Rumo Sa · BMFBOVESPA:RAIL3
Rumo Sa — Investor Presentation (August 2017)
27 slides from Rumo Sa's investor presentation, August 2017
Slide 1: Institutional Presentation
INSTITUTIONAL PRESENTATION
Slide 2: Disclaimer
This presentation contains estimates and forward-looking statements regarding our strategy and opportunities for future growth. Such information is mainly based on our current expectations and estimates or projections of future events and trends, which affect or may affect our business and results o
Slide 3: Agenda
Agenda Business Model Market and Competitiveness Turnaround Strategy Financial Performance Closing Remarks 2
Slide 4: Straightforward Business Model
Straightforward Business Model Agribusiness heavy haul Dominant on core export channels Booming agricultural market UNSERVED STRATEGIC High entry barriers AGRIBUSINESS ASSET DEMAND LOCATION EXECUTION Operational excellence COST CAPACITY Debottlenecking REDUCTION INCREASE Reliability Scalable operati
Slide 5: Heavy Haul Focused on Agricultural Commodities
Heavy Haul Focused on Agricultural Commodities RUMO VOLUME BREAKDOWN 2016 • Rumo is the largest independent railroad service provider in Brazil Other 2% Industrial • ~ 80% of Rumo’s volume is agribusiness 4% Grains Container 66% 4% 80% Fuels 11% Sugar 13% Rondonópolis RUMO CONCESSIONS Londrina CONCE
Slide 6: Overview
Overview RAIL NETWORK ROLLING MATERIAL TERMINALS¹ Concessions 1 North Network 3 West Network Port Terminals 2 Paulista Network 4 South Network 1,000 Static Capacity: 1.3 mln tons locomotives Elevation Capacity: 29 mln tons 1 2 Inland Terminals Static Capacity: 900 k tons 3 Santos 25,000 Paranaguá ra
Slide 7: Shareholders Structure
Shareholders Structure 72.29% Members of Shareholders Agreement = 36.20% Arduini Family 28.47% 4.01% 3.82% 63.71% South North Containers Operation Operation Operation Source: Rumo Note: Rumo’s business units not representing individual companies 6
Slide 8: Agenda
Agenda Business Model Market and Competitiveness Turnaround Strategy Financial Performance Closing Remarks 7
Slide 9: Brazil is the Largest Market for Agricultural Expansion
Brazil is the Largest Market for Agricultural Expansion BIGGEST RESERVE OF ARABLE LAND ¹ Brazil 79 224 303 US 188 81 269 • Planted area increased 58% in the last 20 years, Russia 132 87 219 but Brazil is still the country with the largest arable land potential India 170 170 China 96 42 138 Brazil is
Slide 10: Rumo Dominance in Core Export Channels
Rumo Dominance in Core Export Channels Santos and South Ports concentrate: BRAZILIAN MAIN PORTS BY PRODUCT (2016) SOYBEAN (mm ton) SUGAR (mm ton) 14.5 22.3 of Brazil’s 70% soybean and corn 9.7 8.2 exports 4.0 3.9 5.2 1.0 0.2 0.1 Santos Rio Grande Paranaguá S. Francisco São Luís Santos Paranaguá Mace
Slide 11: EBITDA Expansion Main Driver
EBITDA Expansion Main Driver Grain production growth translate in higher exports … SOYBEAN PRODUCTION Soybean SOYBEAN EXPORTS (million tons) (million tons) Production 8.3% Growth 9.7% CAGR CAGR 96 95 108 +6.4 54 52 61 82 86 43 46 GRAINS (mm ton) 69 75 66 million tons 57 yearly average 29 29 33 33 Ro
Slide 12: Understanding Competition: Trucks
Understanding Competition: Trucks More than 60% of total transportation in Brazil is made by trucks, in spite of poor conditions of important roads. DISTANCE COMPETITIVENESS (Km) POSITIVE EXTERNALITIES Bulk Truck Bulk Railcar (28 tons of cargo) (90 tons of cargo) Railway Truck Competition 1.5 millio
Slide 13: Tapping Unserved Demand
Tapping Unserved Demand Room to gain market share in the largest grain producing state. GRAIN TRANSPORTED VOLUME 2016 MATO GROSSO MT EXPORTED RUMO RUMO % TOTAL REGION VOLUME VOLUME MKT SHARE (2) CENTRAL 14,694 8,400 63% 57% (3) SOUTHEAST 5,362 4,313 32% 80% TOTAL 32,409 13,335 100% 41% Sinop Sorriso
Slide 14: Competitiveness: Widening Rumo's Area of Influence
Competitiveness: Widening Rumo’s Area of Influence CAPACITY INCREASE DRIVING COST REDUCTION AND BOOSTING COMPETITIVENESS MATO GROSSO STATE 52 50 45 CAPACITY (BLN RTK) (R$ /RTK) COST 22.7 21.6 19.3 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E 2023E Rondonópolis Notes : Using 2016/2017 budget with 10
Slide 15: Agenda
Agenda Business Model Market and Competitiveness Turnaround Strategy Financial Performance Closing Remarks 14
Slide 16: Commercial Approach
Commercial Approach NEW COMMERCIAL APPROACH STRONG CLIENT BASE GRAINS Narrowing the relationship with the base of clients Increase of the guaranteed volume – up to 100% of capacity FUELS Long term contracts – up to 3 years Take or Pay clauses SUGAR • Reduction of volume tolerance (from 15% t
Slide 17: It's all about execution
It’s all about execution Business Plan considers R$ 8.5 billion worth of investments, targeting 70 bln RTK capacity in six years. % OF COMPLETION AS OF 1Q17 2015 2016 2017 2018 2019 2020 NEW LOCOMOTIVES (60%) TECHNOLOGY INITIATIVES (10%) NEW RAIL YARDS (18%) NEW RAILCARS (64%) FERTILIZERS PROJECT (2
Slide 18: Process Redesigned in Two Years…
Process Redesigned in Two Years… It is not only about investments. Since merger, there has been major process changes. SAFETY FOCUS MANAGEMENT INITIATIVES • New culture, new behavior • “Zero Accident” Program • “Transformação” Project • Compensation linked to accident targets reduction • Restore pro
Slide 19: …Already Yielding Important Results.
…Already Yielding Important Results. OPERATING RATIO (%) DIESEL CONSUMPTION (Liters/‘000 GTK) 82% 4.95 4.76 4.49 77% 76%¹ 75% 2015A 2016A 2017E 2015A 2016A 2017E Rumo 2016 Budget RONDONÓPOLIS-SANTOS CYCLE (days) MAINTENANCE COSTS (R$/‘000 RTK) 10.3 22.7 21.6 9.6 9.2¹ 9.1 19.3 2015A 2016A 2017E 2015A
Slide 20: Agenda
Agenda Business Model Market and Competitiveness Turnaround Strategy Financial Performance Closing Remarks 19
Slide 21: Operational Performance
Operational Performance Transported Volume (mln RTK) and Average Yield (R$/000 RTK) Port Loading Volume (mln ton) and Tariff (R$/ton) 90 86 24 21 44,910 -10% 40,270 12% 13,114 8,911 7,656 11,682 35,999 32,613 2015 2016 2015 2016 Agricultural Products Industrial Products Average Yield Tariff 20
Slide 22: Consolidated Financial Performance
Consolidated Financial Performance Net Revenue (R$ mln) EBITDA (R$ mln) and EBITDA Margin (%) 39.9% 40.5% 4,803 4% 5,015 1,918 6% 2,029 2015 2016 2015 2016 EBITDA Margin Capex (R$ mln) EBITDA – Recurring Capex (R$ mln) 28% 1,382 1,951 1,926 1,078 840 646 1,111 1,280 2015 2016 2015 2016 Expansion Rec
Slide 23: Indebtedness
Indebtedness DEBT & LEVERAGE (R$ bln) 2Q17 DEBT PROFILE 20 4.4x 4.3x 4.0x 11% 10 12.3 12.0 21% BNDES (FINAME) 9.1 9.4 BNDES (FINEM) 20% Debentures 0 2.0x 21% Senior Notes 1Q17 2Q17 Other Debts Gross Debt Net Debt Net Debt / EBITDA 28% DEBT SCHEDULE AMORTIZATION (R$ bln) 4% 3.0 14% CDI TJLP 1.8 1.7 1
Slide 24: Successful Financial Initiatives
Successful Financial Initiatives Access to funding alternatives supporting investment plan. 2016 2017 Capital Debt Inaugural BNDES Increase Refinancing Bond Credit BRL 2.6 BLN BRL 2.9 BLN USD 750 M BRL 3.5 BLN Strengthen Liability Tapping Access to new Balance Sheet Management International credit l
Slide 25: Long Term Guidance
Long Term Guidance VOLUMES EBITDA (RTK bln) (R$ bln) CAGR: +11% CAGR: +19% 69 D 71 4.4 D 4.6 51 D 53 2.6 D 2.8 2017E 2020E 2017E 2020E CAPEX (R$ bln) 2.0 D 2.2 1.9 D 2.2 1.5 D 1.8 63% 1.0 D 1.3 64% 52% 30% 37% 36% 48% 70% 2017E 2018E 2019E 2020E Recurring Expansion Note 1: EBITDA and CAPEX curves ab
Slide 26: Agenda
Agenda Business Model Market and Competitiveness Turnaround Strategy Financial Performance Closing Remarks 25
Slide 27: Investment Highlights
Investment Highlights High entry barriers Large unserved agribusiness demand Most competitive logistics option for the region Large cost reduction opportunities with capacity increase Opportunity to gain market share and leverage Rumo’s position 26