Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CTT-Correios de Portugal SA (CTTOF, Financial) reported a 17.3% growth in revenues and a 28.6% growth in EBITDA, excluding financial services.
- The express and parcels segment achieved record volumes, with a 46% year-on-year growth, nearing 100 million parcels distributed in the first nine months.
- The company improved its EBITDA margin to 8.7% in the quarter, with a positive outlook for the fourth quarter.
- The bank segment saw a 46% year-on-year growth in deposits, significantly outperforming the market growth of 8%.
- CTT-Correios de Portugal SA (CTTOF) expects a strong fourth quarter with increased working days and recovery of mail backlog from state agencies.
Negative Points
- Mail traffic fell by 7.5% compared to the same period last year, although offset by a 10.1% increase in average price per item.
- Financial services experienced a 51% year-on-year decline in volumes and a 27.2% decline in revenues.
- Operating costs increased by 15.3%, with significant wage inflation impacting the mail segment.
- The company's cash flow was heavily affected by a negative evolution of working capital and a EUR7.3 million impact from VAT recovery rules.
- Net profits declined by 16.2%, and recurring EBITDA was flat due to investments in fleet electrification and capacity.
Q & A Highlights
Q: Regarding the quality service indicators, how will these impact your CapEx going forward, and are these new indicators achievable?
A: We don't foresee any need for additional CapEx due to the new KPIs. They align with European standards and are achievable, changing the role of quality indicators in our concession agreement.
Q: There's a significant difference in cash flow compared to last year. How will this impact your dividend, and what are your expectations for cash flow normalization?
A: The cash flow difference is mainly due to working capital and financial services dynamics. We expect normalization, especially in financial services, which should stabilize cash flow above EUR 40-45 million, aligning with growth forecasts.
Q: With the first period of the concession contract ending in 2025, what changes should we expect for the second period, particularly regarding the price formula?
A: We anticipate maintaining the current price formula, which has yielded positive results. The proposed price increase for next year is 6.9%, pending regulatory approval.
Q: With the bank's new shareholder, should we expect any strategic changes, particularly in loan aggressiveness?
A: We expect a reinforcement of the bank's strategy around resources and savings, particularly with off-balance sheet products, but no significant changes in loan strategy.
Q: Can you clarify the expected cash flow levels for the future and how they relate to dividend policy?
A: We aim for a stable, slightly growing nominal dividend, aligned with cash flow generation. This year, we expect to be at the maximum of the guidance range, reflecting cash flow dynamics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
