Launched in February 2007 as a Vale coastal shipping spin-off, Log-In has been trying to convince shippers to switch from road to sea ever since. It’s been a bumpy road, including failed newbuilding contracts at Rio de Janeiro’s Eisa Shipyard and the disposal of the company’s pair of bauxite carriers to Hidrovias do Brasil in 2016 in order to raise cash for survival.
Log-In suffered a spectacular 97% share meltdown from highs of R$ 73 per share after the June 2007 IPO to lows of R$ 2.10 per share in May 2018. However, particularly after the countrywide truckers’ strike in 2018, the Brazilian container shipping market changed completely. Shocked by their vulnerability to long-haul road transportation, clients started to listen.
Still, during the 3Q21 conference call on November 11, Mauricio Alvarenga, the company’s Commercial Director, argued that there is still room for growth: “The Log-In story over the last few years has been a story of truck cargo conversion. A lot of cargoes that have a fit with coastal shipping are still using road transport”.
The cargo conversion argument was highlighted in the company’s first Sustainability Report, published a day earlier on November 10. The document stated that switching from truck to ship results in an 80% reduction of carbon emissions, as measured in tons of CO2 by tonne-miles.
As a result, demand for Log-In’s services is increasing. Shipping volumes during 3Q21 reached all-time high levels, especially in the feeder segment (+51% over 3Q20). In the company’s terminal operations in Vila Velha (TVV), volumes were also at historical highs. On top of volume increases, the company is enjoying an environment with international freight rates only comparable to the pre-2008 boom levels.
Net profit in 3Q219 was negative R$ 17.2 m (– $ 3.15 m), then R$ 9.1 m ($1.7 m) in 3Q2020. In 3Q21, net profit reached R$ 60.3 m ($ 11 m), up 562% from the previous year. Ebitda for the first 9 months of 2021, at R$ 266 m ($48.8 m) and 26% margin, is close to the full-year total of 2020. This year’s total is likely to be record-high, since the last quarter is usually the strongest one.
The cash influx is helping the company to reduce leverage (currently at Net debt / Ebitda of 2.1 x), while at the same time investing in new tonnage. In February, at the early stages of this year’s container freight historical bull run, Log-In bought the 2,550-TEU vessel Log-In Discovery for $ 20 m from Norway’s Klaveness Container AS. The Harpex index, which tracks worldwide time charter rates for container ships, is up 250% ever since, for vessels of similar size.
On employment alternatives for Log-In Discovery, CEO Marcio Arany commented: “The vessel is currently operating in the international market [AIS tracking data show the vessel currently in Zhoushan, China]. There’s a lot of demand out there. I would say that if Log-In didn’t have a commitment to the development of cabotage shipping in Brazil, we would have chartered out the vessel for the next two years. But we want to have it here in Brazil. We believe the BR do Mar [cabotage reform law] will be approved early next year. We could operate it in the Mercosur, we could open a feeder service to the Caribbean, bringing cargoes to Brazil. We could also upgrade our Log-In Pantanal vessel. There are many alternatives”.
Ordering bigger ships is also part of the path towards lowering emissions and allocating capital for growth. On October 13, 2021, Log-In ordered two containerships at China’s Zhoushan Changhong International Shipyard for $42.6 m apiece. The 3,158-TEU vessels are scheduled for delivery by December 2023 and May 2024. Their projected cargo uptake is 25% greater than 2019-built Log-In Polaris, the company’s most modern vessel to date, but with similar fuel consumption.
Concurrently with the fleet expansion, Log-In has a relevant Capex pipeline for TVV, since its terminal concession there was renewed by 25 years in September 2020. In early October 2021, the company approved the issuance of R$ 240 m ($ 44 m) of non-convertible bonds, tied to investments in upgrading TVV.
A healthy business with various investment prospects is a sharp contrast with the long streak of money-losing years that Log-in has faced. As a result, investors returned. The share price stands at R$ 21.27, up 34.5% YTD, while a R$ 25 per share offer by MSC for a controlling interest remains on the table. In the same conference call, Mr. Arany highlighted the company will remain listed at B3 even if MSC’s bid is successful. The transaction is pending the approval of competition authorities and shareholders.
One should not forget that despite current calm seas, the future is full of uncertainty. The company is strongly tied to the Brazilian economy, which is suffering from highly unpredictable political developments. Additionally, current sky-high rates, a global phenomenon, shall not last forever. In the meantime, Log-In is cashing in.
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