LOG Commercial Properties e Participações S.A. (LOGG3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. You're welcome to the earnings release call for the second quarter of 2026. Here with us today, we have Sérgio Fischer, CEO; Rafael Saliba, Investor Relations Director; and Henrique, direct CFO. We would like to let you know that we have simultaneous translation into English, which is available once you click on the English button. The option to silence the original can be used by clicking mute original. [Operator Instructions] We clarify that eventual statements made during this conference regarding the business perspectives of LOG, operational and financial goals are projections of the company's Board of Directors, which may or not occur. Investors should understand that political, macroeconomic and other operational factors may affect the future of the company, leading to results that differ materially from those expressed in future considerations. To open the video conference for the second quarter of '26, I now turn over to Sérgio Fischer.

Good morning, everyone, and thank you for participating in the call for the earnings release for the second quarter. The market has been [ needed ] based on solid fundamentals. The lack of Class A assets and rentals continue leveraging the demand for high-quality logistic facilities. With that, we have a confirmed capacity to capture opportunities in a competitive manner. We closed the first part of '26, which reinforced the consistency of our results. Quarter-over-quarter, we remain demonstrating that our operational results with a very criteria selection of our assets and a really close relationship with our clients, everything supported by robust support in the second quarter. We had 81,500 square meters delivered of ABL. Pre-location were delivered, 100% average. YoC, the accumulated for the quarter, we totaled 147 square meters. Delivered all of them with 100% of rentals. Stabilized vacancy of 1%. The gross observance was 108,000 square meters. We had a growth of 24.5% when compared quarter-over-quarter and year-over-year. The average ticket. We had an increase of 18% in 12 months. Same client rent was above inflation. And in the development pipeline, we closed this period with 148,000 square meters and a distribution of constructions in 17 areas in 13 states in the main metropolitan regions of the country. We follow our construction schedule very strictly. The remaining of the pipeline is being built, but we can guarantee our growth. We have had the best expansion cycle in the company's history to continue generating sustainable value to our shareholders. We remain committed to high-quality assets, which are strategically located, consolidating LOG's position in one of the main logistic platforms in the country. Thank you for your attention.

LOG remains disciplined with its capital management to generate value to our shareholders. In this last quarter, we had assets for ILCP11, and we sold assets in Recife II in the order of BRL 210 million. And then when the transaction is concluded, we will have BRL 1.3 billion assets sold related to recycled ABLs in the order of 388,000 square meters. This reinforces the liquidity of our assets and the consistent recycling of assets in different market segments. We remain growing with accelerated growth and recurring revenue. LOG ADM closed the quarter with 3 million square meters in ABL, a growth of 24% year-over-year. And the accumulated for the year, we reached new records with BRL 15.8 million, a growth of 76% year-over-year. These figures still do not reflect additional revenue for ILCP11 of approximately BRL 5 million per year. Additionally, LOG has expanded its construction expansion. We obtained a preliminary approval for funding of 8 of the 17 projects that are anticipated for the upcoming years. We estimate a total potential of about BRL 1 billion for the development of over 900,000 square meters. As this initiative is implemented, it will reduce the capital cost for our enterprises. Throughout '26, the company has generated over BRL 1.49 billion in cash, in addition to anticipated monetization in the accounts receivable. This robust cash generation has allowed us to distribute BRL 282 million. In addition, we approved BRL 13.9 million, with payments planned for October. For LPM, on June 30, it was 35%. We have increased the total return to our shareholders. In the second quarter of '26, we had solid financial results, reflecting the consistency and quality of our operations. In the second quarter, the net revenue was BRL 66 million, a growth of 7.3%. In the half of the year, our net revenue totaled BRL 132 million, an increase of 13%, demonstrating the consistency of our business strategy. The net revenue of services in the second quarter had an increase of 60%. And in the accumulated, we had a record of BRL 15.8 million, leveraged by the growth of -- in our management. The rental EBITDA totaled BRL 56.6 million, a growth of 6.2% year-over-year. The margin was 85.8%. The rental EBITDA in the last 6 months, an increase in the consolidated for the half of the year was 79.8 -- for the quarter was BRL 79.8 million and for the half year, it was BRL 264 million, and that excludes the effects of the sales. And if we exclude that effect, the result would have been BRL 410 million, a growth of 57%, results of a strict expense control. The financial result was 14% better when compared to the previous quarter. The cost of our debt closed the quarter with a CDI plus 15% (sic) [ 1.15% ] following a consistent reduction. The net profit was BRL 58.7 million. And in the accumulated for the year, it was BRL 192.7 million, a growth of 11.1% when we compare it to the past half of the year. And the profits per share is higher than in the previous period. The net profit for the half of the year would have been BRL 178.2 million if we could exclude the effect of the transaction we had in the recent past, and we had a growth of BRL 312 million. The adjusted net debt has the lowest level since '24. And if we consider the effects of the sales, it would have been only 0.48. This position reflects our discipline with our finance management, optimizing capital cost and also with efficient resource allocation, generating value to our shareholders. With this, we conclude our presentation and open for Q&A. Thank you very much.

[Operator Instructions] Our first question comes from André Mazini from Citi.

I have 2 questions. In face of the high volume of recycling you are carrying out this year, and with the recent sales of the LOG, what is the payout of dividends going to be for capital allocation with this stronger scenario of asset sales? This is the first question. Second question, recycling of assets and allocation and so on and so forth. So what do you consider to be the main bottleneck for you to reach the goal of [ 2 million ]? And if there is an opportunity to anticipate this target when compared to the end of 2028, which is the target that has been set for now.

Mazini, this is Sérgio. Thank you for the question. Starting with your second question, anticipating our goal, no, but we have an opportunity to deliver a little bit more than we promised. It's important to mention that today, we already have all of these plots allocated, and we have a record volume of area allocated and these assets will be delivered in the next 18 months. In addition to that, we have 500,000 square meters that are guaranteed for our plan. When we have a new plot available, we always map the absorption for that project. We want to continue delivering these assets with a very strong level of 5,000 square meters that we delivered are already taken. We want to maintain efficient capital allocation. But we are very confident that these results are the best in the company's history. And if these construction projects we have today are the best we've had. But in addition to that, it's important to note that we can see, as you mentioned, the sector is growing really well. We are at the best moment of the company ever. The new construction [ cement ] over a month have provided results much higher than anticipated. So we can see a significant increase in our yields, and we anticipate profits of 15% or even greater than that. This is really interesting. And once again, I don't see any changes for the medium term. We will grow strongly with quality. Our figures are also going up. So we see the scenario changing. But in response to your first question on dividends, we have had a strong movement in the past quarters with our payout. We want to increase the return for shareholders. This is always a solution that we pay close attention to. Of course, it will depend on the CapEx versus our recycling speed. But this is something that we are discussing. But the levels will depend on what happens in the future.

Our next question comes from Matheus Meloni from Santander.

I have 2 questions. First, I wanted to understand these sales and also understand how you see these opportunities for more sales this year. Do you think that it's still possible to have more sales? I also wanted to understand the quotas and if the negotiations require part of the payments in quotas and shares and how you see the sales in the future and also the ones that you're making now. So this is my first question. The second question, I wanted to understand a little bit more about costs and some specific results. I wanted to understand how this has evolved for the third quarter and if there will be an impact or not in the projects. This is it.

Matheus, thank you for the questions. It's Sérgio once again. We have seen more pressure in the first quarter as opposed to the second quarter. And what we can see are levels below mainly because of a lower percentage or close to that. The positive thing is what I mentioned. We've seen increased rental prices much higher than that. So the trend for the yield is to increase even further. And also the average for these projects are always all above 13, which is very interesting aspect because we have allocated many products in our construction cycle is that we've been able to have an [ MCC ] had until the construction is delivered to our clients. We are very confident about the results we're going to have in the near future. Regarding the quotas. These are different things. The important sales we had in the second quarter, strategically speaking, we have these quotas to absorb all of the gains in the portfolio in the midterm. And we do not want to leave it in the hands of the market. They will have significant repricing in terms of rentals, and we wanted to be exposed to that. So the way we found was to hold a part of them. We will capture them or a significant part of them. That's very important. Strategically speaking, we wanted to keep these quotas. These areas will capture all of the gains that we expect to have in the future years. This is one aspect. The second sales, for example, that we have as payments are very relevant. These are sales of a gross margin of 41%, very good -- and the -- we are receiving everything in the short term, almost 1 year, we've been receiving the resources and a small part of quotas involved. So we have the protection of these quotas, Matheus. And we are looking case-by-case. We have different proposals depending on the payment, depending on the property. We are open to listening to all of them very carefully.

Our next question is from Herman Lee, Bradesco BBI.

There is one thing I would like to mention. The concentration of the gross revenue from 12.5 to 17 in 1 year. So could you let us know what these clients are and where they work and how we can decrease this exposure? So I wanted to better understand that.

Well, thank you for the question, Herman. Yes, we can do that. This is an SOP client. It represents 11 different operations in different regions of Brazil. Our geographic diversification is significant and so are our operations. Once again, this property that we just sold is there. This is why we do recycling so that we can reallocate our client. We did this in the past with Amazon. We are now doing it with [ Shopee ]. It's part of our business model. The most interesting thing is that we have scattered operations with different clients and we can reallocate everything very quickly. It's usually only 1 month. And as I mentioned earlier, we are growing very significantly. We are concerned about having only one client. But the sales we had recently were very robust. And once again, this is why we have these recyclings.

Our next question is from Igor Machado from GS.