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2013 Sustainability Report

 
Message from the CEO

Our railways generate value

"For ALL, managing the environmental impacts of our operations and maintaining transparent relations with all our strategic stakeholders are just as important as our business performance"

 

Growing together with the Brazilian economy, providing a return for our investors and offering ever more efficient services for our customers are the targets which ensure that we at ALL are always on the go. In pursuit of our vision– to be the best logistics company in Latin America –, it is our understanding that managing the environmental impacts of our operations and maintaining transparent relations with all our strategic stakeholders are just as important as our business performance.

For ALL Railway Operations, 2013 was a year of major achievements. With the inauguration of the Rondonópolis Intermodal Complex in August, we consolidated a solution for one of the country's main logistics bottlenecks. A total of R$ 880 million was invested in expanding the Northern rail network and building an intermodal complex. This structure increases the potential for rail freight between the Midwest of the country and the Port of Santos, Brazil's main grain export corridor.

Another important highlight in the period was the opening of additional BNDES credit lines totaling R$ 1.7 billion. This funding will support the organic growth of ALL Railway Operations between 2013-2015, covering around 80% of the planned investment in business development and the implementation of social projects in the railroads' areas of influence.

At the beginning of 2014, we also received the license necessary to carry out the duplication of the Paulista Network, on the Embu-Guaçu to Evangelista de Souza and Paratinga to Perequê routes. With an investment of some R$ 600 million, work should be concluded in the first quarter of 2015. This will enable ALL to more than double its transportation capacity on this line, which corresponds to almost 60% of the company's total freight volume. Furthermore, a merger by the incorporation of ALL into Rumo Logística, belonging to the Grupo Cosan, was approved by the shareholders of both companies in May 2014. When the transaction, still subject to approval by Brazil's antitrust authority Cade (Conselho Administrativo de Defesa Econômica) and the land transportation agency ANTT (Agência Nacional de Transportes), is finalized, ALL shareholders will have a 63.5% stake in the new company, while Rumo shareholders will have a 36.5% holding.

The company also faced some difficulties during the year. The rail accident in São José do Rio Preto (São Paulo), once again brought home the major challenge for railroad operations in Brazil: interaction with urban perimeters. ALL regrets the occurrence of this accident and has made every effort to determine its causes and learn from it. Based on the investigation report, which indicated waterlogged soil as the cause of the accident, ALL mapped all stretches of the railroad that pass through urban regions with the same risk potential and created a preventive action plan centered on drainage works to be carried out in partnership with the local governments of the municipalities in question.

Although safety in the rail network has increased by around 80% since ALL initiated its operations in 1997, the company continues to seek solutions to reduce the potential risks its operation may present for adjoining communities.

In addition to promoting safety campaigns for adults and children through the Instituto ALL, the company assists local governments and councils in the municipalities neighboring its operations, providing technical support and acting as intermediary in requesting public safety works from the federal government. ALL believes that the construction of railway bypasses around urban centers is a necessity and will benefit all parties. These will ensure greater safety for communities, greater productivity in rail transportation, and will benefit the economy in general.

As of June, the company limited its operations exclusively to Brazil. Its main structural change during the year, the rescission of the company's concessions in Argentina, was aligned with the decision already taken by ALL to focus efforts on the markets presenting the greatest potential. The termination of the contract by the Argentinean government occurred at a moment when the company was at an advanced stage in negotiations with a local group interesting in assuming the operations, which had not been profitable for ALL in recent years.

Economic performance

In 2013, ALL Railway Operations saw 8.9% growth in net revenues compared with 2012. In the same period, EBITDA grew by 8.1% and net profit by 1.3%.* In the ALL Group consolidated results, net revenues were R$ 3.6 billion, an increase of 9.2% over 2012. EBITDA grew by 8.4% and net profit by 3.5%.*

* Not considering the effects of the termination of operations in Argentina.

The main highlights in the new ALL Group businesses were the capitalization of Brado Logística, with R$ 400 million provided by the FGTS Investment Fund (Fundo de Garantia do Tempo de Serviço), and the issue of a preliminary environmental license by Ibama for the transportation of iron ore via the Port of Santos, as part of the Vetria mining project. Another piece of good news was the increase in the estimate of the reserves in the mine from 1 billion to 10 billion metric tons, with an average iron content of 46%.

Ritmo had a challenging year. In spite of a 3.1% increase in net revenues compared with 2012, there was a negative variation of 4.1% in EBITDA in the year. The outlook for the coming years, however, is positive. The company is expected to consolidate its status as an important intermodal road transportation provider for customers with cargoes originating or terminating on rail routes operated by ALL.

The organization's target for 2014 is to consolidate relations with government bodies, regulatory authorities, customers and communities. In this report, you will learn a little about what the company has been doing to integrate sustainability strategically into our operations.

Enjoy reading it.

Alexandre Santoro
CEO, ALL Logística