Rumo SA

BOVESPA:RAIL3

Earnings Call Transcript 2022-Q3

[Operator]

Good afternoon, everyone, and thank you for waiting. Welcome to Rumo conference call to discuss the third quarter 2022 results. Today with us, we have Mr. Rafael Bergman, CFO and IRO; and Mr. Gustavo Rosa, Investor Relations and Treasury Director. [Operator Instructions] This event is also being broadcast simultaneously on the Internet via Web Cast. Before proceeding, we would like to mention that forward statements are based on the beliefs and assumptions of Rumo's management and 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 that 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. Gustavo Marder, please. Mr. Marder, you may proceed.

[Gustavo da Rosa, executive]

Good afternoon, everyone. I'm Gustavo Marder, Investor Relations and Treasury Director. Thank you all for joining us in this earnings conference call for the third quarter 2022. As usual, I would like to start by providing an update on our ESG agenda. On the environmental, social and governance side, Rumo received important awards and acknowledgments.

We highlight for the second consecutive year, we came in first place in the best of the year 2022 awards In the logistics category. In September, Rumo Institute completed its first year of operation. In 2022, in addition to activities carried out in the city of Rondonopolis, Mato Grosso, we started working in Cubaton, Sao Paulo. These and other relevant topics will be addressed in the 2022 edition of our annual sustainability report. In the next slide, we will present the quarter highlights. Operationally, we achieved the highest volume ever transported by Rumo in a month, with more than 7 billion urticates in July, and in the quarter with approximately 20.3 billion urticates.

Our consolidated yield grew 23%, while the market share continues to evolve in Maturos, gaining almost 1 percentage point, which reinforces our constructive view for the logistics market. The higher volumes and yields provided the best EBITDA quarter in Rumo history with BRL 1.4 billion. Net income, driven by this operational improvement also grew totaling BRL 309 million in the quarter. On the next slide, we will present the market share results.

In Mato gross, we gained 0.9 percentage points in the third quarter and 4.9 percentage points year-to-date. In Goa, the market share fell 7 percentage points, mainly due to the prioritization of cargoes in the central network to serve the Eastern region of Matugrus. Year-to-date, we accumulate 2.4 percentage increase in the market share in the state of Goiás. In the Ports of Paranagua and Sao Francisco do Sul, we grew 5.2 percentage points in the third quarter due to improved competitiveness in Mato Grosso do Sul state, which allowed us to bring more long stock to those folks as a result of more pronounced cabin crop failures in the Hublou state. 

On the next slide will detail the operational highlights. From an operational standpoint, Rumo continue to show a good evolution in its KPIs. In the third quarter, transit time in the North operation came practically stable even with a 24% increase in volumes compared with the third quarter 2021. Year-to-date, the indicator shows a reduction of 6.1%. The real time in the port of Santos had a significant improvement of 13.4% in the quarter. The unitary fuel consumption reduced by 5% in the quarter and accumulated 7% drop in this year as it continues to contribute to the agenda of reducing CO2 emissions. In the next slide, we will present our operational results. Transported volumes grew 23.8% in the quarter, uplift by the Northern operation, which grew 32.5%, helping to compensate the stable performance in the South that was impacted by the soybean harvest shortage. Looking at the performance by segment. It's worth noting the 38.6% growth in rents, 11% growth in fuels and 9.5% in containers.

 On the next slide, we will see the results by operation. Consolidated net revenue grew 50% in the quarter, reflecting a 23.8% volume growth and a 23.2% improvement in the yields. Fixed cost and SG&A expenses grew 8%, in line with inflation, even with the higher level of activity in the central network, demonstrating the company ability to manage costs and combine growth with operational leverage. The variable costs grew due to the higher volumes and the increase in the diesel prices, which rose 68% year-on-year.

The EBITDA margin evolved 2.4 percentage points in relation to the third quarter 2021 and continues to recover, reaching 48.4% despite the higher diesel prices, which reduced the percentage margins even when passed through to the tariffs. In the next slide, we will discuss the financial results. The financial results in the third quarter had an increase of BRL 253 million when compared to the third quarter last year. The cost of net comprehensive debt and other expenses increased mainly due to the variation of the CDI and the inflation indexes, which are related to both the company's debt and its concession and lease liabilities. Net income for the quarter was BRL 309 million, reflecting the expansion in operating income.

 In the next slide, we will see the indebtedness and our debt amortization schedule. We continue on our deleverage trajectory with net debt-to-EBITDA ratio reducing to 2.4x compared to the second quarter 2022. We ended the third quarter with debt and gross debt roughly in line with the previous quarter. EBITDA in the last 12 months still reflects the shortfall of corn crop in the fourth quarter 2021. I also remind you that the effects of the 80% sale of the port elevations operation that when completed, should enable further reduction in leverage is not considered here. Our debt and amortization schedule did not present any significant change since there was no relevant funding or amortization this quarter. It's worth highlighting the long-term profile of our debt, which is the execution of the planned investments, including the extension of Rumo in the Mato Grosso State. 

In the next slides, we have the market outlook for soybeans and corn. According to the projections of third-party consultancies, Brazil should have a soybean harvest of 127 million tonnes, of which 77 million tonnes should be exported. While Mato Grosso should produce around 41 million tons, 26 million of which are designated for exports. In Goias, production is expected to be 18 million tonnes with 10 million tons to be exported.

Despite the growth expected for Mato Grosso and Goias, the drop caused a decrease in production in the states of South, resulting in stable performance in great segment of the South operation this quarter. For 2022, about 6 million tons can still be exported between October and December in Brazil. On the next slide, we have the outlook for corn. The projections continue indicating 150 million tons harvest of corn, of which approximately 40 million tonnes should be exported. While Mato Grosso should produce about 40 million tonnes and export 25 million tonnes, Goias is expected to produce 10 million tons with 3 million tons for exports. 

In the next slide, we will present the updated guidance for 2022. Regarding the volume, we have narrowed the previous range and expect to reach between 74.5 billion and 76 billion RTK. We see favorable market dynamics for October and November. The guidance will reflect the volatility of December, a month where the producer may eventually carry inventories into January. In EBITDA, we estimate a range of BRL 4.45 billion up to BRL 4.6 billion. CapEx remains in the same perspective as previously presented. We expect to end the year in line with the plan between BRL 2.7 billion and BRL 2.9 billion. Thereby, I conclude the presentation, and we can start the Q&A session. Thank you.

[Operator]

[Operator Instructions] First question comes from Daniel Sasson from Itau BBA.

[Daniel Sasson, analyst]

My first question is about your commercial strategy. You finished this quarter very strong in volumes and in fees. Can you tell us a bit where did you get it right this time? Of course, the environment for negotiations is much better than what we had late last year with a crop shortfall. But in your opinion, what could you improve in terms of timing, expectations, and what can be may be repeated in 2023?

[Rafael Bergman, executive]

Our commercial strategy hasn't changed. Our strategy is to maximize value margins throughout, as we have talked in previous meetings. We had an expectation to at least have more normal freight markets, and indeed, this happens. So the market is more healthy, and it allows us to recover the transfer costs. So this is a very important moment for us to recover margins into a healthy standard. Since we will provide an important capacity for producers, clients, I believe that this constant dialogue with clients in staging the use of our capacity has led to good results for the company and for our customers as well. Looking to the future, we have a positive scenario in terms of our capacity to provide good services at the appropriate price. And we see this in Q4 with yield as well. But again, always thinking about joint value creation because we are part of a key supply chain for our country.

[Daniel Sasson, analyst]

And since you've mentioned staging of the farmer selling, can you talk a little bit more about one of the reasons to -- for the increase of your EBITDA this year. Is it connected to changes in volumes in Q4, exports becoming stronger at the end of the year? Can this maybe suggest a stronger quarter than the negative seasonality of Q4, as it is usual. Having a stronger Q4, is it more probable or more likely now?

[Rafael Bergman, executive]

Well, as we mentioned, we did reduce the window for volume projections. So yes, we are looking at a strong Q4. It has to do with the availability of product in the system, which is above what we had initially foreseen for the year. This is our expectation. Maybe as a comment, December in a strong quarter, December might not be that strong. If we compare this to last year, last year, we had a strong month of December. We had an unexpected volume of products last December.

This year, we still have some flexibility. That's why we preserve this interval. You've probably heard similar conversations about tradings looking at strategy to maybe hold a little bit of product for next year. So we need to see what this decision is going to be like. Also in December, we need to be careful with our maintenance windows, most of all in preparation for 2023. When we look at market forecasts, 2023 is probably going to be a very favorable year. We want to start off with good capacity available. It's going to be an important year for us.

[Operator]

Our next question comes from Guilherme Mendes from JPMorgan.

[Guilherme Mendes, analyst]

My first question is connected to the first question on commercial strategy. It is regarding yields for next year. We are looking at strong volumes. We have BR-163 and the freight over there. Can you tell us a little bit more about what we can expect in terms of fees for next year? Do you have visibility of the take-or-pay levels? And I have a second question then.

[Rafael Bergman, executive]

Well, we are still not making our 2023 figures public. So I'm going to talk from a qualitative perspective. 2023 is going to be a favorable year from the perspective of demand for freight services, which, of course, is helpful for our business. We need to be prepared to grow our services and meet our customers' needs. So we still see a positive scenario when it comes to the value of our services, looking at the level of demand we've had. We also have the responsibility of reaching correct margins to support the costs we have now, but also an investment program that we've announced recent Locos is a case in point. We want to provide more capacity to our customers. So that's the situation.

And I believe it's compatible with this investment strategy and in offering freight services because we do see a growing demand for this service and the resilient scenario. Thinking of pace, of course, this is strategic information. However, what I can share is that we are moving forward in trading capacity for next year. Our main focus is, well, appropriate margins, but we also want to have a balanced programming for different months with the goal of maximizing all the capacity we offer to the system. So that has been the focus of the sales team as a whole. And these are the conversations we are having with our customers.

[Guilherme Mendes, analyst]

Second question is about the Santos, so Port of Santos. If there's no specific bottleneck today, but in the medium and long term, you were investing in Lucas, do you see any type of bottleneck in the short term? And what are the main investments in this front?

[Rafael Bergman, executive]

Well, Guilherme, this is a topic we approach in our meetings every once in a while. Having the capacity in the Santos port and not just on the tracks. So we are investing in different fronts. When we talk about company investments we have the goal of increasing the capacity that reaches the port of Santos. When we talk about investments in the network, in the port area, we are duplicating some internal lines to improve the maneuvering of vehicles and the movement between different terminals. These investments are ongoing. As for fees or FIPs, this evolution gives us the additional comfort.

It's a plan of investment that we already thought was important, but this is now going to be done through this new association in a split system. So we can increase the capacity of the Santos port to meet the growing demand for these services for cargo in the sport, cargo lifting. Some terminals are expanding their capacity. Our terminals those in which we have a participation have specific projects even this one that we're about to sell, it has an additional investment plan, and we are going to move forward. We're going to preserve 20%, but now we are going to have some partners. With T-39, we are expanding on static and we have more opportunities to develop.

 And we also mentioned the decision that was made, and that leads to increased capacity. So I guess that the most honest answer to your question is, we'll keep on working so that Santos has good capacity when we can provide good capacity coming from the real world. Conditions are favorable. Some other institutions are joining us in this journey, both in terminals and some associations as well. Some players that have invested in terminals recently.

[Operator]

Our next question comes from Lucas from BTG Pactual.

[Lucas Marquiori, analyst]

First, I'd like to know when we look at Q3 on the year-on-year, this increase of JJ has been quite strong. I imagine this is led by the North operations. What was the yield in the central network? We know it's a more competitive area. I would like to understand if the central network is absorbing this gain of competitiveness that was caused by the export channel. Second question, and I wanted to hear what you think of the scenario. There are discussions about some political changes. What do you see as the impact of this discussion to tax grain exports? How would that impact your business? Do you see any political risk? So how do you look at this debate?

[Gustavo da Rosa, executive]

Thank you for your question. Well, the yield gain was quite linear in all different operations. So all corridors reflected this dynamic of increased demand for freight services and that boosts the price of trucks, and for corn specifically, we went to the market, providing better conditions. So this had an impact in our yield gains. For the central network, there is something we mentioned in our results release and in our presentation. Last year, when the central network was being ramped up, it just served the most obvious volume. Of course, we are still expanding volumes and we are reaching remoter areas. Then we have some areas in the state of Mato Grosso. Of course, this is incorporated, but it's still not material in terms of changing our yield. All operations ended up having a positive contribution for the yield. Second question, I think Rafael can help me with that.

[Rafael Bergman, executive]

Lucas, I think it would be a speculation, mere speculation, to comment on possible measures that might be discussed. Our perspective is quite constructive when it comes to the role of agribusiness in the world's food supply chain. So that's what we believe in, and we are prepared to meet the growth of the agribusiness industry. And that's our focus right now. Make capacity available being competitive, focusing on cost effectiveness, safety and being prepared for different scenarios, but certain that the Brazilian agribusiness is very strong when it comes to food security for a world that has a growing demand for our food.

[Operator]

Next question comes from Rogerio Araujo from Bank of America.

[Rogério Araújo, analyst]

And my first question, I wanted to talk about fees. Last quarter, we saw a gap of about BRL 80 per ton in the equivalent that Rumo could be charging when we look at other export corridors versus trucks. So Rumo could be charging BRL 80 additionally, maybe without competitiveness or without volume. Anyway, we saw this gap. This quarter, this gap was of BRL 20. And if we don't consider the toll rates in that road, it would be even higher. So this can be a -- it's actually a qualitative question. How does Rumo see this process of closing the gap? This is something investors talked a lot about. How far below this level that is equivalent to other quarters, does Rumo intends to be in order to be competitive and gain in volumes. If you can comment on this, please.

Regarding tariffs, I know it depends on volume expectations. But it seems to be implicit in the guidance, a marginal reduction of fees in Q4, which is something normal due to seasonality. I just wanted to understand if my comment makes sense or if we might have some additional tariff increase by 2023. Still in tariffs, I wanted to understand if the tier projections to 14%, are these tariffs close to what happened in previous quarters? Or is it closer to market equivalent? I'm going to also ask my second question about ports. When do they leave consolidated? And when do you have only Rumo's share in it?

[Gustavo da Rosa, executive]

Rogerio, I'm going to take your first 2 questions connected to spread. And then we can talk about Q4's fee and Rafael can help me out here. Well, Rogerio, the first thing to take into account is that the rail road value proposition is different from the truck value proposition. The truck is more focused on spot markets. So for any negotiation windows, the value proposition of the railroad is to lock freight based on an expectation of what will happen with the price of trucks in the exact period in which those services is going to be provided. So it's not a direct comparison. I don't know it's the price of the freight when I will actually deliver the price -- the product, but if I'm asking for budgets 3 to 6 months ahead, we have to look at expectations. Of course, our strategy is to be more competitive than trucks. This is a given whenever we negotiate fees.

 We take a stance against an expectation of fuel prices in the future, the spread is too big. In practice, it means that the market has improved or that the price of trucks has significantly improved, which is actually favorable for us. It means that in the next window, we will have the opportunity to close this gap. But we also have to take into account the seasonality impact. So when we look at the price of freight, it's reacting to supply and demand. So when there are peaks, when the crop reaches a peak, we see a larger spread. And this is normal when we reach the end of the year, the peak then retreats. And it's also normal to see the spread opening up a little bit more when we have the new soy crop in February, March next year. So it's quite a dynamic movement. What we saw in Q3 is a clear movement of recovery, recovery of profitability. But this is an ongoing process. It doesn't finish here. It's not over. And of course, it depends on how the market will evolve throughout the next few months. 

Regarding Q4 tariffs, yes, you're right. Since demand is smaller in Q4, you have lower fees in Q4. I don't think the difference is material. Last year is not a good reference point because it was -- there was a crop shortfall. So it's expected to forecast a smaller fee than in Q3, but with gains when compared to last year, which was a year with the crop shortfall and then it's not a good reference. Regarding Lucas, Bergman is going to take your question.

[Rafael Bergman, executive]

I'd like to talk about the sales process of the port areas. We are now closing this operation, finalizing it. We hope this will take place until the end of this year. And when it does take place, we will let the market know as well as when we publish the results when the sale takes place. With the impact of the sale and also the EBITDA that would not be consolidated in order to help you model this impact from now on. So we want to have a possible comparison between 2022 and 2023 moving forward. We will let the market know when we have some more concrete news. 

Regarding Lucas, and we did a conference call just to talk about this project, right? And we showed a little bit of our thesis, how we were comparing alternative solutions for Lucas and for the first stretch as well until Campoverde -- and it shows quite an interesting competitiveness for this railroad. When we show the graphs with competitive fees, I mentioned that our expectation when we do the economic analysis to check on return, it's not about using that whole limit because that limit needs to be weighted according to a medium and long-term strategy. What do we want to achieve in terms of market share? So that fee limit is not what we foresee when we model revenues. We don't foresee for Campoverde or Lucas do Rio Verde, but it's an important indicator in terms of trust. We trust that in different scenarios, this is a project that adds value to our company because we can provide competitive solutions for our customers.

[Operator]

Our next question comes from Bruno Amorim, Goldman Sachs.

[Bruno Amorim, analyst]

I have 2 actually. The first is a follow-up about the outlook for next year. What are the drivers you see for next year? We've discussed the reasons. So this is a driver for EBITDA increase. There's an increase in volume, of course. And if the volumes you've mentioned for soy and corn, if it's concrete, it's probably an amazing opportunity for the company. So what is the capacity you want to add to absorb volumes, how much it can grow from a capacity perspective?

And then we have the tolling of BR-163. Is there any additional driver? And the second question is regarding CapEx. Just recently, we announced a relevant increase for the LocostohuVerji project. You've addressed the reasons already. So it's a follow-up question. What is the implication of that for the current CapEx plan? You have this detailed for Lucas. Is there a perfect detailing for CapEx? I just wanted to understand how should we understand this price review for CapEx as a whole? I'm talking about the BRL 3.5 billion that you mentioned for the following years. and how these estimates were done if they were done differently from Lucas to Evergy.

[Rafael Bergman, executive]

Well, as to the first question, we see the same leverages. So there is a natural recovery of margins. We can talk of margins in the first quarter when compared to this year because we still had the carryover from the crop shortfall for corn in 2021. So there is the opportunity to balance these fees for next year. In general terms, we are looking at our margins regardless of the setting, which was quite difficult. Now we're in a more positive movement due to the demand for freight. We have the expectation of an increased competitiveness. We were looking at the toll -- charging tolls at BR-163 highway, and this is reflected in a moment of competitiveness. In our commercial negotiations, this competitiveness will be translated into an offering of volume and price. In our vision, it can lead to a better margin of contribution for the company. 

When we look at the 2023 outlook, we have these triggers. With an increased volume when you talk about capacity, I think that what's relevant is how do we allocate capacity throughout the year? I mentioned this a while ago when I talked about the focus on allocating capacity through time. If we can avoid too much concentration, we can better plan demand or look at demand, and we can give a better offer to the system as a whole. And in Q1 this year we did have smaller volumes for the South network due to the drought that had an impact in soybean. The South operation has a smaller financial representativeness in Rumo's operation. But in terms of volume, right now, we have this perspective of recovering on these volumes. So yes, we are -- we have a positive outlook for 2023 in terms of delivering volume with appropriate margins looking at those triggers and again, focusing on competitiveness and providing good services. 

Well, looking at Lucas do Rio Verde CapEx and the drivers, there is a key question here. This is a greenfield project. So it's a different nature of CapEx than what we execute and that is part of the original guidance of the company. So the first impact is detailing the scope with engineering studies. And the secondary impact is the units that have an impact in the CapEx we will have, but this is not new. What we -- or the decisions we've made, not just regarding cost prices, but looking at the company's capital costs, they are higher because of the interest rates, of course.

But we want to give more room to the Lucas do Rio Verde project for it will generate a lot of value for the company, and it's strategically important. So we made some priority decisions. So when we become comfortable that interest rates will start to fall down, this can be more attractive once again, but we still have the CapEx guidance that you -- guidance that you know. So we just stressed the CapEx guidance for this year. I mentioned that for next year, we will not remain at the same standards. If we exclude Lucas, it's going to be a little bit above that. But closer, I would say, closer to the low side of the public range, 3.3 billion to BRL 3.7 billion, that's excluding Lucas. We are doing the budget process right now to see what makes sense to the company in terms of staging, priorities because we need to be conservative in our capital allocation with this macroeconomic setting.

[Bruno Amorim, analyst]

If I may ask a follow-up question. I think that the 2 questions are connected. You talked about staging. What is the impact in terms of volume and distribution. This -- I don't know if this is in your hands as a company. How much can you grow next year in Q2 or Q3 versus the same period of this year? Can you have a double-digit growth, 10%, if there is demand? Do you have capacity?

[Gustavo da Rosa, executive]

When we provided the guidance and the investments we've planned, that's the target, about 10%, the expansion in capacity. Of course, if we want to have more capacity, we need to invest more. What Bergman was saying here is that in 2022, due to different reasons, except for the Southern market that suffered with a crop shortfall, if we look at the main markets for the Central and North networks this year had a favorable seasonal impact. We had an anticipated soy crop with record volumes in January.

And we are talking about a Q4 that's going to be quite strong October and November. There are some caveats for December. But when compared to last year, it's going to be a favorable quarter, Q4. That does not happen all the time. We know that some factors are beyond our control, and they can lead to an unfavorable seasonality. So our efforts more than absolute volumes to be traded with clients is how to protect seasonality and ensure that we can better use our capacity in lower demand moments.

Of course, this is connected to an expansion of our capacity at peak time. But capacity at peak time is always limited. And it costs to increase capacity at peak time. So on the one hand, we have to expand capacity, which is connected to the investments we have presented in the guidance. And also the curve for volume distribution has to be closer this year. Otherwise, this might hurt the EBITDA bridge you mentioned in your question. So that's the negotiation we are going through right now to ensure that we have the best possible sales curve in order to maximize our capacity for next year.

[Operator]

Our next question will be asked in English from Stephen Trent from Citibank.

[Stephen Trent, analyst]

I have 2. So the first one at the risk of asking you an oversimplified question, do you have any high-level view regarding what could be the long-term optimal mix between take-or-pay contract versus what you guys get on the spot market?

[Gustavo da Rosa, executive]

Well, every once in a while, we talk about the take-or-pay matter versus spot. Part of our portfolio of clients, they do operate with take-or-pay contracts. Most of all, when it's liquids or pulp and paper, we do have this type of contract, usually when our clients invest in rolling stock. For our grain portfolio, market practice is what we call term contracts. So they are not long-term contracts, but we negotiate these contracts usually before the crop that is being performed.

So right now, we are negotiating volumes for next year, for instance. When we sign these contracts, -- and up to the point when we provide transportation services, these contracts have mechanisms for corrections or adjustments due to positive or negative variation of diesel prices. That's the current system. And I think it allows us to work quite well because at the end of the day, our clients, they rely on the capacity of railroads to transport these products. And our focus has been in having partnerships that lead to incentives aligned between the railroad and the customers. 

We've mentioned a couple of examples such as terminals, with investments coming from clients even in the central network which is more recent for us, we have the Sensima partner, which is a partnership, then we have the Iturama terminal in partnership with Kururipi in the HV consortium we have in Alaris plant. That leads to alignment, and it makes a lot of sense to us from the perspective of using the railroad and serving the best interest of clients for using these assets in which they've invested. When they also invest in rolling stock, this alignment takes place as well.

So now for the Mato Grosso extension, as we were talking last week, regarding the Campoverde first terminal, this is going to be a terminal where an important customer is going to invest. So there's also alignment. And even in the Port of Santos, we have the investment from CFPO, which also leads to alignment, someone investing to [ abilitate ] a terminal of over 14 million tons. Of course, they're going to be a partner of the railroad in the long term. So we are looking for genuine alignment between railroad and customers. It gives predictability and safety to keep on with our journey of investments.

[Stephen Trent, analyst]

Just my second and last question. I think during your previous call, you had mentioned some ESG initiatives with respect to maybe buying some electric locomotives and other type of rolling stock type adjustments. Just wondering what the time line on some of those ESG-related rolling stock investments might be.

[Gustavo da Rosa, executive]

I'm going to talk specifically about the acquisition of 2 locomotive for test purposes. They are hybrid locomotive, so they run with diesel to power, but they are backed by batteries. So we are very optimistic regarding what these locomotives in terms of energy efficiency, the manufacturer expects at least 20% reduction in diesel consumption, which is very interesting for us. So these locomotives are with us. We're going to test them. And if they provide the benefit we expect, they will be part of our portfolio so that through time, we can replace existing locomotives or if we have to add new locomotives, they will be part of this new portfolio.

It not necessarily it makes sense to Rumo to make a huge effort to replace many locomotives that would not be from a financial perspective, replacing a mass would not make sense, but of course, through time, we are looking at these opportunities. because these locomotives have more energy efficiency, they also emit less CO2, but it means cost efficiency, which is very important to the company. So interests are aligned so that with time we start using more efficient machines. But regardless of these locomotives, we have already -- we are already replacing diesel locomotives for more efficient locomotives. This is something we have been doing and we see results.

 And there is also investment in technology from Roman. We have the optimization of the driving mode and also in terms of communication, it reduces the idle time of the trains. That leads to energy efficiency, and also, we invest in modernizing tracks and all of that leads to a reduction in unit terms every year. Just this quarter, there was a reduction of 5% versus the same period of last year. And year-to-date, we have reduced by 7% in unitary terms. So you are quite pleased. And this is one of the topics that we -- in which we look at economic and environments, so 2 Es from the ESG acronym.

[Operator]

Next question comes from Regis Cardoso from Credit Suisse.

[Regis Cardoso, analyst]

Some quick follow-ups about some topics you've covered. I understand that there is a prioritization through time. Is there any need to prioritize or to optimize the central network, the North network, any type of optimization combining these networks and the time line? This is one question. Another question is regarding the expansion of EBITDA into 2023. I wanted to talk about a framework.

If I look at your guidance, the EBITDA for Q2 this year is of 2 -- actually 4.8. And then we have the impacts of Q1 already. So if we look at 4.8, what are the impacts? Do you still expect increased fees because of toll rates, because there's something that seems to be important in Q3 is that fees have expanded, but margins haven't. I don't know if this is connected to cost or this can be a driver for next year? I guess that's it. And one last question, if you allow me, about innovation in the South, if you can comment on that, please.

[Gustavo da Rosa, executive]

Regis, thank you for your questions. Let me begin with the last one, which is easiest. No relevant updates in this process of the rebidding process of the West network and also the renewal of the South network. We are still interested, we are still discussing this, and we are preparing studies for this specific area. Regarding the optimization of instruments, well, the central network is in its final stages. We are concluding investments. So there is still a stretch to go between Autogas and HVE. So this construction work is being conducted, and we probably will finalize it in the beginning of next year. This is a relevant investment we still have to do in the central network. And the central network has quite an interesting perspective for us in terms of increased volumes and share. So we are according to plan to conclude this project and move forward in terms of market share. 

In terms of prioritizing investments, we do have several initiatives for efficiency. We have modernization, we have the acquisition of Rolling Stock. So we will stage this as we see more or less relevant value -- relative value through time. So there's nothing specific regarding the strategy of the North and Central Networks when it comes to optimization. We will look at what makes more sense year after year. Just this year, in 2022, when we announced this window for CapEx forecast, we said that this was going to be an important year for us to test the operational capacity with a smaller acquisition of rolling stock. We did this, and we actually made an excellent work and the performance of the operation was within expectations. It was actually a record month. July was a record month.

 So it's a learning, a constant learning process, and we make decisions as we assess this through time. Regarding 2023, I cannot give you figures, Regis, but we can do this a little bit further in time. Regarding the improvement of EBITDA for next year, we do have a recovery in the first semester. As you mentioned, looking at the second semester as a proxy of sorts, and it makes sense. And now we are moving forward in commercializing capacity. And we can expand the total volume offered. So that's what we can say right now, according to what we can do, and we will keep you posted at the right time.

[Operator]

So this is how we finalize this Q&A session. I would like to give the floor to Mr. Rafael Bergman for his final remarks.

[Rafael Bergman, executive]

Well, I just want to thank you all for being present in our results call for Q3. We are following this path to really build this year on Q1 in spite of the challenges for fees that were defined in the last favorable period. We did deliver the results we wanted to achieve. In Q3, it was already a more favorable moment for margins. We do have a good outlook for Q4. And that combined to this decision of reviewing upwards the guidance for this year makes us confident. I want to thank shareholders for your confidence. And we are available throughout the next few weeks with the Investor Relations team, we are available. See you soon, and thank you very much.

[Operator]

Rumo's conference call is finished. We thank you all for participating. You may disconnect. Have a nice afternoon.