Rumo SA

BOVESPA:RAIL3

Earnings Call Transcript 2021-Q2

[Operator]

Good morning, everyone, and thank you for waiting. Welcome to Rumo Conference Call to discuss the Second Quarter of 2021 Results. Today, with us we have Mr. Ricardo Lewin, CFO and 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. This event is also being broadcast simultaneously on the Internet via webcast. Before proceeding, we would like to mention that forward statements are based on the briefs and assumptions of Rumo's management on information currently available to the company. They involve risks and uncertainties because they relate to 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 second quarter of 2021. I would like to start by providing some highlights on ESG initiatives. Recently, we issued our sustainability report, bringing once again advances in our ESG agenda. We would like to highlight the evolution on diversity emphasizing that Rumo's Board of Directors reached 30% of women in its current structure. Furthermore, we included ESG indexes in the variable compensation of all employees. We also made significant progress in our public commitments and brought an even more ambitious goal to reduce CO2 emissions by 2030. We invite everyone to read the report and know even more about our progress in ESG results. 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 in the second quarter. Consolidated volumes grew 9.1%. A better market outlook and higher fuel prices allowed a yield expansion of 13.8%. EBITDA reached almost BRL 1.2 billion, approximately 32% growth when excluding the nonrecurring effects of Paulista Network renewal. Therefore, net income in the second quarter of 2021 was BRL 314 million, growth of more than 200% when excluding effects of Paulista Network renewal. In May, we had the first test in Rio Verde terminal. And in July, the terminal was inaugurated increasing even more our presence in Golas. Also worth mentioning the public call made in July by the Government of Mato Grosso to enable the railway expansion from Rondonopolis terminal to Lucas do Rio Verde and Curitiba. The deadline for choosing the winner is 45 days after the publication of the notice. On the next chart, we will present the operational results. Our operational results in the second quarter presented growth in all the operations and segments, highlighting the Container segment which increased 32.8%. Looking to the assortment of cargoes, the highlight goes to the recovery of fuel volumes and containers which had been previously affected by the pandemic. Pulp and Paper segment continues presenting consistent growth in commodity segment, the highlight was sugar, which grew 33%, while rains grew 5.5%. On the next chart, we will see results by operations. The EBITDA expansion of 32%, excluding the nonrecurring effects of Paulista Network renewal was a reflection of gains in all operations, especially South operation. Volume growth came with an expressive yield gain, which boosted net revenues. Fixed cost dilution also contributed to margin gain. On the next chart, we will see highlights of consolidated financial results. When comparing the financial results, it's necessary to remember that in the second quarter of 2020, we had a recognition of BRL 131 million as nonrecurring gains regarding the Paulista Network renewal affecting the comparability. Anyway, the financial result came worse than the second quarter 2020 due to increases in CDI and inflation indexes. With better operational performance, the net income reached BRL 314 million, a significant improvement in relation to the previous year when excluding the nonrecurring effects of the Paulista Network renewal. On the next chart, we will see more details of that. We have closed the second quarter with 2.1x net debt to EBITDA. As I mentioned in the previous call, the prepayment of the bond 2024 has improved the debt amortization schedule with a lower concentration of short-term debt allowing the execution of our long-term investment plan. On the next chart, we have the market outlook for soybean and corn. Regarding the soybean market in 2021, according to Agroconsult projections, Brazil should have a harvest of 137 million tons, an increase of 11 million tons compared to 2020. Of this total, 84 million should be exported, 2 million tons more than in 2020. In the first half of 2021, soybean exports were down 1.2 million tons compared to the same period in 2020 due to the delay in the soybean crop suggesting that there is still an opportunity for an increase of 3 million tons in exports in the second half of the year. On the next chart, we will see corn outlook. According to Agroconsult, we had a new update on the corn scenario, showing an additional decrease of 13 million tons in Brazilian production and a drop of 11 million tons in exports volume when comparing to previous forecast. This product failure is more severe in the state of Mato Grosso do Sul, Paranagua and Golas. Although, not so severe in Mato Grosso, the figure may result in lower exports as part of estate production should be used to supply the domestic market in other states. The higher uncertainty of the corn market make it difficult to project corn volume for the entire second half, reason why Rumo decided to discontinue its guidance for 2021. On the next chart, we will talk about the scenario for 2022. For the next year, we remain confident and we expect a huge growth in exports. Because of that, we are maintaining the long-term guidance for 2025. Farmers' profitability skyrocketed in last year, increasing 12x for corn and 3x for soybean. Therefore, from a supply standpoint, we should continue to see profit improvement 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 importer of corn, which increases significantly the global demand for grains. All of 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 some [ spot ] infrastructure. This time, I would like to highlight that we have completed the third line of [ Paqueta ] and export corridor. The Makuk expansion is expected to be delivered in September 21. Thereby, we are going to have a much better and more efficient port. On the next chart, I will comment on central network. As we had already disclosed in July, we officially inaugurated the Rio Verde terminal, thereby we have 2 grain terminal operating in Golas. The second quarter 2021 results show a strong performance evolution, both in terms of volume and in margins. Thus, Rumo is positioned in a very competitive place in the grain market, what should generate relevant increases in volumes over the next few years. Here, I conclude my presentation, and we can go now to Q&A session. Thank you.

[Operator]

[Operator Instructions] Our first question come from Andre Hachem with Itau.

[Andre Hachem, analyst]

My first question is related to the extension of Lucas, right. Basically, I mean, we'd like to understand a little bit more the digital safety you have in going through with a state-owned model instead of the federal model. Still on this question, I'd like to better understand the BRL 12 million CapEx, which was described from the project. I understand there's a new patch or the new railway, which would go to Curitiba. I'd also like to better understand a little bit about these volumes and what will be the potential demand there. So that's my first question. I'll make my second question after this one.

[Ricardo Lewin, executive]

Hachem, just to put everybody in the same page, just we have limited things that we can say about the process, okay? There is still no winner of this process. But Mato Grosso government did an announcement a few weeks ago requiring potential investors to apply for the authorization process to connect [indiscernible] terminal in Mato Grosso to Lucas do Rio Verde and Curitiba, okay? What we can say by now, Hachem, is that Rumo already applied, okay? We delivered very advanced studies regarding this. You all know that we have been studying this for a long time. So we are very well advanced in seeing projects, environmental projects, so we've already provided everything for the local .

And we -- now from the day of the announcement, we have 45 days to have the results of the requirement, okay? So this is the first important thing. I'd like to reinforce before going to your point that you guys know this is a very important project, not only for Rumo, this is a very important project for the producers from Mato Grosso. This is a very important project for the state of Mato Grosso, and these are very important projects for Brazil, okay? And for all our business, this maybe the most important project in the pipeline. It's a project, as I always said, we are very, very high return. We are talking about double-digit real terms project, okay?

Having said that, Hachem, regarding the CapEx, I think this -- the value general provided in the announcement. It's a reference, okay? Regarding the government, we are studying this. There is things that we can save. We have advanced a lot in these last 6 years in engineering methodologies. So this is more a reference from the local government. Once we have the winner of this announcement of the requirement of the government. And if we are the one chosen, we will provide details on CapEx.

Regarding the stretch to Curitiba, okay? Obviously, to be necessary to say that the high return comes out from Curitiba that comes from Lucas to [indiscernible], okay? But it's important, and I was repeating in my meetings, Hachem, that there are 2 returns when you build a new railway. And this is very clear in [indiscernible], for example. First thing is that you provide a better service for the people that is there, okay? So if there is a farmer already in the way of the railway, you improve the credit of service, you improve the costs, you bring efficiency. And the second thing, and I always refer here to [indiscernible] really is booked in that you bring development, where the railway reaches.

So it can have -- and you can see in central network, people calling us understanding what are the costs of railway and investing more where the rail is closed. And this will happen in Curitiba. It's a very interesting stage for containers, so general cargo you can provide there. And there is enough area not growth in Mato Grosso -- in the West of Mato Grosso to support the return of this strategy, okay? But obviously, the bulk of the returns of the project are in the north of the state, in direction of Lucas do Rio Verde. Hachem, I don't recall, if there is still something to be answered?

[Andre Hachem, analyst]

No, no, that was very clear. And if I could ask a second question on Santos port. You guys have made the -- I mean, there's a lot of -- there's already been a lot going on with the port. There seems to be a lot of new capacity opening up. And when we think about the central network, it is diverting cargo that was going to other regions of the port into the main part of the port, right? So my question is, do you see more opportunities to consolidate other players' terminals or to make more agreements to use other players to inspire capacity? I'm thinking specifically of [indiscernible] and maybe the capacity on the [indiscernible].

[Ricardo Lewin, executive]

Hachem, can I ask you to just make the question again. It's not very clear for me.

[Andre Hachem, analyst]

Absolutely. So when we think about the Port of Santos, you guys have already done a lot of things to expand more so you just mentioned [indiscernible]. But when we look into the future, I mean we still see a couple of different areas of the port. -- which are going to become underutilized, right? So when we go into [indiscernible], when we look into the capacity owned by [indiscernible], there seems to be more opportunity consolidated or to do more agreements with other players. How do you see this going forward? How do you see the opportunity to consider doing more expansion within Santos?

[Ricardo Lewin, executive]

Yes. You are right, Hachem. We -- and not only , I said in the last call, that we would be delivering a completely different court in the second quarter, and we did that. I have been in some sport last week, and you can see the improvement of efficiency brought not only the [indiscernible] that is still in the finishing the project by the third line of [indiscernible] and [indiscernible], so there is a huge development. I have -- I also went to 339, ourselves together, we build another 4 million tons of capacity.

It's a great first-class terminal in my opinion. We are from now on due the additional static capacity, okay, that we put even more the efficiency of 339. But you're right. We had the first fertilize -- the loading of grains in the [indiscernible] terminal, okay? So we do have an agreement with [indiscernible] that's good for both parties. And there is plenty of room in the left margin mainly in the left margin, okay? In the right margin, we will have next year, STS 11. There is the opportunity to all the work and the thing is less margin deeper word that we are still working with them, advancing the project. So there's plenty of opportunities for building new capacity, greenfield brownfield and improving the partnership that we have, both with for [indiscernible] and [indiscernible]. So you know that's very interesting for really have different opportunities to load grains and unloading fertilizers, and we are working very hard on that.

[Operator]

Our next question comes from Pedro Balcão Reis with Santander Investment.

[Pedro Balcão Reis, analyst]

First of all, congratulations on the transparency of discontinuing the short-term guidance given the high level of uncertainty in the near term. I have a question regarding CapEx, you saw a high level of investment on expansion in the quarter. You disclosed in the release that it relates mostly to the Malha Central, right, to the central network, about BRL 300 million, if I'm not mistaken. If you could give us a bit more detail on the evolution of this CapEx going forward, meaning the Malha Central network until when this high concentration will go? And overall, in terms of the long-term guidance, which you have kept unchanged of BRL 16.5 billion to BRL 18.5 billion. If you can give us a bit more clarity on the distribution on time of that CapEx, that would be great.

[Gustavo da Rosa, executive]

Pedro, thanks for your question. Let me start with this year. So you're right, there was a concentration of investment in the first half, mainly to afford the operations of Central network. We are not expecting as much CapEx in the second half as we did in the first half. This is pretty much the seasonality that we came up with the plan for this year. So we can say by now that the CapEx will be pretty much inside of the previous range. So we are not expecting any additional CapEx for this year.

With regards to the upcoming years, we might have to adjust the CapEx throughout the year. It depends a lot on how strong next year volumes will be so as Ricardo just mentioned, we are very excited about 2022. We are expecting huge volumes for grains. And also, we believe that Central Network is going to continue to grow fast. And therefore, it's going to require some additional investments pretty much on rolling stock to support and to afford the additional volumes.

But when it comes to infrastructure then the investments will be much more spread. So it will be more steady over time because it has to consider our ability to execute all the CapEx. So the only thing that might change from one year to other is how much volume -- more volumes we are expecting to have. But I would say that on average, the CapEx should be closed every year, maybe a bit more next year due to the ramp up in the volumes in the Central Network.

[Ricardo Lewin, executive]

If I can just complement your answer here. Actually, it's important to say, sometimes I repeat, but maybe these are things that investors I don't see. But every single year, we are improving -- we are investing a lot, and we are improving our knowledge in investment. So -- and also our knowledge in the operations. I always say that we are still a baby. We are a very nascent company. And every single year when we learn more about our operation, we are able to improve our cycle. So we do have a lot of focus in the improvement of our cycle that at the end of the day, that means improvement -- when I say improvement in this sense is a reduction of CapEx, mainly in rolling stock. So we have been very disciplined in terms of CapEx. And every time we improve our operations, we see a reduction of CapEx that we foresaw. We will see this year still a reduction compared to what we talk, and we expect to see also in the next year due to improvement of operations.

[Operator]

Our next question comes from Victor Mizusaki with Bradesco BBI.

[Victor Mizusaki, analyst]

I have 2 questions here. The first one is a follow-up on port capacity. Rumo -- I mean as you said, the company concluded 2 infrastructure projects at the Port of Santos, and based on your presentation, the company will conclude another 2 in the second half. So I don't know if you can give any kind of color on capacity increases. So maybe even if you cannot precise the number, but if you can say you are talking about here maybe 10%, 15% of capacity increase? And how important is this capacity expansion for Malha Central. And the second question is related to the second half, even though it's very hard to predict volumes for -- especially for the fourth quarter, I don't know if you can comment a little bit about volumes in July and August. And if we -- I mean, in some extent, if it would make sense to compare the second half of this year with the second half of 2016?

[Ricardo Lewin, executive]

Okay. I will begin here. Gustavo and I, we are fighting here to answer this question, that's good. But regarding port, okay? As I told you, there are 2 ways to increase port capacity. One is improving the railway, the efficiency of the railway and the other is creating capacity. We are doing both. As I told you, we just increased like 4 million tons, [indiscernible] line. But this is not capacity but all the orders increased a lot the capacity because you improve your cycle inside the port. Also by our agreement with [indiscernible], we can go to the left margin.

So you open room in the right margin to -- and you generate more efficiency because less margin unit margin with less traffic. So I don't like to give a number here. I can tell you like by what's probably a few words, for example, it will be another 8 million tons for grains, 3 million tons for fertilizers. But what's important to say is that the port will not be a bottleneck for the growth of the north and the Central Network in the next years, okay? And when it becomes close to the year, we will be doing new terminals, the ones that we are starting opening capacity. So that's not a concern that the [ spot ] will be a bottleneck for our group. So this is regarding the port. Sorry, the second one, Gustavo, could do. Losses in July and August...

[Gustavo da Rosa, executive]

Yes, yes, I can take this one. Victor, we'll be releasing the numbers for July today as soon as the market closes. So you'll be all having the data available. I can say so far that July was okay, in line with our expectations. So we have been saying that for the third quarter, we have a significant amount of take-or-pay that somehow protect us against any major loss in terms of crop failure. All the uncertainty lies on the fourth quarter, which is hard to predict and where we have lower amount of take or pay. So we depend more on the market. And what we know right now is the market is not clear. And the crop scenario might be difficult to predict with the disruption that we have right now. But we are not foreseeing any major losses for July and August. And we believe that any volatility might come from the fourth quarter. But as I said, it's hard to predict right now, and that's the reason why we suspended the guidance because we don't have the visibility. We don't have enough visibility on that right now to provide a new number. But numbers for the third quarter should be okay.

[Victor Mizusaki, analyst]

Okay. And so -- but I mean, can we compare this, I mean, the current situation of what happened back in the second half of '16?

[Gustavo da Rosa, executive]

Victor, there are some differences. First, I think this year, especially in the third quarter, the amount of take-or-pay is higher than it was in 2016. Another important thing is that this year, we have Central Network, and we didn't have that back in 2016. And another thing was that in 2016, also the sugar market, which is an important alternative for cargoes for Rumo was also bad. This year, sugar is evolving well. So we might try to take more -- try to transport more sugar and other cargoes. So we are less dependent only on grains. In 2016, we didn't have much other cargos to offset any losses from corn. But that being said, the size of the failure it's still not clear. So it's still too early to compare with 2016 because things could get better or worse from now on.

So we really need to have a better view on the fourth quarter. And we believe that we're going to have only a better view as we approach the fourth quarter. So as of now, it's really hard to come up with any prediction about these numbers.

[Operator]

Our next question comes from Regis Cardoso Credit Suisse.

[Regis Cardoso, analyst]

One of my questions was very similar to the previous one. Just wanted to make sure, I mean, the reason why you did not provide a new guidance, is it because you were, let's say, very uncertain about the volumes, or do you also feel very uncertain about the EBITDA. So that you -- I mean, you sort of canceled the last guidance. So we presume EBITDA could be below BRL 4 billion, but we don't know how low that could go, right? So my question is, is that uncertainty, mostly on volumes, or is it EBITDA. And then on those same lines, whether you believe third quarter should be similar to this quarter, second quarter levels? And then I'll ask the second question please.

[Ricardo Lewin, executive]

Regis, I will tell you very frankly that this is a bit tricky question because volumes and EBITDA are very correlated. But what I can tell you is that there is a huge uncertainty in volumes, okay? That obviously can affect our results. The point here Regis, is that, as we said, I think on the first and second call, we have good levels of take-or-pay in -- even in the third quarter when compared with previous years.

So -- but by the end of the quarter and the last quarter is very uncertain, okay? So if you see Mato Grosso, the sale of the crop was not that bad. However, there is a huge consumption of grains from the internal market. So it's very unclear for us, first, if there is any, if any, improvement or worsening of the scenario by the end of the year. How much will stay in the local market, how much will be exported? Also, there is something around 3 million, 4 million tons of soybean that's in Brazil, we had and can be exported.

So it's very unclear for us. The main points here are volumes, okay, and those that will stay in Brazil that will be exported. But the tricky point in that variables are for later, okay? So it's not easy to answer this question, but there is a huge uncertainty of skew, the scenario mainly from September on, okay, September, October, November and December. And what will stay here in the country and what will be exported.

[Regis Cardoso, analyst]

All right. So second question, and actually, if I may, just a quick one and then a more tricky one. The quick one is yields on central network are declining. I think as expected because we come from a very high base. Is this a trend we should expect going forward and whether you believe this should normalize? Is it something like 80 or 90 per RTK of KKU?

And the second question is in regards to Lucas do Rio Verde, again, the expansion project. My question is whether you see any benefits, let's say, potentially waiting for the federal government, who has proposed a provisional measure to accelerate the process [indiscernible] to create the authorization regime. I mean, do you believe, first that, that provisional measure will be successful in accelerating that discussion, if that will be an option. And if it is, if you see any advantages, let's say, going through the federal alternative as opposed to the state level?

[Gustavo da Rosa, executive]

Regis, I will answer the first question and then Ricardo will answer the second one. So with regards to the tariffs in central network, it's pretty much a strategy. So when we first started, we were operating only with a small terminal in São Simão. So there was an excess of demand. So we could pretty much choose whatever cargo we would like to transport. And of course, we choose the ones that were paying more. Right now, as we open the capacity in Rio Verde terminal, both capacities combined will be almost 10 million tons of grain. So therefore, we could be more aggressive in the market in an attempt to try to speed up the ramp-up in the volumes. So that is something that we will certainly do. So we are trying to get the volume as fast as we can.

And also, of course, when we have a different assortment in the very beginning, we were serving only soybeans. From now on, we should be also serving corn and soybean meal. So those other cargoes might have different tariffs and they could change a little bit the mix and the assortment of cargoes that we transport. But the most important thing about central network is that we were capable, as we've shown in the presentation to increase our margin from 47% last quarter to 66% EBITDA margin this quarter. So tariffs is not a problem. The real -- the thing that matters most here is how fast can we capture all the volume that is available in the market. And if we do that, margins could be even beyond this 66% level that we are today. Now Ricardo.

[Ricardo Lewin, executive]

Regis, let me try to answer the second part. Regarding [indiscernible], we are -- this was about the question, but I would like to declare here that we, Rumo is in favor of [indiscernible]. In our opinion, it's very transformational, okay? The only point here that we need to take care, is that having 2 models that are together in the same moment, you need to take care to -- not to harm the current one, okay? The current one is that our -- we have invested a lot. So we just take care with this model leading together, okay? So I don't know what's the right way of imposing or not imposing, voting, discussing to reach an agreement that brings safety, regulatory safety. I think this is important for the railway, this is important for the country.

So the way the government does that I will not comment, but it's important to reinforce here our points. Regarding having a federal expansion or state expansion, I will repeat what I always say in my meeting in that obviously, we would prefer to fill one. I always said that because we know all the regulation, everything. But the point that we have been working both alternatives, okay? And the local government, the Mato Grosso government has done a very serious work on that. Because this extension is very, very important for the state and very, very important for the culture in the country. So now it doesn't matter, like for us, it's state or it's federal. It's important that we have a solution for that. The winner of the announcement here, who is chosen by the government [indiscernible]. In our opinion, if we are a winner, we'll be ready to start to build by the end of the next year. So we are very excited. And in my opinion, all the regulation of the state will be very similar to the federal one and will work very well for everybody. So the question now in not which one is better, which we prefer. Is what we have, what the railway in Brazil has in hand, okay?

[Operator]

Our next question comes from Bruno Amorim with Goldman Sachs.

[Bruno Amorim, analyst]

I have a follow-up question on what's expected for the second half. I appreciate you cannot provide a guidance, but I wanted to clarify one point on the take-or-pay. Gustavo mentioned that you apparently have more take-or-pay now than back in the third quarter 2016. I remember back then, you were under those 3-year contracts where you seemed to be more contracted on their take-or-pay for 2016, '17 and '18. And I understood that even though you have been closing some take-or-pay contracts, short-term ones more recently, they were not as relevant as they needed to be. So I just wanted to clarify if I misunderstood or the reasons for you to believe you are more protected going into the second half of the year, maybe not only the third quarter, but also the fourth quarter.

[Gustavo da Rosa, executive]

Bruno, just to clarify, you're right, back to 2016, we had those long agreements. But most part of the time, the volumes were steady throughout the years. So we were not seeing volumes growing too much. At least the agreement, they were fixed. So every year, we had to add up some volumes to the agreement. This year, we sold in advance most part of the volumes for the third quarter. So if you look to the absolute volumes, we are far more sold than we were back then in 2016.

The problem, as I said before, it lies all in the fourth quarter. Fourth quarter is typically a quarter where in -- even when we have normal market conditions, trading companies and farmers always struggle with the ideas whether or not they should carry over some inventories for next year. So we don't have full visibility even in a normal year, what could happen in the fourth quarter. And for that reason, trading companies try to be more conservative with the volumes they have on their agreement to have some kind of flexibility.

Of course, this year, we sold more, but at the same time, they never expect us to buy everything in advance. So we still need to sell more take-or-pay for the fourth quarter. And of course, that's only going to happen if we have more availability in the market. So -- and 1 other thing, as I mentioned before, when we try to compare with 2016, is the entrance of central network. So that brings a whole new market to serve. So it was a market that we didn't have the ability back then to approach. This year we have. So of course, the same that I mentioned for the North and the South operation applies to the central. So farmers and trading companies are not willing to engage with all the volumes for the fourth quarter because they always know that there might be some uncertainty there.

And the most important thing about those volumes that we sold in advance is that we not only secured the volumes, but also secured some pricing level. So the price that we sold in advance is very good. The thing now is as the market conditions are worse off. Of course, if we have to sell more now for the fourth quarter, prices are definitely going to be lower than the prices that we have under the take-or-pay. So that's another reason why we have some uncertainty because it's not only if we're going to have the volumes, but whether or not this price is going to be pressured by a lower demand that's going to be available in the market.

[Bruno Amorim, analyst]

Just to make sure Gustavo, that I understood you correctly. So you said you have sold a higher volume versus third quarter '16. Is it as a percentage of the expected volume? Or is it in absolute terms. It makes a difference because the company has grown significantly since then, right?

[Gustavo da Rosa, executive]

Yes. I don't know have the numbers by heart, but I would say definitely in absolute terms, the volumes are higher. I'm not quite sure about the percentage, but at least from an overall standpoint, volumes are definitely higher.

[Operator]

[Operator Instructions] The next question comes from Lucas Barbosa with Santander.

[Lucas Barbosa, analyst]

Gustavo, so I have a question on the BR-163 road. So the road concession up until Miritituba was auctioned last month and toll collection to start in the first semester of 2022. I just wanted to hear what will be Rumo's strategy as a response to the start of the toll collection. So in other words, is Rumo thinking about increasing prices next year as a response to the BR-163 toll collection? Or Rumo will maintain prices stable and focus on expanding volumes?

[Ricardo Lewin, executive]

Lucas, thank you for your question. I got a part of the question because I dropped here, but let me -- if I got. What's important here is that it's not expected to have the toll roads ready until beginning of 2023, at the end of 2022. The winner of the BR-163 concession needs to do some improvements in BR-163 because they can charge the road fees, okay? So for next year, we still not have the BRL 20 or BRL 25 per ton additional going up, okay? Having said that, there is -- this BRL 20 or BRL 25 per ton more can be used for both. For price improvements or can be used to get additional market share to be more competitive, okay? So in this sense, we still need to wait closer to the moment that the toll roads are ready. To know how is the market, to say where we'll use it. But our strategy will be used part in price improvements, part in gaining competitiveness.

[Operator]

[Operator Instructions] Our next question comes from Bruno Amorim with Goldman Sachs.

[Bruno Amorim, analyst]

Follow-up. I just wanted to follow up on the take-or-pay on the profitability side, as we have always said, the profitability of the take-or-pay for us is never the same as transporting the grains themselves. So is there any color you can provide in terms of how to quantify how much protected you are. Not in terms of the percentage of volumes which are on take-or-pay. But on the profitability of the terms of the take-or-pay contract. Any color you can provide and maybe if you can provide anything concrete for the second half of this year, maybe directionally the terms that you are closing now, do they protect you more or less than in 2016 for each 1 million ton under the take-or-pay.

[Ricardo Lewin, executive]

Go ahead.

[Gustavo da Rosa, executive]

If you look to the take-or-pay structure, probably the structure is -- protect us a bit more this year than what we had back then in 2016. So the percentage of the fee is higher. But that is a better protection for the third quarter, where, as I mentioned, we have higher -- the most part of the volume is secured by take-or-pay. So if you have any failure in volumes in the third quarter, take-or-pay might have set well in terms of profitability because either way, most part of the volumes are going to be there. Because trading companies are not happy to pay take-or-pay. But when it comes to the fourth quarter, it's already a quarter where we have some idle capacity.

So we never sell 100% of the capacity because usually the market is not high enough to do that. The structure is still better, but as long as we still have a significant portion of the volumes to be sold, that could arguably hurt our profitability. We can't deny that without having the volumes, especially when we are not fully protected with take-or-pay, that might hurt profitability because we depend a lot on fixed cost dilution. Of course, the company will do all the efforts in costs, also trying to get other cargoes to offset or to prevent any major drop in terms of profitability. But it's -- as we have been saying throughout this call, we still have uncertainty, especially on the size of the failure in corn.

But we are working hard internally in the company to bring all the cargo that we can to the system in order to protect the profitability of our operations. But it is real hard as the same way it is to provide guidance for volumes and for fuels. The same is true for profitability because profitability is ultimately driven by the volumes. So we'll do our best to try to get and to operate with as much profitability as we can in the fourth quarter. Very likely, third quarter, as I said, is going to be okay with profitability. We are still predicting good volumes. And we have a central network much more mature with higher volumes. So the scenario of things much brighter for the third quarter than it is for the fourth quarter.

[Operator]

Our next question comes from Alfonso Salazar with Scotiabank.

[Alfonso Salazar, analyst]

Suzano announced a big investment for a new pulp mill in the state of Mato Grosso do Sul. And what we have seen is a new wave of pulp investments by different companies, CMPC, [indiscernible] and now Suzano. Just wondering what is the outlook for growth of transported volumes for pulp over the coming years? If you can comment on that?

[Gustavo da Rosa, executive]

Alfonso, you're right. We are seeing pulp producers growing a lot over the past few years. And also, our volumes of pulp are growing fast. Last year, we had an important debottleneck at the port of Santos. So the government did the action of 2 new terminals for pulp that have the ability to operate with railway. So we have a couple of projects together with the pulp producers that very likely are going to boost our volumes of pulp going forward. So we operate with all the major players like Klabin, like Suzano. And as those negotiations and those agreements advance we are going to be able to capture most part of the volumes that we are seeing in that market. But just to be clear on that, we are presenting sustainable growth on pulp over the last 2 years at least. And definitely, going forward, we continue to expect a large growth coming from pulp producers in South Mato Grosso state and -- which also brings more volumes to us in Mato Grosso state.

[Ricardo Lewin, executive]

Just to complement here the question. And also, Klabin, just to understand the difference. Klabin is transported -- the volumes produced by Klabin is transported by containers by Brado, okay? So the agreement that we announced in the last call, refers to 50% of the total volume of Klabin plant, okay? Just to have an idea, in a usual year, Brado transported 90,000 containers. Klabin contract represents another 30,000 containers, okay? So this is really expressive. In my opinion, it's transformational for the plant, mainly because we do have opportunity to increase from 50% to 100% of the capacity of the plant, once we provide good service and the plant is 100% working.

Regarding pulp production in Mato Grosso, maybe you have seen an interview from our Commercial VP, saying about our conversations on the new plant for Suzano. And obviously, our strategy is to take the pulp through the most efficient concession that we have that is through the North concession. So what we are doing is taking a very stable volume and transporting in a much more efficient concession that we did in the past. So the stability, the improvement of profitability is very important for us. So we really foresee the importance of pulp in our segments.

[Operator]

Our next question comes from Guilherme Mendes with JPMorgan.

[Guilherme Mendes, analyst]

A quick follow-up question here regarding the Lucas project. Can you provide more color in terms of the environmental approval, I recall that you filed for that back in 2019. Just wondering what your expectations for it to be concluded?

[Ricardo Lewin, executive]

We have started a long time ago, the analysis. And you know that in Brazil, this kind of approval, this kind of license, the environment license is usually a bottleneck. So we knew that, and we have been working much before, had any announcement of the government. Because we were interested in the expansion. The most important thing is that who is doing the analysis. It is the local government, the local environmental agents, IBAMA, because that is good because IBAMA has a lot of projects. And this specifically is very important for Mato Grosso. So I think that can be a bit faster, although they are -- they do the same requirements than in IBAMA. But we are very advanced. And what I can tell you is that in the second half of 2022, so second half or second year, we expect to have the license to start building the extension once we are the ones chosen by the Mato Grosso government. So it's very well advanced.

[Operator]

Thank you, everyone. That concludes our question-and-answer session. 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]

Well, you guys know that I usually don't do any speech by the end of the call, but I think this is a good moment for a brief speech from my side. Although, we have the yields on the sale of the corn crop for the next half of the year, I really would like to reinforce that we are in a very, very good moment for the company, and Rumo has a bright future. Operationally, we have 2 months of record in this last half of the year, showing that we can increase our volumes even in the peak of the harvest. We -- remember guys that we started to operate the 120 railcars cars per train. And here I'm confirming that it's a very promising project. Next year, 2022, will be fully operating in both sides going to Mato Grosso and going to Santos, reducing train crossing, reducing emissions, reducing consumption of fuels.

Talking about fuels. This was a another quarter of improvement in consumption of the fuel. And I reinforce what I always say that we will be improving the consumption of fuels for several quarters. There's a lot to do in the Santos. I will not talk more about Santos. I think, I have taken a lot of things about Santos in this call. We delivered 2 terminals in Goiás. We already have double-digit market share in Goiás. It's really impressive with impressive efficiency with impressive margins. So we are supporting the agriculture of Goiás state. We have been improving our commercial skills by improving the knowledge of the market by the proximity to our clients. And I think that this improvement is shown by the gain of market share that we had this year. If you see our competitors volumes has been going down, and we have been gaining market share.

Financially, I don't need to say the company is very stable compared to 2020, every single month, we have done better EBITDAs, unless in January because of the postponement of the crop. Now we have the opportunity to do expansion. We may have the opportunity for expansion if we are the winners of the bid. You know that this is really transformational for the company. This is the project that we foresee since the beginning of the company is serving the middle and north of the state of Mato Grosso, bringing [indiscernible] for the Brazilian agriculture for Mato Grosso. So -- and Brazil is improving in agriculture, the consumption of protein is continuing to grow. And you know guys that Mato Grosso will serve -- Mato Grosso will support this increase of consumption of protein and we are there to serve this growth of consumption of protein. So just finalizing here my speech, I think that Rumo [indiscernible] is stronger than ever. We are very optimistic with next year and with all the next years of the company. I'd like to support -- no, I'd like to thank the support of all our investors of the sell side that understands very well the company and talk to you during the next quarter. Thank you very much.

[Operator]

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