Hidrovias do Brasil SA

BOVESPA:HBSA3

Earnings Call Transcript

[Operator]

[Interpreted] Good morning, everyone. Welcome to the earnings call from Hidrovias do Brasil to discuss the results of the first quarter 2024. Today, we have Mr. Fabio Schettino, CEO; and Ana Carolina Bastos, IR Superintendent.

Please be advised that this event is being recorded and will be available at the company's IR website. After the company's management remarks, there will be a Q&A session, when further instructions will be provided. Just as a reminder, simultaneous translation is available at this platform. [Operator Instructions]

Before moving on, let me clarify that any forward-looking statements are based on beliefs and assumptions on the part of the company's management and also on information currently available to the company. Forward-looking statements might involve risks, uncertainties as they refer to future events, which, therefore, depend on circumstances that may or may not occur. Investors and analysts should have in mind that events regarding the macroeconomic environment, the industry and other operating factors might lead the results to differ considerably from those expressed in these forward-looking statements.

Having said that, I would like to turn the floor now over to Mr. Schettino to start the presentation.

[Fabio Schettino, executive]

[Interpreted] Good morning, everyone. Thank you for joining us in our earnings call for the first quarter of 2024. Just a quick reminder, we are in a period of transition of our CFO position with the departure of Ricardo Pereira and the arrival of Andre Hachem at the beginning of June, as communicated to the market. I will therefore be counting on the support of Ana Bastos from the IR department to give you the figures for the first quarter this year.

Well, let's begin with a few topics that we'll cover in more detail throughout the presentation. I'll begin with Slide #4, showing a summary of this quarter's operational and financial highlights. On the operational side, we can see that the first 3 months of 2024 were challenging for Hidrovias, especially because of the water situation in the South, which, as we had already mentioned in the earnings call at the end of 2023, has been operating with restrictions due to the draft that is below historical leverages at different navigation points, some of which were more than 90% below as compared to the same period last year. This is an atypical situation, and it's different from the historical leverages observed in the long-term historical series.

As a result, we had to adjust our operational plan and adopt what we internally call the low water plan throughout the quarter, which had an impact on the volumes and results obtained during this period in the south corridor. The lower the draft, the more operations have to be adapted, especially regarding costs. Cycles are larger, costs are higher, in terms of displacement and crude. That has an impact on our results.

On the other hand, in the operations where we had normal conditions, we see quite expressive results in line with the full potential of these businesses. In the North corridor, again, we hit all-time highs with volumes growing, even considering the strong base and figures from the first quarter last year.

Of course, with the increase of the real tariff that we have already mentioned in previous calls, due to the scenario of restricted logistics capacity in our country. Our terminal in Santos continues to ramp up very well according to plan. In March this year, we started shipping fertilizers by rail. And in June, we will start handling salt in one of the warehouses of our leased area in Santos.

Coastal shipping remains consistent as we manage our agreement. Results are in line with the company's expectations. So from a financial standpoint, it's important to see that the first quarter made us use less cash than last year even with an EBITDA below the first quarter of 2023 due to the water scenario that is atypical in the South that I have already mentioned. This demonstrates greater regularization of our working capital, which last year was impacted by increases in accounts receivables, which were quickly solved by our commercial team and financial teams.

We ended the quarter with BRL 734 million cash position, which is in line with our minimum cash policy and gives us comfort to meet our financial obligations. This quarter, we presented a higher leverage of 4.6x, reflecting the effect of the potential result that is below expectations in the South corridor and the atypical results in the North corridor last quarter, which ended up worsening our EBITDA for the last 12 months.

This calculation is always made considering the past 12 months EBITDA. And therefore, we see this weaker EBITDA from last quarter because of the North corridor and from this quarter because of the atypical situation in the South.

This is a one-off effect. So as our EBITDA recovers, these indicator should return to levels more in line with the normality of the company's operating cash generation continuing our trend of continuous deleveraging that we have shown in recent years after the end of our investment cycle, December last year.

In 2024, we remain confident about the company's main operations, which are on track to meet the respective budget. The main point of attention so far is the southern corridor where although we have seen a slight recovery in draft since mid-April, we're still operating in tighter conditions than last year and below historical leverages. So the scenario in the South continues to be very volatile, not very predictable. So we still have no way of saying whether we will have more of a positive scenario in the second half of this year or if it's going to be less than expected.

Because of that, we focus on addressing and mitigating these external scenarios and factors that generate greater volatility. Our focus continues to implement drilling and excavation plan, along with the Paraguayan and Brazilian government to make sure we have more perennial navigation in the medium term. This situation doesn't change our growth plan at all, which still focuses on modular expansion in the north, where we will invest in a new crane and a floating trench shipment in the next 2 years to increase capacity at both sites, Barcarena and Marituba.

Finally, I would like to reinforce that continue to have very solid fundamentals and that this modular investment and increasing capacity in the northern corridor is a transitional move since we continue to project the need for more robust expansion as of 2027 onwards, with the construction of a new pier in Barcarena and greater trench shipment capacity in Marituba, maintaining an appropriate balance between long-term contracts under the take-or-pay format, and taking advantage of short-term and medium-term opportunities as the market grows in our influence area. That's how we can make sure we are at a strategic position and have the leadership in this northern corridor.

With that, I'll hand the floor over to Ana from our IR department, and I'll be back soon. Over to you, Ana.

[Ana Carolina Bastos, executive]

[Interpreted] Thank you, Fabio. Good morning, everyone, and thank you very much for partaking in another Hidrovias do Brasil earnings call. Now highlights by operation. Please go to Slide #7.

This is where we see the main figures for the northern corridor. We handled 2 million tons of cargo this first quarter, an increase of 3.8% compared to the first quarter 2023, which was a record. In other words, growth on a strong basis of comparison. This growth occurred as a result of the extra days of operation. Remember that we brought forward the most important maintenance operations that would have taken place at the beginning of January to the middle of December, thus optimizing the system during the atypical period of low water.

We have been operating at full capacity since 2022. There was greater use of the integrated system this quarter, which grew by 13.5%, with a more positive mix of services, which, along with the real tariff increase negotiated for 2024, contributed to the historic results we achieved. So all-time high for the northern corridor.

Our net operating revenue totaled BRL 256.2 million, an increase of almost 20% year-on-year, as you can see in the chart in the light blue color. And the adjusted EBITDA shown in darker blue color reached BRL 168.6 million, 23.8% up on the same period last year, with a very strong adjusted EBITDA margin of 65.8%.

Many of you asked us about the drought and the draft situation in the north after the atypical event. As you can see from the robust results obtained at the beginning of the year, we've been operating in full conditions since January 24. The draft is still slightly below last year, but still better than we need to operate convoys with historical regularity.

Moving on to Slide 8. We try to anticipate an issue that has also come up a lot as we interact with the market, which is the possible impact of La Nina in the North. As you can see in this history chart, we see the effects of La Nina and El Nino, according to their intensity. At the bottom, you see in gray the influence of La Nina, according to their intensity, in orange. And what we can see is that historically speaking, this influence does not have a negative impact on the northern corridor. This can be seen in the black line, which shows the average height of the Santarem ruler. In other words, so far, we have no indications that we will have a similar situation of problems with our drafts in the second half of this year. So we've got good news.

Going on to the next slide, #10, we have the results from the Southern corridor, which, as Fabio mentioned, has been our major point of attention during 2024. But if we think about the midterm, it tends to be less volatile because of our dredging and demolition work that's been influenced and done by the company, along with the government of Paraguay.

We have worked and operated using our low water plant throughout the first quarter, so the draft recovery that was expected in mid-February only really began to take place in April. So the first quarter had many restrictions. That means we have allocated the most flexible assets for handling iron ore under the contract with MCR, requiring lighter shipments and larger fractions along the route, which results in less dilution of costs due to the waiver of cargo and higher costs due to operational restrictions.

Still, we handled 468,000 tons of iron ore, 36% less than the same period last year, effect that was somewhat offset by the 205,000 tons of grain of volume that is higher than last year because the grain route is considerably shorter and has fewer restrictions as compared to ore. The greatest restrictions we have are close to Ascension.

To the south, we have less restrictions, more punctual ones and we can have better operations. As you can see on the table on this slide, we ended the quarter handling 976,000 tons in the South, an expressive volume if you consider the draft level that we observed in the Parana Paraguay Waterway throughout this period.

Net operating revenue, in turn, totaled BRL 107.6 million, down almost 38% year-over-year due to the volume effect I mentioned and the worst mix, if we consider that there was a higher proportion of volume of grain, which has a lower tariff because it has a shorter route as well as the exchange rate effect on the conversion of the results. As you know, this is a dollarized contract in the southern corridor.

In addition to this operational worsening with less dilution of costs, we had some extra expenses regarding the process of optimizing the company's asset base. We directed 2 pushers that were allocated in the north to the south, and that impacted temporarily the cost for the southern corridor. This made our adjusted EBITDA, including JV EBITDA being negative by BRL 6.6 million, below the real potential of this operation, but mitigated by the low water plan and the use of more flexible assets than the market average.

Also trying to anticipate some of the questions you might have with regards to the draft in the second half of 2024, especially regarding the possible influence of La Nina. We still have a little visibility on the behavior of these rivers in this region, but they are still very volatile.

As you can see on the chart, on Slide #11, there isn't -- unlike the North, there isn't an extremely clear relationship between La Nina effect and the behavior of the drafts in the south. In '21, which was the year in which we had the greatest operational restriction, with around 2.5 months without navigation because of the influence of La Nina, draft levels got to minimum historical lows. Now in 1987, 2006 and 2009, we had the influence of lending, but the drafts were not affected the same way. So there is no direct correlation or clear relation in that sense.

This lack of clear correlations and short-term predictability what motivates us to invest more and more in knowledge and plans that will create structural improvements in the region, guaranteeing perennial navigation and less restrictive conditions, even in years of climate events such as this -- this is our focus as we look at the southern corridor. I would like to turn the floor back to Fabio now so that he can give us an update on the actions and events in this regard. And then I'll come back to conclude on the quarter's results. Fabio, thank you very much. Over to you.

[Fabio Schettino, executive]

[Interpreted] Thank you, Ana. As Ana mentioned, we're putting a lot of energy into these studies and plans to make the Parana Paraguay Waterway a navigable and perennial waterway, just as they did on the Mississippi, for example, and other places in the world to mitigate the risks of climate volatility outside historical leverages and making sure we have results that are closer to the potential of the installed capacity of this logistics corridor.

Slide 12, we see sand or stone steps that need some kind of urgent intervention on the northern section of the Parana Paraguay highway. As we showed before, we've got more than 25 dredging points and more than 6 excavation points. But, these steps we see on this slide are the ones who have already identified the most urgent ones in the current scenario. And we are continuing with the due diligence process, along with the Paraguayan government's logistics committee and the association in the region so that we can solve that in the short term, so that we can make sure we have at least 6 feet of draft if the more restrictive rule of 2021 happens again in the second half of this year.

We've been mapping this region constantly by means of bathymetry, together with the studies carried out by IMDC, the company that we hired to carry out those studies. This has been bringing results in the short term.

One of the most important studies will take place in the second quarter, which has to do to the process of demolishing the main restriction points in our entire route, which is called Remanso Paso, #12 in the drawing you see on the slide. That is the main restriction point, and it's been so for several years.

We expect the public tender for the execution and demolition of this pass to take place during the second quarter of this year, and this alone should generate a gain of at least 1 foot of navigation on this stretch, which is very significant when you look at such a large highway as the Parana Paraguay is. The dredging and blasting events on the Paraguay side are progressing very well and generating good results.

It's worth saying that had we not made the interventions that we made late last year, then our performance would have been way below as compared to we're showing you now. So we now already see concrete results. We believe that all the points we mapped on the right-hand side of our drawing should undergo interventions later this year, helping to ensure that there is no total operational stoppage at this point, even if the draft levels go back to the ones they were in 2021.

Remember, in '21, we had to shut down our operations because of the critical draft level. If this happens again, what we want is to not be forced to shut our operations down, so that our concrete results from this dredging program that show that they are working. With that, I'm confident to say that although the short-term scenario will still show some volatility, the medium and long terms tend to be more stable and consequently show results more in line with the fulfillment of the contract for the logistics corridor.

I'll turn it over to Ana so she can conclude the comments on the other operations. Thank you.

[Ana Carolina Bastos, executive]

[Interpreted] Thank you, Fabio. Next operation, Slide #14, results of coastal navigation. As you can see in the table, we handled almost 890,000 tons of bauxite in the first quarter, a volume almost 14% higher year-over-year with no direct impact on the expected result for the year. This contract is 100% dedicated under the take-or-pay format.

Net operating revenue totaled BRL 55.8 million. In light blue, you can see on the chart, reflecting the exchange rate effect and the conversion of the results because the contract is dollarized. Adjusted EBITDA was BRL 25.6 million, reflecting the exchange rate effects and higher variable costs as we made an extra trip to carry out the volume mentioned.

Adjusted EBITDA margin was 45.8%, well in line with the level expected for this operation. So in coastal navigation, everything is as expected and normal with resilient results.

Slide 16, results from Santos, our 25-year lease of the STS20 area. We handle fertilizers, and we're going to begin handling salt. As you can see on the table, 352,000 tons of fertilizers were handled during this period, 12% more year-over-year with a greater share of annual contract volume as if they were under the spot format, which meant that the average tariff was slightly lower than in the first quarter last year.

In line with what we had predicted and communicated to you, we started shipping fertilizers by rail in March this year, and we should be close to the maturity of this operation by the end of 2024. So this is a very positive development curve. As you can see, the operation is going very well.

As far as the salt operation is concerned, negotiations with the clients have been concluded and the operation will begin in June this year. These 2 reasons meant that we had some increases in costs and SG&A with the addition of new employees to clean and maintain wagons, salary adjustments and the addition of a new shift, adjustments to the new operation really that will be diluted as the operation reaches maturity. So we're in line in these operations and according to plan.

Net operating revenue totaled BRL 30.7 million, as you can see in light blue in the chart and adjusted EBITDA totaled BRL 15 million with an EBITDA margin of 48.7% in line with what was planned and expected for the business.

Slide 18. This is the company's consolidated results, which included handling 4.3 million tonnes of cargo, BRL 450.3 million in net operating revenue, and BRL 175 million in adjusted EBITDA. Again, a lower result than expected in the South for the reasons we've already mentioned, but very positive in other logistics corridors, showing the benefit of our diversification of cargo routes and currencies.

Slide 20. CapEx carried out in the quarter. We invested BRL 59.9 million, including recurring maintenance, the start of expansion at the Santos concession, which ends in 2025. And as you know, we will be directing our efforts, especially towards modular growth in the north in the short term. And we will be investing in the design, construction and implementation of a new crane in Barcarena and floating transshipment in Marituba, expanding our capacity in the short term, in line with the greater existing demand, ensuring our leadership position to ship grains, especially in the Mata Grosso and Para states.

Our idea is to expand the capacity of the TUP to around 8.7 million tons by the end of 2025, and the integrated systems to around 7.2 million tons by the end of 2026, an investment that fits into the company's projected cash flow and is already generating results in the short term.

On the next slide, we are going to see the cash flow for the period. There was a consumption of BRL 96.1 million, lower than the consumption of Q1 '23, even with an EBITDA that is below the company's full potential and following the regular seasonality of our business, which tends to have more of a pressured cash flow at the beginning of the year because of the greater concentration of that obligation. So nothing different than usual.

As you can see on the table on the right-hand side, we ended the first quarter with a short and long-term cash position at BRL 734.4 million, which is higher than our minimum cash policy and more than enough for our short-term obligations.

Slide #22, we see that we ended the quarter with a leverage of 4.6x, almost stable as compared to the same period last year, basically reflecting the worsening in the EBITDA 12 month accumulated view. In other words, this is a one-off impact in 2023 that we'll adjust as the southern operation returns to more regular conditions.

This has no impact from the company's liquidity standpoint since there is no anticipation of that maturities -- and we continue to have a very long profile with an average maturity of 5.2 years and weighted average cost of 5.2%. In other words, the debt is quite cheap.

In the chart on the right-hand side of the slide, you can see our debt schedule. Our greatest commitment begins in 2031. With regards to the 25-year debt, the company is already addressing the renegotiation, already having firm offers from financial institutions with attractive conditions that are consistent with the current scenario, a fact that will be communicated later.

With that, I'll hand it over to Fabio to talk about ESG and final remarks. Thank you very much and I look forward to our Q&A session.

[Fabio Schettino, executive]

[Interpreted] Thank you, Anna. Now we're moving towards the end of our presentation. Let's move on to the last slide about our achievements and progress in the area of sustainability.

Without a doubt, this is an essential pillar for the development of our company and the main driver of change in the logistics matrix in our continent. As an ongoing process and continuous process, we're once again carrying out the company's greenhouse gas inventory, which will be completed by May 2024, and we are well advanced with the development of our integrated sustainability report, being one of the few companies in the sector to publish such a complete and externally verified report, which reflects our commitment to transparency and sustainable development.

The report should be ready by June this year, and we'll cover topics such as the challenges we faced in 2023, as well as the targets set for 2024, and the projects carried out by the company, which reached more than 15,000 people in the different locations where we operate. These actions involve different areas of the company, reinforce our leading role in the search for a more efficient and responsible logistics matrix, more sustainable, too. And we're involved in this development process that is shared with all our stakeholders.

This concludes the presentation. Let's now move to the Q&A session. Thank you very much.

[Operator]

[Interpreted] Thank you very much. We'll now begin our Q&A session. [Operator Instructions] First question by Pedro Bruno from XP. Mr. Pedro, over to you.

[Pedro Bruno, analyst]

[Interpreted] Good morning. Can you hear me?

[Fabio Schettino, executive]

[Interpreted]Yes, Pedro, we can hear you.

[Pedro Bruno, analyst]

[Interpreted] I actually have 2 questions. The first one has to do with tariffs in the North. I just wanted to validate if I understood your statement properly. As far as we understand, part of the volume from the first quarter still came from corn from late last year because of the problems we had with the draft level. and they were still running under the old tariff. I just wanted to make sure if we still can expect a ramp-up in terms of the evolution of the average tariff. It's evolved quite well in the first semester, but we see positive scenarios for this market moving forward. I just wanted to double check if we can still expect this ramp up. This is the first question.

[Fabio Schettino, executive]

[Interpreted] Now what you said is correct. There was a carryover volume using previous tariffs, but this is quite a marginal number. If you do the math based on the information we have available, if you look at the gross revenue and divide that by the volume, you will already see an increase of 20% or maybe 21% in tariffs.

So to answer your question, there is such effect. It's marginal. The tariff increase is in line with what we announced in the past. That is 20%. If you do the math, gross revenue divided by the volume, you will see this 20%. Now since the process is quite complex. There is a mix of product. The calculation is a bit more complex. There is displacement of products. Sometimes pricing is different. So to answer your question, Pedro, I think this increase will be on the same level as we saw late last year.

So this effect has already begun. So you're right, but this effect will also be diluted considering our product mix. But yes, you can already see that on the first quarter's figures. Ana?

Well, yes, you should look at the tariff throughout the year. If you look at the figures on a quarter-by-quarter basis, then there are other elements that may factor into this calculation, but all throughout the year, we should be at the level of 20%, which is what we mentioned last year.

[Pedro Bruno, analyst]

[Interpreted] Perfect. Thank you. So there is such effect, but it's like marginal as far as I understand. The second question has to do with costs in the southern corridor. You mentioned a temporary effect of the 2 pushes that were brought from the northern to the southern region. But as far as I understood before, this would be more of a structural process and would then replace equipment leasing contracts in the South. If you can just recap that part, that would be great. Just to make sure this will have a temporary effect or not, like you said before.

[Ana Carolina Bastos, executive]

[Interpreted] Hi Pedro, this is Ana. We're talking about our asset optimization process. Yes, we're taking these 2 assets to the south. They're going to be this region. What we mentioned in the line for SG&A costs has to do with the transfer assets to the south. So, we're taking them from one corridor to the other. So this is a punctual effect as we transfer these assets and now they're going to operate in the south on non [indiscernible] leases.

[Operator]

[Interpreted] Next question by Mr. Filip Nielsen from Citi. Mr. Felipe, over to you.

[Filipe Ferreira Nielsen, analyst]

[Interpreted] Congratulations on the earnings call. Just wanted to understand the transition process. We see that there's been changes.

Hello, can you hear me?

[Ana Carolina Bastos, executive]

[Interpreted] Yes. We can hear you now.

[Filipe Ferreira Nielsen, analyst]

[Interpreted] Yes, my apologies. Not sure if you actually heard my question. We see that many changes are happening in the company in terms of strategic shareholders. New people are joining the company in strategic position. So I wanted to ask you on that, what is the company's strategy moving forward? What are the next steps to be taken as you transition with pipeline positions? How is the leadership transition going about? What role do you have in this process? Can you please elaborate. That will be helpful.

[Fabio Schettino, executive]

[Interpreted] Yes, Filipe. It's important to remember that this transition is expected. We were conceived by a private equity fund and per definition, they invest in the company for a certain period of time. I'm telling you this because Hidrovias do Brasil was created from the very get-go based on independent management practices. So we've been preparing for this transition for a long time.

We became the largest navigation company in Latin America. And under this new phase, we know that other shareholders would lead the company. So this is a natural process. Not only is it natural, but it is also cultural because the principle of our success has to do with the fact that we should develop and monetize based on the investments that were made.

Number two, 100% of our management team is independent. And number three, I must say, as the company's CEO, I can tell you that we had many potential reference partners, and to us and to the management team, these are the best shareholders and investors that we could have in the company. They are operational partners. They've got long-term vision. They've got great credibility and financial robustness. And for me, they've got values, beliefs that are very in line with our culture at Hidrovias.

We are quite energized in the management team because of this transition because we know we're going into a new growth cycle in the company under the leadership of a new reference shareholder.

In practical terms, what should happen, as you saw in the communication reports, we sent you after the Board meeting, we are going to -- well, we basically -- the Board is now calling for an assembly that should happen in 30 days to define who the Board is going to be, and they will be speaking on behalf of all the shareholders and partners.

So yes, we're going into a new phase, under the leadership of another shareholder that for me is the best one the company could have as the reference shareholder so that we can move on with our business plan. The management team has always had a robust pipeline, and we know that opportunities out there in different segments, with very attractive projects.

Some of them have been announced and approved, which is the modular expansion of the North, for example, but let's see what happens. We're going to open up a whole new menu of opportunities, but we're very happy and energized because of this new moment in the company's life.

[Operator]

[Interpreted] Next question by Mr. Lucas Barbosa from Santander. Mr. Lucas, over to you.

[Lucas Barbosa, analyst]

[Interpreted] I wanted to ask you on capital allocation. The company is still highly leveraged, but still has a good cash position, and that is quite for the long term. As you create more cash moving forward, when you open a space for new projects. I wanted to ask you, what are the priority projects? Would it be to expand the northern system through the IPO? We were discussing natural gas logistics. There were some other projects on the table. I wanted to ask you if you've thought about that and what you can tell us for the years to come.

[Fabio Schettino, executive]

[Interpreted] Thank you very much for your question. I'll talk about the management team's vision. The transition hasn't yet been concluded. So we couldn't really have such a detailed discussion with the new partners. Now having said that, of course, the low-hanging fruit is to expand the northern corridor. We will have the e-crane in 2025. We're going to have transshipment in '26.

And by the end of this year -- well, that was the deadline the Board had before, but with the new board it won't change, we had the building a new barge in Vila do Conde.

As you said, after the investment period ended in December, we've got good cash generation so that we can keep on leveraging the company. So -- for us, this is the most obvious investment the management team can make and we can make the most out of our position in the north, considering the increase in demand.

Now the second project is important. That is fertilizers, in terms of grain capacity. After that, fertilizers become kind of standard if they compete with grains' stipend. That's why we put together a fertilizer structure in parallel so that this market can still be served by us.

This is an interesting project. But again, I'm only talking about the potential. And I think we need looking into those. Now since we have a new partner with great distribution businesses, warehouse business, well, that is something we've been looking into regardless of this movement. And I think that after this transition, we can become stronger and we can have better synergies and have access to more alternatives.

But again, Lucas, we never left our pipeline aside. Now since we knew we were going to have a transition in partnerships. We just wanted to look at that after new partners arrived -- after they are fully installed. We want to show them the different projects with great returns and see how we go about that.

There are add-ons that will be added to existing infrastructure, which is already robust. Since their marginal investment returns are great. So let's wait for another 30 days for the new partner to arrive. Then we're going to share this information and share our position with the market. That is our intention in the near future. We should have an event so that we can address all the questions that were asked. Just as you asked us objectively.

[Operator]

[Interpreted] Next question by Mr. Gabriel Frazao from Bank of America. Mr. Gabriel, over to you.

[Gabriel Frazao, analyst]

[Interpreted] Good morning, everyone. I have a question on the project you mentioned during the introduction, the pier projects that should be built by 2027. Can you give us some color on the capacity we can expect after the expansion of the pier.

Also talk about the amount of investment that will be demanded by such projects.

[Fabio Schettino, executive]

[Interpreted] I'll give you a generic response because this project hasn't yet been approved. Now when we created a new bearth, we're doubling our capacity. We moved from 1 to 2. So from 6.5 million tons, we may move to 13 million. So that is the obvious response here.

This investment is worth $1.1 billion. We're still looking into engineering issues, but this would increase the capacity of our system in terms of transportation. Anna talked about, we should move to $13 million. Investments should be $1.1 billion, $1.2 billion. It depends if we're going to use our existing infrastructure or not. But again, Gabriel, this is still being sized.

In the third quarter, ideally, we should have a new partner, and we're going to discuss such alternatives. But particularly, I think these investments, they are strategic and it's -- and they're quite mandatory because we're still the only player that provides integrated capacity in an independent fashion in the northern corridor. And I think we should be able to provide marginal capacities at a better cost, considering our investments are also going to be marginal. So that is what makes the returns of such projects to be so attractive.

[Operator]

[Interpreted] Thank you very much. This concludes I would like to invite Mr. Fabio Schettino for his final remarks. Mr. Fabio,

the floor is yours.

[Fabio Schettino, executive]

[Interpreted] Well, I just wanted to underpin that we have begun a new phase. Aside from the partner change that is only natural and very positive, but we're ending our first phase of our investment cycle that began in 2010 and went until late last year. With that, we now have a platform that is already creating robust results.

As Anna said, our figures in regular conditions will give us more than 50% or 55% of EBITDA margin. This quarter was a quarter of crisis and our margins were at 40%. I worked for other sectors before where these numbers were unimaginable. And this shows how resilient and robust our business is. So the fundamentals are solid. Now we're going to serve better waves.

Investments are incremental on the structure we already have. We are the leaders in these corridors where we act. And now we are developing structures in the south.

If the crisis that impacted us in the past showed anything good, it was this. We showed the Paraguayan government that -- that a solution needed to be addressed -- a permanent solution need to be thought of. The Parana and the Amazonian watersheds, are way calmer as compared to there's other waterways that move way more or handle way more material, such as the one in the Europe and the U.S.

So we need political will, and having been through what we've been, that made governments understand that they had to address these issues. So I just wanted to underpin that the management team is fully committed to developing new projects in line with the continuous deleveraging process of the company, and we're confident that this new cycle will be a great one.

This is my takeaway message, and we're always keeping an eye on the 3 pillars of governance, sustainability and operational security. These are the foundations that will ensure our success moving forward.

Thank you very much. Thank you for your interest. And I hope that by the next earnings call -- well, I'm sure that by the next earnings call, Andre Hachem will join us to share these results, our new reference partner, and we're excited to welcome him to our next earnings call. Thank you very much.

[Operator]

[Interpreted] This earnings call is now concluded. Thank you very much for your participation, and have a good day.

[Statements in English on this transcript were

spoken by an interpreter present on the live call.]