Santos Brasil Participações S.A. (STBP3) Earnings Call Transcript & Summary

[Interpreted] Good morning, everyone, and thank you for holding. Welcome to Santos Brasil Conference Call for the Second Quarter 2025. With us today, we have Antônio Carlos Sepúlveda, Chief Executive Officer; Daniel Pedreira Dorea, Chief Financial and Investor Relations Officer; and Ricardo dos Santos Buteri, Chief Commercial Officer. [Operator Instructions] I would like to remind you that the earnings release and presentation are available on the company's Investor Relations website, where the replay of this event will be available. In addition to the rooms in Portuguese and English, simultaneous translation into Brazilian language is also available.  Before proceeding, I emphasize that the forward-looking statements based on the operational and financial goals are based on the beliefs and assumptions of Santos Brasil management and on information currently available. These forward-looking statements involve risks and uncertainties as they relate to future events and may or may not occur. Investors and analysts should understand that overall conditions, industry conditions, and other operating factors could also cause results to differ materially from those expressed in such forward-looking statements.  I would now like to turn the floor over to Mr. Daniel Pedreira Dorea, who will begin the presentation. You may proceed, sir.

[Interpreted] Good morning to all of you. Thank you for your attendance, and I hope that you are well. Next to me,  Antônio Carlos Sepúlveda, the company's CEO; and Ricardo Buteri, our Commercial Director.  The second quarter of 2025 showed a strong pace of growth in the volumes operated by the company, a trajectory that we had already observed in the first month of 2025. In June, for example, Tecon Santos moved more than 129,000 containers, a historical record that has just been improved by the handling in July, reaching 135,000 containers. This is the highest monthly volume ever handled in a container terminal in South America. These are sites that show the strategic assertiveness of accelerating investments in the expansion of the terminal capacity.  At the end of the quarter, our market share reached 43%. The volume of Tecon Santos grew a little more above 5% in the second quarter '25, vis-a-vis the same period in 2024. All of our flows grew with a highlight for Cabotage with an increase of 27% year-on-year, thanks to the beginning of operation of 2 new services operated by Mercosurline. If we look at the long-haul flow, the apparent stability in the second quarter is explained by the reordering of some services in the month of April, where we had a reduction of stopovers offset at the beginning of May with the coming into operation of the C3 service led by CMA CGM that services the Asia and the East Coast of South America.  An important information is the increase of 22% in imports at Tecon Santos because of consumption goods, capital goods, spare parts, and chemicals. The exports grew 17% in the second quarter '25. At Tecon Vila do Conde, we observed a recovery of volumes with a growth of 3.5% year-on-year, mainly driven by the month of June, with an increase of services that stop over at the terminal. On the other hand, Tecon Imbituba had a drop of 20% in container movements in the second quarter '25 when compared with the same period 2024. The terminal suffered with successes and missions of scale of service for long term due to cabotage continuing to be good with the shipment of agricultural commodities produced in the South.  We had 2 highlights, the vehicle terminal and the liquid terminal. We had a growth of 33% vis-a-vis the second quarter of '24, with 63,000 vehicles handled in the quarter. The main driver was the exporting flow of light vehicles to the Argentine market, along with an improvement in the export of heavy vehicles. For the liquid bulk terminals, the handling was 244 cubic thousand meters of fuel in the second quarter '25, a growth of 34% compared to 2024.  During the quarter, we began the operation of the new capacity of terminals TGL 1 and 3, contributing to offer 110,000 cubic meters of tankage to our clients. With this expanded capacity, we increased not only the volume of the contracts in the Fed, but we also captured new clients. We are in the final stages of the construction work at TGL 02 that will increase total capacity offered to 190,000 cubic meters until the end of 2025.  Let's go on to the economic and financial results. Net revenue totaled BRL 881 million in the second quarter '25, an increase of 25% year-on-year, with the growth in all business lines, a result of 2 main factors. First of all, a greater volume handled in the container port terminals in the vehicle terminals, and liquid bulk terminals, as mentioned. Secondly, a higher average ticket in all of the business lines in the company, including the key operations and the bondage at Tecon Santos. Part of this reflects the contractual negotiation signed with the shipowners, and the bonding operations show a capture of cargo with higher added value, with a higher dwell time.  At Santos Brasil Logistica, we had a drop in the volume during the second quarter of 2025, but net revenue grew year-on-year, precisely because we attracted clients with higher additional value with fraction cargo in terms of EBITDA. In Santos Brasil, we delivered BRL 457 million in the second quarter '25, a sound growth of 35% year-on-year with a margin 52% higher, almost 4 percentage points vis-a-vis the same quarter in '24. This growth of results and increased operational margin show the benefits of leveraging our operations with our asset portfolio, combined with higher tickets and a very efficient management of costs and expenses.  Net revenue grew BRL 194 million and a net margin of 22%, an increase of 13%. Regarding the CapEx in the second quarter of '25, we invested BRL 121 million. The main products for capacity expansion at Tecon Santos, where we allocated BRL 78 million in the quarter, and the liquid bulk terminals, where we invested BRL 27 million in the second quarter of '25. I would like to underscore that the company ended the second quarter of '25 with a net debt of BRL 2.1 billion, representing a net debt EBITDA pro forma leverage of 1.3x, a level that we deem to be very well balanced and under control.  Now to go on to my final comments, some brief updates on the public tender offer that will be led by the group CMA CGM. In May, CMA CGM made a public offer for the acquisition of the totality of common shares for Santos Brasil. Now this means 3 modalities of this public offer, the contractual obligation taken on by CMA when purchasing the shares of the company, and the subsequent acquisition of the control of the company; two, a change of the registration of the company at CGM from category A to category B. And finally, the exit of the company from the Novo Mercado special listing.  I would like to remind everybody that this public tender offer continues to be under analysis by the CGM. Once approved, CMA CGM should continue on with the regular work to execute it.  We are now at your entire disposal for questions and answers. Thank you very much.

[Interpreted] [Operator Instructions] The first question comes from Andre Besiguelo from Itaú Unibanco.

[Interpreted] Could you comment on the potential impact of the increase of tariffs enforced by the United States? Secondly, if you could speak about your CapEx volume going forward?

[Interpreted] Andre, this is Ricardo. Thank you for the question. I will answer the first part regarding to the tariffs that have been enforced. Andre, after a change of the mix of services that we have had since April, the impact of this tariff in the products exported to the United States will not represent more than 5% of our demand. Now in this change of services, we're more connected to the trading levels of the Far East Asia. And as part of our volumes, the services that we have maintained with the company since April 1 means that this tariff will not be important.  If we compare this with all of the demand that we received here, it represents only 5% of what was consolidated in terms of the commodities and items defined by the U.S.A.

[Interpreted] Regarding the CapEx, and this is Daniel speaking. We do not have a figure that we can disclose to the market. Regarding future years, what I can say qualitatively and theoretically is that we continue on with the strategy of investing in the company assets, especially Tecon Santos, where we would like to increase the operational capacity of the terminal. And at the end of the year and beginning of 2026, we will reach 3 million TEUs. And we will, of course, continue to enhance the quality of our equipment. This translates into a higher efficiency for the terminal.

[Interpreted] [Operator Instructions] Our next question comes from Mr. Lucas Martin from Artal Investments.

[Interpreted] I would like to have some more color on this public tender offer, which is your expectation in terms of the schedule of this process? Are there any dates that you can share with us?

[Interpreted] This is Daniel once again. The process, per se, is under analysis at the CGM. We truly cannot inform you on anything until the CGM has concluded the analysis process, authorizing the launch of this public tender. So there is no date that we could confirm at this point. Now theoretically, once this is approved or authorized by the CGM, the regulation states that it can be executed between 30 and 45 days after the public tender offer. But once again, this process is being led by CMA CGM, not by Santos Brasil, and we do have to await the coming stage. Of course, we will maintain the market duly informed about this process.

[Interpreted] Our next question comes from Mr. [indiscernible] Consulting.

[Interpreted] Which is your analysis, and which is the analysis expected with the implementation of Tecon Santos 10?

[Interpreted] This is Antonio Carlos. Well, the -- it went from Antaq to CTU. It will undergo an analysis at CTU. And we don't know when the TCU will request any additional information. Well, for the time being, we know this is a project that will take 5 to 6 years until the end of the conditioning. So it is extremely difficult to determine the impact of Tecon 10 on Santos Brasil. Once again, we have to have patience, understand the process of this public notice, to see what will come out of the accounts tribunal to know when all of this will come into play.

[Interpreted] [Operator Instructions] As we have no further questions, I will return the floor to Mr. Daniel Dorea for the closing remarks.

[Interpreted] Once again, we would like to thank all of you for your attendance. Have a good day and productive work. The Santos Brasil conference call ends here. We would like to thank all of you for your attendance. Have a very good day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]