Brisa Steps Up Spending Cuts as Toll Revenue May Miss 2011 Goal

Brisa-Auto Estradas de Portugal SA, the country’s biggest toll-road operator, plans to step up cost cutting as traffic and toll revenue in Portugal may miss its target this year, Chief Executive Officer Vasco de Mello said.

Toll revenue at the company’s main concession may miss the March forecast of a 2 percent to 3 percent gain, Mello said in a phone interview yesterday. Brisa is focusing on “reducing expenditures” to offset worsened macroeconomic prospects, Mello told analysts in a conference call late yesterday.

Portugal, which in May accepted an external-aid package from the European Commission and the International Monetary Fund, forecasts the economy will shrink 2.3 percent this year and 1.7 percent in 2012. Brisa, based near Lisbon, has been cutting costs by installing automated teller machines on highways and limiting spending on maintenance and consultants. It raised money last year by selling a stake in a Brazilian company.

“Our expectations have to be adjusted to these new macro variables,” Mello said. “Brisa will maintain cash generation capacity under this very difficult macroeconomic environment.” Mello told analysts he will soon announce details of a program to further cut costs and investments next year. In the first half, costs declined 8 percent at the operator’s main concession.

Cash Flow Outlook

The company expects earnings before interest, taxes, depreciation and amortization minus capital spending of at least 350 million euros ($503 million) this year, Mello said. Ebitda excluding capital spending was 345 million euros last year, the company said in a presentation yesterday.

In the first half, sales rose 2.2 percent to 323.7 million euros, and toll revenue declined 1.7 percent to 261.7 million euros, the company said in a statement. Ebitda dropped 1.2 percent to 221.8 million euros.

Brisa shares have fallen 38 percent this year, giving the company a market value of 1.94 billion euros. That’s the fourth-biggest decline in Portugal’s 20-stock benchmark index.

Brisa is looking at opportunities in India and Turkey after selling its stake in Companhia de Concessoes Rodoviarias SA, Brazil’s biggest toll-road operator.

The credit rating of the company’s main concession in Portugal, Brisa Concessao Rodoviaria, is under review by Moody’s Investors Service and faces a possible downgrade to so-called junk status, after it was cut to Baa3 on July 18. Moody’s cut Portugal’s sovereign debt to Ba2, a junk rating, on July 5.

Dividend Plan

Brisa’s plan to pay a 31 euro-cent-a-share dividend for the next four years won’t be at risk even if Moody’s downgrades the concession, Mello said. Brisa has cash reserves of 500 million euros available to pay dividends after the sale of Brazil’s CCR, he said. It has paid 31 cents a share each year since 2008.

Mello said the downgrade wouldn’t affect the company’s expansion outside Portugal as investments in new projects will be “capital-light,” through ventures with local operators.

Brisa still plans to sell bonds after failing to do so in the first half, Mello said.

“We are prepared to act as soon as market conditions are acceptable,” he said. In the meantime, the company has been renewing its short-term credit lines and considering medium-term credit lines, he said. BCR has a cash position of 160 million euros and generates free cash flow close to 200 million euros per year, he said.

The company expects to complete a share buyback program this year, giving it a 10 percent stake in its own shares, up from about 7.2 percent now, Mello said.

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