Equatorial’s Q2 Profit Tumbles 83.5% as Debt Costs Bite

Brazil · Business

The core distribution business actually grew, with revenue up and EBITDA steady. So this is really a balance-sheet story about the price of a long acquisition spree, not an operating stumble.

Equatorial Energia, one of Brazil’s largest electricity distributors, saw its adjusted second-quarter profit fall by more than four-fifths. Yet the drop had almost nothing to do with delivering power.

And almost everything to do with the interest bill on a fast-growing debt load.

What Equatorial reported

Equatorial posted adjusted net income of R$110 million, about US$20 million, for the second quarter of 2026. That is down 83.5% from the same quarter a year earlier, a startling headline for a steady utility.

For a regulated distributor with millions of customers, earnings of this kind rarely swing so violently on the business itself. The number that shocks, in other words, is not the number that tells the story.

The core business actually grew

Strip away the accounting noise and the day-to-day operation held up well. Net revenue rose 10.2% to R$13.7 billion, roughly US$2.54 billion, helped by higher consumption across its networks.

Adjusted EBITDA, a cleaner read on core profitability, was practically flat at R$2.9 billion, about US$540 million.

Where the profit really went

The damage was done below the operating line, in the financial result. Net financial expenses jumped 23.7% year-on-year, pushing the financial result to a negative R$1.67 billion, around US$309 million.

In plain terms, the interest Equatorial pays on its borrowings swelled far faster than its earnings.

Why the debt bill climbed

Two forces pushed the interest bill higher at the same time. The company carries more debt than a year ago, and high Selic rates and inflation have kept that debt expensive.

For a group that borrows heavily to grow, higher rates land straight on the bottom line. The core operation never had to falter for reported profit to shrink this much.

An acquisitive utility

Equatorial has spent years buying distribution networks, transmission lines and renewable projects across Brazil. Most recently it took a 15% stake in water utility Sabesp for about R$6.9 billion, roughly US$1.28 billion.

That expansion builds a bigger company, but it is financed with debt that must be serviced every quarter. When money was cheap the strategy looked shrewd, and with rates high the same debt now bites harder.

The debt in numbers

By the end of June, adjusted net debt stood at R$51.8 billion, about US$9.6 billion. Gross debt was higher still at R$63.7 billion, roughly US$11.8 billion.

Leverage finished the quarter at 3.1 times EBITDA, a level the company still describes as manageable.

Adjusted profit versus the reported loss

There are two profit figures this quarter, and they point in different directions. The R$110 million is the adjusted figure that strips out one-off items; on a reported IFRS basis.

Equatorial booked a net loss of R$170 million, about US$31 million. Neither number is wrong, they simply answer different questions about the same three months.

The renewables soft spot

One operating area did disappoint investors this quarter. The renewable energy segment came in below expectations, adding to the cautious mood around the results.

It was a reminder that even a diversified utility has moving parts that do not all fire at once.

What it means for investors

For shareholders, the message is to look past the profit line to the cash-generating core. Revenue and EBITDA show a business still growing and still throwing off healthy cash.

The pressure is financial, and it eases only when debt falls or interest rates come down. None of that changes the fact that Brazilians kept using more of the power the company sells.

What to watch next

The key things to follow are the direction of the Selic rate and the pace of deleveraging. A lower benchmark rate would cut the interest bill quickly, given how much of the debt tracks it.

Progress on the Sabesp stake will also shape how the market judges the acquisition spree.

Frequently Asked Questions

How much did Equatorial earn in Q2 2026?

Adjusted net income was R$110 million (about US$20 million), down 83.5% from a year earlier. On a reported IFRS basis the company posted a net loss of R$170 million.

Why did Equatorial’s profit fall so sharply?

Mainly a worse financial result. Net financial expenses rose 23.7% as the group’s debt grew and interest rates stayed high, while the core business kept growing.

Did Equatorial’s core business shrink?

No. Net revenue rose 10.2% to R$13.7 billion and adjusted EBITDA was roughly flat at R$2.9 billion, so operations held up.

How much debt does Equatorial carry?

Adjusted net debt was R$51.8 billion (about US$9.6 billion) at the end of June, leaving leverage at 3.1 times EBITDA.

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