Good morning, ladies and gentlemen. Welcome to the video conference of the results of Sequoia Logistics, with reference to the results of the third quarter of 2024. We have with us today Mr. Armando Marquezan, CEO; Leopoldo Bruggen, CFO; and Director of Relations with Investors besides Alexandre Rodrigues and Diego Jesus. We inform that the presentation is being recorded and simultaneously translated. The translation is available by clicking on the interpretation button. For those listening to the conference in English, the option to silence the original audio is to mute original audio. During the presentation, all participants will be with their microphones disconnected. After that, we will begin the question and answer session. To make questions, please click on the Q&A question and type your name, company, and your question.
We clarify that any declarations which may be made during this conference relative to the perspectives of business of Sequoia, operational targets, and financial targets are projections of the management of the company, which may or may not happen. Investors should understand that factors, political factors, macroeconomic factors, and other operational factors may affect the future of the company and lead to results which differ materially from those expressed in these future considerations. To open the conference of the third quarter of 2024, I pass the word to Armando Marquezan.
[Foreign language]
Thank you all. Good morning to everyone. Thank you for your presence. We're going to start our presentation for the third quarter of 2024. As you can see on the slide at the beginning, on the fourth slide, we made important advances in the situation of the company, which Leopoldo will present in detail further ahead. In October, we finalized a global agreement with ex-suppliers of the company here. This mediation will involve three more creditors and other debtholders and other investors. It's an important step for the stabilization of the company, and we're confident in its success. We also protocolled requests for tax transactions within the federal sphere and state sphere using the norms that exist for companies in restructuring. Also, in an organized way, we are selling assets which we judge not to be essential to generate cash for the activities of the company, as was announced previously.
Opening the presentation for the restructuring, on the next slide, I would like to summarize the principal efforts before passing it over to Leo. In accordance with the banks and the debenture holders, we were successful being able to put 73% of the debt in convertible mandatory titles in 2027 and principal due in 2029. With this restructuring, we captured new resources for the acquisition of Move3 Group, which is an operational and commercial merger and for the capital of the company. With the Move3, we initiated a process of capture of synergies, which is still underway, to drive new members into the management team and for the board of directors, and through these new eyes, we're going to accelerate our integration and our processes. As we said previously, we started to implement solutions for the reduction of our liabilities together with ex-suppliers and taxes.
Non-strategic assets are being sold to generate cash, as was announced recently. After all of the efforts started above, we start with the goal to start 2025 with our liabilities under control and with a positive generation of EBITDA. I'm not going to pass it over to Leo, who's going to detail the restructuring process.
Thank you, Armando. Thank you all for joining us in our conference. Bringing these efforts into numbers, we're talking about the potential for the reduction of BRL 1.1 billion in our liabilities, not including in this the economic reduction which exists in the renegotiation of liabilities for five years with interest rates below the cost of capital. The reduction of our debts with our financial creditors represents BRL 582 million, being BRL 172 million, which was stressed out.
With the mediation of non-financial creditors, we had a reduction of BRL 152 million, being BRL 110 million convertible into shares and 42 million in discounts foreseen in the plan. BRL 124 million within 60 months, starting in 2030, indexed to the IPCA. With our request in the IPCA, we did a reduction of interest and fines of BRL 700 million, as well as fiscal costs, with a reduction of BRL 379 million of these liabilities, tax liabilities. It has been common to be limited to 84 months when we do not offer guarantees that are not accepted by the PGFN. In São Paulo, we are asking for 120% important reduction.
[Foreign language]
this, we will reduce by 73% the liabilities of the assets which are in the company for one year. I'm going to go through the entire restructuring of the financial creditors step. We made a global agreement, which was initiated in 2023, migrating BRL 21 million in debts to convertible debentures. In May of this year, we converted BRL 311 million in bank loans to convertible debentures. On the next slide, as you can see at the top on the upper left-hand corner, the conversion into shares, BRL 241 million, as I mentioned, of current debenture holders and BRL 241 million of bank debt. In the lower right-hand side, we have the renegotiations with creditors who did not migrate to convertible agreements, whose periods were lengthened and interest rates were renegotiated to CDI plus 2%. The payment periods will start to be run in 2029.
Looking at the next slide, I'm going to explain a little bit the mediation with the non-financial creditors. After several meetings with non-financial creditors who have been pressuring the company through executions and even requests for bankruptcy, we were able to reduce by 54% of these values to a unified plan covering all of the creditors of Sequoia and Transportadora Americana. With this support, we have requested the approval of this plan for the extrajudicial part of our plan. After an initial part, it was defined in 2021, and was also agreed to a period for the paralyzation of blockages, as well as the liberation of judicial deposits. The support of more than 50% of our creditors was fundamental for us, and we're only going forward with this plan when we reach this level. On the next slide, we're going to present the options of this plan.
[Foreign language]
First option, integral conversion of credits into shares at the price of 8 BRL per share, limited to 110 million BRL. Second option, the payment in 36 months, indexed to the IPCA, with a grace period of five years, also 60 months, also counting from the approval of the plan. Third option is a 30% discount with payment in seven years, indexed to the IPCA, with a grace period of one year. The other options are for 50%, with a 50% discount, with a 16 payment in months, corrected by the IPCA, where 70% of a discount for cash payments. Both of these options have a cap. Remembering that the group of Move3 were not included in this plan, I'd like to now give our director of restructuring, Diego Jesus, who will present the rest of the agreement, the timeline for the agreement.
Thank you for those who are present. Thank you, Leo. Thank you, Armando. When we started this project in May of this year, we diagnosed that the beginning questions with the creditors. Without a global agreement, it would not be possible to address each one of these individual demands. We have accepted the approval, as was expected and as was explained by Leo. On 11th of October 2024, a period of extrajudicial in the commercial court in São Paulo. On the 21st of October, we received a decision deferring the approval of this plan. It was determined, yes, the eligibility of all the credits for 120 days, the stay period, in which case only can be accepted in accordance with one of the options in the plan as soon as it was approved.
In sequence, on 14th of November, we published a period of complaints, as well as the company sent letters informing all of the creditors of the options available. It's important to note that the judge responsible for this assigned an extrajudicial administrator to show the regularity of the titles with the Sequoia Transportes. For one month, the administrator issued a report on the 4th of December, attesting the legality of the plan as approved and certifying the regularity of the quorum necessary for the extrajudicial recovery. This is very important for the homologation of the agreement, the global plan. We are now awaiting the period of complaints, which will close at the 17th of December. It's important to mention that there still has not been one single result against this Sequoia. If anyone complains, the question will go to a decision for homologation for approval.
In terms of an estimate, we are working with the possible approval of the plan in the first quarter of 2025 due to the recess of the judicial system, which will happen between the 20th of December and the 20th of January in 2025. With that, I'll pass the microphone back to Leo. Thank you, Diego. Now, looking to the restructuring, our tax liabilities. In May of this year, the negotiations with the PGFN showed a discount of interest and fines, as we're seeing in the law.
However, the payment period was set for 30 months due to the capacity of Sequoia to make these payments. The PGFN, the PGFN, in other words, BRL 800 million in five years, which does not go along with the current reality of this company. This calculation for the capacity of payment does not take into consideration the debts with financial creditors and non-financial creditors.
We declined this 30-month proposal after analyzing that we would not have cash flow to honor these commitments, and then in October, we asked a revision of that, and we annexed the documents for the extrajudicial recovery. In these attempts, we saw a reduction of interest and fines, as well as a reduction of tax liabilities limited to 70%, which results in a fiscal debt restructured of BRL 77 million. Looking at the next slide, we are asking from the prosecutor's office in São Paulo the benefits of reduction of fines and interest on the ICMS taxes, as well as a payment over a 120-day period, 120-month period. If these debts are difficult to recover at the current level, we will make trying to reduce to BRL 18 million and make this in 120 payments.
[Foreign language]
I'm going to pass the results for the quarter and for the period ending at the end of the third quarter of 2024. The results for the period, which did not capture the benefits of the restructuring, the variance of the restructurings in the payroll and the distribution center were begun only in August. The result for the quarter of 2023 does not include the move through Move3's group, while the results for 2024 have the addition of Sequoia with Move3. The principal highlights in the quarter are the improvement of our gross margin, positive in BRL 51.7 million, along with EBITDA, which, even though it's negative, has an improvement compared to the fourth quarter of this year and the first quarter of next year.
the accumulated of nine months to date, nine months to date, we can see the improvement of performance both in gross margin as well as in our EBITDA. We captured BRL 20 million in August of 2024. We have set up the reduction of our payroll and the closing of several distribution centers. Many of these locations operated indoor logistics for clients, for business clients. That means that many of them, several of them, have shown lack of use and tight margins in relation to the capital employed. With these reductions, we expect an economy of BRL 6.9 million per month starting in September, which means that very little was captured until the third quarter of 2024. Several adjustments, non-recurring adjustments, are explained in the release of results. However, the principal ones are the need to increase the amount of the non-financial creditors within the recovery plan, the extrajudicial plan.
[Foreign language]
T his company has joined the recovery, the extrajudicial recovery. On the next slide, we can see by the balance some of these movements, the first being the reduction of the right of use, which are the distribution centers that are rented, and the use of suppliers coming from the extrajudicial plan. It's worth mentioning also that there still is an important potential recovery of BRL 540 million, if we're successful in the extrajudicial recovery and in the tax benefits, as I commented previously. Looking at the next slide, I'm going to explain the details of the adjustments to these creditors.
[Foreign language]
With approximately BRL 200 million in the balance of suppliers provided for proven contingencies. Within the mediation process, several administrative creditors were evaluated, and we opted to end these disputes.
One example was a huge CD in Embu, where we had BRL 54 million in the dispute, but BRL 16 million was recognized as owed. The unregistered amount for that as a possible loss generated a great deal of uncertainty. Looking at the negotiation for the reduction of BRL 4 million in this discussion and a discount of 50% on the leftover balance, the value to be paid would be down to BRL 25 million. At this moment, we showed an increase of BRL 16 million in what was accounted for to BRL 50 million. However, if the plan was approved, we would have a benefit of BRL 20 million in discounts. We had an increase now, while the benefit of the plan will only be captured in accounting terms after it is approved. Having said that, the total increase was BRL 113 million.
The total list of creditors, totaling BRL 113 million, approximately one-third will be converted into shares. We'll have a discount of BRL 42 million and another BRL 125 million, which will be going to be paid in five years. With all of that, the cash outlays of the plan will be only BRL 35 million between 2025 and 2026. Looking at the next slide, as we said previously, we closed several distribution centers during the year, and several others are being delivered in this last quarter. As you can see on the graph, of 120 CDs, we will begin next year with only five. This is possible by the demobilization of two businesses, the indoor logistics and the field service, which is the distribution of payment terminals. We can see the final results of this plan.
I'll go for a monthly rental cost from BRL 12 million to less than BRL 2 million per month at the beginning of next year. With that, I'm going to finalize my part of the presentation. However, I'm here for any channels for communication with our investors. I'm going to pass it back over to Armando. Thank you, Leo. Very good. Thank you.
We're going to talk about the integration and how our operations are going forward. Even with the restructuring presented by Leo, the group still has 2,800 employees, permitting us to have 120 million deliveries per year in more than 5,000 cities in Brazil. We also count on more than 19 partner deliveries, and we handle 450 clients, including well-known brands in their sectors, which we are very proud to be able to attend. On the next slide, we see how we've separated the business units between Sequoia and Move3.
Move3, more specifically, the Flash is the leader in services for the franchise market and supply services, logistics services for the delivery of credit cards and also for its business segment. We have automation of the CD, which is very sophisticated and differentiated. The B2C market is totally integrated in Move3 through the new mega sorter in São Bernardo do Campo. This sorter is one of the biggest projects in Latin America, being able to do 34,000 packages per hour. In other words, almost a million per day and more than 300 exits, which gives a very efficient rotorization. There's a huge potential for growth in that business area, and we started this sorter only in the second half of this year. So there's still lots of capacity for growth since there's a certain concentration in Sequoia.
Through our model of contracting partner deliveries and using technologies already existing, we have been able to maintain good results and efficient results with clients such as Shein and Mercado Livre. In the express segment, which uses intelligence to do fast and secure deliveries with high-value items such as smartphones and computers, among others, and this technology is done through air transport, last mile, and armored cars. In the beginning of 2025, after 14 years ahead of Sequoia after its use, I decided together with the board of the company. E continuar apoiando a empresa. Onto the board and operating on the board and helping in strategic areas. As was recently mentioned, we're in a process of transition and integration with a new CEO, Alexandre Rodrigues, who is already operating internally in this position and will occupy this position definitively on the 1st of February of next year.
I'm going to leave this space for Alexandre to present and comment on the integration. Please go ahead. Thank you, Armando. Thank you, Leo. Good morning to everyone. It's a pleasure to be here. I'd like to reinforce that I'm very enthusiastic with the challenge that is before me. I'm finding this group an excellent working plan, well set up, and looking at this transition, as Armando. Colocando foco em disciplina e austeridade financeira. There's no lack of discipline and austerity, and principally, an untiring work for operational excellence. Count on me. Please count on me. Thank you. Alexandre, once again, welcome. And in this way, we now close our presentation of the third quarter. And we now are available for any questions you might have.
[Foreign language]
We'd now like to begin the question and answer period, remembering that to make questions, just click on the Q&A icon, type your name, company, and your question so that our operator can do the reading of your questions. I would like to ask you while we collect some questions. Thank you.
[Foreign language]
Remembering that to make questions, just type your name, your company, and your question in the Q&A field. Now, please stand by while we collect our questions. Lembrando novamente. Remembering again that to make any questions.
[ Foreign language]
That's your name, your company, and your question in the Q&A box. Please stand by while we collect any questions.
[Foreign language]
Our first question is from Lawrence Liu, who asks, "Can you speak a little bit about the business perspectives for 2025?"
[Foreign language]
Thank you for the question, Lawrence. This is Leo speaking.
[Foreign language]
As we mentioned during the presentation, this is a moment for restructuring and reintegration. We're working very hard on these two fronts. I understand that the guidance for 2025 is something which will happen naturally as a fruit, both of the restructuring as well as the integration. However, I would say that for the investor right now, it's a moment to believe in the restructuring and believe in the integration. The guidance that I can give you is something that will come naturally.
It wouldn't make sense right now, at this moment, to give you any kind of guidance for 2025 as far as the integration and restructuring is still not complete. Our expectation is to complete both the restructuring as well as the integration by the end of this year to be able to enter in 2025 stronger, to be able to then give guidance as far as the perspectives for the investors. It's a moment again to believe together and understand that the restructuring and integration in the future. Armando.
[Foreign language]
Remembering that to make any questions, just type your name, company, and your question in the Q&A box. Please wait while we collect our questions. Nossa próxima pergunta do senhor. Our next question is from Mateus Beninca.
Did the company communicate to the market about the delay in these demonstrations? What has caused these constant delays? Why are we doing this? There's been a huge delay in the preparation of these demonstrations.
It's a good question, Mateus. What has happened? The fruit of the integration and the restructuring. In this quarter, we had a lot of work of auditing, not only from outside auditors, but also by the judicial administrator of all the credits which were included in the extrajudicial recovery. On the presentation, we had to even increase that which was registered in our accounting numbers. Within this increase, we had to discuss not only with the judicial administrators, auditors, etc., each one of these increments. So we passed this along several quarters with facts such as the first audit of Move3. We have now, with the recovery of the extrajudicial recovery, which are creating these delays.
We obviously do not want to have any delays in the releasing of these numbers, knowing that the market starts to imagine things when in reality we're all working here normally. For the next quarter, we hope to be able to have things more comfortable, more tranquil due to the judicial administrator has released this week their report, in fact, praising all the positive numbers that we have done as far as the creditors and the recovery, so I think by the end of the year, we'll be normal in terms of internal controls, systems, etc. We have our ERP, the Protheus, we have our accounting team, we have our controls all here working hard to integrate the two companies and also at the same time to deliver the numbers in the period of time that's necessary. These are abnormal factors.
I think that in the next few quarters, we'll be back to normality.
[Foreign language]
To make questions, just put your name, company, and your question in the Q&A box. Please wait while we collect these questions.
[Foreign language]
Our next question comes from Reinaldo. He says, "Why delay the dates for the debentures of 4 and 6? Is that just to avoid a dilution at this time, or are there financial costs involved? The BRL 720 million of the pre-grouping of the grouping of shares with the merger with Mobi." Thank you. What happened was that in the recovery, extrajudicial recovery, we have covenants which are going to be coming due ahead of time.
So with these extrajudicial questions, we've understood with the banks to discuss waivers of these covenants, and the banks and debenture holders, due to the perspective that they have in terms of the price of our shares as opposed to the current price, have asked us to delay these delays for 2025 and not necessarily convert them in 2024. We accepted the delay of these conversions in exchange for these waivers, and also due to the price of the share at this time, we felt that it was a positive factor, the fact that we're not converting shares obligatorily into shares right now since the shares would come into the market and affect even more the price of our shares. So these waivers versus the delay.
As far as your other question regarding the shares of the family, the Juliani Family will receive these shares for incorporation of a company by Sequoia. This work involves certain tax planning, incorporations such as goodwill and added value to be able to advance in this area in the fourth quarter. Shortly, we believe that by the end of the year, we'll have the issue of these shares to the family and the right of 42.5% of the total shares. We should advance with that in the next quarter. Thank you for the question.
[Foreign language]
Remembering that to make any questions, just type your name, company, and your question in the Q&A box. Please wait while we collect questions.
[Foreign language]
Our next question comes from Célio, who says, "Congratulations for your efforts for restructuring.
We spoke in the second quarter of 2024 that we would start to see the fruits of these integrations starting now. However, I understand that the integration process is highly complex. How much of it do you consider is concluded, and how much do you believe is still remaining to conclude this restructuring and begin to capture value from this?
[Foreign language]
Thank you for the question. This is Armando. A large part of the process of operational integration is very advanced and practically concluded. As Leo mentioned, in the integration of the CDs, the distribution centers are something that we have to conclude this year. We have only 20 days left, but we have an agenda for the return of these distribution centers in the next few weeks. With that, we will conclude all of the process of integration.
And at the same time, in the same way that Leo mentioned, we will begin 2025 with a company more integrated, more lean, and ready to do the work that Alexandre mentioned of operational excellence and of profitability. This is a job for the next quarter and the time of the year which Alexandre would be leading together with the company. An important step that we're going to take right now, Célio, is on December 31, we will materialize the integration. We will conclude all of the integration of the ERPs, as is common in companies having their companies. We're going to conclude the integration of only, we'll start next year with one ERP, one accounting system, and one human resources management. This is an important step, one more conquest in this process of integration and rationalization of costs.
On the operational side, I would say that we're already very advanced in the common use of transfers, delivery at the last mile deliveries, and this has also made a great deal of advancement daily, and then we're going to have a study and analysis which will involve the integration and the improvement of the TMS and the routing systems and tracking systems, which are one of the final steps of the integration, which will be more complex and involve the integration of more than 450 clients. So this has to be done with great care. However, it's the last step in this integration. Thank you once again for your question. Our next question comes from Reinaldo. He says, "In recent months, we've seen a lot of news about large players investing in logistics: Amazon, Mercado Livre, and more recently, a Chinese player. I'm not sure it's Shopee or Shein.
Is this something that has impacted Sequoia? Does it cause any loss of revenue?"
[Foreign language]
Reinaldo, good morning. This is Armando speaking. Once again, thank you for your question. This process of investment of the big marketplaces has happened, has been happening for several years since 2019 and 2020. It's a continuous process of these principal marketplaces for improvements of the client experience, efficiency gains. So it's a normal process which has been happening, and we don't foresee any impact, an important impact in this sense. All the names mentioned that you mentioned in your question are clients of ours in different lines, different business lines that we have.
So even though there are investments or opening of new distribution centers, Sequoia and the Move3 has a scope of activities which is big enough and wide enough that we'll be able to capture opportunities in that process and growing together with our clients because there'll be certain types of services which will be necessary in their supply chain. So I don't think there's any impact. This impact has occurred already four years ago, three or four years ago. And in this change of the hiring of this service, to make it more clear, one of our units and one of our business units that we presented, which is contained in the presentation, has the services which is to anticipate and attend these clients in these new modes of operations. I would say that it's a natural process. We already know about it for some time.
We're adapted to it, and we're very flexible. We have to continue to serve these clients as needed. Once again, thank you.
[Foreign language]
R emembering not to make any questions, just type your name, company, and your question in the Q&A box. Please await while we gather any other questions.
[Foreign language] .
Our next question is from Samuel Guedes, who says, "How does the sale of Frenet add to the restructuring?" Good morning, Samuel. As you may see, we announced yesterday the signing and sale, the signing and closing were done simultaneously. The money is already in our account. It came in yesterday, something close to BRL 25 million, which gives us liquidity and tranquility for the next few months and the beginning of next year.
I said that the sale, as it was done, planned and organized, it's been under discussion for months, that we have been working with intelligence and negotiations, something that was done in an organized way with our counselors, and it came in at just the right time, as we had planned. So we'll get through the end of the year with the money in the bank, which for us is extremely important. Thank you for your question.
[Foreign language]
Remembering that to make any questions, just type your name, company, and question in the Q&A box. Thank you very much. While we collect any other questions,
[Foreign language]
The question and answer session is now closed. I'm going to pass it back to Senhor Leopoldo to make his final comments.
Thank you all for your participation, and thank you for the quality of the questions. Recent months have been very intense for the restructuring and integration. Several positive changes are happening, and I think that the news of the Log tech is very favorable so that we can get through the end of the year and beginning of 2025 on a positive base. I'd like to thank you once again for the participation of everyone, and I hope to count on you in the next quart er.
[Foreign language]
The results video conference for Sequoia is now closed. If you have any questions, please send your questions to ri@sequoialogistica.com.br. Thank you for your participation, and have a good day. Thank you.