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São Paulo, S.P., 05429-900
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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
SABESP announces 2020 results São Paulo, March 25, 2021 - 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 customers, announces today its fourth quarter and 2020 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 2019. |
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1. | Highlights |
In 2020, the Company recorded net income of R$ 973.3 million, compared to net income of R$ 3,367.5 million in 2019, a decrease of R$ 2,394.2 million.
Adjusted EBITDA totaled R$ 6,421.8 million, down by R$ 1,088.7 million from the R$ 7,510.5 million reported in 2019.
The main factors were:
a) | Start of operation in the municipality of Mauá |
In June 2020, the Company entered into an agreement with the municipality of Mauá, starting operations in November. The impact of this agreement led to an increase of R$ 204.1 million in the 2020 operating revenue and a reversal of R$ 89.6 million in expenses, as shown below:
R$ million | ||||
Impacts of Mauá | 2020 | 2019 | Var.- | |
Revenue - Wholesale (agreement)(1) | 195.0 | 1.7 | 193.3 | |
Revenue - Retail(2) | 10.8 | - | 10.8 | |
(=) | Total Gross Revenue | 205.8 | 1.7 | 204.1 |
COFINS and PASEP | (14.6) | (0.1) | (14.5) | |
(=) | Net revenue | 191.2 | 1.6 | 189.6 |
Costs and expenses(3) | 3.7 | - | 3.7 | |
Estimated losses with asset indemnity(4) | 85.9 | - | 85.9 | |
(=) | Total Expenses | 89.6 | - | 89.6 |
(=) | Net effect | 280.8 | 1.6 | 279.2 |
1. | Non-recurring revenue in 2020 resulting from the consent of the agreement |
2. | Revenue referring to billing from retail operations |
3. | Costs and expenses related to the beginning of operations (excludes indirect costs and expenses) |
4. | Non-recurring reversal of estimated losses with asset indemnity, due to the consent of the agreement |
b) | Economic instability worsened by COVID-19 |
The economic instability worsened by COVID-19 impacted the Company, mainly with the:
· | lower revenue from customers in the commercial, industrial and public categories, decreasing the effective average tariff; |
· | postponement of the application of the tariff adjustment of May 2020. The compensation for the impact caused by the postponement was authorized by ARSESP and became effective in August 2020. The remaining balance of R$ 37.6 million on operating revenue will be recovered in 2021; |
· | payment exemption between April and August for customers in the “Residential Social" and “Residential Favela” categories, of approximately R$ 125.0 million; |
· | increase in the level of delinquency, with an impact of R$ 444.8 million in expenses with allowance for doubtful accounts; and |
· | exchange rate volatility, increasing expenses with exchange variation by R$ 2,180.3 million. |
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c) | Reduction of foreign currency exposure |
The Company adopted the following measures during 2020, aiming to reduce exchange exposure:
· | On April 28, 2020, it completed the debt conversion, from US$ 494.6 million to R$ 2,810.9 million, with the Inter-American Development Bank (IDB); and |
· | On September 30, 2020, it carried out the early amortization of Eurobonds, in the amount of R$ 1,910.1 million (US$ 350.0 million). |
As a result of these actions, the dollar-denominated debt fell by 84.1%, from US$ 1,051.9 million on December 31, 2019 to US$ 167.5 million on December 31, 2020.
Debt denominated in foreign currency accounted for 21% of total debt in 2020 (48% in 2019).
d) | Operation in the municipality of Santo André |
The operation in the municipality of Santo André, started in August 2019, represented a decrease of R$ 1,070.4 million in gross operating revenues and an increase of R$ 149.7 million in expenses year on year in 2020. The variation was due to the non-recurring accounting effects of the agreement entered into with the municipality. The operation in the municipality led to a positive result in 2020, as shown in the following table:
R$ million | ||||
Impacts of Santo André | 2020 | 2019 | Var.- | |
Wholesale Revenue - agreement(1) | - | 1,261.7 | (1,261.7) | |
Wholesale Revenue - billing | - | 22.9 | (22.9) | |
Retail Revenue(2) | 354.4 | 140.2 | 214.2 | |
(=) | Total Gross Revenue | 354.4 | 1,424.8 | (1,070.4) |
COFINS and PASEP | (25.2) | (96.9) | 71.7 | |
(=) | Net Revenue | 329.2 | 1,327.9 | (998.7) |
Costs and Expenses(3) | (141.8) | (56.8) | (85.0) | |
Allowance for doubtful accounts(4) | (13.2) | 51.5 | (64.7) | |
(=) | Total Expenses | (155.0) | (5.3) | (149.7) |
(=) | Net effect | 174.2 | 1,322.6 | (1,148.4) |
1. | Non-recurring revenue in 2019 due to the consent of the agreement |
2. | Refers to billing from retail operation |
3. | Costs and expenses relates to the operation (excludes indirect costs and expenses) |
4. | Reversal of non-recurring allowance for doubtful accounts due to the consent of the agreement |
e) | TAC - Retirees |
On February 20, 2009, Sabesp and the Public Prosecution Office of the State of São Paulo signed a Conduct Adjustment Term (TAC), in which the Company pledged to carry out the gradual dismissal of retired employees. As a result of this TAC, a provision was made for the dismissal of these employees.
The Public Prosecution Office closed the case regarding the TAC on October 11, 2019, given its understanding that the legal requirements were fully achieved. Accordingly, in 3Q19, R$ 173.3 million was reversed in expenses with Salaries, Payroll charges and Pension plan obligations as a non-recurring, the net effect in 2019 was a reversal of R$ 130.3 million.
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f) | Signature of Program Contracts with the Municipalities of São Bernardo do Campo and Guarujá |
In 2019, the Company signed program contracts with the municipalities of São Bernardo do Campo and Guarujá for 40 and 30 years, respectively. As a result, the Company ended all legal proceedings, which were recorded as non-recurring expenses, in the amounts of R$ 39.0 million and R$ 46.4 million, respectively.
g) | Healthcare expenses |
In August 2019, a new health plan administered by Fundação CESP became effective, replacing the previous health plan, administered by SABESPREV.
Health care expenses were R$ 92.6 million lower in 2020. There was no need to make contributions this year, compared to the R$ 108.6 million recorded in 2019.
R$ million | |||
2020 | 2019 | Var., | |
Expenses with healthcare | 204.7 | 297.3 | (92.6) |
2. | Financial Highlights |
R$ million | ||||||||||||||||
2020 | 2019 | Var. (R$) | % | 4Q20 | 4Q19 | Var. (R$) | % | |||||||||
Gross operating revenue | 15,157.8 | 16,134.0 | (976.2) | (6.1) | 4,052.2 | 4,034.7 | 17.5 | 0.4 | ||||||||
Construction revenue | 3,716.6 | 2,946.5 | 770.1 | 26.1 | 1,122.2 | 955.0 | 167.2 | 17.5 | ||||||||
COFINS and PASEP/TRCF taxes | (1,076.9) | (1,096.9) | 20.0 | (1.8) | (290.2) | (293.1) | 2.9 | (1.0) | ||||||||
(=) | Net operating revenue | 17,797.5 | 17,983.6 | (186.1) | (1.0) | 4,884.2 | 4,696.6 | 187.6 | 4.0 | |||||||
Costs and expenses | (9,796.8) | (9,375.6) | (421.2) | 4.5 | (2,477.5) | (2,513.2) | 35.7 | (1.4) | ||||||||
Construction costs | (3,630.1) | (2,881.4) | (748.7) | 26.0 | (1,095.0) | (934.7) | (160.3) | 17.1 | ||||||||
Equity result | 14.1 | 3.7 | 10.4 | 281.1 | 4.5 | (4.6) | 9.1 | (197.8) | ||||||||
Other operating revenue (expenses), net | 107.7 | (18.7) | 126.4 | (675.9) | (5.6) | (37.1) | 31.5 | (84.9) | ||||||||
(=) | Earnings before financial result, income tax and social contribution | 4,492.4 | 5,711.6 | (1,219.2) | (21.3) | 1,310.6 | 1,207.0 | 103.6 | 8.6 | |||||||
Financial result | (3,166.4) | (1,033.7) | (2,132.7) | 206.3 | (180.0) | (7.7) | (172.3) | 2,237.7 | ||||||||
(=) | Earnings before income tax and social contribution | 1,326.0 | 4,677.9 | (3,351.9) | (71.7) | 1,130.6 | 1,199.3 | (68.7) | (5.7) | |||||||
Income tax and social contribution | (352.7) | (1,310.4) | 957.7 | (73.1) | (299.1) | (142.3) | (156.8) | 110.2 | ||||||||
(=) | Net income | 973.3 | 3,367.5 | (2,394.2) | (71.1) | 831.5 | 1,057.0 | (225.5) | (21.3) | |||||||
Earnings per share* (R$) | 1.42 | 4.93 | 1.22 | 1.55 | ||||||||||||
* Total shares = 683,509,869
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Adjusted EBITDA Reconciliation (Non-accounting measures)
R$ million | ||||||||||||||||
2020 | 2019 | Var. (R$) | % | 4Q20 | 4Q19 | Var. (R$) | %, | |||||||||
Net income | 973.3 | 3,367.5 | (2,394.2) | (71.1) | 831.5 | 1,057.0 | (225.5) | (21.3) | ||||||||
Income tax and social contribution | 352.7 | 1,310.4 | (957.7) | (73.1) | 299.1 | 142.3 | 156.8 | 110.2 | ||||||||
Financial result | 3,166.4 | 1,033.7 | 2,132.7 | 206.3 | 180.0 | 7.7 | 172.3 | 2,237.7 | ||||||||
Other operating revenues (expenses), net | (107.7) | 18.7 | (126.4) | (675.9) | 5.6 | 37.1 | (31.5) | (84.9) | ||||||||
(=) | Adjusted EBIT* | 4,384.7 | 5,730.3 | (1,345.6) | (23.5) | 1,316.2 | 1,244.1 | 72.1 | 5.8 | |||||||
Depreciation and amortization | 2,037.1 | 1,780.2 | 256.9 | 14.4 | 526.8 | 480.7 | 46.1 | 9.6 | ||||||||
(=) | Adjusted EBITDA** | 6,421.8 | 7,510.5 | (1,088.7) | (14.5) | 1,843.0 | 1,724.8 | 118.2 | 6.9 | |||||||
(%) Adjusted EBITDA margin | 36.1 | 41.8 | 37.7 | 36.7 | ||||||||||||
* Adjusted EBIT corresponds to net income before: (i) other operating revenues (expenses), net; (ii) financial result; and (iii) income tax and social contribution.
** Adjusted EBITDA corresponds to net income before: (i) other operating revenues (expenses), net; (ii) financial result; (iii) income tax and social contribution; and (iv) depreciation and amortization expenses.
In 2020, net operating revenue, which considers construction revenue, totaled R$ 17,797.5 million, down 1.0% from 2019.
Costs and expenses, which consider construction costs, totaled R$ 13,426.9 million, up 9.5% over 2019.
Adjusted EBIT totaled R$ 4,384.7 million, down 23.5% from the R$ 5,730.3 million recorded in 2019.
Adjusted EBITDA totaled R$ 6,421.8 million, down 14.5% from the R$ 7,510.5 million recorded in 2019.
The adjusted EBITDA margin reached 36.1% in 2020, compared to 41.8% in 2019.
Excluding the effects of revenues and construction costs, adjusted EBITDA margin reached 45.0% in 2020, compared to 49.5% in 2019.
The Company recorded net income of R$ 973.3 million in 2020, compared to net income of R$ 3,367.5 million in 2019.
3. | Gross operating revenue |
The gross operating revenue related to the sanitation services, in the amount of R$ 15,157.8 million, which does not consider construction revenue, decreased by R$ 976.2 million or 6.1%, when compared to R$ 16,134.0 million in 2019.
The main factors that led to this decrease were:
· | Signing of the agreement with the municipality of Santo André in 2019, generating non-recurring revenue of R$ 1,261.7 million; |
· | Lower billed volume in the commercial, industrial and public categories, resulting in a decrease of approximately R$ 805.0 million, compared to last year; and |
· | Exemption granted to customers in the “Residential Social” and “Residential Favela” categories from paying water and sewage bills, leading to a decrease of R$ 40.2 million between April and August. |
The decrease in operating revenue was offset by:
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· | Consent of agreement with the municipality of Mauá in June 2020, resulting in an increase of R$ 204.1 million; |
· | Higher billed volume in the residential category, resulting in an increase of approximately R$ 840.0 million; |
· | Higher revenue from retail sales in the municipality of Santo André, in the amount of R$ 214.2 million; and |
· | Tariff adjustment of 3.4% since August 2020. |
4. | Construction revenue |
In 2020, construction revenue increased by R$ 770.1 million, or 26.1%, compared to 2019. The variation was mainly due to higher asset investments.
5. | Billed volume |
The following tables show the water and sewage billed volume, on a quarter-over-quarter and year-over-year basis, per customer category and region. The volumes of Santo André, Mauá and the categories exempt from payment are presented individually.
WATER AND SEWAGE BILLED VOLUME(1) PER CUSTOMER CATEGORY - million m3 | |||||||||||
Water | Sewage | Water + Sewage | |||||||||
Category | 2020 | 2019 | % | 2020 | 2019 | % | 2020 | 2019 | % | ||
Residential | 1,754.3 | 1,710.1 | 2.6 | 1,518.9 | 1,471.8 | 3.2 | 3,273.2 | 3,181.9 | 2.9 | ||
Commercial | 159.1 | 175.8 | (9.5) | 151.2 | 171.1 | (11.6) | 310.3 | 346.9 | (10.6) | ||
Industrial | 30.7 | 32.7 | (6.1) | 35.1 | 39.6 | (11.4) | 65.8 | 72.3 | (9.0) | ||
Public | 35.8 | 44.1 | (18.8) | 31.5 | 39.6 | (20.5) | 67.3 | 83.7 | (19.6) | ||
Total retail | 1,979.9 | 1,962.7 | 0.9 | 1,736.7 | 1,722.1 | 0.8 | 3,716.6 | 3,684.8 | 0.9 | ||
Wholesale(3) | 50.1 | 48.1 | 4.2 | 14.5 | 16.0 | (9.4) | 64.6 | 64.1 | 0.8 | ||
Subtotal | 2,030.0 | 2,010.8 | 1.0 | 1,751.2 | 1,738.1 | 0.8 | 3,781.2 | 3,748.9 | 0.9 | ||
Santo André(4) | 53.9 | 67.1 | (19.7) | 53.4 | 28.9 | 84.8 | 107.3 | 96.0 | 11.8 | ||
Mauá(5) | 29.5 | 34.8 | (15.2) | - | - | - | 29.5 | 34.8 | (15.2) | ||
Residencial Social/Favela(6) | 45.8 | - | - | 35.3 | - | - | 81.1 | - | - | ||
Total | 2,159.2 | 2,112.7 | 2.2 | 1,839.9 | 1,767.0 | 4.1 | 3,999.1 | 3,879.7 | 3.1 | ||
Water | Sewage | Water + Sewage | |||||||||
Category | 4Q20 | 4Q19 | % | 4Q20 | 4Q19 | % | 4Q20 | 4Q19 | % | ||
Residential | 442.9 | 437.0 | 1.4 | 383.7 | 377.0 | 1.8 | 826.6 | 814.0 | 1.5 | ||
Commercial | 40.7 | 44.9 | (9.4) | 38.6 | 43.7 | (11.7) | 79.3 | 88.6 | (10.5) | ||
Industrial | 8.1 | 8.3 | (2.4) | 8.4 | 9.9 | (15.2) | 16.5 | 18.2 | (9.3) | ||
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Public | 8.6 | 11.3 | (23.9) | 7.4 | 10.0 | (26.0) | 16.0 | 21.3 | (24.9) |
Total retail | 500.3 | 501.5 | (0.2) | 438.1 | 440.6 | (0.6) | 938.4 | 942.1 | (0.4) |
Wholesale(3) | 12.9 | 12.2 | 5.7 | 3.5 | 3.6 | (2.8) | 16.4 | 15.8 | 3.8 |
Subtotal | 513.2 | 513.7 | (0.1) | 441.6 | 444.2 | (0.6) | 954.8 | 957.9 | (0.3) |
Santo André(5) | 13.6 | 13.2 | 3.0 | 13.4 | 13.1 | 2.3 | 27.0 | 26.3 | 2.7 |
Mauá(5) | 3.4 | 8.7 | (60.9) | - | - | - | 3.4 | 8.7 | (60.9) |
Residencial Social/Favela(6) | 18.4 | - | - | 14.2 | - | - | 32.6 | - | - |
Total | 548.6 | 535.6 | 2.4 | 469.2 | 457.3 | 2.6 | 1,017.8 | 992.9 | 2.5 |
WATER AND SEWAGE BILLED VOLUME(1) PER REGION - million m3 | |||||||||
Water | Sewage | Water + Sewage | |||||||
Region | 2020 | 2019 | % | 2020 | 2019 | % | 2020 | 2019 | % |
Metropolitan | 1,297.4 | 1,296.4 | 0.1 | 1,139.2 | 1,137.8 | 0.1 | 2,436.6 | 2,434.2 | 0.1 |
Regional(2) | 682.5 | 666.3 | 2.4 | 597.5 | 584.3 | 2.3 | 1,280.0 | 1,250.6 | 2.4 |
Total retail | 1,979.9 | 1,962.7 | 0.9 | 1,736.7 | 1,722.1 | 0.8 | 3,716.6 | 3,684.8 | 0.9 |
Wholesale(3) | 50.1 | 48.1 | 4.2 | 14.5 | 16.0 | (9.4) | 64.6 | 64.1 | 0.8 |
Subtotal | 2,030.0 | 2,010.8 | 1.0 | 1,751.2 | 1,738.1 | 0.8 | 3,781.2 | 3,748.9 | 0.9 |
Santo André(4) | 53.9 | 67.1 | (19.7) | 53.4 | 28.9 | 84.8 | 107.3 | 96.0 | 11.8 |
Mauá(5) | 29.5 | 34.8 | (15.2) | - | - | - | 29.5 | 34.8 | (15.2) |
Residencial Social/Favela(6) | 45.8 | - | - | 35.3 | - | - | 81.1 | - | - |
Total | 2,159.2 | 2,112.7 | 2.2 | 1,839.9 | 1,767.0 | 4.1 | 3,999.1 | 3,879.7 | 3.1 |
Water | Sewage | Water + Sewage | |||||||
Region | 4Q20 | 4Q19 | % | 4Q20 | 4Q19 | % | 4Q20 | 4Q19 | % |
Metropolitan | 325.8 | 331.5 | (1.7) | 285.9 | 291.4 | (1.9) | 611.7 | 622.9 | (1.8) |
Regional(2) | 174.5 | 170.0 | 2.6 | 152.2 | 149.2 | 2.0 | 326.7 | 319.2 | 2.3 |
Total retail | 500.3 | 501.5 | (0.2) | 438.1 | 440.6 | (0.6) | 938.4 | 942.1 | (0.4) |
Wholesale(3) | 12.9 | 12.2 | 5.7 | 3.5 | 3.6 | (2.8) | 16.4 | 15.8 | 3.8 |
Subtotal | 513.2 | 513.7 | (0.1) | 441.6 | 444.2 | (0.6) | 954.8 | 957.9 | (0.3) |
Santo André(4) | 13.6 | 13.2 | 3.0 | 13.4 | 13.1 | 2.3 | 27.0 | 26.3 | 2.7 |
Mauá(5) | 3.4 | 8.7 | (60.9) | - | - | - | 3.4 | 8.7 | (60.9) |
Residencial Social/Favela(6) | 18.4 | - | - | 14.2 | - | - | 32.6 | - | - |
Total | 548.6 | 535.6 | 2.4 | 469.2 | 457.3 | 2.6 | 1,017.8 | 992.9 | 2.5 |
1. | Unaudited |
2. | Including Coastal and Interior Regions |
3. | Wholesale includes volumes of reuse water and non-domestic sewage |
4. | Billed volume in the retail segment in 2020 and in the wholesale/retail segment in 2019 |
5. | Billed volume in the wholesale/retail segments in 2020 and in the wholesale segment in 2019 |
6. | Volume exempt from paying water and sewage bills |
7 |
6. | Costs, administrative & selling expenses and construction costs |
Costs, administrative and selling expenses and construction costs increased by R$ 1,169.9 million in 2020 (9.5%). Excluding construction costs, the increase was R$ 421.2 million (4.5%).
Costs, administrative and selling expenses and construction costs as a percentage of net revenue was 75.4% in 2020, compared to 68.2% in 2019.
R$ million | ||||||||||||||
2020 | 2019 | Var. (R$) | % | 4Q20 | 4Q19 | Var. (R$) | % | |||||||
Salaries and Payrollcharges and Pension plan obligations | 2,647.0 | 2,681.9 | (34.9) | (1.3) | 641.5 | 712.3 | (70.8) | (9.9) | ||||||
General supplies | 263.8 | 272.9 | (9.1) | (3.3) | 77.1 | 76.9 | 0.2 | 0.3 | ||||||
Treatment materials | 338.8 | 310.4 | 28.4 | 9.1 | 84.9 | 80.5 | 4.4 | 5.5 | ||||||
Services | 1,772.4 | 1,808.4 | (36.0) | (2.0) | 448.7 | 482.0 | (33.3) | (6.9) | ||||||
Electricity | 1,217.4 | 1,142.9 | 74.5 | 6.5 | 301.4 | 297.9 | 3.5 | 1.2 | ||||||
General expenses | 998.1 | 1,177.6 | (179.5) | (15.2) | 276.8 | 288.1 | (11.3) | (3.9) | ||||||
Tax expenses | 77.4 | 73.2 | 4.2 | 5.7 | 25.3 | 17.6 | 7.7 | 43.8 | ||||||
Subtotal | 7,314.9 | 7,467.3 | (152.4) | (2.0) | 1,855.7 | 1,955.3 | (99.6) | (5.1) | ||||||
Depreciation and amortization | 2,037.1 | 1,780.2 | 256.9 | 14.4 | 526.8 | 480.7 | 46.1 | 9.6 | ||||||
Allowance for doubtful accounts | 444.8 | 128.1 | 316.7 | 247.2 | 95.0 | 77.2 | 17.8 | 23.1 | ||||||
Subtotal | 2,481.9 | 1,908.3 | 573.6 | 30.1 | 621.8 | 557.9 | 63.9 | 11.5 | ||||||
Costs, administrative and selling expenses | 9,796.8 | 9,375.6 | 421.2 | 4.5 | 2,477.5 | 2,513.2 | (35.7) | (1.4) | ||||||
Construction costs | 3,630.1 | 2,881.4 | 748.7 | 26.0 | 1,095.0 | 934.7 | 160.3 | 17.1 | ||||||
Costs, adm & selling expenses and construction costs | 13,426.9 | 12,257.0 | 1,169.9 | 9.5 | 3,572.5 | 3,447.9 | 124.6 | 3.6 | ||||||
% of net revenue | 75.4 | 68.2 | 73.1 | 73.4 | ||||||||||
Salaries and Payroll charges and Pension plan obligations
In 2020, the R$ 34.9 million decrease was due to:
· | R$ 92.6 million in healthcare expenses, mainly due to the need of contributions in 2019, of R$ 108.6 million; |
· | the R$ 35.5 million in pension plans, due to changes in the actuarial assumptions; |
· | R$ 20.6 million, mainly due to the 8.2% reduction in the number of employees, arising from the gradual dismissal through the Knowledge Retention Program (Programa de Retenção do Conhecimento - PRC). This effect was mitigated by the application, since February 2020, of 2.0% referring to the assessment cycle of the Career and Salaries Plan; |
· | R$ 12.3 million in overtime expenses; and |
· | R$ 5.9 million in expenses with transportation voucher. |
The above-mentioned decreases were mitigated by the reversal of R$ 130.3 million in expenses with TAC-Retirees in 2019, recorded as a non-recurring event.
Treatment supplies
Increase of R$ 28.4 million, or 9.1%, due to the higher use of algaecides and coagulants in several Water Treatment Plants in the Metropolitan Region of São Paulo in order to maintain the quality of raw water.
8 |
Services
Expenses with services totaled R$ 1,772.4 million, a decrease of R$ 36.0 million, or 2.0%, from the R$ 1,808.4 million recorded in 2019. The main decreases were:
· | R$ 41.8 million with water meter reading and bill delivery; |
· | R$ 30.2 million in surveillance expenses; and |
· | R$ 17.5 million in credit recovery expenses. |
The decreases were partially offset by the R$ 46.9 million increase in paving expenses.
Electricity
Electricity expenses totaled R$ 1,217.4 million in 2020, up R$ 74.5 million, or 6.5%, over the R$ 1,142.9 million recorded in 2019. In 2020, the Free Market Tariffs (ACL) accounted for 47.5% of total expenses (36.7% in 2019) while the Regulated Market Tariffs (ACR) accounted for 52.5% (63.3% in 2019).
The main factors that contributed to this variation were:
· | Average increase of 28.0% in ACL prices (includes Grid Market Tariffs - TUSD), with a 17.6% rise in consumption; and |
· | Average decrease of 3.0% in ACR tariffs, with a 5.5% drop in consumption. |
General expenses
Decrease of R$ 179.5 million, or 15.2%, totaling R$ 998.1 million in 2020, compared to the R$ 1,177.6 million recorded in 2019, mainly due to the following factors:
· | Non-recurring expenses in 2019 related to the conclusion of legal proceedings, in the amount of R$ 85.4 million, resulting from the signing of agreements with the municipalities of São Bernardo do Campo and Guarujá, in the amounts of R$ 39.0 million and R$ 46.4 million, respectively; |
· | Lower provision for the São Paulo Municipal Fund for Environmental Sanitation and Infrastructure, in the amount of R$ 31.1 million, due to the decrease in revenue from the municipality; |
· | Lower expenses with lawsuits in 2020, of R$ 27.1 million, excluding financial expenses; and |
· | Reversal of estimated losses in 2020, in the amount of R$ 12.5 million, resulting from the signature of the agreement with Companhia de Saneamento de Alagoas (CASAL). |
Depreciation and amortization
Increase of R$ 256.9 million or 14.4%, due to the start-up of intangible assets, in the total amount of R$ 3.7 billion.
Allowance for doubtful accounts
Increase of R$ 316.7 million, due to:
· | Increase in delinquency rates due to the economic instability worsened by COVID-19; and |
· | Non-recurring reversal of R$ 51.5 million in 2019, due to the agreement with the municipality of Santo André. |
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Other operating income (expenses), net
Other net operating revenues and expenses came to a positive variation of R$ 126.4 million, mainly due to:
· | Reversal of estimated losses with assets indemnity of the municipality of Mauá, in the amount of R$ 85.9 million, as a result of the signature of the agreement; and |
· | Decrease in the write-off of obsolete items, in the amount of R$ 23.9 million. |
7. | Financial result |
R$ million | |||||||
2020 | 2019 | Var. | % | ||||
Financial expenses, net of income | (807.1) | (698.6) | (108.5) | 15.5 | |||
Net monetary and exchange variation | (2,359.3) | (335.1) | (2,024.2) | 604.1 | |||
Financial result | (3,166.4) | (1,033.7) | (2,132.7) | 206.3 | |||
Financial expenses, net of income
R$ million | |||||||
2020 | 2019 | Var. | % | ||||
Financial expenses | |||||||
Interest and charges on domestic loans and financing | (348.0) | (331.4) | (16.6) | 5.0 | |||
Interest and charges on international loans and financing | (136.3) | (165.4) | 29.1 | (17.6) | |||
Other financial expenses | (538.5) | (483.5) | (55.0) | 11.4 | |||
Total financial expenses | (1,022.8) | (980.3) | (42.5) | 4.3 | |||
Financial income | 215.7 | 281.7 | (66.0) | (23.4) | |||
Financial expenses net of income | (807.1) | (698.6) | (108.5) | 15.5 | |||
Increase of R$ 108.5 million, mainly due to:
· | R$ 16.6 million increase in interest and charges on domestic loans and financing, due to the US$ 494.6 million debt exchange to R$ 2,810.9 million with the Inter-American Development Bank (IDB), with an effect of R$ 22.7 million; |
· | Decrease of R$ 29.1 million in interest and charges on loans and financing in foreign currency, mostly due to: (i) exchange of the US$ 494.6 million debt to R$ 2,810.9 million with the IDB; and (ii) amortization of the debt with Deutsche Bank, in October 2019; |
· | R$ 55.0 million increase in other financial expenses, as a result of higher recognition of interest on lawsuits, in the amount of R$ 73.6 million; and |
· | Decrease of R$ 66.0 million in financial revenues, mostly from the lower yield on financial investments, due to the reduction of the average DI rate. |
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Monetary and exchange variation, net
R$ million | ||||||
2020 | 2019 | Var. | % | |||
Monetary/exchange rate variation on liabilities | ||||||
Monetary variation on loans and financing | (86.9) | (44.8) | (42.1) | 94.0 | ||
Currency exchange variation on loans and financing | (2,180.3) | (234.0) | (1,946.3) | 831.8 | ||
Other monetary variations | (215.0) | (148.3) | (66.7) | 45.0 | ||
Monetary/exchange rate variation on liabilities | (2,482.2) | (427.1) | (2,055.1) | 481.2 | ||
Monetary/exchange rate variation on assets | 122.9 | 92.0 | 30.9 | 33.6 | ||
Monetary/exchange rate variation, net | (2,359.3) | (335.1) | (2,024.2) | 604.1 | ||
The effect of net monetary and exchange rate variations in 2020 was R$ 2,024.2 million higher than in 2019, highlighting:
· | R$ 42.1 million increase in monetary variation on loans and financing, due to a higher funding from the 26th debentures issuance; |
· | Increase of R$ 1,946.3 million in exchange variations on loans and financing, as a result of the higher appreciation of the U.S. Dollar and Japanese Yen against the Brazilian Real in 2020 (28.9% and 35.8%, respectively), when compared to the appreciation recorded in 2019 (4.0% and 5.3%, respectively); |
· | Increase of R$ 66.7 million in other monetary variations, due to: (i) higher monetary variations on lease agreement obligations, in the amount of R$ 34.3 million; and (ii) increase in the monetary variations on lawsuits, in the amount of R$ 31.9 million; and |
· | Increase of R$ 30.9 million in monetary and exchange variation gains, due to higher adjustment on overdue bills. |
8. | Income tax and Social contribution |
In 2020, there was a decreased by R$ 957.7 million due to the lower taxable income, highlighting:
· | Recognition of non-recurring revenue, in the amount of R$ 1,261.7 million, related to the agreement with the municipality of Santo André and the reversal of R$ 173.3 million in TAC - Retiree expenses; and |
· | In 2020, we reported an increase in allowance for doubtful accounts, in the amount of R$ 316.7 million, and an increase in expenses with exchange rate variation, in the amount of R$ 1,946.3 million. |
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9. | Indicators |
a) | Operating |
The Water Loss Reduction Program aims to achieve a consistent loss reduction in the long term, by implementing several operational improvement and maintenance actions, in addition to important actions to renew and improve infrastructure.
As a result of the Program, the total water loss index gradually fell to 27.0% in 2020, corresponding to 263 liters per connection per day.
As from 2021 onwards, the water loss from the municipality of Guarulhos will be accounted for in the index, leading to an increase of approximately 10 liters per connection per day in the total water loss index. Accordingly, the goal for 2021 is reaching an index of 268 liters per connection per day, including the municipality of Guarulhos.
Operating indicators * | 2020 | 2019 | % |
Water connections(1) | 10,088 | 9,933 | 1.6 |
Sewage connections(1) | 8,518 | 8,326 | 2.3 |
Population directly served - water(2) | 27.5 | 27.1 | 1.5 |
Population directly served - sewage(2) | 24.3 | 23.8 | 2.1 |
Number of employees | 12,806 | 13,945 | (8.2) |
Water volume produced in the year(3) | 2,907 | 2,873 | 1.2 |
IPM - Measured water loss (%)(4) | 27.0 | 29.0 | (6.9) |
IPDt (liters/connection x day)(4) | 263.0 | 285.0 | (7.7) |
1. | Total connections, active and inactive, in thousand at the end of period - Includes Guarulhos, Santo André (excludes Mauá) |
2. | In million inhabitants, at the end of the period - Includes Guarulhos, Santo André (excludes Mauá) |
3. | In million of cubic meters - Excludes Aguaí, Tapiratiba and Tejupá |
4. | Excludes Guarulhos, Santo André, Mauá, Aguaí, Tapiratiba and Tejupá |
* Unaudited
b) | Management’s Indicators |
The following performance Management Indicators show: Gross revenue, operating expenses and EBITDA, all of them per billed cubic meter.
The historical series has been presented since 2014, based on quarterly financial data disclosed by the Company, excluding some non-recurring and significant events that would distort the result.
All indicators were calculated based on average values of 4Q20, adjusted by changes in the IPCA consumer price index, to determine the behavior on a same-price base in the period.
Gross Revenue per billed cubic meter increased, especially after the 3Q15. In 4Q20, it was down by 6.0% from 4Q19.
Operating Expenses per billed cubic meter increased in a controlled manner on a quarterly basis, compatible with the expansion of operations, showing a stable average performance and reflecting disciplined cost management. In 4Q20, it was down by 11.2% from 4Q19.
Finally, the EBITDA per cubic meter increased in the period, basically due to the performance of Gross Revenue and Operating Expenses. The 4Q20 had a positive evolution compared to the beginning of the year, reaching the same level as in 4Q19, despite the impact of COVID-19 on the Company’s revenue.
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Total Gross Revenue per m³ Billed - R$/m³
Figures at 4Q20 average prices, updated by IPCA
The following were not considered:
- Construction revenue
- R$928 million referring to the agreement with Guarulhos in 4Q18
- R$1,254 million referring to agreement with Santo André in 3Q19
- R$195 million referring to agreement with Mauá in 2Q20
Operating Expense per m³ Billed - R$/m³
Figures at 4Q20 average prices, updated by IPCA
Expenses considered: personnel, general supplies, treatement materials, services, electricity, general expenses and tax
Reversals excluded:
- R$696 million referring to agreement with the São Paulo State Government in 1Q15
- R$307 million referring to the migration of the supplementary pension plan in 3Q16
- R$173 million referring to the TAC - Retirees in 3Q19
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EBITDA per m³ Billed - R$/m³
Figures at 4Q20 average prices, updated by IPCA
The following were not considered:
Revenue:
- R$928 million referring to the agreement with Guarulhos in 4Q18
- R$1,254 million referring to agreement with Santo André in 3Q19
- R$195 million referring to agreement with Mauá in 2Q20
Reversal of expenses:
- R$696 million referring to agreement with the São Paulo State Government in 1Q15
- R$307 million referring to the migration of the supplementary pension plan in 3Q16
- R$173 million referring to the end of the TAC - Retirees in 3Q19
c) | Economic |
Economic Variablesat the close of the year* | 2020 | 2019 |
Amplified Consumer Price Index(1) | 4.52 | 4.31 |
National Consumer Price Index(1) | 5.45 | 4.48 |
Consumer Price Index(1) | 5.64 | 4.38 |
Interbank Deposit Certificate(2) | 1.90 | 4.40 |
US DOLAR(3) | 5.1967 | 4.0307 |
YEN(3) | 0.05043 | 0.03715 |
1. | Accrued in the year (%) |
2. | Rate p.a. on the last day |
3. | Ptax sale rate on the last day |
* Unaudited
10. Loans and financing
The Company has frequent access to Brazilian and international credit markets and maintains solid relationships with public banks and multilateral agencies. Such mix and diversity of sources results in an extended debt amortization profile, at costs compatible with its investment cycle, especially those granted by official Brazilian banks and multilateral credit organizations. Continuing with the guidelines approved by the
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Board of Directors in 2019 for the management of foreign debt, in order to include initiatives to capture opportunities that decrease the foreign exposure of its debt, at the end of 2020 external indebtedness accounted for 21% of total debt exposed to the exchange variation of the Brazilian real against the U.S. dollar and the Yen, compared to 48% in 2019.
In order to meet its capital needs, the Company carried out its 25th, 26th and 27th debentures issuances at R$ 1.45 billion, R$ 1.05 billion and R$ 1.0 billion, respectively. In April 2020, the Company exchanged US$ 494.6 million debt to R$ 2,810.9 million with the IDB reducing its exposure to the variation of the U.S. dollar. In addition, on September 30, 2020, the Company early amortized Eurobonds in the amount of R$ 1,910.1 million (US$ 357.8 million) to reduce currency exposure and, in November, it entered into an agreement of R$ 950.0 million with IDB Invest.
R$ thousand | |||||||||
DEBT PROFILE | |||||||||
INSTITUTION | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2027 onwards | TOTAL | % of total |
Local Currency | |||||||||
Debentures | 1,952,670 | 582,192 | 681,272 | 918,988 | 485,012 | 378,849 | 1,632,114 | 6,631,097 | 38 |
Caixa Econômica Federal | 90,382 | 95,391 | 88,779 | 87,749 | 93,243 | 99,082 | 860,215 | 1,414,841 | 8 |
BNDES | 177,470 | 177,472 | 171,350 | 164,288 | 144,093 | 134,841 | 397,591 | 1,367,105 | 8 |
BID 2202 | 181,349 | 181,349 | 181,349 | 181,349 | 181,349 | 181,349 | 1,618,053 | 2,706,147 | 16 |
BID INVEST | 44,815 | 89,630 | 89,630 | 89,630 | 89,630 | 89,630 | 449,910 | 942,875 | 5 |
Leasing | 65,423 | 41,555 | 35,412 | 38,017 | 41,387 | 36,536 | 216,289 | 474,619 | 3 |
Others | 3,778 | 4,038 | 3,977 | 1,757 | 1,610 | - | - | 15,160 | 0 |
Interest and other charges | 158,918 | - | - | - | - | - | - | 158,918 | 1 |
Total Local Currency | 2,674,805 | 1,171,627 | 1,251,769 | 1,481,778 | 1,036,324 | 920,287 | 5,174,172 | 13,710,762 | 79 |
Foreign Currency | |||||||||
IADB | 53,412 | 53,412 | 53,412 | 53,412 | 54,810 | 2,795 | 42,282 | 313,535 | 2 |
IBRD | 31,594 | 31,594 | 31,594 | 31,594 | 31,594 | 31,594 | 235,979 | 425,543 | 2 |
JICA | 213,086 | 213,086 | 213,086 | 213,086 | 213,086 | 213,086 | 1,389,773 | 2,668,289 | 16 |
IDB 1983AB | 39,975 | 39,975 | 38,968 | - | - | - | - | 118,918 | 1 |
Interest and other charges | 21,577 | - | - | - | - | - | - | 21,577 | 0 |
Total in Foreign Currency | 359,644 | 338,067 | 337,060 | 298,092 | 299,490 | 247,475 | 1,668,034 | 3,547,862 | 21 |
Total | 3,034,449 | 1,509,694 | 1,588,829 | 1,779,870 | 1,335,814 | 1,167,762 | 6,842,206 | 17,258,624 | 100 |
Covenants
The following table shows the most restrictive clauses in 2020:
Covenants | |
Adjusted EBITDA/Adjusted Financial Expense | Equal to or higher than 2.80 |
Adjusted Net Debt/Adjusted EBITDA | Equal to or lower than 3.80 |
Total Adjusted Debt/Adjusted EBITDA | Lower than 3.65 |
Other Onerous Debt(1)/Adjusted EBITDA | Equal to or lower than 1.30 |
Adjusted Current Liquidity | Higher than 1.00 |
EBITDA/Financial Expense Paid | Equal to or higher than 2.35 |
Net Debt/Adjusted EBITDA | Equal to or lower than 3.50 |
1. | “Other Onerous Debt” correspond to the sum of social security liabilities, heathcare plan installment payment of tax debts and installment payment of debts with the Electricity supplier. |
As of December 31, 2020, the Company met the requirements set forth by its borrowings and financing agreements.
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11. CAPEX
Investments totaled R$ 4,379.5 million in 2020. The investment in 4Q20 was R$ 1,262.0 million.
Cash used in 2020 referring to the Company’s historical investment totaled R$ 3.3 billion.
The chart below shows investments broken down by water, sewage and region.
R$ million | |||
Investments by segment | Water_ | Sewage_ | Total_ |
Metropolitan Region | 1,647.6 | 1,518.9 | 3,166.5 |
Regional Systems | 469.0 | 744.0 | 1,213.0 |
Total | 2,116.6 | 2,262.9 | 4,379.5 |
Between 2021 and 2025, the Company plans investments of R$ 21,0 billion, R$ 8,2 billion of which in water supply and R$ 12,8 billion in sewage collection and treatment.
R$ million | ||||||
2021 | 2022 | 2023 | 2024 | 2025 | TOTAL_ | |
Water | 1,753 | 1,555 | 1,516 | 1,694 | 1,648 | 8,166 |
Sewage Collection | 1,831 | 2,084 | 2,197 | 2,079 | 1,874 | 10,065 |
Sewage Treatment | 587 | 561 | 472 | 405 | 712 | 2,737 |
Total | 4,171 | 4,200 | 4,185 | 4,178 | 4,234 | 20,968 |
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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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Brazilian Corporate Law | R$ '000 | |
2020 | 2019 | |
Net Operating Income | 17,797,541 | 17,983,654 |
Operating Costs | (11,179,667) | (10,137,637) |
Gross Profit | 6,617,874 | 7,846,017 |
Operating Expenses | ||
Selling | (751,286) | (803,404) |
Estimated losses with doubtful accounts | (444,826) | (128,099) |
Administrative expenses | (1,051,181) | (1,187,844) |
Other operating revenue (expenses), net | 107,656 | (18,748) |
Operating Income Before Shareholdings | 4,478,237 | 5,707,922 |
Equity Result | 14,136 | 3,701 |
Earnings Before Financial Results, net | 4,492,373 | 5,711,623 |
Financial, net | (988,028) | (800,583) |
Exchange gain (loss), net | (2,178,343) | (233,098) |
Earnings before Income Tax and Social Contribution | 1,326,002 | 4,677,942 |
Income Tax and Social Contribution | ||
Current | (460,721) | (1,155,463) |
Deferred | 108,037 | (154,962) |
Net Income for the period | 973,318 | 3,367,517 |
Registered common shares ('000) | 683,509 | 683,509 |
Earnings per shares - R$ (per share) | 1.42 | 4.93 |
Depreciation and Amortization | (2,037,112) | (1,780,094) |
Adjusted EBITDA | 6,421,829 | 7,510,465 |
% over net revenue | 36.1% | 41.8% |
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19 |
Deferred income tax and social contribution | 320,716 | 433,996 |
Deferred Cofins and Pasep | 149,444 | 143,693 |
Provisions | 492,093 | 485,561 |
Pension obligations | 2,868,594 | 3,360,932 |
Public-Private Partnership – PPP | 3,045,066 | 3,183,689 |
Program Contract Commitments | 68,939 | 103,321 |
Other liabilities | 555,775 | 272,535 |
Total noncurrent liabilities | 21,724,802 | 18,368,593 |
Total liabilities | 27,624,932 | 24,822,017 |
Equity | ||
Paid-up capital | 15,000,000 | 15,000,000 |
Profit reserve | 8,194,706 | 7,547,954 |
Other comprehensive income | (401,002) | (912,171) |
Total equity | 22,793,704 | 21,635,783 |
Total equity and liabilities | 50,418,636 | 46,457,800 |
20 |
21 |
Pension obligations | (123,014) | (221,784) | ||
Other liabilities | (13,306) | (92,637) | ||
Cash generated from operations | 5,977,945 | 6,157,318 | ||
Interest paid | (626,625) | (737,326) | ||
Income tax and contribution paid | (373,112) | (1,222,747) | ||
Net cash generated from operating activities | 4,978,208 | 4,197,245 | ||
Cash flows from investing activities | ||||
Acquisition of contract assets and intangible assets | (3,299,657) | (3,195,247) | ||
Restricted cash | (9,724) | 5,882 | ||
Financial investments | (3,411,146) | - | ||
Increase/(decrease) in investment | (5,734) | 240 | ||
Purchases of tangible assets | (42,407) | (78,159) | ||
Net cash used in investing activities | (6,768,668) | (3,267,284) | ||
Cash flow from financing activities | ||||
Loans and financing | ||||
Proceeds from loans | 4,777,474 | 1,793,388 | ||
Repayments of loans | (3,244,099) | (2,148,198) | ||
Payment of interest on shareholders'equity | (890,095) | (739,996) | ||
Public-Private Partnership – PPP | (543,346) | (548,079) | ||
Program Contract Commitments | (166,283) | (63,057) | ||
Net cash used in financing activities | (66,349) | (1,705,942) | ||
Increase/(decrease) in cash and cash equivalents | (1,856,809) | (775,981) | ||
Represented by: | ||||
Cash and cash equivalents at beginning of the year | 2,253,210 | 3,029,191 | ||
Cash and cash equivalents at end of the year | 396,401 | 2,253,210 | ||
Increase/(decrease) in cash and cash equivalents | (1,856,809) | (775,981) |
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Companhia de Saneamento Básico do Estado de São Paulo - SABESP | ||
By: | /s/ Rui de Britto Álvares Affonso | |
Name: Rui de Britto Álvares Affonso Title: Chief Financial Officer and Investor Relations Officer |
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.