Santos Brasil Participacoes SA

BOVESPA:STBP3

Earnings Call Transcript 2021-Q4

[Operator]

[Interpreted] Good morning, everyone, and thank you for holding. At this time, we would like to welcome you to the Santos Brasil Participacoes Fourth Quarter 2021 Earnings Results Conference Call. With us today, we have the Chief Executive Officer and the IRO, Daniel Pedreira Dorea; and the Chief Commercial Officer, Ricardo dos Santos Buteri. This event is being recorded and all participants will be in a listen-only mode during the company presentation.

Ensuing the company's remarks, there will be a Question-and-Answer Session, at which time, further instructions will be given. [Operator Instructions] This event is also being broadcast live via webcast and may be accessed through ri.santosbrasil.com.br, where you will also find the presentation. Participants may flip through the slides at their own convenience. The replay will be available shortly after the event is concluded. The webcast participants can post their questions on our website. These questions will be answered by the IR team after the conference is finished.

Before proceeding, we would like to remind you that forward-looking statements made during the conference referring to the Santos Brasil business outlook, projections, and financial goals are based on the beliefs and assumptions of the company management as well as on information currently available to the company. They involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that conditions relating to macroeconomic situations, industry and other factors could cause results to differ materially from those expressed in such forward-looking statements. I would now like to turn the floor over to Mr. Daniel Pedreira Dorea, who will begin the presentation. Mr. Dorea, you may proceed.

[Daniel Dorea, executive]

[Interpreted] Thank you, and a good day to all of you. Thank you so much for your presence. I hope that you are all well. Beside me, I have Ricardo Buteri, our Commercial Officer. Unfortunately, Antonio Carlos Sepulveda, the CEO of the company, will be unable to participate in the call. He is on a mission with Brazil export in Portugal. And of course, this was a prior commitment. That is why he is not with us today, but let us continue on with some initial remarks.

2021 marked another milestone in the history of Santos Brasil, a year that signaled above all the company's financial recovery and its entry into new fronts of activity in the port sector. All of our business units grew, show greater profitability, and improved productivity. And this is not fortuitous, the result of just one extraordinary year, but rather a sustainable growth path that has been built over the last 5 years, even with the difficulties experienced in the last 2 years due to the pandemic, Santos Brasil has remained relevant and strengthened its position as one of the main infrastructure and logistics player in Latin America.

In 2021, the conjunction of 3 main elements helped to explain the strong results presented. First, a higher container volume; second, a balanced cargo mix; and third, a readjustment of the prices practiced. What the company did very well was to take advantage of a healthy business environment to maximize its results. And notably, we have operational excellence to capture all these scales possible, a greater exposure to import routes in negotiation capacity to adjust the prices of the TEUs services, adjusting the quality of the Santos Brasil operation.

If we take the fourth quarter of '21 as an extract, we will see that Tecon Santos grew by 7.3% vis-a-vis the fourth quarter '20, while the Port of Santos had a drop of 2.8% in the same period. Our market share was almost 40%, representing a gain of 4 percentage points vis-a-vis the fourth quarter 2020. In 2021, Tecon Santos handled 1.1 million containers, an increase of almost 23% over 2020, higher than the Port of Santos, which grew by 10%. Among the other units, Tecon Imbituba showed good growth in the fourth quarter 2021, 46.3% and vis-a-vis the fourth quarter '20, driven by the increase in the volume of cabotage cargo volume positively impacted by increase in domestic consumption.

In 2021, Tecon Imbituba grew 4.6%. Tecon Vila do Conde, on the other hand, was negatively impacted by the lack of availability of empty containers for export and had a drop of 15.5% in container handling vis-a-vis the fourth quarter '20. But note that in 2021, the growth of volume of Tecon Vila do Conde was 8% when compared to 2020 our vehicle terminal located in the Port of Santos had a small drop in the handling of vehicles in the last quarter of the year. But the mix improved because heavy vehicles began to represent 41% of the terminals volume.

Well, in the fourth quarter, this was 7.1%. This evolution is due to higher imports and exports of agricultural machinery and heavy equipment used in agri-business and civil construction. In 2021, the growth in the volume of vehicles was 32.3%, reaching more than 200,000 units in the year. Santos Brasil Logistica, meanwhile, showed strong growth in container storage 42% year-on-year, driven by the growing volume of full containers at the Port of Santos. This increase in the flow of stored containers leverages the integrated logistics services offered to our clients.

By 2021, the volume of container stored at Santos Brasil Logistica grew 50% compared to 2020, surpassing the mark of 70,000 containers stored in the bonded warehouses. We now go on to the financial highlights in the fourth quarter 2021. The consolidated net revenue grew 70.2% vis-a-vis the fourth quarter 2020, reaching close to BRL 445 million. In 2021, the consolidated net revenue grew 65% compared to 2020, reaching BRL 1.5 billion. EBITDA totaled BRL 158 million in the fourth quarter with a 38.3% margin. In 2021, EBITDA increased to BRL 564 million, a growth of 65% vis-a-vis 2020. We have an EBITDA of BRL 579 million, in line with the maximum point of guidance that we released in April of 2021.

The consolidated EBITDA margin was 36.8%, 14 percentage points higher than that recorded in 2020. And in the bottom line, we reported a net income of BRL 272 million in 2021. It is interesting to know the effect of the operational leverage of our business enhanced by greater volumes and more balanced prices. After the negotiations we signed throughout 2021. In 2022, we will see the annualized impact of these new contracts, which will be the main variable of our expected growth. Regarding CapEx in the fourth quarter '20, we invested BRL 56 million in our assets, 43% invested in Tecon Santos alone.

Over the year, investments totaled BRL 240 million, making it possible to deliver Phase 1 of modernization in the Tecon Santos port whose handling capacity will jump to 2.4 million TEUs, 20% more than at present. I would like to refer to the use of cash, which ended the year with BRL 1.1 billion in available net cash of BRL 671 million. The agenda for growth and expansion of the company portfolio is and will continue to be a priority through M&As and port auctions. These are some ongoing negotiations in markets that we deem to be resilient for long-lasting growth and not necessarily dependent on domestic consumption.

Our first step has been taken in this direction with the acquisition of 3 bulk liquid terminals in the Port of Itaqui whose demand for fuel is driven by Brazilian agri-business which in turn feeds a large part of the world's population. Additionally, the day before yesterday, we announced a share buyback program, confident that under certain scenarios, the trading price of Santos Brasil shares may offer excessive discounts in relation to what we deem to be the intrinsic value of our assets. Our intention is not to speculate nor to make a treasury a trading desk, but have the opportunity to allocate capital in a way that will truly maximize what we're doing this in the coming 18 months, which is the window that we have for the buyback program.

It is also worth highlighting the distribution of earnings to our shareholders, which will be of BRL 258 million in dividends and interest on equity based exclusively on the fiscal year 2021. This amount is equivalent to the payment of BRL 0.30 per share, conferring a dividend yield of approximately 5% and a payout of about 95%. These 2 fronts, both the payout of dividends and equity and the repurchase of shares in the company does not change our growth strategy considering the expected future cash generation in the short and medium terms, not to mention the room to eventually leverage the company's balance sheet.

I've almost practically reached my final remarks, but I would like to highlight 2 last topics. First is that the company's ESG agenda. In 2021, we published the 13th annual edition of our sustainability report [indiscernible] to follow the guidelines of the Global Reporting Initiative and the fourth in the standards set, this set of value guides the contact of our business, encourages the attraction and retention of talent, and improve our risk management. I would like to invite you to read or reread this report to familiarize yourselves with our initiatives.

By the way, in 2021 Santos Brasil shares were selected to integrate 3 new indexes, IBrX 100, the ICO2, and the Great Place to Work launched recently. They bring together companies certified by the global consultancy of Great Place to Work as having the best working environment. Secondly, we have a start-up of the company's new business unit, Santos Brasil [indiscernible]. We are confident that 2 of the 3 terminals leased at the Port of Itaqui will issue their [ slips ] marking another stage in the Santos Brasil business growth. Very well along with Ricardo, we are now at your full disposal to go on to the Question-and-Answer Session. Thank you very much.

[Operator]

[Interpreted] [Operator Instructions] Our first question is from Gabriel Rezende from Itau BBA.

[Gabriel Rezende, analyst]

[Interpreted] We have 2 questions on our side. First, on price. We have looked at the recent work of Santos trying to take the price to more profitable levels. It seems that you're going beyond this as you did last year with Merch, which is the relevance of this if we could cut down your performance in volume and price, which is the relevance of price in this last part. Especially when you compare yourselves with the third quarter of 2021 and how can we understand new price hikes going forward, if you will be able to do real readjustments in the contracts because the maritime freight still has a positive trend. If you could share with us the impact on your CapEx. At the beginning, the imported products will become ever more expensive and eventually, all of these issues should be redressed.

[Daniel Dorea, executive]

[Interpreted] This is Daniel. I'm going to begin with the second part of your question and Ricardo Buteri, ensuing this will refer to the price scenario. In terms of [ Quay porto ] there was a Veto this in the law that approved the framework for cabotage now this is returning to the Congress to analyze Veto. It is a potential scenario that the Congress now aware of the importance of this for the port segments will turn down the presidential Veto, the class associations of the sector are actively working on this topic, seeking to hold conversations and to make people aware of the importance of this benefit. And I would dare to say that it is possible that [ Quay porto ] will once again be instituted.

It is very relevant for [ the profit ] sector. Most of the equipment and the financial volumes are imported, and this is the largest part. There is no national substitute. You don't buy a ship to shore crane domestically. There is no production of this. So simply to mention an example, I believe that this [ quay porto ] would be possible that the Veto will be overturned and that it will be instituted once again. If we're able to carry out the survey phase, Phase 2, we have BRL 500 million to BRL 700 million of investment and [ Quay porto ] represents BRL 150 million. The impact, of course, if it is not instituted once again. But we will attempt to do this now. The issue with this is that we can accelerate everything.

This will not be permanently open in the suggestion of cabotage, we would have 2 additional years. We will have to make accounts and perhaps anticipate part of the CapEx geared to equipment. So this is what we're doing. We're presently waiting, looking upon everything with a great deal of interest participating through class associations in the debates, and I have a reasonable expectation that it will be once again put in place, and we won't have that financial impact on the payment of the import levy on equipment as well as other related taxation. Ricardo, perhaps you could speak about the price scenario to respond to the other question by Gabriel.

[Ricardo dos Buteri, executive]

[Interpreted] Thank you, Gabriel, for the question. The issue of prices. I'm going to give you a short history so that you can understand what happened in 2021. Gabriel had a very important relationship with one of our clients, and we announced this alternative with 12 clients for our port relationships additionally to what was mentioned here, negotiations began in April of 2021 and concluded in December, which means that throughout 8 months, we had this negotiation with 12 ship owners that work with us not only in Tecon Santos, but in the other terminals.

This is the first piece of information about the more holistic part of the negotiation and saying that it encompassed 100% of our clients. Now these 12 ship owners that we negotiated with in some cases, contracts were carried out with a 1-year term. This means that in 2022, 30% of the total ship owner clients that we negotiated with will have to renegotiate beginning in August and September with that possibility of basing ourselves on the results of the negotiation in the first quarter of 2022. And the others that have a 2-year contract, we will have renegotiations that will only have an impact in 2023.

This is the price scenario when speaking about ship owners. This is what I can inform you at present. And of course, I'm open to other questions in this direction.

[Operator]

[Interpreted] The next question is from Victor Mizusaki from Bradesco BBI.

[Victor Mizusaki, analyst]

[Interpreted] Congratulations for the results. I have 2 questions. The first the SD 10, there has been a public consultation for this initiative, and we have observed quite a bit of discussion in terms of who can or not participate in this auction. My first question is if you would be interested in this asset or not? And secondly, we have followed up on the discussion that [indiscernible] has positioned itself against the participation of MSC and Merck in the auction as this could lead to a certain imbalance in the competitive environment. If you agree with this or not with this stance. The second question is about SD 11 the [ grain ] terminal, the bulk terminal in the Port of Santos. If you have any interest in that as well.

[Daniel Dorea, executive]

[Interpreted] This is Daniel. Let me take your 2 questions, and begin with the SD 10. Yes. The company, of course, is interested in serving and assessing this asset, it's something natural. First of all, because we're dealing with containers. And this is the core of the company, and we are the largest operator of container terminals in Brazil. Naturally, therefore, we are interested in this segment, niche. And secondly, in the Port of Santos, we have an in-depth knowledge of the business environment, and this is where our main asset is. So of course, evidently, this is something that is very dear to us in the sense that we have a great deal of focus and attention. And in principle, it could be an interesting asset.

There is also an additional issue. The SD 10 in our expectation. If there is the auction in 2022 would be an asset that would begin to operate in 2027, '28, '29, where the port will also have a brick wall that would support a capacity of 1.5 million to 2 million TEUs. And Brazil does want to be a supplier of that capacity that will be demanded at the end of this decade. So we believe that it would be interesting to analyze the asset. Now regarding the competition and eventual restrictions for participation. This topic will have to be very carefully analyzed. Public consultation is open. And certainly, there are several contributions on the edge, so that will be sent in. And as Brazil, we have no problem whatsoever with competition as long as Tecon Santos began to operate in 1997, there already was competition. And during all of these years there has been more than 1 or 2 container terminals in the Port of Santos.

It has always been a highly competitive environment. The issue is that we have no problem whatsoever with competition. We think it's healthy. It enhances our performance. Now it has to be balanced. The playing field does have to be leveled out. And this is not happening at Port of Santos only. It's a worldwide discussion because of the verticalization, there is a preference given to the terminals of shipowners. And of course, this is a technical issue based on facts and economic data and paradigms that are global. And I'm convinced that the regulatory agency and the competition agencies will have to analyze this. And without a doubt, the government itself will foster a well-balanced auction, allowing for a very well-balanced dispute.

This is our stats, of course. In terms of STS 11 this is an area sector, a segment for bulk for corn and other grains. And of course, we want to participate in as much as we can. And of course, we're also assessing this, the STS 11. What I do believe is that the term between the publication and the realization of the auction is a very short period. The auction has been set for March. And because of the short term, we're going to have to have a task force, but we are going to analyze it for the reasons that I have been mentioning steadily.

It is linked to agri business. This is a chain that is growing in a very sustainable and long-lasting way. It does not depend on the Brazilian economy, and it is in the port of Santos. So yes, of course, we're going to survey this. To be very clear, we have been serving this and we have carried out several studies for grains in the port of Santos, but looking at the entire map of Brazil as well. So we are presently in the survey stage. And there is no decision taken so far. I hope to have answered your question unless you have any additional questions.

[Operator]

[Interpreted] The next question is from the webcast from Carlos Herrera from Condor Insider.

[Carlos Herrera;Condor Insider;Analyst, analyst]

[Interpreted] I have 3 questions for you. First, which is your outlook on the month-after-month evolution in 2022, will there be an impact because of the crisis in Russia? Second question, would it be feasible to have EBITDA margin that is higher than 40% in 2022. Third, the company has quite a bit of cash. How are you going to allocate these resources.

[Antônio Sepúlveda, executive]

This is Carlos. Let's speak about the volumes for '22. Practically all of the work volumes are in line with our budget. When we look at 2022 with 2 months that have already passed. And your question additionally to the volume is the concern with Russia, of course, we're following up closely on the crisis in Russia. The sanction on exports in Russia will have a very low impact on the handling of containers. The largest volume is bulk. And we -- well, we do have a problem with the fertilizers to give you an idea of share, the share in Tecon Santos, for example, is less than 1% of the total volume. It is 0.6%. So the issue of the impact of Russia on volumes is very, very limited. If we consider the total volume.

Now we do have the problem with the delays. This conflict will cause greater pressure on the logistic chains who have as yet not recovered from the pandemic. We have had delays, suspensions of shipowner clients that no longer have stays in these regions because of the delays in the north of Europe. Some ship owners have already communicated to us that there will be some cut downs and delays, of course, which will have an impact on the Port of Santos support in this region. Now why is this timely for us. We have a series of vessels that will be impacted by these delays. We will have a greater pressure in the ports, and they will put in additional vessels to carry out these scales. And I think Daniel has just mentioned, we made an investment of BRL 400 million in this, and we are ready to put in some additional vessels.

In 2021 the port demanded that we reduce some logistic impacts on Santos Brasil because of its capacity and its operational efficiency was able to do this very calmly. We were able to deal with the additional movement of almost 100,000 empty containers caused by the more intense logistic chains. So we don't think this is a reason for concern in the container segment. And this is a vision that we are adopting here. I will give the floor to Daniel for your second and third questions.

[Daniel Dorea, executive]

[Interpreted] Hello, Carlos. About cash simply to go further in what I said in my original speech. The priority for the use of our cash is an expansion of the company portfolio going more in depth in the portfolio. Containers that will go to the market or possibly go to the market. We have grains, liquid, and we also have a market not only in the auctions, but a secondary market that is on its way. The port sector is extremely dynamic with a great deal of businesses that will happen. And we do have some more advanced negotiations and projects that are being served. So a large part of our cash will be earmarked for that.

We now have the buyback program. And as I mentioned, this is an efficient allocation within some scenarios. Of course, we're not going to speculate with our own shares and treasury will not be trading or negotiating our shares. This is not our profile. It is not our role in terms of treasury. However, if we begin to understand that the price is displaced from the value of our share, this is a good allocation of capital. So it will maximize the return of shareholders. And evidently, there is another part of our cash that will be geared to remunerating the shareholders capital. We have a payout presently based on 2021 of BRL 258 million, and these are the 3 routes or ways of maximizing return and generating value for the company's shareholders.

And part of the question, if it is feasible to have an EBITDA margin higher than 40% in 2022. Yes, it is possible. We're working towards that. However, there is one variable that presently would need to monitor more closely, and this is inflation. How great the inflationary pressure will be in some cost items that are very relevant in the company matrix personnel, for example, energy and fuel. These are the important line items in the company cost matrix. And of course, they will suffer pressure because of inflation, but a margin higher than 40% is feasible with this disclaimer, of course.

[Operator]

[Interpreted] The next question is also from the webcast from Rafael Carvalho from CL4 Capital.

[Rafael Carvalho;CL4 Capital;Analyst, analyst]

[Interpreted] If you could remark on the economic rebalancing process and good Imbituba what is happening with the process? If at any point, this rebalancing is not authorized. How much negative accumulated cash will have to go through these results. Is there any possibility of returning this terminal.

[Daniel Dorea, executive]

[Interpreted] This is Daniel once again, very well. What we have at present is a legal decision that is favorable to suspending payment in terms of the contractual handlings at the port. Now this amount that we have paid as a penalty to the port authority will, of course, depend on the results. It is part of the results. What it does not have is a cash impact. We have this legal decision of not proceeding with this. It's BRL 60 million presently for 2 exercises for [ MSC ]. But once again, it is included in the results, and we have made provisions for this. Now regarding if the process is underway, it's at the judiciary. And of course, the process is rather uncertain. There is a long path to tread.

There will be more years to administratively negotiate a solution. Unfortunately, we did not attain a successful result at the administrative here and we're seeking our rights in the judiciary. And of course, this can be a very lengthy process. Now the return of the port is not such a simple thing in terms of port assets. The port sector was left outside of the law of the friendly return of assets that we have in the railway and highway sector. The port sector has not been included in this possibility of a friendly return. It's a very complex process, and it is equally complex to return the terminal. We cannot simply put in padlocks, say very well we've delivered it and here is the key.

This is a path that will have to be negotiated with all of the interested parties, the granting power, the infrastructure ministry, the port authority, the [ SP part ] from Santa Catarina and the regulator, a very complex path there for but we are devoting a great deal of time and surveys to understand if we can harness phenomenal value in this port if we are able to resolve the issue.

[Operator]

[Interpreted] The next question from the webcast is from Lucas Barbosa from Santander.

[Lucas Barbosa, analyst]

[Interpreted] Congratulations for your results. I would like to understand the outlook for price at Tecon Santos in 2022. If you could remark on the price rises that will happen during this year. And has there been any more relevant impact on the average price of the fourth quarter 2021? Or can we imagine that this price will be maintained in 2022.

[Daniel Dorea, executive]

[Interpreted] I'm going to begin from the beginning, simply because Gabriel from Itau also posed some questions regarding price and readjustments very well if it had a relevant impact on the average price of the fourth quarter 2021. As I explained what we had in the fourth quarter was a consolidation of the increase of adjustments made with ship owners throughout a period of 8 months. So in fact, in the fourth quarter, we had the negotiation signaled out -- and we gained traction with 2 points that are favorable.

First, December was highly positive. The volumes of December were 15% above that of the year 2020 month after month. We had a concentration of our average tickets. And we had a highly positive December in terms of volume. Now if we can imagine that this will maintain itself in 2022, probably yes. As the consignations are being carried out this year in accordance with our budgetary outlook with the desires of all ship owners. We think that we will have that trend of maintaining not only volumes, but prices in 2022.

The only variable that is outside of this is the mix and the mix is very important. We had an increase of imports in 2021. That was very favorable. Our trading in terms of import at the ports are very representative. So that vision of 2021 did not have a different effect besides a consolidation of a very positive volume in 2021. And in 2022, I think this will be maintained. Now to understand the price movements in 2022. I mentioned this in the previous question, 30% of the contracts with the shipowners will give us the opportunity to have a new round of negotiations beginning in September, which, of course, will have an impact on the fourth quarter of 2022.

But I would like to make the most of your question to give you a holistic vision on prices, not only on TEUs or Tecon. Let's speak about Tecon, 12,000 active companies, and these are direct clients that have nothing to do with the cash operation of the ship owners and all of them have contracts with Santos Brasil Participacoes. What is happening is that the volumes are aligned and the average ticket is beginning to point towards a somewhat better growth than what we had analyzed for that moment. Why? Because these readjustments based on inflation and based on the room that Santos Brasil has to render these services to the client and the integrated logistics of these clients is leading to a readjustment in some of the contracts and the volumes have become more concentrated with us not only with Tecon but with [ SB log ] in transportation and other areas.

So the negotiation of contracts with these 12,000 active companies has allowed us to have more attractive tickets in the company as a loyal logistic operator. We work with the logistics chain, the entire change since the moment the container is unloaded from the vessel until the production line of the clients with which we have a long-standing relationship. I wanted to give you this price perspective so that your vision can go beyond that of the war for the TEUs.

[Operator]

[Interpreted] The next question is from Pedro Bruno from XP Investments.

[Pedro Bruno, analyst]

[Interpreted] And my question refers to the answer that you have just given. I would like to further explore prices, but at the tap, the vehicle terminal since the third quarter we have seen a relevant leap that was also gradual in terms of the tariffs aligned with other services as has been mentioned. But in your release you speak about, the mix that the heavy equipment has gained share as part of your service, how sustainable do you think this will be the heavy equipment? How do you imagine the mix going forward? And which will be the weight of this mix improvement in your average tariff vis-a-vis price adjustments? Another angle in the price discussion outside of the container handling. This is the question I have from our side.

[Daniel Dorea, executive]

[Interpreted] So let's speak about the vehicle terminal. The trend continues on. When it comes to volumes, this was a fantastic year in terms of volumes. We had a very well-balanced volume between imported and exported cards. Our vision is that the speed is somewhat lower vis-a-vis 2021, but the average ticket and the mix of agricultural machinery and trucks, this will continue at least that has in the first 2 months of this year. And the average ticket of the year will continue to grow. We're also going to have annual readjustments for the vehicle terminal for contracts with the assembly plants.

So in a very practical way what I would like to say is the following. The issue of heavy equipment in the mix will continue to be favorable. At present, we don't have a view that there will be a reduction because of construction, mining, and agri-business that is importing heavy equipment. And for those who already use the vehicle terminal, the average ticket will be based on the annual negotiations on the contract. So we focus on volume mix and in a very conservative fashion we are saying that there is no trend for change in the mix of heavy equipment.

[Operator]

[Interpreted] The next question is from Guilherme Mendes from JPMorgan.

[Guilherme Mendes, analyst]

[Interpreted] I have 2 questions on my side. The first is a clarification that 30% of negotiations this year, 30% of the number of contracts or volume. And what does this represent in terms of volume in practice which would be the [indiscernible] effect here. Now if we look at Tecon Santos and another terminal ports, the box rate seems to be low compared to other terminals and there should be a price increase in 2023 of 2 digits -- high 2 digits. We have discussed this topic at length, but is there a reason why this box rate has not caught up with other equivalent terminals?

[Daniel Dorea, executive]

[Interpreted] That issue of 13% refers to a number of contracts. We have 12 ship owner clients that in effect will be negotiating during 2022. And this could go on to the next year. It's not an issue of volumes. It's an issue of number of contracts. In terms of box rate, you are right. The Port of Santos does not have the best tariffs, although it is deemed to be a hub and although it has the highest volume of investments in the country, there are spots in the Northeast and in the South with tariffs that are higher to the ones we practice in Santos. Now, what will happen in 2023 and the next cycle with ship owners will depend on supply and demand and the level of investments and operational efficiency that we bring in to provide the logistic solutions to each client.

So I can single out which is the level of box rate at present, but I can't guarantee that more and more we're going to have this -- reduce this disparity because of the operational efficiency vis-a-vis other ports and other states in the country. The negotiation of 2023 will follow these lines as we did in 2021 basing ourselves on supply, on demand, on the heavy investments we are making and the disparity that we find ourselves in and all of this to provide the best solution to be able to service each and every one of our clients, so that we can enhance their returns and bring returns to the company considering the unstoppable investments we have made.

[Guilherme Mendes, analyst]

[Interpreted] I have another follow-up. In terms of capital allocation, you spoke about the STS 10, STS 11 and the port authorities, are you interested in these assets, which would be your priority, which would be more relevant for you?

[Daniel Dorea, executive]

[Interpreted] The port authorities, Guilherme, well, we have decided not to participate, but we surveyed them because this can be used as a benchmark for the SBA at the Port of Santos. I think it could be a good business. We would have to fully understand the model, but a great deal of time will have to go back by especially at the Port of Santos. There are many interest because of the size, it's the largest port in South America with several types of Cargo, a different list of players and a very long list of interest. And all of this will have to be duly addressed. So a great deal of time will still have to go by.

It could be a good business potentially. And, of course, we have to look at it from the viewpoint of perhaps being a good investment opportunity and to have clarity on the impacts that would probably be positive or negative in terms of the lease of the company and the Port of Santos. We have 2 important leases in the Port of Santos. So this is part of our agenda and we are following up on this very carefully. Simply to end Guilherme because you asked about the relevance, terminals, and STS 10 would be one of the first up to present. We are terminal operators. And in the concession of the port authorities as we are leases of the Port of Santos, we would have limitations in terms of participation. We cannot have individual participations that are greater than 15% in this case if we wish to be part of the consortium.

[Operator]

[Interpreted] The next question from the webcast is from [ Leonardo Kapa ] from Santander Bank.

[Unknown Analyst]

[Interpreted] If you could speak with greater granularity of your expectation in investments and the beginning of operations of the 2 terminals, brownfield for 2022 and expectation of your CapEx schedule for the greenfield terminal in Itaqui?

[Daniel Dorea, executive]

[Interpreted] We're going to work with 3 terminals in Itaqui and invest approximately BRL 115 million. The greenfield terminal should enter operation in 2026. The brownfields come into operation in 2022, that is the expectation beginning with the second semester. We're concluding the acquisition of the tanks and we are approving the basic investment plan. So the expectation, what is plausible is to enter into operation for the second semester of 2022 for both terminals. But even that where we will continue investing in these terminals to expand their capacity so that we can have a greater storage capacity in the Port of Itaqui.

[Operator]

[Interpreted] The next question is from [ Jorge Lourencao ] from Morgan Stanley.

[Unknown Analyst]

[Interpreted] Congratulations for your results. This is a conceptual confirmation. When we look at the gross revenues evolution year-on-year, the TEUs, we see 94% in storage and we have the new pricing for storage as well. So what I want from you is a confirmation if this explains the differences or if there is a conceptual issue here.

[Daniel Dorea, executive]

[Interpreted] The topic of storage is a percentage of retention that we have in the terminal based on the volumes that we work within the TEUs. I'll explain the logic what most has an impact on the average ticket of the storage is the dwell time the days that the vessels remain in our units. So it's a mix of the contracts that we have with direct clients, the dwell time, and the retention level. We had several containers, for example, that could be released and taken straight to the industries. Those that are retained in terms of the storage invoicing require some additional service separation or others and this is the difference that is also included in the average ticket, not only of the TEUs, but also of storage. I hope that this has responded to your question. If not, you can ask another question.

[Operator]

[Interpreted] We would like to end the Question-and-Answer Session at this point by returning the floor to Daniel for the closing remarks.

[Daniel Dorea, executive]

[Interpreted] Well, simply I would like to thank you once again, thank all of those that participated and we hope to see you once again at the coming conference call where we will be speaking about the first quarter of 2022. I wish you very good work and have a good day.

[Operator]

[Interpreted] The Santos Brasil Participacoes S.A. conference call ends here. We would like to thank all of you for your participation. Have a good day.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]