This article first appeared on GuruFocus .
Release Date: August 11, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Santos volumes grew 35% year-over-year, reflecting a new commercial strategy and operational improvements that allowed handling two different cargoes simultaneously.
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Paraguay volumes increased 10% year-over-year, driven by a 38% increase in iron ore transportation, aligning with the commercial strategy to prioritize this cargo.
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Consolidated volumes reached 4.2 million tons, up 5% year-over-year, with net operating revenue rising to $662 million from $622 million.
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Leverage decreased to 2.4 times, down 0.3 times from the first quarter, driven by stronger operating cash flow generation and continued deleveraging.
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The company has secured all technical and environmental authorizations for emergency dredging in the North, positioning it to mitigate potential El Nino risks and ensure navigability.
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Management expects higher cash generation going forward, supported by redesigned tax planning, accumulated credits, and ongoing working capital efficiency improvements.
Negative Points
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North region volumes declined year-over-year due to challenges with product intake at the Miritituba terminal, impacted by ongoing works at Transportuaria, which also led to a drop in fertilizer volumes.
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Paraguay's adjusted EBITDA margin saw slight compression to 45%, as prioritizing iron ore led to higher costs from a longer-than-expected operating cycle and asset availability issues.
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The average exchange rate weakened to 5.05 BRL/USD from 5.67 BRL/USD in the prior year, negatively affecting the translation of results into Brazilian reais.
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Uncertainties remain regarding corn export dynamics and the effects of El Nino in the second half of 2026, which could impact third-quarter results.
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The company faced longer waiting times for convoys at the client's port in Paraguay due to increased fleet and port movements, creating a longer operating cycle that was not anticipated.
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Fertilizer volumes in the North decreased significantly due to a client repositioning its portfolio, leading to reliance on take-or-pay revenue recognition and a need to diversify the client base.
Q & A Highlights
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Q: How did the company enforce its strategy to have a stronger iron ore mix in Paraguay, and what is the expected product mix going forward? Also, what were the effects and magnitude of the take-or-pay revenue recognition for fertilizers in the North? A: CEO Desio Marao and CFO Andre Hashem explained that the decision to focus the fleet on iron ore was driven by the drop in grains and the longer travel time for iron ore, which made sense for the operation. They noted record iron ore volumes but acknowledged higher costs due to longer-than-expected operating cycles and asset availability issues. Looking forward, they see opportunities to increase iron ore volumes further with efficiency gains. Regarding fertilizers, they recognized take-or-pay revenue from an international client that repositioned its portfolio due to the war, making the northern route less profitable. They see opportunities to diversify the client portfolio and recover fertilizer volumes in the region.
Q: Can you provide more color on the strong cash generation in the quarter, including working capital and fiscal efficiencies, and what is the CapEx plan for coming quarters? A: CFO Andre Hashem stated that Hidrovias is a cash-generative company, and they have been redesigning tax planning, accumulating credits, and optimizing the situation. The greater efficiency in working capital is an ongoing agenda with room for improvement, not a single isolated event. Regarding CapEx, they prioritized reprioritizing allocations during the year, and with the arrival of a new engineering CEO, they will resume investments in the second half of the year, coming close to the announced full-year CapEx.
Q: What is the status of government decisions regarding emergency dredging due to El Nino, and have you seen any change in client appetite for the northern arc due to hydrological reasons? A: CEO Desio Marao explained that the private sector reached an agreement with the government agency responsible for dredging, and a proposal for emergency dredging was validated technically with environmental licenses already approved. The government is convinced, and they expect political approval shortly, with dredging taking about 90 days. Operationally, they are preparing for a more restrictive scenario if it doesn't materialize. Regarding client appetite, he noted no change, as hydrology is improving in the long term, and the northern arc remains a competitive route for outflow. He emphasized that the legislation and government awareness have changed, bringing them closer to achieving good dredging compared to 2023-24.
Q: The company saw inflation on revenues per volume despite a competitive atmosphere for grain transportation. Was that increase concentrated in take-or-pay for fertilizers or grains, and is there space to increase at a similar rate in coming quarters? A: CFO Andre Hashem clarified that revenues are a mixture of several services, including the transfer of fuel prices. With an increase in fuel prices, there is an impact on margins and unit revenues. This year, prices are more stable with no huge variations among quarters, but the dynamic of fuel price transfer is important to consider.
Q: Can you elaborate on the operational challenges in the North, specifically the impact of ongoing works at the Transportuaria terminal on product intake, and how did the company offset the volume losses in Santos? A: CEO Desio Marao noted that the second quarter of 2026 was a period of learning, with difficulties in accessing the Miritituba terminal due to ongoing works at Transportuaria, which gradually normalized. This impacted product intake in the integrated system. However, navigation contingents remained normal, and demand for grains in Para and northern Mato Grosso was strong, partially offsetting the volumes lost in Santos. Volumes in Santos grew 35% year-over-year, reflecting the new commercial strategy and operational improvements, allowing the handling of two different cargoes simultaneously.
Q: What were the key drivers behind the 10% increase in Paraguay volumes, and how did the decision to prioritize iron ore affect the recurring adjusted EBITDA margin? A: CFO Andre Hashem explained that the 10% volume increase was driven by a 38% increase in iron ore transportation. The recurring adjusted EBITDA totaled $138 million with a margin of 45%, a slight compression compared to the previous year. This was due to the decision to prioritize iron ore in the cargo mix, which brought higher volumes and revenue but also higher costs, mainly from a longer-than-expected operating cycle and asset availability impacts. They believe there is room to improve efficiency and better capture benefits going forward.
Q: How did the foreign exchange translation impact the quarter's results, and what are the expectations for the third quarter of 2026? A: CFO Andre Hashem highlighted that the average exchange rate was 5.05 BRL per US dollar compared to 5.67 BRL in the second quarter of 2025, affecting the translation of results into Brazilian reais. Looking ahead to the third quarter of 2026, they expect results to be broadly in line with the same period last year, although uncertainties remain regarding corn export dynamics and the effects of El Nino during the second half of the year.
Q: Can you provide details on the consolidated results, including net operating revenue and adjusted EBITDA, and the company's leverage position? A: CFO Andre Hashem reported that the company handled 4.2 million tons in the quarter, up 5% year-over-year, reflecting higher volumes in Santos and Paraguay, offsetting the decline in the North. Net operating revenue totaled $662 million compared to $622 million in the same period last year, reflecting higher volumes in Santos and the recognition of take-or-pay revenue from fertilizer contracts. Recurring adjusted EBITDA totaled $322 million with a margin of 48%, reflecting higher costs in Paraguay and higher costs and expenses in Brazil. Leverage ended the quarter at 2.4 times, down 0.3 times from the first quarter, driven by stronger operating cash flow generation. The company maintains a balanced capital structure with an extended debt maturity profile averaging 4.5 years and appropriately hedged foreign currency exposure.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
