Companhia de Saneamento Básico do Estado de São Paulo - SABESP

Q1 2023 revenue was R$4.5 billion, up 13.5% from R$3.9 billion in Q1 2022. EBITDA increased 18.2%, and the EBITDA margin was 45% after deducting construction costs. Net profit declined 23.4% to R$747 million, from R$976 million a year earlier, mainly due to foreign exchange variance and higher financial expenses. Costs and expenses rose 10.3%, including staff costs up 11.4%, materials up 21.7%, services up 22%, and general expenses up 12.8%. Management said the latest fee structure review is in effect as of May 10, with a R$9.56 correction and a 13.6% adjustment mentioned. For guidance, management did not give formal full-year EPS or revenue guidance, but said the tariff review and regulatory agenda should make finances “more resilient,” CapEx priorities were being reviewed rather than materially changed, and the company expects efficiency initiatives, collections actions, and possible future regulation/privatization work to shape the rest of 2023 and beyond.

Andre Salcedo framed the quarter as the start of a new operating model, centered on a flatter organization, faster decision-making, and closer focus on clients, operations, and compliance. He repeatedly stressed simplification, centralized management, and a shift toward value-creating investments, modernization, and better service delivery. His tone was upbeat and transformational, with strong emphasis on the company’s long-term potential and the privatization-related agenda, while acknowledging that some details are still being worked through.

Catia Pereira said the main revenue driver was volume, with a 1.1% increase in water revenue volume and a 1.4% overall volume increase, alongside the tariff hike. She walked through the bridge from Q1 2022 to Q1 2023, explaining that the net profit decline to R$747 million was mainly due to FX differences, including a weaker real versus the dollar and the absence of last year’s FX gains. She also highlighted higher costs and expenses of 10.3%, specifically staff up 11.4%, materials up 21.7%, services up 22%, and general expenses up 12.8%, while noting the debt mix includes yen and U.S. dollar exposure and that 50% of debt is linked to CDI. She added that the latest tariff correction should improve near-term financial resilience.

Analysts asked about the PDI/PDI-related staffing program, derivatives for FX/interest-rate protection, and the large balance of receivables older than 360 days. Management said the PDI payback is expected to be 12 to 15 months, that derivatives are being studied, and that collections will be tackled through an open day, billing actions, and supply cuts after notice; they also said it is too early to quantify recoveries. Other questions focused on the IFC process, the regulatory revenue gap, contract renegotiations with municipalities, the 2024 tariff structure review, and the potential R$1.8 billion OpEx reduction; management said these discussions are ongoing, the calendar is not yet detailed, and the R$1.8 billion target is not yet a precise company forecast. They also said the regulatory agency’s fee-structure timing is on the ARCEFB website and referenced the first semester of 2024.