Investor Relations Report

Transcription

1 Investor Relations Report WARNING: Some of the information contained in this report is based on analyses and forecasts that depend, for their fulfillment, on macroeconomic factors that are beyond Bradespar s control. Therefore, the data on this document cannot be interpreted by shareholders, investors, analysts or by the market in general as a guarantee of future financial gains or remuneration of any kind whatsoever.

2 São Paulo, May 26, 2003 Bradespar [BOVESPA: BRAP3 (common), BRAP4 (preferred); LATIBEX: XBRPO (common), XBRPP (preferred); LSE: BSRPF (preferred)] an investment company with over R$ 3.9 billion worth of interest stakes in invested companies, announced its results for the first quarter 2003 (1Q03). The following financial information, unless otherwise noted, consolidates exclusively the results of the non-operating companies (Bradespan, Elétron, Rubi, Millenium and Babié) in order to allow a better comprehension of Bradespar s results. Such information is expressed in Brazilian Reais ( Real or Reais ), pursuant to Brazilian Corporation Law. INVESTMENTS PORTFOLIO BRADESPAR 36.6% V 30.1% T VALEPAR 52.3% V 33.6% T VALE DO RIO DOCE 33.3% V/T VBC PARTICIPAÇÕES 45.3% V/T CPFL ENERGIA 15.8% V 6.4% T NET HIGHLIGHTS Bradespar reported R$ 23.5 million in operating income for the first quarter CVRD s (parent company) net income was R$ billion in 1Q03, which is the third biggest quarterly profit in the history of CVRD. Gross operating income was R$ billion and EBITDA was R$ billion, with a 47.5% margin. NET s net revenues were R$ million in 1Q03 and consolidated EBITDA was R$ 67.5 million, with an EBITDA margin of 23%, influenced by the lower programming costs and the non-recurrence of accounting provisions made in the previous quarter. All those reasons, plus the reduction in financial expenses, caused net losses to reach R$ 76.5 million, a 75% drop compared to last quarter. VBC Participações reported in 1Q03 losses of R$ million, due mainly to net financial expenses of R$ 42.8 million and the net negative result of equity in the income of subsidiaries of R$ million. 2

3 MANAGEMENT S DISCUSSION AND ANALYSIS The first quarter 2003 was marked by the reversal in the sovereign risk perception in relation to Brazil. The scenario in the quarter presented a deceleration in inflation, Real appreciation compared to the Dollar and reduction in interest rates for foreign loans. However, in spite of all those positive aspects, the basic interest rate remained unaltered, waiting for consistent prospects of lower inflation rate to really go down. Two important events in the quarter marked Bradespar s operations as an Investment Company, namely: The partial acquisition of Sweet River s interest stake held in Valepar. On , there was the financial settlement of the put option exercised by Sweet River, in the total amount of R$ million.therefore, the indirect interest of Bradespar in Valepar s total capital became 30.06%, the equivalent of a 10.11% interest stake in the total capital of Vale do Rio Doce. Execution of an agreement with Mitsui for the purchase and sale of stocks. On , an agreement for the purchase and sale of stocks was executed with Mitsui & Co. Ltd., providing for the disposal of up to 19,607,357 common shares issued by Valepar, the equivalent of 15% of total capital, for the amount of up to US$ million, corresponding to US$ per share. Litel (company controlled by Previ) owns the right of joint sale of 6,643,814 shares, which, if exercised, may reduce the portion to be sold by Bradespar to 12,963,543 shares (the equivalent of approximately 10% of Valepar s total capital). With regard to the behavior of Bradespar s share prices on the stock market in the first quarter 2003, we could observe a 14% appreciation of our preferred shares, while the IBOVESPA suffered a devaluation of 4%, as shown in the following chart. Stock Quotes behavior in 1Q03 compared to IBOVESPA (The three stocksare base 100 in on Jan/02/03) 02,2003) 2003) BRAP BRAP 3 90 IBOVESPA /02/03 02/02/03 03/02/03 3

4 When we analyze the premium/discount of Bradespar's market value in relation to the market value of its stake in CVRD and Net (see graph below), disregarding, for simplification purposes, any control premium for such companies and the value of its indirect stake in CPFL Energia, we realize that in early 2002 Bradespar had nearly a 40% premium, while by year-end it had a discount of around 40%. In March 2003, the Company was negotiated without premium or discount, indicating that the market still undervalues the shares, and that, Bradespar still has upside potential. 60% 40% 20% 0% -20% -40% Premium/Discount Over Value of Interest Stakes in CVRD and Net -60% 1Q02 2Q02 3Q02 4Q02 1Q03 Bradespar Market Value(3/31/03) Bradespar Stake (in million) Shares s Price R$ Number of Shares Outstanding Market Value (R$M) % Market Value Market Value Market Value (R$) (US$) (EUR$) CVRD ,559,056 34,700, % 3,508,236 1,046, ,558 NET ,028, , % 36,528 10,894 9,980 VBC * % Total 3,544,764 1,057, ,539 Bradespar Firm Value Number of Capital Market value % of total Shares s Price R$ Shares Structure Outstanding (R$) Market value Market value (US$) (EUR$) Preffered Shares 49.14% , , , ,512 Common Shares 50.86% , , , ,116 Market Value % 1,507,282 25% 887, , ,628 (+) Net Debt ** 75% 2,639, , ,224 Firm Value 100% 3,527,610 1,052, ,852 Difference between Bradespar Firm value and Asset value (17,154) (5,116) (4,687) * Since we don t have VBC price reference, we are desconsidering Bradespar Stake in VBC ** Net Debt includes Bradespar debentures deducted by cash, financial Investments, investments, and short-term and accounts receivables. in short term. 4

5 COMMENTS ON THE OPERATING SUBSIDIARIES CVRD (parent company) Iron ore and pellets sales volume reached million tons, a 7.7% drop compared to 4Q02, due to: (i) seasonality, since statistically speaking, the first quarter is the weakest in the year; (ii) the months of January and February particularly had heavy rains, causing operating problems in one of the mines and also in the iron ore logistics. Gross revenues in 1Q03 showed R$ billion, 9.6% lower than in the previous quarter. Its composition by product was the following: iron ore 61.7%, pellets 20%, logistics 13%, potassium 2.9%, gold 1.3%, and others 1.1%. CVRD achieved a net income of R$ billion in 1Q03, 24.5% lower than in 4Q02, mainly impacted by foreign exchange rate fluctuations on its net liabilities in foreign currency. EBITDA was R$ 1,148 million, dropping 15.5% in relation to 4Q02, due to the fall of R$ 255 million in net revenues and the increase of R$ 115 million in other operating expenses. NET Serviços Net Serviços is completing the revision of its sales and customer retention processes. Among the actions taken during the process, we highlight the creation of Net Clube, a customer loyalty program that rewards subscribers, stimulating them in the use and purchase of services offered by the company, the creation of an exclusive customer service center for the sale of pay-per-view programs and the return of publicity of its products on the media, whose sales impact will be better assessed in 2Q03. Pay-tv subscriber base dropped 1.6% in the first quarter compared to the previous quarter, falling from 1,323.3 thousand to 1,301.9 thousand. An increase of 4.3% was recorded in broadband Internet access compared to the previous quarter, totaling 58.1 thousand paying subscribers, while in corporate networks there was a reduction of 1.3%, to 4.1 thousand stations. NET s net revenues were R$ million in 1Q03 and consolidated EBITDA was R$ 67.5 million, with an EBITDA margin of 23%, influenced by the lower programming costs and the non-recurrence of accounting provisions made in the previous quarter. All those reasons caused net losses to reach R$ 76.5 million, a 75% drop compared to last quarter. CPFL Energia Bradespar indirectly holds 15.1% of voting and total capital of CPFL Energia, through its 33.33% interest stake in VBC Participações. CPFL companies do not present their results in a consolidated fashion in the quarter. Therefore, the parent company s results were used for the consolidation in Bradespar. CPFL Energia reported a net negative result of R$ million in the quarter, fundamentally impacted by net financial expenses of R$ million and by the negative result in the equity of its subsidiaries of R$ million. Despite such result, the recently completed restructuring has already brought synergy gains, with the rationalization of resources and a higher operating integration. 5

6 BRADESPAR S FINANCIAL RESULTS For a better analysis of its Financial Statements, Bradespar presents, as a supplement to its balance sheet, the consolidation of results of its non-operating companies only: Bradesplan, Babié, Millennium, Rubi and Elétron (see chart below). Bradespar understands that such financial statements are the most representative of its financial position, given that they consolidate the companies whose purpose is to serve as a vehicle of ownership interest in operating companies, and therefore they evidence more clearly Bradespar s assets and liabilities. BRADESPAR 99.9% V/T 4.8% V/T BRADESPLAN 100% V/T RUBI 85.6% V/T ELÉTRON 100% V/T MILLENNIUM 95.2% V/T BABIÉ Operating Revenues As an Investment Company, Bradespar s operating revenues originate mainly from the equity in the income of its investees. Bradespar s Equity Income was a positive R$ 23.5 million in the quarter. This result arises from the following sum: (i) the positive equity in the income of Valepar in the amount of R$ 73.4 million, already including the negative R$ 24 million relative to the net foreign exchange loss in Millennium, a company controlled by Bradespar and headquartered abroad; and (ii) the negative result in the amount of R$ 49.9 million reported by VBC Participações. Operating Expenses Payroll expenses (R$ 1.9 million) and general and administrative expenses (R$ 1.7 million) in 1Q03, remained almost flat in relation to 4Q02. Goodwill amortization expenses were R$ 25.4 million, corresponding to the R$ 815 million in goodwill relating to Companhia Vale do Rio Doce, which is being amortized by the straight line method over a period of 8 years. Net financial expenses totaled R$ 88.6 million, an 85% increase compared to the fourth quarter, influenced by the growth in indebtedness, as required to fund the purchase of an additional stake in Valepar. Other operating expenses showed an 81% reduction compared to 4Q02, dropping from R$ 78.8 million to R$ 15.2 million, due mainly to the decrease in accounting provisions relative to the ones made in the previous quarter. Such expense in 1Q03 is mainly composed of CPMF (tax) expenses relating to the Valepar stocks purchase operation (R$ 6.8 million) and by the provision for losses with doubtful debtors (R$ 6 million). 6

7 Net Income / (Loss) The Company reported in 1Q03 a loss of R$ million, compared to the last quarter when Bradespar reported a net income of R$ million as a consequence of the effect of Valepar capital increase. Short-term Receivables Due mainly to the investment made in the purchase of an additional stake in Valepar, current assets fell from R$ million to R$ 85.2 million. Investments Investments showed an increase of 29%, changing from R$ 3,054.5 million in 4Q02 to approximately R$ 3,929.4 million due to the purchase of Sweet River s interest in Valepar. Short-term Liabilities The change in the position of short-term liabilities, from R$ million in 4Q02 to R$ million in 1Q03 is due mainly to the provision for excess of liabilities over assets relating to VBC, in the amount of R$ 178 million. Bradespar, in a conservative manner, has chosen to make the provision because VBC continued to report a negative net worth as in the previous quarter. Indebtedness The Company s total debt totaled R$ 2,724.5 million in 1Q03, representing a 47% increase compared to the previous quarter. Such increase is a consequence of the sale of debentures that were held in treasury, in order to fund for the acquisition of Sweet River s stake in Valepar. Cash Flow Bradespar s operating activities in 1Q03 consumed cash in the net amount of R$ million, due mainly to the purchase of Sweet River s stake in Valepar. Such disbursement was partially offset by the sale of R$ million in debentures. RECENT DEVELOPMENTS Payment of Interest on own capital Payment of interest on own capital, of R$ 1.62 per share, totaling R$ million. The payment was made starting on April 30 and it corresponds to the first portion of the minimum payout to the shareholder referring to the year 2003, of US$ 1.04 per share. Bradespar indirectly received a net amount of R$ 53 million. Rubi s Capital Reduction The reduction in capital of Rubi Holdings S.A. was decided at a General Shareholders Meeting on , in the amount of R$ 1,367,698 thousand through the return of capital in assets, represented by 647,862,078 common shares issued by Elétron S.A. to Bradesplan Participações S.A. Babié s Capital Reduction The reduction in capital of Babié Participações S.A. was decided at a General Shareholders Meeting on , in the amount of R$ 1,481,466 thousand through the return of capital in assets, represented by 15,019,621 common nominative shares issued by Valepar S.A., 14,298,346 of which relating to Bradesplan Participações S.A. and 721,275 to Bradespar S.A., which will contribute to the simplification of Bradespar s shareholder structure. 7

8 Advance for Future Capital Increase in CPFL Energia An amount of R$ 800 million was set aside by decision of the CPFL Energia s Board of Directors at a meeting held on March 26, 2003, initially as an Advance for Future Capital Increase and later payment of Capital Stock through the private subscription of shares, the specific terms of which will be the subject of a future decision. The funds obtained from said operation were destined to the payment of Company debts due relating to promissory notes and debentures. Revision of CPFL's (Cia Paulista de Força e Luz ) and RGE's (RioGrande Energia) Tariffs In April, Aneel authorized tariff readjustments for CPFL and RGE. The basic readjustment for CPFL was of 20.21% and RGE's was of 31.20%. In addition to these readjustment, both companies have the right to receive the balance of CVA - Account of Change of Parcel A, being 6.79% for CPFL and 4.87% for RGE. However, following a Federal Government decision, this parcel of CVA will be refunded through a BNDES loan, with Treasury's resources, to be amortized on 2004, when the corresponding increases in tariffs will be effective. As a complementary tariff, Aneel has to homologate the results of the audit determined by it, aiming to assess the companies' assets and, consequently, establish a calculation basis for the appropriate remuneration of shareholders. CONFERENCE CALL Conference Call Date: May 28, 2003 Time: 10:00 PM (Brasília Time) Telephone: Code: Bradespar For more information, please contact: Bradespar S.A. Av. Brigadeiro Faria Lima, º andar São Paulo SP Tel: Fax: bradespar@bradespar.com 8

9 ASSETS CURRENT ASSETS 85, ,892 Cash and cash equivalents 10,733 90,388 Marketable securities 74,125 69,635 Accounts receivable 352 8,869 LONG-TERM RECEIVABLES 225, ,274 Taxes recoverable and carryforwards 136, ,725 Tax credits 84,423 84,423 Others 4,551 2,126 PERMANENT ASSETS 3,930,080 3,055,294 Investments 3,929,415 3,054,584 PP&E / Deferred charges TOTAL 4,241,018 3,440,460 CURRENT LIABILITIES 182, ,678 Provision for excess liabilities over assets 178, ,941 JCP and dividends 616 7,776 Other liabilities 3,333 10,961 LONG-TERM LIABILITIES 2,762,042 1,879,680 Debentures 2,724,473 1,855,238 Others 37,569 24,442 MINORITY INTEREST 198, ,358 SHAREHOLDER'S EQUITY 1,098,058 1,215,744 TOTAL 4,241,018 3,440,460 9

10 OPERATING REVENUES 1 st quarter th quarter 2002 Equity Income 23, ,247 Estrutura.net Net - 2,533 Scopus - - Valepar/CVRD 97, ,935 VBC/CPFL Energia (49,905) (57,659) Millennium Foreign Exchange loss (24,032) Total 23, ,247 INCOME STATEMENTS 1 st quarter th quarter 2002 OPERATING REVENUES (EXPENSES) Operating revenues 23, ,247 Payroll expenses (1,876) (1,816) General and administrative expenses (1,676) (1,760) Amortization of goodwill (25,449) (3,000) Financial income (expenses) (88,580) (47,928) Other operating income (expenses) (15,166) (78,752) OPERATING RESULT (109,238) 711,991 Income tax / Social contribution (1,015) (288) Minority interest (7,433) (76,332) NET INCOME (LOSS) (117,686) 635,371 10

11 OPERATING ACTIVITIES 1 st quarter 2003 Net Loss (117,686) Adjustements to reconcile the net loss to net cash from operating activities Net tax credits carryforwards 1,015 Net monetary variations 92,601 Amortization of goodwill 25,449 Equity income (23,509) Others 7,596 Changes in assets and liabilities Received interest on equity/dividends - (Increase) Reduction on other assets 16,185 Acquisitions of investments (833,555) Divestments - Change in minority interest 7,433 Increase (Reduction) in other liabilities (236) Net Cash from (used in) operating activities (824,707) FINANCING ACTIVITIES Cash Flow - R$ thousands Debentures 752,211 Paid interest on equity/ dividends (7,159) Net Cash from (used in) financing activities 745,052 NET INCREASE (REDUCTION) IN CASH AND CASH EQUIVALENTS (79,655) Cash and Cash Equivalents in the beginning of the period 90,388 Cash and Cash Equivalents in the end of the period 10,733 11