All America Latina Logistica : Preview of 1Q14 Results

On June 5th 2013, the Argentine Government rescinded the concessions of ALL in the country, in which the Company used to hold economic rights. Argentina´s figures are part of consolidated results until June 5th, when the concessions were rescinded. However, as the operations in Argentina were discontinued, unless otherwise stated, the figures presented in this notice do not include their results anymore.

ALL´s Consolidated Adjusted EBITDA grew 11.5% in the first quarter of 2014, reaching R$444.7 million. This growth was achieved due to increases of (i) 11.3% in Rail Operations Adjusted EBITDA and (ii) 41.4% in Brado Logística Adjusted EBITDA, partially offset by a decrease of 24.6% in Ritmo Logística Adjusted EBITDA.

*Excludes Argentina´s results in 2013, as the Argentine Government rescinded the concessions of ALL in that country on June 5th, in which the company used to hold economic rights.

ALL Rail Operations volumes increased 1.2% in 1Q14 against an unusually strong 1Q13, reaching 10,041 million RTK. The first quarter is seasonally the weakest period of transported volumes of the year, as the grain crop usually starts to be harvested by mid February. But that was not the case for 2013. Record corn inventory levels at the end of 2012 and favorable international prices boosted exports during January and beginning of February of the last year, creating a strong comparison basis for 2014. Volumes decreased 20.8% in January of 2014 when compared to 2013, but increased 8.0% year-over-year in February and March even with rainfalls which postponed the beginning of the harvest period in Mato Grosso state in 2014.
Additionally, agricultural volume growth was also impacted by a relevant increase in the sugar transportation, especially on the Wide Gauge Corridor - the one that connects the estate of Mato Grosso to the Port of Santos. In 1Q14, total sugar volumes increased 40.0% year-over-year. The increase in sugar volumes reduces average productivity and transportation capacity at the wide gauge rail system, as sugar routes typically have shorter distance, the tougher geography contributes to slower train speed and has a much worse unloading productivity at the port, when compared to other cargo and routes. Agricultural commodities volumes decreased 1.7% in 1Q14 comparing to 1Q13.
Industrial volumes increased 10.6% in 1Q14 year-over-year, mainly pushed by a good performance of Eldorado´s Project volume, which ramped-up during 2013 and is now operating at its full capacity, and by Brado´s ramp-up. Construction volumes also performed better in 1Q14 then in previous quarters.
Rail Operations Adjusted EBITDA increased 11.3% in 1Q14 compared to 1Q13. This growth was mainly driven by higher yields, pushed by inflation and diesel price increases pass through to our take-or-pay contracts and spot market.
The company is ready to haul volumes from the harvest peak in second and third quarters. Operational scenario at the ports is better than the one we faced during 2Q13 and 3Q13, especially in the grain segment, as the unloading restrictions we had at the main grain unloading terminals (TGG - Terminal de Granéis do Guarujá and T-XXXIX) were fixed and are operating at capacity since the beginning of the year. Besides that, our Rondonópolis terminal is prepared to load the major part of agricultural commodities volumes that were previously loaded in Alto Araguaia, increasing average transported distance. Industrial volumes should keep benefitting from (i) Brado´s volume, as it continuing its ramp-up, and from (ii) Eldorado´s volume, which ramped-up during 2013.
On March 12th the Brazilian Institute of Environment and Renewable Natural Resources ("IBAMA") issued the Installation License for the remaining two rail stretches in our rail duplication project from Campinas to the Port of Santos, the most relevant project the Company has nowadays, and we were able to start works in those stretches. The duplication represents an important milestone for the structural increase in productivity and capacity of Brazil's main agricultural export corridor. We expect to conclude the works in approximately 12 months since the beginning of the works. In addition, sugar terminals at the Port of Santos should be able to
unload in a higher level, contributing to the efficiency of the port.

Brado Logística started 2014 with another quarter of volume growth, continuing its operational ramp-up. The increase of 7.9% from 15.1 in 1Q13 to 16.3 thousand containers in 1Q14 was pushed by Paraná and Wide Gauge corridors, where we added locomotives and rail cars during 2013 and where major part of Brado´s investments for 2014 are concentrated.
Paraná corridor volumes increased 30.1% in 1Q14 year-over-year, with a good performance of refrigerated and wood products. Wide Gauge corridor volumes increased 12.2% mainly driven by soybean transportation and the return cargo from Araraquara.
In Rio Grande corridor, volumes decreased 11.8% in 1Q14 against 1Q13, mainly impacted by the end of a polyethylene operation in 3Q13. In Mercosur corridor - which connects Brazil and Argentina - volumes decreased 11.4%.

In terms of RTK, Brado´s volumes grew 18.0% in 1Q14, from 392.2 million RTK in 1Q13 to 462.9 million RTK. The growth in RTK was a result of the (i) increase in number of containers handled and (ii) improvement in average transportation distance, mainly pushed by the Wide Gauge corridor with the start of operations in Rondonópolis.
Brado´s Adjusted EBITDA increased 41.4% in 1Q14, reaching R$ 14.5 million, comparing to 1Q13. This significant growth was driven due to the (i) increase in RTK, and (ii) expansions of Brado´s logistic complexes in Cambé (PR) and Cubatão (SP).
With Brado's capitalization of R$400 million completed in August 2013, the Company has its capital structure prepared to carry on its investment plan and accelerate capacity and volume growth during 2014. Moreover, Brado´s terminal in Rondonópolis complex should boost volume growth in Wide Gauge Corridor, as it increases Brado´s handling capacity, allows the company to access different cargo and increases the average transported
distance.

Ritmo did not perform well during the quarter. Transported volumes decreased 16.4% in 1Q14 against 1Q13, pushed by a 14.9% drop in Dedicated Solutions Unit and by a decrease of 20.9% in the Intermodal Unit.

Dedicated Solutions volumes drop 14.9% in 1Q14 year-over-year, driven by the decrease of (i) the Automotive segment, due to the lower demand and customs restrictions in Argentina, (ii) the Specialized Assets volumes, driven by the discontinuation of a chemical volume in 3Q13 and (iii) the General Cargo volumes, due to the discontinuation of low profitability operations in this segment.
Intermodal Business Unit volumes decreased 20.9% in 1Q14 against 1Q13. The result was affected by the redesign of an important client in 4Q13, as it incorporated the road operation, impacting volumes since then.
Adjusted EBITDA decreased 24.6% in the quarter, to R$ 4.5 million, as transported volumes decreased and the company lost operational leverage over its fixed costs.

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