Annual Report 2002
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NEW WAYS AND GROWTH FOR ALL Profile Companhia de Concessões Rodoviárias (CCR) is the largest motorway concessions operator in Brazil. A strategic holding company, CCR, controls five concessionaires and 2002 T manages 1,290 kilometers of motorways, representing 14% of the Brazilian motorways. The revenue generated Companhia de Concessões Rodoviárias by CCR’s concessionaires represents 35% of the sector’s ANNUAL REPOR CCR 2 total revenue in Brazil. CCR’s five concessionaires are: • AutoBAn - (317 km) linking São Paulo to Campinas and Limeira • NovaDutra - (402 km) linking São Paulo to Rio de Janeiro • Rodonorte - (488 km) linking Curitiba to Apucarana, and Ponta Grossa to Jaguariaíva • Ponte - (23 km) linking Rio de Janeiro to Niterói • Via Lagos - (60 km) linking cities in the Lakes Region in the State of Rio de Janeiro The company was founded on September 23, 1998, when five large Brazilian business groups (Andrade Gutierrez, Camargo Corrêa, Odebrecht, Serveng, and SVE) which at the time were all separately managing motorway concessions, decided to come together and transfer their concessions to the new entity, CCR. In 2001, Brisa, the largest Portuguese motorway concession operator joined PROFILE the group of shareholders, as a strategic partner, 2002 contributing its 30 years of management experience and know-how. Companhia de Concessões Rodoviárias CCR manages some of the nation’s most important CCR 3 ANNUAL REPORT motorways, in terms of traffic volume, and has achieved high approval ratings for its operations, providing top quality service with the best cost/benefit ratio to its users. CCR’s concessionaires activities go beyond motorway operation and maintenance. It includes a broad range of services offered to its users, from electronic toll collection Index systems to several types of assistance to motorists and vehicles on the motorways. Profile 2 Shareholder Structure 4 What distinguishes CCR from other concessionaires is its Operational Summary 5 ability to grow. Given its infrastructure and experience, the Highlights of 2002 6 Company is prepared to acquire other concessionaires and Administration 8 Message to Shareholders 10 immediately begin operating them, with the same high Activity Report 14 standards of quality as the ones it already operates. Analysis of Performance 26 CCR is a publicly traded company. Its common shares Stock Market 40 Strategic Management 44 started trading on the Novo Mercado of the São Paulo Human Resources 45 Stock Exchange (Bovespa), on February 1, 2002. To list on Social and Environmental Report 48 the Novo Mercado, the Company adopted strict rules of Motorway Concession Program 54 Awards and Recognition 57 corporate governance that guarantee transparency and Words of Appreciation 59 respect for all shareholders. Financial Statements 61 Addresses 102 Shareholder Structure ANDRADE CAMARGO BRISA ODEBRECHT SERVENG SVE MARKET GUTIERREZ CORRÊA Part. (BR) 16.0% 16.9% 16.9% 12.3% 5.1% 17.0% 15.8% CCR Centralized Related Concessions Services Businesses Shared Engineering SHAREHOLDER STRUCTURE AutoBAn Nova Dutra Ponte Via lagos Rodonorte Parks Services Center Center 100,00% 100,00% 100,00% 100,00% 74.24% 100,00% 100,00% 74.24% 2002 T Companhia de Concessões Rodoviárias In 2002, CCR created two new subsidiaries with the objective of improving service CCR ANNUAL REPOR 4 quality, standardizing processes, and developing more advanced operating controls: • Actua is a “shared services center” that centralizes and coordinates all of the administrative areas of the concessionaires; • Engelog is an “engineering center” that coordinates construction and develops engineering solutions with turn-key contracts, for the other subsidiaries of the group. Controlling Group The control of the capital stock of CCR , representing 84.2% of the companies registered share capital, is held by its original five shareholders, and by Brisa, one of Europe’s main motorway concession companies. Shareholders’ Agreement The controlling group signed a shareholders’ agreement, valid through 2026, which establishes the basis for their partnership, to avoid any potential conflicts of interest. Through this agreement the shareholders commit themselves to voting as a block at the general meetings, according to what was decided at a meeting of the controlling group held ahead of the general meeting. At these meetings, approval is reached by simple majority, except in certain situations that require a qualified majority of 67%. This way, CCR will always have preference over the controlling shareholders and their affiliated companies, when participating in new business in the motorway concession sector. This agreement also allows for the hiring of an independent specialized firm to check on any potential conflict of interest in the commercial relationships between CCR and its controllers. Operating Summary consolidated ve= vehicle equivalent operating indicators 2001 2002 Var. No. of vehicle equivalent in millions 215.1 229.9 6.9 % 300 $5 Average toll per vehicle equivalent in R$ 4.15 4.51 8.8 % $4 Y 250 $3 economic indicators 2001* 2002 Var. 200 $2 Net operating income in R$ millions (a) 870.3 1,000.3 14.9% 150 $1 EBITDA in R$ millions (b) 300.9 286.6 -4.7% Operating margin (1) 34.6% 28.7% -5.9% 100 $0 1998 1999 2000 2001 2002 OPERATIONAL SUMMAR OPERATIONAL EBITDA in R$ millions (2) 441.7 472.2 7.0 % traffic in millions of vehicles EBITDA / total assets 22.2% 20.5% 1.7% toll in R$ Net profits in R$ millions -13.5 -119.5 na 2002 Net profits / net assets -3.8% -23.6% na Free cash flow in R$ millions (3) -81.0 158.9 na $1400 33% Companhia de Concessões Rodoviárias $1200 28% CCR $1000 5 ANNUAL REPORT main figures Dec/01* Dec/02 Var. 23% $800 18% Total assets in R$ millions 1,983 2,302 16.1% $600 13% Net assets in R$ millions 349 506 45.0% $400 Permanent assets in R$ millions 1,649 1,760 6.7% $200 8% $0 3% 1998 1999 2000 2001 2002 financial indexes Dec/01* Dec/02 Var. net revenue in R$ millions Net financial debt in R$ millions 1,178 1,309 11.1 % General liquidity 0,21x 0,30x — $600 Shares 2001 2002 Var. $500 Volume traded Bovespa in R$ millions — 90,1 — $400 Share price appreciation (4) — -58,4% — $300 Share price on 12/30/2002 in R$/share — 7,40 — $200 $100 $0 1998 1999 2000 2001 2002 investments in R$ millions * takes into account new accounting treatment (see following pages) 3000 $18 (1) operating profits = operating profits before the financial results 2500 $16 (2) EBITDA = earnings before interest, tax, depreciation, amortization $14 2000 (3) free cash flow = net profits + financial disbursements x (1 - marginal IT&SC tax) $12 + depreciation + amortization + other non-cash operating expenses - investments 1500 $10 in fixed assets - investments in operating capital 1000 $8 (4) related to the period running from the beginning of negotiations (02/01/2002) $6 to the last session of the year (12/30/2002), based on the closing price 500 $4 na= not applicable 0 $2 jul oct jun feb sep apr dec nov mar aug may shares traded in R$ millions share price in R$ 2002 Highlights Initial public offering (IPO) and start of trading on the Novo Mercado CCR was the first company to list its shares on Bovespa’s Novo Mercado. This event represented the beginning of the new growth period for the Company showing a strong commitment to its new shareholders. On February 1, 2002, CCR’s common shares began trading on the Bovespa, under the ticker CCRO3. Restructuring and HIGHLIGHTS OF 2002 consolidating the motorway management model 2002 The organizational restructuring, which began in August T 2002, transformed CCR into the strategic controller of all its concessionaires. The planning, finance, engineering and Companhia de Concessões Rodoviárias service departments were centralized so that the CCR ANNUAL REPOR 6 concessionaires could focus on their core business: operating motorways. The first objective of this restructuring was to establish a motorway management model based on the standardization of all processes, thus obtaining new synergies, more agile decision making, increased volume, efficiency, and better quality of the services provided. This way, CCR prepared itself to grow and acquire new concessions, while also strengthening its corporate governance practices. Impact of the Real devaluation against the US dollar The increased risk aversion on the part of the international financial system, especially after the scandals that occurred in large US corporations, has caused international banks to suspend their commercial lines of credit to emerging economies, thus affecting the flow of foreign currency to Brazil. In addition, the economy suffered from uncertainties surrounding the election, the changing government and the fear that the Argentine crisis would spread. These factors pushed up the country-risk index to record levels and contributed to the destabilization of the financial and foreign exchange markets. The result was a steep devaluation of the Real against US dollar, which pushed internal costs and wholesale prices up, and negatively affected CCR’s results, since a portion of the Company’s debt is in US dollars. Change in accounting treatment In November 2002, with the permission of the Comissão de Valores Mobiliários (CVM or Brazilian Securities and Exchange Commission), CCR changed the accounting treatment of the financial obligations of two of its concessionaires, AutoBAn and Via Lagos. This change had a positive and significant impact on CCR’s 2002 results. Achievement of all operating goals Despite the complex macroeconomic and political