Companhia de Saneamento de Minas Gerais (CSMG3) Q2 2025 earnings summary

Executive summary

• Q2 2025 saw net revenue rise 2.1% year-over-year, but net income fell 11% due to higher costs, depreciation, and lower water consumption, while investments in 1H25 reached BRL 1.2 billion, up over 31% year-over-year.

• Operating cash flow was robust at BRL 554 million, and credit ratings were maintained at AAA by Moody’s and Fitch.

• Dividends and interest on equity for 1H25 totaled over BRL 344.9 million, with further payouts scheduled for Q3 2025.

• Strategic initiatives included restructuring, zero-based budgeting, and a Shared Services Center to drive efficiency.

• Record-low default rate of 2.83% and improved water loss rate to 37.6% were achieved.

Financial highlights

• Net revenue grew 2.1% quarter-on-quarter and year-over-year, despite a 6.4% average tariff increase and lower consumption.

• EBITDA margin declined to 38.0% from 41.5% in 2Q24, impacted by lower volume and non-recurring expenses.

• Net income dropped 11% year-over-year, mainly due to higher depreciation and lower EBITDA.

• Operating cash flow remained strong, supporting high CapEx levels.

• Depreciation and amortization rose 19.8% year-over-year due to asset incorporations.

Outlook and guidance

• Multi-year investment plan targets BRL 2.5 billion in 2025 and BRL 3.2–3.8 billion annually from 2026, focusing on universalization, quality, and efficiency.

• Leverage is expected to approach 3x as investments ramp up, with a solid capital structure and long-term debt profile (average term of 8 years).

• 3rd periodic tariff review underway, with WACC preliminarily increased to 9.152% for 2026–2029 and new tariffs effective January 2026.

• The company is confident in meeting universalization goals for water and sewage coverage within legal deadlines.