Sabesp Q3: Revenue Up 9%, EBITDA Up 14%, Net Income Halved

Adjusted net revenue rose 9% year over year to BRL 6 billion in the third quarter, and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) climbed 14% to BRL 3.6 billion — yet reported net income fell to BRL 1.4 billion from BRL 2.2 billion a year earlier. CFO Daniel Szlak laid out the numbers on Sabesp's (NYSE:SBS) third-quarter earnings call, attributing the profit drop to a non-recurring BRL 1.5 billion court-order gain booked last year and BRL 380 million in higher interest expenses tied to debt funding the investment program. Adjusted net income came in around BRL 1.1 billion. The EBITDA margin expanded to 61.2% from 58.6%. The bottom line: operations are accelerating, but financing costs are biting.

What's driving revenue?

Tariffs did the heavy lifting. Price contributed 7.7 percentage points of revenue growth, backed by a 10.6% rate phasing and partly offset by higher refunds, Szlak said. New connections added 2.2 percentage points, meter upgrades 0.4 points, while lower per-capita consumption and customer mix dragged the other way.

The volume picture: water production totaled 796 million cubic meters, down 1.6%, which Szlak tied to heavier rainfall from Super El Niño. Active connections reached roughly 9.5 million for water and 8.3 million for sewage, each up 0.1%. More than 2 million units now access discounted rates, up about 15%, with the CadÚnico social tariff and category mix producing a BRL 44 million mix impact in the quarter.

On costs, personnel expenses fell 22% on a 3.4% headcount reduction, while power costs jumped 37% on inflation, new ANGRA charges and pricier generator use. Sabesp bought 89% of its power on the free market, up 13 percentage points year over year. Cash generation held pace: operating cash flow rose 14% to BRL 2 billion. Pricing, not volume, is carrying growth right now.

How fast is capital spending running?

Sabesp invested BRL 4.5 billion in the quarter — up 14% from a year ago and 21% from Q2. Year-to-date capex hit BRL 12 billion, and the contracted backlog rose to BRL 44 billion through 2029. Szlak reaffirmed full-year guidance of BRL 18–20 billion, saying spending would more likely land near the lower end.

CEO Carlos Piani said no restrictions are holding back spending, though revised safety procedures and an SAP system migration slowed activity during the year. Unitization — putting completed assets into service — decelerated during the migration but is recovering; October's volume nearly matched the entire third quarter. Sabesp expects to unitize roughly two-thirds of 2026 capex within the year, covering both work in progress and new spending. The universal access program spans four contracting waves across 375 cities, while Integra Tietê carries BRL 23 billion in planned investment for 2023–2029, now 69% contracted and 39% executed. The capex machine is running, with an SAP hiccup mostly behind it.

What about customers, safety and debt?

Piani reported 36 new branches and 78 self-service kiosks deployed in 2026. Average branch wait times fell from nearly 14 minutes in April to just over three minutes in September. Ombudsman and critical-channel complaints dropped 51% between March and September; Procon complaints fell 46%. The commercial plan cost about BRL 180 million in Q3 — BRL 80 million non-recurring, BRL 100 million recurring, of which BRL 70 million carries tariff coverage the company expects to recover in the 2028 adjustment. The lost-time injury frequency rate fell 67% year over year, with field inspections up 2.6 times; Sabesp plans roughly BRL 41 million in AI-based monitoring investment through 2029.

Gross debt stood at BRL 46.4 billion, net debt at BRL 38.6 billion — 2.7 times EBITDA — against BRL 7.9 billion in cash. Including October's signed A/B loan proceeds, cash would have been BRL 12.8 billion, enough to cover amortizations through 2029, Szlak said. Because most debt tracks Brazil's CDI rate, a 100-basis-point Selic rise trims net income by about BRL 200 million. Sabesp has raised BRL 40 billion since privatization and expects to raise less next year as amortizations shrink and tariffs rise, with the local market its primary funding channel. Liquidity is covered; the rate sensitivity is the number to watch.