Sabesp Surpasses Estimates with 80% Q1 2025 Profit Surge, Launches Share Buyback

Companhia de Saneamento Básico do Estado de São Paulo (Sabesp), Brazil’s largest water and sewage utility, reported a first-quarter net profit of R$1.48 billion ($259.6 million), an 80% year-over-year jump that trounced the R$1.2 billion ($210.5 million) analyst consensus.

The results, released Monday, revealed broad-based growth fueled by tariff adjustments, cost discipline, and infrastructure investments. Revenue climbed 28.4% to R$8.42 billion ($1.48 billion), driven by a 93.7% surge in construction income to R$2.59 billion ($454.4 million).

Core sanitation revenue also rose 11.7% to R$5.84 billion ($1.02 billion). EBITDA jumped 40.7% to R$3.43 billion ($601.8 million), outperforming the R$2.95 billion ($517.5 million) market expectation.

Executives attributed the margin expansion to eliminating large-client discounts, which added R$893 million ($156.7 million) to revenue, and a 26.7% reduction in operating expenses.

The company’s earnings per share reached R$2.17 ($0.38), up from R$1.20 ($0.21) a year earlier. Sabesp also announced plans to repurchase up to 6.9 million shares (1% of outstanding stock) over 18 months, signaling confidence in its post-privatization strategy.

Sabesp Doubles Capex for Service Expansion

Despite the strong operational performance, net financial losses widened to R$638 million ($111.9 million) due to higher borrowing costs. Capital expenditures doubled to R$2.9 billion ($508.8 million), funding 130,000 new water and sewage connections.

This aligns with Sabesp’s universalization targets to expand services across its São Paulo concession area. Management reaffirmed commitments to reduce water losses by 37% by 2027, a move analysts estimate could save R$873 million ($153.2 million) annually.

CFO Daniel Szlak noted the results reflected “disciplined execution of our infrastructure plan,” while CEO Carlos Piani emphasized Sabesp’s role as “the southern hemisphere’s largest pure-play water utility.”

The company faces mounting pressure to balance growth investments with debt management, as its net debt/EBITDA ratio improved to 2.4x from 3.1x pre-privatization.

Analysts expect further upside from pending tariff adjustments linked to Brazil’s IPCA inflation index, which could add 2.7% annually to regulated revenue.

Shares have gained 18% year-to-date, outperforming the Bovespa index’s 9% rise. Sabesp’s next catalyst will be details of its revised dividend policy, expected after July’s privatization completion.

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