Santos Brasil Participacoes SA

BOVESPA:STBP3

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, one and all, and thank you for standing by. Welcome to the earnings result conference for the second quarter '23 of Santos Participações Brasil. Today, we have with us Antônio Carlos Sepúlveda, CEO; Daniel Pedreira Dorea, CFO and IRO; and Ricardo dos Santos Buteri, the Commercial Officer. [Operator Instructions] The earnings release and the presentation are available at the company website. Please bear in mind that the forward-looking statements made about the business outlooks of Santos Brasil projections, operational and financial goals are based on the beliefs and assumptions of the company management as well as on information currently available to the company. These forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions and, therefore, may or may not occur. Investors and analysts should understand that overall conditions in the sector, other operating factors could impact the future results of Santos Brasil Participações. I would like to turn the floor over to Mr. Daniel Dorea, who will begin the presentation. You may proceed, sir.

[Daniel Dorea, executive]

Well, a good morning to all of you. Thank you for your attendance. Beside me, I have Mr. Antônio Carlos Sepúlveda, CEO; our Commercial Officer, Ricardo Buteri, for the initial comments of the results of the second quarter 2023. If we look back at the first half of 2023, it is very clear to us that the main obstacle to a stronger result was a volume below our initial expectations, below what was achieved in the same period last year, but whose basis of comparison is extraordinarily high. Now in these first 6 months, even the export of containerized commodities was affected by the global macroeconomic environment, with a downturn in shipments of cotton, frozen meat and coffee, for example, accumulating a drop of 8% in the semester at the Port of Santos, which is a naturally more resilient export flow center. At the import end, full container suffered a 3% year-on-year retraction in the volume handled at Tecon Santos. And considering the lower volume of unloading at the port, storage was also negatively impacted. Several reasons explain the observed reduction: the still high industry and retail inventories, a lower pace of consumption in households affected by higher inflation and interest rate, as well as the migration of part of the spending to services to the detriment of consumer durables. Despite this, what seems more relevant to us now is the recovery in volumes already observed in July when we surpassed the 100,000 containers per month mark, a sign that we will have a strong peak season with a weekly moving average already above 20,000 containers a month. The message that I consider crucial is that the year-on-year decline recorded is transitory oscillations typical in our industry without compromising any of the fundamentals of Santos Brasil business. The company is well situated to extract benefits from its operational leverage in an environment of resumption of volumes with balanced price levels without losing sight of efficiency in cost and expense managements, which will lead us to growing the results and margins in the coming years. In other words, today, we are now witnessing a more vigorous result only because of the volumetry of the first semester, one of the few, if not the only, exogenous variable to our business. On the other hand, all other factors are duly aligned and under control. Precisely for this reason, the company's strategy continues to be faithfully executed. And the scheduled investments are being made so that we can be the capacity providers for the potential demand in the markets where we operate, especially in the Port of Santos in the container segment. Among the operational highlights, I consider it worth mentioning the following in line with the recovery I mentioned earlier. Tecon Santos presented a 13.2% growth vis-a-vis the first quarter '23, which proved to be very weak this year. Tecon Vila do Conde registered a 15.2% increase compared to the first quarter '23, with a growth in long haul and cabotage lines. Even in July, we already noticed an improvement in the repositioning of empty containers to meet experts -- exports, which confirms the expectation that it will return to the levels of 2022. The volume of project cargo should also prove positive throughout the year. Tecon Imbituba had a good second quarter, with an increase close to 10% versus the second quarter '22, driven by the transportation of ceramics and rice via cabotage. In term -- the general cargo terminal grew 11% compared to the second quarter of '22 and 10% vis-a-vis the first quarter of '23, with a highlight of greater movement of sugar and chemical products. Additionally, after 4 years, we contracted a new long-haul service for Tecon Imbituba with CTM, a Panamanian Bay shipowner, specializing in work with the Dominican Republic, Cuba and Colombia. This new service should begin in August. Regarding the vehicle terminal, the TEV, in the Port of Santos, there was a drop of 31.1% in the second quarter '23 vis-a-vis the same quarter of '22, with a movement of less than 60,000 vehicles. The main detractor is the reduction of Brazilian exports to key markets in South America, mainly Colombia, Chile and Argentina, which face their own economic challenges. Despite the lower volume, the mix of heavy vehicles grew 12.4% in the second quarter '23 compared to the first quarter of this year, representing a 12% of total vehicles handled. Finally, in Brasil LogÃstica, bonded warehousing operations were impacted by the drop in imports at the Port of Santos, with a 23% decrease in the volume of containers in our bonded warehouses in 3PL logistics operation. The number of pallets handled at the company distribution centers fell 9.6% compared to the previous year due to a lower cargo handling in the automotive and chemical sectors. Moving on to the economic and financial results. If the quarterly volume showed a drop, consolidated net revenue totaled BRL 507 million in the second quarter of '23, an increase, albeit marginal, of 1.3% year-on-year, but 19% higher than in the first quarter. Note that the improvement in the average ticket of our operations was sufficient to compensate for the drop in volume, the worse mix of full containers and the reduction in the dwell time of full containers. This is a unique condition for the growth of Santos Brasil's future results. Consolidated EBITDA amounted BRL 222.2 million in the second quarter of '23, 3.5% higher than in the second quarter of '22, with a 44% margin, representing an increase of 1 percentage point year-on-year. Now compared to the first quarter of '23, there was a significant improvement in Santos Brasil's EBITDA, with a growth of 45% and an increase of almost 8 percentage points in the EBITDA margin, reflecting the higher average ticket and greater efficiency in cost and expense control. For the liquid bulk unit, I highlight the ramp-up of operations at the Itaqui terminals, which recorded an EBITDA of BRL 4.5 million in the second quarter of '23, with a 53% margin, a promising result for the business unit which should continue to gain momentum as we gain scale with the investments that are being carried out. The CapEx in the second quarter of '23 amounted to BRL 126.3 million. BRL 42 million were allocated to Tecon Santos in continuity with the expansion, streamlining and improvement project of the terminal's infrastructure. The expectation is to turn the year with a capacity of 2.4 million TEUs at Tecon Santos, with the process of machines that -- and equipment that will be delivered at the end of '23. The ongoing investments will bring the terminal's capacity to 2.6 million TEUs at the turn of 2024 to 2025, enough to place us as the largest capacity provider for containers in the Port of Santos. And thus, we will absorb market growth. Tecon Vila do Conde received BRL 48 million in investments earmarked for the purchase of new equipment, such as MHC cranes and new equipment, forklifts that have already been delivered. The new equipment will increase the productivity and dynamic capacity of the terminal besides reducing maintenance, rental and fuel consumption costs. Regarding the expansion of the liquid bulk terminals, they're doing very well. The expectation is to more than double the capacity of the two brownfield terminals from the current 50,000 cubic meters to 110,000 cubic meters by the third quarter of '24. And in July now, we started the first stages of the construction of the greenfield terminal, which is expected to be completed in the third quarter of '25, adding another 80,000 to 90,000 cubic meters of tanking. As a result of these investments until 2026, Santos Brasil will have a capacity between 190,000 and 200,000 cubic meters at the Port of Itaqui, which will place it at one of the most important liquid bulk operators in the region. As the last highlight, I emphasize that the company ended the quarter with BRL 474 million in cash and cash equivalents, with BRL 177 million in net cash. The capital structure continues to be optimized with a reduction in the net cash position, but with a balance sheet that is still unlevered, which will allow us to continue investing in our assets and distributing proceeds to our shareholders. Based only on the results of the first half of 2023, we have announced the payout of approximately BRL 134 million between dividends and interest on capital, which reinforces the company's repositioning as a strong dividend payer, but also allowing room to allocate capital and other opportunities that are deemed to be attractive. I do recommend that you read our 17th Sustainability Report for Santos Brasil recently published that summarizes the achievements and results obtained in the ESG front in 2022, besides presenting the company's outlook for the future. Very well. With this, we end the presentation. We are at the disposal of the market to begin the question-and-answer session. Thank you very much once again for your attendance.

[Operator]

[Operator Instructions] Our first question is from Luiz Capistrano from Itaú BBA.

[Luiz Capistrano, analyst]

Good morning, and thank you for taking my questions. Congratulations for your results. I would like to explore a potential driver for margin, in the second semester, your renegotiation with shipowners. And of course, the expectation is to have further price readjustments with the other shipowners. How are you doing in terms of these negotiations? Will the readjustment be of the same magnitude as it was with the first client this year? And if you could give us an expectation of timing, if this should be stronger in the third quarter or fourth quarter, it would be very interesting to hear about this. If you could also remark on if there's anything interesting in terms of the infrastructure auctions and terminal that have drawn considerable attention? Thank you very much.

[Ricardo dos Buteri, executive]

Luiz, good morning. This is Ricardo, and thank you very much for your question. I'm going to give you an overview of what we have already negotiated and what we have in the negotiation pipeline outside of a relevant client that you mentioned, with whom we concluded the negotiation in March. We have had 3 other shipowners when we think of quays with which we have already negotiated until July, and we have 3 additional shipowners undergoing negotiation at this point in time. All of this began in July and will be concluded in August. Two are part of the top three of the company volume. This is the first overview of how much has been negotiated, 4 for Tecon Santos and 5 in the process of negotiation concluded still this month. We have the conclusion of the negotiation that will be made formal in 2 or 3 weeks. To go to your second question, yes, indeed, we already have the opportunity of -- have the pricing that follows the same average of readjustment margins that you were able to identify in March of this year. And this will cover the third and fourth quarters as well. So this is a scenario in terms of negotiations. I would like to highlight that besides Tecon Santos, we also concluded 2 additional renegotiations, one in Imbituba and another one in Vila do Conde. We still have 3 additional opportunities at those sites between September, October and November. So keeping in mind Tecon Santos, all negotiations that began in June are now having the contracts signed. And those that began in August will extend to the third and fourth quarters. Luiz, regarding the second part of your question about the pipeline of government projects. It is our understanding that this potential pipeline continues to be revisited in most of the projects, and the company is very attentive to the final result. The first group of port auctions from the new federal government represents 3 liquid bulk terminals located in Maceió. We have analyzed, surveyed them, and we also carried out an in-local visit in the terminals of Maceió. And it is our understanding that for the time being, this was not in accordance with the strategy that we are following. We're making investments to double the capacity in Itaqui. And these terminals will not significantly change what we believe to be the new path for Santos Brasil. Of course, we're always attentive. We will be outside of this auction. But yes, always with our radar open to new opportunities that doubtlessly will arise through the Ministry of Ports and Airports.

[Operator]

Our next question comes from Fernanda Recchia from BTG Pactual.

[Fernanda Recchia, analyst]

Two questions at our end. The first, I would like to explore with you an agreement. You spoke about capacity expansion for Santos Brasil. Perhaps, you could remark further on this. Looking at the system as a whole, which is the last [ update ] of S 10 (sic) [ STS 10 ], we have seen news from the government trying to reduce the scope of this asset. I would like to know which is your mindset and which is the last update. Secondly, if we could explore the issue of volumes more. You mentioned that in July, you had a good recovery of volumes at the port, surpassing the level of 100,000 volumes. When we look to the rest of the year, what can we expect? Will we get close to 110,000 volumes? And if you could speak about your outlook for the year 2024. This year has been somewhat weaker, and we would like to know how you consider the volume growth going forward to 2024.

[Antônio Sepúlveda, executive]

Good morning, Fernanda. This is Antônio Carlos. In fact, there is that operation of STS 10. The last message, formal message, we have seen is that the passenger terminal would be transferred to another place using half of the airport, that it would be possible to lengthen the airport and maintain the cargo operations that exist in that area. And if well built, they could also hold containers. And in the remaining areas, a new container terminal could be built, perhaps a smaller size. It would be possible to expand in that area. And of course, Santos would have [ took ] large container holders [ in ] the airport. This is a positive model. It is in accordance with what we do as a concentrator of cargo. It is much easier to do the transshipment from larger terminals. However, everybody is -- well, it's still in the design phase. There is no deadline for this. And it's very difficult, therefore, to estimate how this would impact our volumes. You heard the speech by Daniel that Santos is prepared next year to reach 1 million TEUs, and we could do more than half of what the Porto de Santos does now. Therefore, we're working to see if there is a delay in the STS 10 so that our work at Porto de Santos will not face problems in terms of capacity supply. Now we have projects that are underway, and we don't want to have excessive capacity, unnecessary capacity. What we can say at present is that in the coming 5 years, there won't be any novelties because this is the time it would take to implement this STS 10 project. And then our situation remains very comfortable in terms of continuing to make investments. And we do guarantee comfort to the company as we will be able to deliver the capacity that will be needed in the next 5 years. I would like to remind you that this project of 2.6 million TEUs at the port is very important. And the length that we have will allow us to get to 3 million TEUs.

[Ricardo dos Buteri, executive]

Fernanda, this is Ricardo. I would like to answer your second question regarding volumes. Let's review what has been happening. When we look at the first quarter, Fernanda, we worked with an average of 77,000 containers a quarter and in the second quarter, 1,000 containers a month. And as Daniel mentioned in his speech, where he went through all of the units, we already have in the month of July more than 102,000 containers moved, handled and all with very good adherence beyond 101,000 containers, with ships already lined up at Tecon Santos. What we can say, therefore, doubtlessly, the third quarter because we've already gone through 1 month -- the second and third are still on their way. The forecast is that we will not have any port working with less than 100,000 containers. As we have already surpassed our levels in the third quarter, there are very important signs for us. One is a replenishment that is happening not only at the Port of Santos. When we look at Vila do Conde, there was an increase of 2,000 containers per month with this movement because of a peak of exports of oak berry and wood going to the Northeast [ session. ] We have a record harvest of cotton that will have to be shipped. There's already permission for this with the shipowners already reserved. And in the first fortnight of September, this will begin to be exported to Brazil with very large volumes, and a recovery or resumption of coffee as well. So what can we connect to this? We will have a strong third quarter. And the end of the third quarter show signs already that we will have the imports of machinery and electronics, growing 2% between June and July, for example. And this replenishment in the field of exports shows us we will have greater -- or lesser volatility in volumes in all of the segments both for imports and exports that we follow up on day after day in Santos Brasil. Finally, I would like to conclude by saying for 6 weeks, we have been in an upward trend with a moving average in the number of weekly container that we receive at the Port of Santos. So this is a rising trend for the last 6 weeks with more than 21 containers a week. You asked about 2024. It's natural that Santos Brasil begin to analyze everything and follow up on this to plan for the coming year at the end of August and beginning of September. Now we're going to have a level of forecast in the third quarter that will be quite accurate, and we will be able to convey a vision of 2024 in the third quarter. And we have a strong forecast to be able to convey to you what you can expect of the year 2024. I would like to complement something, Fernanda. If we look back last year, we had been growing until the third quarter of 2022. And as of that point, we had a drop in volumes, and it was somewhat atypic, unbalanced year. Of course, there's a seasonality. Our first half of the year tends to be weaker than the second half of the year. And last year, we had a different situation that ended up being more balanced. We had a drop of volumes, a consecutive drop of volumes through time, and we hit rock bottom in the first quarter of this year. Now we are seeing the curve take the opposite direction. It is rising. Every month, we see somewhat more volume. And if you follow the movements in our site, we're getting to 100,000. Our expectation at present is that going forward, when we compare the quarters year-on-year, we will always have growth, a steady growth. This is the path. This is what we feel the shipowners are making their calls. There are some shipowners looking for long-haul services. So our expectation for the second half of this year should offset the last 3 quarters that truly were quite weak.

[Operator]

Our next question comes from Bruno Amorim from Goldman Sachs.

[Bruno Amorim, analyst]

Good day to all of you. I have 3 questions in truth. The first is very objective. How do you think about buyback versus dividends? The company is generating quite a bit of cash. You have paid back the shareholders considerably. Going forward, how much will be dividends and buyback? Secondly, the definition of STS 10. Would you have an idea of timing when there will be a definition on the part of the government? And which will be the impact on the port supply? Will this add capacity? Will there be a new independent operator due to STS 10? Understanding, of course, that there are uncertainties in this process, if you could perhaps share the timing of decisions, the practical implications for the company. The third question refers to guidance, which seems to be quite challenging, considering the results of the first half of the year. Of course, we're expecting a volume recovery in the second half of the year, but there will be a challenge in terms of the yearly EBITDA. Where will catch-up come from, from EBITDA? The dwell time that has already dropped, which would be the good dwell time? Full versus empty containers, which were important this quarter? There seems to be a worsening, depending on which horizon you look upon this. But perhaps more than the guidance, where your upsides will come through besides the volumes, of course. Thank you.

[Daniel Dorea, executive]

Hello, Bruno. This is Daniel. I'm going to begin the answers, and then Antônio Carlos and Ricardo will add their comments. Regarding the buyback process and dividends, now buyback should be looked upon as a continuity of the buyback program. We had already opened the program 18 months ago, but the pricing scenario was different. However, we extended it to have more options in case, we see opportunities to buy our shares at an attractive price. And then we would use this precise instrument for that. It is our understanding that the shares are good. But as we did not do in the back with a deteriorated price scenario, we will not carry out any movement of speculation regarding the company where we do have to have this option. This means, therefore, that to be able to pay back the shareholders' capital, we will have to use the distribution of proceeds through the limit of our own equity or through the payout of dividends, of course. This is our mindset. And of course, maximizing the value of assets by means of the investments that we have made. Now in terms of the STS 10, we are working to be able to comply with our guidance. And of course, there are some issues that we should observe. The main issue is volume. We had a first half of the year with a drop, a significant drop in volume. And this drop was, of course, beyond what we had expected. Yes, there is an exogenous challenge, something that is not within the company control. And we need to verify this in the second half of this year. We did have a strong July. Tecon Santos moved 104,000 containers, and I mentioned that our moving average, our weekly average was higher than 22,000 containers. And this should give thrust to the volume in August to more than 100,000 containers. But we need to see what will happen in September, what will happen in October, and even in the months of November and December. This is an important variable when it comes to complying with our guidance. What is under the company control is being well executed, and it will be a driver so that we can comply with our guidance. We're working stringently in cutting down costs and expenses. It's not working for cost for the sake of cost. We're trying to make a difference when it comes to cost control. But we have also decided not to sacrifice the future. What do I mean by this? And I said it in my speech. The company wants to benefit to the utmost of its operating procedures, and we do believe that 2024 will be a better year than 2023. Now once we have normalization of seasonality, this will work out. If we dis-invest resources in the operation, this will create a problem in the future. So we are willing to sacrifice some things this year. But of course, we will never sacrifice the coming 4, 5 years. Well, this is the company mindset and this is what we continue to do, resizing the company and investing in equipment and human capital in difficult times. But you will see that the cost will fall under better control. And dwell time -- you asked the question -- it remains at 11 days. This should not have a significant change. Something I did not mention, but that Ricardo mentioned in the previous question, upsides are negotiations. And we believe we will be able to recompose the price at the successful levels that we had in the first quarter of 2023. So we'll have to look at the guidance that way. Upside, we're going to drive it up. With price, the average price practiced by the company, we believe that we're at a very healthy and balanced price level. Cost and expenses, we're creating a very strong program to have better control and efficiency in cost management. And the great incognito, of course, will be volume, but we're quite confident that we will have a peak season. And after October, we will be able to assess how we will end the year of 2023. The answer is somewhat lengthy because it includes so many variables, and I wanted to address them. If there's anything you would like to explore further, please feel at ease, and I will give the floor to Ricardo.

[Ricardo dos Buteri, executive]

Bruno, when it comes to the dwell time in addition, even with a drop in the dwell time of cargo, the bonded cargo, there has been a drop in volumes. And industrially, we could, of course, work with greater agility. The strategy of commercial segmentation and pricing that has become more sophisticated in the last 2 years continues, in fact, ensuring that the company's average ticket could grow by 2 digits, if compared to the drop of dwell time and the warehousing time. What Daniel mentioned means the following. All of the contracts -- and I'm not referring to shipowner contracts -- cargo contracts of importers and exporters that have to work with warehousing, they have their base dates for renegotiation. The average ticket has grown from one quarter to the other, and the strategy continues normally until the end of the year with a negotiation of all contracts associated to shipowners. All average tickets have healthy prices, balanced prices. If we look back 1 or 2 years, we have that vision that Daniel mentioned.

[Bruno Amorim, analyst]

Well, that's a very complete answer. I'm sorry to interrupt you. Let's go back to the dwell time. The volumes at the port are below the trend for the reasons we have already discussed. When the volumes return, do you think the dwell time will increase? Will this increase revenues per container or not? I imagine that you will have a greater problem at the customs if you have an increase in dwell time.

[Ricardo dos Buteri, executive]

Well, everything you have said is very correct. I'll mention something symptomatic. In the last 2 weeks of July, we carried out 6 additional calls for shipowners that were not ours, 6 additional calls in 2 weeks. What does this mean, Bruno? The 11 days that we had for dwell time went up to 15 days. Inevitably, that greater volume that came to us led to a greater warehousing. And the volumetry was anticipated with warehousing, increasing the average ticket.

[Antônio Sepúlveda, executive]

Bruno, this is Antônio Carlos, and I would like to add something in terms of STS 10. Now the imported cargo volume has dropped and the entire chain has idle capacity. So all clients have room in their terminals. Now the -- after the election last year, we had a significant drop in imports because of the exchange rate volatility. And we have lower inventories that, of course, are exerting pressure. When the cargo remains longer, this does not mean inefficiency, unless we have a strike. We're able to move this very quickly. Any client can remove the cargo in 2 or 3 days. The customs are not a barrier to speed. It's the client, him or herself, that doesn't have transportation leaves the cargo there. And this is an important point. If they want to take the cargo in 1 day, the freight price will increase. If we do it in 3 or 4 days, there is an average price better in terms of logistics. At the STS 10, let's speak about the concept. There has been a change in concept with the change of government. In the previous government -- and the government had a great deal of development, several projects -- and that means you had to have a new station. And the process of maturing the investment process tends to be lengthened. And this government, no, it makes more investments and generates employment immediately, and the more natural path is to invest in assets. Therefore, they're changing things. They're rethinking. There is concern in terms of capacity, of employment generation to warm up the economy. So there is a change in projects and there is a change in terms of implementing the projects. Now we have people in the midst of this. We have to speak to the ministry. This is a time-consuming job. And you have asked us to give you an idea what we think would be our mindset, and the discussion on these projects will only be concluded at the end of the year. I don't think it's a slow process. It's something that we have to analyze. This STS 10 is the last area, and the port is not there to resolve the problem of operators or terminals. The port is there to outflow the wealth of a country and to bring in consumer goods to society. And we're going to decide which cargo will be put where. So this is a puzzle that we put together. And I believe that at the end of the year, we will finalize this. And this capacity, if it comes, will come faster. Well, we have projects to stop operations and build is faster than making changes in existing construction. So if we have a station for 4 or 5 years, we can put it into operation in 3 or 4 years. Now the Port of Santos has enormous resiliency and we're coming out of a period that is not normal. We're paying the price for this very low growth, once again, due to the impact of COVID. And we're not going to have any disruption in our cash because of the projects that are about to come in.

[Operator]

Our next question comes from Lucas Esteves from Santander.

[Lucas Esteves, analyst]

Thank you for taking the question. Antônio Carlos, you have just told us how to resolve the cargo problem. Besides the capacity of Porto do Santos, there is another structural issue that inhibits the growth, the depth of the port. I would like to understand from you how you can resolve this going forward. We know that the privatization of SPA is no longer part of the agenda. Perhaps, speaking about dredging services and how this can be resolved in the coming years so that we can receive larger ships?

[Antônio Sepúlveda, executive]

A very good question. Well, that's item #1 of the port authority that is there at present. They're working towards doing this with the tools that they have in hand without the station or anything. They have more than BRL 1 billion in cash. And this project is already underway and it will undergo a bid. The engineering director has communicated that this will be done and the delivery will be very soon. This would be important for Port of Santos or Brazil. It will bring in more volume and Santos Brasil has an edge here. And we're very optimistic in terms of this. Now that previous model has been set aside. I see that they're serving new alternatives to expedite all the part of procurement and contracting that presently goes through new processes, discussion at legal levels and much more. Well, they're looking for different paths to avoid the problem. Now before that, this is a project that I believe will come out in some way or another still this year; 13,000, 14,000 TEUs instead of 10,000. And for the terminals, everything is ready. They're ready for that. We already have quays. We have cranes. The terminals are ready to begin operating. And what we truly need is to have a better draft. When the ship is full, they could come into the port. Now they haven't reached the maximum draft. And if you could put a deadline, the coming year, I think we will have the proper draft.

[Lucas Esteves, analyst]

Thank you very much. Simply to clarify this further, it's an issue of eliminating red tape in the contracting of services?

[Antônio Sepúlveda, executive]

Basically, yes, this is a mature project. Several surveys of simulations have been carried out. There's no doubt pending anymore. It's the application. They're putting it into practice. They have the money. There's a project. They're organizing the station, the licensing, and this is a project that could begin at the end of the year and beginning of 2024.

[Operator]

Our next question is in writing for Mr. Guilherme Mendes from JPMorgan.

[Guilherme Mendes, analyst]

Good morning. Anything in terms of the rebalancing of Imbituba?

[Daniel Dorea, executive]

Good morning, Guilherme. Yes, there is an update. We have pursued that solution of a -- consensual solution through the Tribunal of Accounts. They implemented a secretariat that intends to resolve all of these pending issues, disputes, litigations between public and private sectors to ensure that they can satisfy all signatories. So we have held conversations, had interactions with SCPAR, the port authority at the Port of Imbituba. We have also held conversations with the port secretariat and other agencies, and I think there is a reciprocal understanding that a solution has to be found for that imbalance observed in Tecon Imbituba so that the entire terminal can resume financially and economically. The investments have been made. Santos Brasil has made gargantuan efforts to attract new routes, as I mentioned, from Panama, for example. What we need now is balance, a better balance so that the terminal can continue to render its services as the only container terminal in the south of Brazil in the state of Santa Catarina. There have been strides made, and we do intend to continue on with this consensual solution for cargo with all of the parties involved. And I can say that this should be attained, if everything goes properly in 2024 or between 2024, 2025. This is what we intend. And of course, we're devoting a great deal of attention and energy to this process.

[Operator]

[Operator Instructions] A question from Pedro Moreira from Trilha Investments.

[Pedro Moreira, analyst]

Can you remark on the competitive edge versus Itaqui? How is the initial operation compared to the ones projected by Santos Brasil?

[Daniel Dorea, executive]

Better than we had forecast originally, to be very honest. Because in our original business plan, we would only come out with this operation in 2024. And with a full package, only in 2026. What we did was to anticipate the startup of the operation because we acquired tanking infrastructure from the former lessees. This enabled us to anticipate the startup of the operation, albeit at a scale that we did not want. We only have 50,000 cubic meters at present and the commercial response has been very good. The terminal maintains a high usage rate. The clients are relatively fragmented. Therefore, we're quite satisfied with the investment that was made with this new strategic avenue for growth for Santos Brasil. This is a market with enormous growth potential. And our business there is agriculture. Agriculture is growing, especially in the south of Maranhão, a piece of Piauà and Tocantins. There is a chain of growth in Brazil. It's doing very well. The competitive environment -- well, we made investments to have 1/3 of the capacity to offer in that market. We will be one of the most important players. Now from the viewpoint of competition, there's room for everybody because the demands are growing. We don't foresee there will be any problems there; if we have, idleness at the terminal. To be very frank, at present, it has gone beyond our original expectations. We're, of course, speeding up to double the present-day capacity of the terminals.

[Operator]

Thank you. As we have no further questions, I will return the floor to Daniel for the closing remarks. You may proceed, sir.

[Daniel Dorea, executive]

Very quickly and once again, I would like to thank all of you for your attendance. We hope to see you at our next meeting for the results of the third quarter. Have a good day, and thank you very much.

[Operator]

The Santos Brasil conference has come to an end. We would like to thank all of you for your participation. Have a very good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]