Good afternoon, everyone, and thank you for waiting. Welcome to Rumo Conference Call to discuss the Q4 of 2022 result.
Today with us we have Mr. Beto Abreu , Rumo CEO, Mr. Rafael Bergman, CFO and IRO, and Mr. Gustavo Marder , Investor Relations and Strategic Planning Director. We would like to inform that during the company's presentation, all participants will only be able to listen to the call.
We will then 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 a simultaneous translation to English.
This event is also being broadcast simultaneously on the Internet via webcast.
Before proceeding, we would 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. Investors and analysts should understand that conditions related to macroeconomic conditions, industry, and other factors could also cause results to differ materially from those expressed in such forward-looking statements.
I will now turn the conference over to Mr. Gustavo Madra. Please, Mr. Madra, you may proceed.
Good afternoon, everyone. Thank you for joining us on Rumo's Q4 conference call.
As usual, I will start the presentation with an update on our ESG agenda. Rumo got important awards during the quarter.
We highlight that in the second year in a row, we are part of B3 Sustainability Index. Moreover, we participate another year on the Carbon Disclosure Project with a final result of B plus. Energy efficiency was one of our operating highlights in the year, and it was key to sustain our strategy to reduce the company carbon's footprint. These topics and other ones will be presented in further details in our 2022 sustainability report, which will be released to the market in March.
On the next page, I will present the highlights of the year. 2022 was an important year for us with several achievements and developments.
I would like to highlight the consistency in our commercial strategy and a turning point in the competitiveness environment that allowed a combined growth both in volumes and yields.
We have strengthened our growth agenda with the recycled capital through the sale of the port terminals T16 and T19, which accelerate the reduction of our indebtedness, contributing to the start of a Rumo extension works in Mato Grosso. On the following page, we'll present the market share. Rumo market share in Mato Grosso increased 1.6 percentage points in 2022.
In the quarter, Rumo lost 12.7 percentage points when compared with last year as a consequence of higher exports of corn after a crop shortfall in 2021.
Despite the 45% growth in transported volumes, we end up losing market share in Goiás state, given the higher market growth and considering that part of the capacity was used to serve East Mato Grosso region.
In the south ports, Rumo increased the market share by 1.3 percentage points in the Q4 and 1.6 percentage points in the year. Higher availability of grains in Paraná and South Mato Grosso state, coupled with a good level of competitiveness, helped to offset the crop shortfall in Rio Grande do Sul state.
On the next slide, we'll see the operational performance. Rumo have been improving the efficiency of its operations. The dwell time at Santos have presented a material improvement in the quarter and in the full year, with a decrease of 6% and 10% respectively.
The relative fuel consumption has decreased 1% in the quarter and 6% in the full year, thus supporting our agenda to reduce CO₂ emissions. Lastly, the higher concentration of maintenance works in the Q4 has driven a slight deterioration of the trans time figure.
However, the accumulated result in the year was in line with the previous year, even though there was an increase in the train flow in the system due to the higher volumes.
On the next page, I will present our operating results. Transported volume has grown 17% in comparison to 2021, driven by an increase in the North Operation, which delivered a 24% growth.
The result has offset the South Operation performance that was impacted by the soybean crop shortfall, mostly in Rio Grande do Sul state.
Breaking down our performance in segments, it's worth mentioning the 25% increase in grains, a 10% increase in fuel transportation, and a 13% increase in the container business. On the next page, we'll see the results per business unit.
Consolidated net revenue grew 39% in 2022 as a result of the 17% increase in both volumes and tariffs. Fixed costs and SG&A expenses have grown 12%, mostly driven by the enhancement on facilities and security staff and higher maintenance expenses. Variable costs have grown as a result of higher volumes and higher fuel prices since diesel went up 42% year-over-year.
Adjusted EBITDA margin have increased 1.8 percentage points against 2021, and is on a positive trend, reaching 46.1% despite the higher diesel prices.
Adjusted EBITDA in the year was BRL 4.5 billion, an increase of 38%. In line with the guidance provided to the year. On the next slide, we'll talk about the financial results. Net financial result was BRL 2.3 billion in the year as a consequence of higher inflation and interest rates. Net income in the year was BRL 514 million. The figure was positively impacted by the capital gains in the divestment on the port terminals and on the improvements on the operational performance.
As stated previously, the divestment of the port assets has accelerated the financial deleveraging of the company. The net debt to Adjusted EBITDA ratio was two times by the end of last year. We also closed the year with a high liquidity position, which is adequate to the investment cycle we have just begun.
At the end of the year, our cash balance was BRL 8.3 billion, debt maturing over the next 4 years is roughly BRL 1 billion per year. On the next page, I will present the outlook for soybean and corn crops. Brazil should produce a soybean crop of 156 million tons, out of which 95 million tons should be exported. Mato Grosso may produce around 45 million tons, out of which 27 million tons are destined to exports.
Additionally, it is estimated a total production of 18 million tons in Goiás with 11 million tons exported. The states in the south region of the country could deliver an increase in production of roughly 20 million tons, leading the Brazilian production to increase roughly 21% in the current crop.
On the next slide, we'll see the outlook for the corn crop.
Estimates for corn crop suggest a total production of 128 million tons, out of which approximately 48 million tons might be exported. Mato Grosso state may produce 46 million tons and export 28 million tons, Goiás state has an estimated production of 13 million tons and exports of 4 million tons. Let's move to the next page to follow up on the company guidance for 2023.
We presented our operational and financial estimates for the fiscal year of 2023. It is expected a transported volume between 80 billion-83 billion RTKs. Adjusted EBITDA is estimated in the range of BRL 5.4 billion-BRL 5.8 billion. On a fair basis comparison, adjusting the sale of the port asset, the mid-range of the guidance represents a 30% increase year-on-year.
CapEx is estimated between BRL 3.6 billion and BRL 4 billion. The figure includes the investments in the first stage of Rumo's expansion in Mato Grosso state. At this point, I finish my presentation. Thank you.
Hi. Good afternoon. Thanks everyone for joining our earnings release call.
I would just like to recap 2022 very briefly and to talk about our prospects for 2023. With regards to 2022, I'd just like to talk about the operational progress we've made. We've reached a new volume delivery level, 80 billion RTK, highlighting Rondonópolis with over 20 million tons, central network also, and these origins delivering over 500,000 cars to the Port of Santos.
In terms of volume, we reached a whole other operational level. I also want to highlight the consistency of our commercial strategy. You have been seeing it over a long time. For two years, we've been very consistent when it comes to pricing. As a result of that, in 2022, we have had considerable growth, as Gustavo showed in his presentation.
With the volume growth, there has been a market environment with an inflection in the competitive environment. We now have a very different and constructive environment which should continue in 2023.
We have also sold terminals T16 and T19. It's part of our portfolio management work, and along with the operating results, we have also speeded up our deleveraging process. That was an extremely important movement considering the current interest rate, and to face upcoming investments. A couple of other highlights with regards to 2022.
The first one is that we have started construction to reach Campo Verde in 2025.
The first 220 kilometers of the north network should be done in the first 3 years, and in 2026, it should be operational.
Obviously, 2022 will be marked by the beginning of this transformational project, both for the company and for the country in terms of infrastructure. In December 2022, we have signed the new regulatory model for the Port of Santos at IPS. FIPS is the internal railroad in the port. We have appointed a COO for that operation. It's a completely different independent governance, where we'll have a relevant participation in the board.
That will be the main development driver for the port as infrastructure. In terms of market and the regulatory framework, in my opinion, those are the main highlights to be considered in 2022. Looking to 2023, we continue to have a very constructive outlook in terms of the competitive environment.
The figures mentioned by Gustavo show a potential new record crop of 90 million in soybean and corn in the state of Mato Grosso, and another opportunity for the company to consolidate its sales strategy.
Within that context, we have made great progress in our sales agreements. We have an environment to charge a fair price for our services, and our clients have understood the value of our logistics solution in the geographies where we operate. We are also exploring a new geography, which is the north of the state of Goiás and the state of Tocantins, concluding in the Q2 of the central network.
That last missing stretch will be concluded in April. As of May, we should have a new geography to explore. In terms of the market, in terms of demand and the competitive environment, again, we are very optimistic.
There's an important operating challenge, which is to take volume to another level and to continue with our growth agenda. We have been facing a few challenges at the beginning of the year. The first was the delay in the soybean crop, as you all know. In the last week, in our opinion, things have gone back to a normal level. Both the harvest and planting have reached the average of the last five years.
There might have been a considerable delay, but we're back to normal levels. There's also a challenge in the Port of Santos in the last few weeks. There have been public security and violence events. We are working with state security, but we need to make sure that that doesn't get in the way of our operation. In any case, it has affected our February operations.
In São Carlos, as you all know, our operations came to a halt for a week due to major engineering work. We had to rebuild a rail stretch, which has also affected our operation in January. These are challenges that are common in operations the size of ours, but we are focusing on execution, and that is what has allowed us to present you with this guidance, with considerable increases in our results despite the challenges.
Our priority for this year is to continue to move forward, improve efficiency, to deliver on growth, to optimize CapEx, to seek alternative to improve our capital structure in an environment of high interest rates and to continue to be the best logistics solution to our clients.
Those are my opening remarks about 2023.
Now we will open our Q&A session with Rafael Bergman and Gustavo Marder.
Thank you.
Thank you.
We will now begin the Q&A session.
If you have a question, please press star one on your touch phone at this or any time. If at any point your question is not good, you may remove yourself from the queue by pressing the star key. Questions will be taken in the order they are received, and we kindly ask you to make it one by one. Please ask two questions at the most, and when you ask your question, make sure you pick up your handset to provide optimum sound quality.
Please hold while we collect the questions.
The first question is from Daniel Sasson from Itaú BBA.
Hi, everyone. Hi, Beto. Hi, Marder. Thanks for the presentation and congrats on the results. My first question is about fuel prices. Could you comment on that topic and potential fuel and fuel consumption and efficiency gains considering RTKs?
You've had great efficiency at about 5% in the Q3. What is it going to be like in the Q4?
In the midterm, you have a margin gain driver in terms of efficiency gains for the mid and the long term, what do you think is going to happen?
My second question is about operations. In 2022, you had a very strong volume and yield year. For your 30% EBITDA growth guidance for 2022/2023, your gains will probably come more from yield than volume. Could you comment on that part of the strategy, your sales strategy, commercial strategy?
What do you think you've got right for 2023? Looking back, do you think you made a mistake in the first half of last year, given that a large part of your yield recovery happened in the first half?
Could you comment on that market dynamics, please?
Thank you. Hi, Daniel. Good afternoon. Thanks for your questions. This is Rafael.
Let's start by your first question. Energy efficiency is a priority for the company and has been so for quite some time. I think we have shown to be consistent in delivering results, and that includes more efficient processes and also investments that have led to that RTK consumption gain.
The 6% reduction we delivered this year is obviously significant for us, but we still have a way to go. It won't necessarily be linear, so maybe one quarter will be the same as last year with a higher evaluation.
That was the case in this quarter in 2022, which goes to show the consistency I've mentioned. We need to gain efficiency with the trains. Gains with the 120 car train was relevant.
We actually talked about a project to extend trains to 135 cars. We talked about that last year. That will lead to more efficiency gains.
We've been investing in communications and trying to get shorter licensing times. We're updating the stretches as well, and that will lead to more efficiency and time as well. Even though rails are more competitive than roads, diesel is still a relevant cost line. Payback is quick and it makes sense to us both in terms of having the right margins, but also keeping a competitive solution to our clients. With regards to 2023 compared to 2022, I think you're right to say we're projecting large margins.
Obviously, volume is also considered. I mean, 80 billion-83 billion RTK considered to 75 in 2022 is quite relevant in terms of volume.
In 2022, we had to make the most of a constructive market and to show the value of our service to our clients. We have the right commercial tactics and strategy. We're very transparent when we talk to our clients.
Looking back, we've talked a lot about that, right, Daniel?
The beginning of 2022 suffered by the competitive environment that came from 2021 due to the corn crop failure. We want to continue to move forward. With all of our processes, including the commercial and pricing processes. I think we need to continue to focus on progressing, and that's what we're doing in our commercial strategy, fostering partnerships. It's not just about contracts, it's also about joint interests, fostering investments in infrastructure terminals to create a stronger relationship with our clients.
That's great.
Thank you, Rafael. That was very clear.
Next question is from Pedro Bruno from XP Investimentos.
Hi, everyone. Thank you for taking my questions.
I have a couple. Beto talked a lot about short-term volumes. Could I hear a bit more about your volume expectations for 2023, including short-term risk that Beto mentioned?
Please correct me if I'm wrong, but what I got from the message is that you will be restricting yourselves to January and February, given that you have confirmed that that has been taken into consideration into a strong guidance volume.
In the second half, we're hearing about the risk in corn due to rainfall and a delay in soybean harvesting also because of the rain. We're having a hard time understanding that for two reasons.
First, planting levels for corn have recovered relatively well, and they're not that different from last year.
I mean, they're different to last year, but not to the historical average. How do you see that risk?
Is there a risk or isn't there a risk for the end of the year?
Also considering what Beto said about your commercialization, which as Beto showed, you have secured a great deal. Do you see any risk in that sense?
Thank you.
Thanks, Pedro. I'll comment on both points.
The first one about beginning of the January, February, especially. It's been over 45 days of operations. I remember that last year, you asked a lot about the crop failure for soybean in the south of the country. It was a significant soybean crop failure, and we decided to keep our guidance even with the expectation of a crop failure. Every year has its own challenges.
This year, as I said, there has been a delay in the harvest. There was a lot more rainfall than expected. If we look at the figures for last week, Pedro, we'll see that the harvest is now in line with the average of the last five years. It's not been as fast as last year's, but if you look at the last five years, it is within the average. Corn planting should recover.
In fact, it is already recovering. Risks have been considerably decreased. Corn, obviously, will also need rain. Rainfall will be important for the expected corn yield, but so far everything is under control.
That's why we made the decision to move forward more than usual with our commercialization due to many reasons, our commercial strategy being one of them, and all the variables that we monitor when we are making such decisions.
January was affected in terms of the unexpected works. I mean, interrupting operations for 7 days, so a third of January was completely stopped, and obviously that affects operations. The same in February. We had an unloading loss due to operating issues because of the security problems, as I mentioned in my comments.
We are working with the state to try and solve the issue. Hopefully at the end of the month and beginning of March, which is a very strong month to start it, full steam ahead.
Obviously, as you said, all of these elements have been considered in our guidance, which we announced to the market yesterday.
Those are the main points, Pedro. I hope I've answered your questions.
Yes.
You Beto.
Thank you.
If I can have a follow-up question, please.
Could you talk about your CapEx? That came in below our, and possibly the market's expectations, which is great. What does that mean not only for 2023, but your guidance, BRL 16.5 billion-BRL 18.5 billion for the next five years, most of which has already been executed. When you do the math, I think everybody knows that it looks overestimated, right?
Bergman talked a little bit about investments from maybe going up to 135 cars.
What are your priorities? This lower CapEx for 2022 and 2023, what kind of implications will that have, including Lucas do Rio Verde in this question?
Thank you.
That's a great segue for our segue talk, which we have been having with the market over the last few quarters. Let's recap 2022. We invested close to BRL 2.8 billion.
Below what had been in the guidance with 2025, that was based on a decision to rationalize our investment portfolio because the cost of capital scenario is higher, also as a way to test the actual capacity of our operation. End results have been excellent in 2022. I had also mentioned at other times that the CapEx, that does not include Lucas, would not be kept at BRL 2.7 billion, BRL 2.8 billion in 2023. For 2025 and 2024, that has not changed.
Let me give you some round numbers for the purposes of this conversation. Let's use the BRL 4 billion which are in the guidance in terms of CapEx.
1.2 in terms of recurring, our team has been working hard to keep that CapEx as efficient as possible, despite the increase in volume that we have been transporting in our networks. This is a success case for us. We have roughly BRL 2 billion worth of investments made into expansions, but that does not include Lucas.
It's mainly about the Paulista network, also increasing the Paulista capacity at the Port of Santos, and that priority will remain. We're talking about updating some stretches in the Paulista network.
Some of them are being doubled. We're also talking about PTC technology, which will be ramped up this year, but will continue over the next 2 years. Some rolling stock.
This year, at the end of the Q1, beginning of the Q2, we'll begin the third stretch of the central network, as Beto mentioned in his opening remarks. Those are our priorities for 2023, with the exception of Lucas.
With regards to Lucas, we have announced the first stage, the CapEx for which is up to 2025. It should be operational at the beginning of 2026. This is the first year. Even though we started works on top of the BR-163, that was an immaterial investment in 2022.
It will really start in 2023 after all the rain. It's still a ramp-up year, so it's not the most substantial part of our CapEx. We will conclude the works on that bridge. We'll start working the different projects until Campo Verde.
The estimated investment will be BRL 700 million-BRL 800 million, depending on the fine-tuning of our contracting strategy, so that we are prepared for 2024, 2025 to conclude that stretch. Nothing's changed in terms of priority. Now, obviously, it's natural to expect an in-depth conversation about the right time to do the work, considering the high cost of capital environment we have at the moment.
We did the pumping work, and we'll continue to discuss the CapEx priority, but that will not affect the company's strategy in terms of capacity, so that we can continue increasing volume, increasing profitability, and the EBITDA as is in the guidance. Including Lucas do Rio Verde, starting Campo Verde as of 2026. It's a long answer to your question, but nothing has changed.
It's only natural to expect this discipline when choosing the investments that make more sense and to be prudent so that we can do what's most important to the company.
That's great.
Thank you for your very complete answer.
Next question is from Guilherme Mendes from J.P. Morgan.
Hi, Beto. Hi, Rafael. Hi, Gustavo. Thanks for taking my questions.
A couple of follow-up questions. First one is about margin and efficiency. You talked about volume, price, and competitiveness. Now, about short-term efficiency, what can we expect for 2023 in terms of margin levels or very short-term efficiency? My second question is about the return of the west network and the renewal of the south network. Any updates on that regard? Hi, good afternoon, Guilherme.
I'll start by your first question. Looking at our guidance, as Rafael said, there has been a considerable volume increase, and that allows us to dilute fixed cost and to increase our operating leveraging, which has an important effect in terms of EBITDA margin. Our energy efficiency agenda, which is already up and running, has brought good results in previous years.
We'll continue to bring in additional gains in energy efficiency. That will allow us to have some efficiency in variable costs in terms of volume. That's a positive lever for margin. Fair pricing, reflecting the market dynamics and the company's commercial strategy, that also helps us to go back to a similar margin level to what we used to have in the past.
Also considering the fact that diesel, which is a press room for us, sometimes can be a detractor when it comes to % margins. In absolute terms, we will protect the margin because we will pass that through in fuel.
The effect is a consequence of these drivers I have mentioned and the company's operating strategy. We are very well-positioned for 2023.
I think Rafael Bergmann will answer the second part of your question, so I'll turn that over to him. Actually,
Beto. will answer. Sorry. Go ahead, Beto.
Do you want to answer about the West Network, Beto?
Okay, I'll answer the second question.
That process is moving forward with three agencies. The AGU, we have a rebalancing suit against the granting power and that list.
Secondly, we also have the need to engage and get approval from the agency, which, in this case, is the Ministry of Transport, now that there has been a change in administration. Everything is going well in regulatory terms, these agencies can be quite slow to. In commercial terms and operating terms, the West Network has a very small volume. It's a small ore contract.
There's practically no volume. All of Suzano's pulp operation, when we renewed the contract last year, was transferred to the North Network, which is much more efficient. In terms of volume right now, there's practically no operation. It's minimum maintenance until the regulatory process can be concluded.
That regulatory process must take into consideration the rebalancing process and the re-bidding process, the new bidding process.
According to our plan, we hope to conclude that before the end of 2024. Again, not all deadlines are in our hands. In regulatory terms, it is within what we have planned.
That's great, Beto.
Thank you.
Thank you, Gustavo.
The next question is from Victor Mizusaki from Bradesco BBI.
Hi, good afternoon and congratulations on your results. I have a couple of questions. The first one is a follow-up to Pedro's question about the CapEx. Considering 2024 and 25, given that you are setting CapEx priorities, should we expect for 24, 25 that with Lucas, your CapEx will probably go up? Will you be disclosing a guidance update then?
Second question about calls, which just started on the 13th of February. Have you felt any changes? Has there been an impact on the cost of freight?
Hi, Victor. I'll answer your questions. Sometimes there's a slight delay because we are in different places.
We're trying to coordinate the communication. In terms of CapEx, you can expect a CapEx ramp-up because of the Lucas project. We need to invest BRL 4 billion-4.5 billion all the way to Campo Verde, and now the heavier investments will start in 2Q 2023. Obviously, 2024, 2025, arithmetically speaking, will be heavier investment years because of Lucas.
We don't expect to change the CapEx levels. Obviously, we'll also be discussing the company's strategic priorities, but it is natural to expect a total higher CapEx for 2024, 2025 because of Lucas. That Campo Verde can be operational in 2026. In terms of the tolled roads, yes, it has started in 2 different locations in Mato Grosso on the 13th of February.
According to the ANTT authorization, it's happening, we had already expected that when we started to sign the commercial agreements, which will be put into place in 2023. No changes there. No surprise there. That's part of the competitive dynamics that was already being discussed, and it's part of the commercial negotiation environment for 2023.
About the tolled road, did that go in as a trigger in the negotiation? Will there be a automatic readjustment or will it happen in the second half of the year? Not to go into any detail, I'd just like to reiterate that when we negotiated volumes for 2023, the tolled roads were already part of the negotiation discussions with our clients. That was part of what we thought would affect margins in 2023 in general terms.
Great.
Thank you.
Next question is from Regis Cardoso from Credit Suisse.
Hi, everyone. Beto, Bergman, Marder, thanks for taking my question.
You've covered most of the main topics, but just to make sure I got it right. In the guidance for 2023, for that range between EBITDA and volume, you've considered the crop uncertainty. What does that mean exactly? Not because you've contracted your whole volume, but because there's a potential yield range.
That's where the uncertainty comes from, right? Could you talk about the pace of your contracting? That's the first one. The second one is considering the EBITDA for 2023. Fourth Q had a considerable yield reduction in sequence. Obviously, there is a seasonal component, but that also brought a margin reduction with it. I'm thinking that those two variables are what explain the change in 2023.
According to our expectation, which might or might not be the way you see things, we can get a mid-range EBITDA for a combination of yields that will go by 8% and an EBITDA margin that will go back to 48%. Is that the right ballpark figure?
Can we think about actual yield gain? Does it make sense for the margin to go back to similar levels to what you had in the 3Q?
Hi, Regis. I'll take your questions. That volume EBITDA range does take into consideration what we're still seeing as a reasonable range in terms of what still needs to be sold, even though we have sold forward quite a lot, and what the price will be for that volume, because that hasn't been sold yet.
In our view, very little range due to the crop as a key element, as Beto said during his speech.
We are pretty confident that the soybean crop will be healthy, and so will the corn crop. That range doesn't include any unreasonable risk for that scenario. I would say that we're quite confident about that.
Obviously, our operation does have a pace. We need to observe that. In 2022, we reached major efficiency levels and owing to internal and external factors. I mean, it rained a little bit more in Santos, which affected the unloading.
Those will tell what the actual volume we'll be able to transport will be. That range is reasonable, but not considering any upward or downward drastic changes. We're not expecting any of those at the moment.
In terms of ballpark figure, yeah, I think the fourth Q, as you said, there is seasonality and yields are usually a bit lower. When you look at yields, it's important to look at what's happening to diesel as well, because that might affect the specific pricing because contracts are pegged to the diesel. In the fourth Q, there was a drop in the diesel prices, I think 5%-10%. We can give you the exact figure later.
That's normal for the fourth Q and will not affect our margin outlook at all. I think the figures that you have mentioned are within what we would consider to be a reasonable range.
That's great.
Thank you, Bergman.
Thank you.
Congratulations on your results. The next question is from Bruno Amorim from Goldman Sachs.
Hi, good afternoon. Thank you. I have a couple of questions.
The first one to Bergman. We're going back to CapEx. Just to make sure that we got it right, you mentioned that some projects have been delayed. It would be interesting to understand the objective of these projects that have been delayed. As you said, you will be spending BRL 2 billion to expand capacity, and your guidance points to the fact that the company believes you could grow by 10% this year again based on a good volume basis coming in from last year.
Everything is moving at the right speed. What will you not be gaining by these projects that have been delayed? Are you taking on a bit more risk than you mentioned?
I would like to try and understand that trade-off.
My second question, I'd like to hear from Beto, what his opinion is for the mid to the long term in a scenario where diesel prices drop considering oil and an administration that, if anything, goes below parity in the future. Do you think that if diesel prices are lower, trucks will become more competitive compared to the current scenario?
Obviously, rail will always be more competitive, but considering that diesel prices go down over the next 2-3 years, do you think truck drivers will become more competitive than Rumo or not? Or do you think there's a supply and demand dynamics in the market and diesel isn't the only road transportation driver? I know that to be the case, but it would be interesting to hear your opinion about it. Thanks, Bruno. I'll answer your first question, and Beto can take the second.
We talked a lot about regulatory CapEx, and we mentioned that part of the regulatory CapEx because of challenges were quite hard to keep, especially during the pandemic. The 14,273 allowed us to postpone papers because of those effects. It's worthwhile mentioning that everything that has been happening in our operation is a test of adherence in a system where many elements need to be in line.
We always test the actual capacity stretches bring in an example of that, and we were able to prove our efficiency plus needing less rolling stock to achieve a specific level of volume. That can be replicated in many ways. Our mission is to continue to increase capacity in trying to use company's investment. It's worthwhile remembering, without going into any detail, that we have the benefits coming back that will affect part of our investments.
Eighty percent of our pumping station, we still need to do CapEx to conclude the expansion of the terminals. That won't be Rumo's CapEx anymore. Those things will happen, and we hope to continue to deliver volume with profit and making the right CapEx choices. When we did the guidance from 21 to 25, which was presented two years ago, we had a specific outlook.
In general terms, those are the amounts, obviously we make decisions that affect the granularity of decisions. Some of the CapEx is there but won't be used within that 25 window. We make decisions to keep to regulatory requirements and within conversations that are ahead and that are only natural and long-term concessions.
We need to decide which investments make sense to achieve the actual objective of the concession agreement, which is to increase capacity in the Paulista network. That's a normal conversation that we're having with the agency, and that's how we calibrate our investments. You shouldn't expect any great surprises in terms of how our business develops because we're calibrating the company's CapEx.
Those are choices that we will continue to make in order to keep the company healthy and profitable. In a company that is growing with a purpose to offer more capacity to our clients. I'll turn it over to Beto, so he can answer your second question. Thanks, Rafa. Bruno, with regards to the midterm outlook, considering diesel price fluctuations, a couple of points.
First, in our opinion, the balance between supply and demand or logistics is much more relevant than the end price of diesel in the market. Those are the elements that affect the price dynamics. We saw the same thing when there was a crop failure in 2021. When we have more supply in the market. The second thing is that in our opinion, and looking at the data, production increases have been taking place in a structural fashion, and that creates the fundamental to keep this competitiveness in the long term.
Our thesis, which we devised three years ago for Mato Grosso, includes a production of 110 million to 120 million tons. We're going to have to review that because production should be higher in 2023.
Structured production increases affect the supply and demand, and in our opinion, that is the main driver defining the competitive environment. The second thing in the midterm is that we expect our competitive position to change with Rondonópolis to Campo Verde coming into operation. We'll increase volume, we'll decrease unit cost, and it will really be transformational by the time we get to Campo Verde.
Those are the main points, Bruno. All right.
That's great.
Thank you.
Have a great afternoon.
The next question is from Rogério Araújo from Bank of America.
Hi, everyone. Good afternoon. Beto, Gustavo, Rafael. I'd like to hear more about the new administration, especially with regards to authorization. In one of the interviews, Renan Filho conceded, he said he wanted to help unlock those requests for authorization.
First, I'd like to refresh my memory with regards to which authorization Rumo has requested, what the administrator is saying, and if you believe they will be able to somehow move forward with this request. With regards to new concessions. I think FIOL 1, FIOL 2, those are the clearer ones. Given Lucas do Rio Verde, what is your level of interest in that?
A couple of follow-up questions about the West network. In the South network, do you think that will still justify your advantage because we're close to maturity? In the West network, there's an account reconciliation. There's a BRL 2 billion liability and an asset about the change in legislation that had not been included in the agreement. Do you have any idea of what that asset is worth?
If you don't, who's calculating that? Whose responsibility is it?
How are you going to establish that?
Thank you.
Actually, I think you've asked three questions.
Let me see if I can answer them. I'll start with the west network. I briefly said that that asset is a rebalancing suit. We have one at the higher courts, and I won't make any forecasts. In the west network, in our opinion, there won't be any impact of that liability after we have reconciled accounts. You're right about the south network.
As time goes by, the advantage ceases, loses traction. The company is not concerned about that right now. We will take as long as possible to make sure that that renewal renegotiation happens in 2023 or 2024, or when the agreement expires, that it's done on acceptable basis in terms of profitability and cash generation.
To be very subjective, the matter of advantage or not will not make the company speed up that process to renew it according to what we believe to be healthy for the business. That's the South network and the West network. About the organizations, the authorizations and Renan's comments. Yes. We have signed three agreements. One in Mato Grosso and two in Goiás.
The one of Lucas to Água Boa. I won't mention their names, but we have signed those agreements and the 10 authorizations we have requested. That discussion will take place with the Ministry of Transport. Those agreements we have 5 years to start any construction work or any kind of investment. It's almost like an optionality play.
I think that's the best way to describe those agreements.
We have enough time to execute on them if it makes strategic sense for us. For FIOL and FIOL, we weren't interested when the bidding process took place. FIOL also has logistics challenges. There is no port. That railway from Cachoeira was auctioned, but there's no way of moving the product from there. It wasn't attractive to us. We didn't even look into it.
We're still on the same page. Company is not interested in that asset. FIOL, well, it's being built. At least they've started works. Let's see how it progresses in terms of engineering. Once it's been concluded, we don't know when that will be, it will go back to the government. If the government decides to start a bidding process, the company will make a deci . That's an asset we'll probably look into and assess.
I don't know if I missed anything.
No, that's great.
You've answered all my questions, very clearly.
Thank you.
The next question is from Felipe Nielson from Citibank.
Hi, everyone. Thanks for taking my question. Which is about the financing plan for Lucas do Rio Verde.
Considering all the different variables. EBITDA is substantially higher than 2022 in your guidance for 2023. Your CapEx is relatively lower than what had been expected. Looking at 2024 and 2025, your CapEx is considerable, as you said. What are you thinking in terms of leveraging and financing for this year and next year?
Thank you.
Hi, Filipe. Thank you for your questions. Let's start with the EBITDA increase, which is important both because of cash generation and also because of the main leveraging metric.
EBITDA increased considerably in 2023. We have subsequent increases until 2025 because of the capacity increase and our ability to profit from transported volume. Considering that dynamics and everything we considered before making the decision to approve the first stretch of the project until Lucas do Rio Verde, the first one was from Rondonópolis to Campo Verde, will be very healthy in terms of capital.
The starting point being two times net debt EBITDA, adjusted EBITDA, which we reported at the beginning of 2022. Considering the construction work period until the Campo Verde stretch goes into operation, that leverage goal shouldn't change much from 2 to 2.5 times, which seems adequate to us at a time when we're making considerable investments.
Obviously, our shareholders shouldn't expect high dividend payouts during that time because we are reinvesting in the company.
We are doing a great job of balancing our capital structure. In terms of financing, Rumo has been trying to diversify its funding sources. Rumo has access to capital markets, both in terms of domestic and international debt. Some agencies have shown an interest in supporting the growth of our operation, and it will be no different for Lucas do Rio Verde.
We're starting 2023 with a healthy cash position, BRL 8.3 billion. We have an opportunity to have access to different debt markets and bilateral funding sources because we have strong liquidity coverage. In a high cost of capital scenario, we will continue with our strategy to access the available sources in that market.
Thank you. Great.
Thank you.
This concludes our Q&A session. I would now like to turn the floor over to Mr. Rafael Guedes Bergamasco for his final remarks.
I'd like to thank everyone for joining our earnings release call.
Thank you for your questions. I'd like to thank the shareholders for their trust. I'll see you again at our next earnings release quarter call. Rumo's conference call is concluded.
Thank you very much for your participation. You may now disconnect and have a great day.