Hidrovias do Brasil S.A. (HBSA3) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for waiting. Welcome to Hidrovias do Brasil Q2 '23 Earnings Call. Today, we have the presence of Mr. Fabio Schettino CEO; Ricardo Pereira, CFO and RRO; and Ana Carolina Bastos, IR Manager. This event is being recorded, and all attendees will only be listening to the conference call during the companies presentation. Following comments from Hidrovias management there will be a Q&A session. On that occasion furthur instructions will be provided. [Operator Instructions] The event is also being broadcast live via webcast and can be accessed through the website link made available to investors and analysts. Participants can view the slides in order they want. Those who follow the presentation through the webcast can post their questions on our website, and they will be answered by the IR team after the conference is over. Before moving on, I would like to mention that future statements are based on beliefs and assumptions of Hidrovias' management and on information currently available to the company. They involve risks and uncertainties and assumptions, and they refer to future events and therefore, depend on circumstances that may or not occur. Investors and analysts should understand that conditions related to macroeconomic industry conditions and other factors may lead to results that differ materially from those expressed in such future considerations. Having said that, I would like to give the floor to Mr. Fabio Schettino to start his presentation.

Good morning, everyone, and thank you for participating in Hidrovias do Brasil results conference call. I would like to start by thanking everyone who trusted and supported our work during the challenging times we experienced in '21 and '22 due to external and unmanageable scenarios that you already know. I understand that the strong results we will comment on now prove the company's solid fundamentals and puts us closer to the scenario of using our full installed capacity with even greater potential in '24 due to the scenarios we will now mention. I kindly ask you to share Slide 4, where we have a historical consolidated volume charge and the columns in the darkest blue shade show the evolution between the second quarters of each period, reaching 5.1 million loads transported now in '23, an absolute record in the company's history. And the columns in the lightest blue shade show the evolution between the first half of the year, with a record volume also in the total amount of 9.5 million tonnes transported in '23. The significant volume we presented showed growth in all logistics corridors with emphasis on the resumption of the south corridor, where we started to navigate without restrictions since mid-February of this year. In the north corridor, which showed a growth on a record basis and even higher than the estimated capacity for this operation. On the next slide, #5, you can see the evolution of net operating revenue and the adjusted EBITDA, including JVs, also in the darkest blue shaded demonstrating the second quarter and in lightest blue, the first half. Looking at the revenue on the left side of the graph, you can see that we reached the BRL 567 million in the second quarter of this year, an increase of almost 13% compared to the same period of the previous year. And a figure of more than 24% since 2019. In the half of the year, revenues, excluding the effect of hedge accounting, which is truly accounting, it's not cash, added up to the strong mark of BRL 1 billion, a growth of almost 20.5% compared to the same period of the previous year and a CAGR of more than 24%, again, if analyzed since 2019. Both the quarters and the half yearly results demonstrate the strong volume, which I already mentioned in the previous slide and also higher average rate impact to the all logistics corridors. This scenario of higher average tariffs is even more positive for the year '24 as grain production projections in Brazil remain very strong, and we continue to have significant gaps in logistics capacity benefiting players in the country. Adjusted EBITDA, including joint ventures, as you can see on the right side of the slide, was the highest and first shown in a single quarter by Hidrovias do Brasil and totaled almost BRL 300 million, BRL 299 million to be more accurate, an increase of almost 12% compared to '22, which had already been made record as well. Near the CAGR growth since 2019 is even higher, standing at 22%. In the first 6 months of the year, adjusted EBITDA, including joint ventures, was over BRL 500 million, which is very important, reaching almost half or even over BRL 0.5 million (sic) BRL 0.5 billion, reaching more precisely BRL 510.3 million, 20% higher than the same period last year. And if we analyze in 2019, we see a CAGR of almost 24% growth. We are extremely happy with this quarter's figures because although record and with growth on a strong basis they demonstrate that our potential within the operational fullness of all of our businesses is even greater since the South operated with a lot of restrictions in January, only back to normal in February, and Santos is still in a period of growth of its volume curve. Ricardo will comment a little bit on the operating results by business viewed in details. In addition to the consolidated financial results, which, by the way, have very positive views -- news, I'm sorry, since we had the highest net income since the beginning of our operations and significant cash generation. After his explanations, I'll come back with final messages and open for Q&A. Okay. Ricardo, I turn over to you.

Thank you, Fabio, for the introduction. I also take this opportunity to thank everyone who trusted and supported our business suring this period, but also in special the entire Hidrovias team, which has worked tirelessly to make these results presented today possible. Thank you very much to our champion team. Talking a little bit about the result by business unit, as Fabio mentioned earlier. We will mention records over records. A reason for a lot of joy and enthusiasm here for us in the Brazil team. Turning on Slide 7, you can observe the operational data of the South Corridor, which will not yet present its full potential in '23. We have already mentioned that because it started the year with a lot of restrictions. But the results were resumed with greater dilution of costs and consequently added a much closer to its capacity in the second quarter. So in the first quarter, it was a little bit below, but we're back to normal. Looking at the table on the left side of the slide, we can see the volume handled in the quarter, which was more than 1.7 million tons of cargoes. If we consider our participation in the joint ventures, a growth of 3% compared to the same period in '22. And also the highlight to the resumption of grains to historical levels due to the improvement in the production of [ferroalloy] and the strong volume of iron ore. And then we're talking about the long-term contracts that you are already familiar with, and some contracts also in the spot format that we were able to operate. In the half, of the year, 3 million tons were transported by the [Parana-Paraguay] Waterway, an increase of 9% when compared to the same period in '22. We have already released the monthly market node is on navigation conditions in the south. But I think it is important to mention here that the most current projections point to the influence of the aluminum phenomenon from October of this year. And as you know, it tends to potentiate the range and contribute to the average drop in '24, being higher than what we observed in '23. Then a very positive scenario for this operation, not only on the volume side, but also, as you know, in terms of cost dilution and gains of scale that generates here for the business and therefore, the volumetric impact is not at the same rate. When the levels are low and so for next year, our expectation is to have a very positive effect. And still looking at the left side of the slide, we have the net operating revenue table, excluding the account effects of hedge accounting, which was 5% higher in the second quarter, totaling BRL 257 million, reflecting both the higher volume that I commented above as well as higher average rates. In the half of the year, it totaled BRL 429.5 million, an increase of more than 15%. To be more precise, 16.1%, a very significant growth. In the graph presented on the right side of the slide, we have the adjusted EBITDA, including the EBITDA of the joint ventures. Looking at the graph in blue, a little darker you can see the adjusted EBITDA of the second quarter this year, which was BRL 150.8 million, almost 20% higher than the second quarter of '22. The EBITDA was 59%, 58.7% to be exact, demonstrating a strong dilution of fixed costs, savings and insurance lines with positive renegotiations carried out by our team and a reduction in some variable costs due to better navigation conditions. In the half of the year, you can see in lighter blue on the right side of the slide, a total of BRL 208.5 million, an increase of more than 29% when compared to the first half of last year. And the EBITDA margin was almost 49%. And a result more consistent with the operational normality of this quarter as we have commented with you. Moving on to the next slide, Slide #8. We're now going to talk about the north corridor data as well. And we can see strong results, and we're beating record after record every week. We had a growth on a basis that was already record and with volume movement higher than the estimated capacity for the corridor. I only say that [Indiscernible] and her team always surprise us with their excellence, and this result makes it very clear. It is worth remembering that our current structure is already being 100% used and that seeking new opportunities within this positive external scenario that Fabio mentioned, a lack of logistics capacity in the short term, we will increase our capacity by 700,000 tonnes already in '24 through marginal investments in modular structure, the [bay] that we will operate in the water near of the public port of Barcarena. So we are operating miracles in terms of volumes, beating records and even beating our nominal capacity. Looking at the figures for the second quarter of '23. On the table on the left side of the slide, we have almost 2.2 million volumes with emphasis on the strong volume of grains handled within the integrated system where we have transshipment navigation and port elevation, which grew by more than 50% compared to the second quarter of '22. I believe that many of you are looking at the numbers presented in the volume line of the direct road and wondering why we had a 45% drop in the quarter, and the answer is very simple. And even though it is a drop it is still very positive for the company. Because we have this capacity, and we had a very strong demand for the volume of the integrated system, which was higher revenue because it has more added services. We chose to further monetize the system and prioritize this volume then doing it directly. So we did have a drop in the direct volume. And we talked a lot about this during the road show. So not because of the drop in demand because the demand has grown, but because of the lack of capacity, which is a problem -- which is a good problem to have. So in the half of the year, more than 4 million tons were handled also reflecting the same effects in the quarter. The strong volume together also with higher average rates contributed for us having a net operating revenue of BRL 228 million in the quarter, an increase of almost 14%. In fact, 13.8% to be more precise and BRL 441.7 million in the half of the year, an increase of 17.4% compared to the same period last year. Okay. So now looking at the graph on the right side of the slide, again, in darker blue, reflecting the quarter and the lighter blue reflecting the half of the year. We can see that adjusted EBITDA totaled BRL 146 million now in the second quarter almost a 10% growth compared to the second quarter of '22 even with occasional effects of higher costs and expenses related to the commissioning process of the new assets, which will be used for the super trains and the north. Keep in mind that when these assets arrive, we started working with the expenses, and we have revenue generation related to it. And even so, we have had an increase when compared to last year. In the second quarter, the EBITDA margin had a growth of 64%. And then for the half year, the adjusted EBITDA totaled BRL 282 million, an increase of almost 17% when compared to the same period last year, a margin of also 64%. We're very positive with the scenario for the north in '24 as the grain projections remain strong and in the north corridor remains very competitive. Actually, so much so that it is operating for the second consecutive year at full capacity even amid the collection of all BR-163 tolls and with increasing tariffs. So please keep that in mind. We have been evolving and evolving strongly and with [net] for '24. We believe that we will have an even better tariff scenario with the capacity higher than what we have now, which gives us the possibility of reaching new operating records for next year, okay? Okay. So let's move on to Slide 9 now where we see the Coastal Navigation results, which came in line with what we expected, although below last year because we are in a [docking year], I'd like to remind you and with some non-recurring impacts related to the discussion of a nonmaterial portion of the contractual tariffs due to operational cycles, which we already mentioned in the last quarter and which is widely known to all. We mentioned it in the past quarter. And moving on in the table on the left side, we have the volume handled in the quarter. And in the year with 837,000 tons of Bauxite in the quarter and 1.6 million tons of Bauxite in the half. Volumes that are consistent with the history of this operation and that at the end of the day, do not impact the results as much because it's a dedicated contract for Alunorte and 100% in the take-or-pay format. In other words, not necessarily higher or lower volume will result in a higher or lower result. In the consolidated results at the end of the year. It is not a direct relationship in the case of this operation specifically. Net operating revenue for the quarter was BRL 56 million, very similar to the BRL 58.1 million we had last year. In the half, it totaled BRL 115.8 million, also in line with what we had in the first 6 months of '22, which had been BRL 117.4 million. On the right side of the slide, then we have the graph of the evolution of adjusted EBITDA, which, again, in darker blue represents the quarter with BRL 19.2 million now in '23 and in lighter blue in the half with BRL 48.8 million, accuring the year. The EBITDA margin in the quarter was 34.2%. And in the half, it was 42.1%. This EBITDA drop that can be observed in the semester and mainly in the quarter is due to the greater concentration of the docking effect of one of the assets, which ended up taking a little longer than usual this year, and the value was higher than the last stocking carried out by the company due to the new external reality, since the shipyard, cannot take the strong demand given that the number of assets operating in the world has grown significantly in recent years. Furthermore, we have an effect on EBITDA is more recurring, which is the lower account it corresponds to 10% of the revenue linked to the volume handled and which has become 8% since the approval of the [Indiscernible]. So the expected result for this year is therefore lower compared to the normalized and historical basis, which was already expected by the company, and I believe by you who follow our business closely. So nothing new so far, right? Moving on to the next slide, Slide 10. We have the result of the upgrade and in the Port of Santos. Where we are only moving fertilizers now, keeping in mind that the idea is also to have solved by the end of the year and start having a railway expedition of '24 on with volumes still on a growth curve. We are leveraging this volume, and this has shown an impact month on our growth curve. On the left side, the same table show as the others, we have a volume of 317,000 tons of fertilizers no comparison with last year because we were out of operation due to the renovations we made in the warehouses. But in the half of the year, the total volume handled was 630,000 tons. Net operating revenue reached BRL 226 million -- I am sorry, BRL 26 million in the quarter and BRL 53.6 million in the half year. And as a result, adjusted EBITDA observed on the right was BRL 12.5 million in the quarter and BRL 26.6 million in the year with EBITDA margins of 48% and 49.7%, respectively. With that, I think we have gone through all of the company's operations. And you talk a little bit about the consolidated financial results, which also very strong this quarter. I ask you to please show Slide 12, where we have information related to CapEx. As I have mentioned, we are very diligent regarding the company's CapEx and focused on concluding the first major investment cycle since seeking to release cash from '24 or to be directed both to our continuous deleveraging process and to investments in increasing modular capacity seeking to take advantage of the short-term opportunities we see in the Brazilian market and more than that with a rapid [inflow] in the quarter. Consolidated CapEx totaled BRL 59.5 million with segment of installment related to the contraction of the [indiscernible] that will be used in the North, And mainly with the effect with the act of our capital assets. And now that give us the need we had through our obligations with our clients. But we also have an impact on our CapEx, and we will work with it in this team. So you can see that this maintenance represented almost 71% of our -- the total CapEx is on the second quarter, our CapEx fell when compared to the same period last year because we moved some investment spend for this year through the second half. And yes, there was no impact on the total expected value for the year. So even though the accumulated CapEx is lower, let's put it this way. We still have earning -- important amount of the investments made in the second half. And it's very important to make this clear so that you do not [indiscernible] the first quarter and multiply [Q2] to consider the company's yearly CapEX. Everything is done according to plan. We also had the [railways], infact the implementation of the voice in the north and inclusion of investments that were already underway, and they play an important role in the second half of the year. So in the first half, we invested BRL 142 million, including recurring maintenance, noting expecting payment of the Santos ramp, which, by the way, ends in '25. And after seen the cash generation line. So please move on to Slide 13, where we included a reconciliation of the net income that was presented by the company. By the way, the highest net income in our history, which occurred mainly as a result of the excellent of leading performance in the period. Please look on the right side of the table that EBITDA grew almost 91% in the quarter and almost 30% in the half of the year. It's not little, and so this robust operating results is more consistent with our full installed capacity and demonstrate how solid the business is. The fundamentals that Fabio mentioned at the beginning, the fundamentals that have been intact from the very beginning of the thesis that we have been developing. And the figures only show that. We are capable of offsetting the higher financial expense due to the contracting of byproducts last year to reduce the volatility of our results, and the new debt structure after the issuance of debentures. So we're trying to better balance the company's cash flows. So as you can see on the slide, we had BRL 117.9 million as a net income in the second quarter and the accumulated for the first half of '23. It was BRL 137.9 million. It is also worth noting that the same strong operating results that led us to significant cash generation in the quarter totaling BRL 183.3 million. As you can see on this next slide, please, moving on to Slide #14. There was also a significant improvement in the working capital line, which started to show behavior close to historical seasonality. And please remember that I mentioned last quarter that we had a worse working capital line due to the delay in receiving almost BRL 70 million or a little over BRL 70 million, which had already been carried out in April, even though it was not in the consolidated results for the first quarter. So we can now see it in our closing of the second quarter. And it is more normalized. So in summary, everything has contributed for us to closing this quarter with BRL 744.6 million in cash, more than enough to meet our short-term needs as you all know. And so I would like to make a disclaimer. In the second quarter, which is seasonally stronger due to the best conditions in the south and the peak harvest in the North. So we still have important investments in the second half of the year, and a weaker seasonality in the fourth quarter -- for the third and fourth quarter, and this is usual for our business. But for this reason, we should not yet end the year generating all the company's cash potential, which is very strong as we had in second quarter. But even so, we have very positive perspectives. The achievement of full capacity and operations added to a very positive scenario for logistics in South America and with the control and focus on investments, should definitely contribute to a greater cash generation as early as '24. And as we mentioned, we will direct it to two main projects, the first continuous deleveraging of the company and the second work with modular growth so that we can guarantee adequate strategic positioning in the logistic corridors where we operate and also take advantage, of course, of the short-term opportunities. And finally, closing my presentation, I invite you to Slide 15, where we demonstrate the company's continuous deleveraging, and we ended the second quarter with 4.04x with this ratio of net debt over adjusted EBITDA, ex joint ventures. In other words, a reduction of 1.7x, amazing compared to the same period last year. And even so, within the quarter, it was 0.54x compared to the first quarter this year. The average maturity of our debt was 5.7 years and the dollar weighted average cost is approximately 5%. In other words, a long and cheap debt. And as you saw in the previous slide, we ended the second quarter with almost BRL 750 million in cash, which gives us a comfort that we do not need any pressure for funding in the short term. So I now turn over back to Fabio. So he can talk a little bit about our advances in ESG. And then I will come back to you to clarify any questions you may have, okay? Back to you Fabio.

Okay. Well, thank you very much, Ricardo. The result was indeed very good with very good perspectives for the next growth cycle of the company. And so I would like to go to Slide #17, where I would also like to announce that we have now released in early August, our first integrated report on sustainability, in line with our short-term goals for the sustainable commitment the company and increase the level of transparency and information for all our stakeholders. This was the second sustainability report released by the company and already an important advance in the integrated reporting format, and therefore, following the guidelines of the International Integrated Reporting Council, which is a reference for the dissemination data on global reports and the high standards of the global reporting initiative. This is a landmark in the sustainability history of the company. And in addition, this document had the external verification of EY. And I'm sure that it places us in a select group of companies that already positioned themselves and care about the sustainability management of their business and the generation of standard value for all stakeholders. The report is available on the company's [Indiscernible] website. I recommend you reading it that you're more familiar with all of our initiatives and the differentials of our business in terms of sustainability. We've been dealing with this as a priority in the company. With that, I close my presentation and reinforce again on Slide 19, the fundamentals of the company, which was always able to create a sustainable and innovating logistics solutions, bringing competitiveness to South American producers through a structure of customized modern and flexible assets to meet our clients' demand. The perspectives from now on once the main investment cycle of the company is over a very favorable. The company is now capturing the full potential to generate cash on installed basis with investments with very low recurring maintenance investments, and therefore a capacity to invest. I will wrap up here and I'm available to answer eventual Q&As.

[Operator Instructions] Our first question comes from Filipe Nielsen.

Congratulations for the results. I have two questions. You commented a little about modular projects and capacity in the port, which has already been discussed, but I would like you to comment a little bit about your perspective for the mid- and long-term with investments perhaps in different projects and the volume capacity that will grow beyond this all modular projects that you have planned. The second question is about super convoys in the North. How do you see the implementation timing. You have some leverages that are still being implemented. And I wanted to know whether we can already see these convoys operating in the South in the third quarter or whether we should wait for the fourth quarter to have that impact really operating?

Thank you for the questions. I will start talking about the company's growth. And moving one step behind to what Ricardo mentioned. We have concluded a growth conference cycle or CapEx has generated free cash. We have a very inexpensive long debt. Our recurring CapEx period for maintenance is also very low. So of course, this will allow us to generate more free cash to support these investments. So you asked about the north. Infact we are already moving in that direction since the capacity in the north is fully taken this year and I usually state that we have strategic obligation to provide it. We have a very strong demand in the North. It is very surprising, are always making mistakes because the demands are really overwhelming, and we must take advantage of the operational robustness that we developed. So what we're going to do based on the fact that we have to look at growing right now, and we have an [indiscernible] because they can fit this in the company's balance with our own cash generation and is still deleveraging, which is an important opportunity. And Ricardo mentioned that we will continue being very diligent in terms of capital. This means continue growing without having the need of additional leverage. And so the growth in the North, we're discussing how to do it as strategically as possible. We've starting doing it. You mentioned that we will have 600 tons additional. And the second step for this investment has to do with increase of the capacity to BRL 1.5 million of ton with more modular and fluctuating structures in [indiscernible] who was tied with sef loadable ships. And then the next step will be to use loading equipment so that we can have more structured operations, which means doubling our shipping capacity in Barcarena. We do not necessarily double the capacity of the integrated system, but we want to reach 8.5 million tons with these floating structures in Barcarena and the pier is doubled in size, and we're talking about 2026. We'll have about 13 million tons, which will be complemented by direct trucks, which is a mark that [indiscernible] Barcarena has grown a lot. It is very competitive with trucks that arrive there directly and Eastern South of the [indiscernible]. Now this is what we're going to do in the North. We will then try to define the best engineering strategy in the second half. We'll probably go back to the market and to be more specific regarding this blue oceans, where they are and the schedule. But I would say that this is what we're going to do in the North using the very competitive structure with a very robust decline. It's very difficult to compete with somebody who has such a robust system and execution as well. And then I will answer your second question, which is the super convoy. We have some targets, we are focusing on the fertilizer project, it is more structured. We worked with companies that have a retail low so that we can enter vacant capacity. But when we no longer have that, I can create an independent structure, and we will create an independent fertilizer structure. The market has grown a lot in this area. And then we have another project. We have an area in the middle of our Santos terminal, where we have container starts, but we want this area to be added, and we will have a warehouse of about 30 meters so that we can add 2.2 million tons to the Santos terminal. This is our plan for the next 2 or 3 years in summary. We're going to start expanding in the north next year with the [indiscernible]. And then after the third year, we will prepare to double our pier. We will continue investing in an independent fertilizer line and all of that without the need to capture anything to have -- or having a capital core call. The company's cash generation came to that. We had a very detailed discussion with the board. We had to make some choices that fit in our capital structure so that we can use this free and stronger cash generation of the company, which remains an absolute priority of the manager, and Ricardo talked about that. And so this is what I had to say about growth. The convoy, we are already working with two super convoys. We're pushing 35 ships with about 35,000 tons, nobody comes close to that, and that is a huge advantage in terms of cost per ton because the same pusher would push 16, and we are now pushing 35 in [indiscernible] and the operational performance is amazing. We already worked with two super convoys, and we're going to have two other next year. They have arrived from Turkey. We are now in the approval phase. We have testing. But as of next year, we will probably be operating with four super convoys.

Next question from Rogério Araújo, Bank of America.

You've answered two questions. I would like to have some more details. First of all, I wanted to talk about the price negotiations in the North Corridor and how this discussion is done in terms of the volume for the upcoming year? You mentioned a very positive scenario for all players. Could you let us know a little bit more about the timing and magnitude so that we can have an idea of impact of this negotiation for next year? The second question, regarding the South corridor, we mentioned that they went back normal as of February. I wanted to understand if we can have operational improvement and margin for this quarter, I want to understand whether we can still expect some more operational improvement.

Rogerio, the last time I talked to you, you were maternity and I hope that everything is fine. Now let's talk about prices in the north and the perspectives are very positive, Rogerio. This is an offer and demand market. I point that we have some scarcity in the short and near term for the next 2 or 3 years. And of course, all players should make good use of that. How does this work? And before answering about the dynamics for next year, I'd like to remind you that Hidrovias has a little bit over 20% of its capacity already sold and the prices are all market prices, which is an advantage. So we start with a little bit more than 50% every year because that is supported by long-term contracts. The remainder -- a good part of the remainder is being negotiated or have been negotiated. There is a clear concern of clients' position because we have capacity restriction, and we're trying to balance it out to the best way possible. In addition to the 50% that we have already been sold for next year but the other half. And the reason why the amount is already being negotiated and [indiscernible] that will be to negotiate by the end of the year the total volume as I did last year to this year. And then I will answer about the timing. By November if we do not [indiscernible] everything that mean we are trying to allow a little bit to pacify but you are not necessarily going to do that. And we will try, once again, try to solve that maybe beginning of the year. First of all, I would like to say that we've always had tariff increases over the year. Even in our restrictive years, we've always been very careful with tariffs in the company and now even more so with this environment. I can tell you that these tariffs are being negotiated with an actual gain. In other words, gains above the inflation expectation for next year. This is a very positive scenario, and we expect to start next year with tariffs with real gains. Regarding the South, what happened? January was below our expectations. But from February to June, so that we concluded the first half of the year, the river behaved better than what we had expected. We made good use of that, and that's why we saw such good results. The real is seasonable and will remain seasonable. The expectation is to have a second half within the normal range, but not above it. This is good news for us because we made good use of it in the first half. But then if you ask me if the second is going to be the same, I will say that now because it will be more normal in the first half. The first half was positively abnormal. This is not bad news, but quite the way around. We made good use of the difference in level for the first half. And then for the half -- second half, it will -- the curve the river will be more within the normal range. There is a very narrow and clear correlation of these climate effects, be it El Nino and La Nina, they both take about 3 years, and it's very clear that we're going to start El Nino a phenomenon. And when that happens, our expectation is to have a more normal regimen. -- over the next 3 or 4 years. And so I would not expect to have any improvements in productivity because we made good use of a better situation, and we're now going back to a more normal situation in terms of future budgeting.

Next question from Henrique Simoes , Credit Suisse.

I have two questions. First of all, I was thinking about the operations in the south and the problems we had with Argentina and the tariffs they wanted to charge. And there is a more relevant phenomenon, 3% of the Atira in the South and then about in the consolidated. I wanted to know from you whether it was an isolated case in a hypothetical question ignoring the merit of the charge or not. If this cost really exists. Would that be passed on to the contracts. And the other one is the conditions of 163, where the tools are already active. And I wanted to know whether there will be any relevant impact on the short term or whether it is in adequate conditions?

So let's talk about the situation in Argentina. Just to contextualize the Paraguay Panama road is ruled by a very old multinational agreements, the oldest one in the Americas, which defines two basic principles: equity treatment of the signing parties and full navigation, clean navigation as we usually call it. So what happened was that the Argentine government without any offers in exchange because they can change for that. But what they did was simply to Part [Indiscernible]. This was announced to us in January this year. We formally rejected these charges. We did not pay for it, and we claimed against it until they stopped one of our shipments. For them to release that we ended up paying that toll. It was very low, just for one ship and the losses of having one shipment waiting was higher, but we talked to our foreign relations ministry. We talked to our federal government, the senate, we also have a new group that addresses teams that have to do with navigation and then the Brazilian government said that the merit is going to be discussed, but the retention of shipments is not acceptable and therefore. This was an isolated case. We understand it that way. We have not heard of any retention after that or going to discuss that in the court. To make it even worse, the Argentine government started charging their shipments. So this initiative so that they were trying to collect money or contracts be them for iron ore or grains are based on net tariff. And if the decision is really that, if it's really confirmed the contract should pass that cost on to clients. This is true for taxes, increased taxes or fees that we usually have to pay. But we do not believe that this will prevail because it has -- it makes no sense. So regarding 163, the road is well cut, has good signage. And I'd like to remind you that we're not only talking about 163. There's another road, which used to be bottlenecked, and they have all been maintained by the concession and the improvement effect for truck-drivers compensates the tolls that are charged. I always said that the main risk for us was not having a total, but it was having a road good for maintenance conditions. And the fight was BRL 100 more expensive per ton. But now the road is doing well. The concessionary has kept its obligations. And all of this only makes it better for us in terms of competitiveness. In the north region, I have a lot of interest there, but the market does not -- so there's no question that if the conditions were not good, the market would not have had an increase in market share for the grain that is produced the next quarter then [Indiscernible] uses the north region for its logistics. So we have to be very competitive -- remain very competitive. Thank you for your question, Henrique.

Well, with this, we conclude today's Q&A session. I would like to invite Mr. Fabio Schettino to proceed with the final considerations. Please go ahead.

Well, thank you all for the interest, I'd like to reinforce that we're starting a very special moment at the company. In terms of our capital-intensive company with maturation for the mid and long term, we concluded this cycle, the installed capacity and generated BRL 1 million in [Indiscernible] we're going to talk about those, but we will increase our volume as of next year. We have very strong competitiveness be it in the south or in the north or in operating terms. We are obsessed with the technological advancement. We have started using the first electric [Indiscernible]. Our OpEx is very low, and this is where the structural invention of our businesses because it's very difficult to compete with a 70-ton convoy. It's very difficult to compete with a 45 ton capacity per day. And we had 2 years of very challenging times, which only showed resilient we are, and we will now have more robust results, and we will continue using it to deleveraging the company. I thank you very much. We are going to have some good quarters ahead of us, and I will talk to you in the next call. Thank you very much.

With this, we conclude Hidrovias do Brasil conference call. Thank you very much for your participation, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]