Good afternoon, ladies and gentlemen. We would like to welcome everyone to Humu's Third Quarter 2020 Results Conference Call, which will be led by Mr. Ricardo Levin, Chief Financial and Investor Relations Officer. We would like to inform you that this event is recorded and all participants will be in a listen only mode during the company's presentation. After whom's remarks, there will be a question and answer session for investors and industry analysts conducted by Mr.
Ricardo Levin, CFO together with Mr. Gustavo Rosa, Investor Relations Executive Manager. At that time, further instructions will be given. The audio and the slideshow of this presentation are available through live webcast at ir. Humalog.com, and the slides can also be downloaded from the same IR website.
Before proceeding, let me mention that further looking statements will be made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward looking statements are based on the beliefs and assumptions of Humu's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Humu and also cause results to differ materially from those expressed in such forward looking statements. Now, I'll turn the conference over to Mr.
Ricardo Levin. Mr. Levin, you may begin the conference.
Good afternoon, and thank you all for joining us in this earnings conference call for the Q3 2020. I'd like to begin this presentation by commenting on ESG aspects. The COVID-nineteen scenario forced Gumbo to restructure the way we operate to avoid contamination and protect the health of our employees. This was imperative to guarantee the continuity of our operations, but in Brazil into motion from the north to south. Since then, we carried out over 17,000 tests with roughly 2% of positive results, demonstrating the success of the actions we took.
In our 2019 sustainability report, we announced our long term commitment to a few targets for the 2020 2025 period. In the 1st 9 months of 2020, we continue with a significant evolution in terms of safety with a 44% decrease in personnel injury rates. In emissions, which are highly influenced by our field use performance, we already achieved 5.3% reduction in this year. This tell us we are on the right path to achieve our long term goals. The next slide shows the main highlights in our results.
In the Q3, despite all the challenges, we delivered our best quarter in terms of volume, surpassing the 3rd quarter 2019 record. We also maintained our cost discipline, delivering a 4% reduction from last year. EBITDA reached BRL1.1 billion, down 7.9% from the same quarter of the last year, impacted by a 4.2% decrease in tariffs as a revenue mix with higher volumes of sugar, boosting pork loading volumes and logistics solutions, both with lower margins than the railway transportation. Net income in the 3rd quarter stood at BRL171 1,000,000, down 53.7% compared to the Q3 'nineteen due to lower EBITDA and higher finance expenses. Since for the most part of Q3 'twenty, we recognized interest on the renewal agreement for the Paulista and Central Networks.
We also point out the follow on, which not only reduced leverage in the Q3, but also allowed for the prepayment of concession fees for the Paulista and central networks, which will further reduce financial expenses in upcoming quarters. The next slide shows more operating results. Some factors impacted the volume performance of each operation. The North operation had a 3.1% increase in volume, a new record for the operation. The fact that producers held back on common exports limited cargo availability for the railway.
In this context, we used the capacity to transport more sugar, making total volume in tons grow 9%, although not generating that much RTKs and margins since the product has lower profitability compared to grains. Both and Fertilizers continue to grow consistently. The South operation saw a decrease of 5.8% in volume. The industrial segment continues to be affected by COVID-nineteen, decreasing 20% year on year. For the U.
S, the agricultural segment had a marginally negative performance, especially in Isildendidozu, where volume was impacted by a shorter crop due to climate conditions. Container operation grew 5%, still below the usual growth level for this operation due to limited demand because of COVID-nineteen. The next slide shows our results by operation. Non cooperation results were affected by a decrease in tariffs due to agreements negotiated in early 2020 as well as the increase of competitiveness of truck in the North region after paving off the BR 163 highway was completed, still with no tow collection. Furthermore, expenses with port loading and logistics solution grew much more than railway volume.
This offsets net revenue, but also brings higher variable costs since these operations have much lower margins. The higher tariffs in the South operation helped to offset part of the volume loss, bringing revenue close to the Q3 'nineteen levels. EBITDA was impacted by non recurring gains in other revenues in the Q3 'nineteen. The container operations saw significant gains in non recurring EBITDA due to the sale of the Cambay service unit, which is a non core and unprofitable business unit. Now we will take a look at our financial results.
This quarter, we prepared BRL5.1 billion in concession fees for the Paulista and Central Networks. As a consequence, lease liabilities in the balance sheet dropped from BRL7.9 billion to BRL2.7 billion. Worth mentioning that there has been no change in accounting for the write off rules, which will continue to be depreciated over the course of the usual life of the respective concession. With regards to interest expense, since the prepayment was made in second half of September, interest decreased only slightly in the month. Had the prepayment been made since September 1, the interest line in the month would have been approximately BRL26 1,000,000, suggesting potential gains for the 4th quarter.
The next slide shows our net income and financial results. Financial results in the quarter grew 46%. Cost of debt was affected by BRL 23,000,000 by the lower mark to market gain, partially offset by the decrease in CI. Other expenses increased especially with the BRL88 1,000,000 growth in concession fees and operational fees due to early renewal of the Paulista network concession. Net income dropped by 54% due to the lower EBITDA and the higher financial expenses mentioned earlier.
Note that with the capital increase and the consequent prepayment of the concession fees in the quarter, we will have a significantly lower financial expense starting in the Q4 'twenty, resulting in better contribution to net income. On the next slide, we will take a look at our indebtedness. Our net debt dropped from BRL7.9 billion to BRL6.5 billion, mainly due to remaining funds from the capital increase in the amount of BRL1.3 billion. With that, leverage was reduced to 1.7 times EBITDA. Qumu under the quarter with cash of approximately BRL10 1,000,000,000, leaving the company in a very comfortable position in terms of liquidity and amortization schedule.
The next slides show information about the market scenario for corn and soybean. In the corn market, according to agroconsult forecasts, Brazil expected to export 35,000,000 tons of the grain in 2020, a decrease of 4,300,000 tons from 2019. Note that between February September, exported volumes was 6,000,000 tons lower than in the same period of 2019, suggesting availability of this range for the Q4. However, since Brazilian producers have been reducing the pace of trading activities, it's impossible to guarantee that these volumes available will be exported in 2020. HEKAS production is expected for 2021 to be 8% higher than the 'nineteen, 'twenty crop year with project inventories of 8,000,000 to 10,000,000 tons.
Scale of copper is well advanced, having reached 40% in the center south of Brazil and 63% in Mato Grosso, much higher than the historical average. The next slide will show information about soybean market. For 2021, Agroconsult's preliminary forecast for soybean show a 6.4% growth in the Brazilian production and a 2.6% growth in the country exports and an increase of 4.7% in exports for the state of Marcos. Planting was delayed in the early stage due to unfavorable climate conditions and is already recovering, reaching 52% in Mato Grosso in November 2020. Also, according to Agen Raul, sales of 2021 crop is advanced compared to previous years, having already reached 56% in Brazil and 68% in Atogors.
The next slide shows information on central network. Works are advancing for central network that will become operational in 2021. On this slide, you can see the railway works in certain stretches of our network. On the next slide, you can see other details on the terminals of this operation. For the beginning of operations in 2021, 2 terminals will be concluded between the first and third quarters of the next year.
The first one will be in Sao Simon terminal in Guayas focusing on grains. It is being built through a partnership with a client of us called Caramoru. This terminal will be finished by the Q1 of 20 tons. The second one is the Rio Branch terminal, also in Goyas, which in its first stage will serve grains with capacity of £8,000,000. It should be ready to receive volumes by the Q3 2021.
As shown in the table on Slide 20, our clients have shown great interest in this operation, making themselves a series of investments. This points to significant growth of the central network over the next years. Let's take a look at the next slide. On this slide, we illustrate works at Sao Cement and Riberdi terminals, both in the state of Goyas. Thermal works keep their accelerated pace so that the schedule mentioned above is fulfilled.
We are very excited for the start of this operation. We should continue to share more information as construction approach truckloads. This concludes my presentation for the Q3 2020. I'm now available for the Q and A session. Thank you very much.
Thank you. We'll now begin the question and answer session for investors and analysts. We kindly ask you that in case you have more than one question, please announce it at the beginning and ask 1 by 1 to ensure conference Our first question comes from Andre Hachen, Itau.
Hello, guys. Thanks. The first one is related to the North. So if you could see if you could discuss a little bit about how you're seeing the pricing pressure. I mean, we've seen yields this quarter falling quite a bit.
So if you could discuss what your expectations are for next year and how your negotiations for contracts for next year's volume have been evolving, That would be very helpful. My second question is in regards to capital allocation. We saw yesterday the government approving that current owners of railway networks can participate in the fuel auction. So if you guys could discuss a little bit about how you see this auction. I'm sure you guys will not disclose whether or not you will participate, but how complementary this could be to North South Railway or how detrimental it could be?
So, a bit of your take on this new project, which is expected to come on stream over the coming years? Thank you.
Hi, Andre. This is Ricardo. Thank you for your questions. The voice was not that good, but I think that the first question was about pricing pressure. Well, actually you're asking about contracts, pricing, things like this.
So a lot of items here. But let me start here by talking a bit about the competition, the other pricing pressure. It's not new for you guys that the pavement of 163 became cheaper to transport the North Park. So this is the first item that brings brought pressure for us during the year. The second item that brought for us price pressure was the change or actually the decrease of fuel prices.
So when you decrease fuel prices, trucks get more competitive and you know that the North Orange depends more on trucks than we depend. So this brings more competitiveness to the North Orange. So we know there is a sharp run. Competitiveness is what I call I always say in all my meetings that this is a completely asymmetric competition. Once there is no reason for the government paving 163 and not including toll plaza there.
So I call these a completely asymmetric competition. And you know that this brought this asymmetric competition brought pressure on prices. But this is the reality and the company will is dealing and will continue to dealing with this, okay? So the company will not change its strategy because of the short term asymmetric competition. We will keep our strategy.
We will keep in being a company that focus on scalability, okay? We are focused on cost. I always repeat, we are focused on reducing our cost, diluting our fixed cost, reducing the variable cost by improving efficiency, reducing the dependence of fuels. Once we do this, we will be every single time more competitive and this is what we are doing. We have also our extension that we are working with for Lucas dot Locheri that will make our solution more affordable, okay?
So it will depend on us. We are dealing with this pricing pressure. On what it does in what does not depend on us, we are waiting for the auction of BR-one hundred and sixty three was supposed to happen by the end of this year. It seems it will not happen. It will go to 2021.
I don't know if it's beginning at the end of the year. But what this lack of Toros or it went at one time, okay? So the action will happen and the auction will take place and this will bring another BRL15 to BRL25 per ton for the price of trucks going north. So this will make again asymmetric the competition between the two ways, going to the north or going to Santos, okay? So this is the first part of your question, but you're asking about corporates for next year.
You know that I never like to answer about this. This is very strategic information and I don't want to disclose too much information on that. What I can say is that you have been following very closely. I know crops have been commercialized in advance this year if you compare to the average of previous year to this year right now. So it's really fair to say that the demand for take or pay has followed this anticipation and it's far better than previous year.
At least when we refer to the first half of next year, that's soybean. That's what we have sold more volumes, okay? Related to prices, also what I can tell is more related to the first half of the year. That is slightly better than this year right now. But and yes, it's important that you take into consideration everything that I told you like 163 is there with no toll roads.
So there is no miracle regarding yields for the next year, okay. It is slightly better. We have been doing a very good commercial and work. We have right now a new Vice President for 100% focus on the commercial relation to be closer to the client. We have been working a lot in bringing people to understand better the market.
So we have right now our market intelligence area, we have the pricing area working on technology to understand better. So things will come. However, you have this asymmetric competition that I told you. So hope this part of the question was complete. You asked about capital allocation.
I don't know if I get very well because your voice was not that good, but you asked about Could I ask it again?
I'll ask it again. So the question and your first part of the question was very clear. Thank you for your answer. I think everyone is aware of the short term pressures regarding the VR-one hundred and sixty three. The second question was in regards to fuel.
If you could comment, I mean, how complementary it could be to the Nordrassoul railway, if it would help in originate new volumes or new grains from the Far East? Or if you could see it as a potential risk in a should you not participate or should you not win in removing cargoes from the Nacho Noche Su and bring it to other ports in Mayan?
Yes. Here, I will be really direct, Andrea. We don't see a potential risk for central network. Central network is going all the way through grain growth in token teams and Goyas, mainly south of Goyas. And while fuel, it's basically a railway based on minerals, there is nothing related to agriculture.
Remember that that fuel goes only to Caixite. So it's not a risk for us, okay? You know that we have our fiduciary obligation. We will study fuel, okay? You know that there is only few opportunities in real reach in Brazil, but it's really not 100% related to our business.
Remember that our savvier, despite of agricultural Brazil, we take agricultural products from the areas where we have the highest or the most important crops of waste Brazil and our focus is to take these in the north to Cerritos, in the south to Granada Guadal, San Francisco and the fuel energy. So I can tell you that this is not 100% related to our business. But as a fiduciary obligation, we will study.
Our next question comes from Bruno Morin, Goldman Sachs.
I have questions to begin with. The first one is a follow-up on your comments on the phasing of the R163 3 and the effect of lower diesel prices. Has the company reacted somehow? Have you invested to some extent in your commercial efforts? What initiatives have been implemented, if any, in that sense?
And the second question is just to get your view on what should happen next year, given that the planting season for soybean was delayed. Does it mean that the strong volumes for soybean exports should be delayed by maybe 1 month or 2 and maybe the churn volumes will start and show up on March as opposed to February. And if that's the case, should that imply that the corn cycle should also be delayed by 1 or 2 months? What's your view there? Thank you.
Bruno, good talk to you. I will answer the first part of the question. I will let Gustavo answer a bit here about the soybean crop. But as I told you, the pavement what we have done during this year that are initiatives on commercial side, okay. I think that what I have talked is very important.
So I will reinforce that. From the beginning of the year, we have now a market intelligence area, 100% focused on understanding the market, where the greens are, where the greens are going, what are the competition, things like this. We have a pricing area seeing how we can optimize our results. And when I say optimize, brutal. I'm not talking about 2020, about 2021, but layaways are long term companies.
So when we talk about optimizing, we are talking about this year and the longer run. So this debt connected to a new vice president that came. We are acting together with the clients and making working on long term partnerships with the clients, understanding their needs. And a lot of things have been doing here, okay. I really not enter in details here.
That's very strategic, but we have been working strategically and thinking about the long run to have the to be dominant in mainly in Mato Grosso. Bruno, we always talk about this. We put in our mind and to our all investors, we are the most competitive logistics for Mataboz. Okay. There is no other way that's more our logistics solution that are more competitive than us.
Well, talking about the second part of the question, Mael, would you like to take this for the margin?
Yes. I will take this one, Naveen. So, Brond, you're right. We have a different dynamic for next year. So everybody knows so far that the crops of soybeans started late this year.
The seeding and the planting of soybeans started late. Corn starts the 1st crop of corn starts a bit earlier. So what we're going to have next year, it's a 1st crop of corn that typically provide cargoes the local markets. We don't benefit much from this type of cargo. It's more to serve the consumption of corn in Brazil.
So the corn crop, the 1st corn crop will arrive in the regular window, but we're going to have a late soybean crop. And with that sense, it's important to highlight that we are expecting to have this year's strong inventories carry over to next year. And one of the reasons why these inventories are being carried over is because there will be this gap between the first corn crop and the second corn crop. Because the second corn crop, which is the crop that we transport to export, it's going to start only after we finish with soybeans. So once soybeans started late, 2nd crop of corn will also start a bit late.
So inventories could be very profitable to farms. So they can fill up this gap between the first and the second crop of corn using inventories that they had this year. So one of the reasons why the producers are holding back some corn to next year is because they predict that especially during this between the first and the second crop of corn, inventories of corn could be very profitable because it will be the only availability that we're going to have in the market. So with that, we are expecting to have it's too early to say, but according to the increase in the area used for corn, which is expected to grow 4% in Brazil and almost 6% in Mato Grosso, we are expecting production to be growing around 8%. And when we couple that with the inventories, it's likely that exports will be growing 12% year over year.
So it could be a very good availability for corn, but it will be especially in the beginning of the window, it will be much more based on inventories rather than in the second crop of corn, which will arrive a bit late as well as it happens with the soybean.
Thank you. Very clear.
Bruno, just complement one thing that Gustavo said and also came back to Andreas' question. It's important to say that just to reinforce actually that last year, we took longer to close our pick up base. Remember that we this year last year, no, we are assuming 2020. So this year, it took longer for us to close the take or pay contract. We got more exposed to spot market.
This was one strategy that we are following. But just to reinforce that with the growth, I'll reinforce what I said to Andreas, you asked about commercial attitude that we are taking here. The point here that once we have more commercialization is what I said, it's really when I use the word far better in terms of the core pace because we are following these anticipated commercialization. So as Magdalena said, the commercialization is anticipated for mainly for soybean. We are also anticipating our contracts with declines.
What make us more optimistic related to certainty of volumes at least when you are talking about soybean. You know we talk every single call about that. It's more difficult to understand because we need to wait a bit more during the year, okay. But we will also work on that commercially talking.
Our next question comes from Victor Mizusaki, Bradesco,
Hi. I have two questions. The first one, how do we take a look on the CapEx as you can see here? I feel like the company already invest like BRL1.2 billion in capacity expansion. And I mean in this number, we also have the conclusion for early renewal for Maripolisa.
So I'd like to know if you can give any color on the capacity growth this year and what can we expect for next year, specifically in the case of Manipalista? And the second question, I think that recently there was a change in the state constitution for Mato Grosso that could allow the local government to approve new investments in railway. So I'd like you to know if is there any plan to maybe try to apply for Lucas de la Verde using this new legislation? Thank you.
Hi, Vitor. I will take the first question and then maybe Ricardo can comment on the second one. So regarding the extension CapEx, we did our job this year. We expanded capacity. Unfortunately, we saw some change in the assortment of cargoes that we transport that are not producing as much RTKs that we could do if the mix was the same as last year.
So for instance, we saw higher volumes of sugar that they generate a lot of tons transported, but they don't produce the same amount of RTKs once the average distance is a bit lower. So we are not maximizing our capacity when we transport as much sugar, but it turns out that it was the only option. As I mentioned before, the farmers were holding back corn to export later on at higher prices. Another thing that is important to highlight is that due to COVID-nineteen, we didn't have much of our industrial volumes. So we saw, especially in the South operation, some significant decline in the demand for industrials.
So that part of our capacity is kind of idle. And of course, as long as we recover this demand and hopefully, this will happen soon, we're going to be able to start transporting more volumes to and then I think our capacity will be more clear. You guys can look at the volumes and see how well we are doing in terms of volumes. With regards to next year, the plans, as Ricardo mentioned before, continues. So we're going to have some, in the beginning of the year, the entrance of the longer trains.
We have very important investments happening in Malle Paulista. We're going to have the entrance of central operation, which will request also more capacity in Malepolista. So we are doing all the expansion, trying to follow our schedule in a way that we can afford significantly more volumes next year, especially because there will be this new trigger, which is the central network requesting a lot more of capacity. Then I think Ricardo can comment on the second question.
Yes. Thank you, Gustavo and Dieter. Thank you for the good question here. Just to align the knowledge of everybody, recall that recently Mato Grosso state has approved an amendment in the local constitution, the state of Mato Grosso Constitution, what we call in Brazil, PECI, that allows the state to authorize a railway to authorize any railway project within the state. It's not going to be outside the state, but in the state of Mato Grosso, okay?
That already exists in the south of the continent, Parana, the OSG is an example of that. But how we see that is that this approval reinforces the importance of this project to the community of Mato Grosso, okay? And also that the government went to speed up things. So for us, it's very important, Victor, because this is another option. So now we have other options to start to build our extension to Lucas do Ultrale.
Remembering that Lucas do Ultrale is an important project for the competitiveness of agriculture in Mato Grosso. Mato Grosso that's the frontier of agriculture, not only in Brazil, but in the world. So I think that I've right understanding the importance of this project, okay? So but important to say that although we have this optionality, we still believe that the federal government will be approving this project soon. This project is much more efficient than any other project that is being studied for Mato Grosso and will increase competitiveness.
One thing that's not maybe you people have not read in the newspaper, but it's important. Not many people talk about this, that Iberma formula proved that the environmental licensing for the extension was transferred from Imbema to Colsima, that's the environmental secretary from Mato Grosso, okay. So that will speed up the environmental approval for the project. So I think that besides the package, I think this change is also very important and we continue to work on that, getting the approval, get heavy evolving in our project. Once it's 100% approved, we are 100% ready to start to work on that.
Okay. Thank you.
Our next question comes from Rogerio Araujo, UBS.
I have a couple of questions here. One is a follow-up on yields. So is there a way of isolating the BR-one hundred and sixty three pavement on the fares on the freight price in the North? So do you have an idea on how much freight prices came down in terms of reais per ton, isolating that? I'm asking this because I want to know if there is any kind of additional yield pressure in the short term, so before the tolls start to be collected there?
So any additional potential pressure in yields? So could you make this calculation? That's my first question.
Rogerio, I will try to answer this one. So when we compare with last year, we saw freight prices going down by approximately BRL35 per ton in the North March. I think it's fair to say that probably BRL 12 to BRL 15 per ton is related to lower fuel prices. But all the rest, we can put in the account of having the BR-one hundred and sixty 3 paved without toll roads. So we believe when we look to the documents of this auction that the price for going north after the privatization and consequently the toll roads could be between R15 to R25 per ton higher.
R25 is probably to take the assumption that the trucks will go up loaded and they will have to return empty, which is kind of the base case. Of course, there might be a few trucks returning with other cargoes, but we believe that the majority of the trucks will be returning empty. So this could make a huge impact in terms of competitiveness. So today, with the current fuel prices that we have, to get back to the previous level of competitiveness, we need to have the follow-up in place. And as Ricardo mentioned, it's not clear yet when we're going to have this.
It depends on the action from the government. So that is probably the fastest way to get our competitiveness back to the levels it was before the payment of the R163.
That's very clear. Thank you. And my second question is regarding a couple of items related to your capacity. So the first one is what you mentioned, the 120 rail wagon strength. If you could give us some color on when exactly to start and the expected impact on the volume, on the cost due to that?
And in addition to that, also some any kind of color you could provide us on the part of Santos, the investments being done there with Codespi, with the port terminals, with the Portoferr. So what and when to expect some kind of debottlenecking events there? Thank you very much.
Thank you, Rogerio. I will start and then Ricardo will comment about the port of Santos. So we are planning to have the 120 railcars train in the beginning of next year. It will not be 100% of the trains running with longer trains at the beginning, but we'll have throughout the year the option to increase the percentage of trains running with longer trains. When talking about cost, this is almost for granted.
Of course, when we shift to longer trains, that helps us to increase the average speed. It helps us to improve the fuel consumption. So it makes our operation far more efficient, and it allows us to reduce our costs and also to increase the scalability of this business. When it comes to volumes, of course, it will be subject to the port capacity that Ricardo will comment, but also to certain market conditions. So by having the longer trains, the company will have some degree of flexibility trying to increase capacity in the short run.
In the past, when you are when you depend on building infrastructure, it's much hard to provide more capacity in the short term. I think the long trains are a quick response in terms of capacity that the company can speed up depending on how much volumes and how high could be the demand in the short term. But we have to put all those things together. It depends on how high is the demand, how willing the customers are to engage with more take or pay agreements and also, of course, the capacity that we have in the port of Santos. So Ricardo, if you can comment on Santos?
Hi, Rogerio. We have been investing in Santos for the last 5 years, okay? We never maybe we never gave names to the projects for investor also size, but we have basically embedded in a series of projects that is rolling de bottleneck the are de bottlenecking the support and making it more efficient, okay. You have been following all the investments that we have done in our T16, T19 and many projects that we have done in the entrance of the port that's both a robotic part of the port. Currently, we have in our pipeline projects that are not transformational, but projects that debottlenecked, mainly the right side of the port.
And I will tell the name of 2 that's probably you heard, but Bakugou, the 3rd line of Paqueta. So these are improvements that we are doing that are not that expensive projects, but that bring a good improvement of capacity for SunSport. There are other projects that we are working on. 1 that you probably read in the newspaper talks about the loop that will be that the government is studying to be built close to actually part of our terminals in the right side. So this loop is very important to improve the capacity of the port.
At the same time, you have a line that will going outside the port and entering the port and doing all the unloading of the trains. So this loop is important. And there are other projects that are under study that are more focused on terminals that we can be part of this project in different ways, okay. So, for example, we can be part of improvement of terminals or building new terminals by being equity partners or by being commercial partners, giving contracts that make incentivize people to improve their terms or build a new terminal. The point here, just summarizing what I'm saying, Rogerio, is that we are we look very closely two things, capacity of the port and efficiency of the port, okay?
And we never stopped working on that. And with the time once we start to in the first one that I told you that are improvement of efficiency as Maculco, 3rd line of Paqueta, we are working on that. And you will hear from us other projects related to terminals, not only on the right side of the port, but
on the left side of
the port that will allow us to invest in Paulista, increasing capacity, that will allow us to take more volume in Mato Grosso without having Santos as a bottleneck.
That's very clear, Levin and Gustavo. Thanks so much. Have a great day.
Thank you, Rogerio. Have a great day too.
Our next question comes from Regis Cardoso, Credit Suisse.
Hi, guys. It's Talvo and Cardo. Good afternoon. Thanks for taking the questions. Few follow ups on my side.
First one on yields, how can we explain the improvement in the Q3 over the Q2? So you saw already some sequential improvement there. Is this in any way related to mix because now you have more corn instead of soy? Or is it really early signs of recovery in yields? And also, I mean, you're talking 3rd quarter and second quarter, but if you could also comment on how that impacts Q4 2021 as you explained.
2nd topic still on the discussion around the yields and volumes, more specifically on the extension of the Hondo Napoli transshipment terminal, whether you believe that could reduce truck lines and if you believe that could also have any sort of impact for freight between Sohuizu and Hondonopolis? And then just finally, if you allow me a third one, it's about CapEx. If you can sort of describe what are the order of magnitude or the size of the investments you plan to make in Male Paolista, Centrao and in the 1st few years now 'twenty one, 'twenty two, 'twenty three, given that you reduced leverage quite substantially after the recent follow on? So these three questions. Thank you.
Thank you, Regis. I will Gustavo speaking. I will address the first question and then Ricardo maybe can comment on the last one. So starting with the yields. Yes, you're right.
We had some improvements in yields from the Q2 to the Q3. Indeed, a lot of things changed. In the first in the second quarter, we were transporting soybeans, which most of the soybeans were negotiated in the beginning of the year, where we had low trucking prices and we also had the effect of the low fuel prices in the market. Since then, we saw some improvements in fuel prices, which helps our which helps to increase the price of trucks and therefore our competition. So that definitely helped us to improve the yields compared to the Q3.
Another thing is that in the Q3, we shift from soybeans to corn. So it was a completely different dynamic. We negotiate more of the volumes in the short term. So therefore, we did better negotiations than the ones that we did earlier in the year. So as a consequence of that, we had better yields in the 3rd quarter.
When it comes to the Q4, it's still unclear. Of course, we have already a big chunk of the volume negotiated, but there is still some capacity left to be negotiated with customers. And that's why it's so important to see how much willing the producers will be to sell all the corn in the Q4. So depending on how much we sell those additional volumes and how much more volumes we can transport, that could change our yields in the Q4. So I would say that the volumes that we already negotiated, they could be close to the pattern that we did in the 3rd quarter, but we are not 100% done.
So there is still some volumes to be negotiated. And so far, it's too early to say how well can we negotiate those prices. And I think when it comes to 2021, Ricardo already answered. So we have slightly better prices for soybean so far. We are well advanced in the negotiations for soybean.
And when it comes to corn, it's not the priority of the farmers and the trading companies right now. We should start to negotiate corn maybe in December. This process can speed up. And then I think in a couple of months from now, maybe January, February, we can have a better view on prices for corn. So it's still too early to say.
But when it comes to soybean, it's fair to say that it's at least slightly better at this point.
With regards to
the expansion of capacity that we did in Hombonopoulos, I will let Ricardo comment on that.
Yes. Thank you, Gustavo. Regis, thanks for the questions. You know that the extension from OdontoPrev, the extension of the Verde directly, we are not still releasing to the market any kind of use of volumes, okay? Let me just it's important to you to understand the rationale of what brings value to the extension, okay?
So you can do your calculations on that. Some people make confusion that the extension will bring more capacity through. This is not true. What brings more capacity is the improvement of Paulista network, Okay, so we are investing and that comes through to your second your third question, actually, I will go through this. But are the investments that we'll be doing in the next few years that in Malapaulista that will build the capacity from Malapaulista and allow us to bring more volumes from Mato Grosso.
So here is when you talk to volumes in the long run like we talk about doubling the volumes from the capacity from Broadista, okay, that allow us to take more volumes here. And here, you can take market analysis from long run for Batu Bross, Okay. What takes what's important for the what brings value with the extension is the following, that currently the transportation from Sogiso or from Luka de Albuquerque to Rondolop is made by trucks, okay? So we can do the same transportation, okay, in maybe with a similar tariff or obviously we can charge less than this, but with a much better margin than the truck does today, okay? So here you can start to make your assumptions.
You can take the truck prices much probably will be a bit cheaper than that. But our margins in this stretch that's much more efficient than Paulista, for example, even more efficient than Technologics. We have good margins there that this will bring value for the CapEx that we'll be investing in this extension. And going to your third question that CapEx for Mala Pao Vista, what we have released and that's public by now is that like we have a commitment to invest BRL6 1,000,000,000. What are in the documents that this BRL6 1,000,000,000, 50% of debt will be invested until 2028 and 50% of this fixed or 25% of the total would be invested until 2023, okay?
So this is what we can take from now. And but once we and next year, we will probably be releasing a new long term guidance. You'll see this CapEx there in the long term guidance. Is that good, Rejes?
Icardo, follow me. Just a follow-up on the second question. Maybe I wasn't completely clear. Thanks for the comment on the extension. It's very clear on that one.
But I also wanted to know about the expansion of the transshipment capacity with more truck loaders in Honda and Office, truck dumpers, sorry, Honda and office, whether you
Yes. So sorry, Greg, because every time we talk about expansion, I collect to the expansion to look at the delivery. We are saying that we did investments in Rodelonopoulos to double the capacity there. So this is done by now. We have finished what's important for this, the turn of the of the office that's not only the most important terminal from Brazil, but the most important green terminal I think from Latin America.
The turn was too high. It's more than one time a day, okay? So this stressed too much the terminal. With this increase of static capacity and unloading capacity also, loading and unloading capacity, unloading trains, unloading capacity for the train. With the increase of this capacity, you reduce a lot the stress of the terminal, increase capacity for transportation, okay, and reduce the risk of having any problem in the terminal.
So this is already done. This is one thing that allow us to improve capacity for the next year. And third thing that another thing that is important here is that once you reduce also the turn time of trucks as you get more efficient, as you have more static capacity, it gets more attractive for the trucks coming to Rondonopolis than sometimes going to the North Park, for example. Because in the past, trucks need to stay for a long time in the terminal and that was drastically reduced with this project that we did. So it gets cheaper for the truck drivers come to hold an office and get more attractive.
So we call more volumes for the terminal. Maior, I don't know if you want to complement anything here before about the expansion of capacity. Sorry, Regis, I misunderstood you.
I don't know Regis. I think Ricardo just answered the question. If you have any other follow-up, let us know.
Very clear, guys. Thanks so much. Have a great day.
Likewise.
Our next question comes from Stephen Trent, Citibank.
Yes. Good afternoon, gentlemen. Thanks for taking my questions. I just had 2 just to make sure I understand. When you mentioned in your release that Logistics Solutions created some EBITDA margin pressure, Should we think of this as a temporary phenomenon related to high sugar volumes or extra measures you took during the COVID pandemic?
Or is this or could this be something more structural? And then my second question, when you mentioned outside investors, is this something that we could still eventually see for the Southern network? Thank you.
Hi, Stefan. Good to hear from you. I will answer the first question and then Ricardo can comment on South Network. You're right, somehow logistics solution is temporary, but not due to COVID. It's indeed a function of strong volumes of sugar that we had this year.
So as long as the FX is helping the export of sugars, we are seeing strong demand for sugar. And as I mentioned as we mentioned before, we didn't saw the market as strong for corn. So there was a lot of capacity in the railways that we used to transport more sugar. If you look at our sugar volumes transported by railway, it grew like 80%, above 80%. So it was a pretty high growth.
And on top of that, we own as long as we own a terminal in the port of Santos that has capacity for almost 10,000,000 tons of sugar, we have to complement our the amount of sugar that we transport with railways using 3rd party. Of course, when we have more capacity over time, the company will be able to shift from 30 parties to increase the percentage of volumes transported by railway. Right now, it was what was over the table. So we did well in terms of railway's volumes when it comes to sugar, but we also relied on 3rd party volumes to fill up all the capacity that we had in our port operation. But over time, as we add more capacity, this will be clearly shifting from 3rd parties to the railway.
And that's the reason why we are doing this right now. It's a way to keep the volume there. And as long as we have the capacity, could be able to serve the whole amount of volume.
Makes sense. Thank you.
Ricardo, if
you want to comment the second. Could you repeat your question about the soft network, please?
Yes, certainly. So I think I heard you respond to an earlier call participant about other investments with potential equity partners joining you in other investments, if I heard correctly. And I remember some time ago, there was potential discussion with potential equity partners in China perhaps in terms of looking at a long term equity partner for the Southern network? I mean, this is going back some time and I was just wondering how you guys are thinking about that now?
Yes. Well, Stephen, in this call, what I talk about partnerships, things like this, is our partnership in the Centers For to incentive the improvement of capacity in terminals or efficiency in terminals in centers. So this is what I said this call. But you're right, in the past, we did have discussions on having partners in the south network. The discussions took too long.
So as we are close to the end of the term of the concession, we decided to stop this kind of conversation. And today, we are 100% focused on the review of the South Eskomod. We started already the discussions with NTT, with the government. So we are evolving on discussions for renewal of the South. Once we have the renewal done, we can think about as a as we have a portfolio of concessions.
For these specific concessions, we will study and analyze if we will be if you want that we will bring a partner. But today, the focus is on the review of the concession.
Understood. Thanks very much, Riccardo and Gustavo.
Thank you, Stephen. Have a good day. I think that we have one more question from sorry, Stephen?
No, I said you too. Thank you very much.
Okay, great. Thank you. I think we have one more question for Rogerio. That's right.
Our next question comes from Roger Araujo, UBS.
Yes. Hey, guys. Thanks a lot for the follow-up. So you mentioned in the report that some there was some pressure on some components on the maintenance side due to the bare depreciation. We have until now annualized at BRL1.1 billion maintenance CapEx.
So but this includes the minor St. Cloud as well. So can you provide us some kind of normalized maintenance CapEx figure, excluding minus Saint Cloud, how much can you think about it on an annual basis? And also how much of the components on maintenance is dollar in terms of dollar? Thank you.
Hi, Rogerio. I will take this one. Yes, you're right. Due to the FX rate, we saw an increase in some costs the cost of some investments, especially rolling stock. We have some parts in the locomotives and the railcars that are denominated in U.
S. Dollars. But at the same time, we have some agreements with the suppliers that sometimes avoid a major pass through in the cost. So it was not the full impact of the currency exchange, but definitely we had some kind of impact due to that. The amount of investments, the recurring investments in the central network at this point is not that much significant.
So you can think about BRL1 1,000,000,000 BRL1.1 billion in terms of recurring CapEx without central network. Right now, it doesn't make much difference. Of course, as we start to operate the central network, this number, this recurring CapEx in central network can be higher. But as of now, it's not that much relevant. Another thing that we have to take into account is the very fact that last year, the recurring CapEx was a bit low in the Q3.
So there is a phasing issue. But if you think about BRL1 1,000,000,000 BRL1.1 billion, you won't be wrong. So that's the kind of recurring CapEx level that we should have going forward.
Very clear, Gustavo. Thanks a lot again.
Thank you, Roger.
That concludes the question and answer session for investors and analysts. Now I will turn the floor over to Mr. Ricardo Levin for his considerations. Please, Mr. Levin?
I was on mute, sorry. I just would like to thank you all for the questions you had today. Any doubts or follow-up you'd like to do, please contact myself, Gustavo or Mariana. Thank you very much. Have a good day.