Setting up the foundations for growth

Transcription

1 Setting up the foundations for growth Rio de Janeiro, November 9, 2010 Log-In Logística Intermodal S.A. (BM&FBOVESPA: LOGN3) today released its results for the third quarter of 2010 (3Q10). Unless otherwise stated, all the information in this report is presented in Brazilian currency (Reais or R$). Log-In is a logistics company that offers the market integrated solutions for port handling and door-to-door transport of containers by sea or rail, complemented by short distance road transportation and container storage at its inland intermodal cargo terminals. CONFERENCE CALL / WEBCAST PRESENTATION: Vital Jorge Lopes CEO and Investor Relations Officer Thursday, November 11, 2010 PORTUGUESE: Time: 11:00 a.m. (Brasília time) Connection number: (55 11) Access Code: Login Logística The teleconference audio with a slide presentation will also be webcast. Access through: ENGLISH: Afterwards, an English transcription of the conference call conducted in Portuguese will be provided. PUBLIC MEETING WITH INVESTORS AND ANALYSTS Friday, November 26, :00 a.m. (Brasília time) Venue: Hotel Radisson Av. Cidade Jardim, 625, Jardim Europa São Paulo Investor Relations: Daniela Tinoco Phone: (55 21) Flávia Tavares Phone: (55 21) Business Environment Brazilian Logistics The Brazilian economy has been growing at a faster pace than the investments to increase the logistic infrastructure in the country. This discrepancy creates business opportunities for the companies that operate in this sector. The logistics industry is expected to grow in coming years. There is currently a limited number of alternatives to transport the Brazilian production in a competitive edge. The price paid for the lack of infrastructure investments is high, which proves the need for the consolidation of an integrated logistics company. In addition, the trend toward cargo containerization worldwide can also be seen in Brazil. The favorable conditions for the economy to grow in coming years lead us to believe that the consumer market in the North and Northeast Regions of Brazil will develop faster, thus creating a need for industrial cargo handling to those regions. Those regions have also been attracting new industries, which must receive raw materials and ship out finished goods, thus generating new business opportunities. Cabotage: a constantly growing market There is a global trend toward cargo containerization. More and more companies are seeking to standardize cargo securing to lower cargo handling costs. This is a positive trend for intermodal logistics companies inasmuch as it creates opportunities for them to enter new markets. Brazil is a continent-sized country. Its coast covers over 8,000 km long, and income distribution among the different regions pose challenges for the logistics and transportation industry. At present, there is a greater cargo flow from the South and Southeast Regions to the North and Northeast Regions, which creates an imbalance in Brazil s transportation system. Furthermore, the most efficient transportation mode for distances longer than 1,500 km is coastal shipping, and its extensive use greatly contributes to Brazil's development. 1

2 Potential Cabotage Market thousand TEUs/month 96 1 GDP* Growth potential 80 limit for cabotage use due to infrastructure limitations Road Cabotage Sources: Log-In s analyses, IDET/FIPE/USP IDET: Índice de Desenvolvimento Econômico do Transporte (Economic Transportation Development Index) * GDP of 3% p.a. as of 2010 Cabotage: a booming market Studies to determine the cabotage market potential show that 93 million tons of cargoes were handled by road per month in Excluding bulk handling, intrastate cargo flows and peers of non-competitive states for the sea mode, the calculations indicate that 2.5 million tons of cargoes can potentially be handled by coastal shipping. This corresponds to about 151,000 TEUs per month. If this potential is added to the estimated handling by this mode in ,000 TEUs per month, the potential market came to 175,000 TEUs per month in that year. Estimated Potential for Intermodal Logistics Average cargo volume per month in 2009 in million tons Total Market ,2 1 TEU = 16.3 tons Far from a port Small cargo shippers Fractioned cargo Road market IDET/FIPE/USP Bulk Intrastate flows General cargo between states peers of noncompetitive states road flow with cabotage potential cabotage potential in TEUs per month 96 Potential Market Road Cabotage Long distance road transportation is still the most frequently used mode in Brazil. Trucks are abundant and versatile assets. Nevertheless, cargo handling between the different Brazilian regions by cabotage is on the rise, with increasingly competitive services. 2

3 Log-In: our growth strategy Coastal Shipping We moved on with our Investment Plan, which was introduced in 2007 and focuses on the development of an efficient and sustainable transport matrix for Brazil, in which cabotage shipping is very important and will probably be Log-In s main foundation for growth vis-a-vis other businesses of the Company. Shipbuilding: on schedule and on budget Since 2007, investments allocated to the construction of seven new vessels have amounted to R$ 402 million, out of a total of R$ 1 billion projected until option for the fourth and fifth container vessels container vessels first container vessel delivery second container vessel delivery third container vessel delivery fourth container vessel delivery fifth container vessel delivery build up phase of the operational model 4Q10 1Q11 4Q11 1Q12 2Q12 3Q12 1Q13 2Q13 4Q13 stabilization phase investment maturation and addition of value bulk carriers - Alunorte contract first bulk carrier delivery second bulk carrier delivery This Investment Plan is being carried on according to its schedule and budget plan. In addition to strengthening Log-In s position as the leading provider of intermodal services in the Brazilian market, it will reduce logistics costs for our customers and create value for our shareholders. As per the construction schedule for the new vessels at Estaleiro Ilha S.A. EISA, the Log- In Jatobá was launched in the last week of October. It is the second vessel out of an order of seven, five of which are container vessels. The first of these vessels, the Log-In Jacarandá, will be delivered by EISA shipyard by late 2010 and go into operation during 1Q11. These new vessels have great cargo handling capacity, and each of their trips will mean 2,800 fewer trucks on Brazilian roads. They, therefore, will help reduce CO 2 emissions. 3

4 Additionally, they will be more energy-efficient than the vessels currently used by Log-In. The new vessels are expected to consume 30% less bunker in each available slot (considering their nominal capacities in TEUs). The construction of two bulk carriers to transport bauxite ore for Alunorte Alumina do Norte do Brasil S.A. is also on schedule. We have concluded 46% of the steel processing for the first vessel, which will be delivered by EISA in late 2011, and 26% for the second vessel, which the shipyard is expected to deliver in 2Q12. Terminals The works in TVV s container yard and new access gates are scheduled to be concluded in late November. They will result in increased handling capacity and cargo turnover at the Terminal. The dredging work of the access channel to the Port of Vitória, under the responsibility of the Brazilian Special Port Authority - CODESA (Dock Company of Espírito Santo State), is expected to begin in the next few months. It will facilitate the access of larger vessels to TVV and allow receiving additional cargo. Investments in intermodal terminals: the goal is to achieve a greater integration with the other modes used by Log-In In the last week of September, Log-In received the environmental license for the expansion works at the Paulínia Intermodal Terminal (São Paulo State), which will comprise a container yard and internal passageways, a general cargo yard, a reception desk, support areas and maintenance workshops. Log-In s investments in the Paulínia Terminal are estimated at R$ 21 million, and the works are scheduled to be concluded in the first half of Log-In`s operation of intermodal terminals aims at improving the integration with the other modes used by the Company to develop logistics solutions for its customers. Coastal Shipping Containers Log-In seeks to use multimodal logistics in an efficient manner, thus contributing to the balance of the Brazilian transport matrix. Log-In`s growth plan is based on developing and introducing innovative logistics solutions, and the Company continuously assesses its operational model, in a search for alternatives to reduce costs and boost competitiveness. In the last week of October, Log-In resumed operating its own vessels in Manaus (Amazonas State), by means of a Vessel Sharing Agreement (VSA). Manaus is a strategic market for Log-In, and the operation of its own proper vessels is crucial for the Company. This operational agreement allows Log-In to offer its customers increased cargo handling capacity, commercial and operational flexibility, in addition to higher number of ports served in the Amazonas Service. In 2011, Log-In Jacarandá and Log-In Jatobá vessels will start up operations Log-In will use the new Log-In Jacarandá vessel, which has a nominal capacity of 2,800 TEUs and will go into operation during 1Q11, in this shared operation in the Amazonas Service. Until the delivery of this vessel, Log-In Amazônia vessel, whose nominal capacity is 1,700 TEUs, will be temporarily allocated in the VSA. In order to ensure regular and frequent operations in the Atlântico Sul Service, Log-In has chartered the Santa Giulietta vessel, on a time charter basis, for the period of twelve months. This vessel, with nominal capacity of 2,061 TEUs, will serve the ports of Buenos Aires (Argentina) and Fortaleza (Ceará State), alongside with Log-In Pantanal, HS Smetana and RR Europa vessels, whereas Log-In Rio and Log-In Santos vessels will be used in complementary operations. Once the Log-In Jacarandá starts being used in the Amazonas Service, the Log-In Amazônia will return to the Atlântico Sul Service. The new Log-In Jatobá vessel is scheduled to start its operations in the second half of

5 A series of adjustments will be made in the operational structure of the Coastal Shipping service in 2011: (i) two new container vessels will go into operation, leading to a ramp up in all the activities connected to them; (ii) two other vessels, HS Smetana and RR Europa, will be returned to their owners in 1Q11 and 4Q11 respectively; and (iii) the VSA to serve the Manaus market will go into effect. Log-In believes that the rearrangement of the assets currently used in container handling will lead to an expansion in its market share. However, it is worth noting that the Company will incur transition costs in this phase, with the overlap of some costs and expenses. In addition, there will be a period for expenses to be adjusted, so that gains should only materialize as of In 3Q10, we recorded our highest quarterly volume ever in our history in thousand TEUs 54% % % % % 82% 82% Chg % 9M10 x 9M % 105.8% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 9M07 9M08 9M09 9M10 Feeder Mercosul Capacity in TEUs Cabotage Occupancy rate in TEUs Northbound Dedicated services - bulk In January 2010, Log-In started providing handling services for Alunorte with two chartered vessels to support the contracted volume. In 3Q10, Log-In entered into a two-year contract with D/S Norden A/S for a bulk carrier with nominal capacity of 74,000 tons of deadweight tonnage (Panamax type), on a timer charter basis. The Company will continue using chartered vessels to handle bauxite ore until its own vessels, under construction at EISA shipyard, are delivered. Once the owned vessels go into operation in 2012, this service will be provided on a new cost basis, which will allow Log-In to reap the benefits of the project. Specialized cargo logistics solutions in Brazilian cabotage: an integral part of our strategy The agreement with Alunorte is part of Log-In s strategy to develop solutions especially designed for cargo logistics in Brazilian cabotage by means of long-term contracts. Capital structure Log-In s gross debt amounted to R$ million as at September 30, 2010, with an average maturity of 19.7 years. Of that amount, 63.4% was pegged to the TJLP (Brazilian Long-Term Interest Rate), 35% to the US Dollar variation and the remaining 1.6% to the IPCA (Brazilian Broad Consumer Price Index). Net debt totaled R$ million, considering the cash position of R$ 42.9 million on that date. Aging of the Debt Maturity R$ million < 1 year 3.4 > 1 year and < 3 years 33.2 > 3 year and < 5 years 37.7 > 5 years Total

6 773.4 R$ million property, plant and equipment % - container vessels: start-up scheduled for % - bulk carrier: start-up scheduled for % - terminals Sept 30, 2007 Sept 30, 2008 Sept 30, 2009 Sept 30, 2010 operating assets fixed assets in progress (vessels under construction) gross debt A large amount of Log-In s debt is related to the financing for construction of the Company s new vessels, whose operations and consequent cash generation will start as of Main financial highlights R$ million 3Q10 2Q10 Chg% 3Q09 Chg% Net Operating Revenue % % Cost of Freight and Services (147.0) (129.6) 13.4% (92.3) 59.3% EBITDA % % EBITDA Margin 16.0% 11.4% 4.6 p.p. 10.4% 5.6 p.p. Net Result % (0.5) - Net Result per Share (R$) % (0.01) - Capex % 69.9 (14.9%) EBITDA amounted to R$ 27.9 million, and the EBITDA margin was 16% in 3Q10. In the January-September 2010 period (9M10), EBITDA came to R$ 49.2 million, with EBITDA margin of 11%. Coastal Shipping: record high quarterly volume in cabotage, increase in prices, growing volumes in the Mercosul and feeder segments. In 3Q10, Log-In recorded an 8% rise in volume quarter-over-quarter and in 9M10 volumes went up by 49% year-over-year. Continuing recovery in foreign trade flows, coupled with positive prospects for the Brazilian economy. Addition of new customers, services to new segments, larger market share over the road mode, larger share in the logistic chains of existing customers. TVV: increasing container handling and improved equipment mix, record high general cargo handling, gains in storage services due to a rise in imports cargo storage. Logistics Services: new cargoes in São Paulo State Center-West Region route. 6

7 R$ million 9M10 9M09 Chg% Net Operating Revenue % Cost of Freight and Services (390.9) (274.8) 42.3% EBITDA % EBITDA margin 11.0% 6.4% 4.6 p.p. Net Result Net Result per Share (R$) Capex % Operational performance The indicators posted throughout 2010 show a good recovery in foreign trade flows, including the trade between Brazil and Argentina, coupled with a growth in the Brazilian economy. Data from the Brazilian Central Bank's Boletim Focus show a projected growth in Brazil's GDP of 7.5% in 2010 and 4.5% in The physical industrial output rose by 8.8% between January and August 2010 year-over-year. An 11.3% growth is projected for In 9M10, the foreign trade flow increased by 36.9% year-over-year. Concerning the trade between Brazil and Argentina, exports climbed by 57.4% and imports by 34%. Coupled with the remarkable macroeconomic performance over the last few months and the need to reduce the dependence on road transportation in cargo handling over medium and long distances, the efforts made by Log-In s different areas lead to the improvements that have been achieved. The Company has added new customers, developed new routes, entered into new markets and increased its share in the logistic chains of existing customers. In cabotage and the rail route between São Paulo State and the Center West Region, Log-In started to serve segments previously using other transportation modes and gained market share over the long-distance road mode. The Company is currently consolidating its Cost Reduction Program, introduced in 2009 and focusing on cost efficiency and reduction. The Program has already resulted in lower costs throughout EBITDA came to R$ 27.9 million in 3Q10, a 64.1% rise quarter-over-quarter. In 9M10, EBITDA totaled R$ 49.2 million, more than twice as much as in 9M09, R$ 20.3 million. There was an increase in all Coastal Shipping segments, with a production of 62.9 million TEU-Mile in 3Q10. Cabotage cargo handling was driven by the addition of new customers, cargoes from segments previously not served by this mode, market share gains over the road mode, in addition to improved conditions owing heightened economic activity in Brazil. Handling totaled 18,251 TEUs, the largest quarterly volume ever in Log-In's history. The occupancy rate in TEUs in the Atlântico Sul Service northbound was above 80%. Revenues from these operations were also impacted by Log-In s higher prices. The Mercosul cargoes reflect the larger volumes handled in the segments of white goods, food and petrochemical, in addition to increased handling between the Northeast Region of Brazil and Argentina. The stronger trade flow between Brazil and Argentina also contributed to the better results in the Mercosul segment. In the feeder segment, the increased foreign trade flow resulted in a larger amount of imports cargo coming to Brazil. This created opportunities that Log-In managed to seize with international shipping companies. It is worth noting that the depreciation of the US Dollar against the Real, which has been eroding the value of the US currency, had a negative impact on the revenues from these cargoes. The bauxite ore handling service for Alunorte has been following the contract provisions, with the use of chartered vessels while Log-In's own ships are under construction. The margins of this operation are, therefore, impacted since the service still does not adopt the model designed for this specific purpose. At TVV, 51,435 boxes were handled in 3Q10, and a record high productivity of 47.5 moves/hour was recorded, with average handling of 553 containers per vessel. The full use of the third portainer contributed to the Terminal s positive results. Full containers, more profitable than empty ones or removals, accounted for about 70% of total handling, which contributed to the equipment mix and, consequently, the higher revenues recorded at TVV. Imports cargoes have been rising steadily in 2010 and were 49% higher between January and September than in the same period of Increased imports cargo storage impact revenues from storage and other services. 7

8 TVV also added new customers and took advantage of opportunities in the general cargo segment, which resulted in record high handling of 70,756 tons in 3Q10. The results recorded in intermodal land transportation show that the Company has increased its ability to transport cargoes in the São Paulo State - Center West Region route, with an ensuing increase in yield, measured as the ratio between net revenues and total production in NTKs. EBITDA Log-In includes AFRMM benefits in the calculation of its EBITDA, corresponding to the reimbursement of investments in ship maintenance and building. Log-In received R$ 0.2 million as AFRMM reimbursement in 3Q10, corresponding to funding for dry docking and, therefore, booked under other operating income (expenses). The result from the settlement of Log-In s derivative instrument operations, entered into by means of fuel forward contracts (bunker, reference US Gulf Coast FO 3%), is also included in the calculation of EBITDA and was negative by R$ 0.5 million in 3Q10. EBITDA came to R$ 27.9 million, versus R$ 17 million in 2Q10 and R$ 10.9 million in 3Q09. The EBITDA margin was 16%, higher by 4.6 p.p. quarter-over-quarter and by 5.6 p.p. year-over-year. R$ million margin 10.4% 69.1 (54.7) margin 16.0% (4.6) 3Q09 Net Revenue Costs of Services Provided Operating Revenue Expenses) Depreciation and amortization AFRMM and bunker hedge 3T % % R$ million % 3Q09 3Q % (0.9) (6.6) (7.7) Log-In TVV * Coastal Shipping Logistics Services Non allocated selling and administrative expenses * Other Revenues and expenses * as stated in the note about administrative adjustments shared with Log-In on the Performance by Business Segment, TVV Costs of Services Provided, page 4, data pro forma for comparison effects 8

9 Gross operating revenues Gross revenues amounted to R$ 194 million in 3Q10. Coastal Shipping operations accounted for 67.7% of 3Q10 s total revenues, TVV operations for 23.6% and Logistics Services for 8.7%. R$ million 3Q10 2Q10 Chg % 3Q09 Chg % Coastal Shipping % % TVV % % Logistics Services % 21.4 (21.0%) Gross Operating Revenue % % Net operating revenue In 3Q10, net revenues came to R$ 174 million, excluding the taxes on gross operating revenues. R$ million 3Q10 2Q10 Chg % 3Q09 Chg % Coastal Shipping % % TVV % % Logistics Services % 18.1 (16.0%) Net Operating Revenue % % Cost of services provided Cost of services provided amounted to R$ 147 million. Coastal Shipping operations accounted for 71.3% of those costs, TVV operations for 18.8% and Logistics Services for 9.9%. Gross profit R$ million 3Q10 2Q10 Chg % 3Q09 Chg % Coastal Shipping % % TVV % % Logistics Services % 14.7 (1.4%) Cost of Services Provided % % In 3Q10, gross profit amounted to R$ 27 million. Operating income (expenses) Operating expenses totaled R$ 5.9 million in 3Q10. Log-In recorded provision reversals totaling R$ 5.8 million due to a projection review and the conclusion of lawsuits and R$ 2.6 million concerning severance pay. Equity from Subsidiaries and Affiliates In 3Q10, the equity from subsidiaries and affiliates, corresponding to Log-In s equity interest in Log.Star, was negative by R$ 1.2 million. Financial result The financial result was positive by R$ 0.5 million, consisting of financial income of R$ 3.5 million, financial expenses of R$ 2.3 million and negative exchange and currency variations of R$ 0.6 million. Log-In s derivative instrument operations, entered into during 1Q10 by means of a fuel forward contract (bunker, reference US Gulf Coast FO 3%) and settled in 3Q10, recorded a negative result of R$ 0.5 million. However, the mark-to-market results from these operations led to a R$ 1.2 million gain, which was reflected in the net financial result. 9

10 Net income Net income totaled R$ 12.3 million in 3Q10, corresponding to earnings per outstanding share of R$ Capital expenditure Capex for FY 2010 is estimated at R$ million. Investments between January and September amounted to R$ million, or 46% the total amount projected for the year. Investments in 3Q10 totaled R$ 59.5 million, R$ 30.7 million of which allocated to the construction of the container vessels, R$ 18.7 million to the construction of the bulk carriers for bauxite transportation and R$ 2.5 million to the TVV expansion. Additional information on the business performance per segment is available in the Investor Relations section of Log-In's website, All statements herein contained concerning business prospects, expected operating and financial results and references to the Company s potential for growth are simply forecasts and were based on the expectations and estimations of Management as regards the Company s future performance. Even though the Company believes these forecasts are based on reasonable assumptions, it does not guarantee that they will materialize. The expectations and estimates that give reason for the Company's future prospects are highly dependent on the behavior of the market, Brazil s political and economic situation, current and future regulations, international industry and markets and, consequently, are subject to changes beyond the control of the Company and its Management. The Company does not have a commitment to posting updates or reviews of the expectations. 10