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Executive Summary

Sabesp reported 2Q26 results with adjusted EPS of R$0.33 (down 42.1% YoY from R$0.57) and adjusted net income of R$1,150 million (down 41.2% YoY). While net sanitation revenue grew 6.7% YoY on tariff increases, operating costs surged 24.5% driven by customer service investments, legal comparisons, and chemical inflation. Net debt ballooned to R$34 billion from R$23 billion a year ago, and net financial expenses exploded 809.6% YoY to R$1,076 million, crushing profitability. The company continues heavy capex (R$3.7B in 2Q26, +3.6% YoY) and completed the EMAE acquisition, but the earnings decline and leverage build are the dominant signals.

Key Facts

• 2Q26 adjusted EPS of R$0.33 vs R$0.57 in 2Q25, a decline of 42.1%
• Adjusted net income fell 41.2% YoY to R$1,150 million
• Adjusted EBITDA declined 3.2% YoY to R$3,503 million
• Operating costs and expenses rose 24.5% YoY, driven by services (+39%), general expenses (+977% on legal comparisons), and treatment supplies (+97%)
• Net financial result worsened 809.6% to a loss of R$1,076 million due to higher net debt (R$34B vs R$23B)
• Net debt increased to R$34.2 billion from R$27.8 billion at year-end 2025
• Capex of R$3.7 billion in 2Q26, up 3.6% YoY; R$7.5 billion in 1H26, up 15.6% YoY
• Acquired control of EMAE (energy) and Águas de Castilho during the period

Financial Impact

Adjusted net income down 41.2% YoY to R$1,150 million; adjusted EPS down 42.1% to R$0.33; net financial expenses up 809.6% to R$1,076 million

Risk Factors

• Continued cost inflation in treatment supplies and customer service investments may further compress margins
• Higher net debt and interest expense could pressure earnings if rate cuts do not materialize
• Execution risk on R$20 billion annual capex target and U-Factor universalization goals
• Regulatory tariff adjustments may not keep pace with cost inflation

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Investment Themes

Documents Analyzed

This report is based on 4 SEC documents filed with EDGAR.

US Market Status