Syn Prop & Tech S A : 1Q24 Conference Call Transcription

Conference Call Transcript

1Q24 Results

Syn (CCPR3 BZ)

May 10, 2024

Operator:

Good morning, ladies and gentlemen. Welcome to video conference of Syn to discussion of the results of the 1Q24.

This video conference is being taped and the replay can be accessed in the site of the Company, ri.syn.com.br, and the presentation is also available for download.

We inform that all participants are only watching this video conference during the presentation. Following, we will have the session of Q&A where instructions will be delivered.

Before continuing, the declarations here have a basis in suppositions of the administration of Syn, information present once are available, and these declarations can involve risks and uncertainties, and we have to say that they are future events and this depends on circumstances that can or cannot occur. Investors, analysts and journalists should take into consideration that this macroeconomic environment in this segment and other factors can make that the results be materially different from those expressed in these declarations.

Present in this video conference; Mr. Thiago Muramatsu, Director, President of Syn, and Mr. Hector Leitão, Financial Director and Relations with Investors.

Now I would like to give the word to Thiago Muramatsu, who will give the beginning of the presentation. You can begin, Thiago.

Thiago Muramatsu:

Good morning, all. Thank you very much who is accompanying our results of the 1Q. This is taped, of course. And I think that beginning this opening in the performances and the financial issues of the 1Q, I would just like to give everyone an update of the operation that we are doing with XP.

We have advanced a lot, and one of the main conditions for us to advance with this transaction is the captures of resources through the emission of new quotas that XP has done recently, and this was concluded with very success, R$1 billion in this emission. And this is an important phase that we had to go through to finalize this.

Now we continue, the phase is complementary of diligence and negotiations of the contract. Everything is going well, but we still do not have novelties in relation of this subject.

The trimester was a good trimester operationally for our buildings and also for our malls, and also, at the end of last year, we delivered the warehouse and we see some revenue in the area of logistics. And so with this we are going to open and speak about our operational performance.

In relation to occupation, physical and financial of our portfolio, we did not have big changes of what was the 1Q23. It's important in 2022, but in 2023 it's more or less same level. The only novelty is that we considered these warehouses obviously an occupation that is lower because it was just delivered. It's in the phase of leasing. And so in the warehouse, we have more or less half of it leased, but we have had a lot of people that are interested, and we are going to see a good evolution in the vacancy and evolution of this venture.

In relation to the financial occupation, we have an impact that is less the vacancy of the warehouses. Even though it's a big area, it has a rent that is lower in the segment of businesses and shopping centers.

And going into this detail of the occupation of the malls, we maintained ourselves stable physically, and it dropped a little financially, but it was a small drop. But what's important, half of the month of

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Conference Call Transcript

1Q24 Results

Syn (CCPR3 BZ)

May 10, 2024

May, we saw that April was a good month for us in commercialization. So we had a lot of leases and less than we presented, like a month, and that is very positive to commercialize the shopping. So we believe in the next trimester, we are going to see an evolution that is very good in these numbers.

In the sales, it was one of the items that we had in evolution that is very important. We grew in total sales almost 11%, and with this, almost 8% was the sale of the stores. So when we look at the evolution of what we have in our portfolio, it is an important evolution in terms of influence. And also, we had good substitutions in the stores during this period, and we grew almost 2% in relation to what had been practiced in the previous leases. And we developed very much the area, especially of events and media, in a way of attracting the public for our ventures, and this was a growth of the sales of 1%.

When we look at the leases, we have a growth that is above what was in the 3Q and 4Q23. In the last two trimesters, we grew almost 6% against 3% and 4.4%, in the 3Q. And this also reflects, obviously, of the evolution of the sales.

And now in the part of the performance, Hector is going to speak.

Hector Leitão:

Good morning, all. Following the operational results of the ventures, we concluded the trimester with R$50.9 million of results operational of the assets. This is a growth of 7% of the previous year.

Breaking the classes, starting with malls, we had a growth of 4.4%, and concluding R$40.9 million. In this trimester, the result should have been two digits, if it will not be the PDD, and here, this is an effect of accountant of last year, mainly of the nonpayment of the Americanas stores. According to the policies, after a year, we have to consider this in the fiscal balance. And even this nonpayment that is equalized, this is a flow that was agreed with them of payment, because of consideration for legal actions.

In offices, we had a growth of 18% and R$90 million concluding, and mainly the main effect, the end in discounts, where we had found various ventures. So this is very pulverized, especially in the building that had a positive impact, and very relevant.

Following, EBITDA, we had a growth of 15%, very expressive, concluding R$40 million, R$50 million in the trimester, which is explained by the operational performance of the ventures, of the projects, especially of offices.

And in the financial result, we had a good evolution, and we also had a breakage of 19% in net, and this comes of various factors. The decrease of Selic, this 200 bps of last year, we also have also a balance because of XP, because of the transaction. And also, we have IPCA, which is in a lower level and also impacts in one of our debts that we have in our balance. And so, at the end of the day, we concluded at 28 versus expenditure of last year.

Finally, at the end of the day, the bottom line, the profit of the trimester was R$7.4 million, and also a debt, and FFO and the generation of the cash flow, R$50 million versus the breakeven of last year. This is a good evolution in operational part, and also the management of the debt.

We opened the debt of the Company, and we must highlight the decrease of the main covenant, which is the gross debt. We closed it twice, 4.4x of the previous trimester. And here, we have the main impact of this transaction of R$300 million.

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Conference Call Transcript

1Q24 Results

Syn (CCPR3 BZ)

May 10, 2024

Also, there's a disclaimer, with the accounting rule, there's a big probability to conclude the transaction, and us be with less than 10% in 5 malls where we are selling, and we needed to disconsider the cash flow of SPEs, and put assets available for sale, circulating assets.

This value is R$1.2 billion, the cost of these assets. So we have a notion of how this would be in terms of profit before taxes, and to be more precise. And the cash flow of these SPEs is almost R$68 million.

So when we look at the patrimonial balance pro forma, there is a difference of this cash flow that is adjusted and it is also net, and we have to adjust it in the patrimonial issue in IFRS, which are the contracts of our debts.

We also had a drop that was expressive, and we concluded with 3.2x versus 4.5x the previous trimester. And remember, it's 7%, so this is also a slack that's very expressive, and this also releases 1.4, and we conclude it 5x before the previous trimester. We can continue.

Concluding, nothing changed from the last trimester. Our timeline of amortizations is pulverized in the following years, and we only have amortization for the next year of R$239 million in 2026, million, R$162 million in 2027, and the biggest amortization in the tower of payments only in 2028.

In relation to the transaction, we did not make the decision of how much or when are we going to prepay these debts and distribution of dividends. This is a doubt that made out for all of us, but I think in the next trimester, we are going to have this defined, the strategy and also the allocation of yield and capital of the Company.

These are the financial results, and I have just ended.

Reinaldo Francisco (via webcast):

Congratulations for the results. If you maintain the projections of R$3 million annually, how is the situation in opening and amplifying the shopping?

Thiago Muramatsu:

Good morning, Reinaldo. In terms of ITM, we continue with this projection, which is a cost of this IPTU and maintenance of some securities and condominium. But I think, differently than the previous trimesters, we have had some demands that are interesting there.

And so, just to give the same destination, or even demands that are different, there is an asset that we have worked a lot on, and in the moment, it has generated some engagements. But looking conservatively, we consider this R$3 million of annual cost ideal.

About the second part of your question, the amplification of São Paulo, we have approval of the São Paulo Mayor to do this, and now we are working in technical projects to start, and probably in the 2H24, ideally.

Eduardo Grangeiro (via webcast):

Is there a preview of acquisitions for these investments in the radar of 2024, 2025?

Thiago Muramatsu:

Eduardo, do we have acquisitions? No, but we have been studying acquisitions, and also in investments. We have been working with some options for the two parts, but I think this is the

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Conference Call Transcript

1Q24 Results

Syn (CCPR3 BZ)

May 10, 2024

business as usual. We have always done acquisitions and investments during our life, and so we are going to continue this. But today, we are focused on our time to conclude this transaction.

Operator:

Not having any more questions, the session of Q&A is ended, We would like to give the word to Thiago Muramatsu so that he makes considerations, the final ones of this Company.

Thiago Muramatsu:

I think, as I said in the beginning, that this trimester was a good operational trimester. The 2Q that we are going through has been showing us that it is very active in terms of leasing and sales of stores. And so, we have an expectation that is positive for the 2Q24, and a good part of the energy, Hector's and mine, especially, is now dedicated to conclude this transaction. And so in the next trimester, we will have more news.

Thank you all very much, and have a great day.

Operator:

The video conference of Syn has just ended. We thank all for your participation, and have a great day.

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