Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp (SBS)

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Companhia de Saneamento Básico do Estado de São Paulo (SBS)

Q4 2009 Earnings Call Transcript

April 1, 2010 3:30 pm ET


Mario Arruda Sampaio – Head of Capital Market and IR

Gesner Oliveira – CEO

Rui Affonso – CFO and IR Officer

Nara Maria Marcondes França – Head of Accounting


Michael Gaugler – Brean Murray, Carret



Good afternoon. ladies and gentlemen. At this time, we would like to welcome everyone to SABESP conference call to discuss its results for the fourth quarter of 2009 and the full year 2009. The audio for this conference is being broadcast simultaneously through the Internet and the website

In that same address you can also find the slideshow presentation available for download. We inform that all participants will only be able to listen to the conference during the company's presentation. After the company's remarks are over, there will be a Q&A period. (Operator instructions)

Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Reform Litigation Act of 1996. Forward-looking statements are based on the beliefs and assumptions of SABESP’s management and on information currently available to the company.

Forward-looking statements are not guarantees of performance. They involve risk, uncertainties and assumptions because they relate to future events and therefore depend on the circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of SABESP and could cause results to differ materially from those expressed in such forward-looking statements.

Today with us we have Mr. Gesner Oliveira, SABESP’S CEO; Mr. Rui Affonso, Chief Financial Officer and Investor Relations Officer; Mr. Mario Arruda Sampaio, Head of Capital Market and Investor Relations; and Mrs. Nara Maria Marcondes França, Head of Accounting.

Now I will turn the conference over to Mr. Arruda Sampaio. Sir you may begin the conference.

Mario Arruda Sampaio

Okay. Thank you. Good afternoon everybody. We wish you to join our conference call right now. First, before we move on ready to discuss results, we would like to highlight a few important issues that happened during the course of the year 2009. First from the corporate governance aspect, which is one of the foundations of our credibility. With this respect for the third consecutive year, SABESP was maintained in the Bovespa Sustainability Index.

Another highlight is that despite the credit crisis that affected the financial markets in 2008 and 2009, we continue to maintain this credibility. Recently the rating agency Standard & Poor's improved our rating from BB- to BB on a global scale, and this was already BB on the Fitch Scale. And from A+ to AA- on the (inaudible) followed also by Fitch, which is obviously recognition of the company’s capacity to honor its financial commitments even on a hectic environment.

On the regulatory side, the regulation framework has been improving and increasingly demanding greater efficiencies from the company. We did not stay still. We made progress in the negotiations with the municipality and managed to renew another 14 contracts, which now total 174 renewals, and more importantly we are in advanced stage of negotiations to sign a contract with the City of São Paulo. During the crisis, there was a doubt if we could be capable of financing our aggressive Capex program. What was earlier a doubt is now a fact. At least 80% of our Capex has been secured financing and overall since 2007 all the way to by the end of this year, it should have been already contracting finances to the amount of 6 billion [ph].

Most of these are already secured and signed, and some are in final more bureaucratic negotiations. We highlight with this respect the financing we are negotiating with the JICA Bank, IDB, World Bank, which all offer attractive rates long-term rate periods, enabling the company to expand its business could meet its target.

The last point to be highlighted is the progress in streamlining our workforce. In 2009, we reduced our headcount by 9.3% as a result of the TAC we signed with the State Prosecution Office. The TAC is a Conduct Adjustment Term to dismiss employees retired under the Public Social Security Program, what here in Brazil is called the ENESF [ph], and that still works for the company. And in addition to this we also dismissed 2% of our workforce which is capital out [ph] by our labor union agreement.

After this somewhat brief summary of what was 2008 for us in highlight, let us move onto the presentation. We have five slides, and let us discuss the main events of this. After that we will open for question and answers.

Let us move to slide three. On this slide, we show the 2009 billed water and sewage volume growth of 2.5%. This growth happened despite the decline in volume in the industrial segment due to the closure and/or reduction of production in a few industrial units, and also with the signing of a take-or-pay agreement, as well as the reduction in the volume in the public sector category that is municipal and state level due to the incentives for the reduction in consumption provided by the PURA, the program for the rational use of water.

We take this opportunity to highlight the results of water loss control in 2009. At the same billed water volume by 2.1% in 2009. The volume of water produced fell by 0.3%, mostly due to the decline in water loss rates, which was 27.9%, almost 28% in 2008, and it is now in 2009, 26%. This reduction of almost 2% in water loss occurred at the same time the company served the population of 1% bigger. So we reduced the loss. We maintained production and covered more people. Equivalent, in fact, more people equivalent to the population of the city such as São Paulo.

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