RUMOF (RUMOF) Q2 2026 Earnings Report, Transcript and Summary

Good afternoon, and thank you for waiting. Welcome to Rumo's Second Quarter 2026 Earnings Conference Call. The presentation is being recorded and simultaneously translated. Translation is available by clicking on the Interpretation button. If you are listening to the video conference in English, you have the option to mute the original audio Portuguese by clicking our mutual original audio. Before proceeding, we would like to reiterate that forward-looking statements are based on Rumo's Executive Board's beliefs and assumptions and information currently available to the company. These statements involve risks and uncertainties as they relate to future events and depend on circumstances that may or may not materialize. We recommend that you refer to the disclaimer on the second page of the presentation. I will now turn it over to Mr. Felipe Saraiva, Executive Manager of Investor Relations at Rumo to begin his presentation. Felipe Saraiva Thank you for joining earnings call for the second quarter of 2026. Let me start with the highlights on Page 3 of the presentation. In June, we started operations at the new BR-070 terminal, completing the first phase of the [ Ferrovia de ] [indiscernible ], the new railway strengthens our capacity to serve one of the most important agriculture regions in Brazil. I would like to call your attention to our operating performance over the last 12 months, already including the volumes we reported last night, which transported 921.2 billion RTK, including 35.4 million tonnes of grains in the Northern operation. This is in line with the indications we shared with you at the beginning of the year. Adjusted EBITDA for the quarter was BRL 2.3 billion, stable year-over-year. It was worse reminder that last year's figure included roughly BRL 100 million from insurance proceeds and the reclassification of equity income. Excluding this effect, growth would have been 4%. Financial leverage remained stable at 2.1x. Moving to Page 4 with the operating results. We transported 23.8 billion RTK in the quarter, with strong growth in the Northern operation. The main contribution came from grains, but also we saw good performance in fertilizers and liquid fields. In the southern operation, growth was concentrated also in grains, which offset the more difficult dynamics in the sugar market. Now on Page 5, let me go through market share. we kept a good level of share in all of our major markets. If we combine our performance in Mato Grosso and [ Reas ], we gained 2 percentage points of share in our addressable market. In Santos, our market share was 50% and in the Southern boards 26%. On Page 6, we have the operating details. Even with relevant volume growth, we kept our main operating indicators stable. Trains time in the Northern operation was roughly in line with the second quarter of 2025 and dwell time in Santos improved in the period. Regarding energy efficiency, unit fuel consumption was flat year-over-year. On Page 7, I will present the breakdown of our net revenues. Consolidated net revenue was BRL 3.9 billion, up 6% year-over-year. On yields, the Northern operation was down 3%, mainly reflecting price dynamics in [ Malesa ] with stable prices in Mato Grosso. In the Southern operation, yields were down 1 percentage basically a mix effect with a lower share of sugar in the portfolio. On Page 8, we present EBITDA. As we mentioned before, EBITDA was stable in the quarter at BRL 2.3 billion. We delivered contribution margin growth in both operations and the others line reflects roughly BRL 100 million from insurance proceeds and the reclassification of over income that took place last year and did not repeat this year. On Page 9, we will go through the financial results and net income. Net financial result was negative by BRL 765 million, mainly reflecting a higher net debt base. Even so, we delivered adjusted net income of BRL 688 million, in line with our operating performance. On Page 10, we will look to the indebtedness of the company. Net debt ended the quarter at BRL 17.3 billion, and financial leverage was stable at 2.1x. We keep an adequate liquidity position with BRL 5.9 billion in cash and a long-term debt maturity profile. After the movements of the quarter, we closed the period with BRL 2.4 billion in committed and undrawn credit lines. On Page 11, I present the investments for the quarter. We invested BRL 1.6 billion in the quarter with almost BRL 600 million in recurring CapEx and almost BRL 1 billion in expansion. In the northern operation, which concentrates our expansion investments. Most of the investments were towards the expansion of existing radio network into the [ Ferrovia do ] Mato Grosso project. I want to reinforce here that we moved investments forward in the Northern operation and concentrated the pending on the [ Ferrovia do ] Mato Grosso project in the first half of the year. As a result, CapEx in the second half will be lower than in the first half. Now let me give you an update on the soybean market on Page 12. The initial estimates for the '26, '27 crop point to stability for the Brazilian soybeans with production and exports at levels that are similar to the current crop. These figures are still subject to the uncertainties of the agriculture cycle and to the current weather outlook, which points to a strong [indiscernible] scenario. In Mato Grosso, we expect a slight increase in planted area of roughly 120,000 hectares with no relevant change in the outlook for production and exports. Moving to Page 13 with the corn market. The corn crop was confirmed at a high level, which should support a good export volume. For the next crop, preliminary estimates for further growth in the planted area for the second crop of corn, the corn [indiscernible], driven by domestic demand for biofuel production. In this scenario, production and exports should remain close to the current levels with the carryover stocks covering the increase in domestic consumption. This concludes my presentation, and we are now available for the Q&A session. Thank you. Joining us today are Mr. Daniel Rockenbach, Mr. Guilherme Machado and Mr. Felipe Saraiva. Before we begin the Q&A session, I would like to turn it over to Mr. Daniel Rockenbach for his opening remarks.

Good afternoon, everyone. I'd like to start by thanking Mr. Pedro Palma for his support during the whole transition process. Rumo has just started a new stretch in the BR-070, and that delivery is directing the company towards a new phase. As of now, we will be focusing on productivity and operating efficiency and to improve the operational capacity of the installed capacity, also value creation and return on invested capital. We have opportunities to generate even more cash in the coming years, and that process will be bringing results as of 2027. To that end, CapEx and OpEx reductions are the top of our priorities. We have made considerable investments. We have increased our asset base and areas of operation. Now we need to make sure that, that capacity is used to its full potential, and we do see opportunities to that end. I'd like to thank everyone for their trust, and we are now available for the Q&A session.

First question is from Alberto Valerio from UBS.

My first question has to do with what the CEO just said about being more efficient, making the most of the investments that have been made. How can we look at that for next year? Would it be lower levels of CapEx a year of cash generation or maybe delaying [ Lucas ]. What does that mean for future projects at Rumo?

This is Guilherme. I'll take your question. Yes, as Mr. Rockenbach said, our clear objective is to focus on cash generation. And the objective is to bring in results as of next year. And of course, one of the levers -- one of the main levers is to revisit the investment program here at the company. So that we can strike a balance between all the default we have in our contracts. We need to keep our commitments and ensuring operational excellence, integrity of our assets as well as safety and security. There are opportunities. We have two key programs to acquire rolling stock and expand capacity in an area, we do have an opportunity to resize and rationalize the portfolio of those programs. Especially by making the most of investments that have been made, we have acquired some rolling stock. And through our rail engineering, we have been operating longer trains and that has been bringing in results to our operation. So we will be focusing even more in extracting even more value from these assets because they can lead to further growth in the years to come. In terms of expanding capacity of an area we can reprioritize or delay the construction of yards, and we can resize those programs overall. So we are looking into it. We have a budget process planned for next year, but CapEx for 2027 will be lower than that of 2026. For sure. And that will already give us a perspective of short-term cash generation. So we have a very robust asset base, and we have the ability to extract more value from them to lead to more growth and cash generation in the next few years.

The next question is from Andre Ferreira from Bradesco BBI.

My question is close to 2 months have gone by since the new terminal opened in BR-070. What's the ramp-up curve of the term now compared to the plant, how many plants? And what are you expecting for the end of 2026? And on price, will you have to have promotions to make it viable?

This is Guilherme. Well, right now, we are commissioning the terminal. Operations are going well. They are safe. The ramp-up is taking place. It started at the end of June, and the first tests have shown that the terminal is performing a satisfactory level. In July, we're operating at about 30% of the terminal's capacity. And the idea is to gradually use our capacity. The terminal as the possibility to operate more than 800,000 tonnes a month. So we want to increase that gradually as we use up our capacity. The commercial dynamics isn't directed specifically to a terminal. So we'll be optimizing the company's margin within our origins portfolio. And we'll optimize the capacity based on that. So ramp-up is going well at the operation. And we expect it to be met by the end of the year, and we should have the rightsize terminal to operate satisfactory.

Next question is from Lucas Marquiori from BTG Pactual.

Based on what Rockenbach has said and the company's strategic review and the right environment to generate cash as of 2027. So I think we've understood the CapEx trajectory. But part of that will come from liability adjustments. So thank you for the new information, in the release about the waiver of the concession fees, the disclosure of the provisions for the West and South networks. I'd like to understand how you're thinking about how the accounts will be progressing in '26, '27? We saw the aging. What about the fifth addition to the West network. What would be the most plausible solution for the West network? And how much of that can be saved for the balance sheet for the company's liabilities. So I'd like to hear more about the balance sheet so we can get to the cash generation target for next year.

Well, about the West network, let me just emphasize that the settlement of accounts is regulated by the regulatory agency, but the company does believe that we have more assets than liability. Now the additive of the West Network was important because it makes things faster and it's also a technical conversation about the settlement of accounts. So we see it with very positive is looking forward. Felipe Saraiva This is Saraiva. Thank you for your question. In fact, one of the contributions we have towards better performance and cash generation, not only next year, but over the next 3 to 4 years is reducing spend on the payment or concession fees. In 2020, we prepaid part of the concession fees and the contracts for the Central and [ Polystar ] networks, which we took over again at that time. So the company should be spending roughly BRL 900 million this year, to pay for concession fees, that will drop to BRL 700 million in 2027. And then in '28, '29, we're talking about BRL 100 million. And we do have that time line available in the material we have disclosed to help you out.

The next question is from Daniel Gasparete from Itau BBA.

I'd like to hear more about cash generation. You talked about reducing OpEx. Could you give us some more color on the magnitude of that reduction? Also, if Mr. Rockenbach could share his vision about the commercial side. What kind of opportunities do you see? And are you thinking about the business differently? And also how do you yield in the second half of the year?

Sorry, we had some connection issues. So you talked about the OpEx cost structure a little bit about commercial dynamics and about next year, right?

Yes. Apologies. I asked about OpEx annual cash generation guidance and your commercial policy if there should be any changes? And how you're seeing yields in the second half of the year.

So I'll start with the OpEx cost structure. Yes, we are focusing on efficiency and cash generation, and we are revisiting our cost base. So that's our strategic direction. We can resize the company in light of the investment program, which we are revisiting. And our objective is to have a considerable reduction not only through dilution and the profile of our business and the operational leverage because higher volumes and higher revenue bring it in through units, but we also want to see nominal reduction of the cost base. And some elements are already taking place, such as personnel reduction to simplify and rationalize the company structures in favor of rail operations and the supporting structures will be proportionately adapted to the current company scenario. And there's a second effect, which are indirect reductions in terms of property, facilities, travel licenses, and we are also revisiting the discretionary expenses such as consulting services and that kind of service. So this is a continuous objective here at the company but it will be emphasized now because we want to reduce our investment portfolio. We're only beginning that journey. Obviously, there will be some extraordinary costs along the way during that process, but we are seeking a nominal reduction at this specific point in time. Now in terms of prices for the second half of the year, in Q3, prices should remain stable compared to Q3 last year. We have made considerable progress in the main company portfolios, more specifically grains in the north operation and grains and sugar in the South operation. In fact, we have gone over 80% capacity for those portfolios, which makes us feel secure for the final stretch of the year. So the current commercialization will be prioritizing return of our assets. And for Q4, we do see the potential to grow compared to last year. Let's not forget that last year we ended up selling at lower price levels, given the economic scenario, which isn't happening this year. So yields should be more in line with the returns we expect for our assets. So Q3 will be stable. And there should be some growth in Q4. We're just beginning our commercial engagement with our clients. We are seeing positive fundamental. Saraiva during the presentation. shared with you that the crop outlook is reasonable and in line with this year. So let's wait and see. And then when we have the first discussions with the clients, we'll see what kind of price levels we'll have for 2027. I would just add in terms of how we see our current position. If you look at this company in the last 5 years, we made investments that qualified us as a growth player. Now looking forward, we want to go back to a position of a value player. And being a value player means looking for projects where we can go back to have recurrence capitalize on all this infrastructure that has been deployed and also to make sure we have guarantees that this infrastructure is being used. We don't think that's going to be done in the first or second month. There's a lot of work to be done jointly with our current clients so that we can go back to transitioning towards being a value player. Because looking at our current position, the fewer incidents than our real competitor, a lot less cargo theft compared to our competitor. So our service is top quality. Therefore, their prices should be higher than what they are right now. So our sales team also needs to do some work. We need the right sales strategy so that we can position ourselves as a top quality player. But that's an ongoing process. We don't think we're going to be changing strategy completely for the next quarter, but that will be our mental model.

I have a follow-up question, please. You mentioned 80% of your capacity has been sold. Is that Q3? Or is it in the second half of the year in terms of grains in the North operation. 80% of our -- of the company's total capacity has been sold in the grains portfolio for both North and South operation. Is that Q3 or the second half of the year?

Until the end of the year, the company has sold most of 80% -- sold more than 80% of grains in the north operation and more than 80% in the grains and sugar portfolio in the South operation.

The next question is from Pedro Bruno from XP.

Still on sales, I have two specific questions. First, you talked about repositioning the central network commercially. And you said that yields will be affected by that commercial repositioning. Could you explain how that dynamics will work? And also if you could quantify what kind of an impact you're talking about given the lower volumes in that network compared to the North network. And also in fertilizers, fertilizers grew considerably in the north operation year-on-year. It was the case in Q1, even more so in Q2. So I'd like to get a better perspective if you're talking about a commercial strategy to use capacity seasonally? And if so, what is that seasonality? And how can we think about that for the rest of the years in fertilizers. So that's it in commercial dynamics.

This is Guilherme. Central network operation. Well, we repositioned prices so that we could be more competitive and that proved to be an important move to attract more cargo to that network and the terminals we operate over there. And in Q2 compared to what we consider internally. So the [ MVA ], which are logistics alternatives, we work 100% below logistics alternatives in terms of competitiveness, which we consider reasonably. So that was a one-off effect for that network. Just to illustrate -- our terminal in Rondonópolis was in line with our strategy. And that was the full yield value in the North operation. In fertilizers, we also have a very specific strategy in the second half to attract more cargo. And it was very important in terms of trading off volume. The volume we attracted with our competitiveness strategy brought positive margins to that portfolio and good position in terms of contracted volumes within that strategy for the second half of the year. So those were two very specific initiatives based on our marketing perspective we implemented in those two portfolios.

The next question is from Guilherme Mendes from JPMorgan.

I have a follow-up question about 2027. I know you've already touched on it. In terms of cash generation -- and you've just started talking about your commercial strategy for 2027. What about El Nino's effect on brain yields and sales? Maybe you'll extend contract terms. But does the El Nino risk as an issue to that sales timing? Should we have more short-term sales?

El Nino a risk factor that we monitor every year. In fact, it is on our radar. We have been discussing it internally in our committees to assess any potential impact. Traditionally speaking, it tends to hit the ends, the North and South systems differently. And Mato Grosso tends to be less impacted, but it's too soon to think about any consequences of that impact. . What is on our radar is to allocate our assets better for whatever scenario of production that may arise. As I said previously, by the end of August, we will have started interacting with some clients. We're going to test the demand and see what kind of volume levels will have fixed for next year. As Rockenbach said, "we'll be doing that work gradually will be implementing that strategy gradually. And we I'll understand what will be fixed with clients. Obviously, the higher the percentage the greater the opportunity to coordinate our operational system in a more optimized fashion. And that is what we will pursue until the end of the year.

The Next question is from Rogério Araújo from Bank of America. Rogério Araújo BofA Securities I have a couple of follow-up questions. You mentioned you may be increasing yields in Q4 compared to last year. If you could talk about volume, carryover inventories are a bit more difficult this year. Will that have an impact? What can we expect in terms of volume in Q4 compared to last year? And in terms of liabilities, in the South and West networks. I would imagine that you see the non-solidarity agreement is something positive for you in terms of obligations in the West network. Could you explain if that protection could also be applied to the South network?

The company has been doing well operationally. We are monitoring it on a month-by-month basis. And so have you. We disclosed that -- following the end of each month and volumes in July were very good, and we have been performing consistently. If we look at the last 12 months, in terms of reported volumes, we have been operating above 90 billion RTK, which is the level that we committed to reaching internally. And which is above the 86 [ billion ] RTK, that was our performance last year. We had the ability to have good volumes if we have the portfolio. So there should be some carry of those volumes to Q4, and we will be ready to move those volumes just like we show that we are able to. We operated three products last year, pretty much throughout the year. So we should have some growth in Q4 in terms of volume. And given current price levels, and the market in Q4, we should have yield growth compared to last year. As I said. Some of the volumes last year were locked at price levels to fill up our capacity, but we don't see the need to do that in Q3. So that's the outlook from now until the end of the year. In terms of the West network, you asked a specific question. And it's about corporate law. It's circumscribed to the West networks liabilities, but we are monitoring it. We want to reach a good resolution with the government, we believe we have more assets than liabilities. And we are working hard to make sure we have good talks around the settlement of accounts. That settlement of accounts is calculated by the regulatory agency, not a concessionnaire, and we believe there should be a well-balanced technical discussion, so we can find a solution that is favorable to all. In terms of the South network, well, it is yet to happen, there are other variables to be taken into account. About the South Network, our obligation ends in February 2027. But the government has shown the world towards a temporary extension of the current agreement. So what we're discussing now is that extension can only happen if it's economically viable. So before any guidance in terms of that addition on our side, that addition should help the company to improve operation in the South network over the next 2 years.

The next question is from Filipe Nielsen from Citi.

I have a follow-up question. the CapEx. You mentioned that you're very diligent when it comes to capital allocation and the CapEx will be lower in 2027. But looking at [ Lucas ] the [indiscernible] alone, if you exclude that, it already means CapEx will be a lot lower. But what about the other lines, the other projects expanding the [ Paulista ] network, terminals, maintenance, Will there be a reduction there as well? Or will there be a ramp-up in any other project in any other ongoing project. If you could break that down, that would be great. .

This is Guilherme, for this project, we will be optimizing and revisiting the programs. As I said, and I will reiterate now, we have the company's maintenance program, which will always favor safety, operation and performance of our assets the volume ramp-up will be anchored in the maturation of those investments. And we'll be revisiting some programs, such as rolling stock. We believe that our assets interesting and can allow for growth, so we will revisit acquiring rolling stock. In terms of investments in the network, the main thing for us is to deliver capacity and safety. If we can do that efficiently by rationalizing the financial amount that is invested, then we'll do so. And the third element is the distribution of that CapEx over time so that we can create opportunities to mitigate spend and the use of cash flow in those programs over the next few years. So right now, we are working on opportunities that will allow us to do that. As I said, in terms of expanding the capacity of the network, new yards, we are revisiting programs as a whole so that we can obtain cash generation results in the short term.

The next question is from Jon Brizo from Goldman Sachs.

I have two quick questions. The first one is a follow-up question on CapEx. In 2026, CapEx is at around BRL 5 billion, BRL 1 billion of which is the first half of the year and related to the first phase of [ Lucas ]. So looking at this year's CapEx and excluding the [ Lucas ] part. So the CapEx for '27 would already be less than BRL 5 billion. Is that the right way of looking at it? Or as you said, you will be revisiting projects and CapEx might still be over BRL 5 billion next year? My second question is about the following phases in [ Lucas ] and [indiscernible] Phases 2 and 3, our talks with the government in terms of delays are you considering not going forward with those projects after all? Or would you just be delaying it?

This is Guilherme. With respect to CapEx, as I mentioned earlier, we are aware of some elements, and we know how we're going to bring down the CapEx in terms of spend this year. So we'll be working on that. As we move forward, with our internal work, we will be sharing any changes with you. But what I do want to reiterate is that CapEx levels will be lower than that of 2026. And we'll share with you what the levers will be. . With regards to Mato Grosso, it's important to say that we've concluded Phase 1, it's opened. We are focusing on ramping up the terminal and operating it efficiently and there is flexibility in the contract. So right now, we are focusing on the operational ramp-up and using the available flexibility. We'll have time when we will resume discussions and we don't have any expenses planned for the next phases this year. We'll see what happens next year, and we'll see how we're going to deal with it.

This concludes the Q&A session. we would like to hand the floor back to Mr. Guilherme Machado for his closing remarks.

Well, I want to thank you all for joining us on this conference call. Right now, we have a good asset base. We are focusing on monetization and on extracting value from those assets to create value for our shareholders to create return we are emphasizing achieving efficiency and cash generation, and we are being very selective when it comes to investments. We are revisiting our cost metrics. Our balance sheet is well balanced. The company is in a liquid position, it does have credit lines available and leverage is very comfortable. So we are paving the way towards good operational performance in the second half of the year, and we are creating the foundation for growth in 2027 to focus on our portfolio and cash generation. So delivering results and creating value for our shareholders. Thank you for joining us and I'll see you soon and the next conference call.

This concludes Rumo's video conference. Thank you for joining us, and have a great afternoon.