Companhia de Saneamento Básico do Estado de São Paulo - SABESP Q1 FY2023 earnings call

• Organizational restructuring: Unified boards, simplified management structure, and created new departments for client relations, engineering, and innovation. - Strategic focus: To focus on clients and regulatory compliance, with initiatives like the integrated project and PCJ Cantareira project. - Financial performance: Discussed revenue growth, cost and expense breakdowns, and impact of foreign exchange rates. - Initiatives: Working on reducing PECLD costs, improving client relations through new departments, and reviewing CapEx prioritization for value creation.

In the first quarter of 2023, SABESP's revenue from water provision was R$4.5 billion, a 13.5% increase from Q1 '22's R$3.9 billion. This increase was composed of a 1.4% volume increase and a fee increase effective May 2022. Volume of water provision saw a 1.1% increase, with industrial and public water contributing to this growth. Costs and expenses increased 10.3%, with staff costs up 11.4%, general materials up 21.7%, and other categories having respective changes. EBITDA increased 18.2%, but net profit dropped 23.4% due to foreign exchange variance.

• The latest fee structure review is in effect from May 10, with a R$9.56 correction. - Prioritizing investments in modernization, network expansion, and reduction of losses to create value. - Working on contract renegotiations with city governments to ensure beneficial agreements for all parties.

• Foreign exchange variance impacting net profit. - Potential impact of changes in monetary policy on foreign exchange and interest rates. - Challenge of reducing long-overdue accounts receivable over 360 days.

Q: Considering the new governor of the Japanese Central Bank reviewing monetary policy, will the administration consider acquiring derivatives to keep foreign exchange rates and interest rates favorable?

A: Yes, SABESP is studying possibilities of acquiring derivatives to keep rates at good levels.

Q: Summary of accounts receivable over 360 days old is near record levels. How will this be reduced?

A: The open day is aimed at improving adoption rates from defaulted clients, with a focus on reducing such inventory and managing new accounts receivable.

Q: Have interactions with IFC about modeling studies occurred and when will studies be completed?

A: SABESP has been in meetings with IFC, participating in discussions about contracts and value levers, but no detailed calendar for study completion is available yet.

Q: Gap between realized and regulatory revenue. What strategies to reduce it?

A: Working on regulatory updates, technical discussions with agencies, and addressing issues like bill reissuing and fee table adjustments for vulnerable and standard clients.