Log-In Logística Intermodal S.A. (LOGN3) Earnings Call Transcript & Summary

Good day, everyone. Welcome to Log-In Logística Intermodal Conference Call to discuss first quarter 2022 results. My name is Júlia Ornellas. I'm Log-In's Investor Relations Specialist, and I will be hosting this event. The presentation and comments about the company's results will be made by Log-In's CEO, Marcio Arany; our CFO and IRO, Pascoal Gomes; our Commercial Officer, Felipe Gurgel; our Terminal's Officer, Ilson Hulle; and the Officer of Tecmar Transportes, Mauricio Alvarenga. They will comment on the company's performance and main highlights of the quarter. Then they will be available to answer questions that you might have. The slides presentation and earnings release in both Portuguese and English are available in the results center at the company's website, but we will be showing the presentation in Portuguese here on Zoom. In addition to the rooms available in Portuguese and English, we also provide Brazilian sign-language interpreting during the whole event. [Operator Instructions] Be advised that this webinar is being recorded and will be available on the company's website. Before proceeding, as usual, let me mention that forward-looking statements that might be made during this conference call relative to Log-In's business perspectives, projections, and operating and financial goals are based on the beliefs and assumptions of Log-In's management and on information currently available. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties, and assumptions, and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Log-In and could cause results to differ materially from those expressed in such forward-looking statements. Now, with the legal disclaimers made, I'd like to turn the floor to Marcio Arany, Log-In's CEO, to start the presentation.

Good day to all. I'm Marcio Arany, CEO of the company. I would like to thank everyone for joining us on this conference call to review first quarter 2022 results of Log-In Logística Intermodal. Let's start the presentation on Slide 3, going over the main achievements of our strategic plan, then, we'll move to the presentation of our earnings. In our Cabotage coastal shipping business, we highlight historical quarterly EBITDA record, record NOR, and volume handled for a first quarter and the international charter of Log-In Discovery. In TVV and in logistics solutions, we highlight historical NOR record at the terminal, highest volume of general cargo handled in the history of TVV, and the start of the second phase of TVV expansion project. Regarding our capital structure, the third block of our corporate strategy, no new debt was issued, and we were able to reduce the company's leverage. The fourth and last point is related to our corporate management strategy. We highlight the acquisition of Tecmar Transportes. We celebrated zero accidents or cargo theft with more than 20,000 road operations carried out in the quarter. We also launched our greenhouse gas emissions calculator for Cabotage shipping and started the process to replace our ERP system. Next, our team will present the results of the quarter, starting with our CFO, Pascoal Gomes.

Thank you, Marcio. Good day, everyone, and thank you for joining us on this call. Please go to Slide 4. Here, we see that Q1 '22 consolidated results for Log-In were once again excellent for Log-In. We achieved record results both for coastal shipping and TVV. Our net operating revenue, NOR, totaled BRL 388.4 million, posting a significant 43.2% increase over Q1 '21. This growth stems from higher volumes transported by our shipping operation, with a highlight going to Mercosur trade, which showed a positive variation in volume up 88% in the period, mainly due to the arrival of new customers. Another effect that contributed to this revenue increase was the positive variation in unit NOR in all coastal shipping trades, Feeder, Mercosur, and Cabotage, due to better mix in price, and this price in part reflects the pass-through of bunker price variation to customers in the period. Additionally, there was a record of general cargo handling and consequently of net operating revenue at Vila Velha Terminal, TVV, mainly stemming from the new projects and clients captured. This clearly shows that the strategy of transforming TVV into a multi-purpose terminal still in progress is being effective. EBITDA totaled BRL 114.1 million in Q1, up 62% year-over-year. This strong rise was driven by the increase in revenues in the company's core businesses, as already highlighted, in addition to the 24% growth in AFRMM, the additional freight from the mercantile marine, due to the expansion of cabotage revenues. Revenue growth more than offset cost pressures mainly derived from bunker prices in coastal shipping, and diesel prices in door-to-door delivery services which include the road part of transport. Also, there was a gradual resumption of discretionary expenses, which support the company's business generation and long-term strategy. Lastly, highlight that consolidated EBITDA margin was 29.4%, an expansion of 5.6 percentage points in the period. I will show in the next slides that the growth of the company's operating result, coupled with a better financial result translated into a net income of BRL 60.3 million, the fourth consecutive quarter of positive results. Well, moving to the next slide, Slide 5, I'd like to highlight, as already mentioned, the record results of NOR and EBITDA in their respective historical series shown in the charts, an extension to the seasonality of NOR, which in the pre-pandemic period, as you can see, the quarters of 2019. The first quarter was always a quarter that was the starting point for an ascending revenue level along the year, which reinforces even more the excellent result we had in first quarter 2022. Now, speaking about the financial results on the next slide. The highlight is a positive exchange rate variation by virtue of appreciation of the Brazilian currency, BRL, in the quarter, coupled with the hedge accounting strategy adopted by the company since the first quarter of 2021, which enhances the predictability of our results. Q1 '22 recorded a significant improvement over the same period last year, reaching total expenses of BRL 12 million, down from BRL 68 million in Q1 '21. This has a relevant impact on our net income, which posted a positive result for the fourth consecutive quarter, totaling approximately BRL 60 million, and equivalent to an earnings per share in the last 12 months of BRL 1.69. And I'll turn the floor to Felipe Gurgel, our Commercial Officer.

Thank you, Pascoal. Good day, everyone. As highlighted by Pascoal, we had an excellent start to the year, achieving some more important records in our results of coastal shipping. In this first quarter, we had an increase in the volume of containers transported of 8%. If compared to the same period of the previous year, we transported about 99,000 TEUs. This volume was driven mainly by the Mercosur trade, which grew 88% over Q1 2021, and continues to be one of Log-In's main products and priorities even after the bilateral agreement between Brazil and Argentina being terminated. Volume performance is also supported by an excellent level of service both in terms of the performance of our vessels and in relation to our road operations, which recorded a punctuality indicator of almost a 94% with zero incidence of theft or accidents. We also reached the highest historical NOR for a first quarter, approximately BRL 300 million, up 29.8% over the same period in 2021. This NOR results from a better combination of cargo mix and also from the charter revenue of Log-In Discovery. Lastly, we highlight the coastal of shipping EBITDA, which reached BRL 105 million, almost double that of the same period last year, and a record EBITDA margin of 35%, 12 percentage points above Q1 '21, primarily explained by the mix of container revenues and the reduction in the volume of vehicles transported in Ro-Ro vessels, which has a lower margin. I now turn the floor to Ilson Hulle, who will present TVV's results.

Thank you, Gurgel. Now, moving to Slide 8. I'm going to highlight in detail some points mentioned by Arany at the beginning of the presentation as well as talk a bit more about TVV. First, I'd like to highlight a strong NOR that we had in the quarter, BRL 77 million, the best first quarter in the history of TVV in terms of net operating revenue. When we compare to the first quarter of last year, we're talking about a 29% increase. So the first quarter was very strong. We were able to record good revenues. EBITDA was not historical record, but it was the best for a first quarter in the history of TVV, BRL 32 million, up 12% year-over-year, also a very relevant result for the beginning of 2022. Besides the financial highlights, I would like to underscore the record mark for general cargo handled in the quarter with a total of 286,000 tons handled, a year-over-year comparison that posted a 150% growth. The container volumes ended -- r posted a small reduction of 8% when compared to the first quarter of 2021. I just want to recap, first quarter of last year was a quarter when there was a strong economic upturn worldwide with a lot of container handling. Despite this small reduction, 40,000 units handled is a significant volume when we look at the history of TVV. Let me speak a little about the growth in general cargo. I have been commenting on the transformation of TVV, in turning TVV into a multi-purpose terminal balancing product mix. And this handling volume record is the result of that. We have been having growing volumes of handling. In this first quarter of 2022, we were able to capture strong contracts that brought TVV a very significant handling. In the region of Espírito Santo, there is an important production part for steel products. It's a market that has been heated in recent months, and we were able to attract a good handling for that business. In our container business, the highlights were warehousing revenues at the terminal. In the yearly comparison, we could observe good warehousing results, although there was a reduction in volume. Containers also contributed for this positive EBITDA and NOR. Lastly on my end, I would like to update you on our modernization project for TVV. Phase 1 was completed with the arrival of MHC cranes, mobile harbor cranes, this has been mentioned before. Part of the general cargo handled in this quarter was carried out using the new equipment. We also captured cargo because of the new cranes, and that was very relevant for us. So investments made in TVV already bringing results. We're moving full steam with phase 2 of the project with a complete retrofit of our containers, a project that is expected to be completed by year-end and beginning of next year. I'm very eager to continue to develop new projects to grow the terminal from the financial and volume standpoint. This is what I had about the first quarter. I will be back later, and I turn the floor back to Pascoal now.

Thank you, Ilson. Now, talking about indebtedness, the main highlight is the level of leverage expressed by the net debt over EBITDA ratio, which remained at stable levels this quarter and within the range expected by the company at 2.1x. This variation quarter-on-quarter is due to the reduction basically in gross debt is a consequence of the regular amortization of the existing portfolio of debts, coupled with the reduction of the balances in U.S. dollars of part of the debts due to the exchange rate variation. Even though the company's cash has been marginally reduced by virtue of the acquisition of the equity stake in Tecmar Transportes and the execution of the CapEx to sustain the company, still the expansion of EBITDA in the last 12 months, which was very strong, lead to an improvement in the leverage ratio. And the graph below will simply show the extension of the company's amortization schedule, which has been extended since Q1 last year, and it shows also the debt service expected for the coming years. I now turn the floor to Mauricio Alvarenga, Tecmar Transportes Officer.

Thank you, Pascoal. All, hello. Good day, everyone. I'm Mauricio Alvarenga, and I'm now officer in charge of Tecmar Transportes. And before going into the presentation itself, I would like to talk a little about why Log-In acquired Tecmar. Well, for a few years now, our strategic plan has been to enter the parceled cargo market in Brazil in a structured fashion. This is a more complex business, operationally speaking, which requires the structure of pickup and delivery routing, a lot of warehouses for storage and cross-docking, cross-docking in the various regions where we operate. In this sense, about 2 years ago, Log-In began the search for a company that would fit in with our logistics network. And after evaluating some opportunities, we signed the acquisition of Tecmar recently, last March 18, 2022. Tecmar, and moving to Slide 11. Tecmar has operations in 14 Brazilian states. Tecmar has a strong presence with its distribution network, particularly in the south and northeast regions, reaching 100% of the cities in these regions. There are 50 branches in all, 23 own branches plus 27 franchised branches. It operates daily with its own fleet, plus third parties fleets, exceeding 2,700 vehicles, and Tecmar has a diversified base of more than 2,000 customers, most of them B2B, from all industry segments in Brazil. Please note that in 2020, the period used to evaluate the acquisition, Tecmar posted net revenues of BRL 467 million and an EBITDA just under BRL 10 million. Now, going to the next slide, Slide 12, please. In the upper part, we can see graphically how the operation works. The largest business is actually parceled cargo, that accounts for more than 70% of the business. And parceled cargos understood here as those in which customers ship volumes that are not sufficient to fill a transport vehicle. So it is necessary to have a collection network with great capillarity and smaller vehicles, example, frogs, urban cargo vehicles, and even vans. It's often necessary to have an area for consolidation of cargo from several customers at the origin, then we have long haul, mid- or long-distance transport between branches, and, again, at the destination, we need to have storage area, a structure for storage of goods. It's normally a cross-docking point, but we can also store goods. So we need to have a distribution center in each location, and then the cargo will be scheduled to be delivered to their final destination. At the bottom of the slide, we highlight how we should move forward with the integration and transition of this new business. Tecmar will be a business unit within the Log-In group. And our initial mission is to ensure a smooth transition from the operating point of view, from the commercial point of view, for both customers and employees, and to seek operating efficiencies in the existing model. So that would be phase 1. Moving to phase 2, that's when we are going to look for synergies, particularly with coastal shipping. There are a number of synergies already mapped, and they will be worked on at the right timing. And in the third phase, we'll look for synergies for the business and synergies with the coastal shipping business. We estimate around 12 to 18 months for the integration process. Well, that's all I have for now. Thank you very much, and I turn the floor now to Ilson, our Terminal's Officer.

Thank you, Alvarenga, and good luck in this new challenge. Well, I would also like to update you all on the events related to the privatization process of CODESA. We have been talking a little about this because of the impacts that this can have on TVV's business. CODESA was the first port authority in Brazil to go through the privatization. This happened on March the 30th, at B3, and Quadra Capital Fund was the winning bidder. This is a 35-year process. They're estimating BRL 850 million to be invested in the Port of Vitoria. We have been monitoring this from the beginning. We occupy the largest area in the Port of Vitoria. We are the main client of the Port of Vitoria. So we've been following this process with creating interest and we have been very optimistic about this. And now, we're getting to the end of the process. I bring you some points that we believe can favor TVV along the project. The main new possibilities to expand the area. We've listed with the contract with the concessionaire that'll allow for an expansion of areas for TVV, that can change a little the characteristics of TVV in the future. The review of port duties, so there are a cap of duties that can make the port more competitive and make logistics of importers and exporters more competitive. And last but not least, and perhaps one of the most important things, efficiency gains with dredging and road access to the Port of Vitoria. We have been suffering with that in recent years with the port under public management. Sometimes the trains are interrupted, the train tracks need maintenance, and we believe that with all of these improvements, our operation can be a lot more positive. Now the process is moving towards the conclusion of the approval stage. The winner hasn't been authorized yet. We're waiting for that stage, and we hope to be able to interact very productively with the new concessionaire and develop projects together with them, not just in the beginning of the privatization process, but along the 35 years when we are going to have a relationship with them. Our leasing contract extends until 2048. This amendment was signed in 2020, and it will be preserved in the process. The government worked on that. Counters in effect will be respected, and with that, we expect to continue to grow together with this fund, Quadra, and we expect to contribute to the Port of Vitoria as an investor and as a player interested in turning the port into a more competitive port. With that, I turn the floor to Marcio.

Thank you, Ilson, this is Marcio speaking. Thank you, Pascoal, Ilson, Gurgel, and Alvarenga. We now begin the Q&A session. And the whole team will be available to answer your questions, thank you.

Thank you. [Operator Instructions] We have a question by Rodrigo Faria.

Congratulations on the results. Can you please elaborate on what should be the seasonality of EBITDA margin of Tecmar in the coming quarters, and how this will influence EBITDA margin of Log-In?

Rodrigo, thank you for the question. I'll answer it myself. I believe that we are still in the beginning of the transition and integration of Tecmar with Log-In. Our expectation for the horizon that Alvarenga mentioned after 18 months, already enjoying some synergies, well, is to operate with the margins that road transport operate, around 8% to 15%, depending on different realities. I think it's way too early to have detailed numbers, but I believe that we have a positive outlook in terms of capturing synergies, but this is a new business for Log-In as we mentioned before. We are in a learning curve and we are in the process of integration. We found a Tecmar team that is very motivated and skilled and experienced with many, many years operating in that sector, and that is what makes us very motivated and excited with the results to come. But for now, we are at the stage of just capturing synergies, learning and as we go about this, we will improve the results of the company.

We have a question by Artur Sampaio.

Good day, folks, congratulations on another excellent result. Should we wait for retraction in general cargo volume at TVV in the coming quarters close to past years, or 1Q '22 is already, the results to be expected in the new phase of TVV?

Thank you, Artur. I'll ask Ilson to answer your question.

On the general cargo business, as I mentioned, there is something that we have been developing along the last 2 to 3 years and very actively. Through our commercial strategy, we seek new customers and business, and with the TVV available to carry out this kind of operation. The acquisition of MHCs is in line with that. In other words, we want to bring to TVV new types of cargo, new types of projects. And our expectation is to continue to grow handling. But I'd like to remind you that this is not regular cargo. We cannot ensure that the numbers will be maintained. I cannot really tell how this is going to play about in this first half of the year, but the commercial work we are doing is to continue this kind of operation.

Thank you, Ilson. We have here, a question by Bruno Amorim. Bruno, we're going to enable your mic so you can talk.

Could you give us an update on the strategy for Log-In Discovery? Could you confirm if it continues to be chartered in the international market? What is the revenue that you are posting with this operation? And where can we see this in terms of business line?

Bruno, for your question, I'll answer it myself. Yes, it continues to be traded internationally. Our plan for Log-In Discovery in the short-term is to continue to keep her in the international market. It has been covering docking operations of 2 new vessels that we still need to carry out this year. But as of October, we are considering the possibility of bringing her to Cabotage or to continue with her in the international market. This is still to be defined internally. Revenues of Log-In Discovery can be found in the package of Coastal Shipping.

And what is the approximate amount? And from what I understood what you're saying when it replaces other vessels, that revenue will stop pouring in. And I just want to understand the impact of Log-In Discovery on revenue and how her contribution will continue? I imagine that her contribution will be reduced since the vessel will come to replace docked vessels.

Perfect. Well, I cannot give you an accurate number regarding revenue because there were some peculiarities in the operation.

If you can give me a ballpark figure, it will be helpful.

We are chartering it at the levels of the international market. When she returns, she will return to generate revenue in coastal shipping. So we will just be changing hats for the revenue, one activity replacing the other. Now, of course, in Cabotage, there is a [ REMPA ], but it's not a spontaneous revenue, as we have in charter, but there is a greater potential in the midterm.

But given that we'll be replacing vessels that will be docked, that are now generating revenues, do you think it is a fair statement to say that initially while replacing the docked vessels, you will lose some revenue? You'll lose charter revenue, and she will be replacing vessels that are generating revenue now?

Yes.

And as of October, when the other vessels leave the docking operations, and if Log-In Discovery doesn't go back to international charter, then you will have a ramp-up in coastal shipping?

Yes. There will be a loss of revenue for 2 months. That is approximately how long it will take to dock those 2 vessels.

Thank you, Marcio. We have a question by Diego Alcantara.

Since the first quarter's historically, not very good, and this one was, can we expect even better quarters along 2022?

Thank you, Diego, for the question. I will split your question into -- I'll ask Gurgel to speak about the outlook for cabotage and coastal shipping, and then Ilson will speak about TVV.

Thank you, Marcio, and thank you, Diego, for the question. Regarding coastal shipping, we are very optimistic with this scenario that we've had so far. We had a first quarter that was very strong, and we can see good occupancy rates, particularly, in the Mercosur trade as mentioned. That has been very intense, with a very good response by Log-In, in terms of profitability. For the coming quarters, we expect to continue, of course, we need to pay attention to the docking operations as mentioned in the previous answer. But last year, we had some docking operations and we dealt with that quite easily. So looking forward, there's no point of attention on our end. Ilson?

Well, speaking about TVV, I just want to underscore some points. We continue with a very positive expectation. We are very optimistic about the growth of TVV operations. The second half of the year, historically, can capture more businesses in bulk, for example. So there is an upward trend in volumes of general cargo. We follow handling in Europe, the United States, and Asia to understand possible impact on the container business, but there is no sign so far, that this market where we operate, particularly, for civil construction in Southern U.S.A. I think will interfere negatively in our business. No signs of that, so the outlook continues to be positive, particularly with the investments made in the opening of TVV to new businesses.

Thank you, Ilson. Now we have a question by Jerome.

Good morning, everyone. What has been the strategy, given the increasing price of fuels, both for coastal shipping and for intermodal operations? Does this first quarter point to an intense passthrough to the market? Does this strategy continue to apply?

Thank you, Jerome. I'll ask Gurgel to answer.

Thank you for the question, Jerome. Yes, we do have a strategy of automatically passing through fuel prices, regarding bunker fuel for coastal shipping. As regards to cost of the intermodal operation with diesel, we negotiate that on a case-by-case basis, according to need, according to cost pressures. And then we negotiate with customers. There's no automatic trigger, as is the case for bunker fuel. But for diesel, case by case negotiations.

And Gurgel, if I may, I want to add something, because there are some relevant aspects here. First is that the docking operations we carry out for the vessels. After the docking operation, the vessels go out full speed. So we docked 3 vessels last year. And that's a heavy investment for the vessels to become more efficient, in terms of fuel consumption, but that makes a difference. We're going to have 2 more docking operations this year. And that will help mitigate the impact of fuel on our results. Secondly, in comparing with our main competitor, the Road Modal, we have a much greater capacity of coping with cost increases. And balance fuel price increases with our revenue than our competitors. So in the comparison, that favors cabotage, further increasing the price gap. We are more competitive than the Road Modal, as a rule of thumb, and we can improve even further that relationship.

Thank you, Pascoal. [Operator Instructions] We have a question by Daniela Andrade.

What is the process of integration with Tecmar like?

Thank you, Daniela. I want to turn the floor to Mauricio Alvarenga.

Hello, Daniela, thank you for the question. Well, regarding the transition process, it began recently, as I mentioned in the presentation. We've been at Tecmar for a little over 40 days, and we split the integration process into 3 conceptual phases effectually, just to help you understand. The first stage is about understanding the business. That's what we're doing now, we're learning a lot. Because it is a very different business than what Log-In was used to running because it deals with parceled cargo. When we are talking about full cargo, Log-In knows everything about that. So, it's good, because Log-In is learning a lot with this process. There's a lot of important information that sometimes, we will hear from the market, but now, we can see firsthand how the road transportation is run. We are in a phase of learning and structuring the business, and how we want to run the business, seeking margin gains for the business, because we got this business with very low margins but we believe that we can bring the business, as Pascoal mentioned, to market level. Then we have the second stage. This is going to be the phase to integrate Tecmar in our business, how we can use Log-In's logistics network, which has an extremely complete coverage of Brazil from north to south, and the Tecmar network that goes to the countryside of Brazil. I can risk saying that no other logistics company in Brazil will be able to have the network that Log-In plus Tecmar will have. Now, this will happen a little later, but we will seek to integrate both businesses, trying to get the best of each one for this kind of cargo. And then, later after that, in Phase 3, we'll go through the integration process for costs and joint procurement, you know, future strategies for the business. But what matters is that this is a complementary business. Never did we have this and coastal shipping. Given the complexity of this business, we could not couple it with coastal shipping, but now that we are in this business, we can do it. And as a logistic, company, we'll start having a logistics network that no other logistics operator will need to offer. This will be a huge cutting edge for us, a differential for us.

Thank you, Alvarenga. We have a question by Alexandre Kogake.

Given the mismatch in the pass through of bunker prices to customers, was there a positive or negative impact on margins in the quarter, and what was the relevance of this?

Thank you, Alexandre for the question. I can answer that myself. There's always a gap. There's always a mismatch because we have an agreement with our customers. It's a rule that after a bunker price increase, we pass through this increase to them. So for a month, at least, we have a situation which is worse for Log-In. And this role with customers work up and down. So when bunker prices start to decrease, we'll also have that kind of pass through, but following the same sequence with a 1-month gap. So there is a gap, but it's not relevant. You have followed that bunker is at very high prices and our results remain very excellent.

Thank you, Marcio. We have a question by Fernando Vendramini.

Congratulations on the result. Building on the fuels, you mentioned the GHG calculator. Is there any initiative to reduce and offset these greenhouse gas emissions?"

Thank you, Fernando. Log-In has many initiatives in that regard. The GHG calculator is showing our customers how good it is to use Cabotage with a cleaner and safer process. But in Log-In, we have a number of initiatives, many of them mentioned by Pascoal. During storage, we do a lot of investments for fuel management and fuel savings. We monitor the vessels intensely with AI, artificial intelligence, that learns with the trips and schedules, the best speed of the vessel to reduce fuel consumption. So we have a lot in that area. I think that Pascoal mentioned this. And because of the results of these initiatives already deployed in 3 vessels, we were able to mitigate the pressure of increasing fuel prices on our operation.

And just to add, Marcio, last year, we had our first sustainability report. We have an ESG agenda at Log-In. This is not a project. This is a perennial strategy for us in regarding the environment. For our business, it is very relevant as a competitive differential in addition to making a difference in the Brazilian transportation matrix. So that's our purpose. In terms of offsetting carbon emissions, that's something we are still looking into. It's the first time we measured our carbon footprint, last year. This year, we are measuring it again, and we'll release a new sustainability report with these indicators. All of them following GRI and international standards. This is a constant discussion in our industry worldwide, and it's going to be an active topic at Log-In as well in serving the domestic market. And we are looking at that with great attention.

Thank you, Pascoal. We have a question by Nicholas.

Hello, could you elaborate on hedge accounting?

Thank you, Nicholas. Pascoal, over to you.

Nicholas, thank you for the question. You know, how does hedge accounting work? That is important to clarify. To start, that it's called hedge accounting because it's totally accounting. It doesn't resort to derivatives. And how does it work? We at Log-In, we have revenues in dollars, particularly Mercosur and feeder trade, in coastal shipping. And we have some costs that are also dollarized. Bunker, for example, our container leasing, some port expenses in Mercosur ports where we pay port duties. And we are a net positive. In other words, we have surplus of dollars in the end. These dollars, more than offset, more than paying for the service of the debt, which is also dollarized. So we have hedge accounting so that we can have a natural hedge of the operation. So the operation will not have any dollar exposure. But also, because of accounting rules, since the balance of dollar debts is a balance that we will amortize over 12 years. The variation of P-tax every quarter brings some change to that balance. And we need to recognize that in the result of any given quarter. But again, this is an accounting effect. It's not a cash effect. To protect the company from a strong foreign exchange oscillation that we have in Brazil, we estimate revenues and costs 5 years in the future, and we compare that with the service of the debt. Instead this being recycled in the result, it is recycled in the shareholders' equity. And it will be eventually a result in the future. But with the hedge accounting strategy, we're able to defend and protect a good part of the accounting foreign exchange variation in the short term.

Thank you, Pascoal. We have a question by Viktor Matos.

The new rules brought by the BRFDC, will they change the planning of the company for the chartering and acquisition of new vessels?

Thank you Viktor for the question. None in the very short term. We have plenty of the vessels with the new orders placed with the ship. We are the owners. But we have a lot of flexibility. BRFDC has always been interpreted as being positive to Log-In. So in the short-term our fleet design has been established. We will make the arrival of Log-In Discovery for cabotage and then we will bring in the 2 new vessels.

Thank you, Marcio. As there are no more questions, I would like to thank you all for participating. And I turn the floor to Marcio Arany for his final statements.

Well, some final messages, folks. I think that we ended the first quarter surpassing our initial estimate, which was excellent. Our business remains vigorous and fully aligned with our growth strategy. I believe we managed to conclude the Tecmar acquisition, which brings the Log-In competitive differentials in the cabotage market, and it completes our portfolio of services to customers. The geographic service for parceled cargo, as Alvarenga mentioned, performed by Tecmar is incredible and will soon be available for cabotage customers. The privatization of CODESA also motivates us, as Ilson mentioned, to design new expansion projects and supplementary services for our terminal customers. With that, I thank you all for your attention during this conference call. Thank you very much, and have a great day.

Thank you, Marcio. The conference call of Log-In Logística Intermodal reviewing first quarter '22 results has ended. Please, disconnect, and have an excellent day.