Good afternoon, everyone, and thank you for waiting. Welcome to Humalogistika conference call to discuss the Q1 of 2021 results. Today with us, we have Mr. Ricardo Levin, CFO and IRO Mr. Gustavo Rosa, Investor Relations and Treasury Director.
We would like to inform that during the Company's presentation, all participants will only be able to listen to the call. We'll then begin the Q and A session when further instructions will be given. In case you need assistance during conference, please request the operator's help by pressing star 0. 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. The event is also being broadcast simultaneously on the Internet via webcast.
Before proceeding, we would like to mention that forward statements are based on beliefs and assumptions of whose management and on information currently available to the company. They involve risks and uncertainties because they relate to the 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 Q1 of 2021. I would like to start by providing some highlights on ESG initiatives. Once more, KUMU delivered a substantial reduction on fuel consumption. This is the main driver for reducing fuel through emissions. In our long term goals, we are committed to reduce our emissions by 15% until 2023.
Another important effort is related to diversity. Recently, we announced our restructure of the Board, bringing 2 women as members, as of now representing 20% of its composition. Besides that, we are strongly committed to increasing women presence in all organization levels. Already in April, we issued our first sustainability linked bond in the local market, reinforcing again our transparency and engagement with ESG agenda. Last but not least, we expect to publish our sustainability report in June, highlighting several important improvements in our sustainable agenda.
On the next chart, we are going to go through the main highlights of this quarter. Qumu presented a good performance in all main KPIs this quarter. Despite the delay in the soybean crop, consolidated volumes grew almost 13%. A better market outlook and higher fuel prices helped enhance our competitiveness, which allowed a yield expansion of 5.9%. In March, we started to operate Sao Simon terminal in central network, allowing us to access new areas such as Boyas and Tocquentini states.
EBITDA reached R832 million dollars 44 percent up year over year. During the Q1, we prepared 2024 senior notes that not only reduced average cost of debt, but also brought a non recurring financial gain due to the unfold of the debt swap. Therefore, net income reached BRL175 million compared to a loss of BRL274 million in the same quarter last year. On the next chart, we will present the operational results. North operation delivered the highest contribution for the quarter volume, growing 16.4%.
In the South operation, the harvest historically starts later than Mato Grosso. This year, volumes arrived only March, which limited its growth to 2%. Looking to the assortment of cargoes, besides a good performance in grains that grew 9%, we highlight a 44% growth in fertilizers, 26% in fuel and almost 20% in pulp. On the next chart, we will see results per operation. Our consolidated EBITDA grew 44%, result of a 42% growth in the North operation and a 67% in the South operation.
The higher growth in the South has basically three reasons. First, higher yields, mainly due to concentration of volumes in March when tariffs are typically higher. Second, a better assortment of cargoes with more sugar and finally, better pricing in Rio Grande do Sul that had a crop disruption last year. Consequently, we posted significant gains in margins in both operations. On the next chart, we will see the highlights of financial results and net income.
Financial expenses improved due to last year concession fees prepayment and a non recurring effect of BRL203 million due to the unfold of the 2024 senior note swap. A better operational performance coupled with better financial results generated a profit of BRL175 1,000,000 compared to a loss of R274 $1,000,000 in the Q1 2020. On the next chart, we will see the effect of the 2024 senior notes prepayment in the P and L and cash flow. The all in cost of 2024 senior notes were approximately 144 percent of CEI, while company's recent issuance in the local market are around 110% of CDI. As a result, the anticipated amortization of the 2024 senior notes improved the room's debt profile, increasing its duration and reducing its average costs.
Also, the unfold of the debt swap brought a net impact of approximately BRL204 1,000,000 in the P and L. On the next chart, we will see more details of that. In the Q1 2021, leverage reached 2 times net debt to EBITDA with a reduction of gross debt. As already said in the previous slides, the prepayment of 2024 single bonds has improved the debt amortization schedule, reinforcing the strength of the company for the execution of next year's investment plan. On the next chart, we have the market outlook for soybean.
Regarding the soybean market, 2021 according to agroconsult's projections, Brazil should have a record harvest of 137,000,000 tons, an increase of 11,000,000 tons compared to 2020, of which 85,000,000 tons should be exported. Also according to the consultancy, Mato Grosso is expected to increase its exports by 2,000,000 tons, extending their harvest until July. In El Granitos Sul, a strong expansion of production, 8,300,000 tons is also expected, recovering from the 2020 crop failure. In Goias state, a new market that started to be served by home in March, production is estimated at 13,400,000 tons. Commercialization and volumes undertake of the agreements are well advanced, bringing a good outlook for the Q2 of 2021.
On the next chart, we will see corn outlook. Aje Rural projects a reduction of 8,000,000 tons in the country's production and a decrease of 6,000,000 tons in export volumes. In Mato Grosso, a reduction of 1,000,000 tons in exports is expected. In that goes to Sur Parana, production is estimated at 20,000,000 tons. And in Goias, The volume of corn contracted for the second half of the year is substantially higher than that in the same period of 2020.
However, volumes for the Q4 are still challenging due to the expected lower availability for exports. On the next chart, we will take a look at the long term drivers for grains. Farmers profitability has skyrocketed in the last few years, increasing approximately 12 times for corn and 3 times for soybean. Therefore, from a supply standpoint, we should continue to see crops improvements 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 soybean is going up.
At same time, China is becoming a relevant important of corn, which increases significantly the global demand for grains. 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 Sammis. In previous calls, we have been highlighting improvement in SEMS Point Infrastructure. This time, I would like to share with you the deliveries that changed dramatically the efficiency in the port.
Improvements of the export corridor, Macoute Expansion and the 3rd light of Paquita will be operational by June this year. Also by this time, terminal T39 in which Qumu has a stake will be delivering the first phase of investments committed in the early renewal process that will bring another ship loader and access to berth 37. With that, part of Samsung will be significantly better off. On the next chart, I will comment on central network. As already disclosed, we have been operating Sao Simon terminal since March, and we are seeing volumes going up fast.
At the same time, the construction of Hill Village terminal is advancing well. And throughout the second half, we expect significant additional installed capacity in our terminals. Therefore, Qum is getting ready to take full advantage on its competitive position in the grain market. Before finishing, I would like to talk about our container operation. Flavin, which is already a very important customer for Humu, is partnering with Brado.
Companies signed a long term agreement that will create a demand for 30,000 containers per year, reinforcing the diversification of cargoes with high scalability always attractive to railways. Also, this partnership allows the replacement of trucks, which brings further contribution to CO2 emissions avoidance. Here, I conclude my presentation and we can go to Q and A session. Thank you.
Ladies and gentlemen, we'll start now the Q and A session. Our first question comes from Andre Acin with Itau. Please Mr. Acin, you may go ahead.
Hello, Nadim. Thank you for taking my questions. Congratulations on the results. My first question is in regards to volumes. You had a big delay this year on the soy harvest.
So and even though you mean you still reported strong volume for the Q1. So I'd like to understand a little bit better how you're seeing volumes developing for the Q2 of this year, given the pushback or ability within the harvest. Still on this topic, I'd also like to see how you're seeing the corn harvest later this year, right, the winter harvest, given that we're seeing a much less a much lower expectation on production? So that's my first question on volumes. My second question is on the central network.
You provided numbers which seem to be a lot higher than we were expecting, which is a very strong ramp up. Do you think this should maybe level off and then it only resume by the end of the year? Or how should we think about the evolution of the dynamics within the central network? Thank you.
Hi, Andrea. I will take the first part of the question and then Levin will complement with regards to corn and central network. So when we think about soybean this year, we are having an all time high crop. It got late, you're right. So we were able to grow to grow more volumes from March onwards.
So we are seeing a good availability of sign ins for the 2nd quarter. And as we already disclosed, we are well advanced in terms of the agreements and the commercialization of grains is doing okay. So we believe we're going to have pretty good volumes throughout the Q2 of this year. With regards to corn, I will hand over to Ricardo.
Thank you, Gustavo. Hi, Andres. Well, for corn, as you said, we will have a considerable drop in the harvest. According to agroconsult, it's expected to drop 8,000,000 tons in Brazil, okay, and consequently 6,000,000 tons in exports. In Mato Grosso, it's expected to drop 1,000,000 and this may be a bit conservative.
So it's important to say that this year, the window for exports is going to be shorter for corn due to the late harvest of soybean, as you said. Also important to note that for this year, for the corn period, okay, for the corn crop, we are 2x more contracted than we were at the same period at 2020. So we have 2 times more take or pay contracts this year. So we expect to have a good Q3, okay? The point here is that for the Q4, there is still a lot of uncertainty.
Maybe and the Q4 uncertainty is due to not only the late soybean harvest, but also to the weather conditions, okay? And together, these weather conditions plus delayed crop halted completely the commercialization of corn. So there is still a lot of volume to be sold in the Q4. So this is the answer for corn. The second one is regarding central network.
Andre, I don't know if you remember that on the Q3, we provided you a table on all the terminals. So there was like Saucibon that we said that that would start Q1 this year exactly what we did. And I remember that the second one that we're talking about was HILVERITY. So Hillverity, we expect to have it ready very soon. So we will take advantage of the corn crop.
We'll be able to start to elevate from this terminal in the second half of the year. Obviously, there is a huge capacity. Just to have an idea, we have static capacity in Riberde that's 2x more than we had in HondoNopolies before this improvement that we did in HondoNopolies. So, however, we will not start to use the entire capacity. But what I can say that it's a respectable ramp up and we will be using a good amount of capacity for the second half of the year already in Rio Village.
Just to comment
on that, we're going to be releasing today after the market closes our volumes for April. And then you're going to have a better view on how fast volumes are growing in central network. We are still talking only about the Saint Simon terminal. So Ricardo made a fair point. Of course, the capacity will boost after we have the entrance of Rio Verde.
But you're going to see, for sure, some very significant growth from March to April in our Sao Simon terminal.
Perfect. Thank you. Very clear.
Thank you, Andre.
Our next question comes from Lucas Barbosa with Santander. Please, Lucas, go ahead.
Good afternoon, Levi, Gustavo. Congratulations on
the results and thanks for taking my question. So my question is regarding yields. Can you give some color on how you are seeing yields for the Q2? What magnitude of year over year expansion you are seeing? And in addition, if you could comment on what are your expectations for the Q3 this year?
That's my question. Thanks very much.
I will take this Lucas. Thank you for participating on the call also. Well, let's talk about prices for the Q2. Total prices will depend a bit on the fuel prices, okay? But as we said in the last call, for the first half of the year, we that's the soybean transportation, we are very well positioned in terms of take or pay, okay?
So we consider that ex fuel prices will continue to be at a good level. So you said about the second quarter. What was the other question? For the Q3 also. Yes, Q3 as well.
Yes, yes. As I said to Andre, the 3rd party is we already have a very good amount of take or pay contracts, okay, as I said, for the second half of the year. We are 2 times we have 2 times more take or pay than we had at the same time of the year in 2020. So but the point here that's very concentrated in Q3, okay? So Q3, we have guarantees good guarantees of volume and prices, okay, obviously depending on how you'll vary fuel prices.
The point here is that for the Q4, it is still too early to say, okay? As I said, there is still a lot of uncertainty due to the weather conditions, late crop, commercialization that was completely halted. So we see a good scenario until the 3rd quarter this year.
Our next question comes from Rogerio Araujo with UBS BB. Please, Rogerio, go ahead.
Hey, Levin, Gustavo. Thanks for the opportunity. Congratulations on the results. A couple here on my side. The first one is on take or pay revenue.
Can you please go through the negotiations on take or pay for the 1st Q? How this played out with the delay in the crop by February? If you can say how much take or pay revenue there is recognized here in these results more or less? And also on my second question, if you it seems that Rumu gained share over the northern corridor in 1st Q. Can you go through the negotiations with the trading companies, all this take or pay volume that was closed by the first half of the year.
If you have a view on how cheaper is to use your railway network instead of going to the northern corridor, when you are like close to Charizio or Lucas de Juverde region. So how is the competitiveness south versus north at this moment? That's my questions. Thank you.
Rogerio, thank you. Thanks for the questions. You can see in our release that the take order pay for the Q1 is a bit more than BRL100 1,000,000, okay. You see the revenues and you see also in the working capital, okay, because it should be paid in the Q2. So these are like usual negotiations with trading companies in the sense that we signed contracts on that and this is owned by them to us.
So this is not a huge discussion with them. If we cannot transport, we also own them take or pay, but something around a bit more than BRL100 million. For the second part of the question, Gustavo would like to take this? Sure, Ricardo. Thanks.
Rogerio, you're right. So we did well in terms of market share in the Q1. I think we have a lot of effects here. You remember, we recently implemented a new commercial structure that right now is responsible for the whole company. And it amplifies the focus on the commercial relationship with customers.
So that allows us to negotiate take or pays in advance, which ultimately allows us, for instance, to have more volumes sold for January that generate the take or pay in 1st place. But it also reflects the improvement of the market conditions that we saw when we were negotiating with customers. So everybody knew that fuel prices were going up and that it's very important to explain our competitiveness against trucks.
We are
also, this year, different from what happened last year. The trading companies were having better visibility on volumes. So there was any kind of trouble with the offtakers abroad. So the commercialization evolved well and railway tends to be cheaper, especially after we have this rebalance in oil prices that allows us to present better prices. So what's going to happen in the upcoming quarters, it will depend pretty much on the markets, but we are well positioned.
And we believe that our commercial strategy is in place. And depending on what's going to happen with fuel prices, we might present a good performance throughout the year.
Thank you. And just a follow-up, when you look at volumes that are published, does it also include the take or pay that was not transported, but it was paid or not?
No, not at all. We only recognize the
take or pay in other revenues, but
it does not the take or pay in other revenues, but it does not affect not even yields, not even transported volumes because the volumes weren't transported at all.
Our next question comes from Victor Mizusaki with Bradesco BB.
BB. I have two questions here. The first one is a follow-up on the central network. So if you think about this operation, right, I mean, you're talking about like a one off of operation, only some small terminal with a relatively small terminal with like point 5,000,000 tons of capacity. And you said you have a very high margin of 46%.
So my question is with the open up Hilbert terminal in the Q3 with like 8,000,000 tons of capacity and expect dilution of fixed costs, Can we say that maybe minus Intel can achieve the same margin of the Northern network, so the margin above 50%? And the second question is, if you can give us an update on the environmental license of Lucas' utility project? Thank you. Victor, thank you for the questions. I will tell you about the margins.
I will not give you a number, but I can tell you that the margins on single network can be equal or more the north network, okay? So and this is remember that we always say that we have gains in scale, scale gains here. So when we are full operating, that has a distance that's higher than Sao Ceball, we can be with equal or even better margins than network, okay? Regarding the environmental license, we are working on that. As we said before, the license has been discussed locally, yes, by the local Secretarial Environment Secretary and we are evolving on that, okay.
So what I can tell correct what I can say at this point that the studies are improving very well.
Our next question comes from Stephen Trent with Citibank Group. Please Stephen, go ahead.
Good afternoon, gentlemen, and thanks very much for taking my question. Just two quick ones from you. When you think about longer term incremental investments, do you have any high level thoughts with respect to whether you would invest in a brand new project that the government presents? And I realize it's a little unfair to ask because we don't know all the projects that they could present. Or would you rather make incremental investments in the Southern network, for example?
And then my second question relates to the hydrological conditions in some parts of the south of Brazil, if you are seeing any impact. Thank you.
Stephen, let me take the first one. The second one, I will Gustavo will take. But I don't know if I get very well the question. If I didn't get you just after I answer you tell me. But the point here is that obviously there is a project that's very important for the company with good very good returns.
That's the extension to Luka de Ruberg. And obviously, our preference is always to invest in high return projects, okay? However, we do have other projects. What you're saying is that if I have limited capital, which one I would invest, obviously I will invest in the extension, okay? Regarding the South network, it's an interesting project.
Obviously, as you see today, the margins of the South is much lower than in the North network. But still, you can see a good returns on investments in the South. But in the South, the project let me say that, its returns are lower than going to the north. So being very direct, we would prefer investing in the north, but we are discussing in the south the renewal to see if we reach to a situation in which is attractive for the company to invest.
You're right. We have 2 things going on. 1st is the late crop of corn, and that brings also some weather concerns. So we don't know yet for sure how this might differentiate the production. But right now, there is at least some risks on that.
But on the other hand, and especially when it comes to Rio Grande do Sul state, which does not have a corn crop, they only work with soybean crop. Last year, we had a huge drop. So this year, the ability of soybean is much higher. And that could help us, at least in Rio Grande do Sul States to offset any or to present any losses in corn that we are seeing or expecting to partnerize states due to the bad weather. So we're going to have to see in the upcoming months how this will take place.
But there is at least reasons for concern with regards to the size of the current production in the South State.
Okay. Very helpful, Gustavo, and good to hear from you as well. Thanks a lot.
Our next question comes from Murillo Freiberg with Bank of America. Please, Murillo, go ahead.
Hi, guys. Thank you for the opportunity of asking. Couple of questions from our side related to the central network. The first one is, I know it's a bit too early to discuss that, but when we look at the yields there, they were substantially higher than what we see in the Northern corridor, for example. So I wanted to I know you want to provide like a financial guidance, but to have a rough idea of where we could lend the yields in the long run.
Should it be closer to what we have in the North Corridor, slightly higher? Or if you can give any kind of guidance on that sense? And the second one, I know it's also a little bit too early to discuss, but if you could talk a little bit about the competitive environment moving forward as you ramp up operations, You will probably reach kind of the same influence area that you have on FCA network, if you guys anticipate any kind of sharper competition with the other railway system. So that would be the 2 questions from our side.
Thank you, Murillo. Thank you for the question. Let me start by talking about the central network. So it's a business that is starting, and our main priority is to get all the volumes we can in that concession. So I wouldn't like to commit on any guidance for pricing because pricing is not the objective.
What we want there is to be to have the highest competitiveness we can in order to ramp up the volumes very fast. So right now, we are trying to get all the volumes and prices are luckily coming strong, but that's not the final objective. When we ask about the competitiveness in the region, we believe that our network is the most competitive one. We are very close to the heart of the production in the Goias state. Therefore, we are much less exposed to trucks than FCA.
So we believe that naturally the volumes tend to shift to our network as we become able to afford additional capacity. So we are not concerned about competition, and we believe that we have the right tools to capture most parts of the volumes.
Our next question comes from Josh Milberg with Morgan Stanley. Please, Mr. Milberg, go ahead.
Hey, everyone. Hey, Lavin. Hey, Gustavo. Thanks for the question. You guys had in the presentation the slide on the different investments being carried out in Santos.
And I was just hoping you could elaborate on that topic and revisit it to some degree how much those projects will help you overcome any potential bottlenecks over the next few years? And if you could also just revisit the status of the project with DP World, that would be great.
Hi, Josh. Thank you. Well, let's start with DP World. Like we are still evolving with them in the project, okay. It's not like when we announced it, it was the first MOU on the project.
So we still have some time to close all the details, okay? Regarding Santos, as you saw here in the presentation, there are a lot of projects that change completely the scenario in San Antonio, okay? So we have the 3rd line of Paqueta, you have the Punta del Apara project, you have several projects that both increase efficiency in the port and also increase capacity. At least consequently, they increased capacity. Santos is not a bottleneck right now, but we have been working in the last 5 years to avoid that it becomes a bottleneck.
And the bottleneck is mainly not necessarily in the terminals, but in the entrance of the recent port. And these are the ones that we are working on to improve efficiency. I give just another year, but just to illustrate what I'm telling you, like in the last year, we were doing such a priority in the sport by something around 50 meters, okay? So this is how, this is the result of the great job that we are doing in Santos, in Santos Port. And this is only one example, okay?
So besides this project that I told you, there are other ones to increase capacity like the improvement in T39 that we said in the presentation that we increase static capacity and we increased an additional capacity in Sanskork. So thanks to this job that we are doing, we are changing completely the efficiency and capacity in Santos in SunSport.
Okay. And I mean, is there it's probably difficult to measure, but just talking about the cost benefit of and the commercial benefit of those of the investments being done there. Could you address that?
In what sense, Josh? Could you elaborate a bit more? Well, no, just I mean, just thinking a little bit about
the speed to market, so like the turnaround time And just you mentioned sort of those efficiency gains that presumably would bring some kind of cost benefit to the operation.
Yes, I got it. And I think all the calls, Josh, I always say that a very efficient or when we meet a very efficient railway, there are extremes that are very efficient. So we have on one side the homoedopolis that's very efficient. We will have Cloudera that's very efficient. But not necessarily, we have all the efficiency that we would like to have in Santos.
And this is the reason that we are working. What that means like that, once we get an efficiency, the example that I told you, reducing almost 1 hour in turning in the cycle inside the transport. That means that we are reducing our costs and getting more competitive, okay? Once we get more competitive, we can fight for more volumes, for example, in Mato Grosso, for example, in Goyas, okay? So these you can feel, okay.
And for us like it's obvious that we can once you see here that we reduce our cost and get more competitive, we keep our margins. So this has a direct relationship with competitiveness of the entire company, entire North network.
And Levine, you had also talked about some potentially transformational projects in the Santos port. I mean, are there still some opportunities, some larger scale opportunities that you're pursuing?
What I can tell you is yes. There is still some room to grow in Centrus and we are pursuing that. Okay, unfortunately, Josh, I cannot tell you more on that. But yes, we see there is still room to increase both efficiency and capacity in Santos in San Saphora, okay? The ones that we have efficiency here that we can tell you, Josh, are the ones that I always tell, okay?
So we have T39, Macupu. We have increasing capacity for fertilizers in Teramagio. So the ones that are public are the ones that we are already working. There are only ones to create additional capacity that we are working on. And once I have more details, we will bring here to the calls.
Our next question comes from Hejes Cardoso with Credit Suisse. Please Mr. Regis, go ahead.
Thank you, Levin, Gustavo. Thanks for taking questions. Congratulations on the results. A few topics I wanted to touch base on. The first one is in relation to the guidance.
So the low end of the guidance $4,000,000,000 let's assume some $200,000,000 in the central network that means the existing operations would have to do about 3.8 or in other words, a $1,000,000,000 BRL1 1,000,000,000 on average EBITDA for the next three quarters. These are very rough calculations, right? My point really is that the low end of the guidance already implies very strong results for the few quarters ahead, already adjusting for the central network. I mean, unless you, of course, disagree that the central network EBITDA would be down around $200,000,000 and otherwise it would be much bigger. Anyway, what I wanted to ask you is, do you see it as very likely that you'd reach that result or does it depend on 4th quarter corn harvest?
That's one question. And the other one is whether this is very seasonal, for example, whether you expect a very big concentration in the second quarter now, whereas we are looking at this on a normalized day for the quarter, right? So this is the first risk there. The second topic or actually 2 quick ones is on capacity, whether you have spare capacity right now or if adding volumes would require additional trains and so on. I'm trying to gauge whether the upside would come mostly from in the North operations, right, in the existing operations would come mostly from tariffs or volumes in the shorter term in 2021.
And then one last quick one, working capital was quite negative this quarter, if there is any specific reasons for that, maybe the new terminal is starting up, but that led to a debt increase. So how do you manage this? Thank
you. Thank you, Regis. Well, I'll take the first one, then I'll send you to Starco. But regarding the guidance, there is no change that we would like to do right now, okay? The point here is that we know that there is a huge reduction on corn crop.
Okay. But as I said, we foresee good second and third quarters. It's still early to see or to tell about the Q4. It's very uncertain, okay, what will happen. But at this point, we don't have why to change the guidance we believe we can reach in the range.
Okay. So if you say like how likely is like we believe that we can reach, but we will follow this. If we have any change that we want to do, we will come to the market and provide new guidance, but this is not the case by now. And, Hejib, one thing that's important, remember that with central network, and not only only with central network, carbon that we have, we have some flexibility that we are working on that. So we have sugar that we can transport, in volumes that come from the north can come right now from central network.
So and it's the first year that we are operating with a central network. So this is also one reason for not changing anything by now, okay? But if any change we see that we need to do any change, we will to the market and we will tell you, okay? Gustavo?
Sure. Let me start with the capacity, Helges. Maybe the most important thing to understand here is that we did real good volumes for the Q1, even though as we mentioned and highlighted, the harvest arrived late. So that shows how strong the capacity of the company is right now. And we also operate in the Q1 with a very few contribution of central network.
So we believe that from the Q2 onwards, we're going to have a higher contribution from central network that would take advantage on the capacity that is being built in that concession. We're going to be also running with longer trains that is already in place and that could provide a lot of capacity. And all of that will meet those investments that Ricardo just pointed out in the port of Santos. So we truly believe and we can add to that the expansion of Hondanopoli that we did last year. So we believe that we have all the right conditions to afford higher growth in the upcoming quarters.
On top of that, you also asked about tariffs. I think we already covered a bit of that. Tariffs will depend pretty much on the market and on the fuel prices. The good news is that we have more volumes protected than last year, but it still might be subject to any kind of volatility that could come from the market. Your last question was about the working capital.
So you're right, there was an outflow this year, lower than the outflow that we had last year. And one of the reasons that contributed to generate a higher outflow in the working capital was the take or pay recognition. So as Ricardo mentioned earlier, we recognized roughly BRL100 1,000,000 in take or pay fees that are expected to be come cash in the Q2. So if you exclude that from that number, then you're going to have very probably what we call business as usual. So working capital was affected by suppliers, receivables and taxes, but it was all ordinary, nothing from different.
But I think when it comes to working capital, my main remark would be that we definitely expect for the Q2 to cash in most part of the pay that was recognized in the Q1. And then it could offset a bit this effect of working capital that we showed in the Q1.
Ladies and gentlemen, that concludes our question and answer session for today. Now, I would like to turn the floor over to Mr. Ricardo Levin for his final remarks. Please Mr. Levin, you may proceed.
I just would like to thank you for the participation of everybody. We had a very good quarter. And as I said here in the call, we expect to have good second, third quarter with certain uncertainty in the 4th, but we are still very positive with the 2021 year. Okay. Thank you everybody for your participation.
Talk to you next call. Bye bye. Thank you.
That concludes Humu's conference call for today. Thank you very much for your participation. You may now disconnect and have a good day.