Good morning, everyone, and thank you for waiting. Welcome to Humu Conference Call to discuss the Second Quarter of 2021 Results. Today with us, we have Mr. Ricardo Levin, CFO and RIO and Mr. Gustavo Rosa, Investor Relations and Treasury Director.
We would like to inform that during the company's presentation, all participants will be only able to listen to the call. We'll then begin the Q and A session and further instructions will be given. We also would like to inform that the conference call will be presented in English by the company's management, and there will be simultaneous translation to Portuguese. 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 briefs and assumptions of Hummus may reach and 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'll now turn the conference over to Mr. Ricardo Levin. Please, Mr.
Levin, you may proceed.
Good afternoon, everyone, and thank you all for joining us in this earnings conference call for the Q2 of 2021. I would like to start by providing some highlights on ESG initiatives. Recently, we issued our sustainability report, bringing once again advances in our ESG agenda. We would like to highlight the evolution on diversity, emphasizing that Humu's Board of Directors reached 30% of women in its current structure. For Gerhard Mar, we included ESCG indexes in the variable compensation of all employees.
We also made significant progress in our public commitments and brought an even more ambitious goal to reduce CO2 emissions by 2,030. We invite everyone to read the report and know even more about our progress in ESG results. On the next chart, we are going to go through the main highlights of this quarter. PUMU presented a good performance in all main KPIs in the 2nd quarter. Consolidated volumes grew 9.1%.
A better market outlook and higher fuel prices allowed a yield expansion of 13.8%. EBITDA reached almost BRL1.2 billion, approximately 32% growth when excluding the nonrecurring effects of Paulista network renewal. Therefore, net income in the Q2 of 2021 was BRL314 1,000,000, growth of more than 200% when excluding effects of Paulista network renewal. In May, we had the first tests in Rio Verde terminal. And in July, the terminal was inaugurated, increasing even more our presence in Goyas.
Also worth mentioning, the public call made in July by the government of Mato Grosso to enable the railway expansion from Rondonopolis terminal to Lucas du Rio Verde and Cuellaba. The deadline for choosing the winner is 45 days after the publication of the notice. On the next chart, we will present the operational results. Our operational results in the Q2 presented growth in all the operations and segments, highlighting the container segment, which increased 32.8%. Looking to the assortment of cargoes, the highlight goes to the recovery of fuel volumes and containers, which had been previously affected by the pandemic.
Pulp and Paper segment continues presenting consistent growth. In Commodities segment, the highlight was sugar, which grew 33%, while grains grew 5.5%. On the next chart, we will see results by operations. The EBITDA expansion of 32%, excluding the non recurring effects of Paulista Networks renewal was a reflection of gains in all operations, especially South operation. Volume growth came with an expressive yield gain, which boosted net revenues.
Fixed cost dilution also contributed to margin gain. On the next chart, we will see highlights of consolidated financial results. When comparing the financial results, it's necessary to remember that in the Q2 of 2020, we had a recognition of BRL131 1,000,000 as non recurring gains regarding the Paulista network renewal, affecting the comparability. Anyway, the financial result came worse than the Q2 2020 due to increases in CEI and inflation indexes. With better operational performance, the net income reached BRL314 1,000,000, a significant improvement in relation to the previous year when excluding the nonrecurring effects of the Paulista network renewal.
On the next chart, we will see more details of that. We have closed the 2nd quarter with 2.1x net debt EBITDA. As I mentioned in the previous call, the prepayment of the bond 2024 has improved the debt amortization schedule with a lower concentration of short term debt, allowing the execution of our long term investment plan. On the next chart, we have the market outlook for soybean and corn. Regarding the soybean market, in 2021, according to our consult projections, Brazil should have a record harvest of 137,000,000 tons, an increase of 11,000,000 tons compared to 2020.
Of this total, 84,000,000 should be exported, 2,000,000 tons more than in 2020. In the first half of twenty twenty one, soybean exports were down 1,200,000 tons compared to the same period in 2020 due to the delay in the soybean crop, suggesting that there is still an opportunity for an increase of 3,000,000 tons in exports in the second half of the year. On the next chart, we will see corn outlook. According to Agua Consul, we had a new update on the current scenario, showing an additional decrease of 13,000,000 tons in Brazilian production and a drop of 11,000,000 tons in exports volume when comparing to previous forecast. This crop failure is more severe in the states of Mato Grosso do Sul, Parana and Boyas.
Although not so severe in Mato Grosso, the failure may result in lower exports as part of the state production should be used to supply the domestic market in other states. The high uncertainty of the corn market make it difficult to project corn volume for the entire second half, reason why Humu decided to discontinue its guidance for 2021. On the next chart, we will talk about a scenario for 2022. For the next year, we remain confident and we expect a huge growth in exports. Because of that, we are maintaining the long term guidance for 2025.
PagSeguro's profitability skyrocketed in last years, increasing 12x for corn and 3x for soybean. Therefore, from a supply standpoint, we should continue to see crops improvement over the next years once farmers could expand investments in productivity and area expansion. On the demand side, China is recovering fast from the African swine flu and the consumption of soybeans going up. At the same time, China is becoming a relevant importer of
corn,
which increases significantly the global demand for grains. All of that points out that our investment thesis is stronger than ever and we should continue to pursue the development of Brazilian logistics infrastructure. On the next chart, I would like to comment on the port of Santos. In previous calls, we have been highlighting improvement in Sunspot infrastructure. This time, I would like to highlight that we have completed the 3rd line of Paqueta and the export corridor.
The Macauk expansion is expected to be delivered in September 21st. Thereby, we are going to have a much better and more efficient port. On the next chart, I will comment on central network. As we had already disclosed, in July, we officially inaugurated the Rio Verde terminal, thereby we have 2 grains terminal operating in Boyas. The Q2 2021 results show a strong performance evolution, both in terms of volume and in margins.
Thus, Humu is positioned in a very competitive place in the grain market, but should generate relevant increases in volumes over the next few years. Here, I conclude my presentation, and we can go now to Q and A session. Thank you.
Thank you. We'll now begin the Q and A session. Our first questions come from Andre Acin with Itau. Please, Andre, go ahead.
Hello, Hikah. Hello, Gustavo. Thank you for taking my questions. My first question is related to the extension of Lucas.
Basically, I mean, we'd like to understand a
little bit more the judicial safety you have and going through with a state owned model instead of
the federal model. Still on this question, I'd like to better understand the $12,000,000,000 CapEx, which was described within the project. I understand there's a new patch or the new railway, which would go to Cuyaba. I'd also like to better understand a little bit about these volumes and what would be the potential demand there. So that's my first question.
I'll make my second question after this one.
Hi, Hashim, good to have you in the call and thank you for the question. Just to put everybody in the same page, just say, we have limited things that we can say about the process, okay? There is still no winner of this process. But Mato Grosso government did an announcement a few weeks ago requiring potential investors to apply for the authorization process to connect the Rauldonopoulos terminal in Mato Grosso to Lucas du Rio Verde and Cuyama, okay? What we can say by now, Rajen, is that who are already applied, okay?
We delivered very advanced studies regarding this. You all know that we have been studying this for a long time. So we are very well advanced engineering project, environmental project. So we've already provided everything for the local government. And we now from the day of the announcement, we have 45 days to have the results of the requirement.
So this is the first important thing. I'd like to reinforce before going to your point that you guys know this is a very important project, not only for Jumbo, this is a very important project for the producers from Mato Grosso, this is a very important project for the state of Mato Grosso and this is a very important project for Brazil, Okay. And obviously for us, this may be the most important project in the pipeline. It's a project, as I always said, we have a very high return. We are talking about double digit real terms project, okay?
Having said that, Hashim, regarding the CapEx, I think this the value provided in the announcement is a reference, okay, regarding the government. We are studying this. There is things that we can save. We have advanced a lot in these last 6 years in engineering methodologies. So this is more a reference from the local government.
Once we have the winner of this announcement of this requirement of the government and if we are the one chosen, we will provide details on CapEx. Regarding the stretch to Cuyaba, okay, Obviously, it's necessary to say that the high return comes not from Cuyaba, but comes from Lucas du Silve Energy, okay? But it's important and I always repeat in my meeting, Tajin, that there are true returns when you build a new railway. And this is very clear in Mala Sin Car, for example. First thing is that you provide a better service for the people that is there, okay?
So if there is a farmer already, the way of the railway, you improve the quality of service, you improve the cost, you bring efficiency. And the second thing, and I always refer here to Motel Lobato when you read his books, is that you bring development where the railway reaches. So it can have and this you can see in central network, people calling us, understanding what are the costs of railway and investing more where the railway is closed. And this will happen in Cuyaba. It's a very interesting state for containers.
So general cargo, you can provide there. And there is enough area in Mato Grosso, in the west of Mato Grosso to support the return of this stretch, okay? But obviously, the bulk of the returns of the project are in the north of the state in direction of Lucas Doer River. Hashim, I don't know if I there's still something to be answered.
No, no, that was very clear. And if I could ask a second question on Santo's board. You guys have made I mean, there's a lot of there's already been a lot going on with the port. There seems to be
a lot of new capacity opening up. And when
we think about the central network, it is diverting cargo that was going to other regions of the port into the main part of the port, right? So my question is, do you see more opportunities to consolidate other players' terminals or to make more agreements to use other players' spare capacity? I'm thinking here specifically of Chipotle and maybe the capacity of
Leidovias. Jose, can I ask you to just make the question again? It's not very clear for me. Absolutely, sir. A bit more slow, yes, you have time.
Thank you.
When we think about the Port of Santos, you guys already done a lot of things to expand more. So you just mentioned the Maricopa Baraju. But when
we look into the future,
I mean, we still see a couple of different areas of the port, which are going to become underutilized, right? So when we look into Chipotle, when we look into the capacity owned by Ettrovia, there seems to be more opportunity to consolidate or to do more agreements with other players. How do you see this going forward? How do
you see the opportunity to consider doing more expansions with incentives?
Yes. You're right, Sachin, like we and not only Maculco, I said in the last call that we would be delivering some port last week and you can see the improvement of efficiency brought not only the Macuco that is still in the finishing finishing the project, but the 3rd line of Paqueta and Punta da Praia. So there is a huge C-thirty 9, Beramu and ourselves together, we rebuild another 4,000,000 tons of capacity. It's a great first class terminal in my opinion. We are from now on building additional static capacity that will improve even more the efficiency of T39.
But you're right, we had the first fertilizer the loading loading of grains in the Tiflun terminal. Okay, so we do have an agreement with Velai, Velai that's good for both parties. And there is plenty of room in the left margin, mainly in the left margin. In the right margin, we will have next year STS-eleven. There is the opportunity of the deep reward and these I'm saying is the left margin deep reward that we are still working with them, advancing the project.
So there is plenty of opportunities for building new capacity, greenfield, brownfield and improving the partnership that we have, both with, for example, Karamoru and Vialai. So you know that's very interesting for the Rio. We have different opportunities to load grains and unloading fertilizers, and we are working very hard on that.
Thank you,
Arun. Our next question comes from Pedro Brun with Citi Investments. Robert, Pedro, you may proceed. Mr. Pedro Bruni, your line is open.
Can you hear me
now? Yes, perfectly, Pedro.
Okay. Thank you. Thanks for the question. First of all, congratulations on the transparency of discontinuing the short term guidance given the high level of uncertainty in the near term. I have a question regarding CapEx.
We saw a high level of investment on expansion in the quarter. You disclosed in the release that it relates mostly to the Magalha Centrao, right, to the central network, about $300,000,000 if I'm not mistaken. If you could give us a bit more detail on the evolution of this CapEx going forward, meaning minus the central network until when this high concentration will go? And overall, in terms of the long term guidance, which you have kept unchanged of €16,500,000,000 to €18,500,000,000 If you can give us a bit more clarity on the distribution on time of that CapEx, that will be great. Thank you very much.
Hi, Pedro. Thanks for your question. Let me start with this year. So you're right, there was a concentration of investments in the first half, mainly to afford the operations of central network. We are not expecting as much CapEx in the second half as we did in the first half.
This is pretty much the seasonality that we came up with the plan for this year. So we can say by now that the CapEx will be pretty much inside of the previous range. So we are not expecting any additional CapEx for this year. With regards to the upcoming years, we might have to adjust the CapEx throughout the years. It depends a lot on how strong next year volumes will be.
So as Ricardo just mentioned, we are very excited about 2022. We are expecting huge volumes for grains. And also, we believe that central network is going to continue to grow fast, and therefore, it's going to require some additional investments pretty much on rolling stock to support and to afford the additional volumes. But when it comes to infrastructure then, the investments will be much more spread. So it will be more steady over time because it has to consider our ability to execute all the CapEx.
So the only thing that might change from 1 year to other is how much volumes more volumes we are expecting to have. But I would say that on average, the CapEx should be closed every year, maybe a bit more next year due to the ramp up in the volumes in the central network.
Marty, if I can just do a a complement your answer here. It's important to say, sometimes I repeat, but maybe these are things that investors themselves I don't see. But every single year, we are improving we are investing a lot and we are improving our knowledge in the investment. So and also our knowledge in the operations. I always say that we are still a baby.
We are a very recent company. And every single year when we learn more about our operation, we are able to improve our cycle. So we do have a lot of focus in the improvement of our cycle that at the end of the day, that means improvement when I say improvement in defense, it's a reduction of CapEx, mainly in rolling stock. So we have been very disciplined in terms of CapEx. And every time we improve our operations, we see a reduction of CapEx that we foresaw.
We will see this year still a reduction compared to what we thought. And we expect to see also in the next year due to improvement of operations.
Our next question comes from Victor Mizusaki with Bradesco BBI. Please, Victor, go ahead.
Hi. I have two questions here. The first one is a follow-up on port capacity. Jumu, I mean, as you said, I mean, the company concluded 2 infrastructure projects at the part of Santos. And based on your presentation, the company will conclude another 2 in the second half.
So I don't know if you can give any kind of color on capacity increases. So maybe even if you cannot precise the number, but if you can say, you are talking about here maybe 10%, 15% of capacity increase. And how important is this capacity expansion for Manacentral? And the second question is related to the second half, even though it's very hard to predict volumes for especially for the Q4. I don't know if you can comment a little bit about volumes in July August.
And if we I mean, in some extent, if it would make sense to compare the second half of this year with the second half of twenty sixteen. Thank you.
Okay. I will begin here, Gustavo and I. We are fighting here to answer this question. That's good. But Victor, regarding port, okay, as I told you, there are 2 ways to increase port capacity.
1 is improving the railway, the efficiency of the railway and the other is generating capacity. We are doing both. As I told you, we just increased like 4,000,000 tons the T39, but this is not in capacity, but all the orders increase a lot the capacity because you improve your cycle inside the port. Also, by our agreement with PLAA, we can go to the left margin. So you open room in the right margin to and you generate more efficiency because a left margin it's a margin with less traffic.
So I don't like to give a number here. I can tell you like by what's public that the pure world for example, it will be another 8,000,000 tons for grains, 3,000,000 tons for fertilizers. But what's important to say is that the pork will not be a bottleneck for the growth of the Vons and the central network in the next years, okay? And when it becomes close to be, we'll be doing new terminals, the ones that we are still in opening capacity. So that's not a concern that the SunSport will be a bottleneck for our growth.
So this is regarding the 4th. Sorry, the second one, what could you? Yes. The second one. The second one.
In July and ours, Maric, would you like to get this? Or
Yes. Yes. I can take this one. Victor, we'll be releasing the numbers for July today as soon as the market closes. So you'll be all having the data available.
I can say so far that July was okay, in line with our expectations. So we have been saying that for the Q3, we have a significant amount of take or pay that somehow protects us against any major loss in terms of crop failure. All the uncertainty lies on the Q4, which is hard to predict and we have lower amounts of take or pay. So we depend more on the market. And what we know right now is the market is not clear and the crop scenario might be difficult to predict with the disruption that we have right now.
But we are not foreseeing any major losses for July August, and we believe that any volatility might come from the Q4. But as I said, it's hard to predict right now, and that's the reason why we suspended the guidance because we don't have the visibility we don't have enough visibility on that right now to provide a new number. But numbers for the Q3 should be okay.
Okay. And so but I mean, can we compare these, I mean, the current situation of what happened back in the second half of twenty sixteen?
Vitor, there are some differences. First, I think this year, especially in the Q3, the amount of take or pay is higher than it was in 2016. Another important thing is that this year we have central network and we didn't have that back in 2016. And another thing was that in 2016, also the sugar market, which is an important alternative for cargoes for Humu was also bad. This year, sugar is evolving well, so we might try to take more try to transport more sugar and other cargoes.
So we are less dependent only on grains in 2016. We didn't have much other cargoes to offset any losses from corn. But that being said, the size of the failure, it's still not clear. So it's still too early to compare with 2016 because things could get better or worse from now on. So we really need to have a better view on the Q4, And we believe that we're going to have only a better view as we approach the Q4.
So as of now, it's really hard to come up with any prediction about these numbers.
Our next question comes from Regis de Cardoso with Credit Suisse. Please, Regis, go ahead.
Thank you, Lavin. Thank you, Gustavo, for taking my questions. One of my questions was very similar to the previous one. Just wanted to make sure, I mean, the reason why you did not provide a new guidance, is it because you were, let's say, very uncertain about the volumes? Or do you also feel very uncertain about the EBITDA so that you I mean, you sort of canceled the last guidance.
So we presume EBITDA could be below $4,000,000,000 but we don't know how low that could go, right? So my question is, is that uncertainty mostly on volumes or is it EBITDA? And then on those same lines, whether you believe 3rd quarter should be similar to this quarter, 2nd quarter levels? And then I'll ask the second question,
Regis, I will tell you very transparently that this is a bit tricky question because volumes and EBITDA are very correlated, yes? But what I can tell you is that there is a huge uncertainty in volumes, okay, that obviously can affect our results. The point here, Regis, is that as we said, I think in the first and second call, we have good levels of take or pay even in the Q3 when compared to previous years. So but by the end of the quarter and the last quarter, is very uncertain. So if you see Mato Grosso, the sale of the crop was not that bad.
However, there is a huge consumption of grains from the internal market. So it's very unclear for us first if there is any improvement or worsening of this scenario by the end of the year? How much we stay in the local market? How much we will be exporting? Also, there is something around 3,000,000, 4000000 tons of soybean that's in Brazil we had and can be exported.
So it's very unclear for us. The main point here are volumes, okay, that we and those that will stay in Brazil, that will be exported. But the tricky point is that variables are correlated, okay? So it's not easy to answer this question, but there was a huge uncertainty of still the scenario mainly from September on, okay, September, October, November December. And what will stay here in the country will be exported?
All right. So second question, and actually if I may, just a quick one and then a more complete one. The quick one is yields on central network are declining, I think, as expected, because they come from a very high base. Is this a trend we should expect going forward? And whether you believe this should normalize?
Is it something like 80 or 90 per RTK or for KKRU? And the second question is in regards to Lucas Ruben, again, the expansion project. My question is whether you see any benefit, let's say, in potentially waiting for the federal government who has proposed a provisional measure sort of to accelerate a process in PLS-two sixty one to create the authorization regime. I mean, do you believe first that, that provisional manager will be successful in accelerating that discussion if that will be an option? And if it is, if you see any advantages, let's say, in going through the federal alternative as opposed to the state level?
Hi, Hesj. I will answer the first question and then Ricardo will answer the second one. So with regards to the tariffs in central network, it's pretty much a strategy. So when we first started, we were operating only with a small terminal in Sao Simone. So there was an excess of demand.
So we could pretty much choose whatever cargo we would like to transport. And of course, we choose the ones that we're paying more. Right now, as we open the capacity in Rio Verde terminal, the both capacities combined will be almost 10,000,000 tons of grains. So therefore, we could be more aggressive in the volumes. So that is something that we will certainly do.
So we are trying to get the volume as fast as we can. And also, of course, when we have a different assortment, in the very beginning, we were serving only soybeans. From now on, we should be also serving corn and soybean meal. So those other cargoes might have different tariffs, and they could change a little bit the mix and the assortment of cargoes that we transport. But the most important thing about central network is that we were capable, as we shown in the presentation, to increase our margin from 47% last quarter to 56% EBITDA margin this quarter.
So tariffs is not the problem. The real the thing that matters most here is how fast can we capture all the volume that is available in the market. And if we do that, margins could be even beyond this 56% level that we are today. Now, Ricardo?
Let me try to answer the second part. Regarding POS TeleAssit, we are this was on the question, but I would be to be clear here that we Jumbo is in favor of Belleesi. In our opinion, it's very transformational, okay? The only point here that we need to take care is that having 2 models that are together in the same moment, you need to take care to not to harm the current one, okay? The current one is the hour.
We have been invested a lot. So we just need to take care with this model leading together, okay? So I don't know what's the right way, it's imposing or not imposing voting, discussing to reach an agreement that brings country. So the way that government does, I will that I will not comment, but it's important to reinforce here our points. Regarding having a federal extension or a state extension, I will repeat what I always say in my meetings is that, obviously, we would prefer the Phase 1, I always said that because we know all the regulation, everything.
But the point is that we have been working both alternatives, And the local government, the Montaguest government has been done a very serious work that because this extension is very, very important for the state and very, very important for agriculture in the country. So now it doesn't matter like for us it's state, it's federal. It's important that we have a solution for that. The winner of the announcement here, who is chosen by the government, start to build. In our opinion, if we are the winner, we will be ready to start to build by the end of the next year.
So we are very excited. And in my opinion, all the regulation of the state will be very similar to the federal one. It will work very well for everybody. So the question now is not which one is better, which we prefer, what we have, what the railway in Brazil has in hand,
okay? Very clear, Olivier and Christophe. Thanks for the answers.
Our next question comes from Bruno Moring with Goldman Sachs. Please Bruno, go ahead.
Hi, good afternoon. Thank you for taking my question. I have a follow-up question on what's expected for the second half. I appreciate you cannot provide a guidance, but I wanted to clarify one point on the stakeholder base. Gustavo mentioned that you apparently have more take or pay now than back in the Q3 of 2016.
But I remember back then you were under those 3 year contracts where you seem to be more contracted under pay for pay for 2016, 'seventeen 'eighteen. And I understood that even though you have been closing some pay per pay contracts short term ones more recently, they were not as relevant as they used to be in the past. So just wanted to clarify if I misunderstood or the reason for you to believe you are more going into the second half of the year, maybe not only the third quarter, but also the Q4? Thank you so much.
Thank you, Bruno, for the question. Just to clarify, you're right. Back to 2016, we had those loan agreements. But most part of the time, the volumes were steady throughout the years. So we were not seeing volumes growing too much.
At least the agreement. They were fixed. So every year, we had to add up some volumes to the agreement. This year, we sold in advance most part of the volumes for the Q3. So if you look to the absolute volumes, we are far more sold than we were back then in 2016.
The problem, as I said before, lies all in the Q4. Q4 is typically a quarter where in even when we have normal market conditions, trading companies and farmers always struggle with the ideas whether or not they should carry over some inventories for next year. So we don't have full visibility, even in a normal year, what could happen in the Q4. And for that reason, trading companies try to be more conservative with the volumes they have on their agreements to have some kind of flexibility. Of course, this year, we sold more, but at the same time, they never expect us to buy everything in advance.
So we still need to sell more take or pay for the Q4. And of course, that's only going to happen if we have more availability in the market. So and one other thing, as I mentioned before, when we try to compare with 2016 is the entrance of central network. So that brings a whole new market to serve. So it was a market that we didn't have the ability back then to approach.
This year, we have. So of course, the same that I mentioned for the North and the South operation applies to the Central. So farmers and trading companies are not willing to engage with all the volumes for the Q4 because they always know that there might be some uncertainties there. And the most important thing about those volumes that we sold in advance is that we not only secure the volumes, but also secure some pricing level. So the price that we sold in advance is very good.
The thing now is that as the market conditions are worse off, of course, if we have to sell more now for the Q4, prices are definitely going to be lower than the prices that we have under the take or pay. So that's another reason why we have some uncertainties because it's not only if we're going to have the volumes, but whether or not this price is going to be pressured by a lower demand that's going to be available in the market.
Gustavo, just to make sure that I understood it correctly. So you said you have sold a higher volume versus Q3 'sixteen. Is it as a percentage of the expected volume? Or is it in absolute terms? It makes a difference because the company grew significantly since then, right?
Yes. I don't have the numbers by heart, but I would say definitely in absolute terms, the volumes are higher. I'm not quite sure about the percentage, but at least from overall standpoint, volumes are definitely higher.
Our next question comes from Lucas Barbosa with Santander. Please Lucas, you may proceed.
Good afternoon, Lavin Gustavo. Thanks for taking my question. So I have a question on the BR 163 Road. So the road concession up until Miritutva was auctioned last month and the total action should start in the 1st semester of 2022. I just wanted to hear what will be Rumo's strategy as a response to the start of the collection?
So in other words, is Rumor thinking about increasing prices next year as a response to the BR163 toll collection? Or will Rumor maintain prices stable and focus on expanding volumes? Thank you very much.
Hi, Lucas. Thank you for your question. I got a part of the question because I dropped here, but let me if I got. Out. What's important here is that it's not expected to have the tools ready until beginning of 2023, actually end of 2022.
The winner of the BR163 concession needs to do some improvements, EBR 63 because they can't charge the loan fees, okay? So for next year, we still won't have the BRL20 or BRL25 per ton additional going up, okay? Having said that, there is this BRL20 or BRL25 per ton more can be used for both, for price improvements or can be used to get additional market share to be more competitive, okay? So in this sense, we still need to wait closer to the moment that the growth are ready to know how is the market, to say where we'll be used. But our strategy will be used part in price improvements, part in gaining competitiveness.
Our next question comes from Bruno Marin with Goldman Sachs. Please, Bruno, go ahead.
Thank you for taking my follow-up. I just wanted to follow-up on the take or pay on the profitability side. As you have always said, the profitability of the take or pay clause is never the same as transporting the grains themselves. So is there any color you can provide in terms of how to quantify how much protected you are, not in terms of the percentage of volumes, return on take or pay, but on the profitability
of
the terms of the take or pay contract, any color you can provide? And maybe if you can provide anything concrete for the second half of this year, maybe directionally, the terms that you are closing out, do they protect you more or less than in 2016 for each 1,000,000 ton under the paper pay? Thank you so much.
So if you look to the take or pay structure, probably the structure is protect us a bit more this year than what we had back then in 2016. So the percentage of the fee is higher. But that is the better protection for the Q3 where, as I mentioned, we have higher the most part of the volume is secured by take or pay. So if you have any failure in volumes in the 3rd quarter, take or pay might offset well in terms of profitability because either way, most part of the volumes are going to be there because trading companies are not happy to pay take or pay. But when it comes to the Q4, it's already a quarter where we have some idle capacity.
So we never sell 100% of the capacity because usually the market is not high enough to do that. The structure is still better, but as long as we still have a significant portion of the volumes to be sold, that could arguably hurt our profitability. We can't deny that without having the volumes, especially when we are not fully protected with take or pay, that might hurt profitability because we depend a lot on fixed cost dilution. Of course, the company will do all the efforts in costs, also trying to get other cargoes to offset or to prevent any major drop in terms of profitability. But it's as we are being saying throughout this call, we still have uncertainty, especially on the size of the failure in corn.
But we are working hard internally in the company to bring all the cargo that we can to the system in order to protect the profitability of our operations. But it is real hard as the same way it is to provide guidance for volumes and for yields. The same is true for profitability because profitability is ultimately driven by the volumes. So we'll do our best to try to get into operate as much profitability as we can in the Q4. Very likely, Q3, as I said, it's going to be okay with profitability.
We are still predicting good volumes and with our central network much more mature with higher volumes. So the scenario seems much brighter for the Q3 than it is for the Q4.
Our next question comes from Alfonso Salazar with Scotiabank.
Yes. Thank you for taking my question. Susano announced a big investment for
a new pulp mill in the state of Mato Grosso do Sul. And what we have seen is
a new wave of both investments
by different companies, CNPC, Brussels, Claville and now Susano. Just wondering what is the outlook for growth of transported volumes for pulp over the coming years. You can comment on that.
You're right. We are seeing pulp producers growing a lot over the past few years. And also our volumes of pulp are growing fast. Last year, we had an important debottleneck at the port Santos. So the government did the auction of 2 new terminals for pulp that have the ability to operate with railway.
So we have a couple of projects together with the pulp producers that very likely are going to boost our volumes of pulp going forward. So we operate with all the major players like Klabin, like Suzano. And as those negotiations and those agreements advance, we are going to be able to capture most part of the volumes that we are seeing in that market. But just to be clear on that, we are presenting sustainable growth on pulp over the last 3 2 years at least. And definitely going forward, we continue to expect large growth coming from pulp producers in South Mato Grosso state and which also brings more volumes to us in Mato Grosso state.
Yes. Martin, just to complement here the question. And, Alfonso, Klabin, just to understand the difference, Clavin is transported the volumes produced by Clavin is transported by containers by Brado. So the agreement that we announced in the last call refers to the total volume of Klabin plant, okay? Just to have an idea, in a usual year, Brade transported 90,000 containers.
Clabin contract represents another 30,000 containers, okay? So this is really expressive. It's, in my opinion, transformation of Fort Brado, mainly because we do have opportunity to increase from 50% to 100% of the capacity of the plant once we provide good service and the plant is 100% working. Regarding pulp production in Mato Grosso, maybe you have seen an interview from our commercial VP saying about our conversations
on the new plan
for Suzano. And obviously, our strategy is to take the boat through the most efficient concession that we have. That's through the North concession. So what we are doing is taking a very stable volume and transporting in a much more efficient concession that we did in the past. So the stability, the improvement of profitability is very important for us.
So we reinforce the importance of pulp in our segments.
Our next question comes from Guilherme Manges with
JPMorgan.
A quick follow-up question here regarding the Lucas project. Can you provide more color in terms of the environmental approval? I recall that you filed for that back in 2019. Just wondering what your expectations for it to be concluded? Thanks.
Yes. Thank you, Guillermo, for the question. We have started a long time ago the Americas and you know that in Brazil, this kind of approval, this kind of life, the environment license is usually the bottleneck. So we knew that. And we have been working much before had any announcement of the government because we're interested in the expansion.
The first important thing is that who is doing this analysis is the local government or the local environmental agents, no IBAMA, because that is good because IBAMA has a lot of projects and this specific is very important for Mato Grosso. So I think that can be a bit faster, although they are as they do the same requirements than Ibrama. But we are very advanced. And what I can tell you is that in the second half of twenty twenty two, so second half of the second year, we expect to have the license for Star building the extension once we are the ones chosen by the Mato Grosso government. So it's very well advanced.
Advanced.
Thank you, everyone. That concludes our I would like to turn the floor over to Mr. Richard Levin for his final remarks. Please Mr. Levin, you may proceed.
Well, you guys know that usually I don't do any speech by the end of the call, but I think this is a good moment for a brief speech from my side. Guys, although we have the yields on the sale of the corn crop for the next half of the year, I really would like to reinforce that we are in a very, very good moment for the company and Humu has a bright future. Operationally, we have 2 months of records
in this last half of
the year, showing that we can increase our volumes even in the peaks of the harvest. We remember guys that we started to operate the R120 railcars per train. And here I'm confirming that it's a very promising project. Next year, 2022, we'll be fully operating both sides, going to Matagrosa and going to Santos, reducing train crossing, reducing emissions, reducing consumption of fuels. Talking about fuels, this was another quarter of improvement in consumption of fuel.
I reinforce what I always say that we will be improving the consumption of fuel for several quarters. There's a lot to do in the sense. I will not talk more about Santos. I think I have talked a lot of things about Santos in this call. We delivered 2 terminals in Goya.
We already have double digit market share in Goya. It's really impressive with impressive efficiency and with impressive margins. So we are supporting the agriculture of Goliad state. We have been improving our commercial skills by improving the knowledge of the market, by the proximity to our clients. And I think that this improvement is showed by the gain of market share that we had year.
If you see our competitors, volumes has been going down and we have been gaining market share. Financially, I don't need to say the company is very stable compared to 2020. Every single month, we have done better EBITDAs unless on January because of the postponement of the crop. Now we have the opportunity to do expansion. We may have the opportunity to expansion if we are the winners of the bid.
You know that this is really transformational for the company. This is transformational for the company. This is the project that we foresee since the beginning of the company is serving the middle and north of the state of Mato Grosso, bringing competitiveness for the Brazilian agriculture for Mato Grosso. So and Brazil is improving in agriculture. The consumption of propane is continuing to grow.
And you know guys that Mato Grosso will serve. Mato Grosso will support this increase of consumption of protein, and we are there to serve this growth of consumption protein. So just finalizing here my speech, I think that homeostasis is stronger than ever. We are very optimistic with the next year and with the older next years of the company. I'd like to support I'd like to thank the support of all our investors of the sell side that understands very well the company and talk to you during the next quarter.
Thank you very much.
Thank you. This concludes Hummer's conference call for today. Thank you very much for your participation. Have a good day and you may now