Rumo SA

BOVESPA:RAIL3

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon, everyone, and thank you for waiting. Welcome to Rumo Logística conference call to discuss the first quarter of 2021 results. Today with us, we have Mr. Ricardo Lewin, CFO and IRO; Mr. Gustavo Rosa, Investor Relations and Treasury Director. [Operator Instructions] We also would like to inform that the conference call will be presented in English by the company's management, and there will be simultaneous translation to Portuguese. The event is also being broadcast simultaneously on the internet via webcast. Before proceeding, we would like to mention that forward statements are based on beliefs and assumptions of Rumo's management and on information currently available to the company. They involve risks and uncertainties because they relate to the future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand the conditions related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements. I will now turn the conference over to Mr. Ricardo Lewin. Please, Mr. Lewin, you may proceed.

[Ricardo Lewin, executive]

Good afternoon, everyone, and thank you all for joining us in this earnings conference call for the first quarter of 2021. I would like to start by providing some highlights on ESG initiatives. Once more, Rumo delivered on substantial reduction on fuel consumption. This is the main driver for reducing CO2 emissions. In our long-term goals, we are committed to reduce our emissions by 15% until 2023. Another important effort is related to diversity. Recently, we announced our restructure of the Board, bringing 2 women as members as of now, representing 20% of its composition. Besides that, we are strongly committed to increasing women presence in all organizational levels. Already in April, we issued our first sustainability linked bond in the local market, reinforcing again our transparency and engagement with ESG agenda. Last, but not least, we expect to publish our sustainability report in June, highlighting several important improvements in our sustainable agenda. On the next chart, we are going to go through the main highlights of this quarter. Rumo presented a good performance in all main KPIs space. Despite the delay in the soybean crop, consolidated volumes grew almost 13%. A better market outlook and higher fuel prices helped enhance our competitiveness, which allowed a yield expansion of 5.9%. In March, we started to operate São Simão terminal in Central Network, allowing us to access new areas such as Goiás and Tocantins states. EBITDA reached BRL 832 million, 44% up year-over-year. During the first quarter, we prepared 2024 Senior Notes that not only reduced the average cost of debt, but also brought a nonrecurring financial gain due to the unfold of the debt swap. Therefore, net income reached BRL 175 million compared to a loss of BRL 274 million in the same quarter last year. On the next chart, we will present the operational results. North Operation delivered the highest contribution for the quarter volume, growing 16.4%. In the South Operation, the harvest historically starts later than Mato Grosso. This year, volumes arrived only in March, which limited its growth to 2%. Looking to the assortment of cargoes, besides a good performance in grains that grew 9%, we highlight a 44% growth in fertilizers, 26% in fuel and almost 20% in pulp. On the next chart, we will see results per operation. Our consolidated EBITDA grew 44%, a result of 42% growth in the North Operation and a 67% in the South Operation. The higher growth in the South has basically 3 reasons: first, higher yields, mainly due to concentration of volumes in March when tariffs are typically higher; Second, a better assortment of cargoes with more sugar; and finally, better pricing in Rio Grande do Sul that had a crop disruption last year. Consequently, we posted significant gains in margins in both operations. On the next chart, we will see the highlights of financial results and net income. Financial expenses improved due to last year concession fees prepayment and a nonrecurring effect of BRL 203 million due to the unfold of the 2024 Senior Note swap. A better operational performance, coupled with better financial results generated a profit of BRL 175 million compared to a loss of BRL 274 million in the first quarter 2020. On the next chart, we will see the effect of the 2024 Senior Notes prepayment in the P&L and cash flow. The owing cost of 2024 Senior Roles were approximately 144% of CDI. While company's recent issuance in the local market are around 110% of CDI. As a result, the anticipated amortization of the 2024 Senior Notes improved debt profile, increasing its duration and reducing its average costs. Also, the unfold of the debt swap brought a net impact of approximately BRL 204 million in the P&L. On the next chart, we will see more details of that. In the first quarter 2021, leverage reached 2x net debt to EBITDA with a reduction of gross debt. As already said in the previous slides, the prepayment of 2024 Senior Bonds has improved the debt amortization schedule, reinforcing the strength of the company for the execution of next year's investment plan. On the next chart, we have the market outlook for soybean. Regarding the soybean market in 2021, according to Agroconsult projections, Brazil should have a record harvest of 137 million tons, an increase of 11 million tons compared to 2020, of which 85 million tons should be exported. Also, according to the consultancy, Mato Grosso is expected to increase its fixed ports by 2 million tons, extending the harvest until July. Rio Grande do Sul, a strong expansion of production, 8.3 million tons is also expected, recovering from the 2020 crop failure. In Goiás state, a new market that started to be served by Rumo in March, production is estimated at 13.4 million tons. Commercialization and volumes under take-or-pay agreements are well advanced, bringing a good outlook for the second quarter of 2021. On the next chart, we will see core outlook. AgRural projects a reduction of 8 million tons in country's production and a decrease of 6 million tons in the export volumes. In Mato Grosso, a reduction of 1 million ton in exports is expected. In Mato Grosso do Sul and Paraná, production is estimated at 20 million tons, and in Goiás, production can reach 11 million tons, which representing an additional volume opportunity, given the recently consolidated geographic expansion. The volume of corn contracted for the second half of the year, it's substantially higher than that in the same time in 2020. However, volumes for the fourth quarter are huge challenge, due to due to expect lower availability for exports. On the next chart, we will take a look at the long-term drivers for grains. Farmer's profitability has skyrocketed in the last years, increasing approximately 12x for corn and 3x for soybean. Therefore, from a supply standpoint, we should continue to see crop improvements over the next years once farmers could expand investments in productivity and area expansion. On the demand side, China is recovering fast from the African swine flu and the consumption of soybean is going up. At the same time, China is becoming a relevant in market of corn, which increases significantly the global demand for grains. Also that points out that our investment thesis is stronger than ever, and we should continue to pursue the development of Brazilian logistics infrastructure. On the next chart, I would like to comment on the Port of Santos. In previous calls, we have been highlighting improvement in Santos Port infrastructure. This time, I would like to share with you the deliveries that change dramatically the efficiency in the port. Improvements of the export corridor, Macuco expansion and the third line of Paquetá will be operational by June this year. Also by this time, Terminal TXXXIX in which Rumo has a stake, will be delivering the first phase of investments committed in the early renewal process that will bring another shiploader and access to berth 37. With that, Port of Santos will be significantly better off. On the next chart, I will comment on Central Network. As already disclosed, we have been operating São Simão terminals since March, and we are seeing volumes going up fast. At the same time, the construction of Rio Verde terminal is advancing well and throughout the second half, we expect significant additional installed capacity in our terminals. Therefore, Rumo is getting ready to take full advantage on its competitive position in the grain market. Before finishing, I would like to talk about our container operation. Klabin, which is already a very important customer for Rumo is partnering with Brado. Companies signed a long-term agreement that will create a demand for 30,000 containers per year, reinforcing the diversification of cargoes with high scalability, always attractive to railways. Also, this partnership allows the replacement of trucks, which brings further contribution to CO2 emission avoidance. Here, I conclude my presentation, and we can go to Q&A session. Thank you.

[Operator]

[Operator Instructions] Our first question comes from André Hachem with Itaú.

[Andre Hachem, analyst]

My first question is in regards to volumes. You had a big delay this year, obviously, harvest. So -- and even though you maybe still reported strong volumes for the first quarter. So I'd like to understand a little bit better how you're seeing volumes developing for the second quarter of this year, given the pushback or delay within a harvest. Still on this topic, I'd also like to see how you're seeing the corn harvest later this year, right -- the winter harvest, given that we're seeing much, let's say, much more expectation on production. So that's my first question on volumes. My second question is on the Central Network. You provided numbers, which seem to be a lot higher than we were expecting, which is very strong ramp-up. Do you think this should maybe level off and then it only resume by the end of the year? Or how should we think about the evolution of the dynamics in the Central Network?

[Gustavo da Rosa, executive]

Hi, André. I will take the first part of the question, and then Lewin will complement with regards to corn and Central Network. So when we think about signing this year, we are having an all-time high crop. It got late, you're right. So we were able to grow more volumes from March onwards. So we are seeing a good availability of signed-ins means for the second quarter. And as we already disclosed, we are well advanced in terms of the agreements and the commercialization of grains is doing okay. So we believe we're going to have pretty good volumes throughout the second quarter of this year. With regards to corn, I will hand over to Ricardo.

[Ricardo Lewin, executive]

Thank you, Gustavo. Hi, André. Well, for corn, as you said, we'll have a considerable drop in the harvest. According to Agroconsult, it's expected to drop it 8 million tons in Brazil, okay? And consequently, 6 million tons in exports. In Mato Grosso, it's expected to drop 1 million, and this may be a bit consult conservative. So it's important to say that this year, the window for export is going to be shorter for corn due to the late harvest of soybean as you said. Also important to note that for this year for the corn period -- for the corn crop, we are 2x more contracted than we were in the same period in 2020. So we had 2x more take-or-pay contracts this year. So we expect to have a good third quarter, okay? The point here is that for the fourth quarter, there is still a lot of uncertainty. Maybe -- and the fourth quarter uncertainty is due to not only the late soybean harvest, but also to the weather conditions, okay? And together, these weather conditions plus delayed crop halted completely the commercialization, okay, of corn. So there is still a lot of room -- a lot of volumes to be sold in the fourth quarter, okay? So this is the answer for corn. The second one is regarding a Central Network. André, I don't know if you remember that on the third quarter, we provided you a table on all the terminals. So there are like São Simão that we said that would start first quarter this year, it's exactly what did. And I remember that the second one that we're talking about was Rio Verde. So Rio Verde, we expect to have it ready very soon, okay? So we will take advantage of the corn crop. We'll be able to start to elevate from this terminal in the second half of the year. Obviously, there's a huge capacity. Just to have an idea, we have static capacity at Rio Verde that's 2x more than we had in Rondonópolis before this improvement -- which is coming of this. So however we will not start to use the entire capacity. But what I can say that it's a respectable ramp-up, and we will be using a good amount of capacity for the second half of the year already in Rio Verde.

[Gustavo da Rosa, executive]

André, just to complement on that. We're going to be releasing today after the market closed our volumes for April. And then you're going to have a better view on how fast volumes are growing in Central Network. We are still talking only about the São Simão terminal. So Ricardo made a fair point. Of course, the capacity will boost after we have the entrance of Rio Verde. But you're going to see, for sure, some very significant growth from March to April in our São Simão terminal.

[Ricardo Lewin, executive]

Thank you, André.

[Operator]

Our next question comes from Lucas Barbosa with Santander.

[Lucas Barbosa, analyst]

So my question is regarding yields. Can you give some color on how you're seeing yields for the second quarter? What magnitude of year-over-year expansion you were seeing? And in addition, if you could comment on what are your expectations for the third quarter this year? That's my question.

[Ricardo Lewin, executive]

I will take this, Lucas. Thank you for participating on the call also. Well, let's talk about prices for the second quarter. Total prices will depend a bit on the fuel prices. Okay. But as we said in the last call, for the first half of the year, we -- the soybean transportation, we are very well positioned in terms of take-or-pay, okay? So we consider that ex-fuel prices will continue to be at a good level, okay? So you said about the second quarter. What was the other question? For the third partner also. For the third -- yes, yes. As I said, to André the third part is -- we already have a very good amount of take-or-pay contracts, as I said, for the second half of the year. We are 2x -- we have 2x more take-or-pay than we had at the same time of the year in 2020. So -- but the 5 million that were concentrated in third quarter, okay? So third quarter, we have guarantees -- good volume and prices, okay, obviously, depending on how you arrive fuel prices. The point is that for the fourth quarter, it is still too early to say, okay? As I said, there is still a lot of uncertainty due to the weather conditions, late crop, commercialization that was completely halted. So we see this scenario through the third quarter this year. Thank you, Lucas.

[Operator]

Our next question comes from Rogério Araújo with UBS.

[Rogério Araújo, analyst]

A couple here on my side. The first one is on take-or-pay revenue. Can you please go through the negotiations on take-or-pay for the first Q, how this played out with the delay in the crop by February. If you can say how much take-or-pay revenue there is recognized here in these results more or less? And also on my second question, if you -- it seems that Rumo gained share over the Northern Corridor in first Q Can you go through the negotiations with the trading companies, all this take-or-pay volume that was closed by the first half of the year. If you have a view on how cheaper is to use the -- your railway network instead of going to Northern Corridor. When you were like close to Sorriso or Lucas do Rio Verde region. So how is the competitiveness South versus North at this moment? That's my question.

[Ricardo Lewin, executive]

Rogério, thank you. Thanks for the questions. You can see in our release that the take-or-pay for the first quarter is a bit more than BRL 100 million, okay? You see the revenues and you see also in the working capital, okay, because it is to be paid in the second quarter. So this will -- these are like usual negotiations with trading companies in the sense that we signed the contracts on that, and this is owed by then to us. So this is not a huge discussion with them. If we cannot transport, we also owe them take-or-pay. But it's something around a bit more than BRL 100 million. For the second part of the question, Gustavo would like to take this?

[Gustavo da Rosa, executive]

Sure, Ricardo. Thanks. Rogério, you're right. So we did well in terms of market share in the first quarter. I think we have a lot of effects here. You remember, we recently implemented a new commercial structure that right now is responsible for the whole company. And it amplifies the focus on the commercial relationship with customers. So that allows us to negotiate take-or-pays in advance, which ultimately allows us, for instance, to have more volumes sold for January that generated the take-or-pay in first place. But it also reflects the improvement of the market conditions that we saw when we were negotiating with customers. So everybody knew that fuel prices were going up, and that is very important to explain our competitiveness against trucks. We are also this year different from what happened last year. The trading companies were having better visibility on volumes. So there was any kind of trouble with the uptakes abroad. So the commercialization evolved well and railway tends to be cheaper, especially after we have this rebalance in oil prices that allows us to present better prices. So what's going to happen in the upcoming quarters, it will depend pretty much on the market, but we are well positioning. And we believe that our commercial strategy is in place and depending on what's going to happen with fuel prices, we might present a good performance throughout the year.

[Rogério Araújo, analyst]

And just a follow-up. When you look at volumes that are published, does it also include the take-or-pay that was not transported, but it was paid or not?

[Gustavo da Rosa, executive]

No, or not at all. We only recognize the take-or-pay in other revenues, but it does not affect, not even used, not even transported volumes, because the volumes weren't transported at all.

[Ricardo Lewin, executive]

Thank you, Rogério.

[Operator]

Our next question comes from Victor Mizusaki with Bradesco BB.

[Victor Mizusaki, analyst]

I have 2 questions here. The first one is a follow-up on the Central Network. So if you think about this operation, right, I mean you were talking about like a one-off operation only São Simão terminal with a relatively small term it like 1.5 million tons of capacity. And you delivered a very high margin of 46%. So my question is with the open of Rio Verde terminal in the third quarter, we like 8 million tons of capacity and expect dilution of fixed costs, can we say that maybe Malha Central can achieve the same margin of the Northern Network, so EBITDA margin above 50%? And the second question is if you can give us an update on the environmental license of Lucas do Rio Verde project.

[Ricardo Lewin, executive]

Victor, thank you for the questions. I will tell you about the margins. I will not give you a number, but I can tell that the margins on Central Network can be equal or more the North Network, okay? So -- and this is -- remember that we always say that we have gains in scale -- there is scale gains here. So while we are full operating Rio Verde that has a distance that's higher and then São Simão, we can be with equal or even better margins than the North Network, okay? Regarding the environmental license, we are working on that. As we said before, the license has been discussed locally, yes, by the local Secretary or Environment Secretary, and we are moving on that, okay? So what I can tell correct -- what I can say at this point that the studies are improving very well. Thank you, Victor.

[Operator]

Our next question comes from Stephen Trent with Citibank Group.

[Stephen Trent, analyst]

Just 2 quick ones from you. When do you think about longer-term incremental investments, do you have any high-level thoughts with respect to whether you would invest in a brand-new project that the government presents? And I realize it's a little unfair to ask because we don't know all the projects that they could present? Or would you rather make incremental investments in the Southern Network, for example?

And then my second question relates to the hydrological conditions in some parts of the South of Brazil, if you're seeing any impact.

[Ricardo Lewin, executive]

Stephen, let me take the first one. The second one, I will -- Gustavo will take. But I don't know if I get very well the question. If I didn't get you just -- after I answered you, you tell me. But the point here is that, obviously, the -- there's a project that's very important for the company with very good returns. That's the extension to look at the Rio Verde. And obviously, our preference is always to investing in high-return projects, okay? However, we do have other projects. What you're saying is that if I have little bit capital, which one are you to invest? Obviously, I would invest in the expansion, okay? Regarding the South Network, it's an interesting project. Obviously, as you see today, the margins of the South is much lower than in the North Network, but still you can see good returns on investments in the South. But in the South, it's the deposit -- let me say that, its returns are lower than going to the North. So being very direct, we would prefer investing in the North, but we are discussing in the South the renewal to see if we reach to a situation in which is attractive for the company to invest.

[Stephen Trent, analyst]

I wanted to get your high-level view. Very helpful.

[Ricardo Lewin, executive]

Okay, Gustavo would like to get the second?

[Gustavo da Rosa, executive]

Yes, yes, please. So Stephen nice to talk with you again. With regards to the South, you're right. We have 2 things going on. First is the late crop of corn, and that brings also some weather concerns. So we don't know yet for sure how this might influential the production. But right now, there is at least some risks on that. But on the other hand, and especially when it comes to Rio Grande do Sul state, which does not have a corn crop, they only work with soybean crop, last year, we had a huge drop. So this year the ability of signing is much higher, and that could help us at least in Rio Grande do Sul state to offset any -- or to prevent any losses in corn that we are seeing or expecting to Paraná state due to the bad weather. So we're going to have to see in the upcoming months, how this all -- how this will take place, but there is at least reasons for concern with regards to the size of the current production in the South State.

[Operator]

Our next question comes from Murilo Freiberger with Bank of America.

[Murilo Freiberger, analyst]

Couple of questions from our side related to the Central Network. The first one is, I know it's a bit too early to discuss that. But when we look at the yields there, they were substantially higher than what we see in the Northern Corridor, for example. So I wanted to -- I know you won't provide like a financial guidance, but you have a rough idea of where we could lend the yields in the long run. Should it be closer to what we have in the North Corridor or slightly higher? Or if you can give any kind of guidance on that sense? And the second one, I know it's also a little bit too early to discuss, but if you could talk a little bit about the competitive environment moving forward. As you ramp up operations you will probably reach kind of the same influence area that you have on FCA network, if you guys anticipate any kind of sharper competition with the other railway system. So that would be the 2 questions from our side.

[Ricardo Lewin, executive]

Thank you, Mario. Thank you for the question. Let me start by talking about the Central Network. So it's a business that is starting, and our main priority is to get all the volumes we can in that concession. So I wouldn't like to commit on any guidance for pricing because pricing is not the objective. What we want there is to be -- to have the highest competitiveness we can in order to ramp up the volumes very fast. So right now, we are trying to get all the volumes and prices are luckily coming strong, but that's not the final objective. When we ask about the competitiveness in the region, we believe that our network is the most competitive one. We are very close to the heart of the production in the Goiás state. Therefore, we are much less exposed to trucks than FCA. So we believe that naturally, the volume tends to shift to our network as we become able to afford additional capacity. So we are not concerned about competition, and we believe that we have the right tools to capture most part of the volumes.

[Operator]

Our next question comes from Josh Milberg with Morgan Stanley.

[Joshua Milberg, analyst]

You guys had in the presentation, the slide on the different investments being carried out in Santos. I was just hoping you could elaborate on that topic and revisit it to some degree, what -- how much of those projects will help you overcome any potential bottlenecks over the next few years? And if you could also just revisit the status of the project with DP World.

[Ricardo Lewin, executive]

Josh, thank you. Well, let's start with World, like we are still -- we are still evolving with them in the project, okay? It's not like when we announced it was the first MOU on the project. So we still have some time to close all the details, okay? Regarding Santos, as you saw here in the presentation, there are a lot of projects that changed completely the scenario of Santos, okay? So we have the third line of Paquetá, You have the Conceiçãozinha project. You have several projects that both increased efficiency in the port and also increased capacity -- at least consequently, they increase capacity. Santos is not a bottleneck right now, but we have been working in the last 5 years to avoid that it becomes a bottleneck. Okay. And the bottleneck is mainly not necessarily in the terminals, but in the entrance of the Central Port and these are the ones that we are working on to improve efficiency. I give just another year, but just to display what I'm telling you, like in the last year, we reduced the [indiscernible] by something around 50 million, okay? So this is how -- this is the result of the great job that we are doing in Santos in some sport. And this is only one example, okay? So besides this project that I told you, there are other ones to increase capacity like the improvement in TXXXIX that we said in the presentation that we increased static capacity and we increased an additional capacity in Santos Port. So thanks to this job that we are doing, we are changing completely the efficiency and capacity in Santos in Santos Port.

[Joshua Milberg, analyst]

And I mean, is there -- it's probably difficult to measure, but just talking about the cost benefit of -- and the commercial benefit of those of the investments being done there? Could you address that?

[Ricardo Lewin, executive]

In what sense, Josh, could you elaborate a bit more?

[Joshua Milberg, analyst]

Well, no, just -- I mean, just thinking a little bit about the speed to market, so like the turnaround times. And just you mentioned sort of those efficiency gains that presumably would bring some kind of cost benefit to the operation.

[Ricardo Lewin, executive]

Yes, I got it. I think all the calls, Josh, I always say that a very efficient -- when we met a very efficient railway, there are extremes that are very efficient. So we have, on one side, the whole Rondonópolis that's very efficient. But Rio Verde that's very efficient. But not necessarily, we have all the efficiency that we would like to have in Santos. And this is the reason that we are working. What that means, like that once we get an efficiency, the example that I told you, reducing almost 1 hour turn in cycle inside the transport. That means that we are reducing our costs and getting more competitive, okay? Once we get more competitive, we can fight for more volumes, for example, in Mato Grosso, for example, in Goiás, okay? So this -- you can feel, okay? And for us, like it's all good that we can -- once you see here that we reduced our cost to get more competitive, we keep our margins. So it has a direct relationship with competitiveness of the entire company -- the entire North Network.

[Joshua Milberg, analyst]

And Lewin, you had also talked about some potentially transformational projects in the Santos Port. I mean, are there still some opportunities, some larger-scale opportunities that you're pursuing?

[Ricardo Lewin, executive]

What I can tell you, yes, okay. There is still some room to grow in Santos, and we are pursuing that. Okay. Unfortunately, Josh, I cannot tell you more on that. But yes, we feel there is still room to increase both efficiency and capacity in Santos -- in Santos Port, okay? The one that we have efficiency here that I can tell you, Josh, are the ones that I always tell. So we have TXXXIX, Macuco. We have increasing capacity for fertilizers in Termag. So they're the ones that are public are the ones that we are already working. There are other ones to create additional capacity that we are working on. And once I have more details we will bring here to the calls. Thank you, Josh.

[Operator]

Our next question comes from Regis Cardoso with Credit Suisse.

[Regis Cardoso, analyst]

A few topics I wanted to touch base on. The first one is in relation to the guidance. So the low end of the guidance, BRL 4 billion, let's assume some BRL 200 million in the Central Network that means the existing operations would have to do about BRL 3.8 billion or in other words, BRL 1 billion on average EBITDA for the next 3 quarters. These are very rough calculations, right? My point really is that the low end of the guidance already implies very strong results for the few quarters ahead, already adjusting for the Central Network. I mean unless you, of course, disagree that the Central Network EBITDA would be of around BRL 200 million and otherwise, it would be much bigger. Anyway, what I wanted to ask you is. Do you see it as very likely that you'd reach that result? Or does it depend on fourth quarter corn harvest? That's one question. And the other one is whether this is very seasonal. For example, whether you expect a very big concentration in the second quarter now, whereas we are looking at this on a normalized base for about [ 2 and 3 ] quarters, right? So this is the first question, a little bit of math to understand how to reach the guidance or if there is any risk there. The second topic or actually 2 quick ones is on capacity, whether you have spare capacity right now or it's adding volumes, let's say, would require additional trains and so on. I'm trying to gauge whether the upside would come mostly from -- in the North operation, in the existing operations would come mostly from tariffs or volumes in the shorter term in 2021. And then one last quick one. Working capital was quite negative this quarter. If there is any specific reasons for that, maybe the new terminal starting up, but that led to that increase. So how do you manage this.

[Ricardo Lewin, executive]

Thank you, Regis. Well, I'll take the first one, then I send to Gustavo. But regarding the guidance, there is no change that we would like to do right now, okay? The point here is that we know that there is a huge reduction on corn crop, okay? But as I said, we foresee good second and third quarters. It's too early to see or to tell about the fourth quarter, it's very uncertain, okay, about what will happen. But at this point, we don't have why to change the guidance we believe we can reach in the range, okay? So if you say like how likely is, like, we believe that we can reach, but we will follow this. If we have any change that we want to do, we will come to on to the market and provide you guidance. But this is not the case by now. And had one thing that's important, remember that with Central Network and not only with Central Network, but the diversity of cargo that we have, we have some flexibility that we are working on that. So we have sugar that we can transport if volumes don't come from the North then come right now from Central Network. So -- and it's the first year that we are operating with the Central Network. So this is also one reason for not changing anything by now, okay? But if any change -- we see that we need to do any change, we will come to the market, and we will tell you, okay? Gustavo?

[Gustavo da Rosa, executive]

Sure. Let me start with the capacity, Regis. Maybe the most important thing to understand here is that we did real good volumes for the first quarter, even though, as we mentioned and highlighted, the harvest arrived late. So that shows how strong the capacity of the company is right now. And we also operated in the first quarter with a very few contribution of Central Network. So we believe that from the second quarter onwards, we're going to have a higher contribution from Central Network that would take advantage on the capacity that is being built in that concession. We're going to be also running with longer trains that is already in place, and that could provide a lot of capacity. And all of that will meet those investments that Ricardo just pointed out in the Port of Santos. So we truly believe -- and we can add to that, the expansion of Rondonópolis that we did last year. So we believe that we have all the right conditions to afford higher growth in the upcoming quarters. On top of that, you also asked about tariffs -- I think we already covered a bit of that. It also depend pretty much on the market and on the fuel prices. The good news is that we have more volumes protected than last year, but it still might be subject to any kind of volatility that could come from the market. Your last question was about the working capital. So you're right, there was an outflow this year, lower than the outflow that we had last year. And one of the reasons that contributed to generate a higher outflow in the working capital was the take-or-pay recognition. So as Ricardo mentioned earlier, we recognized roughly BRL 100 million in take-or-pay sales that are expected to become cash in the second quarter. So if you exclude that from that number, then you're going to have very probably what we call business as usual. So working capital was affected by suppliers, receivables and taxes. But it was all ordinary, nothing from different. But I think when it comes to working capital, my main remark would be that, we definitely expect for the second quarter to cash in most part of take-or-pay that was recognized in the first quarter. And then it could offset a bit this effect of working capital that we showed in the first quarter.

[Operator]

Ladies and gentlemen, that concludes our question-and-answer session for today. Now I would like to turn the floor over to Mr. Ricardo Lewin for his final remarks. Please, Mr. Lewin, you may proceed.

[Ricardo Lewin, executive]

I just like to thank you for the participation of everybody. We had a very good quarter. And as I said here in the call, we expect to have good second, third quarter with certain uncertainties in the fourth, but we are still very positive with the 2021 year. Okay. Thank you, everybody, for your participation. Talk to your next call. Bye-bye. Thank you.

[Operator]

That concludes Rumo's conference call for today. Thank you very much for your participation. You may now disconnect, and have a good day.