Santos Brasil Participacoes SA

BOVESPA:STBP3

Earnings Call Analysis

Santos Brasil Triumphs Amid Volume Challenges

Despite a 10% drop in container volume, Santos Brasil's EBITDA rose to BRL 258 million in Q3 2023, up 19% year-on-year, while net profit grew 31% to BRL 139 million. Focusing on price rebuilds and cost efficiency, they improved their EBITDA margin by nearly 7 percentage points. With rigorous cost control strategies, they're now set to expand capacity at the liquid terminal and invest heavily in terminal upgrades, including BRL 113 million on CapEx. The company projects a Q4 volume rebound, ending the year with a smaller drop of 3-4%. Santos Brasil also stresses its investor appeal, with a robust dividend and interest on capital distribution totaling BRL 265 million.

Santos Brasil Marks a Turnaround in Third Quarter 2023 Despite Volume Challenges

Santos Brasil experienced a pivotal third quarter in 2023, which became a balancing act of confrontations and triumphs. While grappling with the challenge of lowered volumes, the company managed to reward the strategic decisions made in previous years aimed at bolstering profitability and key financial metrics. Importantly, despite a 10% decline in container volumes handled year-on-year, EBITDA saw an impressive ascent to BRL 258 million, marking a 19% growth from the third quarter of 2022. Net profit swelled by 31% compared to the same period in the previous year, settling at BRL 139 million with a robust net margin of 26%. Serving higher value-added segments and stringent cost controls underpinned these results. Moreover, in the container terminal division, the EBITDA margin soared to 57%, reflecting the company's relentless focus on operational efficiency and renegotiated contract prices.

Strategic Expansion and Cost Control underlining Future Prospects

Steadfast in its endeavor to master cost management and competitive pricing, Santos Brasil delved into a meticulous process of matrix budgeting aimed at turnover exceeding BRL 600 million annually. This strategic financial modeling is not just about cutting costs but deeply understanding the dynamics of each expense to become a benchmark in the industry. While the liquid terminal has been constrained by regulatory limitations, it celebrates one year of operations with positive contributions to the overall finances. In anticipation of growth, the company is on track to double its current capacity to 110,000 cubic meters by the third quarter of 2024, with ambitious plans to extend it to 190,000 cubic meters by the end of 2025, taking a significant stake in the Itaqui port's quarter.

Investments in Infrastructure Boosting Energy Efficiency

An investment of BRL 113 million, of which BRL 69 million is allocated to liquid bulk terminals, underlines the company's commitment to infrastructure and energy efficiency. Santos Brasil is in the midst of preparing for the Port of Santos's future demand by receiving and commissioning advanced equipment, including ship-to-shore cranes and 8 electric RTGs. This initiative marks the commencement of the terminal's energy transition journey and positions the company as both a capacity provider and a technological frontrunner.

Solid Financial Position Reinforcing Shareholder Confidence

The company concluded the third quarter of 2023 in a strong financial position, boasting BRL 570 million in cash and cash equivalents and an enviable net cash status of BRL 147 million. The optimization of their capital structure is already reflecting the benefits from financing obtained through Banco do Nordeste, which will cover the majority of the capital expenditure for the liquid terminals expansion at the Port of Itaqui. Santos Brasil's commitment to returning value to its shareholders remains entrenched, with BRL 265 million distributed between dividends and interest on the capital reflecting earnings from the 2023 results, fortifying its reputation as a dividend-paying powerhouse.

Outlook on Volume Guidance and Tecon Santos Retrieve Positive Momentum

Stemming from a dismal start in 2023, the quarterly volume trends at Tecon Santos have been improving, with third-quarter numbers reaching 99,000 containers handled on average. The positive trajectory augurs well for the fourth quarter expectations, evidenced by the October performance where the figures climbed to 102,000 containers at Tecon Santos, setting the stage for a stronger year-end, reflective of the company's resilient operations and market adaptability.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, everyone, and thank you for standing by. Welcome to the Santos Brasil Third Quarter 2023 Results Conference Call. Present with us are the Financial and Investor Relations Director, Daniel Pedreira Dorea; and the Commercial Director, Ricardo dos Santos Buteri. [Operator Instructions] I would like to remind you that the earnings release and presentation are available on the company's Investor Relations website, where a recording of this event will be made available. Before proceeding, please bear in mind that any forward-looking statements that may be made about the business prospects of Santos Brasil as well as projections on operational and financial targets, constitute beliefs and assumptions of the company and are based on information currently available. Forward-looking statements are no guarantees of performance as they involve risks, uncertainties and assumptions, and they refer on events that may or may not occur. Investors and analysts should understand that general conditions, industry conditions and other operating factors may affect the company's future results and lead to results that differ materially from those expressed in such forward-looking statements. I would now like to turn the floor over to Mr. Dorea, who will begin the presentation.

[Daniel Dorea, executive]

Mr. Dorea, you may proceed. Well, good morning, and thank you all for your attendance. I hope you are all well. Beside me today, our Commercial Director, Ricardo Buteri, exceptionally our CEO, Antônio Carlos Duarte Sepúlveda will not be taking hard in today's results conference call, as he is accompanying the Brazil export international mission to Singapore. With regard to the results from itself, our view is that the third quarter '23, we consent a turning for Santos Brasil in a year, which, on the one hand, proved to be challenging in terms of the volumes operated. On the other hand, rewarded the strategy outlined some years ago for growing profitability and the main financial indicators of the business. In our business, volume is a variable, which the company has bid or no control. So we focus on rebuilding prices in key activities and in logistic services. This is consuming cuts on expenses more efficiently. As a result in consolidated terms, the EBITDA margin expanded almost 7 percentage points year-on-year, and EBITDA reached BRL 258 million, a growth of 19% vis-a-vis the third quarter '22. Net profit totaled BRL 139 million in the quarter, an increase of 31% year-on-year with a net margin of 26%, and this despite the retraction of 10% year-on-year in container volume with [indiscernible] handling 9% as containers with a drop of more than 10% in the import flow. Nothing helped us on this side of the occasion, but we still delivered a growing results. In other words, -- we feel that we have done our duty and are confident that Santos Brasil will reap even better results in the near future. The company is navigating a balanced business environment and has the right size to capture operational gains. Some operational and financial aspects worth highlighting considering the third quarter ‘23. Firstly, even with a normalized seasonality and therefore, a strong peak season despite the impact of the implementation, we were not able to close the gap that began since the first quarter. This is a reality. We will have to live within 2023. The positive is that there is a recovery underway since the second quarter this year. If 2023 began with a drop of 14% drop in the first quarter, we believe it should close at minus [ 3% ] to minus 4% in 2023, which reflects a fourth quarter with good volumes. We have already disclosed the operating data for October. Despite this, if we look on the container terminal division, the EBITDA margin reached 57% in the third quarter '23, even pending some contract negotiations, an increase of percentage points compared to the third quarter '22. In relative terms, the EBITDA growth was 21% year-on-year, totaling BRL 229 million in the container terminals. Another relevant point is to look at Santos Brasil Logistica's quarterly results. EBITDA totaled BRL 26 million, [ 12.6% ] compared to the third quarter '22. Even with a drop in net revenue and volume stored in our warehouse is 16% lower year-on-year. Not to mention the drop in 12 times. This is the result of 2 main factors: first, serving higher value-added segments initiatives, maintaining a high average ticket and avoiding the rendering to the price war in the Port of Santos back area. Secondly, a stringent control of costs and expenses. By the way, speaking of costs and expenses, since May of this year, we have started an extensive process of matrix budgeting with in-depth analysis of data that will exceed BRL 600 million a year. Our aim is not simply to cut off like finger nails but to understand in depth how each of these line items consumes input and it would price contracts. The ultimate goal is to make Santos Brasil a benchmark in cost and expense control. You can see that the cost and expenses are declining, except in the corporate area where we are still carrying some expenses that are not perennial. And you will observe that they have begun to be reduced year-on-year. Regarding the liquid terminal, we are about to celebrate 1 year of operation and are satisfied with the results achieved despite the small scale and the restrictions in customs, which limit our commercial activity. In any case, the terminals in operation are already making a positive contribution to the company's consolidated results with good occupancy of the capacity offered, the investment plant in Itaqui is on schedule. And by the third quarter '24, we should double our current capacity, reaching 110,000 cubic meters. By the end of 2025, we will reach a total of 190,000 cubic meters at the Port of Itaqui when the greenfield terminal starts operating and construction work is underway. In the 2-year cycle, Santos Brasil will be able to have 1/3 of the quarter of the Itaqui port. Finally, worthwhile to mention that Santos is investing in the expansion of other terminals, we invested [ BRL 113 million ], of which [ BRL 69 million ] were in the liquid bulk terminals of the company. If base of CapEx should become intensified in the fourth quarter of the year when we will receive and commission to ship to short fee cranes and 8 electric RTTs that are already on the way from China. Now these electrified RTTs mark the start of the terminals energy transition process. Tecon Santos being prepared to be the major capacity provider for the future demand of the Port of Santos with gains in efficiency and productivity to increase its competitive edge. At the end of the third quarter of 2023, we had BRL 570 million in cash and cash equivalents and net cash of BRL 147 million. The capital structure continues to be optimized, now already reflecting the financing raised with the Banco do Nordeste, which will cover 80% of the CapEx of the liquid terminals at the Port of Itaqui. In addition, with the remuneration of our shareholder holders' capital, whose distribution of earnings has already reached BRL 265 million between dividends and interest on capital based on the 2023 results, reinforcing Santos Brazil position as a high payer of dividends. Very well. These were my initial remarks. Ricardo Buteri and myself are at your entire disposal to begin the Q&A session. And once again, I would like to thank you for your attendance.

[Operator]

Thank you all. [Operator Instructions] Our first question comes from Victor from Bradesco?

[Victor Mizusaki, analyst]

Congratulations for the results. I have 2 questions. The first referring to the guidance and volumes. Well, you have already disclosed is on use to and what you realized in the first 10 days of November and what you have the line up can we consider as part of that guidance per volume that you're pointing towards the middle of the guidance? If you could remark on this. The second question, if you could remark further on what is happening with STS 10. And when you believe the government will finally take a position in terms of what will happen in 2024. Thank you.

[Ricardo dos Buteri, executive]

Victor, good morning. This is Ricardo Buteri, and thank you for your question. I'm going to answer the first question, referring to the guidance. Very quickly, some background so that we can recall what has been happening. In the first quarter, we had an average of volume handle at Tecon Santos of 77,000 containers a semester with a retraction showing of the levels that we would have for 2023, and the challenge in terms of volume. In the second quarter, we worked with 88,000 containers. At the last meeting we had with you, we pointed out that in the third quarter, the trend would be positive, would be favorable if compared to the second quarter and that we saw an upward trend and this was confirmed. We ended the third quarter with 99,000 containers handled on average. When you speak about the volume guidance with a view towards the fourth quarter, as Daniel mentioned, the figures of October have been disclosed. We worked with 102,000 containers only at Tecon Santos. Which means that in the fourth quarter, we will have a growth compared to the background that I have just shared. This about the terminal in Santos. Now what enables us to have this positive belief is the following Victor, at the Port of Santos, we have a total of 42 additional [ dropovers ] recorded in 2023. Several of these due to the export of cotton and sugar of the 42 stop over 50% are operated by ourselves Santos Brazil. But we also have extra cost because of the competition in efficiency. We have 2 competitors that are working more with exports, which means that the ships for imports that arrive and falls to avoid lines in the Port of Santos. Now in terms of additional costs because of the competition and efficiency, we had 12 bps and this continues on. So we have a November where we have an accrual of 5 additional costs in the same scenario in the same situation.

[Daniel Dorea, executive]

Victor, if you allow me here with all of this, Victor, I can say that we would be at minus 5% or minus 6% at the end of the year. However, if this pace that Ricardo has just variated continues. Who knows we will be in the upward part of our guidance. However, we ate as Ricardo mentioned, we are faced with this. Now in terms of the STS 10, the scenario is the most present on the most current one. The migration of the passenger terminal to the area of the [indiscernible] lobby that would be closer to that zone where we have the coffee exchange would occupy an important space. And this could or we will have an Ecoport and we will have an area that is disputed for the handling of fertilizers and other general cargo. So now -- this is what we have at present. Now where does this arise from? It arises from an understanding of the government of the present government and the Ministry of the port that in [ Amban ] with the investments that are being made in Tecon Santos with an eventual expectation of having an anticipated investment in PTP that we'll have to invest in an expansion of capacity, and there is room for expansion there. I believe that these incumbents respond and [indiscernible] short-term demand, and I'm referring to a scenario of 7 to 10 years. Tecon Santos and others will reach [ BRL 3.2 million ] with an upside if we wish to expand this capacity. And of course, this would address the growth that we expect as the port of Santos in the coming decade. Now let's think further ahead if we can and the response for the – for that demand in the very long term, will refer to the areas in the left margin, the [ Badra ] Island, which will demand an expansion of the organized force. These are areas that are not occupied on the left margin. There's less densification vis-a-vis the right, where we have the city of Santos. I think this would respond to the future demand besides the term that I have mentioned. This is an [ outstanding ] vision that is appearing. But of course, nothing has been decided and we continue to communicate this to our shareholders in the market. Well, thank you very much.

[Operator]

Our next question comes from Lucas Marquiori from BTG. You may proceed, Lucas.

[Lucas Marquiori, analyst]

Allow me a follow-up of this question by Victor. Now given what you have just mentioned, Ricardo, the understanding of the government that the incumbents would have the capacity to support the need for an increase of demand at the Port of Santos.And that, of course, those who are operating the terminal will be in a positive position. If this incentive at Santos Brasil to speed up their CapEx program for the coming year for the expansion of the terminal. And what it is that we can expect if you're going to have a normalized CapEx in 2024, or incorporating this desire to have additional capacity in that terminal? This is my first question. The second question, if you could speak about the scenario for global box rate, we have seen the result of chip owners this semester and acceleration globally now has this begun to appear in the reviews of box rate for the smaller contracts Tecon Santos – or Tecon Santos stealing somewhat pressured by this global scenario of navigation that is somewhat more conservative.

[Daniel Dorea, executive]

Lucas, I'll answer the question about CapEx. What is important here is the following. We have not changed our investment schedule. We began the phase, Phase 1. We're now in Phase 2 in 2019 when the scenario was much more unfavorable for the company. Our mindset is the following to [ attempt map ] what is demand and to be somewhat ahead of the curve by adding capacity, and this has been proven to be assertive. We're not trying to mix this PS10 with other things with additional offers of capacity of the Port of Santos. What I'm trying to say is the following: we have stepped up following. We want to put 2.6 million of build [ up ] capacity of the Port of Santos at the end of 2024 is what we're pursuing, this is what we're going to deliver. Of course, there is an interesting point that you make. If our projection for growth here proved to be correct. We will have to go beyond BRL 2.6 million without really being concerned with what the competitors are doing. So we have to carefully dose, look at the capacity based on the demand curve that is expected because of all of this noise of STS, we would have stopped investing 2 years ago when this was a very hot issue and was part of our day-to-day conversations, we would have stopped investing. Now we're about the mindset of Santos Brasil, our mindset is how to service the users with high productivity and operational efficiency. And for this, we require investment that has already been contracted. What we want to do is rationalize the use of capital. We continue to invest. It is possible, yes, that in 2024, we will have a CapEx equal or somewhat superior to that of 2022, but only to service demand, the port. Certainly, not as a defense for space that competitors are doing there.

[Ricardo dos Buteri, executive]

Lucas, thank you for your question about the box rate. This is Ricardo. I would like to say the following in line with what Daniel has said about the company's strategy in terms of CapEx. First of all, there has been no impact, and there will be no impact. Our renegotiations have been carried out this month. In the month of October, we closed 3 new contracts for very relevant shipowners, 2 of them in the top 3. And now we're only pending 2 new contracts that should be renegotiated. The proposals are on the table, and they will be concluded in the coming weeks. Because of this, we have the end of the 2023 renegotiation contract, 13 contracts for Santos and 7 for Tecon. Now that scenario of a retraction of clients globally, Santos Brasil strategy is very clear. We began a strategic plan to generate capacity in Brazil in the hub that is the Port of Santos. We have been adding 200,000 TEUs of capacity every year, 80% of them were negotiated for 2 years from 2023 to '25. The guarantee of that capacity and the leading service that is important in that negotiation. This is what allows the ticket, not only the box rate to become perpetual with a closed amount until the end of 2025. This is not a timely negotiation or a short-cycle negotiation and a reduction of sea freight is against Santos Brasil, shipowners seek us out after the end of these 2-year negotiations to speak about the long term, their interest in Santos Brasil is to have the guarantee of service to ensure that when the ships arrive in the Port of Santos or in other ports that they will have the best level of services contracted through the service agreement. So we're working not only with average tickets and box rates, and you can see that despite the drop of dwell-time in storage, although we have returned to a faster dwell-time in cargo, our commercial strategy and pricing strategy are guaranteeing results. And this will continue on for a minimum of 2 years with the renegotiations already carried out.

[Lucas Marquiori, analyst]

That's very good. Thank you very much. Thank you for the call, and have a good day.

[Operator]

Our next question come from Guilherme Mendes from JP Morgan. You may proceed with your question.

[Guilherme Mendes, analyst]

The first question refers to a cost reduction. You have delivered excellent work, congratulations. What still lies ahead of you? Daniel spoke about the holding cost. And if you could summarize in terms of what would be a normalized margin for 2024 is going forward and an eventual balance in Imbituba?

[Daniel Dorea, executive]

Hello, Guilherme, there is more to come. Now the gain here is the following. We are attempting to understand and this is what I said in the speech, how each package will consume factors or input. And if we compare this within the company, we set forth guidelines on how to consume this throughout the year, which is the end results gain, current gains, but we're beginning from a base that has already been optimizing is more efficient for 2024. We repeat this process in 2024, and we begin 2025 with a more optimized base. So all of those savings are taking advantage of throughout the life of the company. We're not just cutting costs. We want to become a benchmark and the efficiency of cost and expenses, and you will observe this. Of course, we have to make adjustments in volume, but you will see that these costs will not rise very much anymore. This is the mindset. There's more to come, of course. And you see this in logistics. I think that in logistics, this is ever clear, there was a drop in revenue there. In terms of margins, in the margin of 48%, well, this is the margin we will have going forward up to 50%. In consolidated figures in the terminal, the figure, 57%, and this will rise in the fourth quarter because Santos Brasil needs to have this margin. And what we need is volume, a punch of volume. We have sized the company to work with 100,000 containers here on the other 100,000 containers per month on average. And we were somewhat below that. There were months where we were at 20,000. So you will see our operational leverage, operating in a favorable way and the margins will expand. So this is work that is underway with the work of the renegotiation of contracts with healthy prices at balance levels. This is one part. The other part is all of that efficiency that we have on the package, BRL 600 million in cost on expenses and part of the cost of the company are not manageable. We're working with what is manageable, which is a package of BRL 600 million. And we have also carried out work, of course, seeking greater reductions. Now the other side of this in quotation marks is our operations are the key with volumes that we hope will change in 2024, 2025. The company will reach normalized margins of 50% with a bias upwards and at the other terminals, the margin will be higher than 60%. That is how we're thinking. And let's go to Imbituba [ balance ] and Imbituba. It has been operating well. I have already mentioned this year with you, with some of you. We have sought to come to our consensus with the port secretariat, the port authority of the Port of Imbituba and that speaking about the need to rebalance in Imbituba, but makes a terminal feasible for the long term. It's not interesting from Santos Brasil to leave the Imbituba port and to allow it to remain as a container terminal. There has to be alignment in that search for a consensus and a mechanist that could give legal security to both parties through the secretariat and the tribunal of accounts to which we could finally come to a final design that will make the container terminal of Imbituba, feasible and sustainable. You will probably be asking yourself, give me a term, I can't give you a term. This is a negotiation that is dependent on several parties and will depend on what will happen at the court of accounts. This should take another year, I believe. But once again, we are going to keep you updated in this scenario as we hold further conversations.

[Guilherme Mendes, analyst]

That was very clear, Daniel. Thank you, and have a good day.

[Operator]

Our next question comes from Gabriel Rezende from Itaú.

[Gabriel Rezende, analyst]

Good morning, Daniel and Ricardo. I would like to do a follow-up on Victor's first question on volumes. We're exploring the data of October. We have seen an advance improvement for the fourth quarter. At the end of September, there was a nonrecurrent event that weather that led to a lot of volumes in September. I would like to know in October, you had a benefit that volume of September slipping into October and perhaps this did not happen the issue of bad weather. Did it have a positive effect? And if you had stronger volumes of Imbituba, I would like to know if this would be a recurring level. We have that feeling that this was simply a timely increase at the port of Imbituba. I have a second point that refers to the mid and long term. If you could speak about the company's capital allocation, there's a high payout already. This is very attractive for investors. The company continues to be deleverage. You have spoken about CapEx [ with states to ] remain flat year-on-year. What is it that the company foresees as a trend in capital allocation? Are you going to pay dividends? I understand there are no M&As that will take place in the midterm. If you could explore this further to peak interest.

[Ricardo dos Buteri, executive]

Gabriel, this is Ricardo. I will answer your first 2 questions on volume in September/October and in Imbituba. Speak about volume, Gabriel, the closing of the port did not have a relevant impact. We're referring to 3,000 to 4,000 containers or 2 ships that were not able to enter the port, but we did finish that call within the month. Now that rollout between 1 month and another was 3,000 to 4,000 containers. The impact of October, therefore was not that relevant. Now despite this, and as I mentioned in the last answer, I would like to say that October is strong. Still thinking about Santos that comes from maintenance of the number of additional calls that we're performing because this is the terminal with the largest capacity of work -- working with ships. So we can deal with additional demand, once again, due to the inefficiency of competition that is not able to attractive or a shift that is arriving. So the demand in October has been strong. I think November will maintain the volumes we have had in the last 2 months. Your question on Imbituba is very important, a terminal prepared to work with 4,000 containers of Cabotage had to be serviced by a number of ships of Santa Catarina to be able to unload a ship where we had 7,000 additional containers as part of our routine that was only Cabotage. So the effort has been incredible to be able to work with the delivery. We have more people, more equipment working there. You asked if this was recurrent because of bad weather, it shouldn't be. We are back to the levels where we only receive ships for Cabotage, but there is a work that will be announced in [indiscernible] for 2024 that will extend for 2 years. We have already begun. We have started up conversations with shipowners not to receive [ spot ] cargoes in emergency situations that happened in October. But to be able instead to have that possibility of having 1 or 2 long-haul services, while the expansion is not fully achieved or the investments have not been made another nonrecurring fact which is bringing in a [ differentiate, so the ] situation for Santos Brasil. Santos Brasil is helping to save Manaus. We have a demand of Vila do Conde of 9,000 to 10,000 containers a month. We're working with 12,000 containers per month due to the drought, all the demand of Manaus is arriving. It was negotiated with several shipowners with Cabotage with ship to work with industrialized products and basic inputs now. This ambition exists differently from [indiscernible] Imbituba.We understand that at least in the coming 45 to 60 days, we will continue to support this amount of volume, and we will work with the demand of Vila do Conde and Manaus. I will now give the floor to speak about capital allocation. Well, Gabriel, our capital allocation is centered on 2 main fronts: One, CapEx in the portfolio assets, notably Tecon Santos for the reasons I have explained throughout the call. And [indiscernible] also enabling us to remain relevant with [ era ] the Port of Itaqui. So we continue to allocate capital, and these are significant investments for those 2 assets, logistics received a part, Vila do Conde another part, but the priorities are Itaqui and the Port of Santos. We have another current, which is the payback of shareholders' capital through equity interest and the payout of dividends. Yes, we have paid out everything that is possible from the results to our shareholders Santos Brazil is in a very good position. We have more liquidity than we can pay out. We have an analysis underlying this on how to carry out a larger payout of capital to shareholders, given the limitation we have attributing our net profit. So our mindset, therefore, is focused on those 2 pillars or factors, capital allocation and to take advantage of what was said with M&As, with new often. So we're looking to see what the government will, but we're growing containers. We're growing the integrated logistics at the port, much more in an organic way within our capacity and expertise. And in the liquid bulk terminals, of course, we're paying attention when we carried out the follow-on. We should recall that the interest rate was at 2%. Presently, we're almost at 13%. So the cost of opportunity, the cost of capital has changed, and our mindset has changed in terms of what will bring in more value to the company and for the company investors. But of course, we're attentive to opportunities that may appear.

[Gabriel Rezende, analyst]

Very good. Thank you, Daniel. Thank you, Ricardo, and congratulations for your results once again.

[Operator]

Our next question comes from [indiscernible] from Goldman Sachs.

[Unknown Analyst]

We have 2 questions here. The first refers to the unit revenues for storage. When we look at this year-on-year, the growth is limited, especially if we compare this with revenues from key where you negotiate large contracts, but nothing to impact the segments. So I would like to understand why you have this difference of performance in unit revenues between these 2, and what you can expect in terms of storage for the fourth quarter and 2024. The second question refers to a follow-up. In terms of the minor contracts, you're about to close. I would like to know if the repricing of services, the key store is something immediate? Or will it take some time to come into effect? These are my 2 questions.

[Ricardo dos Buteri, executive]

[indiscernible], good morning. This is Ricardo and thank you for your question. Let's speak about the storage revenues or the warehouse revenue. Now we're living a more challenging scenario than the key. The volume for Brazil have had a retraction and it's natural that each terminal will decrease the retraction of cargo and will not allow the cargo to be short at the trucks or other sites. Now secondly, there is a difference of approximately 3 days less in the time of Cargo 12 in our bonded warehouses, not only in our bonded warehouses, but everybody else in Brazil. Now why is this happening? There's a retraction in demand because the custom process of the industry is more agile, and there is no logistic bottleneck. Cargoes are removed much faster. So the main point that lead to revenue are these 2 now it's worthwhile recalling the following. The average ticket for warehousing increased by 2 digits. We have work once again as part of our strategy in the commercial and pricing strategy of the company, and Daniel referred to this, where we have a strategy. We generate campaigns to identify a mix of cargo with SIP value, ensuring that the average ticket will always be at better levels than previously. If the warehousing revenue dropped less than 20% of retraction -- it's about this commercial strategy, the pricing strategy to ensure that these contracts now with shipowners directly with those importing or exporting cargoes can be negotiated monthly. We have 9,000 active companies at Tecon Santos and these contracts every year have a readjustment based on inflation or some other KPI, higher volume or ensuring that integrated logistics will make sense for them, so they can use our assets more. Regarding your question on minor contracts and repricing, let's separate things, keys and warehousing the repricing of minor contract fees with shipowners -- all of them have been concluded based on the same strategy, the same levels and margin conditions that you have seen. Since the first contract in March of this year, there has been no difference whether they have smaller or larger volumes. This strategy is the same, and we had new sites. Now if the contract matures in September, for example, the new price table will become valid as of October 1. If we have a contract that will be negotiated in October that was finalized on October 25. The invoicing is retroactive based on the new table negotiated how it works. Now regarding the warehousing contracts, there truly is a monthly control on this. A meeting in terms of the effectiveness of sales, we look at the minimum that we charge the date of the contract and the percentages of readjustment, not only for the Port of Santos, but for entire Brazil. These are contracts that are separate from the key, and they are discussed every month and readjusted directly with the client.

[Unknown Analyst]

That was very clear.

[Operator]

Our next question from Lucas Barbosa from Santander.

[Lucas Barbosa, analyst]

Good morning, Daniel, Ricardo. We have 2 questions that are in. First, about pricing, as you have had a very good evolution in your key contracts for the next cycle. Could you speak about the difference in the price increase between type of cargo, type of service and the price of full containers seems to have increased more than other containers? We don't see this because of the less favorable mix this year. I would like to see this in the results. The second question about drivers to enhance volume in the third quarter, you had the peak season seasonality aiding and abetting you. How is this helping in terms of volume? And how can it help in 2024? Perhaps we will see other effects, not only the industry, perhaps less negative effects in warehousing for the industry, the automotive industry, helping you with a better cycle of credit. What has improved so far in terms of volume? And what do you expect in the coming quarters and 2024?

[Ricardo dos Buteri, executive]

Lucas, thank you for the question. This is Ricardo. You're correct in your analysis in terms of the pricing for the keys for 2 years, they have already been defined, but there are differences. Brand shipments, for example, has to have a more competitive price compared to a full container. These cargoes that come from Gateway are taken off a Long Haul fit and are being loaded for Cabotage the following days. So obviously, because of compliance with all of our clients, I cannot refer to percentages charge for each type of service that is renegotiated, not to speak about the box rate an empty container has gained more relevance than it had in the past. This is natural. It's common to see in the market an empty container that has to be handled. It is 50% of the price of a full container. We have been able to reduce the disparity. We have better rates. Now transshipment is more competitive even though there was a retraction of minus 8% of current shipments at the Port of Santos. Santos Brasil has 62% of the market share of all of the port transshipments. It's the type of activity that because of our capacity because of the number of print is relevant, and it is very helpful to shipowners. It gives them greater flexibility in terms of Long Haul and Cabotage. The average ticket did have a growth. I won't refer to the box rate. And therefore, a full container has become very relevant for us. Transshipment in a situation of balance for the shipowner and an empty container has gained relevance in terms of percentages if compared to a full box trade. Now referring to the industries or the segments. I can say the following. We observe a resumption for the last 2 months of cotton and sugar and this has been very significant. The exports of sugar to China had a growth of over 2,000% when we compare the third quarter '23 with the third quarter of '22. The volumes are expressive. And this is because of the rupture in their harvest and the restriction of India of selling more sugar to the world. So Brazil has become a highly important player more than it was because of these volumes required for sugar. And in cotton, we have observed a recovery in the last month, an increase of 16%. Despite a drop of [Foreign Language] the growth in the last 2 months of 16%. [Foreign Language] But the quarter had a greater drop than in '22. Now when we talk about imports Lucas, what goes to have resilience since the beginning of the year in the 10 main segments are electrical appliances. They have had an increase of 25%, and the normalization of the chain of production with ship has brought back this segment. We see a better segment this year besides, of course, solar panels, and this will continue on in 2024 with the imports of solar panels. And in import, where we see a very good trend, we have the machine segment, agricultural, implement machines to support the growth of the harvest and agri business, as well as equipment used in civil construction. In the automotive industry that you asked about, it has maintained its performance. It had a trough in the third quarter and the drop was observed in all of the trades. Not only for parts and pieces, but also for vehicles. This is the scenario of exports and the segments that should pose an opportunity in 2024.

[Lucas Barbosa, analyst]

That was very clear, Ricardo.

[Operator]

Our next question comes from Pedro Bruno from XP.

[Pedro Bruno, analyst]

Thank you for taking my question. I would like to go back to the volumes that are not container volumes and go back to the guidance review, I think that the warehousing point has been clarified. When we look at the guidance review your expectation is to remain in terms of the same volumes you had in the former guidance. Well, in the EBITDA, we saw a review below the previous range. Why having to forecast a drop? I was going to bring up the point of the vehicle terminal and warehousing. Warehousing has been fully explored here, but which will be the dynamic of the vehicle terminal and to speak about a broader context. Where is your dissolution because of warehousing that has a great deal to do with the volumes of the keys the 2 points that Ricardo has just explained? That is the first question. I did have a more specific question.

[Daniel Dorea, executive]

Pedro, how are you? This is Daniel. Allow me to speak about the guidance. There are 2 effects here. One, the volume of a container handles that is at minus 8% and minus 4%. It was at plus 8% formerly. And therefore, in the guidance, it is contained in the previous interval. That's correct, except that the cargo mix was deteriorated vis-a-vis the original company's projection. And this is where the difference lies when we look at warehousing, if we look at warehousing and Tecon Santos, there was a drop in the 9 months of '23 of 18% vis-a-vis the 9 months of '22. If we go to logistics, there's a drop of 18% which means that imports have suffered much more than all of the other components of the cargo mix for the company. Import is a strong revenue generator in warehousing and logistics services associated to imports in cargo. And this is where the detrition lies in terms of our results and for the cargo mix. It's not only based on the volume review. It is volume and how this cargo mix behave throughout the year. And this has a relevant impact on our EBITDA projection. Ricardo said, the average ticket was increased to, but the volume had a significant drop. And this ratio is not sufficient when we look at the cargo mix deterioration.Pedro, I will speak about the vehicle terminal in your question about our present expectations. First of all, we have to be aligned in the following the comparative base of 2022 was very high. It was a record in this asset a historical record. When you come out of historical base of invoicing, you can imagine that the expectations will be more accentuated in the case of a retraction. Now the reduction of volume from Argentina, which are the main players where Brazil was of 86% in exports because of the exchange rate difference in the political situation. Other relevant markets that had gained market share in '22, like Chile and Colombia and drops of 70% to 80% as well. This was the main reason that led us to having a retraction of 30% in the number of vehicles invoiced. There is a part of the point that -- we have observed with a certain recurrency in the last 3 months. This comes from the Mexican market, especially the exports to the Mexican market that had a growth of 32% with the Port of Santos responsible for 1/3 of those shipments. We have several assembly plants that are working with exports from Brazil, Mexico. And from there, they transfer these vehicles to the United States. We have an expectation that after the election, the things will become easier in Argentina. It's very difficult to foresee this, but we hope that Mexico will be a winner at this moment of a very weak amount of volume, not only in Santos but throughout Brazil. And this is because of some countries that are not doing very well. The export of vehicles in Brazil, Pedro based on the COMET source that we have as a partner, recorded a drop of 45% compared to the third quarter of '23 and the third quarter of '22. When we look at imports, although they are much lower, they are also at the level of 30%. So this is what we are facing in terms of the vehicle terminal. The average ticket despite the retraction is higher because of 3 contract renegotiation and the collection of a new service that we have the port operation docking bit that formerly was not our service. We requested it from the port authority, and this is the current scenario regarding the vehicle terminal.

[Pedro Bruno, analyst]

Last question. It's difficult to understand your [indiscernible] here, there seems to be a mismatch between what is effective and what is deferred. We would like to understand if there's something different that we should expect for coming quarters.

[Ricardo dos Buteri, executive]

Pedro, in this case, you have the fat field for the equity interest and deferred credits that we have used. This is the explanation for the difference in the aliquots for the quarter. There is a balance. So the effective aliquots will continue to be lower because these consolidated credits that we are recovering will be offset during 12 months. So there will be a positive impact on the effective aliquots of income tax and social contribution on profit.

[Operator]

Our next question comes from Lucas [indiscernible]. He said Maya has brought a very hard message on the sector, holding back expenses and investments for a period that will be of significant difficulty for the maritime freight. How does this impact Santos -- or will the reality of the terminals be different with the end of alliance between [ MSC and Maya ] have an impact on the ecosystem of the Port of Santos for terminals in the midterm?

[Ricardo dos Buteri, executive]

Lucas, thank you for your question. Of course, as you have -- we are fully aware of everything that is happening with the ship foreigner the success of our customers, our clients are success. We have to work jointly. What I would like to underscore here, our challenges, not a navigation company that we don't have. I will give you 2 examples. At our terminal, we have prices based on capacity and service levels. We never carry out investment levels of billions to create capacity for the short term. Since we've been speaking about the consent in 1947. Now when we had the pandemic, and I'm going to refer to Maya as, but this refers to shipowners. There was a boom in demand and the record requests for new ships since 2021 that began to arrive in 2023. Now if these commissionings are delivered and if there is a reduction in trade because of freight issues, of course, the challenge of shipowners will increase compared to that of a service operator in a Santos Brasil terminal. This does not have a direct impact on Santos Brasil. We look at this very cautiously following up on the number of [ ships ] that come there. There has been an increase. There are 549 ships, docked at the Port of Santo compared to 590 last year, but the number of containers has dropped from 1,400 per ship to 1,300. What will this represent for us? We have to follow up on this. And if the routes and the claims have been maintained. Now this shipowner and the other shipowners have a contract with us. On the one hand, we have to commit ourselves to the service levels, and we have a commitment with Banco do Brasil as well. We are monitoring this week after week the volume for each trade, for each route, Europe, Asia, North America and South America. Let's see what is happening with each shipowner. We're very attentive to this. We're concerned, but we don't have a direct relationship with sea freight, if it increases or decreases. We have to maintain the capacity of our services for the contracts that have already been signed.

[Operator]

As we have no further questions, I will return the floor to Mr. Dorea for his closing remarks.

[Daniel Dorea, executive]

I simply wanted to thank all of you for your attendance. Thank you for your participation, and we'll see you at the next results of for the fourth quarter 2023. Thank you very much.

[Operator]

The Santos Brasil conference call ends here, we would like to thank all of you for your attendance. Have a good day.