Good morning everyone. Thank you for waiting. Welcome to Rumo Conference Call to discuss the first quarter of 2023 results. Today with us we have Mr. Rafael Bergman, CFO and IRO, and Mr. Gustavo Rosa, Investor Relations and Strategic Planning Director. We would like to inform you that during the company's presentation, all participants will be in a listen-only mode. We will begin the Q&A session when further instructions will be given. In case you need any assistance during the conference, please request the operator's help by pressing star zero. We also would like to inform that Rumo's Q&A session will be presented in Portuguese by the company's management, and there will be simultaneous translation to English. This event is also being broadcast live simultaneously on the internet via webcast.
Before proceeding, we'd like to mention that forward statements are based on the beliefs and assumptions of Rumo's management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. All participants should read the disclaimer available on the second page of the presentation. I will now turn the conference over to Mr. Gustavo Marder. Please, Mr. Gustavo, you may proceed.
Good afternoon, and thank you for joining the first quarter 2023 earnings conference call. As usual, let's start with the ESG highlights on page three of the presentation. Reinforcing our commitment to the ESG agenda, Rumo released the 2022 sustainability report on March 20, which presents, among other highlights, advances in the carbon agenda, evolution in the levels of safety and engagement of our employees. The 2022 report is the seventh sustainability report we have published and an important document to disclose the development of this agenda and to monitor the evolution of our long-term goals. On the next slide, we'll present the highlights of the quarter. The outlook for the freight market remains constructed, driven by the record sowing in harvest and a good prospect for the corn crop.
The higher demand for logistics has reinforced the competitiveness of rails with real-term growth in the yields in the auto operations. Our operations close to the Port of Santos were affected by criminal activities, resulting in worse productive and lower than expected volume performance. By the end of the first quarter, the response of public authorities became more effective and helped to reduce the problems in the region, therefore sustaining the perspectives of better volumes going forward. With regards to our expansion in the state of Mato Grosso, we have advanced with licensing process, achieving around 80 km of installation licenses between Rondonópolis and Campo Verde. We also made progress on other important fronts, such as the land acquisition and the construction of a viaduct over the BR-163.
As a subsequent event in reinforcing the material facts we released on April 20, we are assessing a potential corporate reorganization that will promote greater efficiency in the management of Rumo and its subsidiaries, reinforcing Rumo's liquidity. Rumo S.A. will be an important investment vehicle with the construction of the expansion project in Mato Grosso. It's important to maintain a robust liquidity condition in this entity. This simplification will optimize the corporate structure of Malha Norte, an entity that will hold only railway operations. The definition of the exchange ratio is being developed by an independent committee. We'll keep the market informed about any developments in this matter. On the next slide, we'll present the market share performance. The criminal acts around Santos region caused a deterioration in the railroad's productivity in the north operation, directly impacting the volumes transported in the quarter.
A result, Rumo's market share fell to 38% in Mato Grosso and 19% in Goiás, consequently 50% in the port of Santos. In the south operation, heavy rainfall caused a landslide around São Francisco do Sul region, affecting the performance at the port, driving a market share of 21%. On the next slide, we'll detail the operational figures. Despite the improvement in efficiency in the recent years, in this quarter, we saw a decline in operational performance caused by the criminal acts around the Santos port region. We expect to resume this trend of improvement in operational indicators with the normalization of safety conditions in the Santos area. On the next slide, we are going to talk about our operating results. The transported volume fell 11% compared to the first quarter last year.
This drop was substantially driven by North Operation due to criminal acts around Santos Port Area. Consolidated volume for the quarter was 16 billion RTKs. Regarding the performance by segment, the most significant loss was in the North Operation grain segment. I would also point out that in addition to the criminal acts in Santos Region, there was a delay in the soybean harvest in January and seven days of interruption of Malha Paulista at São Carlos region. With the record crop in the Midwest area and the improvement in traffic conditions around the Santos Port, we are expecting better volume performance in the upcoming months. On the next slide, we'll present the revenues and yields per operation. Net revenue grew in all operations 8% in consolidated terms.
Despite the drop in volumes, there was a real term gain in yields in all the operations, reinforcing the margin recovery path that we began in the second half 2022. The competitive environment for 2023 remains constructive, allowing Rumo to continue to seek for a fair value for its services. On the next slide, we'll see the EBITDA per operation. EBITDA reached BRL 1.18 billion, an increase of 18% with an EBITDA margin of 49.5%. Growth of 26% on a like-for-like basis due to the sale of T-16 and T-19 terminals in the fourth quarter 2022. In the North operation on a comparable basis, EBITDA rose 18%. In the South operation, EBITDA more than double. Margins were 54.5% and 39% respectively.
The variable costs were driven by lower transported volumes, an increase of 60% in fuel prices, worse than expected energy efficiency caused by the constraints in the Santos region, and the recognition of approximately BRL 60 million in provisions for take-or-pay obligations. Fixed costs and SG&A expenses were impacted by approximately BRL 25 million in costs associated with the criminal acts in the Santos region. On the next slide, we'll talk about the financial results and net income. The net financial result was a loss of BRL 607 million in the quarter, driven by the interest rates and inflation. I would also emphasize that Rumo's debt profile is mainly exposed to CDI, either contractually or through derivative instruments. Net income for the quarter was BRL 71 million, positively impacted by better yields and margins.
Moving to the next page, we'll present our investments in the quarter and the progress of the expansion project in Mato Grosso. Total investment was BRL 928 million in the quarter, out of which BRL 324 million referred to recurring CapEx. BRL 580 million to expansion projects, and BRL 24 million to investments in the Rumo expansion in the Mato Grosso state. The expansion in Mato Grosso project is currently on its first phase, connecting Rondonópolis terminal to the new Campo Verde terminal. We are advancing according to the plan in the quarter. We highlight that we have obtained 80 km of installation lines, and we are also advancing in the land acquisition front.
As you can see in the right side of the chart, we have concluded the construction of a railway viaduct crossing the BR-163, close to our terminal in the Rondonópolis city. On the next slide, we'll present our indebtedness. Our leverage was 2.2 x net debt to EBITDA by the end of the quarter. For better illustration, the leverage calculation for the first quarter 2023 is on a like-for-like basis, and it does not consider the results of the terminals T-16 and T-19 in the last 12 months. We ended the quarter with BRL 7.3 billion in cash, and maturities in the coming years are less than BRL 1 billion per year. The liquidity position is adequate for the investment cycles that we have just started. On the next slides, we have the market perspectives for soybean and corn.
Brazil should have a soybean crop of 156 million tons, out of which 95 million should be exported. Mato Grosso might produce about 45 million tons, out of which 28 million tons should be exported. Production in Goiás State is estimated at 18 million tons, with 10 millions to be exported. On the next slide, we'll see the perspectives for corn. Corn crop estimates suggest a potential production of 126 million tons, out of which about 49 million tons are expected to be exported. Mato Grosso should produce around 50 million tons and export 29 million tons. In Goiás, production is expected to be around 13 million tons, with 4 million tons to be exported. With that, I conclude my presentation and we are available for the Q&A session. Thank you.
We will now begin the Q&A session. If you have a question, please press star one on your touch-tone phone at this or at any time. If at any point your question is answered, you may remove yourself from the queue by pressing the hashtag key. Questions will be taken in the order they are received. We kindly ask you to ask one question at a time. First question is from Josh Milberg, Morgan Stanley.
Good afternoon, everyone. Congratulations on the results, thanks for the call. My first question is about April volume. What was the benefit from rescheduling volume in February and March? Related to that, what kind of reversal level do you have in terms of take-or-pay provision out of the BRL 60 million we can see for the next few quarters?
If you could also give us some color about the criminal acts and what the government has been doing about that. Do you see that problem as basically having been resolved, or do you think things might go back to how they were before? That's my first question.
Hi, Josh. Good afternoon. Thank you for the question. Let's start with the criminal acts. That problem became a bit more relevant at the end of January, February. We talked about that during the call for the fourth quarter when we also shared the guidance for 2023 that did affect our operation during February and March, as we had reported.
In terms of measures that have been taken, the company has reiterated the measures that are relevant to the company in terms of the recovery when those criminal acts happen, because obviously it affects our productivity when the train has to stop, and it takes a while before we recover that. We have implemented procedures to improve that. As you've mentioned in your question, we did have the support of the Government. The Secretary for Security took some important measures because obviously that's a matter of public security. Our role was to raise the issue so that the authorities could implement the required measures. Those measures are in place. They are still working on it, and it's important that the authorities continue to work on it.
It's a work in progress. Obviously, as those measures become stronger, more robust, and our ability to recover improve, our performance in April can also improve considerably. I wouldn't say there have been no effects. There have been effects. The impact has been a lot less than in the last few months. We're confident that we're on the right track and so is the government in fighting those criminal acts and what they need to do looking forward. As for the sales volumes, this year has relevant volumes for soybean and corn, as Marder said, in each. There are no market issues. We do have a challenge and an opportunity to deliver on our capacity for April. April has had historical records in the North operation.
That is very important to us because it makes us confident that the capacity is there so that we can deliver. That's our challenge in light of the opportunity the market is posing. In terms of the take-or-pay, we did the provisions that were required. The market is very strong this year, we believe that economically speaking, our operations and negotiations will result in a good year for us. We will be able to make the most of market interest. Reversals are a lot less relevant because we have the ability to perform based on what the market is offering with the margins that we have been showing. We've had some very constructive results.
That's great, Rafael. Thank you so much for the very detailed answer. That's very clear. If I might ask another question, please.
Could you talk a bit more about your share losses for this quarter and what they've been through? It's clear that you captured a lot of that in April, but what about the volume that you were not able to transport? Have you been seeing or do you expect to see any movements from traders that have their own terminals in the North Arc? Do you think these trading companies might add more capacity, not only based on your capacity limitation in the last few semesters, but also based on the very high yields we see now?
Well, Josh, starting with market share, that's circumstantial, that's not structural. You know, our productivity issues, the issues that we had in February and March, and also January was a tough month for us. We had to stop the North operation for seven days.
As you said, April is already showing our availability and capacity to provide good service to our clients. In terms of creating additional capacity, we trust that our solution is very competitive, and we are offering the best we can to our clients. Obviously, population is growing, the country is growing, and the demand for logistics also tends to grow. We see it with naturalness, and our position is to provide reliable and competitive services to meet our client and our partner needs.
That's great, Rafael. Thanks again, and have a great afternoon.
The next question is from Guilherme Mendes from JP Morgan.
Hi, good afternoon, Rafael, Gustavo. Thank you for taking my questions. I have a couple of points. First, in terms of pricing, your performance in the first quarter was very strong, road freight prices should continue to increase.
You close, I think, okay, when prices were less than they are right now. Assuming that in the second quarter, because you've practically completed the first quarter, there are negotiations before the end of this year and for 2024. Is there any room for the company to bring forward the pricing negotiation and to make the most of the higher levels, especially considering the port side of things? That's the first question. The second one has to do with taxes. Will there be an immediate impact from what the government has been discussing? Do you see anything more relevant happening in terms of taxes in the second half?
Thank you for the questions, Guilherme. I'll start with the second one. I think it's too early to say anything about the tax reform and the impact that might have on the company.
What I can say is that we continue to focus on having a competitive and efficient solution, and that we are ready for whatever comes. Our business is about long-term investments in infrastructure. There are still opportunities in the country for that. This is a sector that we need to look at from that perspective. We need to continue to be appealing for investments, justifying what we have been doing in terms of investments, and obviously long-term maturity investments. That's the first answer. In terms of pricing, Guilherme, obviously we're looking at freight prices on a monthly basis, road freight prices, and we always say that looking at the spread from month-to-month isn't necessarily the best way to understand what pricing will be like for the next six-12 months, because those involve more structural discussions.
We have a constructive view, as we've said, and it has been materializing as it has in the first quarter. We are taking all the information available into consideration in our commercialization strategy and obviously offering contracts that make sense to us in terms of profits and that make sense to our clients. I think it's too early to talk about that for other periods of time. Obviously, this is the first semester of 2023. We still have the corn crop coming. We've progressed in terms of the corn crop sales already, and as you said, logistics have the opportunity to be appreciated right now, and we are ready to meet our clients' needs. Oh. I'm sorry. I was gonna go back to that point. Our SUDAM incentive for our Malha Norte network will come to an end at the end of the year.
We're already going through a renewal process. That was a major investment we made in the extension to the Rondonópolis terminal, and we are sure that that rationale will remain. We don't see any changes in that sense.
That's great. Thank you so much. Have a great afternoon.
Next question is from Daniel Sasson, Itaú BBA.
Hi. Good afternoon, everyone. Thanks for taking my questions. The first is about the corporate restructuring that you announced, weeks ago. One of the consequences was to make it easier to sell some of your remaining terminals that are part of the holding company. Could you comment on your plans to recycle your portfolio, and why doing something like that would be more advantageous after the corporate restructure, considering the terminals under the holding company? Second question is about volume recovery.
You've mentioned that April volume were less affected by the criminal act. To deliver on your guidance, you'd have to be closer to the peak of the system that you showed us halfway through last year for a few months. How comfortable are you feeling about your volume guidance for the year? How does that relate to the delayed soybean crop harvest this year? Will we be seeing higher volumes in months that seasonably are usually weaker, but maybe due to that delay, you might have volumes being transported closer to the end of the year perhaps? Thank you.
Hi, Daniel. Thank you for both questions. I'll start with your question about our corporate restructuring. Let me make it clear to everyone who's joined our conference, the two objectives of our corporate restructuring are to manage our liquidity, intercompany liquidity better. Rumo Malha Norte has a surplus.
It generates cash, and Rumo S.A. is a holding company that only has administrative and financial expenses. Rumo S.A. is the company that we have chosen to invest in the Mato Grosso extension project. When we have a corporate restructuring that leads to cash generation inside the company that will be making the investment, that means we will have more efficiency in our liquidity. The second objective is to simplify our corporate management. I'm sure we have shares in the port terminals. Before that corporate restructuring, our remaining share in the 16 and 19 terminals is already with Rumo S.A. We have those three stakes at Rumo Malha Norte, North Network, and that is a vehicle to concentrate those operations. This is being assessed by independent agents, and the idea is to have all of our stakes in terminals under one single vehicle.
In terms of the capital recycling, it's our duty to look at opportunities. We talked about that when we announced we were going to sell Terminal 16 and 19. We said that we focus on investing in rail expansion opportunities. We still have some investments to make. We just started the Lucas project. If we have the opportunity to recycle capital for partial or wholesale of other assets, if there are attractive proposals and also, and more importantly, with the right partners, we will consider it. We'll look into it. That's what happened. We found the right partner to run the operation, and they're doing that very satisfactorily. We will continue to do that. We'll continue to look at opportunities, but we haven't got any news at the moment to share with you. About your first question, I think that's it.
In terms of volume, let's not forget that in February, when we announced our volume guidance, our EBITDA, our CapEx, we already had visibility of our productivity loss due to the criminal acts in the Santos region. The speed with which they were resolved could have an impact on the volume for the year. April is making us confident that we do have the capacity, we have that ability. There is uncertainty in terms of volume. More on the way there because this situation is still ongoing. I mean, we feel confident, but we don't have full control over the situation. April has pointed to that. 6.9 billion RTK with soybean, which was less density, but it's proof that the capacity is there. Our team is highly focused on turning that into transported volume.
We will continue with the estimates that we disclosed in mid-February. With regards to EBITDA projections, we have the volume lever. We also have the margin lever. I think we have even more levers than that. Generally speaking, we feel very confident. There are challenges, and there are also opportunities this year. We're going to pursue value for the company when the market is favorable and make the most of volume opportunities over the next few months to come. As you said, we do have the opportunity to recover anything that we didn't make the most of in terms of volume with some relevant value on the table that we want to pursue.
That's great. Thank you so much.
Next question is from Lucas Barbosa from Santander.
Hi, good afternoon, Gustavo and Rafael. Thanks for taking my questions, and congratulations on your results.
We heard about yields earlier. Could you give us some idea, the yield increase was obviously quite strong in the first quarter? How much of that was helped by the higher concentration of volumes in March, how much was that due to the market because of the pricing effect? How much was the effect of the toll roads? Just so we can understand how long that's gonna last in the second quarter and the quarters after that. In the midterm, could you give us some idea about the supply and demand for the next two years? Have you mapped the competitors' capacity? How do you see yields in the midterm?
Thank you, Lucas, for your two questions. I'll start with the first one. Your comment on the different months, it does make some sense. March is a peak a demand peak month.
There are good volumes at higher prices. Over the year, there will be seasonal effects affecting prices both upwards and downwards. The comparison basis for the first quarter 2023 is quite weak. That was the first quarter of 2022. We talked a lot about that in our previous earnings calls. Maybe that high yield percentage or the yield revenue, I don't want to go into details about the quarter because it doesn't make any sense. We will continue on the same track that we shared with you when we disclosed our guidance for the year. Looking at the year as a whole, making the most of opportunities and price is a reflection of those opportunities. We've seen yield increases across the board.
The market is looking very constructive, and I think now is the time to pursue the right value for our service so that we can make the investments that we want to do and meet the growing demand. We want to provide good service to our clients. That's what we're here for. I think that dynamics will remain over the next few years. Production is increasing, yields are increasing, planted area is growing. The demand for our logistic solution is also growing. We're also working You know, there's a growing demand in Asia and the Middle East, which justifies our investment view, our investment thesis. Right now, we're very focused. What matters is that we're ready to meet our client needs. We're doing our job to make sure we provide good service to our clients and to meet high production levels in the country.
That's very clear. Thank you. Have a great afternoon.
Next question is from Regis Cardoso, Credit Suisse.
Hi, thank you for taking my question and congratulations on the great results. I have a couple of questions. One is about you, but more about profitability. We did the back calculation, assuming that you'll be able to keep the same profit per RTK as the first quarter. What would be the volume you need? It's quite low compared to the average monthly volume of the first quarter. It suggests that looking at the lower end, the guidance is looking more conservative than aggressive. My question to you [audio distortion]
Good afternoon, Regis. This is Gustavo. I'll take your questions. First of all, about the guidance and profitability. As Bergman said, we feel very comfortable about the numbers we have disclosed to the market.
What we have delivered in the first quarter is compatible with what we expected for the year. Obviously, in February, we already expected to have some operational restrictions due to the criminal acts in the Central region. In terms of profitability, it really is in line with what we had projected. When we look at profitability over the quarters, there's a great deal of variation. In the first quarter, for instance, we're between crops. For sugar, as of April, had the first sugar crop, and the EBITDA per RTK of sugar is not as profitable as it is in grains. We also have the operation mix in the south network with a higher contribution. There are different fluctuations. The yield curve, as we have said, isn't necessarily linear over the quarters.
Again, I don't think the point is to try and determine how these dynamics will vary quarter-on-quarter, but to feel confident that the way we see things, we're in a great position to deliver on what we have proposed for the year. We have profitability. We are recovering volume when compared to what we saw in the first quarter. There are new projects with new loads. We're working with treasure seeds, fuel, pulp. There isn't one single growth driver in the grains market. There are also some other plans that should help us deliver on the guidance that we've projected for the year. I think it's too early to say during this first call to have any estimates based on what we have disclosed earlier. About cash flow, I can turn it over to Bergman to talk about our capital discipline afterwards.
Historically speaking, the first quarter usually shows some working capital loss. There are some seasonal effects. One of them is the variable income pay. That's something that you provision for over the other quarters, but you have the cash concentration for that in the first quarter. That's recurring. It happens every year. Obviously, last year we had slightly better results, it also marginally reflects on variable compensation. Probably the larger explanation for the difference in working capital is diesel. Our volume performance for the quarter was slightly lower, our diesel cost has a payment that is higher. This first quarter, we ended up having to pay for transported volumes and for the diesel that we used last year. Since last year's volumes were higher than this year's, we get that asymmetry.
For the next quarter, specifically talking about the diesel, that trend will tend to be reversed because you will be recognizing in the results higher diesel levels. Naturally, we'll expect higher volumes in the second Q, and you will be converting the diesel cost into cash of what we've performed now. I don't think there are any major distortions there. There are seasonal effects on the cash flow, and those should normalize over the year.
If I can add to that, Regis, there are no structural changes in the midterm in terms of payables and receivables will continue with the same types of contracts. What we see for the year is to generate the EBIT that we have in the guidance to deliver on the CapEx that we propose to.
With that, our leveraging levels will also fall within the levels that we mentioned, which we see as adequate until the end of the year, from 2x-2.5x . This quarter, it's 2.2x . 80% of port loading are recurring from the end of last year. Based on the projections and delivering on what we propose to deliver, that number tend to decrease from now to the end of the year. That's our financial discipline commitment to cater for the investment that we are making in the Mato Grosso extension. Thank you.
Thank you, Gustavo. Thank you, Bergman, and congratulations again on the results.
Next question is from Rogerio Araujo from Bank of America.
Hi, good afternoon, Berg. Thank you for the call. I have a couple of questions.
I'd like to go back to the yield topic from a different perspective. We haven't had the magnitude of spot market compared to the negotiated average with the current crop. Also can you give us a ballpark in terms of what's missing in terms of volume and what you expect for you to close the contract, especially for corn. How much have you sold? If you can give us a range, that would be great. As a follow-up question on yields, in 2022, I think Rumo negotiated much of the 2023's volume ahead of time, and there was a price increase over the year, and that affected the yield versus estimate for the 2020.
I'm wondering if now in 2023, looking for 2024 volumes, if we can also expect some relevant volumes being brought forward instead of doing that end of the year negotiation. The market, a lot about that. Do you think there will be any forward negotiations? Very quickly, about the BRL 25 million compensation payments, what were they about? Did it have anything to do with the criminal acts in Santos? I don't recall you talking about that when you talked about the take-or-pay.
Hi, Rogerio, this is Gustavo. There are lots of questions. Let me try to answer all of them. About the spot market, in order to understand how yields will behave this year, I'd say it's practically irrelevant. We've priced the yields we're delivering and have delivered in the first quarter last year based on what you described.
To us, it's always important. You know, given the Port of Santos limitations, we need to have some operational planning to do it with our clients so that we can maximize the volume that we can operate with in the Port of Santos. Rumo always tries to sign those agreements with clients ahead of time to try and maximize our capacity at the Port of Santos. Somebody actually mentioned this in a previous question. Obviously, we're at the peak of crops right now, so spot market prices are quite high. There's no point in trying to look at the market and base ourselves on peak prices. Obviously, the freight market, freight prices will fluctuate until the end of the year. What matters to us is the market is constructive right now, which enables favorable margin levels for the company. In terms of sales percentage, we've already talked about that.
We've done very well for the soybean and we've made great progress in terms of corn. Obviously, there are seasonal aspects. Things change from one month to the next. These were last-minute adjustments, especially in the fourth quarter. It's harder to get things right in the fourth quarter and to get a commitment from clients for 100% of the volume ahead of time. That's perfectly normal. I just want to reiterate the fact that we're happy with the level of negotiations and profit that we have right now. We had never intended to have price peaks as a target, but to be profitable for the level of investments that we've been making. As for 2023, 2024, I think you can expect the same thing we've been doing every year. We'll always favor planning volumes ahead of time.
As long as the market continues to be constructive, negotiating volumes ahead of time doesn't mean giving up on yields. It means being able to come to a good term with your clients at the right rate prices. That depends on how healthy the market is when negotiations are going on. Bunge just wants to leave the table sure of not that I got the best price, but a fair price. That's why we have our investment plan. As for the compensation payments, a lot of the criminal acts in the central region had to do with people opening our cars to try and steal cargo. Those BRL 24 million do not account for everything that was stolen. When you open 100 car and you steal 10 tons, sometimes that leads to quality issues. Product losses.
The product might spill out of the car, and that needs to be replaced. That's not a recurring cost, but it is associated to security issues. As Bergman said in his previous answer. They have been happening less frequently, so those compensation payments will reflect lower amounts. If the frequency of criminal acts decrease as we have seen in the first quarter.
That's great. Thank you so much, Gustavo. Have a good afternoon.
Question is from Victor Mizusaki from Bradesco BBI.
Hi, good afternoon and congratulations on the results. I have a couple of questions. The first one is also about yields. Gustavo, looking at the first quarter, there's a huge difference between yields and diesel price trends. As you said, you had the tariff recovery movement for soybeans. Looking at the next quarters, do you think things will remain at the same level?
Will there be a pass-through for the second half of the year? The second question is about the take-or-pay contracts. In the first quarter, there were provisions considering the port of Santos, especially in April, the north network had record volumes. Considering your CapEx and capacity increases, if we consider April volume, can we consider that you will not have any more take-or-pay provisioning regardless of the problems in the Santos region?
Good afternoon to you, Victor. With regards to diesel and profitability, that's irrelevant to us because it is a pass-through in terms of margins. If diesel continues to drop as it has been, there will be a minimum impact on yields and the reduction of diesel costs. The way we like to look at it is always looking at the contribution margin so that we can see the net effect of both variables.
To us, in the short term, what happens to diesel prices doesn't really affect our profitability. As for take-or-pay contracts, as Bergman said earlier, those 6.9 billion RTK in 30 days, if we do the equivalent calculation, I mean, that would be over 7.1 billion RTK. Since we transport soybeans in the first quarter, there's a density difference of up to 5%. You could be getting up to 7.5 billion levels in terms of equivalent capacity for the second half of the year. Criminal acts have not been completely resolved. Things are better, but we're still having to deal with incidents. The current level of capacity is adequate.
Obviously for that reason, we have kept all the projections we've made for the whole year, and we continue to be confident that we'll be able to deliver those results. Of course, things could change for better or worse over the year. I mean, performance could be even better in terms of capacity at the port of Santos, and we need to see what will happen to these criminal acts. Based on April results, I'd say that we have already reached capacity levels that we had expected. Of course, that is not the cap of what we can do. If we address the issues, we could have even higher volumes before the end of the year. The take-or-pay provisions are mutual, obviously. This is a contract mechanism. It obviously has an accounting treatment. The main thing is the partnership and coordination with our clients.
Our objective and our clients' objective is to make sure we meet volume needs. We have a time schedule to make sure that the whole system is efficient across the year. What matters is that we're ready in terms of capacity to meet market needs. We have made progress in our sales, but we can still sell some economic value from that opportunity will continue to happen over the year. We can't say for sure when the reversal will happen, during which month. I just wanted to make that clear.
Okay, great. Thank you.
Next question is from Bruno Amorim, Goldman Sachs.
Good afternoon. I have a couple of questions.
The first one, you delivered great results in the first quarter, which suggests you keep the guidance even though volumes were low at the beginning of the year, which suggests to me, obviously I may be wrong, that prices over the first quarter also surprised you. It would be interesting if you could comment on what happened. Did spot market prices come in higher than you had expected? Maybe you had some capacity left over to be sold in the spot market. That's one question. The second question is, in the long term, road freight and rail freight, as they don't necessarily go hand in hand. When you look at the short term, they are on a month-by-month basis, but over a long period of time, they tend to.
Last year, we saw a significant increase in road rates, and that reflected in higher prices for you, as well as the quarter last year. The result of the first quarter showed that there was some additional progress compared to the second half of last year. My question is, does the current rate level reflect the reality in road rates, or do you think the gap... If you look at an average of the last months between your rate and road rate, is the gap still bigger than a long-term trend, or do you think you can still close that gap? That's my question.
Hi, Bruno. How are you doing? Happy to talk to you. Actually, yields, they didn't surprise us, as I said earlier. We agreed on those yields ahead of time last year.
Also, when we agreed on those yields last year, we didn't think there would be lower volume levels in January and February. Since March is the month where yields tend to be higher, that may have marginally helped us to have a slightly higher percentage than we had expected in terms of market dynamics. I'd say that we were pretty much aware of what the yields were gonna be. What will happen to them over the rest of the year. I mean, we didn't deliberately think we'd have enough room to do that in the spot market. When there are seasonal effects, like at the end of the soybean crop and at the end of the corn crop, those are more uncertain months, and it's harder to sell 100% of the volume forward.
There's room to sell, but it wasn't really a deliberate decision to try and play with the spot market to get additional yields. That effect was not part of the explanation for the yield levels that we achieved in the first quarter. Could you repeat the second question, Bruno, please?
Second question. Has to do with where your free prices are in comparison to road freight prices, considering that there is a delay between what happens to road freight and rail freight. Last year at the beginning of the year, road freight prices went up rapidly, and you had to wait another six months for it to happen to you. I just wanted to know if you would be able to close the gap. I mean, road freight prices went up halfway through last year, but then it reached a plateau.
Your price in this first quarter, do you think it's already reflecting the gap that is closer to road freight charcoal prices? Do you think your prices will go up further even though road freight prices aren't going up anymore?
Obviously, the prices we've negotiated have more to do with what we saw happening at the end of last year and our expectations for 2023. We can never get it 100% right. Everybody looked at 2023 and saw very constructive market drivers. You have to price that ahead of time. It's very hard to capture 100% of the opportunities. As I said earlier, current freight prices right now, we can't even say that it will represent what we'll see for the rest of the year because there are seasonal effects, there are other effects.
For 2024, do you know, in addition to the freight dynamic, we also need to look at what will happen to the logistics supply and the logistics demand. Closer to the end of the year, we'll be able to understand better what will happen to the crops. Hi, good afternoon. Sorry, we got disconnected. As I was saying, it's not just road freight prices that determine what will happen in terms of negotiations for 2024. There are the crops as well as other elements. In the second half of the year, we'll have more information.
Thank you.
Our next question is from Filipe Nielsen from Citi.
Hi, good afternoon. Thank you for taking my questions. I have two very quick questions. One is about investment. I'd like to understand from you talked about potential partnerships. How do you see partnerships with foreign companies?
Are you considering more local companies as investment partners? Second question is about technology improvements. What do you think will be the next steps to improve profitability considering technology? During the investor day, you talked about optimizing networks, optimizing fuel consumption. I'd like to hear more about those projects and what the next steps are in that sense.
Hi, Filipe. Thank you for the question. Given the size of the investments we are planning, perfectly normal for us to talk about different things, but there aren't any actual negotiations about partnerships. We've been talking a lot about partnerships with clients to operate terminals, but those are more common partnerships. There's nothing too different from that. If at any point there is anything to come to that, we will let the market know. As for technology and operating efficiency, there are many initiatives going on.
Some of them are part of the investments we have committed to make to renew the Paulista network. The IPTC, the licensing and signaling system, will optimize the rail network and to make train traffic more intelligent. We're also looking into using artificial intelligence to improve train maneuvers in yards, train traffic. The main driver in terms of productivity for us is to reduce fixed costs and to operate in this very high scale system at very high quality and efficiency level. We have a very robust investment plan, our technological agenda is consistently moving forward. As I mentioned, the first quarter has slightly moved away from that trajectory due to operating restrictions. Other than that, we have been delivering very positive results on that, in that regard. Thank you.
Thank you, Gustavo.
The Q&A session has now ended, and I would like to turn it over to Mr. Rafael Bergman for his final remarks.
Thank you for joining our first quarter earnings release call, and I'll see you next time. Have a great afternoon.
This concludes VLI's conference call. Thank you very much for your participation. You may now disconnect. Have a good day.