubic meter fell 6.7% year-over-year, and EBITDA per cubic meter increased 38.2%.

• Costs and expenses fell 15.5% to R$3,302 million in 2Q24, with personnel costs down 8.4%.

• Allowance for doubtful accounts as a percentage of revenue dropped to 2.3% in 2Q24, supporting margin expansion.

Outlook and guidance

• CapEx target for 2024 remains BRL 8.1 billion, with acceleration expected in the second half to meet universalization goals.

• Multi-year investment plan of BRL 27 billion through 2029, focusing on major projects like the Tietê River cleanup and network expansion.

• Capex plan for 2024-2029 totals R$105.1 billion, with 99% of 2024-2025 capex already contracted.

• Focus on expanding water and sewage infrastructure, with 100% execution targeted for 3Q24.

• Continued focus on efficiency, digitalization, and customer service improvements under new private management.