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

Good day, everyone. Welcome to Log-In Logistica Intermodal S.A. conference call to discuss second quarter 2025 results. I am Sandra Calcado, Log-In's Investor Relations Strategy and ESG Manager, and I will be your hostess during this event. The presentation and comments about the results will be made by Log-In's CEO, Marcio Arany; Pascoal Gomes, Finance and Investor Relations Vice President; Marcus Voloch, Coastal Shipping Vice President; Gustavo Paixao, Terminals Officer; and Mauricio Alvarenga, Road Cargo Transportation Officer. They will comment on the company's performance and main highlights of the quarter, and 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 of the company's IR website, and we will be showing the presentation in Portuguese here on Zoom. In addition to the rooms available in Portuguese and English, we will 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, we would like to clarify 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 to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they 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 with his initial remarks.

Thank you, Sandra. Good day, everyone. This is Marcio Arany speaking, the company's CEO. I would like to thank you all for attending Log-In's Second Quarter 2025 Earnings Conference Call. We will start our presentation on Slide 3, by reviewing the main Q2 '25 achievements of our strategic plan in 4 blocks: Coastal Shipping and Integrated Solutions; TVV; Road Cargo Transportation; and ESG Capital Structure. This last one, which permeates all of the company's business units. In our Coastal Shipping business, we highlight historical record of Cabotage volume with 57,100 TEUs, a historical record NOR for Coastal Shipping, BRL 487.6 million; an all-time record Feeder NOR for second quarter, BRL 211.9 million; highest adjusted EBITDA for Coastal Shipping, BRL 131 million; and a historical record of intermodal operations with 35,100 operations. At TVV, of note are highest volume of bulk cargo handling, 129,900 tons; and a record high for container handling in a single month, 25,400 containers handled in June. In Road Cargo Transportation, we highlight the 7-percentage point increase in level of service compared to the second quarter 2024, and the 9.2% increase in the customer base. The fourth and final point refers to our ESG Agenda and Capital Structures I mentioned. In this block, we highlight, recertification by GPTW as a great place to work company, obtaining the Psychological Safety seal from GPTW; the company joining the Sustainability Pact of the Ministry of Ports and Airports; 3 years of our CAB program; assurance of the 2024 Greenhouse Gas Report; and Log-In's 5th Debenture Issuance. Now our team will present the quarter's results starting with Pascoal Gomes, Finance and Investor Relations Vice President.

Thank you, Marcio. Good morning, everyone. Again, thank you for joining Log-In Logistica Intermodal's Second Quarter '25 Earnings Conference Call. This is another quarter with very consistent results for Log-In, many record marks. As Marcio mentioned, we ended Q2 with net operating revenue, NOR of almost BRL $740 million, up 8% year-on-year. In the half year, we followed what happened in the first quarter in terms of revenue, 9.2% increase, a little bit more than BRL 1.4 billion in the first 6 months of the year. Adjusted EBITDA for the quarter posted even stronger growth than what we saw in the first quarter, a positive variation of 21.2%, reaching BRL 181 million. Naturally, this was impacted by a cost increase. Costs -- consolidated costs overall grew 6.2%, totaling almost BRL 560 million. The highest share of our business comes from Coastal Shipping. So Coastal Shipping is the one that posted 15.2% cost increase, reflecting variable costs mainly related to container handling and road transportation, and even expenses with the container park and the growth of fixed costs, mainly running costs. And in running costs, the main cost is the cost of seafarers and vessel services, not to mention tariff increases at some port terminals. Our EBITDA margin posted growth 2.7 percentage points, up compared to the same period of 2024, ending the quarter with an EBITDA margin of 24.5%. I now turn the floor to our Coastal Shipping VP, Marcus Voloch.

Thank you, Pascoal. This is Marcus Voloch speaking, Coastal Shipping VP. I'll start Slide 5 by highlighting our 16.6% growth in net operating revenue in the second quarter year-on-year, and 18.5% in the first half, reaching the historic mark of almost BRL 950 million. It is important to note the drop in total volume handled, which is exclusively due to the end of the Navegantes Feeder Service, since operating conditions at that port are now practically back to normal. As a result, the vessel Log-In Evolution, which was dedicated to this service was transferred to our sea service, completing our fleet of 4 vessels on the Manaus route. Despite the decrease in Feeder volume, revenue in this market was a record, especially for the second quarter since we exchanged a short stretch between Navegantes and Santos, where freight per container was lower for longer stretches with higher revenues, bringing us superior results. In the domestic market, we grew marginally, but achieved our record volume in the second quarter with 57,000 TEUs. Stronger growth was recorded in Mercosur with an 8.1% increase year-on-year, in line with the recovery of the economy in Argentina. It is worth mentioning that Log-In ranks first in market share in this trade. We achieved our best operating results for second quarter of this year with EBITDA of BRL 131 million, and EBITDA margin of 26.9%. In the first half of the year, we also closed with a record EBITDA of almost BRL 240 million and EBITDA margin of 25.2%. In Q2 '25, according to data from the Brazilian Association of Cabotage Shipowners, ABAC, the market grew 4.4%, while Log-In grew just under 1%. Our market share in this quarter was 26.5%, about 3 percentage points above Q1 '25. In the second quarter, we maintained the level of reliability observed in Q1 with ship arrivals and departures running on time more than 90% of the time. This reliability effectively translated into more volume, as I explained in last quarter's earnings call. Another important point was our record volume of intermodal operations, which are delaying routes where Log-In is responsible for collecting and delivering our customers' cargo. In addition to the record volume in June, we had the best punctuality index in the last 18 months despite challenges in certain markets where part occupancy rates remain high and caused delays in land operations. As I mentioned last quarter as well, we ended the SSN service, the Navegantes Shuttle Service, after 12 months of successful operation. With that, we migrated our 9th vessel to the Manaus service, completing the standalone operation. That is a completely independent operation operating all 4 ships. It is worth noting that 2 years ago, Log-In operated only 1 vessel on this route. We now operate 4, demonstrating our confidence in the continued growth of this market, both for domestic and Feeder cargo. Although we are seeing a certain slowdown in the domestic economy, we continue to move forward, converting new volumes to Cabotage through the commercial team that has been reorganized over the last few months and has delivered consistent results every month. We have also recently strengthened our customer service teams in addition to introducing new tools that will assist in the digitization of processes and improve customer perception of the service provided. This is what I had, and I'll hand over to Gustavo Paixao, who will present the Terminals results.

Thank you, Voloch, and good day to all. This is Gustavo Paixao speaking, Terminals Office. And now I'll be sharing with you TVV's results for the second quarter 2025. Well, starting with volume of containers handled, our main cargo. In the second quarter, we handled 60,600 boxes at TVV. This figure, although significant represents a slight drop of around 3% over the same period last year when we handled 62,400 boxes. But in June, we had a record mark of containers handled showing recovery. The main cause of this reduction is a decline in exports, especially of coffee, which has performed below the levels of the same period last year when record figures were achieved. This is still the result of the off-season and also of less competitive prices in the international market, which affected the entire first half of 2025. However, it is worth noting that quarter-on-quarter, there has already been a 20% recovery in container handling, which shows a small rebound in exports, but above all, consistency in our imports, which remain a highlight also in the second quarter of 2025, mainly due to the handling of vehicles in flat rack containers. Turning now to general cargo handled. We posted growth of around 11% with approximately 194,000 tons handled in Q2 compared to 174,000 tons handled in the same period last year. Here, we see evidence of the recovery in the handling of this type of cargo, which was impacted by the maintenance work carried out at the terminal in 2024. Highlights in the second quarter were bulk, up 37.5% and vehicles increasing 39.6%, the result of strong commercial efforts aimed at the market and customers to drive recovery. This whole scenario resulted in a net operating revenue of BRL 99.1 million, down 4% compared to the same result in the second quarter of last year, which was BRL 102.7 million. This shows the positive impact of the diversity of cargo handled at the terminal, which helped to partially offset the drop in the volume of containers, the cargo with the highest contribution margin to the business. In addition to the lower volume, this also impacted the result due to a lower mix of full containers than budgeted for the second quarter of 2025. Our EBITDA totaled BRL 41.1 million, down 8.1% in the year-over-year comparison. This is a direct reflection of the following factors: lower container throughput at the terminal, containers have a higher contribution margin in our business; and the handling of general cargo with lower added value despite the higher volume compared to the same period last year; as well as a higher cost, albeit marginal, in our personnel costs. Well, I'll take this opportunity to update you on our TVV expansion plan. As a reminder, this expansion was signed in February of this year with the port authority, and it gives us the right to explore an additional area of approximately 66,000 square meters for the next 5 years, where an investment of BRL 35 million will be made. Well then, the works is still underway with good progress, not only from the point of view of construction, but also in terms of authorizations and licenses. The only point of attention was kind of a strike by the Federal Revenue Service that we faced during this period, an issue that has already been resolved, but which caused bureaucratic delays in obtaining customs clearance for the area. However, we have been in constant communication with the Federal Revenue Service of Brazil and other stakeholders, and we are confident that the area will be operational between the end of Q3 and beginning of Q4 of this year, in line with the original schedule. Very well, these are the results and material facts by the Terminals management for the second quarter. On the one hand, Q2 showed a reduction in volumes, specifically for containers and lower financial results when compared to the same quarter last year. On the other hand, Q2 also reflects a scenario of recovery in the quarter-over-quarter comparison. This concludes the presentation of the results of the Terminals division, and I hand over to Mauricio Alvarenga, Officer responsible for TECMAR Transportes, who will continue the presentation. Thank you, all.

Thank you, Gustavo. Good day, everyone. This is Mauricio Alvarenga speaking. I'm responsible for the Road Cargo Transportation business, Tecmar. In the second quarter of 2025, we saw positive developments on several fronts of Tecmar's turnaround and recovery plan. Starting with adjusted EBITDA, we recorded BRL 2.3 million, which is lower than the previous year. But compared to the last 2 quarters, it showed good progress. Businesses related to container, transport and storage are progressing positively. We had the best quarter for Tecmar Norte, formerly known as Oliva Pinto, since we took over the operation in the beginning of 2023. We welcomed a new storage customer. You see storage and warehousing is another business front in which we have been investing a lot because it is a business that helps link road transportation with maritime transportation. So it is an interesting business in terms of the complete logistics chain for the customers. And our challenge continues to be to recover the less than truckload operation. In the next slide, we illustrate an important action we are focusing on for the less than truckload operation, what we call LTL business. We're investing energy and technology and adopting better controls to improve regularity and raise the level of service for the end customer. It is not an easy task in this segment because we have a large network, especially in the Northeast, where we have distribution in 100% of the Northeastern municipalities and also in the South and some municipalities in the North region. So we have a big network. It entails a lot of energy and effort. We can see in the chart on the left that we have been suffering a drop in volume. This is -- we started changing the profile of cargo last year. But with the improved level of service, our OTD, on-time delivery was the best in the last 2 years. And therefore, our volume started to improve now in the second quarter of 2025. We stopped a period of decline and started improving volume. However, our main focus continues to be to improve the profile of the cargo we transport, seeking cargo with higher added value, which also has equivalent freight rates. We also had a good cost management in the first half of 2025. We implemented a matrix management for the main costs and expenses, which is giving us greater accuracy. And we continue to seek greater performance and productivity in our branches and fleet optimization. So we have this work front in which the whole team is focused. We also continue to seek greater synergy with Coastal Shipping, bringing Tecmar's cargo to Log-In's vessels. Internally, we call this Roado-Cabotage or Road Sea Transport. It means joining Tecmar's road network with Log-In's network to offer a different service to our customers. The service is the one that is growing the most internally. So we are getting a good feedback from our customers because it focuses a lot on sustainability and with an affordable cost. This quarter, we handled 1,050 TEUs of less than truckload cargo haul on Log-In's vessels contributing to the group's results. And there is another front in which we are evolving in container transport operations; so containers from the port terminal to the customer's plant or from the customer's plant to the port terminal. This quarter, we exceeded 12,000 container transport operations in Q2 '25, both for Log-In and for import and export customers at the main Brazilian ports. Well, this is what I had. Thank you very much for your attention. And I will hand over back to Pascoal, who will continue the presentation.

Thank you, Alvarenga. Moving on and talking about our indebtedness. Net debt ended the quarter at BRL 1.2 billion, a little higher than the previous quarter, but very much in line with the same quarter last year with an important profile of leverage, improvement in net debt over EBITDA ratio stable at 1.8x. And this reflects a robust financial structure. I would also like to highlight, I think that Marcio kind of raised this in the beginning of the presentation. It was the fifth issuance of debentures in the amount of BRL 280 million with a 7-year maturity at a very interesting cost in comparison with the market, reinforcing what we normally say we want to do, our strategy of lengthening our liabilities and strengthening our liquidity. We can see in the bottom chart how this new debt represented here by this July forecast, the dotted line, how this is relieving a lot of the cash flow of the current year and for the next 3 years until 2028. Well, these are the highlights. I now turn the floor to our CEO, Marcio Arany.

Thank you, Pascoal, Voloch, Gustavo and Alvarenga. We now move on to the question-and-answer session. We are here for you.

[Operator Instructions] We have a question from Pedro [ Cadre ].

What changes in Log-In's relationship with the public tender offer of MSC with Wilson Sons?

Thank you, Pedro. I'll answer that. I think that for now, nothing changes. They are a wonderful partner of ours, Wilson Sons. They're an excellent partner. They have towboats, for example. And I think that the process will take some time to be completed. We have an excellent customer supply relationship, and this will continue. Of course, eventually, we'll be able to capture synergies as we had with our controlling shareholder. And this is always beneficial for both companies. So we'll always follow this direction. Whatever is win-win for both parties involved, we'll try to execute.

We have a question from an anonymous attendee.

Firstly, congratulations on the results presented. Given the current political scenario and international geopolitical scenario, especially with trade tensions and conflicts in some regions, has Log-In felt any direct or indirect impact on its logistics operations or maritime route? Do you have any preventive or strategic measures underway to mitigate possible risks?

Thank you for the question. I don't know who asked it, but Pascoal, can you answer it, please?

Well, I guess the most direct impact on our business, and Marcus Voloch and Gustavo Paixao can help me answer that, is what is related to the tariffs imposed on Brazilian exports. As you know, we have businesses well connected with foreign trade, both for imports and exports. TVV, for example, has some of its products destined for North America. Obviously, the producers and growers are reevaluating their strategies. They are trying to understand the impact on the final price of the products. The United States are an important market for granite, for example. But when we look at the impact on the export's portfolio of TVV, although granite is one of the flagships, if we can call it, in the flow of exports of the terminal -- what was actually impacted in the composition of revenues of the terminal. Well, the impact was not that relevant. TVV is available to the sector to discuss measures that can one way or another, improve the competitiveness of Brazilian products abroad. The whole sector is joining efforts to discuss this. And the trend in terms of actions to mitigate the risk is that the whole sector will have a constructive agenda and a change in their commercial strategy to relieve the impact on the operations. Gustavo, if you want to add anything to this? As regards Coastal Shipping, there are 2 sides to the coin. Undoubtedly, the services that we operate here do not have a connection with the exports flow, it's not a direct dependency to the United States. Of course, in the international market, when we speak about the long haul, which is the main operation of our controlling shareholder of MSC, there will be indeed a dynamic of adjustment to these tariffs imposed. And it not only to Brazil. These tariffs have been imposed to other markets as well. And of course, this will need some settlement in terms of trade policies and maritime routes globally when we speak about long-haul shipping. In Brazil, potentially, this can be even beneficial. I think that Marcus can give us his opinion about the Coastal Shipping business. So Marcus, Gustavo, if you want to add anything?

Thank you, Pascoal. I'd like to add something. Indeed, there is a concern about the impact. But as you said it yourself, Pascoal, these impacts at the end of the day are not very relevant. And I think it's worth speaking about the strategy adopted by the Terminal for some years now, which is diversification of cargo and a multipurpose terminal that helps offset any impact we might feel given these tariffs imposed on our exports. We are following the process up close and we are working commercially to fill in the gaps in our business, gaps that may arise.

Well, on the side of Coastal Shipping, it's kind of curious, actually, except a slight impact on Feeder of cargo leaving Vitoria, going to the United States, the impact is practically negligible. But there is a contrary effect, which is positive for us. It's super interesting because on the second, factors can be positive. Brazil ends up exporting more cargo to Argentina, which will reexport Brazilian cargo to the United States. So the Mercosur market particularly imports of Argentina have reacted really well in the last few months and weeks. It's too soon to say whether the cargo will leave Brazil to be re-exported. But the fact is that volume from Brazil to Argentina has boomed. So there might even be a positive impact. Although this is deleterious, these geopolitical tensions can be harmful overall, but it can have a very positive effect on our Mercosur trade.

There's another question by an anonymous attendee.

This growth in Cabotage volume, does it refer to conversion of cargo from other shipowners or to conversion of cargo from road to Cabotage?

Well, thank you for the question. I will ask Voloch to answer this question.

Thank you. Well, it's a little bit of both. There is a lot of conversion. Our team continues to work strongly, bringing more cargo to Cabotage because cargo that migrates to Cabotage is the cargo with the highest margins. A part of this is coming from Tecmar. Tecmar has been doing brilliant work to convert with what we call Roado-Cabotage, Road Sea Cabotage. So we are increasing the TEUs carried by Tecmar, an important volume. But obviously, we have increased capacity, particularly in the Manaus route, we increased by more than fourfold our capacity in the last 2 years. And part of what is occupying the space is cargo that existed already in the market. We are positioning ourselves in a differentiated way. It is common for large customers to have a lot of annual bids. Many of them happened in May and April and Log-In was able to get a good share from these customers because after all this is the base cargo. They will maintain our fixed costs paid. So basically, we fill the ship with the base cargo and make more money with the new cargo. So this is continuous work by everyone, but it's a mix of both things, a mix that is being very successful. Thank you for the question. It was an interesting one.

Well, as there are no more questions, I would like to thank you all for participating, and I turn the floor back to our CEO, Marcio Arany, for his final statements.

Well, everyone, we ended a very challenging quarter, as you could observe in our presentation. I think that there is a very good side, the investment in Manaus, the investments in the launch of the sea service. Cabotage is growing with the additional capacity that Voloch mentioned, and it is growing in a sustainable way, bringing new cargo to the market. It's not just the base cargo that we had in the market. Log-In is contributing to increase the total volume of cargo transported in Cabotage. Our team remains motivated. You saw the indicators, GPTW, and our team continues to promote vigorous growth in our operations. I think that we are with a very high level of energy of the company, we are growing. We are doing new and different things. I think that we're going to have Q3 that will be challenging, but we have a lot of lessons learned. Lastly, thank you for your attention during this conference call. Thank you very much.

Thank you. The conference call of Log-In Logistica Intermodal S.A. to review Q2 2025 earnings has ended. You may disconnect and have an excellent day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]