Hidrovias do Brasil S.A. ($HBSA3)

Good morning, everyone. Welcome to Hidrovias do Brasil Earnings Conference Call for the First Quarter of 2026. Joining us today are De Sampaio Amaral, Chief Executive Officer; and Andre Hachem, Chief Financial Officer and Investor Relations Officer. This event is being recorded and will be available on the company's Investor Relations website. Ensuing the comments of management, there will be a Q&A session at which time further instructions will be provided. [Operator Instructions] Before proceeding, we would like to underscore that forward-looking statements are based on the beliefs and assumptions of Hidrovias management and the information currently available to the company. These statements may involve risks and uncertainties as they relate to future events and depend on circumstances that may or may not occur. Investors and analysts should bear in mind that events related to the macroeconomic environment, the segment and other factors may cause results to differ materially from those expressed in the forward-looking statements. That said, I would like to turn the floor over to Mr. De Sampaio Amaral to begin the presentation.

Good morning, everyone, and thank you for joining our first quarter 2026 results call. We began 2026 in a challenging operating and market environment. In our Brazilian operation, navigability conditions remain normal, supported by the high volume of rainfall in January and February. On the other hand, the same scenario, combined with the ongoing works in Transportuaria created significant access difficulties at Miritituba. Additionally, the first quarter '26 was marked by the simultaneous handling of 2 products and shipments were only completed in January. This context brought about handling challenges and important lessons for upcoming programs. In the South, despite lower navigation draft levels compared to the same period previous year, we were able to move volumes that were practically equivalent, highlighting the process made with the dredging program throughout 2026. To achieve this performance, the operation was carried out with smaller convoys than those used in the first quarter '25 with lower loading per barge requiring a higher number of trips. We remain focused on our operational discipline, and we are, of course, facing significant operational challenges. We remain focused on operational discipline, efficiency and better asset utilization, preserving performance in the quarter marked by significant operational challenges. We are able to progress, thanks to the initiatives implemented in 2025. Financially, we have a more balanced financial structure, maintaining leverage at a level compatible with the business strategy and reinforcing discipline in the capital allocation. I will now turn the floor over to our CFO, Andre Hachem, who will comment on the quarter's results. I will be at your disposal at the end of the presentation.

Thank you, Decio, and good morning, everyone. Before going into the numbers, I would like to highlight that starting this quarter, we are presenting our results under a new segmentation aligned with how we manage our business. Results are now reported across 2 divisions, Brazil, which includes the Northern operation, Santos and their respective administrative expenses in Paraguay. Let us begin with Brazil's results on Slide 7. In the quarter, we handled 1.7 million tons in the North with a year-over-year decline, mainly reflecting challenges in the intake at ETC and because of simultaneous handling of 2 products due to the higher corn volumes moved at the end of 2025. In Santos, we handled 474,000 tons in the quarter, an 8% increase compared to last quarter, reflecting the unit's operational improvements on a consolidated basis for the Brazil division, total volume reached 2.1 million tons in the quarter with recurring adjusted EBITDA of BRL 111 million and a 45% margin. Looking ahead to the second quarter, navigability conditions in the north remain normalized. And of course, we observed the same situation as that observed in the same period last year. Moving to Paraguay, we moved 1.1 million tons in the quarter, maintaining stable volumes compared to the first quarter '25. As Decio mentioned, the result was achieved despite a less favorable hydrological scenario. To enable this, we operated with smaller convoys while capturing the benefits of the dredging and rock removal programs carried out in 2025. It is also worth highlighting the effects of exchange rate conversion. The average exchange rate in the first quarter '25 (sic) [ '26 ] was BRL 5.29 per dollar compared to BRL 5.85 in the first quarter '25. Recurring adjusted EBITDA totaled BRL 71 million with a 36% EBITDA margin, reflecting higher operating costs in the period, especially due to exchange rate effects and the use of smaller convoys, which increased cost per ton. Looking ahead in the second quarter of 2026, we see an navigability scenario closer to normal, combined with a favorable bulk cargo with a higher share of iron ore. Now moving on to the consolidated results. We will please turn to Slide 9. In the quarter, we handled 3.2 million tons, a 6% decline compared to last year, mainly due to the North in a context marked by the challenges of the ETC, as we mentioned. Net operating revenue totaled BRL 445 million compared to BRL 489 million in the same period last year, impacted by lower cargo volumes in the North during the quarter. Additionally, Paraguay's operations was also affected, which impacted the translation of results. Recurring EBITDA totaled BRL 182 million in the quarter with a 41% margin, reflecting weaker operational performance in Brazil, offset by the expense reductions during the period. In the debt slide, we had an increase of 0.4x in our leverage of 2.7% (sic) [ 2.7x ] explained by a higher cash consumption as we resume operations. On a year-to-year basis, we continue to show meaningful deleveraging with a reduction in net debt following the capital increase and improved results in recent quarters. We maintain a balanced capital structure with a long-term debt and average maturity of 4.7 years, weighted average cost of 108% of CDI and our entire foreign exchange exposure properly hedged. With this, I conclude my remarks. We will now go on to the question & answer session.

[Operator Instructions] Our first question is from Pedro from Itaú BBA.

I would like to approach 2 questions. First of all, gain a better understanding of tariffs you have an alteration in the north along with Santos. If you could give us more color on the evolution of the integrated system year-on-year. And I would like to explore the issue of competitiveness. There are other logistic workers. So if you could comment more on the integrated system, your competitiveness compared to other logistic models. The second question, let's explore the part of volumes, especially in ETC. The expectation of improvement throughout the year because of a better access to ETC. But which are the risks of El Nino, for example, and the volatility caused by this in the second half of the year and the ramp-up of volumes because of this throughout the year?

Pedro, this is Hachem. To begin with the first question on competitiveness, there's an important issue to remember in the first quarter. We had greater difficulties in loading because of the port situation. We had less navigation and lower volumes, of course, this was represented in 3 different events. The volumes that we report are those of navigation, and that is why the results of the first quarter were less favorable. That is why you see a lower or less favorable tariff in the first quarter. This explains most of the effect. If we were to normalize this month after month, naturally, as I have remarked, we don't see a favorable condition as we had last year. Last year, of course, we had a more favorable price for the moment, we have to be more aggressive than last year. Now when we look at the coverage as a whole, we had in-house problems and not truly competitiveness problems that would alter the Northern Arc and the Southern Arc. Now the problems are mainly coming in-house and the problems of competitiveness[vis-a-vis last year. And this year, of course, are not favorable, but they will be normalized. There won't be significant changes year-on-year.

Pedro, this is Bastos. Thank you for the question. Now to speak a bit about the issue of competitiveness and the volumes in El Nino. I see a trend for the improvement of competitiveness in the Northern Arch. We're in the middle of works for the new access to Transportuaria. This should be ready until the end of this year. And part of the execution of these works this quarter hampered a bit our work. This will be resolved during the year. One of the great bottlenecks is reaching Miritituba. This should be eliminated before the next harvest because this does interfere with the differential of freight with a difference of 5 to 6 days. So we have made strides in terms of competitiveness in the sector. Now your second concern about El Nino, we constantly follow up on forecast for the time being, navigation conditions are normal. Now we do work with the National Water Agency. And if we're close to any disruption in navigation, we will have the proper dredging in a timely way. This is a conversation we hold with DNIT, the agency responsible for carrying out the dredging so that we can mobilize on time. For the time being, the forecast indicate good navigation conditions. We follow up on this week after week.

Our next question comes from Filipe Nielsen from Citi.

I have 2. I would like to better understand the dynamic of the simultaneous operation that you had in January. You mentioned this was a detractor. Perhaps we could have a mix window throughout the year. And which were the learnings that you had, which was your learning curve and if you have already thought about improvements for the coming windows. And to go back to what was said a follow-up on the contracting of freight for corn. Now the second question refers to your CapEx. We see a somewhat lower CapEx compared to the annual CapEx, which is the curve so that you can comply with the guidance of BRL 270 million for the year and which are the stages, the projects that you are implementing for this?

Filipe, this is Decio and thank you for the question. Your question on simultaneous operation is very good to explain what happened this quarter. We have several concurrent effects. We had the works of Transportuaria emergency works on the present day waterway and works on the opening of the new waterway. They were simultaneous works that caused some interruptions in the reception flow to maintain the level of service for our customers. We rented capacity from third parties, and we suffered less, but we did incur on a higher cost. Our focus, of course, was to maintain service levels for our customers. When we speak about the private terminal, we had a simultaneous arrival of containers with corn and soybeans. We have a segregation of products in the warehouses as we were at the end of the harvest. We had to wait a bit to complete the ship and this delayed some of the unloading at the private use terminal. The return of the convoy to seek products from third parties meant we had to navigate at a higher speed, increase the use of fuel and to maintain the volume of shipments because this is a period where we normally carry out our annual maintenance. So we also rented lifting capacity from third parties. So in that quarter, we did incur a higher cost to maintain the service levels for the customers to maintain the simultaneous deliveries on corn and soybean. The coming year, we won't have the works in Transportuaria. We will have a more controlled flow. And of course, this will aid and a bit the operations at the private use terminal. This problem should not repeat itself. And we have a similar dynamic to that of last year commercially. We have a significant volume of contracts, and we follow the natural rhythm of negotiation. Nothing different compared to last year. If you could speak about the CapEx we have postponed some investments as we did in January, we postponed some stopovers in the north. We will resume them during the year. So the CapEx is not linear this year, but it is very similar to what we had last year.

Our next question comes from Joao Ramiro from XP.

We have 2 questions. If you could give us more color on the modular projects you were at test phase and implementation, which has been the evolution? And what can we imagine for the rest of the year? And on the floating device, which are your terms? You said the term would be 2027. Is this still holding true? Or will you anticipate this for 2026 and which will be the reflection on volumes? The second question regarding operations. We see that you have been suffering from the higher cost because of the increased number of trips to offset that worse volume of draft. Now in the second half of the year, the draft should be better. So what will happen with a normalized draft and the initiatives of derocking and dredging last year, if this will allow you to have improvements?

Joao, this is Decio. Thank you for the question. To speak about Cabrera and Tombador began its work in the first quarter, and they will begin the conditioning in the second half, working at full operation capacity as foreseen. Now this project continues with the manufacturer schedule. It will go into conditioning and will be part of the system in the coming year. The floating rate borrower. Now we have an interesting effect here. We had a volume very similar to that of last year in the South at a higher cost because of 2 reasons basically. As we have the benefit of the dredging, and this is an important point, we were able to achieve the same volumes. Had we not had dredging in the south, the volumes would be lower, but we still have not been able to use a convoy with 16 barges. We only use 12 barges. This captures the volatility of the business because of the effects of dredging that continue on this year. And this restriction began in Brazil much later. It's more advanced in other countries. So we see a half class, an empty class in this case. Now we anticipated maintenance of our fleet to have the benefit of availability in the period of higher water. In the period of higher waters, we can operate with 16 barges guaranteeing availability of the products at a lower expense. And we will see better results than we saw in the second half of last year. Now as Bastos said, simply to clarify this, when we look at the cost in the South, it depends on the number of trips and not of the volumes. As we had more trips because of the lower number of barges, the cost in hands, we should be able to normalize all of this presently.

[Operator Instructions] The next question is from Rogério Araújo from Bank of America.

We have 2 questions at our end. The first, it's not 100% clear to me all of the events that impacted your access to And how much disruption this truly caused? If you could speak about these events. Secondly, which was the impact, if you can mention figures? And third of all, which is the expectation for the normalization of the events? This is my first question. Secondly, perhaps you could share with us the reason why the company has changed segmentation and no longer discloses results at the Santos operation. Do you have a potential subsequent event, new investments in mind? If you could share your rationale, this could be very helpful.

I will begin with the second question. Regarding the change in reporting and disclosure, we're going through a significant process of turnaround. And as part of that process, we understood that in the Brazil segment, we should divide everything in navigation and terminals because navigation, therefore, becomes a different line of business. We have the terminals, but we can also operate for third parties. We understood it would be interesting to segregate navigation and terminals, therefore. Now speaking about scale, it also makes sense to work with segmentation. In Brazil, the figures are quite lower. So we joined everything in the Brazil part. And in Paraguay, we have a separate reporting. Another question -- well, this is about your question regarding reporting. In Miritituba, let me underline the events. At the beginning of the year, we had an increase in rainfall. We began with a wetter harvest, increased rainfall. At the end of Transportuaria in that piece that leads to the terminals, we had a great deal of mud and we have 2 hills there, Santo Antonio and another one. Now when the harvest began, we had that excess of rainfall, and we detected several impediments in that region. Along with that, we had the works at the highway, the concessionaire is working on the conclusion of the roads that read to the terminals. And this, of course, affected the transportation by trucks. And Decio also mentioned that we were working with 2 products. When we work with 2 products, therefore, we have disproportional work in terms of warehousing compared to what we have vis-a-vis already stored products. This is what happened in that quarter. And of course, we had several learnings. The combination of these 2 factors led us to lower reception levels because of lower reception levels, we had lower navigation. Most of our invoicing in the north is linked to navigation and lifting. These are the factors that impacted us. In the month of April, we had normalization of these events. And in the second half of the year, we should operate with normalized conditions in general. We remind you that we're also facing the highway work that will impact future events. Now to give you more color, we have 2 simultaneous works. A new access, this is a work carried out by a concessionaire, and we have the paving of the main hills that exist, [indiscernible] and Santo Antonio carried out by the operators themselves from Transportuaria with our backing. Now the paving of that first hill, Santo Antonio is 100% concluded. It has been fully paved. -- will no longer pose problems for this harvest and the Mallu Hill will conclude the pavement. It has 2 lanes. Now the paving of the highway. And once this is ready, it means we will no longer have these impacts that we were faced with at Transportuaria in the last few years. Transportuaria is using the same yard, enabling us to intelligently control the flow and avoid the problems we had last year. We believe that we have mitigated the impacts of Transportuaria going forward and that bottleneck that we had at reception.

PPerfect. If you allow me a follow-up. How much of the difficulties of access are due to the new access and the 2 highways.

One will be concluded now, the other at the end of the year. I think the main problem was the pavement of the present day access. We had restrictions, go and stop operations during the work. So the problem was the pavement of the access that go and stop operation interrupted flow while the pavment was being done. This problem no longer exists and one of the routes of access has already been fully paved. As we mentioned at the beginning to try to mitigate problems for the customers, we had to work with third parties to partially mitigate this effect to continue on with reception that was not fully mitigated. It should be fully mitigated in this coming quarter. Thank you. Thank you very much.

With this, we conclude our question-and-answer session. We will now turn the floor over to Mr. De Sampaio Amaral for the closing remarks. You may proceed.

TThank you very much for your questions, for your attendance, and we will be back very soon to speak about our results for the second quarter. Have a very good day.

The Hidrovias conference call ends here. Thank you for your attendance. Have a very good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]