Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp NYSE: SBS reported higher first-quarter 2026 revenue, EBITDA and net income, while management said the company continued to accelerate investments tied to its universal access commitments and operational transformation.
Chief Financial Officer Daniel Szlak said adjusted net revenue rose 11% year over year to BRL 6 billion. Adjusted EBITDA increased 26% to BRL 3.8 billion, with margin expanding to 62.9%, while adjusted net income climbed 32% to BRL 1.5 billion. Reported net income was BRL 1.7 billion, up from BRL 1.5 billion a year earlier.
Szlak said the figures presented were for SABESP only and did not include MI’s figures, noting that for the quarter the company had consolidated only the balance sheet.
Revenue Lifted by Tariffs and Commercial Initiatives
Management attributed the 11% increase in adjusted net revenue to pricing, volume and mix effects. Szlak said price contributed 12%, reflecting the latest tariff increase implemented in January, including a 9.1% phase-in from last year’s bills invoiced in 2026, as well as an additional 2.8% gain from commercial initiatives, particularly the termination of large-client contracts.
Volume contributed 2.4%, with customer-base expansion partly offset by lower consumption per capita due to weather effects. Mix reduced revenue by 3.4%, reflecting the expansion of subsidized tariff programs.
Subsidized tariffs now cover more than 2 million connections, up 23% year over year. Szlak said the programs are aligned with SABESP’s social mandate and are covered within the regulatory framework.
Water production totaled 778 million cubic meters in the quarter, down 4.6% from the year-earlier period. Szlak said the decline reflected a milder summer, with average temperatures 3.3 degrees Celsius lower than last year, as well as night pressure management implemented for about 10 hours per day under SP Águas’ operational rule to improve system resilience.
Costs Decline as Efficiency Measures Take Hold
SABESP said adjusted EBITDA growth was supported by higher revenue and cost discipline. Szlak cited gains in general and administrative expenses, including a BRL 30 million past-due settlement with one of the cities served by the company, and lower power expenses as the free market accounted for 86% of total consumption.
Personnel costs declined 26% year over year, reflecting a 13% reduction in average workforce to 8,800 employees and a more favorable job and salary mix. These measures more than offset 5.5% wage inflation in the period.
Szlak said net financial expenses increased as expected, due to higher interest rates and higher average debt to fund the company’s capital expenditure program. The impact was partly offset by lower income tax expense, helped by deductions from interest on capital payments during the quarter.
Investment Program Advances
SABESP continued to ramp up its investment program, with first-quarter CapEx described by management at roughly BRL 3.7 billion to BRL 3.8 billion, about 31% higher than a year earlier. Chief Executive Officer Carlos Piani said the company had a CapEx backlog of BRL 39.8 billion from April 2026 through 2029.
Szlak said SABESP has already delivered a large share of its multiyear universal access targets for 2024 through 2026, including 87% of its water connection goal, 77% of its sewage collection goal and 71% of its sewage treatment target.
Among major projects, the company said phase one of its Countryside Universal Access Program is underway, with 11 projects involving BRL 5 billion in investments in execution. SABESP also launched phase two tenders for eight additional projects totaling BRL 5.4 billion. The Integra Tietê program advanced with the expansion of the Barueri Sewage Treatment Plant, a BRL 5.7 billion project expected to increase capacity by 41% and benefit about 4 million people by 2029.
Asked about the expected CapEx disbursement curve, Szlak said spending typically starts slower in the first quarter and ramps up through the year. He also said SABESP expects unitization to be about two-thirds of CapEx annually in the first two or three years of the cycle, with the trend reversing in the final two years.
Balance Sheet and Regulatory Priorities
At the end of March, net debt stood at BRL 32.5 billion. Szlak said SABESP’s average cost of debt remained around the benchmark rate and that average debt maturity had been extended to 6.3 years. About 64% of debt matures in 2031 or later. The company ended the quarter with BRL 19.2 billion in cash, which management said was enough to cover more than five years of debt service.
Net debt to adjusted EBITDA was reported at 2.4 at quarter-end. SABESP also reported trailing ROIC of 11% and ROE of about 17%.
Piani said one of SABESP’s main challenges in 2026 is implementing new regulatory accounting principles, including a new regulatory asset base methodology. He said the company expects to conclude the work by year-end and plans to submit recommendations to ARSESP’s public consultation on the DRC methodology by May 13.
On large-user discount policies, Piani said SABESP expects to submit a policy to ARSESP in the coming weeks and hopes for approval, with any adjustments, by the end of the quarter. He said the policy would likely become valid for consumers in the second half of the year and could affect second-half results, with compensation occurring two years later under regulation.
Customer Service, ESG and Growth Questions
Piani said SABESP continued to advance its digital transformation, including the go-live of SAP S/4HANA. The company said 10.5 million customers use its digital payment channels, its WhatsApp platform averages 2.8 million interactions per month, and its app maintains a 4.6 rating with about 1.5 million monthly interactions.
On ESG, Piani said SABESP remained in the ISE B3 index for a second consecutive year and received a B rating in the CDP Climate Assessment in January, improving from the prior year.
During the question-and-answer session, management said revenue assurance remains a key focus, including meter replacement, collection efforts, workflow changes and stricter policies for late payment. Piani said SABESP is balancing the pace of these actions with customer service capacity as call center, branch and ombudsman processes are redesigned.
Asked about potential participation in Copasa’s privatization process, Piani said SABESP would register and participate. He also said partnerships are welcome for major opportunities, and that Equatorial would be “a good partner” if SABESP decides to move forward, though he did not confirm a partnership.
On broader capital allocation outside São Paulo or outside Brazil, Piani said SABESP has a fiduciary duty to evaluate opportunities but is not seeking a major transaction that would change its risk profile. He said the company is still early in its transformation and would consider opportunities only where the risk-reward relationship makes sense.
About Companhia de saneamento Basico Do Estado De Sao Paulo - Sabesp NYSE: SBS
Companhia de Saneamento Básico do Estado de São Paulo (SABESP) is a Brazilian utility that provides water supply and wastewater collection and treatment services. As the principal sanitation company serving the state of São Paulo, SABESP operates a wide range of infrastructure spanning water capture, treatment plants, distribution networks and sewage systems. The company’s activities support residential, commercial and industrial customers and are focused on delivering potable water, ensuring water quality and expanding access to sanitation services.
SABESP’s service offering includes the operation and maintenance of water treatment and sewage treatment facilities, network expansion and rehabilitation, meter reading and billing, customer service and environmental programs aimed at improving sewage treatment rates and protecting water resources.
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