CCR S.A. (Publicly-Held Company) Individual and Consolidated
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CCR S.A. (Publicly-held Company) Individual and Consolidated Financial Statements for the Years ended December 31, 2019 and 2018 and Independent Auditors' Report on the Financial Statements CCR S.A. (Publicly-held Company) Financial statements as of December 31, 2019 Contents Management Report 3 - 18 Independent auditors’ report on individual and consolidated financial 19 - 25 statements Balance sheets 26 - 27 Statements of income 28 Statements of comprehensive income 29 Statement of changes in equity - Individual 30 Statement of changes in equity - Consolidated 31 - 32 Statements of cash flows - Indirect method 33 - 34 Statements of value added 35 Notes to the financial statements 36 - 188 2 Management Report 1. About the Company 1.1. To the shareholders It is with great pleasure that we submit for your appreciation the Management Report and the Individual and Consolidated Financial Statements of CCR S.A. for the year ended December 31, 2019, together with the Independent Auditors' Report. 1.2. Presentation CCR is the holding company of the CCR Group and its corporate purpose allows it to operate in highway, urban road, bridge, and tunnel concessions, in addition to subway, airport, water, and telecommunications infrastructure sector and other related sectors, as well as to hold participation in other companies. CCR was created as the result of a strategic decision of its founding shareholders, to focus corporate efforts on a single company, improving the performance of each concessionaire by means of synergies and focus on excellency in operations. Companies in which CCR directly and/or indirectly holds control or control jointly held with third parties are listed in note 1 to the Financial Statements - Operating report. In order to expand its field of business, CCR plans to bid on new highway, urban road, and airport concessions via public bidding processes and Public and Private Partnerships (PPP) of the Federal, State and Municipal Governments, as well as acquire other existing concessionaires. The Company's strategy also includes seeking new opportunities in the foreign market. 1.3. Highlights for the year 2019 On January 11, Concessionária das Rodovias Integradas do Sul S.A., a wholly-owned subsidiary of Companhia de Participações em Concessões, a direct subsidiary of CCR, and the Federal Government, by means of the National Agency of Land Transportation, signed a Concession Agreement to exploit the infrastructure and provide public services of recovery, operation, maintenance, monitoring, upkeep, improvement, capacity expansion, and service-level maintenance of the Road System made up of sections of BR101/290/386/448/RS, in a section of BR-101/RS, between the SC/RS border until the junction with BR-290 (Osório); from BR- 290/RS, at the junction with BR-101(A) (Osório) until km 98.1; from BR-386, at the junction with BR-285/377(B) (to Passo Fundo) until the junction with BR-470/116(A) (Canoas); and BR- 448, at the junction with BR-116/RS-118 until the junction with BR-290/116 (Porto Alegre). The concession will last for 30 years. On March 11, 2019, CCR communicated to its shareholders and the market in general that the International Competition Special Bidding Commission No. 01/2017, promoted by the State of São Paulo, through the Metropolitan Transportation Department - STM, declared that the commercial proposal presented by the Line 15 Consórcio ViaMobilidade, formed by CCR, as the leader (80%), and RUASINVEST PARTICIPAÇÕES S.A. (20%), was the best classified to provide, under an onerous concession regime, public passenger transportation services on Line 15-Silver of the São Paulo subway network, with monorail technology, comprising operation, maintenance, upkeep, improvements, and expansion. Throughout 2019, the Company indirectly acquired additional share in VLT Carioca, corresponding to 42.023% of the capital, for R$ 91,312, and now holds 66.9543% of the investee's capital, as well as its control, from October 7, 2019. 3 On December 6, the Company communicated to its shareholders and the market in general that the Company's Board of Directors approved the 12th issuance of simple debentures, totaling R$ 800,000 thousand, falling due in 6 years. 1.4. Dividends (cash) At a meeting of the Board of Directors ad referendum of the 2020 Annual General Meeting (AGM), held on May 2, 2019, the payment of dividends of R$ 600,000 thousand, corresponding to approximately R$ 0.30 per common share, was approved. On October 15, 2019, a meeting of the Board of Directors ad referendum of the ASM above, approved dividends of R$ 940,000 thousand, corresponding to approximately R$ 0.47 per common share. The amount paid in 2019 totaled R$ 1,540,000 thousand, or approximately R$ 0.76 per share, resulting in a payout of 107.1% in relation to the profit attributable to the parent company's shareholders. 1.5. Outlook and subsequent events CCR continues to operate with synergies captured from administrative optimization of its businesses with positive impacts on its operating margins. Management continues to search for new business opportunities in the national and international, primary and secondary markets, and in highway, urban mobility, and airport concession, as well as in related businesses, in line with its corporate purpose. In the highway sector, there are multiple growth opportunities, as only about 10% of the road network paved throughout the national territory was granted to the private sector, according to the 2018 ABCR Annual Report. According to information released by the Federal Government's Investment Partnership Program (PPI), the bidding or new auction processes for 14 federal highways are ongoing until 2022. On February 21, 2020, CCR communicated to shareholders and the market in general that the Commission responsible for the bidding subject to Concession Auction Notices No. 02/2019, promoted by the Federal Government, through the National Agency of Land Transportation, declared that the winning proposal was the one presented by the Company regarding the concession to exploit infrastructure and the rendering of public services for recovery, operation, maintenance, monitoring, upkeep, implementation of improvements, capacity expansion, and service-level maintenance of the section BR-101/SC, between Paulo Lopes (km 244+680) and the border SC/RS (km 465+100) ("CONCESSION"), pending the award of the CONCESSION. Three federal highways are undergoing a process of preparation a report of responses to contributions made during the public survey period for publication of concession call notices: BR-381/262/MG/ES, BR-163/230/MT/PA, and BR-153/080/GO/TO. In addition, the Public Survey process was initiated for the new auction of BR-116, in the section between Rio de Janeiro and São Paulo (Presidente Dutra highway), including the section of BR-101 between Rio de Janeiro and Ubatuba. In the airport sector, the Federal Government announced that the 6th and 7th auction rounds should take place to grant to the private sector 6 groups of airports that add up to 40 assets, between 2020 and 2022. In 2019, the Federal Government began studies to sell 49% of Infraero's participation in Guarulhos, Brasília, Confins, and Galeão airports. The process is estimated to take place between 2020-2021. 4 In urban mobility, the Company is mapping opportunities in Brazil and abroad. In São Paulo, the bidding process of Line 7 of CPTM and Campinas TIC (Trem Intercidades) of Campinas are in the final stages of studies for publication of the documents for public hearing. The public hearing for Lines 8 and 9 of CPTM is scheduled for February 27, 2020. Other projects are under analysis, such as the Brasília subway system, whose PMI studies were delivered to the Federal District Government and studies by CBTU and TRENSURB that are being conducted by BNDES. Abroad, the Company participated in the process of expressing interest for the operation of the Quito Metro, whose construction works will be completed in 2020. 2. Strategy and Management 2.1. Corporate governance CCR and its subsidiaries are signatories to the UN Global Compact, especially the initiatives proposed by the Anti-Corruption Thematic Group, and are, therefore, committed to adopting the Integrity Handbook in the Construction Sector. Our success is based on principles of integrity and respect, our values described in the Code of Ethical Conduct and Clean Company Policy, in line with the guidelines defined by the New Market. We constantly reinforce, with the support of Senior Management, the continuous disclosure and updating of the Compliance Program, created in 2015, by means of which we guide all employees, shareholders, managers and third parties, at all levels, on the need to develop sustainable business in line with internal policies, standards, and the legislation of the countries in which they operate. We constantly seek the best market practices, fighting corruption, bribes, kickbacks, or facilitating payments. In this sense, the Program contains several policies and standards that address third-party risk assessment, donations and sponsorships, gifts and presents, interaction with public agents, and conflicts of interest. We constantly conduct training and communication campaigns, aiming at engaging everyone in the Compliance culture. When monitoring compliance with these initiatives, CCR and its subsidiaries monitor the Compliance Program by mapping any non-conformities, which will be subject to disciplinary measures, if applicable. CCR is committed to the continuous improvement