10
years
ALL - América Latina Logística
To be the best logistics company
in Latin America
Values
• Focus on the client
Always
ahead
Annual Report 2006
•P
eople make a difference and
are valued for their work
• Integrity and transparency
• Increasing shareholder value
through profitability
• Simplicity combined with creativity and
austere cost control
• Methodology and superior quality standards
for constant improvement
• Teamwork in a fun and safe environment
• Commitment to the community and
the environment
10 years Always ahead
Rua Emilio Bertolini, 100
Vila Oficinas - CEP 82920.030
Curitiba - PR - Brasil
Tel.: 55 41 2141-7555
fax: 55 41 2141-7484
e-mail: ir@all-logistica.com
Vision
A n n u a l
R e p o r t
2 0 0 6
10
years
ALL - América Latina Logística
To be the best logistics company
in Latin America
Values
• Focus on the client
Always
ahead
Annual Report 2006
•P
eople make a difference and
are valued for their work
• Integrity and transparency
• Increasing shareholder value
through profitability
• Simplicity combined with creativity and
austere cost control
• Methodology and superior quality standards
for constant improvement
• Teamwork in a fun and safe environment
• Commitment to the community and
the environment
10 years Always ahead
Rua Emilio Bertolini, 100
Vila Oficinas - CEP 82920.030
Curitiba - PR - Brasil
Tel.: 55 41 2141-7555
fax: 55 41 2141-7484
e-mail: ir@all-logistica.com
Vision
A n n u a l
R e p o r t
2 0 0 6
r e p o r t
2 0 0 6
10
years
A n n u a l
Always
ahead
r e p o r t
2 0 0 6
10
years
A n n u a l
Always
ahead
A n n u a l
R e p o r t
2 0 0 6
10
years
ALL - AMÉRICA LATINA LOGÍSTICA |
Always
ahead
| Annual Report 2006
Ten years of challenges, but also achievements and accomplishments. In this Annual Report,
you will get to know a little more about the Company’s path, and will also get to know how
the largest independent logistics operator in the continent is shaping the future. Always at
the forefront of the industry.
chapter 1
chapter 2
chapter 3
ALL: 10 years always ahead
Always putting people first
Always ahead in planning
04 Introduction
19 P
eople, culture
and management
34 Goals and strategy
06 Company profile
35 Investments
24 Corporate governance
11 Message to shareholders
38 Technology and innovation
30 Other intangible assets
40 Risk management
Operational
agreement to
operate in the
southern region of
São Paulo State
1999
Privatization
of Ferrovia Sul
Atlântico
1998
1997
02
31 Awards and recognition
Acquisition of
two Argentine
railroads
index
ALL - AMÉRICA LATINA LOGÍSTICA |
chapter 4
chapter 5
chapter 6
Always ahead in business
Always ahead with responsibility
Outlook and challenges ahead
46 Agricultural commodities
64 Environment
80 Outlook and challenges
48 Industrialized products
66 Labor safety
50 Highway-based services
68 R
elationship with
customers, suppliers
and the community
53 Brasil Ferrovias
Shares are
issued on
Bovespa
2006
Listed among the
best companies
to work
2006 standard
financial statements
2004
2003
2001
55 Financial results
Leasing of
Delara’s
assets
appendix
74 Balance sheet
Acquisition
of Brasil
Ferrovias
03
52 ALL Argentina
| Annual Report 2006
The Company celebrates its tenth anniversary with various and justified reasons to
celebrate. Originated from the southern network of Rede Ferroviária Federal (RFFSA), which
prior to the privatization lacked investments and was inefficient, ALL achieved new service,
productivity and safety levels in its operations. It decisively moved into intermodality and
industrial segments, which previously were poorly explored, and increased its share in
the agricultural segment. It expanded its coverage area and its asset base through several
acquisitions. Its revenue went up from R$194 million in 1997 to R$1.5 billion in 2006,
and its EBITDAR rose at an average rate of 59% a year, totaling R$591 million in 2006.
It was considered by its employees as one of the best companies to work for and was also
acknowledged by investors, as its shares have appreciated 377% since its initial public
offering in June 2004.
10 years always at the forefront of the industry
Despite the important achievements of the period, the outlook and challenges for the
Focus on results, meritocracy, simplicity with creativity, and excellence in the provision of
share of the railways in the total cargo outlet in Brazil and Argentina and from the growth
services. These are some of the pillars of a culture developed over ten years that, together
of the agricultural and industrial production in the region, ALL is consolidating its position
with a clear vision, strong values and articulated goals, made ALL – América Latina Logística
as a company that is always at the forefront of its industry, whether in the quality of its
the largest independent cargo transportation operator in Latin America. ALL currently offers
operations, in the motivation of its personnel or in its commitment to society. After all, to
a wide range of logistics services and operates a rail network with more than 20,000 km in a
be always at the forefront is, above all, to have a view into the future. For many decades
region that represents 75% of Mercosul’s GDP, serving ports responsible for almost 80% of
of growth to come.
04
South America’s agricultural exports.
next ten years are still superior. Strategically positioned to benefit from the increase in the
‘
ALL - AMÉRICA LATINA LOGÍSTICA |
Privatization
of Ferrovia Sul
Atlântico
ALL was founded in 1997 with the
privatization of Rede Ferroviária
Federal, when it started to operate the
Southern Network, which comprises
the states of Paraná, Santa Catarina
and Rio Grande do Sul.
1997
In 2006, we evolved our service
capacity, production and safety of operations.
Our employees consider us as a good company to
work for, and clients and investors recognize us
as a company one can rely on ’
| Annual Report 2006
Profile
Last year, ALL acquired Brasil Ferrovias (Ferroban and Ferronorte) and Novoeste, railway
ALL was created in 1997 with the privatization of the former Rede Ferroviária Federal (RFFSA).
operators located in the states of Mato Grosso, Mato Grosso do Sul and São Paulo. The business,
Under the name Ferrovia Sul Atlântico, and headquartered in the city of Curitiba, it began its
evaluated at R$3 billion (R$1.4 billion in shares plus R$1.6 billion in debt), increased its share in
operations with its southern network (the states of Paraná, Santa Catarina and Rio Grande do
Sul), after the signature of a 30-year concession agreement, renewable for another 30 years.
In 1998, it also began to operate in the southern stretch of the state of São Paulo, as a result
of an operational agreement with Ferroban. In the following year, it acquired Ferrocarril
Mesopotamico – General Urquiza and Ferrocarril Buenos Aires al Pacifico – General San
Martin, all within Argentine territory, expanding its network up to Mendoza, near the
Chilean port of Valparaiso, on the Pacific Ocean.
In 2001, it had already adopted its current name and acquired Delara, a logistics company
with a strong presence in the highway segment, becoming a multimodal operator with
businesses across the entire Southern Cone. With this acquisition, ALL started to offer
customized solutions, handling cargo through trains and trucks, in addition to managing
product distribution terminals, warehouses and centers, serving various industries, such
as agricultural, automotive, beverages, consumer goods, fuels, construction, fertilizers,
forestry, pulp and paper, and steel making. Its customers include large industrial
conglomerates, such as Gerdau, Votorantim, Bunge, Cargill, Ambev, CSN, Ford, Scania,
06
Renault, Sadia, Unilever, Klabin, White Martins and Petrobras.
‘
the country’s main industrial region and added to its network one of Brazil’s major agricultural
commodities export corridors, via the Port of Santos.
The acquisition of Brasil
Ferrovias amplified our
operations in the country’s main
industrial regions and added to
our network one of Brazil’s major
agricultural commodities export
corridors, via the Port of Santos ’
ALL - AMÉRICA LATINA LOGÍSTICA |
| Annual Report 2006
Now, ALL’s scale can be compared to various other private railways in the world. Its assets
The growth achieved is supported by an aggressive variable compensation system based
are distributed across an area that accounts for 75% of Mercosul’s GDP and for almost 80%
on individual goals and coupled with the discipline in the adoption of routine management
of South America’s agricultural exports, strategically located to benefit from the growth in
methodology and tools along with intensive use of technology, and a constant concern with
the share of railway transportation in the region’s overall cargo transportation.
cost control, which resulted in sustained productivity gains and expansion in its results.
17%
Diesel consumption
(liters/thousand GTK)
2006
2005
2004
2003
2002
1997
12%
11%
8%
5.44
5.6
5.7
5.9
6.1
6.78
20,000 kilometers of track
Employees (RTK per Employee)
Locomotives (RTK per Kgf)
Rail Cars (RTK per Rail Car)
08
Track (RTK per Km)
980 locomotives
28,000 rail cars
1,300 highway vehicles
Volume
(RTK)
2006
2005
2004
2003
2002
1997
22.0
19.9
18.6
17.5
15.3
6.2
ALL - AMÉRICA LATINA LOGÍSTICA |
During these ten years, average diesel consumption dropped 20% and productivity of
employees, locomotives, rail cars and track increased at an average annual growth rate
close to two digits. In addition, ALL’s revenues increased 25% per year on average, whereas
EBITDAR expanded at an average rate of 59%, and EBITDAR margins rose from 6% in 1997
to 47% in 2006.
Net income (million)
Gross revenue (million)
EBITDA margin
1,249.3
171.2
2005
615.9
-99.5
2001
-62.0
1997
30.3%
821.4
22.1
2002
37.0%
990.5
4.5
2003
44.3%
1,083.7
150.6
2004
46.5%
1,466.5
172.7
2006
194.0
6.0%
1997
22.8%
2001
25.6%
2002
2003
2004
2005
2006
09
0
| Annual Report 2006
ALL has been listed on Bovespa’s (São Paulo Stock Exchange) Level 2 of Corporate Governance
since 2004, when the Company carried out its initial public offering (IPO). The Company
offers its shareholders full tag-along rights regardless of the class of share, in addition to
the standard requirements of Level 2, thus restating its commitment to good corporate
governance practices. Since going public, ALL’s shares have appreciated 377% as compared
to a 114% increase of the Ibovespa index.
10
Evolution of share price vs. Ibovespa since IPO (R$)
ALL - AMÉRICA LATINA LOGÍSTICA |
Midwestern Brazil and in São Paulo. These markets have a low presence of the railroad modal
and with a great growth opportunity from the railroad infrastructure recovery.
The good results achieved have only been possible through our staff commitment, which
has worked with the solid intent of delivering the best service to our clients, with safety
and constant productivity gains. This commitment is a result of a meritocratic culture,
incessant in cost reduction and in the search for results.
The year of 2006 was transformational
for A LL for five main reasons:
1. EBITDAR grew by 23% over 2005, reaching R$591 million in 2006. This growth was
comprised of a 25% increase in Ebitdar of ALL Brasil, to R$547 million, and a 9% increase
M ESS AG E TO SH A R EHOLDE R S
in Ebitdar of ALL Argentina, to P$64 million. Our consolidated revenue grew by 15%
compared to 2005, to R$1,430 million, and in 2006 the consolidated volume had a 10.6%
growth, reaching 22.047 billion RTK.
We are pleased to present the results for 2006, a year which will be remembered as a milestone
Our ability to provide integrated logistics solutions to clients, associated with the tireless
advantages, for we achieved our financial goals facing an adverse agricultural market and
focus on the reduction of expenses and productivity gains, allowed us to grow in an adverse
managed, with agility, to increase our volume in the ports and reach new industrial segments.
scenario in the agricultural market, with an unfavorable foreign exchange and depreciated
2006 will also be remembered for the largest acquisition of our history, the purchase, in May,
prices in the first half of the year. In May, we faced the stoppage of farmers, which interrupted
of Brasil Ferrovias, totally carried out through the capital markets, focusing on the States of
flows of agricultural transportation for 25 days, both in Midwestern and Southern Brazil.
11
for our business. The period shows the strength of ALL’s fundamentals and competitive
| |Annual Report 2006
Even through, the volume of agricultural commodities grew by 13.4%, from 10.2 billion RTK,
With the acquisition of Brasil Ferrovias, we leveraged the net debt/Ebitda ratio from the
in 2005, to 11.6 billion RTK, in 2006.
level of 0.2x at the end of 2005 to 3.8x at the end of 2006. The debt of R$1.6 billion of Brasil
Ferrovias, incorporated to our balance sheet, has a long-term profile, taken with BNDES
In the industrial market, we continued our growth curve above 20% in intermodal
and governmental bodies, with more attractive rates than the market, and with present
volumes, mainly in steel products, refrigerated cargos and containers. In the highway
value in a very positive level. Our result and cash generation growth curve makes us calm
market we maintained our strategy of focusing on dedicated operations and grew by 44%
concerning the financing and reduction of this indebtedness as planned. In addition, the
our operating result, reaching new operations in the Beverages (AmBev), Consumption
intensive use of the EVA, both in the corporate level and in our business units, allowed
(Unilever) and Automotive (Renault) segments.
us to grow at the same time we kept on reducing the invested capital, so that we can
obtain a growing free cash flow.
In Argentina, despite facing a weak soybean, corn and wheat crop, our volume grew by
6%, basically pushed by the improvement in our operating indicators. The reliability of our
Our Investor Relations area has dedicated itself in the proximity and education of our
assets and the safety level had a significant improvement in the year. For the first time,
business with the financial market, as we are the only logistics publicly-held company
we entered into long-term agreements with investments of clients, such as AGD, Iecsa,
in Brazil, with superior corporative governance practices and being followed closely by
Agrenco and Cia Argentina de Granos.
more than 10 prime analysts and investors all over the world. The performance of our
shares, with a 377% appreciation since their launch in June 2004, compared to a 114%
In Brasil Ferrovias, we promoted a significant reduction in the cost base. During the second
appreciation of IBOVESPA in the period, is the acknowledgment of our transparency and
half of 2006, period in which the company was already under the management of ALL,
demonstrates the trust of the capital markets in the fundamentals of our business. In
EBITDAR grew by 86%, increasing from R$92 million in 2H05 to R$171 million in 2H06.
addition, we are already in the Ibovespa and IBrX-50 indexes and have received several
All cost adjustments, such as personnel, renegotiation of agreements with suppliers and
awards for our Investor Relations website.
financial debts have already been made, totaling a gain of synergies over R$80 million.
2. The history of ALL is repeated with the acquisition of Brasil Ferrovias. In May 2006,
in the 2006 balance sheet.
we acquired, through an exchange of shares, the operations of Brasil Ferrovias, preserving
12
The adjustment process had a cost of R$400 million and all existing liabilities are presented
ALL - AMÉRICA LATINA LOGÍSTICA |
ALL’s cash for the restructuring and investment process in the operational recovery of this
improvement in the terminals turnover and the remunerated/km of our trucks. The diesel
network and its assets. It had 4.7 thousand kilometeres of railroad, 7.8 thousand railcars
consumption (liters/000gtk) was again reduced by 3% on 2005, and we had significant
and 280 locomotives. The history of ALL is repeated with the opportunity of operationally
gains in the services and material purchases contracts.
changing Brasil Ferrovias into a viable railroad operation and starting to commercially
grow its share in the transportation matrix. For comparison purposes, currently the railroad
In 2006, we had our best performance in operational safety, rewarding the discipline in
share in the Port of Santos stands at 27%, against 60% in Paranaguá.
the compliance with the conduction procedures, with audits in 100% of mountain range
travels and strong use of technology. Thus, we improved our gravity indicators and
The operational indicators of safety, track conditions, reliability of locomotives and
the number of accidents, with 12.2 accidents by million of train/km in the southern rail
turnover of railcars show significant gaps to those already reached by our operation in
network, against 83.2 in 1997, which made ALL southern rail network one of the safest
Southern Brazil. We believe this improvement process, which already starts showing small
cargo railroads of the world.
results, will take from two to three years to be concluded.
Our clients’ satisfaction survey showed an improvement in relation to 2005, rewarding our
The operational and administrative systems have already been implemented and our
quality policies in the execution of operational processes. The commercial proximity with
Operational Control Center (CCO) already controls by satellite from Curitiba the railroad
our clients has been the key to accelerate our growth with joint expansion projects.
operations in our entire network in Brazil. We created five more operational production units
and two business units in São Paulo. Our management system by guidelines, individual
4. Strong advance in sales agreements and investments of clients and of our
goals and performance championships has already been implemented for all our employees.
own. We entered into several long-term sales agreements, ensuring new volumes and
Therefore, all processes, procedures and goals have already been consolidated and we have
investments of clients, showing the trust and acknowledgment with our service level and
been operating in a unified manner since January 2007.
their strategic decision to expand their businesses in ALL’s influence area. There were
more than 1,500 railcars, among new and refurbished ones, from clients such as Bunge,
Coamo, Álcool PR, Klabin, Sadia, Votorantim, Ipiranga, among others. We also had terminals
We reached new levels of productivity and reliability for railcars and locomotives, with an
inaugurated in ALL’s operational areas such as the plate terminal of Masisa, in São Paulo,
13
3. Significant improvement in the service, productivity and safety levels.
| |Annual Report 2006
of Standard, for container, in Cambé and Cascavel, of Meridian, for grains, in Maringá, and
2nd generation Board Computer, the implementation of detectors of railcar derailment
the duplication of Pasa, for sugar, in Paranaguá.
and barrier falls, and the development of CCP (Yard Circulation Control), which will
allow us to manage the maneuvers and movement of railcars in the yards. Since the
Various new operations were added to the company, strengthening our presence
privatization, in 1997, more than R$1.2 billion was invested in new technologies, track,
in Brazil and Argentina as an Intermodal Logistics Operator, growing in dedicated
rolling stock and training.
operations, storage, transfers, urban distribution and border services. As an example, we
have the management of the whole logistics network of Calpar, of Bunge Fertilizantes
5. Improvement of our employees’ satisfaction and integration with the community.
PR, and of the supply of High Maltose to Ambev’s plants, in addition to the dedicated
More than 4.7 thousand employees were trained by our Corporate University in technical
highway operations of Unilever, Ford, Scania and White Martins. In the 4th quarter, we
and management courses, and we obtained a significant improvement in our internal
also took over the entire intermodal logistics of refrigerated products of Sadia in west
research of the organizational environment. This was also a year of great proximity with
Paraná and the dedicated highway operation of Renault in Mercosur.
the community, where important projects of Corporate Responsibility were developed,
such as the Talent Workshop project that graduates youngsters from public schools in
Within the several projects developed, we highlight two of the most important ones.
Basic Engineering, the signaling of more than 200 Level Crossings in places with a wide
The first one is the new port in Zarate, Argentina, with a static capacity of 150 thousand
circulation of vehicles and the Environmental Train program that benefited more than
tonnes/year, under construction by Agrenco, which will allow a better outflow of the
one thousand youngsters from the communities close to the railroad. We are already in
Argentine and Paraguayan crop. The second one is TGG, new grains terminal in the
the newly created Bovespa Corporate Sustainability Index (ISE), the first Latin American
port of Santos, with static capacity of 240,000 tonnes, built in a partnership between
indicator targeted at companies with a responsible attitude towards the environment,
Bunge, Amaggi and ALL. These two large-extent projects, which significantly increase
society, clients, suppliers and governments.
the railroad competitiveness, will be under operation as from February 2007.
2007 Outlook: Operational reliability to grow in volume and result. The strong
Balance allows us to concretize our growth and investment plan, regardless of the
added up to R$300 million, focusing on information technology, with the launch of the
financial market fluctuations. In 2007, the commercial market scenario is very promising,
14
ALL also continues its policy of intense investments of its own. In 2006 investments
ALL - AMÉRICA LATINA LOGÍSTICA |
with the recovery of the grain crop and the growth trend for industrial volumes.
The adaptation of 40 locomotives and refurbishment of 1,800 railcars of the dead
fleet, improvement in track, port terminals and information system have already been
provided to support the ambitious growth planned. By means of the right allocation
of these investments, we are working to give one more step towards growth, with
significant profitability and productivity results in 2007.
Finally, we would like to thank all our clients, suppliers and regulation bodies for the
support shown during these years, our shareholders for the constant support, and our
employees, who in every moment show a differentiated commitment , always in pursuit
of our vision, which is “To be the best logistics company of Latin America”.
Wilson Delara Chairman of the Board of Directors
Alexandre Behring Vice Chairman of the Board of Directors
15
Bernardo Hees Chief Executive Officer
| Annual Report 2006
Always
putting
16
people first
24 C
orporate governance
30 Other intangible assets
31 Awards and recognition
02
17
19 P
eople, culture
and management
chapter
ALL - AMÉRICA LATINA LOGÍSTICA |
18
| Annual Report 2006
ALL - AMÉRICA LATINA LOGÍSTICA |
ALL has developed a corporate culture based on merit and geared towards results,
founded on a clear vision, solid values and well-defined goals. At ALL, “People make a
difference and are valued for their work”.
The various profiles of our people include trainees, market experts and people who built
their careers at the Company, all of whom benefit from the great mobility at all levels.
New operators can become engineers, supervisors and coordinators. The process is similar
to interns, trainees and analysts. For instance, our CEO, Bernardo Hees, reached that office
six years after joining the Company as an analyst in 1998.
Talent retention is promoted by means of a continuous challenge (through job rotation),
training and development, variable compensation, stock options and the involvement
of the people through an open dialogue about the business. In addition to the technical
and operational training, the enhancement program is highly geared towards managerial
development, through ALL’s Corporate University (UniALL), where over 4,600 employees
were trained in 2006.
‘
Currently, the Company has 5,062
employees in Brazil and 1,518 in
Argentina, totaling 6,580 people,
of which 5,648 in the railway mode
and the remaining in the highway mode.
Our team is young: 45% of the employees
are up to 30 years old. The average
turnover recorded in the period was 2.3%,
of which 1.4% in the railways and and
5.1% in the highways. ’
19
P e o p l e , c u lt u r e a n d m a n ag e m e n t
| Annual Report 2006
Va r i a b l e C o m p e n s at i o n
Already a part of ALL culture, the Variable Compensation Program (PRV) is a set of different
incentive programs that strives to align employees’ attitudes and behavior with the
Company’s goals, placing a high value on team work and the constant improvement to
achieve better results. The basic premise for the PRV is the fulfillment of the EBITDAR, Net
Income, Delta EVA and Free Cash Flow goals.
The Company also has a stock option plan for selected employees who share the vision of
the owner, deliver results and have a long-term view of the Company. The Program aligns
the interests of the Company’s management to those of its shareholders, making the former
partners of the business. Today, the Company has over 100 employees participating in its
20
stock option plan.
Operational agreement to
operate in the southern region
of São Paulo State
In December 1998, by means of an
operating agreement, it began to
operate also in the southern stretch
of the state of São Paulo.
21
1998
ALL - AMÉRICA LATINA LOGÍSTICA |
| Annual Report 2006
I n t e g r at e d m a n a g e m e n t sy s t e m
The Integrated Management System (SIG) was developed to enable the integrated
management of the entire Company, aimed at its constant enhancement. Based on
the SIG and our strategic plan, the Company prepares its annual goals, which serve as a
benchmark for the Variable Compensation Program.
M a n a g e m e n t b y t h e G u i d e l i n e s ( G P D ) It aligns the Company’s short-term
goals with the strategic planning approved by the Board of Directors, defining annual
goals from the CEO to the supervisors. All employees know what they need to do in
order to achieve their goals.
M anagement o f the Routine ( G PR )
This is the system that ensures the
incorporation into the daily routine of the improvements adopted in the GDP, through
the standardization of procedures, monitoring of indicators and internal audits of critical
processes. The best practices are adopted and disseminated throughout the Company.
On-sight Management and 5S
They ensure the maintenance of quality at
the work environment and transparency in the goal-definition process. Through Onsight Management, goals and their status are exposed on the wall, with the following
representation: green for results better than the goal; yellow for results between 90% and
22
100% of the goal; and red for results below 90% of the goal.
ALL - AMÉRICA LATINA LOGÍSTICA |
Ideas and Initiatives Program creative ideas and enterprising initiatives presented by
Trainees
employees to improve existing procedures or solve the Company’s problems are valued
ALL’s Trainee Program is aimed at preparing – each year – a new generation of leaders,
and compete for a prize at the end of each year. In 2006, the best idea was rewarded with
developing the technical and human skills of recent college-graduates. The training is
a brand-new car.
carried out in different areas of the Company and enables participants to have a systemic
vision of the business. Over 159 people have already been trained and more than 35% of
Si x S i g m a
Employees are trained in the Six Sigma methodology, such as black belts
and green belts, increasing their analysis capacity to identify opportunities and reach new
them now hold key positions at the Company. The Program is among Brazil’s most popular
ones and in 2006 it had approximately 4,000 contenders, of whom 18 were approved.
productivity levels. The adoption of statistical tools integrated to the management by
project method enables the constant enhancement of procedures.
Knowledge, development
and training management
The Company has a series of professional development training programs, which are
carried out at ALL’s Corporate University (UNIALL). Created with the purpose of disseminating
and multiplying knowledge among employees, this institution offers continuing
education focused on results. It is the only one in Brazil offering technical training to
engineers. In 2006, R$5.0 million were allocated to the development of 4,692 employees,
23
providing a total of 446,600 training hours.
| Annual Report 2006
C o r p o r at e G o v e r n a n c e
Board of Executi ve Officers Comprised by the CEO and eight executive
officers, appointed for two-year terms, all of whom eligible for reelection. Members are
ALL has always been concerned with corporate governance. Since its creation, the
responsible for managing our operations, following the decisions and strategic planning
Company has had independent directors and an active board of directors, which sets
set forth with the Board of Directors..
forth strategic guidelines and monitors the operations from close range. Even before
becoming a publicly-traded company, it already had a close relationship with the capital
Bernardo Vieira Hees CEO
markets, holding Annual Meetings with Banks, in which its executive officers presented
He has been ALL’s CEO since January 2005. He entered ALL in 1998 as a logistics analyst,
the developments of their respective areas and of the Company.
occupied managing positions in the areas of operational planning, finance and sales, and
in 2004, he was the Company’s managing officer. He holds a BA in Economics from the
In June 2004, ALL went public and joined Bovespa’s Level 2 of Corporate Governance,
Pontifícia Universidade Católica (RJ), and an MBA from the University of Warwick, in the UK.
offering its investors guarantees in addition to those required by the law, including a higher
In 2005, he completed the Owners & President Management program at Harvard.
level of information and transparency, adhesion to the Bovespa’s Arbitration Chamber and
minimum free floating. ALL offers full tag-along rights to shareholders of all classes of share
Alexandre de J esus S antoro Logistics Officer
and also meets all requirements of the Novo Mercado, except for the offer of a single class of
He has been ALL’s logistics officer since April 2004. He entered the Company in April 2002
shares, which was not possible due to regulatory restrictions of the concession.
and was its distribution manager, being responsible for AmBev’s urban, inbound and
outbound distribution, and SLC Alimentos’s intermodal operation. He graduated in
ALL also has a Code of Ethics and a Share Trading and Information Disclosure Policy
Computer Sciences from the Universidade Salvador, Bahia, and holds a post-graduate
widely disseminated among employees. The Company is part of the Corporate Sustainability
certificate in Management from Fundação Getúlio Vargas.
Index (ISE), comprised by the companies listed on Bovespa that present the best corporate
Alexandre Milani de Oliveira Campos Industrialized Products Officer
Latin America’s investors, and the Company was among the TOP 5 in disclosure procedure
He has been ALL’s industrialized products officer since January 2007. He joined the
and earnings release in the 2006 IR Global Rankings.
Company in July 2001 and held the following offices: industrialized products manager
24
sustainability practices. ALL’s Investor Relations site was chosen as the favorite among
ALL - AMÉRICA LATINA LOGÍSTICA |
from 2005 to 2006, manager of the liquid products unit from 2003 to 2005, in addition
He graduated in Law from Universidade Gama Filho, in Rio de Janeiro, and holds an
to being the coordinator of working capital and Treasury from 2001 to 2003. He studied
MBA degree in Logistics and Services from COPPEAD, in Rio de Janeiro.
business administration at Fundação Getúlio Vargas in São Paulo, and holds a Master’s
degree in Economics and Finance from Universidade de São Paulo (USP).
Raimundo Pires Martins da Costa Operations Officer
He has been ALL’s operations officer since June 1998. He graduated in Civil Engineering
Eduardo Machado de Carvalho Pelleissone Agricultural Commodities Officer
from Pontifícia Universidade Católica - PUC of Minas Gerais and holds a Master’s degree in
He has been ALL’s agricultural commodities officer since April 2004. He joined ALL in May 1999
Administration from Fundação Dom Cabral of Minas Gerais.
and held the following offices: national manager for agricultural commodities, from 2002 to
2003, regional manager of agricultural commodities sales in 2001, in addition to working as
Roberto Monteiro Managing Officer of ALL Argentina
sales coordinator from 1999 to 2001. He studied Business Administration at Instituto Mauá de
He has been ALL Argentina’s managing officer since May 2004, and joined ALL in May
Tecnologia, and holds an MBA in Logistics and Services from COPPEAD, in Rio de Janeiro.
1999, as Coordinator of Financial Planning. In December 2001, he began working at ALL
Argentina, initially as its Financial Officer and as its Operations Officer as from March 2003.
Paulo Luiz Araújo Basílio Services and Technology Officer
He graduated in Civil Engineering from Universidade de São Paulo (EESC - USP), with
He has been ALL’s services and technology officer since January 2007. He joined the
as Master’s degree in Business Administration from Carnegie Mellon University (Tepper
Company in October 2000 and held the following offices: industrialized product officer
School of Business – Pittsburgh - EUA).
from 2005 to 2006, financial manager from 2004 to 2005, financial planning manager from
2002 to 2004, in addition to having held the office of planning coordinator from 2000 to
Sérgio Messias Pedreiro Financial and Investor Relations Officer
2002. He studied Economics at the University of Brasília, and holds a Master’s degree in
He has been ALL’s financial and investor relations officer since January 2002. He was
Economics from EPGE/FGV, in Rio de Janeiro.
a member of ALL’s Board of Directors, from 1997 to 2001. He graduated cum laude in
Aeronautical Engineering from the Instituto Tecnológico de Aeronáutica (ITA) and holds a
Pedro Roberto Oliveira Almeida People and Institutional Relations Officer
Master’s degree in Business Administration from the Stanford Graduate School of Business.
25
He has been ALL’s human resources and corporate relations officer since March 1997.
| Annual Report 2006
Board of Directors
Antonio C arlos R ibeiro Bonchristiano Director
comprising thirteen effective members, elected in a General Meeting for one-year terms, all
He has been a member of ALL’s Board of Directors since September 2001. Mr. Bonchristiano is the CEO
of whom eligible for reelection. It is chaired by Mr. Wilson de Lara and has three independent
and a partner of GP Investimentos Ltda., and has worked at GP Investimentos Ltda. since January 1993,
members. Regular meetings are held once every quarter and special meetings whenever
and is a member of the Board of Directors of Gafisa S.A., Submarino.com and Hopi Hari. He holds BA
convened by the Chairperson. Its main duties include: set forth general guidelines;
degrees in Political Science, Philosophy and Economics from Oxford University, in the UK.
approve annual and multiannual plans, projects and budgets; define sales, administrative
management, personnel and financial policies; and elect and evaluate the performance of
Benjamin Powe ll Sessions Director
its officers.
He has been a member of ALL’s Board of Directors since July 2002. Mr. Sessions has been
an Investment Officer of the Global Environment Fund (GEF) since 1998, focusing primarily
Wi l s o n Fe r ro d e La ra C h a i r m a n
on Latin America. Mr. Sessions graduated in Soviet and Eastern European studies from Tufts
He has been a member of ALL’s Board of Directors since 2001. Mr. de Lara was the CEO of Delara
University and holds a Master’s degree in International Economics from Johns Hopkins’ School
Brasil Ltda., in the period between 1989 and 2001, and CEO of Transportes Cimensul Ltda.
of Advanced International Studies.
Between 1980 and 1989. In addition, Mr. de Lara was a manager at Randon S.A. from 1974 to 1980.
He graduated in Economics in 1979, and holds a Master’s degree in Business Administration.
Bernardo Vieira Hees Director
He has been a member of ALL’s Board of Directors since July 2002. Mr. Hees has been ALL’s CEO since
Alex a n d re B e h r i n g V i ce C h a i r m a n
January 2005. He joined ALL in 1998 as a logistics analyst, occupied managing positions in the areas
He has been a member of ALL’s Board of Directors since March 1997, having held the
of operational planning, finance and sales, and, in 2004, he was the Company’s managing officer.
office of CEO for the Company from July 1998 to December 2004. Mr.Behring is a partner
He holds a BA in Economics from Pontifícia Universidade Católica (RJ), and an MBA from the University of
of an investment firm located in the United States and was a partner and member of the
Warwick, in the UK. In 2005, he completed the Owners & President Management program at Harvard.
Investment Committee of GP Investimentos S.A., a company to which he was connected
Bruce Mansfield Flohr Director
Católica - PUC of Rio de Janeiro and holds an MBA from Harvard Graduate School of Business,
He has been a member of ALL’s Board of Directors since July 2001. Mr. Flohr is also a member
where he graduated cum laude as Baker Scholar and Loeb Scholar.
of the Board of Directors of Railcomm, Inc. and is he has been the CEO of Flohr Enterprise, Inc.,
26
from 1994 to 2004. He graduated in Electrical Engineering from Pontifícia Universidade
ALL - AMÉRICA LATINA LOGÍSTICA |
a railway consulting company, since 2000, and was Chairman and CEO of Railtex, Inc. from 1977
M arcos Barbosa Pinto Director
to 2000. He graduated in Industrial Engineering from Stanford University in 1962 and holds a
He has been a member of ALL’s Board of Directors since June 2006. Mr. Barbosa Pinto
Master’s degree in Industrial Management from Purdue University in Indiana.
works at BNDES in various projects related to public-private partnerships, coordinated
the restructuring and disposal of the control of Brasil Ferrovias S.A. and prepared the bill
approved at the Brazilian National Congress that changed the Concessions Law to facilitate
He has been a member of ALL’s Board of Directors since September 2006. Mr. Danilo Gamboa
the financing of infrastructure projects. He holds a degree in Law, with specialization in
joined GP Investimentos in 2004 and has been an executive partner since 2006. He graduated
Corporate Law, from Universidade de São Paulo, and holds an LLM from Yale University,
in Production Engineering from Universidade de São Paulo, holds an MBA from Sloan School
where he received academic distinction. He is currently working on his PhD at the General
of the Massachusetts Institute of Technology (MIT).
Law Theory Department from the Law School of Universidade de São Paulo.
Guilherme Narciso de Lacerda Director
Pedro Pullen Parente Director
A member of ALL’s Board of Directors since July 2006, Mr. Lacerda is the CEO of FUNCEF – Fundação
He has been a member of ALL’s Board of Directors since the first half of 2004. Mr. Parente
dos Economiários Federais. He was the Chairman of the Board of Directors of Brasil Ferrovias and
is the Executive Vice President of RBS-Rede Brasil Sul. In 1999, he was Minister of State,
Novoeste Brasil from May 2003 to June 2006, when he coordinated the restructuring process of
being responsible for coordinating the transition team of President Fernando Henrique
both companies. He is a Professor (currently on leave) at the Economics Department of UFES,
Cardoso’s administration. In March 2001, he was the acting Minister of Mines and Energy,
with dozens of academic works and supervisions for dissertations and theses. He holds a degree
and between April and July 1999, Minister of Planning, Budget and Management. He holds
in Economics, with a Master’s degree from IPE/USP and a PhD from UNICAMP.
a degree in Electronic Engineering from Universidade de Brasília.
Márcio Tabatchnik Trigueiro Director
Ricardo G iambroni Director
He has been a member of ALL’s Board of Directors since April 2004. He joined GP Investimentos
He has been a member of ALL’s Board of Directors since September 2006. Mr. Ricardo Giambroni
in 2001 and has been an executive partner since 2004. He graduated in Mechanical-
is an executive officer of Litel Participações S/A (the holding company that controls CVRD) and
Aeronautical Engineering from the Instituto Tecnológico de Aeronáutica (ITA) and holds an
he was a member of the Board of Directors of the following companies: (i) Paranapanema,
MBA from Harvard Business School, where he graduated cum laude. 1997/2001; (ii) Cia Vale do Rio Doce – CVRD, 2001/2005; and (iii) Companies from Grupo
27
Danilo Gamboa Director
| Annual Report 2006
Brasil Ferrovias, 2005/2006. He is currently a member of the Board of Directors of Valepar. Since
monitoring the results and identifying and proposing to the Board of Directors initiatives
1996, he has held the office of Executive Manager for the Corporate Investments Section
regarding the results; and evaluating the fulfillment of recommendations made by the
of PREVI – the closed pension scheme of the employees of Banco do Brasil. He holds
independent auditors. Its current members are Pedro Pullen Parente, Riccardo Arduini e
a degree in Economics, with post-graduation studies in Finance, Corporate Governance
Márcio Tabatchnik Trigueiro.
and Corporate Law, from IBMEC and FGV. He participated in the Management Program
for Corporate Managers from INSEAD, in Fontainebleau (France) and of Capital Markets in
New York and Chicago.
Fiscal Council
Riccardo Arduini Director
it monitors the acts of management and verifies the fulfillment of its legal and statutory
He has been a member of ALL’s Board of Directors since April 1997. He is also the
duties. It consists of, at least, three and, at most, five members and their alternates, who must
Vice-President of Cia. Industrial de Peças para Automóveis - CINPAL. He holds a BA in
be Brazilian residents. Its members are elected by the shareholders in the General Meeting,
Mechanical Engineering with post-graduate studies in Business Administration from the
being eligible for reelection. The Chairman of the Fiscal Council is Mr. Emanuel Schifferle.
FGV - Fundação Getúlio Vargas.
The council also has one representative from the minority preferred shareholders.
Emanuel Sotelino Schifferle
Mr. Schifferle has held several executive positions in the financial sector and in companies
Statutory Audit Committee
connected to GP Investimentos Ltda. From July to December 1996, Mr. Schifferle was the
It consists of three members from the Board of Directors. It holds regular meetings four
CEO of FCA – Ferrovia Centro Atlântico S.A.
times a year or special meetings, at any time, whenever convened by any of its members
Ricardo Scalzo
management’s reports and independent auditor opinion; analyzing the Annual Report
Mr. Scalzo has been a member of the Fiscal Council of Lojas Americanas S.A. since 2003
and the Financial Statements and making recommendations to the Board of Directors;
and from Companhia de Bebidas da América – AMBEV (and its predecessor company)
28
or by the Board of Directors. Its activities include reviewing the accounting statements,
ALL - AMÉRICA LATINA LOGÍSTICA |
since 1992. Between 1982 and 1998, Mr. Scalzo worked for Banco Garantia. Mr. Scalzo
holds a degree in Physics from Universidade Federal do Rio de Janeiro – UFRJ.
Newton de Souza Jr.
Mr. Souza has been an Executive Vice President and a Board member of Ferrovia Paraná
(Ferropar) since 2003. Between 2000 and 2003, Mr. Souza held various executive offices in
companies belonging to the portfolio of GP Investimentos, including being a member of
the corporate board of ALL from 1997 to 2000, and, concurrently, a member of the Board
of Directors of Ferropar. Mr. Souza holds a BA in Law from Universidade Estadual do Rio de
Janeiro (UERJ), with post-graduate studies in Economics and Corporate Law from Fundação
‘
ALL develops a series of
professional development
training programs, which are
carried out at ALL’s Corporate
University (UNIALL)
’
Getúlio Vargas, in addition to holding an MBA in Business Administration from COPPEAD.
Rafael Sales Guimarães
Mr. Guimarães is responsible for the corporate governance area of FAMA Investimentos
Ltda., monitoring and developing the practice of market relations in several Brazilian
companies. Currently, he is a member of the Fiscal Council of Kepler Weber S/A. and
Indústrias Romi S/A. From 1999 to 2004, he was an associated lawyer of Mattos Filho
Advogados, working in the department of legal structuring of investment and capitalization
operations of Brazilian companies, in the domestic and international markets, as well as in
the legal counsel of publicly-traded companies. Mr. Guimarães holds a Law degree from
29
Universidade Mackenzie (São Paulo - SP).
| Annual Report 2006
Ot h e r i n ta n g i b l e a s s e t s
Technology applied to the Business
ALL developed a series of customized tools applied to the business aimed at improving
Se r v i ce s
the logistics management of the network, reducing costs, increasing safety of the
ALL offers a complete range of logistics services for cargo transportation in large volumes
operations and expanding the turnaround of assets. On-board computer, derailment
and for long distances. It offers from railway, highway and intermodal transportation in
detector, rail car wheel temperature detector and logistics systems are some of the
domestic and international routes up to customized logistics projects. The Company
tools developed by ALL and that are currently being negotiated with other railways in
manages stock, terminal operations, warehouses and distribution centers, in addition to
Brazil and abroad. ALL also developed in-house technologies applied to the operation,
door-to-door cargo handling and dedicated fleet services.
such as the exchange of engine gauge, enabling it to import used engines from the
USA, and the creation of an engine with eight axles, which can be used across the
Sa fe t y
Company’s entire railway network.
Over these ten years of history, ALL’s railway operation achieved safety levels
comparable to those of the safest cargo railways in the United States, according
C ustomers
to the U.S. Federal Railroad Administration (FRA) criteria. The same happens
ALL has a solid relationship with its customers, based on trust and partnership.
when we compare ALL to the best national railways, using the National Terrestrial
Over these ten years, its customers invested more than R$750 million directly in the
Transportation Agency (ANTT) criteria.
Company’s operation through the construction of terminals, railway switches, rail car
adaptation and purchase of new rail cars. In addition, the Company entered into long-
K n ow le d g e o f t h e B u s i n e ss
term commercial agreements, some that will last for more than twenty years.
ALL developed a solid knowledge of the business and a strong discipline in the
ALL has a customer portfolio including some of the main Brazilian and multinatio­nal
railways) increased at rates near two digits, and fuel consumption has decreased
companies, including large grain and food processing, oil and industrial companies. To
20% since 1997. Part of the tools currently used was brought from other railways and
assist them, it has developed a Customer Service Excellence Program (“Programa de
logistics companies from the USA and other parts of the world.
Excelência no Atendimento ao Cliente”), which involves a series of initiatives aimed at
30
execution. As a result, average productivity of the assets (rail cars, engines and
ALL - AMÉRICA LATINA LOGÍSTICA |
constantly enhancing the quality of this relationship. As a result, the Company received
Awa r d s a n d R e c o g n i t i o n
the 2006 Customer Service Excellence (“Excelência em Serviços ao Cliente”) award, a
Zilda Arns Award for the Company’s Talent Workshop project (“Oficina de
Talentos”) Top Social ADVB
Large & Leading Companies Award (“Grandes & Líderes”)
Amanhã magazine / PricewaterhouseCoopers
Top of Mind – Most recognized brand in Logistics
Eighth Edition of the Decision-Makers’ Brands (“Marcas de Quem Decide”) Survey Jornal do Comércio de Porto Alegre (RS) and QualiData Pesquisas e
Conhecimento Estratégico
The Best Quarterly Earnings Releases and Latin America’s Disclosure Procedures
– TOP 5 – IR Global Rankings – Eighth Annual Edition, 2006
Latin America’s Most Popular IR website - POP+IR Global Rankings –
Eighth Annual Edition, 2006
2006 Customer Service Excellence Award (“Prêmio de Excelência no
Atendimento ao Cliente”) Consumidor Moderno magazine
31
customer service award granted by the Consumidor Moderno magazine.
| RELATÓRIO ANUAL 2006
Always
ahead
32
in planning
35 Investments
38 Technology and innovation
40 Risk management
03
33
34 Goals and strategy
chapter
ALL - AMÉRICA LATINA LOGÍSTICA |
| Annual Report 2006
G o a l s a n d S t r at e g y
Strict cost control
One of the most striking features of ALL’s culture is the strict control of its costs. Fixed expenses
Simplicity is one of the most striking features of ALL’s strategy over these last ten years. In
are grouped in packages, with owners from senior management and annual cost reduction
order to maintain historical levels of volume and revenue growth, ALL will continue to do
goals. Expense budget is prepared based on the Zero-base method and the noncompliance
more of the same, with a strategy driven by five basic principles:
of same eliminates the entire section from the bonus pool. Fuel consumption, the main
variable cost item, is monitored on a daily basis and its reduction is one of the most important
G row t h i n m a r ke t s a n d ro u te s i n
goals of the operation. With investments in technology and initiatives such as the Diesel Cup
w h i c h i t h a s a c le a r co m p e t i t i ve a d vantage
(“Copa Diesel”), a program that rewards engineers who achieve the lowest fuel consumption,
The integration of the lower costs of railways with the flexibility of highways generates
ALL has been decreasing year after year its average diesel consumption.
a structural advantage towards ALL’s competitors. The Company intends to continue
growing in the corridors where it is the most economical logistics alternative, taking
Maximum return on capital employed
advantage of the great room for market share expansion in the agricultural and industrial
Since its privatization, ALL has grown concentrating investments in operation bottlenecks
segments.
and focusing on the turnaround of its assets. From 1997 to 2006, the Company increased the
productivity of its assets at average annual rates close to two digits. The average cycle of rail
Fu l f i l l i t s co m m i t m e n t s to i t s c u stomers
cars dropped from 15.6 days to 7.9 days. ALL is evaluated based on its EVA (Economic Value
Over these ten years of history, ALL has improved in a consistent way the level
Added) and maintains a rigid working capital and investment management policy, placing
of the service it provides and has developed a relation of partnership and trust
priority on investments with the highest return through a tower ranking methodology that
with its customers. As a result, several commercial agreements were entered into
come from our field operational areas.
and its customers are investing directly in the Company’s operation through the
Partnerships and acquisitions
new rail cars, among other initiatives. In 2006, customers invested over R$200
ALL has a history of acquisitions and is attentive to investment, partnership and
million in ALL’s business.
acquisition opportunities that may result in synergy gains and the creation of value.
34
construction of terminals, railway switches, rail car renovation and purchase of
The Company constantly evaluates alternatives to expand the coverage of its railway
Consolidated Investments (R$ million)
network, increase efficiencies, create operational synergies. The opportunities range from
partnerships with customers for investments in rail cars, terminals and warehouses, to
partnerships with the government for expanding our network and carrying out occasional
255
acquisitions of railways next to ALL, such as was the case of Brasil Ferrovias in 2006.
24
312
Consolidated
29
Argentina
283
Brazil
232
188
Investments
33
121
Since 1997, ALL has invested over R$1.4 billion in its operations, with a disciplined
investment policy, focused on clearing bottlenecks hindering its growth. Its expansion
was primarily based on productivity gains, supported by adopting a quality methodology
and investments in technology. Starting in 2005, the Company accelerated the addition of
‘
25
96
67
40
155
111 116
24
24
95
87
92
14
81
103
15
88
67
40
rolling stock to its fleet. It acquired more than 100 locomotives and its customers invested
over R$400 million in the acquisition of new rail cars.
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
35
Simplicity is one of the features of ALL’s
business strategy; discipline is the main focus
of our investment policy ’
| Annual Report 2006
In 2006, investments increased 22%, from R$255 million in 2005 to R$312 million in
2006, as a result of the 22% expansion in Brazil to R$283 million and the 25% growth in
Argentina to R$29 million. The largest investments in Brazil in 2006 reflect the 9% rise of
maintenance expenses and the 34% growth in expansion. In Argentina, investments in
maintenance rose 3% and in expansion increased 61%.
Brazil
Investments
Argentina
Consolidated
(R$ million)
2006
2005
% Change
2006
2005
% Change
2006
2005
% Change
Maintenance
123.6
113.3
9.1%
15.3
14.8
3.4%
138.9
128.1
8.4%
Expansion
159.1
118.4
34.4%
14.0
8.7
60.9%
173.1
127.1
36.2%
Total investments
282.7
231.7
22.0%
29.3
23.5
24.7%
312.0
255.2
22.3%
Investments in maintenance preserve the Company’s current capacity – increasing as
procedures are improved – and include exchange of rails, maintenance of the permanent
track, and maintenance and repair of rail cars and locomotives. Expansion investments
increase transportation capacity and include acquisition of locomotives, crossing yards,
improvements in the railway network, investments in technology and purchase of
1999
36
highway vehicles.
Acquisition of
two Argentine
railroads
In 1999, it acquired the rights
related to two railway networks
in Argentina, establishing strong
regional presence in Mercosul.
37
| Annual Report 2006
T e c h n o lo g y a n d I n n o vat i o n
ALL constantly invests in technologies applied to the business, aimed at reducing costs, improving the service provided and increasing
safety, reliability and efficiency of its operation. The Company developed in-house a series of systems and products, which are currently
sold to other railways in Brazil and abroad through its subsidiary ALL Tecnologia. ALL’s trains and trucks are equipped with on-board
38
computers and GPS systems, ensuring the on-line control of our operations.
On-board Engine Computer
Translogic
Comms Modulo
Fuel consumption reduction; accident
Railway operation system: deployment of the
Engine communication system:
reduction; improvement in the use of the
constant improvement process; demand planning;
GPS support; satellite communication;
assets; Functions: vision of the stretch; on-line
train planning; railway indicators; asset tracking;
GPRS communication; radio for
consumption; black box; electronic fence;
production background; yard planning; web
communication between the engines
monitoring of maximum speed
application – low cost of operation
and the end of train.
ALL - AMÉRICA LATINA LOGÍSTICA |
‘
39
Our business also involves technology.
System solutions and products now
developed by ALL are commercialized with
other railways in Brazil and abroad ’
| RELATÓRIO ANUAL 2006
Op e r a t i o n a l Ri s k s
Ri s k M a n a g e m e n t
ALL identifies and manages risks based on the analysis of potential impacts of
its activities on the environment, the community, the safety of its employees,
the safety of the operation, the financial strength and long-term sustainability
of the Company, and the generation of value for its shareholders.
Environment: In order to avoid damages arising from occasional accidents, ALL has an Emergency
Service Plan (“Plano de Atendimento Emergencial”), with technical, operational and managerial procedures
for emergency situations. The Environmental Control Plan (“Plano de Controle Ambiental”) maps and
identifies environmental restrictions in the network and the Environmental Brigade (“Brigada Ambiental”)
has a crew trained in the preservation of the flora, fauna and water resources. The water used to wash engines
and rail cars is recycled in nine effluent treatment stations and is reused in the processes. The waste generated
is separated and assigned for its final discharge. All facilities have selective collection of garbage.
40
Community: Education is the primary tool to
minimize the impact of ALL’s operations on the
surrounding communities. Programs such as the
Community Train and the Grade Crossing Campaigns,
inform the population about safety measures for
crossing a railway line, with educational seminars and
distribution of informative matters.
ALL - AMÉRICA LATINA LOGÍSTICA |
76 47
764 7
Safety of the employees: Employees’ safety is preserved through training,
well-designed procedures and stringency when auditing safety procedures. The
Red Card (“Cartão Vermelho”) program imposes penalties on employees who do
not comply with the established guidelines. Through the Risk Communication
(“Comunicado de Risco”) program, unsafe conditions are identified and informed
to the safety specialists. Units with zero labor accident rates receive the Safety
Scratch Lottery, a device that rewards employees’ commitment to operational
safety regulations.
F i n a n c i a l Ri s k s
Credit: ALL’s cash is invested only in first-rate institutions, with investment
grade credit rating.
Liquidity: The average maturity of ALL’s debt is very long and 82% of it consists
of long-term debt. Leverage (Net Debt/EBITDA) currently stands at 3.8X and the
Company intends to reduce that to 2.0X over the next years.
Foreign Exchange: ALL’s policy consists of maintaining its entire debt in
Safety of the operations: Each year, ALL
domestic currency, using hedging contracts to protect itself from foreign
improves the safety of its operations, and it is
currently one of Brazil’s and the world’s safest cargo
railways. The rate of accidents per million trainkilometers, one of the concession goals, dropped
from 88 in 1997 to 12 incidents in 2006. This result
arises from investments in technology and the
adoption of quality management methodology,
with the mapping of procedures and a strong
discipline in the execution.
exchange fluctuations in its debt in foreign currency.
avoiding fluctuations in its face value due to interest rate fluctuations.
41
Interest: ALL preferably seeks to maintain its debt pegged to the CDI or TJLP,
| RELATÓRIO ANUAL 2006
G e s tã o d e r i s c o s
Riscos operacionais
A ALL identifica e gerencia os riscos a partir da análise dos possíveis impactos de sua atividade no meio ambiente, na comunidade, na segurança dos colaboradores, na segurança
Segurança das operações – A ALL vem melhorando a cada ano a segurança de suas
da operação, na solidez financeira e sustentabilidade de longo prazo da empresa e na
operações, e é hoje uma das ferrovias de carga mais seguras do Brasil e do Mundo. O
geração de valor para seus acionistas.
índice de acidentes por milhão de trem km, uma das metas da concessão, caiu de 88 em
1997 para 12 incidentes em 2006. Esse resultado resulta de investimentos em tecnologia
Always
ahead
e da aplicação da metodologia de gestão da qualidade, com mapeamento dos processos
e forte disciplina na execução.
Segurança dos colaboradores – A segurança dos colaboradores é resguardada por
treinamento, processos bem desenhados e rigor na auditoria dos procedimentos de segurança. Alguns dos programas da ALL são benchmark. O Cartão Vermelho penaliza os
colaboradores que não cumprem diretrizes estabelecidas. Através do Comunicado de
Risco, as condições inseguras são identificadas e repassadas aos técnicos de segurança.
Unidades que obtêm índice zero de acidentes recebem a Raspinha de Segurança, um
in business
mecanismo de premia o compromisso dos colaboradores com os regulamentos operacionais de segurança.
Comunidade – A educação é a principal ferramenta para minimizar o impacto das operações da ALL nas comunidades em seu entorno. Programas como o Trem da Comunidade
e as Campanhas de Passagens de Nível, informam a população sobre segurança ao cruzar
42
uma linha férrea, com blitzes educativas e distribuição de material informativo.
50 Highway-based services
52 ALL Argentina
53 Brasil Ferrovias
55 Financial results
43
48 I ndustrialized products
04
46 Agricultural commodities
chapter
ALL - AMÉRICA LATINA LOGÍSTICA |
44
| Annual
| RELATÓRIO
Report
ANUAL
2006
2006
ALL
- AMÉRICA
LATINA
LOGÍSTICA
| |
ALL
- AMÉRICA
LATINA
LOGÍSTICA
45
The 2006 year will be remembered as a milestone in ALL’s
history due to the expansion of its coverage area, which
reached the agricultural frontier in the states of Brazil’s
Center-West region and the entire state of São Paulo, the
country’s largest industrial center. At the same time, the
Company was capable of achieving its financial goals for 2006.
The challenge that ALL has to face will demand the entire
commitment and capacity of its team, in order to materialize
the great potential of the recently-integrated network.
| Annual Report 2006
At year-end 2006, ALL presented a 22.7% increase in its EBITDAR and its volume, revenue
Ag r i c u lt u r a l C o m m o d i t i e s
and EBTIDA went up 10.6%, 17.4% and 11.7%, respectively. These results were achieved
despite the fact that, since the acquisition of Brasil Ferrovias, in May 2006, it has worked
in two different fronts with two separate objectives: (a) to achieve the ambitious goals
set forth for ALL’s operations; and (b) to restructure Brasil Ferrovias, streamlining its cost
structure and preparing it for the complete integration of operations.
The results for 2006 reflect: (i) a good operational performance especially in Brazil, where
ALL achieved its all-time lowest diesel consumption, of 5.4 liters per thousand RTK; (ii) a
strong recovery of Rio Grande do Sul’s crop; and (iii) real yield gains due to changes in the
mix transported and contractual adjustments.
The first phase of Brasil Ferrovias’ integration was successfully implemented: all cost
The agricultural sector is traditionally the main user of the railways, transporting large
adjustments have already been done and all operating systems have been completely
volumes in bulk. Currently, customers from this segment still ship a large part of their cargo
integrated and are operating in unison. Since January 1st, the networks of Brasil Ferrovias and
via highways due to the limited capacity of railway services. Over these ten years, ALL has
ALL have been managed jointly from our operational control center in Curitiba. The operational
expanded its market share in this segment, but there is still a significant amount of room for
indicators of Brasil Ferrovias showed some improvements in 2006. The most important of
market share gains. Agricultural exports are increasing at an accelerated pace and growth
them was the enhancement in the safety level, with a reduction of approximately 40% in the
expectations are promising due to Brazil’s great competitive edge in this segment.
number of accidents per million of train-kilometer, which dropped from 170 in June 2006 to
105 in December 2006. It is expected that the Company’s operational restructuring will be
The volume of agricultural commodities transported by ALL increased by over 13% in
concluded in two or three years, closing the gaps between the north and south networks.
2006, from 10.2 billion RTK in 2005 to 11.6 billion RTK, despite the interruptions in May
2001
46
in the railway network due to the farmers’ protests against Brazil’s agricultural policy.
Leasing of
Delara’s
assets
In July 2001, ALL leased the business assets of
Delara, one of the largest Brazilian highway
transportation companies, with operations in
Brazil and in Argentina, extending its focus and
establishing a solid operating platform, with
which it began to offer integrated logistics
services to medium-sized and large-sized clients.
ALL - AMÉRICA LATINA LOGÍSTICA |
The growth was driven by the expansion in the transportation of sugar (38%), corn (40%),
Agricultural Commodities – Market Share per Port
fertilizers (18%) and soybean (37%). There was a drop in the volume of wheat (44%), since
Brazil did not export the commodity this year, and of soy meal (25%) due to the transfer of
crushing activities to factories in Argentina, due to fiscal and exchange rate variations.
2006
2005
Soybean
4,939.3
3,593.8
37.4 %
Soy Meal
1,506.3
2,019.4
-25.4 %
Fertilizers
1,499.9
1,273.3
17.8 %
Sugar
1,447.0
1,045.6
38.4 %
Corn
Agricultural Commodities
% Change
(million RTK)
1,016.6
725.3
40.2 %
Wheat
466.9
832.3
-43.9 %
Rice
509.4
461.7
10.3 %
Other
168.3
240.7
-30.1%
Total
11,553.7
10,192.0
13.4 %
EBITDAR of the agricultural commodities unit rose 27% in 2006, amounting to R$386
million, primarily due to the increases in volume transported and yield. EBITDAR margin
The Company’s market share in the ports served by its railway network dropped from 68%
remained in line with the previous year at 58%. Gross revenue increased 27%, totaling
in 2005 to 64% in 2006, despite the increase in transported volume. The recovery of Rio
R$1,466 million and average yield rose 12.3%, driven by the pass-through of inflation, the
Grande do Sul’s crop after the draught that destroyed almost 80% of the state’s crop in
increase in diesel price, and the change in the mix of products transported.
47
2005 resulted in a strong market growth in our area of operations.
| Annual Report 2006
I n d u s t r i a l i z e d P r o d u ct s
The transportation of industrialized products by ALL is increasing substantially in various
industries, including steel products, petrochemicals, pulp and paper, and food. This was a
segment virtually abandoned by railways in the past, served almost exclusively by trucks,
mainly as serving these customers required customized service and door-to-door logistics
solutions. After moving into intermodality, ALL began to offer also to these customers the
advantage of the low cost of railways, coupled with the flexibility of highway transportation.
The room for growth in this market segment is even bigger than in the agricultural segment
because, despite the strong expansion in the last years, the Company’s market share in
industrialized products is still very low.
In 2006, the volume transported by ALL in intermodal industrial flows increased 22%, with
important market share gains in almost all business segments. A highlight worth mentioning
is the expansion in steel product (37%), containers (23%), and wood (22%) segments.
Intermodal Industrial
Products
48
(million RTK)
Steel Products
Wood, pulp and paper
Food products
Containers
Other
Total
2006
2005
% Change
644.2
437.1
440.4
687.7
106.2
2,315.6
470.1
358.0
362.3
561.1
147.8
1,899.4
37.0 %
22.1 %
21.5 %
22.6 %
-28.2 %
21.9 %
ALL - AMÉRICA LATINA LOGÍSTICA |
In the segments of fuel, construction and vegetal oil – transported almost exclusively
through railways in our coverage area – we already have a higher market share and
our performance depends on the growth of these markets. In construction, the volume
transported by ALL increased 11% in 2006, while fuel volume rose 4%, reflecting the higher
level of activity in these sectors. The volume of vegetal oil dropped almost 32% due to the
closing of some soybean crushing factories at the beginning of the year.
Industrial Products
– Pure Rail
(million RTK)
Fuel
Vegetal Oil
Construction
Total
2006
2005
% Change
2,405.4
2,309.8
4.1 %
245.0
359.5
-31.8 %
1,175.5
1,058.1
11.1 %
3,826.0
3,727.3
2.6 %
EBITDAR of the industrial products unit increased 20% in 2006, amounting to R$153 million,
while EBITDAR margin remained in line at 45%. Gross revenue grew 21%, amounting to
R$406 million in 2006, due to the 9.2% increase in the volume transported and a 10.8%
49
expansion in average yield.
| Annual Report 2006
H i gh way - b a s e d S e r v i c e s
The highway-based services unit provides customized logistics services to large industrial
customers. Created after the purchase of Delara in 2001, this strategic unit was restructured
in order to increase the margins of the business, by discontinuing unprofitable operations
and establishing minimum profitability goals. This process resulted in the reduction of the
volume transported, but with an increase in operating results.
The unit’s EBITDAR increased 44% in 2006, totaling almost R$9 million, while EBITDAR
margin rose 4% in 2005, standing at 7% in 2006. Gross revenue presented a 10% decrease,
totaling R$139 million, while volumes dropped 16% and average yield went up 7.6%. In
2006, new customers were added to the business, including Renault, Unilever and Minalba.
For 2007, we will continue our focus in differentiated dedicated operations with higher
‘
profitability over the spot market.
50
Customized service rendering has enabled ALL to substantially grow in the transportation of
industrialized products – in industries such as steel products, petrochemicals, pulp and paper,
food, and others – and also in highway logistics
’
ALL - AMÉRICA LATINA LOGÍSTICA |
‘‘
51
Pullam venibh eugiam illam zzriure tat. Venit lorpero con venis au
giat in henibh estiscilit, quip et ad modio odo dolobore tem augiamet nit
ent aut aliquate.”Na adit wisim vulla facilis modolore exer si tat, nostrud tie conse.”
A LL A r g e n t i n a
The fundamentals of our business in Argentina are very similar to those existing
in Brazil. With a still low market share, and with the largest part of the cargo being
transported by trucks, the Company has substantial room for growth in the agricultural
and industrial markets.
ALL Argentina’s gross revenue increased 9% in 2006, amounting to P$221 million, reflecting
a 3% rise in the average yield and a 6% growth in the volume transported. EBITDA went up
52
9%, totaling P$64 million, while EBITDA margin remained stable at 29%.
Agricultural Commodities
2006
2005
% Change
(million RTK)
Soybean
Soy Meal
Fertilizers
Sunflower
Sugar
Corn
Wheat
Rice
Other
428.2
49.4
111.5
52.1
0.0
115.0
34.2
6.3
0.0
225.9
43.8
69.6
54.3
10.9
151.5
66.2
5.5
2.1
89.6 %
12.7 %
60.2 %
-4.0 %
na
-24.1 %
-48.4 %
14.4 %
na
Total
796.6
629.7
26.5 %
ALL - AMÉRICA LATINA LOGÍSTICA |
The volume of agricultural commodities transported rose 26.5% in 2006, totaling 797
Brasil Ferrovias
million RTK, primarily due to substantial market share gains in soybean, fertilizers and rice.
In the industrialized products market, volume increased marginally to 3.6 billion RTK in
On May 9, after six months of negotiations, ALL concluded the acquisition of Brasil
2006, with a volume increase in the transportation of containers (17%) and construction
Ferrovias. After obtaining all necessary approvals and fulfilling all conditions, the
(8%), which was partially offset by the decrease in the volumes of steel and food products.
operation was concluded on June 16 through a share swap.
The strong change in the mix transported reflects the strategic decision of transferring
part of the rail cars used in the industrial unit to agricultural products, which presented
The acquisition is an important step in the strategy of accessing very important markets,
better margins.
such as the states of São Paulo, Mato Grosso and Mato Grosso do Sul, which comprise
(million RTK)
Vegetal Oil
Steel Products
Wood
Food Products
Construction
Container
Other
Total
2006
2005
% Change
37.6
381.3
326.4
343.3
1,772.2
477.9
216.3
3,554.9
40.4
453.9
336.9
397.5
1,647.1
407.5
196.8
3,480.1
-7.0 %
-16.0 %
-3.1 %
-13.6 %
7.6 %
17.3 %
9.9 %
2.2 %
Brazil’s current agricultural frontier, and the Port of Santos, the country’s largest one both
in volume of agricultural products and in container handling. After the acquisition, the
share of agricultural commodities in our cargo mix increased, representing approximately
75% of ALL’s total revenue. As time goes by, we should reach, once again, a 50/50 balance
between the agricultural commodities and industrial products.
Similar to ALL right after its privatization in 1997, Brasil Ferrovias had a weak operating
performance, lower morale and a history of negative results, but with a great potential for
growth. ALL’s challenge is to restructure Brasil Ferrovias with initiatives that are aimed at (i)
reaching productivity and safety levels similar to those of ALL; (ii) implementing the same
meritocratic culture and constant concern with cost control; and (iii) achieving compatible
volume and revenue growth as planned.
53
Industrial Products
| Annual Report 2006
Agricultural Commodities*
(million RTK)
Soybean
Soy Meal
Fertilizers
Sugar
Wheat
Other
Total
Industrial Products*
During the second half of 2006 – already under the management of ALL – Brasil Ferrovias’s
EBITDAR increased 85.6%, as compared to the same period of the previous year, amounting
to R$171 million. EBITDAR margin rose 24 percentage points, reaching 49%, primarily due
to the reduction of the fixed cost basis.
Gross revenue decreased 5% in the second half of 2006, totaling R$391 million, due to a
6% drop in volume. A reduction in volume was expected during this phase of transition.
The investments carried out between the end of 2005 and the beginning of 2006 did
(million RTK)
Vegetal Oil
Steel Products
Fuel
Iron ore and Pellets
Manganese ore
Construction
Other
Total
2006
2005
% Change
4,054.2
2,082.1
487.3
851.6
10.4
58.3
4,539.6
2,260.0
617.4
622.1
4.4
57.5
-10.7 %
-7.9 %
-21.1 %
36.9 %
136.8 %
1.3 %
7,543.9
8,101.0
-6.9 %
2006
2005
% Change
109.4
113.5
1,019.1
376.9
84.5
20.2
5.6
36.4
91.1
1,018.9
402.0
166.0
22.7
5.8
200.5 %
24.6 %
0.0%
-6.2%
-49.1 %
-11.1 %
-4.3 %
1,729.1
1,743.0
-0.8 %
* Excludes the RTKs related to trucking connections that were considered in the volumes of Brasil Ferrovias.
not benefit on the 2006 crop, since they were aimed at improving the railway lines and
acquiring rail cars and locomotives that were not ready in time. The delivery of 750 new
In 2006, including the pre-ALL-acquisition period, Brasil Ferrovias’s EBITDA increased 45%,
rail cars began in April and ended in September. The used locomotives acquired in the
totaling R$180 million, and EBITDA margin rose from 17% to 25%.
54
USA were delivered in July and will be operating for the 2007 crop.
ALL - AMÉRICA LATINA LOGÍSTICA |
F i n a n c i a l R e s u lt s
C o n s o l i d at e d I n c o m e S tat e m e n t s
Financial Results
(R$ million)
Gross revenues
Deduction from gross revenues
Net revenues
Cost of sales
Fuel
Outsourced and contracted fleet
Labor
Maintenance
Depreciation and Amortization
Lease and Concession
Other
Railcar Rental
Gross profit
Operating income (expenses)
Selling, General and Administrative
Other
Equity earnings and gain (loss)
on investments
Operating profit (loss) before net
financial expenses
Net financial expenses
Operating profit (loss)
Translation gain (loss) and monetary
adjustment gain (loss), net
Non-operating results
Income tax benefit (expense)
Net income (loss)
Brazil
Argentina
Consolidated*
2006
2005
% Change
2006
2005
% Change
2006
2005
% Change
1,312.0
(190.7)
1,121.3
(662.6)
(236.8)
(85.5)
(102.7)
(36.7)
(44.9)
(25.6)
(51.5)
(78.7)
458.7
(82.3)
(88.5)
6.3
1,092.0
(158.4)
933.6
(550.5)
(200.2)
(83.4)
(97.4)
(35.1)
(27.3)
(25.6)
(57.6)
(23.8)
383.1
(65.4)
(77.9)
12.5
20.1%
20.4%
20.1%
20.4%
18.3%
2.5%
5.4%
4.3%
64.4%
0.0%
-10.5%
230.3%
19.7%
25.9%
13.6%
-50.0%
154.5
(3.9)
150.6
(125.0)
(25.2)
(21.9)
(38.5)
(12.2)
(11.1)
(4.3)
(11.8)
0.0
25.6
(6.0)
(13.8)
7.8
157.3
(4.0)
153.3
(118.0)
(25.9)
(22.2)
(30.5)
(14.4)
(11.7)
(3.8)
(9.5)
0.0
35.4
(14.9)
(17.2)
2.3
-1.8%
-2.7%
-1.8%
5.9%
-2.8%
-1.6%
26.2%
-15.2%
-4.5%
13.1%
24.1%
na
-27.5%
-59.6%
-20.0%
234.2%
1,466.5
(194.6)
1,271.9
(787.6)
(262.0)
(107.4)
(141.2)
(48.9)
(56.1)
(29.9)
(63.3)
(78.7)
484.4
(88.3)
(102.3)
14.0
1,249.3
(162.3)
1,087.0
(668.5)
(226.2)
(105.7)
(127.9)
(49.5)
(39.0)
(29.4)
(67.0)
(23.8)
418.5
(80.2)
(95.1)
14.9
17.4%
19.9%
17.0%
17.8%
15.9%
1.6%
10.4%
-1.3%
43.8%
1.7%
-5.6%
230.3%
15.7%
10.0%
7.5%
-5.6%
(60.9)
(6.0)
917.7%
(2.0)
(2.2)
-9.6%
(62.9)
(8.2)
671.0%
6.3
12.5
-50.0%
7.8
2.3
234.2%
14.0
14.9
-5.6%
(126.6)
188.9
(88.1)
223.6
43.6%
-15.5%
(4.2)
13.5
(17.2)
1.2
-75.7%
1,049.9%
(130.8)
202.4
(105.3)
224.8
24.2%
-9.9%
0.0
0.0
na
0.0
(22.5)
na
0.0
(22.5)
na
(3.5)
(26.3)
159.2
7.6
(32.3)
198.8
na
-18.7%
-19.9%
0.0
(2.8)
10.7
0.0
(6.3)
(27.6)
na
-55.7%
na
(3.5)
(29.1)
169.9
7.6
(38.6)
171.2
na
-24.7%
-0.8%
55
* Excludes results of Santa Fé Vagões (40% owned by ALL), Brasil Ferrovias (wholly owned) and Novoeste Brasil (wholly owned).
| Annual Report 2006
Revenues
Consolidated gross revenue increased 17% in 2006, amounting to R$1,467 million, due to
the 20% growth of revenue in the Brazilian operation, which was partially offset by a 1.8%
reduction in gross revenue in Reais of the Argentine operation. The growth in Brazil reflects
a 12% increase in volume transported to 17.7 billion RTK in 2006, as well as a 12% growth in
the average yield, due to the pass-through of inflation and of the diesel price. The reduction
of gross revenue in Argentina reflects primarily the depreciation of the Peso before the Real,
as the revenue presented a 9% increase in Pesos. Net earnings rose 17% in 2006, amounting
to R$1,271.9 million, as a result of the 20% increase in Brazil and a 2% drop in Argentina.
Cost of Sales
Consolidated cost of services rendered grew 18%, totaling R$788 million in 2006, due to a
20% increase in the cost of services rendered in Brazil, to R$662.6 million, and a 6% rise in
Argentina, to R$125 million.
The increase in cost of services rendered in Brazil was primarily due to (i) higher costs
with rail car leases, as new rail cars are being added by the customers; (ii) higher expenses
with fuel due to an expansion in the volume of railway activity and in the diesel price;
and (iii) the increase in depreciation expenses primarily caused by the increase in the
investments carried out in 2006. In Argentina, the increase reflects the rise in labor costs
arising from negotiations with unions, which was partially offset by the devaluation of
56
the Peso in relation to the Real.
ALL - AMÉRICA LATINA LOGÍSTICA |
Operating Income and Expenses
Consolidated operating expenses increased 10%, amounting to R$88 million in 2006. In
Brazil, SG&A expenses increased 14%, totaling R$89 million, while other operating expenses
decreased from R$13 million in 2005 to R$6 million in the period. In Argentina, SG&A
expenses dropped 20%, amounting to R$14 million, while other operating expenses
increased from R$2 million in 2005 to R$8 million in 2006.
Net Financial Expenses
Net financial expenses increased 24%, amounting to R$131 million in 2006 due to the
growth of the net debt arising from the need of additional cash during the restructuring
process of Brasil Ferrovias. Net financial expenses of the Brazilian operation increased 44%,
totaling R$127 million and decreased 76% in Argentina, amounting to R$4 million.
Net Income
Other Costs and Expenses
As a consequence of the results discussed above, and including the net income from our
Other costs and expenses – including equity income, gains on investments, non-operating
interest in Santa Fé Vagões, consolidated net income increased from R$171 million in
income (expenses), and the translation and adjustment effects – increased from R$23
2005 to R$172 million in 2006.
million in 2005 to R$66 million in 2006, primarily due to the R$55 million provision for
potential losses in the sale of our minority interest in Geodex.
Balance Sheet and Capital Structure
Consolidated net debt totaled R$2.6 billion as compared to R$157 million at the end of
2005, reflecting the raise in the Company’s leveraging through the acquisition of Brasil
Ferrovias. At year-end 2006, net debt/EBITDA ratio stood at 3.8X as compared to 0.2X in
19% reduction in Brazil to R$26 million and a 56% drop in Argentina to R$3 million.
2005, and net debt/equity ratio moved from 0.1X in 2005 to 1.1X in 2006.
57
I n co m e Ta xe s
Income tax expenses decreased from R$39 million in 2005 to R$29 million in 2006, with a
| Annual Report 2006
Brazil
Cash Flow
(R$ million)
Operating Activities
Investment Activities
Financing Activities
Cash Increase
Argentina
Consolidated
2006
2005
% Change
2006
2005
% Change
2006
2005
% Change
447.2
(282.7)
521.8
686.3
444.8
(213.4)
0.5
231.9
0.5%
32.5%
na
195.9%
37.7
(29.3)
(0.1)
8.3
35.6
(44.3)
18.1
9.4
5.9%
-33.9%
na
-11.9%
484.9
(312.0)
521.7
694.6
480.4
(257.7)
18.6
241.3
0.9%
21.1%
2701.8%
187.8%
C a s h F low
shares was a great differential in relation to other potential buyers, enabling the controlling
Operating cash flow rose from R$480 million in 2005 to R$485 million in 2006, primarily due
shareholders of Brasil Ferrovias to participate in the appreciation of the new business.
to the EBITDA growth in the year. Investments increased from R$258 million in 2005 to R$312
million in 2006 and cash flow from financing activities expanded from R$19 million to R$522
In the debt market, we carried out a new public offering of debentures to finance the expenses
million, and the Company raised R$700 million in debentures to finance Brasil Ferrovias’s
with the restructuring of Brasil Ferrovias, which amounted to R$700 million in 2006. The debentures
restructuring finance. As a result, in 2006 the Company close the year with a positive cash
are pegged to the CDI, with a five-year maturity and amortization at the end of the period.
position amounting to R$695 million.
Liquidity Trends
C a p i ta l M a r ke t s
ALL’s liquidity increased substantially in 2006, with a 613% rise in the average number of
ALL carried out its initial public offering (IPO) in June 2004. Now, the Unit, which combines
transactions and a 128% growth in the daily traded volume, which totaled R$34.4 million on
one (1) common share (ON) and four (4) preferred shares (PN), is ALL’s most liquid asset,
average. The Company promoted a one-for-ten stock split of its shares in September and, in the
and approximately 60% of the Company’s capital is outstanding.
same month, it was included in Ibovespa and IBrX-50, indices that are based on the Exchange’s
most liquid shares. In addition, ALL’s Units are part of the following indices of shares: (i) IBrX, which
focuses on the 100 most liquid securities in Bovespa; (ii) ISE (Corporate Sustainability Index),
transaction of the industry since the privatization of the railway sector. The operation was
comprised by the shares of 28 companies with differentiated governance practices; (iii) Itag (Tag
concluded in June through a share swap. In addition to preserving ALL’s cash, the use of
Along Index), which focuses on companies that give their minority shareholders the right to follow
58
Through the capital markets, ALL acquired Brasil Ferrovias in May 2006, the largest
ALL - AMÉRICA LATINA LOGÍSTICA |
the controlling shareholders in the event of the disposal of the controlling block; and (iv) IVBX-2,
Investor Relations
comprising the companies between the 11th and 60th positions of Bovespa’s liquidity ranking.
ALL’s policy is to fulfill 100% of investors’ demand for meetings with the Company. In 2006,
we held over 150 individual meetings with investors, four conference calls, two roadshows
S h a re h o ld e rs’ C o m p e n s a t i o n
and six participations in events and conferences. The Company’s investor relations site
In 2006, ALL’s shares had the highest appreciation among those that comprise Ibovespa,
(www.all-logistica.com/ir) was chosen as the favorite among Latin American investors, and
presenting a 122% increase against an average rise of 33% in the index’s shares. In the
the Company ranked among the TOP 5 in transparency and earnings release in the 2006 IR
beginning of 2006, we paid our shareholders R$40.3 million by way of interest on own capital
Global Rankings.
and dividends. From the initial public offering to December 31, 2006, our shares appreciated
Main Shareholders | Date: December 31, 2006
377%, against a 114% appreciation of the Ibovespa.
*ON
*PN
**UNITS
Overall Total
Delara Brasil Ltda
Shareholder
67,103,310
69,191,040
0
136,294,350
Emerging Mark Capit Inv LLC
95,456,800
0
0
95,456,800
104,137,830
107,689,100
70,425,330
124,761,412
88,850,920
0
0
60,276,468
0
0
58,706,690
357,834,933
192,988,750
107,689,100
363,958,780
1,974,212,545
569,573,782
218,318,428
416,541,623
2,870,600,325
Judori Adm Emp e Part S.A.
Ralph Partners I LLC
Bndes participações S.A.
Other
* Not included in units
** Units - certificates of deposits of no par registered book entry shares issued by Banco Itaú S.A. the unit
depositary. Each unit represents one commom share and four preferred shares.
59
Total
60
| RELATÓRIO ANUAL 2006
ALL - AMÉRICA LATINA LOGÍSTICA |
61
c o r p o r at e c ha r t
| RELATÓRIO ANUAL 2006
Always
ahead with
62
responsibility
68 R
elationship with
customers, suppliers
and the community
74 Social report
63
66 Labor safety
05
64 Environment
chapter
ALL - AMÉRICA LATINA LOGÍSTICA |
| Annual
| RELATÓRIO
Report
ANUAL
2006
2006
Environment
The harmony of its operation with environmental preservation and conservation is a
Environmental licensing
constant concern at ALL. Through its Environmental section, the Company invested R$4.3
ALL was the first railway to receive the license from the Brazilian Institute for the
million in 2006 and has developed several projects, such as the use of environmentally-
Environment and Renewable Natural Resources (IBAMA) in the states of Paraná and
friendly crossties and the treatment of effluents resulting from washing rail cars and engines,
Santa Catarina and, according to a schedule agreed with the federal agency, it must
with the adoption of innovative technologies. Audits are carried out on a quarterly basis to
license all of its stretches up to 2009.
identify the adhesion to the environmental management standards set forth by ALL.
Environmental Education
E m e rg e n c y S e r v i ce P l a n ( “ P l a n o d e Atendimento Emergencial”)
The Company has an environmental education program geared towards its employees
it establishes technical, operational and managerial procedures to be adopted in
and the community. It promotes games with students from the communities
emergency situations and for carrying out rapid responses, aimed at preventing,
surrounding the railway near ALL Wood (“Bosque ALL”), in which they learn about
avoiding or minimizing material or environmental damages and at ensuring the safety
basic environmental concepts, such as the sustainable use of energy and water. Basic
of employees and the surrounding communities. ALL Brasil has eleven fixed and three
safety behavior and rules are also taught to avoid accidents with children living and
mobile support bases, strategically located in its network.
playing next to the railway network.
C o n t ro l o f e f f l u e n t s a n d w a ste
Environmental Train
ALL has nine treatment stations for effluents resulting from washing rail cars, engines
Students from municipal and state schools near the railway network have the opportunity
and parts. Each year, over one hundred tonnes of solid industrial waste are treated,
of traveling in a rail car fully adapted to the program while they attend an environmental
separated and sent to licensed landfills or to be co-processed for producing energy
education class. In 2006, 726 children participated in the project.
in furnaces of authorized cement companies. ALL maintains selective collection of
64
materials in all of its facilities.
65
ALL
- AMÉRICA
LATINA
LOGÍSTICA
| |
ALL
- AMÉRICA
LATINA
LOGÍSTICA
| Annual Report 2006
Risk Communication (“Comunicado de Risco”)
incidents and unsafe conditions are communicated by employees to safety specialists
through this program. Since the beginning of the program 2,310 incidents have been
communicated, of which 1,708 were solved.
Red Card (“Cartão Vermelho”)
this program imposes penalties on employees of any hierarchical level who do not comply
with established guidelines. Penalties range from warnings to dismissal with cause.
Safety Scratch Lottery
it recognizes employees’ commitment with the distribution of scratch lottery tickets
for those units with zero labor accident rate.
Environmental Safety and Health Trainings
Labor Safety
All employees from all units receive these trainings. In 2006, 5,071 employees were trained.
ALL’s Safety Management System strives to ensure the preservation of health and the
Labor Accident Prevention Week
safety of the employees while they perform their duties, by establishing systematic
it is promoted in all units, in an integrated way, with highway and railway operations
accident control, monitoring and prevention initiatives, as well as promoting the
personnel.
constant improvement by means of educational and training initiatives. Some of the
2003
66
main programs aimed at industrial safety include:
Listed among the
best companies
to work
ALL was the only denationalized
company to be rated as one of the
best companies to work for, according
to the main business magazines both
in Brazil and in Argentina
67
ALL - AMÉRICA LATINA LOGÍSTICA |
| Annual Report 2006
Relationship with Customers,
Suppliers and the Community
the goods, expected arrival, vehicles programmed for loading, and information on incidents,
compensation and insurance.
Relation ship wi th S upplie r s
Relat i onsh ip wit h Cu stom e r s
An important portion of the result and productivity gains obtained by ALL is based on the
One of ALL’s values is its focus on the customer. As a result, the Company has
adequate supply of its operations, with suppliers capable of delivering better solutions at
developed relationships with its customers based on partnership and trust, fulfilling
more competitive prices. Over these ten years, the Company expanded its relationship with
the commitments it made. Consequently, customers have participated directly in the
suppliers, demanding from them the same ethical and conduct standards practiced by ALL.
Company’s business, investing directly since 1997 over R$750 million in its operation
Many suppliers are small-sized companies, incorporated by former employees from Rede
and signing long-term agreements.
Ferroviária Federal, who left the Company before or after the denationalization process
and, therefore, continue to keep in touch with the history they helped make. In 2006, ALL
D i f fe re n t i a te d s e r v i ce s
launched its Champion Partner Award (“Prêmio Parceiro Campeão”) and celebrated the best
The Company operates in different market segments and offers a wide range of services.
suppliers in sixteen categories of services and materials.
Services available to customers include: railway and highway transportation, domestic
and international intermodal door-to-door transportation, port terminal services, urban
Soci al Respo ns i b il i t y
distribution, milk run collection services, and complete management of warehouses,
For ALL, the Company’s growth is directly related to the welfare of its employees and the
distribution centers and inventories.
surrounding communities. To be a citizen company goes beyond than just making donations.
Social responsibility is at the core of the Company’s operations. ALL is a member of Instituto Ethos
Through ALL’s Service Central (CAALL, in Portuguese) and a CRM (Customer Relationship
to manage their businesses in a socially-responsible way. In 2006, the Company was included in
Management) system, customers can monitor in real time information with the location of
the Corporate Sustainability Index (ISE), launched by the São Paulo Stock Exchange.
2004
de Empresas e Responsabilidade Social, an NGO created to rally, sensitize and help companies
68
P ro m p t re s p o n s e
Shares are
issued
on Bovespa
In June 2004, it entered the capital markets
going public at the São Paulo Stock Exchange
(BOVESPA), reassuring its commitment to ethics
and transparency and adhering to Level 2 of
Corporate Governance, guaranteeing equal
treatment to minority and majority shareholders.
ALL - AMÉRICA LATINA LOGÍSTICA |
ALL’s Social and Environmental Responsibility initiatives are based on four pillars: EMPLOYEES,
Family Train
COMMUNITY, VOLUNTEERISM and CULTURE:
This program allows engineers to take their significant others to have a closer look at
their daily work routines.
1 . E MPLOY EES.
It consists of Integration Programs aimed at providing all of the Company’s employees
O pen D oors
with a deeper contact with ALL’s operations, in addition to enabling their families to
This program allows employees to bring their families and friends to know their work
have first-hand experience with their daily routines. These are as follows:
environment.
Learn my Job
The goal of this program is to allow ALL’s corporate managers to have a closer look
at its railway and highway operations. They follow - for some hours - engineers or
fleet or urban distribution drivers while these carry out their daily tasks. This activity is
encouraged by ALL.
ALL also values and invests in the continuous development of its team. Thanks to
the ALL on the Educational Tracks (“ALL nos Trilhos da Educação”) program, the
Company fosters elementary and high school studies among its employees.
The Company maintains nine educational centers structured within its work units,
as well as partnerships with educational institutions recognized by Brazil’s Ministry
69
of Education and Culture (MEC).
| RELATÓRIO ANUAL 2006
‘
70
ALL pursues to establish
transparent and cooperative
dialogs with its internal and
external publics. Both when
dealing with employees and
suppliers and when working
jointly with neighboring
communities, social
responsibility is at the core of
the Company’s operations ’
ALL - AMÉRICA LATINA LOGÍSTICA |
2 . C OMMUNITY
ALL develops several initiatives in favor of the communities with which it interacts.
Ta le n t Wo r k s h o p ( “ O f i c i n a d e Ta lentos”):
This social inclusion initiative trained 58 students from public schools and the
surrounding companies in basic courses in electricity and mechanics. Through this
project, the Company promotes the social inclusion of teenagers from local communities;
it contributes with the social development of these communities; and it offers these
teenagers an opportunity to learn and develop their skills, in addition to contributing to
increase their employability in the local community.
C o m m u n i t y Tra i n ( “ Tre m d a C o munidade”):
These are visits to ALL aimed at streamlining the relationship of the Company with its
various publics, such as unions, associations and organizations.
E n v i ro n m e n ta l Tra i n ( “ Tre m A m biental”):
This project consists of a train ride and is aimed at sensitizing children from communities
surrounding all of ALL’s units regarding environmental preservation issues.
S e n i o r C i t i z e n ’s Wo r k s h o p ( “ O f i cina da Terceira Idade”):
ALL has a classroom at UniALL for a group of thirty senior citizen ladies, who organize
handicraft and painting activities to develop their skills and generate an additional
71
income for their families.
| RELATÓRIO
Annual Report
ANUAL
2006
2006
E n v i ro n m e n ta l E d u ca t i o n P ro g ram at ALL Wood:
The Company’s community-schools integration is aimed at sensitizing students to
citizenship, the environment and safety issues. During the project, the Company
disseminates environmental preservation and natural resources optimization practices,
contributing to the enhancement of the community’s quality of life.
3 . VO LUNT EE RI S M
The Company’s Corporate Voluteerism Program – Friend of the Community
(“Amigo da Comunidade”) – is aimed at consolidating all volunteering initiatives
carried out by its employees.
The Company is a member of Junior Achievement, an NGO present in 112
countries that promotes volunteerism. This partnership fosters volunteer work
among its employees, carrying out the program every year among elementary
school students at Escola Municipal Coronel Durival Britto Silva, located beside
ALL’s headquarters.
In addition, each year, the Company organizes campaigns to benefit charities.
Some of them include: Easter Campaign, Clothes Campaign, Children’s Day and
Christmas. Through volunteer work and donations, employees work in favor of
72
less privileged populations and entities.
ALL - AMÉRICA LATINA LOGÍSTICA |
ALL supports Fundação Iniciativa – a charity that maintains four homes in Curitiba that
house 50 children and teenagers – through the Childhood and Adolescence Fund (FIA,
in Portuguese).
In addition, ALL has in its units Committees of People (“Comitês de Gente”), which, in
addition to being responsible for identifying enhancement opportunities for employees,
promotes volunteer work in their communities.
4 . C U LTUR E
ALL uses both municipal and federal tax incentives to invest in cultural projects focused,
primarily, on education.
In 2006, ALL’s Talent Workshop Project received the TOP SOCIAL ZILDA ARNS award, granted by
Brazil’s Sales and Marketing Managers Association (ADVB) to socially responsible companies. In
December 2006, ALL received the 2006 CASEM seal, an award granted by Associação Comercial
do Paraná, a business association located in that state, to socially responsible companies.
The award was granted due to the social and environmental responsibility programs carried
out by the Company, such as the Environmental Train and Talent Workshop.
Further information on the social and environmental responsibility projects can be found at
the website “In Good Company” of the São Paulo Stock Exchange (BOVESPA):
73
www.bovespa.com.br/emboacompanhia
| Annual Report 2006
social report
1 - Basis of Calculation
2006 Amount (in thousand reais)
2005 Amount (in thousand reais)
1,726,132
110,261
178,147
1,086,973
224,751
133,498
Net Revenues (NR)
Operating Results (OR)
Gross payroll (GP)
2 - Internal Social Indicators
% of GP
% of NR
Amount (thousand)
% of GP
% of NR
9,515
22,723
39
3,635
798
285
0
4,743
0
0
4,054
45,792
5.3%
12.8%
0.0%
2.0%
0.4%
0.2%
0.0%
2.7%
0.0%
0.0%
2.3%
25.7%
0.6%
1.3%
0.0%
0.2%
0.0%
0.0%
0.0%
0.3%
0.0%
0.0%
0.2%
2.7%
8,336
31,943
491
4,472
705
245
0
4,345
0
19,145
0
69,682
6.2%
23.9%
0.4%
3.3%
0.5%
0.2%
0.0%
3.3%
0.0%
14.3%
0.0%
52.2%
0.8%
2.9%
0.0%
0.4%
0.1%
0.0%
0.0%
0.4%
0.0%
1.8%
0.0%
6.4%
3 - External Social Indicators
Amount (thousand)
% of GP
% of NR
Amount (thousand)
% of GP
% of NR
Education
Culture
Health and sanitation
Sports, leisure and recreation
Nutrition and combating hunger
Others
Total - Contributions to society
Taxes (excluding payroll taxes)
Total - External social indicators
115
249
0
50
90
0
504
255,923
256,427
0.1%
0.2%
0.0%
0,0%
0.1%
0.0%
0.5%
232.1%
232.6%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
14.8%
14.9%
27
137
18
1
0
0
182
193,194
193,376
0.0%
0.1%
0.0%
0.0%
0.0%
0.0%
0.1%
86.0%
86.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
17.8%
17.8%
Food
Mandatory payroll taxes
Private pension plan
Health
Safety and health care in the workplace
Education
Culture
Training and professional development
Day-care (on-site or allowance)
Profit results sharing
Others
Total - Internal social indicators
Amount (thousand)
74
continues
ALL - AMÉRICA LATINA LOGÍSTICA |
4 - Environmental Indicators
Investments related to production / company operations
Investments in programs and/or in external projects
Total investments in the environment
With relation to the setting of “annual targets” to minimize waste,
consumption in general in
production/operations, and increase the efficiency
of use of natural resources, the company:
Amount (thousand)
% of GP
% of NR
Amount (thousand)
% of GP
% of NR
5,322
500
5,822
4.8%
0.5%
5.3%
0.3%
0.0%
0.3%
1,636
415
2,051
0.7%
0.2%
0.9%
0.2%
0.0%
0.2%
( ) has no goals
( ) achieves 51 to 75%
( ) achieves 0 to 50% ( x ) achieves 76 to 100%”
( ) has no goals
( ) achieves 51 to 75%
( ) achieves 0 to 50% ( x ) achieves 76 to 100%”
2006
2005
Number of employees at the end of the period
Number of employees a hired during the period
Number of outsourced employees
Number of interns
Number of employees above 45 years old
Number of female employees
% of management positions occupied by women
Number of african american employees
% of management positions occupied by african americans
Number of employees with disabilities or special needs
6,580
1,620
2,485
159
1,660
297
16.0%
332
2.1%
5
4869
1,638
1,824
137
1,112
221
16.8%
317
2.0%
4
6 - Relevant information regarding business responsibility
2006
2005
67x
67x
Ratio between the highest and the lowest salary
75
5 - Personnel Indicators
| Annual Report 2006
DISTRIBUtion
Wealth Generation (R$ million)
2002
2003
2004
2005
2006
(A) Revenues
822.8
994.7
1.080.6
1.256.8
1.977.7
(B) Goods and services acquired from third-parties
Fuel
Outsourced and contracted fleet
Maintenance
Lease and concession
Other
Rail cars
Operating Expenses
449.4
121.9
116.9
62.0
30.0
50.1
0.0
68.5
502.1
175.6
127.4
62.8
29.0
58.0
0.0
49.3
501.5
182.1
106.7
61.0
28.1
68.9
0.0
54.7
539.4
226.2
105.7
49.5
29.4
67.0
23.8
37.8
869.9
340.9
112.5
71.1
43.7
121.7
112.5
67.5
(C) Gross added-value (A-B)
373.4
492.6
579.1
717.4
1.107.8
47.0
53.3
62.7
57.1
139.1
(E) Net added-value (C-D)
326.4
439.3
516.4
660.3
968.7
(F) Transfers
Equity earnings
Equity interest results
Financial revenues
116.3
42.4
0
73.9
36.4
-10.6
0
47.0
111.9
44.2
0
67.7
143.4
-30.7
0
174.1
252.1
-62.9
0
315.0
(G) Total added-value to distribute (E + F)
442.7
475.7
628.3
803.7
1.220.8
(D) Retained
(depreciation, amortization and depletion)
76
continues
ALL - AMÉRICA LATINA LOGÍSTICA |
2002
2003
2004
2005
2006
80.0
80.0
91.4
91.4
120.2
120.2
200.9
200.9
285.6
285.6
Employees
Payroll
Social contributions
Private pension plan
Benefits
Profit sharing
142.9
96.1
27.5
0.1
11.0
8.2
142.3
95.5
27.1
0.3
10.5
8.8
147.0
94.9
28.5
0.4
12.4
10.9
152.2
87.1
31.9
0.5
13.5
19.2
206.6
146.5
22.7
0.4
17.2
19.8
Finance companies
Third-party capital compensation
197.6
197.6
237.5
237.5
210.5
210.5
279.4
279.4
652.3
652.3
0.0
0.0
0.0
0.0
36.8
36.8
40.3
40.3
17.7
17.7
22.1
22.1
4.5
4.5
113.8
113.8
130.9
130.9
58.3
58.3
Productivity Indicators
2002
2003
2004
2005
2006
Gross margin
Net margin
Turnaround of Assets (net revenues/ average asset)
Average ROA (Operating Revenues/Average Assets*)
Net debt / EBITDA
Liquidity ratio
27.2%
3.0%
0.65
3.2%
3.2x
0.4
31.1%
0.5%
0.68
14.7%
2.0x
0.8
35.2%
15.9%
0.52
16.2%
0.5x
1.9
38.5%
15.7%
0.45
13.7%
0.2x
1.8
35.9%
4.4%
0.30
7.8%
3.8x
1.7
Government
Taxes less subsidies (exemptions)
Shareholders
Interest on own capital and dividends
Retained earnings
Retained earnings / loss for the year
77
Distribution per Intersted Party
| RELATÓRIO ANUAL 2006
G e s tã o d e r i s c o s
Riscos operacionais
A ALL identifica e gerencia os riscos a partir da análise dos possíveis impactos de sua atividade no meio ambiente, na comunidade, na segurança dos colaboradores, na segurança
Segurança das operações – A ALL vem melhorando a cada ano a segurança de suas
da operação, na solidez financeira e sustentabilidade de longo prazo da empresa e na
operações, e é hoje uma das ferrovias de carga mais seguras do Brasil e do Mundo. O
geração de valor para seus acionistas.
índice de acidentes por milhão de trem km, uma das metas da concessão, caiu de 88 em
1997 para 12 incidentes em 2006. Esse resultado resulta de investimentos em tecnologia
Outlook and
challenges
e da aplicação da metodologia de gestão da qualidade, com mapeamento dos processos
e forte disciplina na execução.
Segurança dos colaboradores – A segurança dos colaboradores é resguardada por
treinamento, processos bem desenhados e rigor na auditoria dos procedimentos de segurança. Alguns dos programas da ALL são benchmark. O Cartão Vermelho penaliza os
colaboradores que não cumprem diretrizes estabelecidas. Através do Comunicado de
Risco, as condições inseguras são identificadas e repassadas aos técnicos de segurança.
Unidades que obtêm índice zero de acidentes recebem a Raspinha de Segurança, um
ahead
mecanismo de premia o compromisso dos colaboradores com os regulamentos operacionais de segurança.
Comunidade – A educação é a principal ferramenta para minimizar o impacto das operações da ALL nas comunidades em seu entorno. Programas como o Trem da Comunidade
e as Campanhas de Passagens de Nível, informam a população sobre segurança ao cruzar
78
uma linha férrea, com blitzes educativas e distribuição de material informativo.
06
79
80 Outlook and challenges
chapter
ALL - AMÉRICA LATINA LOGÍSTICA |
| Annual
| RELATÓRIO
Report
ANUAL
2006
2006
O u t lo o k a n d c h a l l e n g e s
ALL should also benefit from Brazil’s and Argentina’s great competitive edge in
agricultural production. These countries are among the few that still have a substantial
amount of unused land available for agriculture and should consolidate over time as
worldwide suppliers of food and renewable fuels. Ethanol and other biofuel markets
should expand at high rates over the next years, substantially increasing the demand
for agricultural commodities from the region.
ALL still has room for efficiency gains in its operation, despite historical two-digit
asset productivity gains, the reduction of approximately 20% in the average diesel
consumption, and the great leap ahead in safety issues of our operation. With
investments in technology, and the adoption of cutting-edge methods, the Company
should continue decreasing the cycle of its assets, reducing its diesel consumption
Despite everything that ALL has been achieved over this decade, the outlook for the
and improving the level of the services it provides to its customers.
next ten years is even more promising.
The incorporation of Brasil Ferrovias is both a great challenge and an opportunity to
The Company is strategically positioned at Merscosul’s agricultural and industrial
repeat ALL’s history. Brasil Ferrovias is similar to ALL in 1997, with a weak operational
heartland, being ready to continue to expand its volume at around the 10% rate a year
performance, but with a great potential for growth. ALL is currently better positioned
with the increase of the railway modal in the total cargo outlet. The transportation
to complete this process than it was in the beginning of its concession period, since
matrix in the region is still based on highway transportation, less economic and more
its team now has ten years of experience and it has a consolidated culture of service
pollutant, and there is still a significant amount of room for market share gains in the
and results.
2006
80
railway and intermodal operations.
Acquisition
of Brasil
Ferrovias
In May 2006, ALL acquired Brasil Ferrovias and
Novoeste Brasil, which comprise the states of
Mato Grosso, Mato Grosso do Sul and São Paulo,
extending its operations in the country’s main
industrial region, adding to its network one of
Brazil’s major agricultural commodities export
corridors, via the Port of Santos.
81
ALL
- AMÉRICA
LATINA
LOGÍSTICA
| |
ALL
- AMÉRICA
LATINA
LOGÍSTICA
| RELATÓRIO ANUAL 2006
G lo s s a r y
Commodities – Term used to describe primary products or goods with a large share
in the international market and that are purchased or sold on a mercantile exchange,
including for future delivery. Examples: soybean, corn, wheat, coffee, cotton, sugar
(agricultural), or steel (industrial), iron ore and oil.
EBITDA – Earnings before Interest, Tax, Depreciation and Amortization.
Compliance – Term which comes from the verb comply which means compliance with
the legislation, internal and external rules and corporate principles required by the best
market practices. In a company, compliance is to maintain the controlled management
of risks, ensuring the integrity of the conglomerate, clients, shareholders and employees.
EBITDAR – Earnings before Interest, Tax, Depreciation, Amortization and Rent.
In the case of ALL, the rent is that of new railcars added to the fleet through
investments made by our clients.
Concession – Permission to use or run a certain public service, granted by the
Government to an individual or company. In the case of ALL, in 1997 at a privatization
auction we obtained the concession to run the rail network of the State of Paraná, Santa
Catarina and Rio Grande do Sul for 30 years. The agreement is renewable, but it can be
terminated by forfeiture or non-compliance with the established rules.
EBITDA Margin – Ratio between EBITDA and the net revenue of the company
being analyzed.
Free-float – Number of shares of a company has available for trading in organized
markets. At ALL we maintain a 60% free-float, compared to the minimum of 25%
required by the rules of Level 2 of Corporate Governance on Bovespa.
Gauge – Term used in railroads to describe the distance between tracks, or between
the wheels of the train axles. In Brazil there are several track gauges. In ALL network,
gauge is metrical (1.067 m).
Dead fleet – Non-operational fleet of railcars and locomotives.
Gauge adjustment – Increasing or decreasing the gauge. At ALL we have developed
an exclusive gauge adjustment methodology for locomotives. We bring used machines
from the United States, with a gauge of 1.40 m, and adapt them to a gauge of 1.0 meter.
In some cases we also add new axles to reduce the cargo load on the axles and increase
traction capacity.
Dry products – Expression used in ALL’s Argentinean operation for minerals in
general, for steel products or civil construction.
GTK – Gross ton kilometer, calculated by multiplying the total weight of the trains,
including the locomotives, railcars and freight weight, by the distance transported.
82
Dedicated operations – Customized logistics projects, including inbound operations
and management of warehouses and distribution to end-customers. In dedicated
operations the assets are made available only to meet the specific needs of a
certain customer.
ALL - AMÉRICA LATINA LOGÍSTICA |
Inbound operations – Supply collection operations of production components
that involve milk-run collections, grouping of materials, international highway transport,
issue of export documentation, reverse logistics for packaging and parts.
Stakeholders – All the public that may have financial, credit or other type of
interest in the Company’s businesses, such as clients, suppliers, shareholders,
government, regulation bodies and people from the community.
Intermodality – Total integration of the transport chain, enabling management of
multiple transport modals.
Tag along – This is the extension of the control premium to all shareholder.
The right to sell shares owned by minority shareholders under the same terms obtained
for the sale of the controlling block, in the event of a company changing ownership.
IPO – Initial Public Offering. When a Company goes public and starts offering shares
on a stock exchange.
Meritocracy – System which offers equal opportunities to everyone and rewards
people who achieve their goals. Individuals are measure by their own talent and
performance, generating competitiveness.
Milk-run collections – These are collections in which trucks load parts or inputs in
pre-determined quantities at particular times, for the production of an industrial unit.
They provide benefits, such as delivery accuracy, fleet optimization and better use
of the space in warehouses, among others. ALL makes milk-run collections for
Scania and Ford.
Take-or-Pay – Agreements between a purchaser and a seller of product or services
that obliges the purchaser to pay a minimum amount in product or services, even
if the product or service is not used or delivered.
Turnover – Turnover of employees in a company.
Unit – Share deposit certificate issued by Banco Itaú S.A., each one representing
one common share and four preferred shares, all non-par registered, without
nominal value.
Yield – Average price obtained by the dividing the revenues by the
transported volume.
Refrigerated products – Cargo submitted to refrigeration for preservation;
frozen products.
83
RTK – Revenue ton kilometer, calculated by multiplying the weight of the freight
on the train by the distance transported
CReDITS
Coordination
ALL – Investor Relations Management
ALL – Marketing Management
Concept, research and wording
Selulloid AG - Comunicação por Conteúdo
English version
Mz Consult
Pictures
Rua Emilio Bertolini, 100
Vila Oficinas - CEP 82920.030
Curitiba - PR - Brasil
Tel.: 55 41 2141-7555
fax: 55 41 2141-7484
e-mail: ir@all-logistica.com
Ito Cornelsen
Graphic design and publication
Publications on the quarterly results, annual reports,
Selulloid AG - Comunicação por Conteúdo
presentations, conference calls, earnings releases, press
releases and event schedule, as well as other
Printing
information may be accessed at ALL’s IR website
Stilgraf
(www.all-logistica.com/ir)
10
years
ALL - América Latina Logística
To be the best logistics company
in Latin America
Values
• Focus on the client
Always
ahead
Annual Report 2006
•P
eople make a difference and
are valued for their work
• Integrity and transparency
• Increasing shareholder value
through profitability
• Simplicity combined with creativity and
austere cost control
• Methodology and superior quality standards
for constant improvement
• Teamwork in a fun and safe environment
• Commitment to the community and
the environment
10 years Always ahead
Rua Emilio Bertolini, 100
Vila Oficinas - CEP 82920.030
Curitiba - PR - Brasil
Tel.: 55 41 2141-7555
fax: 55 41 2141-7484
e-mail: ir@all-logistica.com
Vision
A n n u a l
R e p o r t
2 0 0 6
ALL - América Latina Logística
Financial Statements 2006
10 years Always ahead
Rua Emilio Bertolini, 100
Vila Oficinas - CEP 82920.030
Curitiba - PR - Brasil
Tel.: 55 41 2141-7555
fax: 55 41 2141-7484
e-mail: ir@all-logistica.com
F i n a n c i a l
S t a t e m e n t s
2 0 0 6
in its Results
ALL - América Latina Logística S.A. and its subsidiaries
Financial statements from december 31, 2006 and 2005
and report of independent auditors
appendix
Always
ahead
all | américa latina logística AND ITS SUBSIDIARIES |
R E P O R T O F I N D E P E N D E N T A U D I TO R S
accounting practices and estimates adopted by the Company’s management,
as well as the presentation of financial statements taken as a whole.
To the
Management and Shareholders of
3. I n our opinion, based on our audit and on the report of other independent
ALL – América Latina Logística S.A.
auditors, as mentioned in paragraph 1, the aforementioned financial
statements fairly represent, in all material aspects, the equity and the
1. W
e have audited the balance sheets of ALL – América Latina Logística S.A. and
financial position of ALL – América Latina Logística S.A. and the consolidated
the consolidated balance sheets of ALL – América Latina Logística S.A. and
equity and financial position of ALL – América Latina Logística S.A. and its
its subsidiaries on December 31, 2006 and 2005 and the related statements
subsidiaries on December 31, 2006 and 2005, the results of its operations, the
of income, statements of changes in shareholder’s equity and statements
changes in shareholders’ equity and changes in financial position related to
of changes in financial position related to the years then ended, prepared
the years then ended, in conformity with the accounting practices adopted
under the responsibility of its management. Our responsibility is to express
in Brazil.
an opinion on those financial statements. The financial statements of the
indirect subsidiary Boswells S.A., whose investment represents a provision
4. A
s mentioned in Note 4 (a), the indirect subsidiaries América Latina Logística
for unsecured liabilities of R$2,308 thousand on December 31, 2005 and
Central S.A (“ALL Central”) and America Latina Logística – Mesopotámica S.A.
generated a negative equity accounting result of R$670 thousand and of
(“ALL Mesopotámica”) are in renegotiation process of concession agreements
the affiliated company Geodex Communications S.A., whose investment
with the Argentine Government. On October 20, 2006 the subsidiaries
represents R$67,403 thousand on December 31, 2005 and generated an
executed a new “Letter of Understanding” with “Unidad de Renegociacion y
equity accounting revenue of R$1,120 thousand, regarding that fiscal
Analysis de Contratos de Servicios Publicos” which sets forth a renegotiation
year, were audited by other independent auditors, who issued unqualified
proposal of the concession agreements based on the following assumptions:
reports. Our opinion, concerning the amount of these investments and the
(i) Recognition commitment of liabilities of concession fees (“canon”) as from
equity accounting result generated by them, is based on the opinion of
January 2006 up to the end of the concession; (ii) Assumption of investment
those other auditors.
commitments by ALL Central and ALL Mesopotámica as from January 1, 2006
up to the end of the concession; (iii) Recognition of mutual claims between
the Argentine Government and the subsidiaries, whose balance in favor of
Brazil and it comprised: (a) the planning of our audits taking into consideration
the Argentine Government will be converted into investment commitments
the significance of balances, the volume of transactions and the accounting
to be complied with by the subsidiaries as from January 2006 up to the end
and internal control systems of the Company, (b) the verification, on a test
of the concession. The referred Letter of Understanding must be approved
basis, of evidences and records supporting the amounts and accounting
by the bodies that represent the National Congress and by Decree of the
information disclosed, and (c) the evaluation of the most representative
President of that country, therefore, still subject to changes and possible loss
02
2. We conducted our audit in accordance with auditing standards applicable in
all | américa latina logística AND ITS SUBSIDIARIES |
of effect. The financial statements described in paragraph 1 were prepared
6. A
s described in Note 4 (c), the direct subsidiary ALL Argentina did not
based on the presupposition that the conditions agreed in the said Letter
recognized in its financial statements a possible minority interest on
of Understanding are confirmed; however, they do not include possible
advances for capital increase granted to its subsidiaries ALL Central and ALL
adjustments that may arise from future alterations in such conditions.
Mesopotámica, judicially required by a non-controlling shareholder, based
on the opinion of its legal advisors. The financial statements do not include
5. A
s mentioned in Note 4 (c), considering the Resolutions of Inspección
General de Justicia (“I.G.J”) 25/2004 and 1/2005, the direct subsidiary ALL
potential effects of adjustments or reclassifications that may arise as a result
of the conclusion of these discussions.
- América Latina Logística Argentina S.A. should have decided about the
allocation of advances for future capital increase (“aportes irrevocables”),
7. A
s described in Note 6, the direct subsidiary ALL Central interrupted the
which were recorded in its shareholders’ equity, within a 180-day term,
recognition of revenues linked to tolls of Unidad Ejecutora del Programa
which was extended many times; however, it expired on February 21, 2006,
Ferroviário Provincial (U.E.P.F.P.) as from January 2002. This decision is based,
and it had not been extended until this moment. If a specific authorization
mainly, on the lack of recognition of services rendered by the aforementioned
is not obtained by I.G.J, such advances shall be converted into capital stock
Unit. In 2004, ALL Central filed a lawsuit at the National Administrative
or reclassified to a liability account. In accordance with the Administrative
Litigation Court of the province of Buenos Aires, requiring the payment of toll
Resolution applicable to the subsidiary, the alterations in its capital stock
amounts related to the period between 1993 and 1995. Due to agreements
shall be previously approved by the Argentine National Government and,
entered into with previous shareholders, ALL Argentina records a liability in
consequently, the enforcement of the conversion of “aportes irrevocables”
the approximate amount of R$3,857 thousand (P$5,510 thousand), linked to
into capital stock depends on the said approval, that did not occur until
the liability of reimbursing 50% of recovered amounts, related to the tolls
now. On December 31, 2006, the balance of “aportes irrevocables” totaled
incurred in the periods prior to the acquisition date of ALL Central and ALL
approximately R$83,000 thousand and, based on the opinion of our legal
Mesopotámica. Based on the Management’s opinion, supported by its legal
advisors, the Company’s management chose to consider it as an account of
advisors, the suit related to collection of amounts filled against U.F.P.F.P. has
the subsidiary’s shareholders’ equity for purposes of investment registration,
a relatively high probability of success, although the amount receivable of
for as a holder of the right of enjoyment of its shares, it firmly maintains
approximately P$5,420 thousand (R$3,800 thousand) is not accounted for. The
its intention to convert such advances into capital in the future, when a
financial statements do not include possible adjustments or reclassifications
regulamentary restriction that hinders it. The subsidiary’s management issued
that may arise as a result of these discussions.
a waiver request from the application of the aforementioned Resolutions
8. O
ur audit was conducted with the purpose of issuing an opinion about the
conversion of advances, and no answer was obtained until the date of this
financial statements described in the first paragraph, taken as a whole. The
Report. The financial statements described in paragraph 1 does not include
statements of cash flow, corresponding to the years ended on December 31,
any possible effect that may arise from the conclusion of this matter.
2006 and 2005, presented in order to provide additional information on the
03
to I.G.J, in view of the current regulatory impediment to proceed to the
all | américa latina logística AND ITS SUBSIDIARIES |
Company, as shown in Note 30, are not required as an integrating part of the
financial statements, in accordance with the accounting practices adopted
in Brazil. The statements of cash flow were submitted to the same auditing
procedures described in the second paragraph and, in our opinion, they are
fairly presented in all their material aspects regarding the financial statements
taken as a whole.
Curitiba February 26, 2007.
ERNST & YOUNG
Auditores Independentes S.S.
CRC (Regional Accounting Council)-2-SP 15199/O-6 -F- PR
Marcos Antonio Quintanilha
04
Accountant CRC-1-SP-132776/O-3 T-SC-S-PR
all | américa latina logística AND ITS SUBSIDIARIES |
BalaNCE SHEET
ended on December 31 (in thousands of reais)
ASSETS
Current assets
Cash and cash equivalents
Trade accounts receivable
Inventories
Lease and concessions
Taxes recoverable
Deferred income tax and social contribution
Dividends and interest on own capital
Advances and other accounts receivable
Prepaid expenses
Total current assets
Non-current assets
Long-term assets
Credits with related companies
Lease and concessions
Taxes recoverable
Deferred income tax and social contribution
Judicial deposits
Long-term investments
Other accounts receivable
Prepaid expenses
Total Long term assets
Permanent assets
Investments
Intangible assets
Fixed assets
Deferred charges
Total permanent assets
Total non-current assets
Total assets
The notes are an integral part of the financial statements
Consolidated
2006
2005
2006
2005
5
6
7
8
9
10
270,067
250,282
17,762
20,257
141,537
15,044
2,477
467,144
21,421
6,630
33,999
14
1,528
313,874
1,739,040
111,317
70,995
6,182
152,771
36,082
1,006,282
68,434
28,164
10,075
126,711
21,922
44,543
9,634
2,170,564
13,012
8,708
1,283,308
29,319
6,654
18,753
34,085
28,869
6,099
122,594
55,677
63,635
378,140
203,094
43,619
19,495
892,353
2,694
84,427
10,732
65,463
24,155
17,794
27,963
11,499
244,727
2,536,962
137
2,840,460
445,741
5,823,300
6,715,653
8,886,217
234,410
137
850,421
42,305
1,127,273
1,372,000
2,655,308
19
8
9
10
18
11
1,063,059
7,393
1,152,609
12
13
14
3,163,209
137
4,286
120,467
3,288,099
4,440,708
4,907,852
308,222
4,531
3,686
351,962
860,337
137
860,474
1,212,436
1,526,310
0
Parent Company
Note
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Balance Sheet
ended on December 31 (in thousands of reais)
Parent Company
LIABILITIES
Current liabilities
Suppliers
Loans and financings
Debentures
Other taxes payable
Lease and concessions
Payroll and related charges
Advances from clients
Lease
Other accounts payable
Dividends and interest on own capital
Total current liabilities
0
Non-current liabilities
Long-term liabilities
Loans and financings
Debentures
Debts payable from related companies
Provision for contingencies
Lease and concessions
Provision for unrealized profit
Lease
Other accounts payable
Provision for unsecured liabilities in subsidiary
Deferred income
Total non-current liabilities
Minority interest in subsidiaries
Shareholders’ equity
Capital stock
Capital reserves
Profit reserves
Accrued losses
Advance for future capital increase
Total shareholders’ equity
Total liabilities and shareholders’ equity
Note
2006
2005
15
16
1,083
1,621
187,578
2,415
11,567
22,239
3,472
15,842
208,539
179
38,483
75,940
15
16
19
18
17
20
28
640
1,035,000
12,029
796
485,957
5,956
12
21
1,189,563
17
28
15,593
2,252,825
Consolidated
2006
2005
333,502
231,936
224,342
180,300
16,990
95,648
29,586
18,380
93,855
15,964
1,240,503
288,404
167,131
22,239
116,808
22,909
32,437
13,046
2,324,861
1,573,516
650
442,794
664,373
1,688
38,483
703,145
427,808
485,957
15,523
52,621
16,337
509,046
7,066
165,691
26,765
25,443
5,204,394
8,692
1,017,366
19
22
2,129,475
32
315,999
682,190
32
259,058
982
2,446,488
4,907,852
44
941,324
1,526,310
2,129,475
32
315,999
(5,168)
982
2,441,320
8,886,217
682,190
32
259,058
(6,546)
44
934,778
2,655,308
The notes are an integral part of the financial statements
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Statement of income
Years ended on December 31 (in thousands of reais)
Gross revenue from services
Gross revenue from sales and/or services
Gross revenue deductions, mainly taxes
(ICMS, ISS, PIS and COFINS)
Net revenue from services
Cost of services provided
Gross profit
Income from shareholding
Equity accounting
Provision for unsecured liabilities in subsidiaries
Goodwill amortization in subsidiaries
Provision for loss in investment
Other operating income (expenses)
Selling
General and Administrative
Other operating income
Operating result before financial result
Financial
Financial expenses
Financial income
Operating profit
Non-operating income, net
Income before taxes
Provision for income tax and social contribution
Deferred income tax and social contribution
Minority interest in subsidiaries
Net income for the year
Number of shares at the end of the year (in thousands)
Net income per thousand shares at the end of the year – R$
The notes are an integral part of the financial statements
12
12
12
12
25
25
24
9
Consolidated
2006
2005
2006
2005
15,550
960
1,981,152
1,249,289
(2,027)
13,523
(255)
13,268
37,937
203,779
(103,461)
(7,269)
(55,112)
(6,962)
(92)
868
(255,020)
1,726,132
(1,106,963)
619,169
(62,899)
1,444
(162,326)
1,086,963
(668,495)
418,468
(8,193)
1,241
(9,434)
(80,208)
(7,659)
(87,480)
14,931
330,067
(127,839)
(301,924)
174,085
202,228
7,558
868
179,493
186,757
(7,264)
(7,706)
744
44,243
16,009
(139,592)
155,601
60,252
(148)
(7,628)
744
173,477
(9,336)
(84,341)
75,005
164,141
(288)
(9,231)
(55,112)
(108,662)
(23,300)
(101,893)
16,531
447,608
(337,353)
(652,338)
314,985
110,255
(3,434)
60,104
(5,911)
20,486
163,853
(796)
6,763
106,821
(46,998)
16,359
209,786
(53,219)
14,662
74,679
2,870,595
169,820
222,717
(122)
76,060
2,870,595
(31)
171,198
222,717
26,0152
762,49
26,496
768,68
(6,884)
0
Parent Company
Note
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Statement of changes in shareholders’ equity
ended on December 31 (in thousands of reais)
Paid-up capital
Capital reserve
Subscribed
capital
Capital to
be paid
Goodwill on
share issue
Legal
reserve
Investment
reserve
On December 31, 2004
Capital subscription and payment
Transfer of long-term liability
Net income for the year
Appropriation of net income for the year:
Reserve constitution
Proposed dividends
Interest on own capital
644,089
44,693
(27,165)
20,573
32
8,342
121,228
On December 31, 2005
Capital subscription and payment
Net income for the year
Advance received
Appropriation of net income for the year:
Reserve constitution
Proposed dividends
Interest on own capital
688,782
1,447,853
0
On December 31, 2006
Profit reserve
Retained
earnings
AFCI
169,820
746,526
65,266
44
169,820
(129,488)
(20,332)
(20,000)
(20,332)
(20,000)
44
8,491
(6,592)
(568)
32
16,833
120,997
242,225
44
74,679
938
3,734
2,136,635
(7,160)
32
20,567
53,207
295,432
Total
(56,941)
(2,738)
(15,000)
941,324
1,447,285
74,679
938
(2,738)
(15,000)
982
2,446,488
The notes are an integral part of the financial statements
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Statements of changes in financial position
ended on December 31 (in thousands of reais)
Parent Company
From shareholders
Capital payment
Advance for future capital increase
From third parties
Increase in long-term liabilities
By transfer of long-term assets
to current assets and investments
Loans, financing and debentures
Sale of fixed assets
Sale of share ownership
Dividends and interest on own capital received
Total sources
The notes are an integral part of the financial statements
2005
2006
2005
(60,026)
74,679
(40,472)
169,820
476,156
76,060
355,579
171,198
(203,779)
103,461
55,112
(186,757)
(1,444)
(1,241)
55,112
122
2,041
5,453
7,264
(96,249)
(30,055)
(744)
(744)
132,464
9,231
18,288
31
(5,916)
56,369
9,434
11,651
174,356
(1,162)
100,950
(521)
13,129
(8,900)
22,524
1,448,223
1,447,285
938
65,266
65,266
1,448,223
1,447,285
938
65,266
65,266
128,556
6,073
259,319
306,753
79,676
213,695
227,077
205,673
122,483
53,646
1,516,753
284,113
205,673
6,961
1,061
2,231,132
634,540
0
Sources of funds
From social operations
Net income for the year
Expenses (revenues) that do not represent
movement in the working capital:
Equity accounting
Provision for unsecured liabilities
Provision for loss in investment
Minority interest in subsidiaries
Residual value of permanent assets written-off
Depreciation and amortization
Goodwill amortization in subsidiaries
Provision for contingencies
Financial charges of long-term assets and
liabilities, net
Realization of deferred income
Realization of unrealized income
Deferred income tax and social contribution
Foreign exchange variation on foreign subsidiaries
Consolidated
2006
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Statements of changes in financial position
ended on December 31 (in thousands of reais)
Parent Company
Consolidated
2006
2005
2006
2005
17,738
690,874
40,332
277,462
17,738
111,269
40,332
17,940
1,331,846
4,511
32,589
50
255,276
5,557
(548,887)
42,903
1,411,117
372,354
5,278
1,101,426
(1,137,948)
1,496,082
393,286
1,881,234
515,071
20,671
(109,173)
349,898
119,469
Current liabilities
At the beginning of the year
At the end of the year
153,270
313,874
467,144
(92,599)
406,473
313,874
887,256
1,283,308
2,170,564
310,446
972,862
1,283,308
Current liabilities
At the beginning of the year
At the end of the year
132,599
75,940
208,539
16,574
59,366
75,940
537,358
703,145
1,240,503
190,977
512,168
703,145
Increase (decrease) in net working capital
20,671
(109,173)
349,898
119,469
Uses of funds
Dividends and interest on own capital
Increase in long-term assets
In permanent assets
Investments
Fixed assets
Deferred assets
Non-current assets of company acquired in the year
By transfer from long-term liabilities to current liabilities
Total uses
Increase (decrease) in net working capital
195,916
10
Changes in net working capital
The notes are an integral part of the financial statements
all | américa latina logística AND ITS SUBSIDIARIES |
1 . O perations
According to the commitments taken by parent company ALL - América Latina
Logística do Brasil S.A. with the BNDES, the Company should adapt its Bylaws to
(a) The Company
the rules of the Novo Mercado (New Market) of BOVESPA by February 1, 2004.
ALL - América Latina Logística S.A. (the “Company” or “Parent Company”) was
Management requested and obtained from BNDES on March 7, 2006, the extension
established on September 30, 1997 and started its operating activities in April 1999,
of this deadline for February 1, 2008, therefore, eliminating all the penalties
when the shareholders of former Ferrovia Sul-Atlântica S.A. (currently ALL-América
determined (early maturity of the debt and execution of guarantees).
Latina Logística do Brasil S.A., ALL Brasil) contributed all of the shares of ALL Brasil in
exchange for all of the Company’s shares.
The Company operates rail transportation in Southern Brazil through ALL Brasil,
and in the Central-West region and State of São Paulo through the concessionaires,
The Company’s mair corporate objectives are:
indirect subsidiaries, Ferroban, Ferronorte and Novoeste, of Brasil Ferrovias and
t o hold stock ownership in other companies, ventures and consortia, the purpose
Novoeste Brasil, recently acquired by the Company, as mentioned in Note 12. It
of which is related to transportation services, including rail transportation;
operates in Argentina through its subsidiary ALL - América Latina Logística –
Argentina S.A. (ALL Argentina), holding company of ALL - América Latina Logística
t o perform activities relating to transportation services, such as logistics, intermodal
- Central S.A. (ALL Central) and ALL - América Latina Logística - Mesopotámica S.A.
transportation, port operations, movement and storage of goods, operation and
(ALL Mesopotámica), and also provides road transportation services in Brazil through
administration of storage warehouses and general warehouses;
ALL - América Latina Logística Intermodal S.A. (ALL Intermodal).
t o acquire, lease or lend locomotives, wagons and other rail equipment to
ALL Brasil holds the right to operate part of the Brazilian rail network (Malha
third parties;
Ferroviária Sul - Southern Rail Network), with a total length of 6,586 km, by February
2027, a period that may be renewed by the granting authorities for an additional
t o perform other activities within the Company’s structure;
30 years, covering the States of Paraná, Santa Catarina and Rio Grande do Sul. The
Company also has an agreement to operate, on an exclusive basis, 874 km of rail
m
ultimodal transportation operator.
lines in the State of São Paulo.
Brasil Ferrovias is a publicly-held company and holding of the cargo rail
its investors and the market with full business transparency, on May 31, 2004 ALL
transportation industry, the predominating activity of which being the direct
joined the Special Corporate Governance Practices - Level 2 implemented by the
control of the concessionaires Ferronorte S.A. Ferrovias Norte Brasil (Ferronorte) and
São Paulo Stock Exchange (BOVESPA), where its shares are traded. ALL is the first
Ferroban – Ferrovias Bandeirantes S.A. (Ferroban), the indirect control of Portofer
land freight transportation Company to join this special corporate governance
Transportes Ferroviários Ltda. (Portofer), and shared control of Terminal XXXIX de
level, undertaking to fully comply with the related requirements.
Santos S.A. (Terminal XXXIX).
11
Considering the appreciation potential of its assets and with a view to providing
all | américa latina logística AND ITS SUBSIDIARIES |
Ferroban has the right to operate part of the Brazilian rail network, with an approximate
Novoeste Brasil S.A. (Novoeste Brasil) is a closely-held company and holding of the cargo rail
length of 4,186 km by December 2028, a period that may be renewed by the granting
transportation industry, resulting from the partial spin-off of Brasil Ferrovias, which occurred
authorities for an additional 30 years, covering the entire State of São Paulo.
on May 13, 2005, and it is the parent company of Ferrovia Novoeste S.A.
Ferronorte is a logistics Company which links the North and Central-West regions to the
Ferrovia Novoeste S.A. (Novoeste) has the right to operate part of the Brazilian rail
South and Southeast regions of Brazil and to Port of Santos. It is the only railroad in the
network, with an approximate length of 1,600 km by July 2026, a period that may
Country recently built with private capital. Its concession agreement was executed on May
be renewed by the granting authorities for an additional 30 years. The railroad has
19, 1989, between the Federal Government and Ferronorte, by which the concession for the
interconnection with waterway terminals in Porto Esperança and Ladário, both in the
development of a cargo rail system was granted to Ferronorte, comprising the construction,
State of Mato Grosso do Sul, and it interconnects with Ferroban, in Bauru (State of São
operation, exploration and preservation of the road between Cuiabá (State of Mato Grosso)
Paulo) and the Bolivian Ferrovia Oriental in Corumbá (State of Mato Grosso do Sul).
and Uberlândia, Santa Fé do Sul, Porto Velho and Santarém, for a 90-year period, which may
be extended for another 90 years. There are no payment obligations at any amount while
ALL Central has the right to operate part of the Argentine rail network, in a total length
the agreement is valid.
of 5,690 km, the main lines of which extend from Mendoza, on the Chilean border, to
Buenos Aires, by August 2023, a period that may be renewed for an additional 10 years.
The first segment of Ferronorte was inaugurated in 1999, with a length of 421 km,
ALL Mesopotámica has the right to operate part of the Argentine rail network, in a total
connecting Aparecida do Taboado (State of Mato Grosso do Sul) to Alto Taquari (State of
length of 2,704 km, the main lines of which extend from Buenos Aires to Uruguaiana, by
Mato Grosso). In April 2002, another 90-km segment was inaugurated, interconnecting
October 2023, a period that may also be renewed for an additional 10 years. In Uruguaiana
Alto Taquari and Alto Araguaia, both in broad gauge. With the continuity of the expansion
these networks are interconnected to the rail network of ALL in Brazil and the border with
project, Ferronorte will reach Rondonópolis (State of Mato Grosso), and afterwards Cuiabá
Paraguay, in Corrientes.
(State of Mato Grosso).
Boswells S.A. is a financial investment company based in Uruguay.
Portofer is a special purpose company constituted on June 28, 2000 by Ferronorte and
by Ferroban, partners which hold 50% of its quotas each. It controls 90 km of railroads in
ALL Intermodal provides logistics and road transportation services, mainly by
Port of Santos, and its goal is to perform the rail movement of goods in the port, through
trucks, to the most populated Brazilian regions. This Company also distributes
an agreement executed with CODESP (Companhia Docas do Estado de São Paulo) for a
goods in urban areas and provides road freight services.
25-year period, which may be extended by mutual agreement between the parties.
On December 1, 2001, the Company sold all of its partner rights in ALL Argentina to
Logispar Logística e Participações S.A. (Logispar), a Company’s jointly-controlled
TERMAG were executed on August 8, 1997 between Ferronorte and CODESP. The period for
subsidiary, for R$256,201. At that time, this amount was equivalent to the amount
the concessions is 25 years, which may be extended under agreement between the parties.
paid in May 1999 by ALL Argentina for the acquisition of ALL Central and ALL
12
The concession and lease agreements related to the terminals Terminal XXXIX, TGG and
all | américa latina logística AND ITS SUBSIDIARIES |
Mesopotámica, plus irrevocable advances for capital increases made up to that
a ll rights and privileges transferred to the Companies will return to the Federal
date, approximating its market value according to the valuation report prepared by
Government, together with leased assets and those resulting from investments
independent appraisers. On December 31, 2003, the Company reacquired all the
that are considered reversible by the Federal Government for being necessary to
shares of Logispar at market value.
the continuous rendering of services under the concession.
Based on the Extraordinary General Meeting held on March 29, 2006, the right of
the assets considered reversible will be indemnified by the Federal Government
enjoyment over ALL Argentina’s shares was transferred from Logispar to the Company,
at the residual cost value, calculated in accordance with the accounting records
by means of Capital Stock reduction, and its purpose was to directly concentrate the
of the Companies, net of depreciation; this cost will be subject to technical and
rights and obligations over issuance shares and rights over AFAC’s (advances for future
financial analyses by the Federal Government. Any and all improvements made
capital increase) made in ALL Argentina at the Parent Company.
to the permanent track superstructure will not be considered as investments for
indemnification purposes.
On September 29, 2006, the Board of Directors approved and merged Logispar’s
net assets by its parent company ALL.
The Company’s activities are focused on the control and planning of operational,
commercial and strategy activities of the subsidiaries, in addition to the supply
of financial resources to enable the subsidiaries’ operations.
(b) Limitations and conditions to operate the concession granted to ALL Brasil,
Ferroban and Novoeste
The Companies are subject to complying with specific conditions established in
the privatizations offer and in the concession agreements for the operation of
Rail Networks.
The concession agreements of these subsidiaries may be terminated in view of
the following events: expiration of the contractual term; expropriation; forfeiture;
termination; annulment and bankruptcy; or extinguishment of the concessionaire.
The main impacts of the extinguishment of any of the concessions would be
13
as follows:
all | américa latina logística AND ITS SUBSIDIARIES |
2 . P resentation of the
financia l state m ents
(a) Overall aspects
As a result of the settlement of transactions comprising these estimates, values
The financial statements were prepared and are presented in conformity with the
may be materially different from those recorded in the financial statements due to
accounting practices adopted in Brazil, considering the accounting guidelines
inaccuracies inherent to the estimate process. The Company reviews its estimates
set forth in the corporation law and in the rules of the Securities and Exchange
and assumptions at least quarterly.
Commission of Brazil - CVM.
Assets and liabilities are classified as current when its realization or settlement is
The authorization for the conclusion of the preparation of these financial statements
probable to take place in the next twelve months. Otherwise, they are stated as
occurred at the meeting of the board of executive officers held on February 16, 2007.
non-current. Monetary foreign currency denominated assets and liabilities were
The preparation of the financial statements requires the Management to make
from the translation of currency were recognized in the statement of income. For
estimates based on assumptions that affect the values of assets, liabilities, revenues,
subsidiaries located abroad, its assets, liabilities and income ended on December
expenses and disclosures presented in the financial statements. Material items
31, 2006 were translated into reais according to the exchange rate on the balance
subject to these estimates and assumptions include the selection of the useful
sheet closing date, R$0.699839 to P$1.00 (Argentine peso) (on December 31, 2005
life of the fixed assets and their recoverability in operations, credit risk analysis to
- R$0.773785 to P$1.00) to Companies headquartered in Argentina and R$2.138 to
determine the allowance for doubtful accounts, as well as the analysis of other risks
US$1.00 (U.S. dollar) (on December 31, 2005 – R$2.3407 to US$1.00). Exchange gains
to determine other provisions, including provision for contingencies and assessment
(losses) of foreign currency denominated investments are recorded in the result
of financial instruments and other assets and liabilities on the balance sheet date.
under the item financial income (expenses).
14
translated into reais according to the balance exchange rate. Differences resulting
all | américa latina logística AND ITS SUBSIDIARIES |
(b) Consolidated financial statements
The consolidated financial statements comprise the Company’s operations and
the following subsidiaries’ operations, the percentage ownership of which on the
balance sheet date is summarized as follows:
Ownership %
2005
100.00
100.00
100.00
99.00
100.00
95.83
100.00
100.00
100.00
99.00
100.00
100.00
100.00
39.99
100.00
100.00
100.00
39.99
Indirect Subsidiaries
Investee of ALL Intermodal
ALL-América Latina Logística Armazéns Gerais Ltda. (ALL Armazéns Gerais)
ALL-América Latina Logística Equipamentos Ltda.. (ALL Equipamentos)
100.00
4.17
100.00
Investee of Armazéns Gerais
PGT Grains Terminal S.A. (PGT)
100.00
100.00
Investee of Logispar
ALL-América Latina Logística Argentina S.A. (ALL Argentina)
ALL-América Latina Logística Equipamentos Ltda. (ALL Equipamentos)
Boswells S.A.
100.00
100.00
100.00
continues
15
Direct Subsidiaries
ALL-América Latina Logística do Brasil S.A. (ALL Brasil)
ALL-América Latina Logística Intermodal S.A. (ALL Intermodal)
ALL-América Latina Logística Overseas Ltd. (ALL Overseas)
ALL-América Latina Logística Tecnologia Ltda. (ALL Tecnologia)
ALL-América Latina Logística Centro-Oeste Ltda. (ALL Centro-Oeste)
ALL-América Latina Logística Equipamentos Ltda.
Logispar Logística e Participações S.A.
ALL-América Latina Logística Argentina S.A. (ALL Argentina)
Santa Fé Vagões S.A.
Brasil Ferrovias S.A. (Brasil Ferrovias)
Novoeste Brasil S.A. (Novoeste Brasil)
Boswells S.A.
2006
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Ownership %
2006
Investees of Brasil Ferrovias
Nova Ferroban S.A. (Nova Ferroban)
Ferronorte S.A. – Ferrovias Norte Brasil (Ferronorte)
Ferroban – Ferrovias Bandeirantes S.A. (Ferroban)
80.00
97.55
30.52
Investee of Nova Ferroban
Ferroban – Ferrovias Bandeirantes S.A. (Ferroban)
66.42
Investee of Ferroban
Portofer Transporte Ferroviário Ltda. (Portofer)
50.00
Investee of Ferronorte
Portofer Transporte Ferroviário Ltda. (Portofer)
Terminal XXXIX de Santos S.A (Terminal XXXIX)
Ferronorte Locadora de Vagões S.A. (Ferronorte Locadora)
Tenorte S.A.
16
Investee of Novoeste Brasil
Ferrovia Novoeste S.A. (Novoeste)
Investee of ALL Argentina
ALL-América Latina Logística Central S.A. (ALL Central)
ALL-América Latina Logística Mesopotámica S.A. (ALL Mesopotámica)
2005
50.00
50.00
100.00
100.00
100.00
73.55
70.56
73.55
70.56
all | américa latina logística AND ITS SUBSIDIARIES |
ALL Central and ALL Argentina have the following minority interest breakdown on
For Companies ALL Argentina (direct subsidiary), ALL Central (indirect subsidiary), ALL
December 31, 2006:
Mesopotámica (indirect subsidiary), headquartered in Argentina and Boswells S.A.
(direct subsidiary), headquartered in Uruguay, analyses were carried out with a view to
adapting the accounting principles adopted in Argentina and Uruguay to the accounting
principles adopted in Brazil. Except for the indirect subsidiaries ALL Central and ALL
% interest
ALL Central
ALL Mesopotámica
6.45
2.74
Mesopotámica, which amortize the organization expenditures and pre-operating costs
under the item deferred permanent assets for periods which differ from the criteria used in
the balance sheets in compliance with Brazilian rules, no other differences in accounting
Railroad Development Corporation
Alesia S.A.
3.64
Petersen, Thiele Y Cruz S.A.
3.06
practices were identified.
Besides the investments in Santa Fé Vagões S.A. and Terminal XXXIX, whose controls are
Ministerio de Economía y Obras y Servicios
Públicos de la Nación
shared with other shareholders, assets, liabilities and results are consolidated proportionally
to the interest in the Capital Stock of those investees. For the subsidiaries, direct and
16.00
16.00
4.00
4.00
indirect ones, their total assets, liabilities and results were consolidated, highlighting, when
applicable, the interest of minority shareholders in shareholders’ equity and in the result of
Other – Individuals
the periods. Investments in subsidiaries, non-realized profits and the portion correspondent
to its shareholders’ equity were eliminated in the consolidation, as well as asset and liability
balances, revenues and expenses resulting from transactions realized among consolidated
companies, as indicated in Notes 12 and 19.
The fiscal years of the subsidiaries included in the consolidated are coincident with the
parent company’s and the accounting practices evenly applied in the consolidated
The financial statements of indirect subsidiaries based on Argentina, used for consolidation
companies and consistent with those used in the previous year.
purposes, consider as a whole the inflationary effects of such country up to August 31, 1995
and from January 1, 2002 to February 28, 2003.
ALL Argentina negotiated with its minority shareholder Railroad Development Corporation
The conciliation of net income for the year and shareholders’ equity between the parent
The trading depends on the approval of the share transfer by the Argentine government.
company and the consolidated is summarized as follows:
17
the acquisition of its interest of 6.45% and 2.74% of ALL Central and ALL Mesopotámica.
all | américa latina logística AND ITS SUBSIDIARIES |
(d) Complementary information
As complementary information, the Company is also presenting the statements
Shareholders’ equity
Parent company
2006
2005
2006
2005
2,446,488
941,324
74,679
169,820
(5,168)
(6,546)
1,381
1,378
Gain in the variation
of interest
Realization in the year of
the gain in the variation
of interest
Consolidated
Net income for the year
of cash flows. Such statements were prepared according to the rules established
by IBRACON, Brazilian Institute of Independent Auditors and Accounting
Federal Council, introduced in Note 30.
3 . Su m mary of the main accounting practices
2,441,320
934,778
76,060
171,198
(a) Cash and cash equivalents
They include the balances in current account and redeemable financing
investments in the term of 90 days of the balance sheet date, including, when
The gain of interest refers to the subscription and payment, on August 22, 2000,
applicable, income earned by the balance sheets dates.
by ALL - América Latina Logística do Brasil S.A. of 16,573,431 shares of Itacaiúnas
Participações S.A., with goodwill of R$21,193. Such subscription generated variation
(b) Allowance for doubtful accounts
in the parent company’s interest from 100% to 63.03% of the capital with capital
The allowance for doubtful accounts is established in an amount considered
gain of R$13,782. The realization of this gain will take place as the locomotives,
sufficient by management to cover possible losses on the realization of credits,
which originated the value of referred goodwill, are depreciated.
considering the client portfolio profile, the economic scenario and specific risks.
(c) Comparability of the financial statements
(c) Inventories
The comparison of the consolidated financial statements was significantly
Inventory items are evaluated by their average acquisition costs, which do not
affected by the acquisition of investments in the subsidiaries Brasil Ferrovias S.A.
exceed the realization amounts.
and Novoeste Brasil S.A., as mentioned in Notes 1(a) and 12. The consolidated
(d) Lease and concessions (assets)
consolidated, as well as the results of the operation related to the period from
Lease and concession prepaid amounts are recorded at cost and allocated to
June 1 to December 31, 2006.
result according to the remaining concession term.
18
balance sheet of these companies drawn up on December 31, 2006 were
all | américa latina logística AND ITS SUBSIDIARIES |
(e) Investments
(j) Advances for future capital increase
The significant investments in subsidiaries and affiliated companies were appraised by
The Company records the amounts related to advances for future capital increase,
the equity method of accounting, adjusted to the recovery value when it is lower, as
received from participants of the Stock Option Plan described in Note 22, in
shown in Note 12; goodwill recorded upon the acquisition of subsidiaries based on
shareholders’ equity account, considering the control and expectation that the
expectation of future profitability is amortized on a straight-line basis over the remaining
Company has for resolution on conversion of advances in capital increase.
concession term based on the curve of future economic benefits generation.
(k) Taxation
(f) Fixed assets
Charges (PIS, Cofins, ICMS and ISS) incurring on revenues from services rendered
Recorded at the acquisition, formation or construction cost (including interest and
are presented as sales deductions in the statement of income. Credits deriving
other financial charges linked to projects or constructions), whose depreciation is
from the non-cumulativity of PIS/COFINS are presented deductively of the cost of
recognized on the straight-line basis, considering the estimated economic useful life
services rendered in the statement of income.
of the assets at the annual rates described in Note 13.
Taxation on profit comprises the income tax and social contribution. The income
(g) Intangible assets
tax is computed on the taxable income by the 15% rate, increased of a 10%
Recorded at the acquisition and formation cost that do not overcome the
additional for profits that exceed R$240 in the 12-month period, whereas the
realization values.
social contribution is computed by the 9% rate on the taxable income, recognized
by the accrual method, therefore, inclusions to the accounting profit of expenses
(h) Deferred charges
temporarily non-deductible, or revenue exclusions, temporarily non-taxable, for
The portions of lease and concession cost, corresponding the pre-operating
determination of the current taxable income generate deferred taxable credits
phase of Brazilian operations were deferred and have been amortized also over
or debits.
the concession term, as described in Note 14. The pre-operating and studies and
projects expenditures are amortized within a five-year term, as from the occasion
Certain subsidiaries record the provision for income tax awnd social contribution
in which the benefits started to be generated.
on net income, adopting the taxation regime by taxable income computed based
on a percentage of gross sales or the taxation rules of the countries where these
(i) Determination of net income
are located.
Net income is determined by the accrual method. The revenues from services
Prepayments or amounts subject to offset are stated in the current or non-current
there is significant uncertainty of its realization.
assets, according to the estimate of its realization.
19
rendered are recorded as services are rendered. A revenue is not recognized if
all | américa latina logística AND ITS SUBSIDIARIES |
Deferred tax credits arising from tax loss or negative basis of social contribution
Argentine Government in May 2003 suspended the process for a few months and
are stated by the amount expected to be realized. Some subsidiaries present
in September 2003, the concessionaires were once again required to update
a historic of recurring losses and, therefore, do not comply with criteria which
data and to attend various meetings with government officers and advisers of
rule the recognition of tax credits of such type, as per rules of the Securities and
the Ministry of Federal Planning.
Exchange Commission, which will be recognized only when such conditions are
fully reached. The recognized tax credit, as well as the basis of potential credits, not
On July 18, 2005, Provisions 18/2005 and 19/2005 of the Unit for Renegotiation
yet recognized in accounting statements, is disclosed in Note 10.
and Analysis of Public Services Agreements were published on the Official Bulletin
of the Argentine Government, relative to the Letter of Understanding resulting
from renegotiations for commitments to the concession agreement between ALL
Central and ALL Mesopotámica with the Argentine Government. On October 20,
2006, ALL Central and ALL Mesopotámica executed new Letters of Understanding
with the Unit for Renegotiation and Analysis of Public Services Agreements
4 . A r g entine subsidiaries re l ationship w ith the g rantin g authorities
in order to replace the prior Letter. The effects and commitments arising from
this concession are reflected in the Financial Statements, even considering that
the referred Letters shall be analyzed and approved by the Argentine National
(a) Renegotiation of the concession agreement
Congress and by the President of the Republic of Argentina. The referred Letters
From July 1997 to March 2001, through Decree 605/97, the Argentine Executive Power
mainly establish the following:
ordered the Transportation Secretariat to renegotiate all concession agreements for
freight rail transportation services, and there were various discussions and analysis
(i) Annual investment plan
resulting in the proposal of an addendum, which was null and void.
As of January 2006, the concessionaries must carry out annual investments in an amount
equivalent to 9.5% of total net revenues of ALL Central and ALL Mesopotámica related to the
With the enactment of Law 25,561, a new turning point for the renegotiation of
previous quarter. In 2006 these companies made investments at the amount of R$20,474 and
concession agreements was introduced, and on April 10, 2002, a presentation
R$8,849 respectively, which are higher than the minimum assumed commitments.
was delivered to the Argentine Minister of Economy through which the process
was reinitiated.
(ii) Concession fee (“canon”)
As of January 1, 2006, the amount corresponding to 3% of total net revenues of ALL
Central and ALL Mesopotámica referring to the previous year will be considered
for the renegotiation of all concession agreements. This committee reports
as the amount of the concession fee (“canon”). During 2006, these Companies
simultaneously to the Ministry of Economy and to the Ministry of Federal
recorded expenses of R$3,124 and R$1,169, respectively, having as counter-entry
Planning, Public Investments and Services. The change in the management of
the lease and concession payable account.
20
In 2003, the Executive Power issued Decree 311, creating a special committee
all | américa latina logística AND ITS SUBSIDIARIES |
The concession tariffs relating to the previous three-year periods were included as
the Argentine Government, and on April 26, 2004 that Government approved
an integral part of mutual claims negotiations, as described in item (iii).
the share transfer, which is now in progress.
(iii) Rights and obligations comprising the mutual claims
Additionally, ALL Argentina holds partner rights in ALL Central and ALL Mesopotámica,
The renegotiation of concession agreements includes the discussion on amounts
by means of a usufruct agreement entered into with the 5 shareholders in May 1999.
claimed by both Argentine Government and concessionaries, such as: investments
Under the terms of the usufruct agreement, ALL Argentina undertakes the rights (both
not complied with by concessionaries, amounts related to concession tariffs of
economic and political) and responsibilities as the shareholder of ALL Central and ALL
previous periods and losses incurred by concessionaires by unavoidable reasons
Mesopotámica. The term of the usufruct agreement shall expire upon the effective
(floods and other).
transfer of shares of ALL Central and ALL Mesopotámica to ALL Argentina.
Based on the Letters, the extinction of liabilities of the amounts related to
Also in May 1999, the Company entered into a purchase agreement with the 5
mutual claims balances, which totaled P$79,760 thousand and P$14,480
shareholders for the total number of shares of ALL Argentina and a usufruct agreement
thousand for ALL Central and ALL Mesopotámica, respectively, in favor of the
over the rights (both economic and political) over shares of ALL Argentina. The term of
Argentine Government, was set forth, and the concessionaries started to assume
the usufruct agreement is 20 years, automatically renewable if, up to the expiration of
investment commitments as from January 2006, which can not be lower than
the agreement, the Argentine Government does not express an opinion with regard to
3.17% and 1.54%, respectively, on net revenues of the previous year, respecting
the approval for the transaction. Should authorization be denied by the Government,
the minimum amounts of P$4,686 thousand and P$852 thousand, respectively.
the 5 shareholders irrevocably undertake to exercise the voting right over shares of ALL
The minimum investments required by the Letters commitments were fully
Argentina, in accordance with the Company’s instructions.
complied with by concessionaries in 2006.
Subsequently, as described in Notes 1(a) and 2, the Company sold all its partner
(b) Approval for transfer of shares
rights in ALL Argentina to Logispar, and reacquired these rights through the
On May 26, 1999, the indirect subsidiary ALL Argentina entered into an agreement
purchase of Logispar’s shares on December 31, 2003.
with Poconé Participações S.A., Judori Administração, Empreendimentos e
On March 29, 2006, the Company reacquired the usufruct right and obligations
Partners II L.P. and Emerging Markets Capital Investments (“the 5 shareholders”)
over ALL Argentina’s shares, as well as the right over advances for future capital
for the purchase and sale agreement for 73.55% of shares of ALL Central
increase (“aportes irrevocables”), described in Note 4(d), recorded in that investee,
and 70.56% of shares of ALL Mesopotámica. The amount of the transaction,
by means of capital stock reduction in Logispar (assignor of such rights and
equivalent to US$ 33,900 thousand at that time, was settled by means of offset
obligations). This transaction was supported by Appraisal Report issued by
against credits the subsidiary held with 5 shareholders. Pursuant to the terms of
independent experts and approved in Annual General Meeting held on the date
the concession agreement, this transfer of shares is subject to the approval by
mentioned above.
21
Participações S.A., Interférrea S.A. - Serviços Ferroviários e Intermodais, GP Capital
all | américa latina logística AND ITS SUBSIDIARIES |
(c) Advances for future capital increase (“aportes irrevocables”)
make any capital investment. This proposition was not accepted by ALL Argentina,
Considering the Resolutions of Inspección General de Justicia (“I.G.J”) 25/2004 and
therefore the Government pleaded a suit with the purpose of challenging this
1/2005, the direct subsidiary ALL - América Latina Logística Argentina S.A. should
decision. Until this moment, there was no definitive decision regarding this suit.
have destined the advances for future capital increase (“aportes irrevocables”),
granted by its former parent company Logispar which are recorded in their
The final treatment form of these advances and, therefore, their classification and
shareholders’ equity at the approximate amount of R$83,000 on December 31,
evaluation in ALL Central’s and ALL Mesopotámica’s balance sheet and the equity
2006, for a term, which expired on February 21, 2006 and which was not extended.
accounting calculation performed by ALL Argentina and recognition of respective
Such decision should imply the conversion of “aportes irrevocables” into capital
minority interests, depends on the legal adequacy to be granted when the closing
stock or reclassify them to a liability account.
of these discussions takes place. Until this moment, ALL Argentina recognizes its
100% interest on advances granted, without attributing any interest to the minority
Pursuant to Administrative Resolution applicable to the subsidiary, alterations
in its capital stock shall be previously approved by the Argentine Government.
Accordingly, the compliance with the conversion of “aportes irrevocables” into
capital stock depends on said approval, which until this present moment did not
occur. The subsidiary’s management issued a request of waiver to the application
of said Resolutions to I.G.J., in view of current regulatory impediment in carrying out
the conversion of said advances, and until the issue date of this Report, no definitive
decision was obtained.
The Management of the Company consistently maintains its commitment to
convert “aportes irrevocables” into capital stock in ALL Argentina, as well as ALL
Argentina to convert “aportes irrevocables” into capital stock in ALL Argentina and
ALL Mesopotámica.
Additionally, the indirect subsidiaries ALL Central and ALL Mesopotamica record
R$100,730 (P$143,900 thousand) and R$69,230 (P$98,900 thousand), respectively,
related to advances for capital increase (AFAC) received from its subsidiary ALL
Argentina. In April 2004, at the Shareholders’ Meetings of these companies, the
Argentine Government (minority shareholder) proposed the capitalization of such
22
AFACs, but, however, its interest should not be changed, although it would not
shareholder (Argentine Government), which may correspond to 16%.
all | américa latina logística AND ITS SUBSIDIARIES |
5. C ash and cash e q ui va l ents
Parent Company
Cash and banks
Financial Investments
Consolidated
2006
2005
2006
2005
58,842
211,225
293
249,989
99,854
1,639,186
18,343
987,939
270,067
250,282
1,739,040
1,006,282
These are substantially represented by short and long-term Bank Deposit Certificates
(CDB) with rates linked to the variation of the Interbank Deposit Certificate – CDI
(83.50% to 104% rates) and with daily liquidity, excepting the FAQ/FIF Exclusivo
investments, whose liquidity is lower than 90 days. The investment funds are also
measured through the Variation of the Interbank Deposit Certificate – CDI, however,
its financial results is post-fixed, occurring only on the redemption date.
The investments linked to the Austrian Notes may be redeemed at any moment
according to the Company’s decision, regardless the maturity term, with fiscal benefit
of Income Tax exemption and daily liquidity. The balance of financial investments is
23
set forth as follows:
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Amount
Institution
Parent company
FAQ/FIF Exclusivo Paranaguá
Banco ABN AMRO Real S.A..
Banco Alfa S.A.
Banco Brascan S.A.
Banco Bradesco S.A.
Banco Caixa Econômica Federal S.A.
Banco Itaú BBA S.A.
Banco J Safra S.A.
Banco Modal S.A.
Banco Pactual S.A.
Banco Panamericano S.A.
Banco Safra S.A.
Banco Santander S.A.
UNIBANCO
Banco Votorantim S.A.
Banco Industrial e Comercial S.A.
Credit Suisse First Boston S.A.
HSBC Bank Brasil S.A.
Direct Subsidiary – ALL Brasil
Banco BMC S.A.
Banco Pactual S.A.
FAQ/FIF Exclusivo Paranaguá
Fundo Mellon Brascan
Banco ABC Brasil S.A.
Banco ABN Amro Bank
Banco Alfa S.A
Type of investment
%CDI
Maturity
Investment fund
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
100.00
102.00
102.20
101.00
100.00
101.00
102.00
100.00
101.00
103.00
102.00
100.80
100.25
102.20
104.00
101.00
101.00
09/08/2007
05/28/2007
10/30/2006
10/15/2008
06/09/2007
08/04/2007
08/29/2007
08/21/2006
08/28/2007
10/29/2006
08/01/2008
04/08/2008
05/09/2009
08/22/2008
07/31/2008
09/06/2007
04/15/2007
Investment fund
Investment fund
Investment fund
Investment fund
CDB X CDI
CDB X CDI
CDB X CDI
101.00
100.78
101.60
06/22/2007
05/16/2008
02/23/2009
2006
2005
86,841
211,225
54,004
26,088
7,308
5,922
11,751
8,731
9,040
5,220
118
20,873
54
15,661
23,647
11,565
26,105
2,736
10,437
10,729
249,989
75,462
6,202
9,209
100
13,767
3,111
36,379
5,387
10
6,175
29,273
12,178
1,191
2,701
1,516
18,364
60,577
10,240
29,795
24
continues
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Amount
Banco BMG S.A.
Banco Bradesco S.A.
Banco Caixa Econômica Federal
Banco do Brasil S.A.
Banco Itaú BBA S.A.
Banco J. Safra S.A.
Banco Modal S.A.
Banco Pactual S.A.
Banco Pine S.A.
Banco Safra S.A.
Banco Santander S.A.
Banco Votorantim S.A.
Credit Suisse First Boston
HSBC Bank Brasil S.A.
Paraná Banco S.A
UNIBANCO
Banco Del Istmo Internacional Ltda
Credit Suisse First Boston S.A.
Direct Subsidiary – Logispar
Banco Itaú BBA S.A.
Direct Subsidiary – ALL Intermodal
Banco ABN Amro Bank
Banco Bradesco S.A.
Banco Caixa Econômica Federal S.A.
Banco Itaú BBA S.A
Banco do Brasil S.A.
UNIBANCO
Type of investment
%CDI
Maturity
2006
2005
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
TD – US$
Austrian Notes
103.00
100.20
100.00
100.00
100.50
100.25
100.00
101.00
103.00
102.00
100.78
102.20
101.05
100.30
103.00
100.09
10/22/2007
03/16/2009
12/18/2008
09/24/2009
09/14/2007
02/28/2008
08/21/2007
11/09/2007
05/12/2007
07/07/2008
05/16/2008
07/09/2008
11/02/2007
03/16/2009
05/12/2007
01/21/2008
710
52,533
173
72,341
41,281
20,005
626
36,434
9,012
15,526
3,505
12,889
406
30,803
125
36,926
26,592
26,572
22,737
41,708
83.50
08/03/2008
CDB X CDI
100.17
11/22/2007
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
CDB X CDI
100.50
100.50
100.00
101.00
100.00
100.06
09/25/2008
08/24/2007
01/18/2008
02/20/2009
05/17/2009
06/16/2006
56,864
136
41,803
31,953
63,926
21,521
91,595
7,374
99,748
2,708
663,582
1,372,993
79,238
2,935
280,964
719,511
6,870
6
1,014
14,440
293
9,238
24,991
5
1,204
1,500
1,214
118
4,041
continues
25
Institution
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Amount
Institution
%CDI
Maturity
CDB X CDI
100,50
11/15/2007
2,184
CDB X CDI
100,00
11/06/2007
2,182
Indirect Subsidiary – ALL Armazéns Gerais
Banco ABN Amro Bank
Indirect Subsidiary – ALL Equipamentos
Banco do Brasil S.A
Indirect Subsidiary – Boswells
Banco Itaú BBA S.A
Investment Fund
Shared Control – Santa Fé Vagões
Banco do Brasil S.A.
Investment Fund
Indirect Subsidiary – Ferronorte
Banco Itaú BBA S.A.
Indirect Subsidiary – Ferroban
Banco Itaú BBA S.A.
Indirect Subsidiary – Terminal XXXIX
UNIBANCO – União de Bancos Brasil.
2006
1,995
CDB X CDI
100,00
06/12/2007
2,944
CDB X CDI
100,00
06/12/2007
3,657
CDB X CDI
100,00
12/02/2007
486
CDB X CDI
100,00
04/07/2009
1,029
CDB X CDI
Investment Fund
100,00
05/15/2011
12,499
12
Indirect Subsidiary - ALL Central
Investment Fund
Subsidiaries
Consolidated
2005
3,121
Indirect Subsidiary – Ferronorte Locadora de Vagões
UNIBANCO – União de Bancos Brasil.
Ferrovia Novoeste
Banco do Brasil S.A.
Direct Subsidiary – ALL Argentina
Indirect Subsidiary – ALL Mesopotámica
26
Type of investment
41
3,134
4,221
1,427,961
1,639,186
737,950
987,939
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
6. Trade accounts receivable - consolidated
Subsidiaries
Trade accounts receivable
ALL Brasil
ALL Intermodal
ALL Armazéns Gerais
ALL Tecnologia
Santa Fé
Ferroban
Ferronorte
Ferrovia Novoeste
Terminal XXXIX
ALL Central
ALL Mesopotámica
2006
2005
135,286
31,744
16,803
216
4,577
1,096
15,318
17,658
11,780
1,494
28,214
6,386
88,049
29,433
21,251
157
341
(23,969)
(993)
(858)
(19,615)
(1,756)
(58)
(7)
ALL Central and ALL Mesopotámica maintain, among others, provision on amounts
receivable referring to toll revenue at the amount of R$9,240 on December 31,
29,178
7,689
2006 (R$10,836 on December 31, 2005).
ALL Central has been collecting under the administrative scope, amounts derived
Consolidated
(1,553)
(3,051)
(1,639)
(14,358)
(1,517)
(16,504)
(1,290)
111,317
68,434
from toll revenues receivable from “Unidad Ejecutora del Programa Ferroviário
Provincial” (“U.E.P.F.P.”) at the amount of R$5,420 thousand, whose probability of
success in the realization of such asset was classified as probable by our legal
advisors, however, they are not recorded, in view that the referred entity does not
recognize service provisions. As outlined in Note 6, for those amounts resulting
from toll revenue, the chances of losses of which were classified as probable,
provisions for doubtful accounts were made.
27
(-) Allowance for doubtful accounts
ALL Brasil
ALL Intermodal
ALL Tecnologia
Ferroban
Ferronorte
Ferrovia Novoeste
ALL Central
ALL Mesopotámica
all | américa latina logística AND ITS SUBSIDIARIES |
7 . I n v entories - conso l idated
Maintenance supplies
Raw material (railcars)
Finished products (railcars)
Fuel
Advances to suppliers
Materials in transit and others
2006
2005
52,695
2,394
9
3,125
8,242
4,530
18,304
70,995
28,164
2,819
4,145
2,896
8 . Lease and concessions - conso l idated
2006
28
Lease
ALL Brasil
ALL Intermodal
Ferroban
Novoeste
Prepaid right of way
ALL Brasil
Concessions
ALL Brasil
Ferroban
Novoeste
2005
Current
assets
Long-term
assets
Current
assets
Long-term
assets
2,734
52,410
2,734
5,930
55,144
1,760
166
36,955
3,064
1,262
24,990
1,261
26,251
150
97
13
2,881
2,042
252
150
3,032
6,182
122,594
10,075
84,427
all | américa latina logística AND ITS SUBSIDIARIES |
The lease of RFFSA’s assets, for a 30-year period, was contracted by ALL Brasil on
The 30-year concession for rail freight transportation services was obtained by ALL
February 27, 1997, for R$202,112, R$82,032 of which was paid in cash. The remaining
Brasil for R$10,830, R$4,510 of which was paid in cash. The remaining R$6,320 has
R$120,080 has been paid since January 15, 1999 in 112 quarterly installments
been paid since January 15, 1999, in 112 quarterly installments including interest of
including interest of 12% per annum, restated by the General Price Index – Internal
12% per annum, restated by the IGP-DI. The Company also provisions such liability
Availability (IGP-DI). The provision for this liability is described in Note 17.
as described in Note 17.
The long-term lease agreement of ALL Intermodal, relating to rolling stock owned
The 30-year concession for rail freight transportation services was obtained by
by Delara Brasil Ltda., and other accessory assets of this rolling stock have as
Ferroban – Ferrovias Bandeirantes S.A., for R$12,252, R$2,917 of which was paid
counterpart the payment of fixed amounts in cash and shares of the Company.
in cash. The remaining R$9,335 has been paid since December 15, 2000, in 112
The lease was amortized on a straight-line basis for a contractual 60-month period
quarterly installments including interest of 12% per annum, restated by the IGP-DI.
since June 2001.
The Company also provisions such liability as described in Note 17.
The lease of RFFSA’s assets, for a 30-year period, was contracted by Ferroban
The 30-year concession for rail freight transportation services was obtained by
– Ferrovias Bandeirantes S.A. – on December 30, 1998 for R$230,160, R$52,793 of
Ferrovia Novoeste S.A. for R$3,118, R$409 of which was paid in cash. The remaining
which was paid in cash. The balance of R$177,367 has been paid as from December
R$2,709 has been paid since January 15, 1998, in 112 quarterly installments including
15, 2000, in 112 quarterly installments including interest of 12% per annum, restated
interest of 12% per annum, restated by the IGP-DI. The Company also provisions
by the General Price Index – Internal Availability (IGP-DI). The Company provisions
such liability as described in Note 17.
such liability as described in Note 17.
The lease of RFFSA’s assets for a 30-year period, was contracted by Ferrovia
Novoeste S.A. on June 26, 1996 for R$56,440, R$4,969 of which was paid in cash.
The balance of R$51,471 has been paid as from January 15, 1998, in 112 quarterly
installments including interest of 12% per annum, restated by the General Price
Index – Internal Availability (IGP-DI). The Company provisions such liability as
described in Note 17.
Prepaid right of way refers to the amount paid by ALL Brasil to Ferrovia Bandeirantes
S.A. as a consideration for the use of the lines from Presidente Epitácio to Rubião
Júnior and from Pinhalzinho/Apiaí to Iperó (SP), in accordance with the agreement to
29
operate these lines for 30 years, which is also the accounting amortization period.
all | américa latina logística AND ITS SUBSIDIARIES |
9 - R ecov erab l e ta x es
2006
2005
Current assets
Long-term assets
Current assets
3,092
18,753
11,725
14,670
17,762
18,753
9,696
21,421
Value-added Tax on Goods
and Services – ICMS
36,817
31,291
9,707
9,942
Tax on Value Added – IVA
Withholding income tax - IRRF
Recoverable IR and CS - prepayment
Federal Tax Credits to offset
Others
1,589
21,676
18,475
47,322
9,130
1,113
2,320
9,317
2,499
73,729
7,718
790
135,009
36,924
105,290
10,732
152,771
55,677
126,711
10,732
Parent Company
Withholding income tax - IRRF
Recoverable Pis and Cofins
Recoverable IR and CS – prepayment
Long-term assets
Subsidiaries
Consolidated
4,520
ALL Brasil and ALL Intermodal acquired federal credits to offset with debts of other
management negotiated the restitution of federal credits recorded by ALL Brasil
federal taxes, such as: PIS, COFINS, IRRF and CSL. Such credits derive from lawsuits
at the amount of R$46,648 on December 31, 2006, and the allowance for doubtful
filed by third parties, with res judicata and without the possibility of filing an action to
accounts was recorded at the amount of R$16,240, related to the difference between
overrule a final judgment on the part of the federal government. The amount offset
the amount of credits to be restituted and liabilities owed to those sellers.
30
by both Companies until December 31, 2006 amounted to R$52,115. The Company’s
all | américa latina logística AND ITS SUBSIDIARIES |
1 0 . D eferred I nco m e ta x
and socia l contribution
The credits of the parent company’s deferred income tax and social contribution
are as follows:
Income tax credits
On tax losses
On temporary differences
Social contribution credits
On negative bases
On temporary differences
2005
Current assets
Long-term assets
Current assets
Long-term assets
12,771
2,124
6,024
19,041
3,576
1,299
17,667
3,560
14,895
25,065
4,875
21,227
4,598
764
2,142
6,878
1,287
468
6,360
1,282
5,362
9,020
1,755
7,642
20,257
34,085
6,630
28,869
31
2006
all | américa latina logística AND ITS SUBSIDIARIES |
Due to the expectation of future tax results, as well as in compliance with the
conditions set forth by the accounting practices in Brazil and rules of the Securities
and Exchange Commission of Brazil (CVM), the parent company recorded deferred
IR and CS credit.
The expectation of generation of future taxable income is basically founded on
the occurrence of future events, which will be materialized in a closer period.
Deferred income tax and social contribution credits of the parent company
and the subsidiaries ALL - América Latina Logística do Brasil S.A., ALL – América
Latina Logística Intermodal S.A. and ALL - América Latina Logística Argentina
are as follows:
2006
Income tax credits
On tax losses
On temporary differences
32
Social contribution credits
On negative bases
On temporary differences
2005
Current assets
Long-term assets
Current assets
Long-term assets
13,653
12,878
22,669
28,283
4,282
11,837
31,266
21,828
26,531
50,952
16,119
53,094
4,915
4,636
2,478
10,205
1,541
4,262
9,277
3,092
9,551
12,683
5,803
12,369
36,082
63,635
21,922
65,463
all | américa latina logística AND ITS SUBSIDIARIES |
Tax losses, negative bases and consolidated temporary differences are shown
as follows:
Consolidado
2006
Social Contribution
Income Tax
Social Contribution
84,944
7,478
84,917
7,478
91,264
7,863
29,158
91,238
7,863
29,158
216,159
1,162,688
1,138,029
319,636
1,560
3,078
216,159
1,162,688
1,138,029
319,636
1,560
3,078
79,752
76,788
2,979
11,354
436,345
115,037
85,048
811,642
44,894
79,752
76,788
2,979
11,354
436,345
115,037
95,048
811,642
44,894
35,599
62,833
1,956
35,599
60,267
1,956
51,705
33
Tax losses and negative bases
ALL – América Latina Logística S.A.
ALL – América Latina Logística Intermodal S.A.
Logispar Logística e Participações S.A.
Brasil Ferrovias
Ferroban
Ferronorte
Ferrovia Novoeste
Ferronorte Locadora de Vagões
Novoeste Brasil
Temporary differences
ALL – América Latina Logística S.A.
ALL – América Latina Logística do Brasil S.A.
ALL – América Latina Logística Intermodal S.A.
Brasil Ferrovias
Ferroban
Ferronorte
Ferrovia Novoeste
Nova Ferroban
ALL – Argentina – consolidado
2005
Income Tax
all | américa latina logística AND ITS SUBSIDIARIES |
The expectation of realization of deferred tax credits is as follows:
2007
2008
2009
2010 to 2023
Parent Company
Consolidated
20,257
2,130
2,130
29,825
36,082
22,369
10,174
31,092
54,342
99,717
The indirect subsidiaries ALL Central and ALL Mesopotâmica consolidated part of
The deferred tax assets on December 31, 2006, in the amount of R$99,717, are
their corporate reorganization process, and based on the expectation of future
based on a technical feasibility study approved by the Board of Directors, which
taxable results, the subsidiaries meet the conditions set forth by the accounting
presented future taxable income discounted at present value, in accordance with
practices adopted in Brazil for the recognition of the deferred income tax credit
CVM Instruction 371.
at the amount of R$15,713 on December 31, 2006 (in 2005 R$18,097), which were
recorded. The tax losses, according to the Argentine tax legislation, prescribe in
Tax losses and social contribution negative bases generated in the parent company
5 years, term considered enough by the management for the full recovery of the
and Brazilian subsidiaries do not become time-barred and will be offset with future
deferred income tax assets.
taxable income, according to the tax legislation criteria.
Tax losses and negative bases of Logispar Logística e Participações S.A. were fully
used with taxable income at the moment of its merger.
In the subsidiaries Brasil Ferrovias and Novoeste Brasil and its subsidiaries, such tax
credits were not recognized, in view of the history of losses during the last years and
the lack of a realization feasibility study of tax losses, negative bases and temporary
34
differences. These balances of tax losses and negative bases are under review.
all | américa latina logística AND ITS SUBSIDIARIES |
1 1 . Lon g - ter m in v est m ents
(a) Debentures - Parent Company
On June 17 2005, the Company acquired 27,459 registered debentures, nonconvertible into book-entry shares, at unit par value of R$10, of subordinated type,
relative to 1st tranche of 2nd issuance, through the private issue of ALL – América
Latina Logística do Brasil S.A.
On October 2, 2006, the subsidiary Brasil Ferrovias approved the issuance of
70,000 registered debentures, non-convertible into book-entry shares, at unit par
value of R$10, of subordinated type, relative to the Company’s 4th issuance. This is
related to a private issuance of the parent company.
On October 2, 2006, the subsidiary Novoeste Brasil approved the issuance of
15,000 registered debentures, non-convertible into book-entry shares, at unit par
value of R$10, of subordinated type, relative to the Company’s 1st issuance. This is
related to a private issuance of the parent company.
Tranche
Issue date
Amount
Final maturity
Annual yield
2006
2005
1st issue
4th issue
1st issue
17/06/2005
02/10/2006
02/10/2006
274,590
622,818
53,501
06/01/2015
10/02/2016
10/02/2016
CDI + 4%
CDI + 4%
CDI + 4%
385,248
624,690
53,121
308,222
1,063,059
308,222
35
Long-term assets
all | américa latina logística AND ITS SUBSIDIARIES |
(b) Marketable Securities
1 2 . I n v est m ents
The indirect subsidiary Ferrovia Novoeste holds LFT’s (Financial Treasury Bills),
with compensatory interest of 100% of CDI linked to banking surety rendering
(a) Investments in subsidiaries and affiliated companies
agreement at the fixed amount of R$147,572. Such surety is destined to the
guarantee of the amounts of overdue installments related to concession and
lease due by Ferrovia Novoeste S.A to RFFSA – in settlement and the Federal
Government. On November 28, 2005, they were redeemed and replaced by other
Parent Company
63,100 LFT’s, and on January 19, 2006, other 1,917 LFT’s held in custody with Banco
do Brasil S.A. in the amount of R$203,094, respectively, with maturity on December
16, 2009, classified as “long-term investments” in the consolidated balance sheet.
(c) Subscription bonus security
Interest in subsidiaries
Interest in affiliated
companiess
Goodwill in
subsidiaries
2006
2005
665,945
665,152
Consolidated
2006
2005
67,403
7,151
68,473
2,497,264
127,782
2,529,811
165,937
3,163,209
860,337
2,536,962
234,410
On June 21, 2004, the subsidiary Logispar Logística e Participações S.A. and the indirect
subsidiary ALL – América Latina Logística – Argentina S.A., swapped with “GEEMF II
Latin, America LLC”, the totality of shares held thereby issued by its subsidiary ALL
– América Latina Logística S.A. for subscription bonus securities issued by the latter
at the amounts of R$17,642 and P$198, respectively, with long-term maturities. The
subscription bonus of Logispar Logística e Participações S.A. and ALL Argentina
were sold on September 1, 2006 and October 11, 2006, by amounts near to the
36
market value of shares, resulting in gains of R$57,534 and R$3,778, respectively.
all | américa latina logística AND ITS SUBSIDIARIES |
(b) Chart of interest in subsidiaries and affiliated companies
Number of Shares/Owned quotas
ALL Brasil
ALL Intermodal
ALL Overseas
ALL Tecnologia
ALL Centro-oeste
ALL Equipamentos
Logispar
ALL Argentina
Santa Fé
Brasil Ferrovias
Novoeste Brasil
Boswells S.A.
% Voting
Preferred Shares
Total
Interest
2006
2005
2006
2005
2006
2005
2006
2005
9,914,626,262
9,914,626,262
15,084,057,716
15,084,057,716
100
100
100
100
63,844,232
63,844,230
100
100
100
100
11,000
7,000
100
100
100
100
999
999
99.9
99.9
99.9
99.9
499,999
24,192,631
499,999
99.9
95.83
99.9
99.9
95.83
99.9
343,291
3,298,470
50,000
570,051
6,404,530
25,000
29,996
99.99
100
14,996
39.99
100
100
39.99
50
4,731,051,827
1,672,758,809
100
100
46,670,083
6,934,891
100
100
100
100
60,000
50
37
Common Shares/Quotas
all | américa latina logística AND ITS SUBSIDIARIES |
Subsidiaries/affiliated companies
38
Direct Subsidiaries
ALL Brasil
ALL Intermodal
ALL Overseas
ALL Tecnologia
ALL Centro-oeste
ALL Equipamentos
Logispar
ALL Argentina
Santa Fé
Goodwill
Logispar
Santa Fé.
Brasil Ferrovias
Novoeste Brasil
Affiliated company
Geodex
Shareholders’
Equity
Income for
the period
Distributed
dividends
372,773
126,238
3,597
1
500
25,245
84,223
34,725
3
12,247
7,489
26,488
56,591
10,698
7,168
49,626
8,247
26,366
12,247
7,489
26,366
Parent Company
Equity accounting
2006
2005
Investments Amount
2006
2005
Received
dividends
(a) It comprises the
exchange variation on the
135,530
7,776
1,703
84,223
34,725
(275)
12,124
7,489
7,308
56,591
(2,495)
2,867
(a)
141,086
49,895
(571)
3,082
9,525
(b)
372,773
126,238
3,597
1
500
24,196
(17,380)
(c)
135,530
3,110
1,120
186,757
49,626
8,247
investee with functional
12,247
7,489
25,261
amount of (R$278).
212,395
457
2,364,380
132,427
1,222
203,779
338,177
99,762
2,786
1,907
10,025
3,163,209
currency in dollars in the
(b) Subsidiary purchased
by the merger of Logispar
100
676
127,732
50
on September 29, 2006.
(c) It comprises the
exchange variation on the
investee with functional
67,403
860,337
currency in pesos in the
103,546
amount of (R$13,193).
all | américa latina logística AND ITS SUBSIDIARIES |
(c) Subsidiaries with Negative Shareholders’ Equity
Related to those subsidiaries that present negative shareholders’ equity, the respective
provision was composed, which is being presented in the Long-term Liabilities group
in the balance sheet, and it was estimated as it follows:
Subsidiaries
Direct Subsidiaries
Brasil Ferrovias
Novoeste Brasil
Boswells
Unsecured liabilities
Income for the year
1,125,229
58,355
5,979
(85,767)
(17,701)
(3,867)
Parent Company
Write-off (provision) unsecured liabilities
2006
2005
(85,767)
(17,701)
7
(103,461)
Provision for unsecured liabilities
2006
2005
1,125,229
58,355
5,979
1,189,563
(d) General information
ALL Overseas: a wholly-owned subsidiary acquired in December 1999, and its corporate
Company had against Logispar at the amount of R$282,930 recorded under
purpose is to perform any activities that comply with Bahamian legislation.
the item “Accounts receivable – sale of subsidiaries” and loan receivable from
such related party. Goodwill verified at the amount of R$142,260 has been
Logispar: the main purpose of the acquisition of Logispar was to integrate
amortized on a straight-line basis over the remaining concession periods, and
the operating, accounting and corporate activities performed in Brazil by the
R$7,269 of which has been amortized in the years ended on December 31,
Company and its subsidiaries with those performed in Argentina by Logispar and
2006 and 2005.
its subsidiaries.
On March 29, 2006, Logispar no longer has the right of usufruct over ALL
Argentina’s shares, by means of capital reduction and assignment of this right to
and ALL Mesopotâmica, ALL Argentina had its shareholders’ equity appraised at
its parent company ALL. On September 29, 2006, the Board of Directors resolved
market value, at the amount of R$355,888, by local independent experts based
on the merger of Logispar’s net assets by ALL, being the goodwill reclassified to
on the expectation of future profitability. This amount was settled with credits the
deferred assets.
39
In order to define its acquisition value, considering the investees ALL Central
all | américa latina logística AND ITS SUBSIDIARIES |
Geodex: the Company has a 3.28% interest in the voting capital and a 43.69%
Pursuant to the Shareholders Agreement of Geodex, the preemptive right of
interest in the total capital of Geodex Communications S.A. (Geodex), whose
receipt in the disposal shall be granted to the shareholders who have performed
main activity is to provide telecommunication services in connection with the
capital contributions in cash, who shall be remunerated by the US dollar variation
network and specialized circuits. On October 06, 2006, the Company adhered
plus 10% per year. For the reason shown the Company has recorded a provision
to the Memorandum of Understanding with the other shareholders of Geodex,
for investment loss in Geodex in the amount of R$55,112 and reclassified the
for a future disposal. The investment is evaluated by the equity method until
loss net permanent investment in the amount of R$13,514 under the item other
September 30, 2006, adjusted by the estimated recovery value.
accounts receivable in current assets.
In the consolidated balance sheet, investments are comprised as follows:
Consolidated
Book value of investments
Appraised by the equity accounting method
Geodex
Rhall Terminais
Other
Goodwill
Logispar
ALL Argentina
Brasil Ferrovias
Novoeste Brasil
Santa Fé Vagões
2006
2005
1,151
6,000
67,403
929
141
32,547
2,364,380
132,427
457
40
2,536,962
127,732
38,155
50
234,410
all | américa latina logística AND ITS SUBSIDIARIES |
ALL Argentina: goodwill in ALL Argentina is based on the future profitability at the
carriers, alternatively being able to become involved in other similar, related or
time the shares of ALL Central and ALL Mesopotámica were acquired on May 26,
ancillary activities, or activities that use the Company’s structure.
1999, and has been amortized on a straight-line basis over the concession period.
On May 9, 2006, PREVI, FUNCEF, JP Morgan, BRP FERRONORTE, GABORONE
On August 11, 2005, the Company and Millinium Investimentos Ltda. (“Millinium”),
and ALL executed two Investment Agreements, besides other ancillary and
subsidiary of the Indian Company Besco Engineering and Services Private Limited,
correlative agreements, which establish the terms and conditions of the merger,
entered into agreements aiming at the incorporation of Santa Fé Vagões S.A. Its
by ALL, of all shares issued by Brasil Ferrovias and by Novoeste. On May 10, 2006,
corporate purpose is manufacture, maintain, commercialize, and trade items and
BNDESPAR, which originally had the tag-along right in a Shareholders’ Agreement
services related to rolling stocks, rail systems, traction equipment, trails, signaling
executed with PREVI and FUNCEF, exercised the referred right and adhered to
on rail vehicles, and mechanical equipment related to rail activities, in addition to
the Investment Agreement and Other Covenants related to the merger of shares
its parts and components, as well as the import, export, purchase, sale, distribution,
from Brasil Ferrovias and Novoeste Brasil.
lease, rental and loan of railcars, machinery, equipment and inputs related to
rail activities.
The conclusion of the operation was conditioned to the compliance with a series
of suspensive conditions, which were fully accomplished.
According to the agreements mentioned above, Millinium has undertaken to
provide Santa Fé Vagões with complete technical support and the know-how
In accordance with Protocols for Merger of Shares and Justifications, entered
necessary for railcar manufacturing. The Company, on its turn, granted Santa Fé
into on May 31, 2006, the operation was structured based on Article 252 of the
Vagões a loan for use of an area located in the city of Santa Maria, state of Rio Grande
Corporation Law, through the merger of all shares issued by Brasil Ferrovias and
do Sul, including part of the equipment used by Santa Fé Vagões for the fulfillment
by Novoeste Brasil, with all rights inherent to them, including those related to
of its corporate purpose, for the performance of its industrial, commercial and
dividends, recorded or not, bonuses, and any other forms of profit sharing. With the
administrative activities.
conclusion of the operation and, therefore, the effective corporate reorganization
resulting from the merger of shares, ALL became holder of the totality of Brasil
On November 1, 2004, the Company incorporated, with minority shareholders,
Ferrovias’ and Novoeste do Brasil’s capital stock and, as a result, it also became
the Company ALL - América Latina Logística Centro-Oeste Ltda. The Company’s
holder, indirectly, of the share control of rail concessionaries Ferroban, Ferronorte
corporate purpose is the rendering of services related to contracting of freight
and Ferrovia Novoeste.
road transportation under the local, interstate and international scope, combined
The merger of shares of Brasil Ferrovias and of Novoeste do Brasil caused an
to freight transportation such as logistics, port operations, handling and storage
increase in ALL’s capital stock, through the conference of all shares held by
of commodities and containers, cargo agency, operation and management of
shareholders of those corporations, excepting the ones who have exercised
warehouses, purchase, sale and lease of containers, association with other logistic
their right to withdrawal, in accordance with the economic values verified in
41
with rail and water transportation of cargo, in addition to other activities related
all | américa latina logística AND ITS SUBSIDIARIES |
the appraisal reports of Brasil Ferrovias and of Novoeste do Brasil. The increase
in ALL’s capital and conference of shares carried out on June 16, 2006 totaled
approximately R$1,405,033, plus the costs directly attributable to the acquisition
process, generated goodwill of R$2,496,807 on December 31, 2006, based on the
expectation of future profitability generation.
On June 16, 2006, the General Shareholders’ Meetings of the Company, of Brasil
Ferrovias and of Novoeste do Brasil, approved the merger of shares, as well as
further related acts necessary to the implementation of the referred acquisition.
As part of the transaction, PREVI, FUNCEF and BNDESPAR adhered to the Issuer’s
block of control, becoming a party of the Shareholders’ Agreement.
The term for the exercise of the withdrawal right expired on July 24, 2006 for
the dissenting shareholders of the Company and on July 26 for the dissenting
shareholders of Brasil Ferrovias and of Novoeste do Brasil. After the term expiration,
the former shareholders of Brasil Ferrovias and of Novoeste do Brasil who did not
exercise the right to withdraw, became shareholders of the Company, which
became holder of all shares issued by Brasil Ferrovias and by Novoeste do Brasil.
The documents related to the merger of shares were presented to the authorities
of Competition Defense Brazilian System on May 29, 2006, and are currently under
42
a process of analysis by the proper authorities.
all | américa latina logística AND ITS SUBSIDIARIES |
1 3 . I m obi l i z ado
Own fixed assets in use
Track
Locomotives
Railcars
Assets in use supplies
Land
Buildings
Furniture and fixtures
Road vehicles
Data processing equipment,
systems and applications
Telecommunications and
signaling equipment
Equipment for track maintenance
and rail transportation
Other
Construction in progress
Locomotives
Railcars
Track
Advance from suppliers
Systems and applications
Road vehicles
Other
2005
Taxas (%)
Depreciation Annual
Weighted Average Rates (%)
Cost
Accumulated
depreciation
Net
Net
308,706
161,700
625,234
56,837
1,152,477
(112,030)
(53,770)
(88,637)
(14,603)
(269,040)
196,676
107,930
536,597
42,234
883,437
89,799
27,169
196,988
44,504
358,460
4.49
15
8.5
10
920,115
551,906
268,331
38,983
15,241
78,078
24,235
37,513
(93,997)
(119,715)
(65,751)
143,602
123,314
18,381
624
8,272
362
18,243
4.49
10
(18,788)
(10,277)
(19,337)
826,118
432,191
202,580
38,983
15,241
59,290
13,958
18,176
51,318
(25,814)
25,504
15,219
20
34,456
(20,965)
13,491
3,979
10
51,428
106,349
2,177,953
(22,535)
(38,021)
(435,200)
28,893
68,328
1,742,753
10,263
17,737
359,996
11
Sundry
52,846
9,890
30,418
35,516
9,629
5,988
69,983
214,270
40,337
16,356
55,375
874
1,330
17,693
131,965
2,840,460
850,421
52,846
9,890
30,418
35,516
9,629
5,988
69,983
214,270
3,544,700
(704,240)
3.5
15
15
43
Improvements in third parties’ assets
Locomotives
Railcars
Track
Other
2006
all | américa latina logística AND ITS SUBSIDIARIES |
1 4 . D eferred char g es
Consolidated
Cost
Accumulated
amortization
2006
2005
Net
Net
The subsidiary ALL Brasil adopts as a basic criterion to amortize concession
and lease expenses on the straight-line basis over the remaining term of the
agreement. However, based on an operational study of installed capacity for
transportation in tons per kilometer useful- RTK, concluded in December 1998,
management reviewed the estimate of such amortization absorption until the
Parent Company
Logispar goodwill
Subsidiaries
Concession and lease - ALL Brasil
Pre-operating expenses
ALL Central
ALL Mesopotámica
Santa Fé Vagões S.A.
PGT Ltda.
Ferronorte
Terminal XXXIX
Expenditures with studies
and projects
ALL Equipamentos
ALL Brasil
Consolidated
122,284
(1,817)
subsidiary reaches its operational break-even. From 1998 through mid December
120,467
2001, amortization of concession and lease amounts was calculated considering
the proportion between the RTK transported volume and the volume projected
24,736
(4,914)
19,822
20,805
to reach operational break-even, estimated at 14 billion RTK. With the attainment
of the operational break-even, deferred concession and lease expenses have
19,746
4,532
438
148
645,294
469
(8,704)
(1,975)
(284)
12,960
2,983
574
138
(362,744)
(422)
11,042
2,557
154
148
282,550
47
3,776
6,337
(378)
(781)
3,398
5,556
3,776
1,069
827,760
(382,019)
445,741
42,305
been amortized on a straight-line basis over the remaining concession and lease
term, and the amount of R$983 was recorded for the years ended on December
31, 2006 and 2005.
Pre-operating expenses refer to disbursements in the Argentine rail companies
ALL Central and ALL Mesopotâmica in connection with feasibility studies
for the concession acquisition, which are amortized over the remaining
concession period.
The pre-operating expenses of the indirect subsidiary Ferronorte refer to the
implementation expenditures incurred in its pre-operational phase since 1988,
net of financial expenses and income. The expenditures come from Phase I,
comprising the segment of 403 km between the roadrail bridge on Paraná River
and Alto Taquari (MT), ended in March 2001 and expenditures coming from Phase
II, which comprised the segment 1, of 96 Km between Alto Taquari (MT) and Alto
Araguaia (MT), ended in March 2003. Such expenses have been amortized on the
44
straight-line basis, by the remaining term of the concession.
all | américa latina logística AND ITS SUBSIDIARIES |
1 5 . Loans and financin g s
Parent Company
In foreign currency (exchange variation linked to the US$)
Financing of locomotives
10% (with swap to CDI)
Swap operations
Maturity
2006
2005
December 2007
2,261
7,692
4,671
2,261
12,363
19,121
117,261
339,616
34,026
292,607
69,248
36,103
19,775
88,497
Total Parent Company
Subsidiaries
Domestic currency
• ALL Brasil
Commercial banks
CCB
BNDES investments
116% of CDI
106.3% of CDI
106.3% of CDI
TJLP + 5.25%
TJLP + 5.25%
TJLP + 6.63%
NCC
• ALL Intermodal
BNDES investments
- FINAME
• Brasil Ferrovias
Commercial banks
• Novoeste
Other guaranteed accounts
107.0% of CDI
November 2007
August 2008
April 2008
Quarterly/Monthly
from January 2000 to April 2010
Quarterly/Monthly
from May 1998 to April 2008
Quarterly/Monthly
July2006 Until January 2012
March 2013
104,641
206,816
TJLP + 3% to 4.7%
Quarterly/Monthly
from January 2002 to December 2009
13,223
CDI + 4%
CDI + 7.44%
From August 2007 to March 2011
Monthly until January 2007
17,131
20
14,668
continues
45
Annual charges
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Annual charges
Maturity
2006
2005
• Ferroban
BNDES investments
TJLP + 1.5% a.a
Umbndes + 6%
Quarterly/Monthly
from April 2006 to January 2018
Quarterly/Monthly
from December 2005 to January 2013
191,576
3,099
• Ferronorte
BNDES investments
FINAME
Commercial banks
•Terminal XXXIX
BNDES investments
TJLP + 1.5% a.a
Quarterly/Monthly
from April 2006 to January 2016
788,086
TJLP + 3%
Quarterly/Monthly
from April 2006 to January 2016
204,871
TJLP + 4%
Quarterly/Monthly
from April 1999 to January 2009
37,038
CDI + 2 % a.a.
Agosto 2007 até Março de 2011
10,417
6,386
2,148,325
465,901
Foreign currency (exchange variation linked to US$, with swap to CDI)
• ALL Brasil
IFC Loan
LIBOR +7.1%
December 2008
Financing of locomotives
Transfer 2770
36,078
10%
December 2007
4,520
December 2007
353,778
15,384
1,42%
46
continues
all | américa latina logística AND ITS SUBSIDIARIES |
Annual Changes
Maturity
Swap transactions
2006
2005
1,633
359,931
40,644
92,106
Foreign currency (exchange variation linked to Argentine Peso - P$)
8,4%
Badlas + 6,9%
11,5%
Bibor + 3%
13,5%
Dólar + 9,05%
December 2006
November 2007
March 2006
December 2008
March 2011
January 2009
5,462
24,991
9,455
CER + 8%
13,0%
September 2008
August 2008
1,396
2,993
2,422
396
15,0%
CER + 8%
11,0%
9,75%
January 2003
February 2006
January 2006
February 2006
46,280
391
1,248
1,165
4,525
24,569
Total subsidiaries
2,554,536
582,576
Total consolidated
2,556,797
594,939
(231,936)
(167,131)
2,324,861
427,808
• ALL Central
BST
Itaú Argentina
• ALL Mesopotámica
Commercial banks
Other
Portion in the current liabilities
Portion in the long-term liabilities
9,449
1,983
4,973
47
• ALL Argentina
Commercial banks
CMF – Debt 3
Mortgage Debt 1
Mortgage Debt 4
Itaú Argentina – Debt 6
Itaú Londres – Debt 2
all | américa latina logística AND ITS SUBSIDIARIES |
Composition by maturity year of long-term liabilities:
Cash and cash equivalents and financial investments include collateral accounts in
the subsidiary ALL Brasil amounting to R$25,576 on December 31, 2006 (December
2007
2008
2009
As from 2010
2006
2005
515,668
420,521
197,969
1,190,703
69,221
320,103
22,983
15,501
2,324,861
427,808
31, 2005 – R$34,373).
For foreign currency financing contracted in Brazil, there are swaps protecting
the Brazilian real against the US dollar, being translated at rates of 85% to 105%
of CDI.
The loans obtained from BNDES and IFC, as above, are intended for investments and
depend upon the compliance with certain financial liquidity ratios related to the
Abbreviations:
net debt; shareholders’ equity; earnings before taxes, financial results, depreciation
BNDES
National Bank for Economic and Social Development
and amortization (EBITDA); debt service; short-term debt, among others, which have
CCB
Bank Credit Note
been complied with by the Company.
CDI
Interbank Deposit Certificate
CER
Reference Stabilization Ratio
In 1H06, the parent company raised loans in the amount of R$700,000 recorded in
FINAME
Government Agency for Equipment and Machinery Financing
current liabilities as bridge to the 6th issue of public debentures. As described in
LIBOR
London Interbank Offered Rate
Note 28, these loans were settled on July 31, 2006 with funds arising from the public
TJLP
Long-Term Interest Rate
debentures (6th Issue).
IFC
International Finance Corporation
NCC
Commercial Credit Note
For the subsidiaries of Brasil Ferrovias, in guarantees of loans and financings the
following items were granted: (i) Pledge of the total shares issued of Ferronorte
held by the parent company Brasil Ferrovias, (ii) Pledge of revenue on the product
amount considering the same agreed terms and conditions, except in the case of
of the fee collection for the provision of the rail transportation services resulting
BNDES, which is guaranteed by collateral account ensuring liquidity of payment, and
from the work project of Ferronorte, (iii) Linkage of the revenue of service
in the case of the financing of locomotives, which guarantee the financing.
agreements, (iv) Promissory notes.
48
Loans and financings are guaranteed by promissory notes for the total financed
all | américa latina logística AND ITS SUBSIDIARIES |
Some agreements have restrictive covenants establishing financial limits quarterly
determined in each publication of the consolidated financial statements of
the Issuer as follows:
The index corresponding to the ratio of the Net Debt by the Consolidated
EBITDA of the last 12 months, in the maximum limit of:
Year
2006
2007
2008
2009
2010
4.0
3.5
3.0
2.5
2.5
Consolidated Net Debt/Consolidated
Consolidated
Minimum limit of 1.3 times for the index corresponding to the division of the
O
n October 1, 2004, the Company issued 13,500 debentures non-convertible into
Consolidated EBITDA of the last 4 (four) quarters of the Issuer by its Consolidated
shares at unit par value of R$10 each (4th issue);
Net Financial Expense.
O
n September 1, 2005, the Company issued 20,000 debentures non-convertible into
shares at unit par value of R$10 (5th issue);
O
n July 1, 2006, the Company issued 70,000 debentures non-convertible into
shares at unit par value of R$10 (6th issue).
1 6 . D eb E ntures
Subsidiary Brasil Ferrovias
O
n October 31, 2001, the Company issued 71,700 debentures convertible into shares
Parent Company
at unit par value of R$10 (2nd issue).
O
n February 1, 2003, the Company issued 5,500 debentures convertible
into shares at unit par value of R$10 each (2 nd issue);
Indirect Subsidiary – Ferronorte
On July 1, 1997, the Company issued 10,00 debentures convertible into shares
shares at unit par value of R$10 each (3rd issue);
at unit par value of R$10 (1st issue);
49
O
n June 1, 2004, the Company issued 12,000 debentures non-convertible into
all | américa latina logística AND ITS SUBSIDIARIES |
On April 10, 2000, the Company issued 60,000,000 debentures convertible into
shares at unit par value of R$1.00 (2nd issue);
On January 14, 2002, the Company issued 40,000,000 debentures convertible
into shares at unit par value of R$1.00 (3rd issue);
On December 3, 2003, the Company issued 60,000 debentures non-convertible
into shares at unit par value of R$10 (5th issue).
The issued series are as follows:
2006
Series
Parent Company
2nd issue
3rd issue
4th issue
5th issue
6th issue
Subsidiary Brasil Ferrovias
2nd issue
Value
02/01/03
06/01/04
10/01/04
09/01/05
07/01/06
55,000
120,000
135,000
200,000
700,000
02/16/09
06/01/07
10/01/09
09/01/12
07/01/11
Annual yield
TJLP + 6.25%
110% of CDI
110% of CDI
CDI + 1.50%
CDI + 1.50%
Current
liabilities
Long-term
liabilities
121,364
4,570
9,304
52,340
135,000
200,000
700,000
187,578
1,035,000
10/31/01
7,170
20/06/05
105% of CDI
18,602
18,602
Indirect Subsidiary Ferronorte
1st issue
07/01/97
2nd issue
04/10/00
3nd issue
01/14/02
5nd issue
12/03/03
100,000
60,000
40,000
60,000
06/30/06
04/10/07
01/14/09
12/03/09
TJLP + 1.5%
TJLP + 4%
TJLP + 4%
CDI + 1.5%
9,152
Consolidated
50
Date
Final
maturity
9,010
18,162
224,342
247,174
146,013
77,824
67,505
538,516
1,573,516
2005
Current
liabilities
Long-term
liabilities
1,594
1,960
6,190
12,495
30,957
120,000
135,000
200,000
22,239
485,957
all | américa latina logística AND ITS SUBSIDIARIES |
Events in the Parent Company:
Payment of interest of fifth issue debentures on March 1, 2006 at the amount
Payment
of interest of third issue debentures on December 1, 2006, at the amount
of R$18,583;
of R$9,211;
Payment of interest of fourth issue debentures on April 1, 2006, at the amount
of R$12,460;
Events in the subsidiary – Brasil Ferrovias:
Payment of interest of third issue debentures on June 1, 2006, at the amount
O
n June 16, 2006 – conversion into shares of Brasil Ferrovias of 10,000 debentures
of R$10,863;
of the first issuance at the amount of R$330,916;
Approval of compensation change of these forth issue debentures on June 9,
2006, at the Debentureholders’ General Meeting, from 108% to 110% of CDI. This
Events in the subsidiary – Ferronorte:
new compensation would become effective starting on June 16, 2006;
Approval of compensation change of these fifth issue debentures on July 26, 2006,
A
pproval of compensation change of these fifth issue debentures on June 9, 2006,
at the Debentureholders’ General Meeting, from CDI + 5% to CDI + 1.50%. This new
at the Debentureholders’ General Meeting, from CDI + 1.30% to CDI + 1.50%. This
compensation would become effective starting on June 30, 2006;
new compensation would become effective starting on June 16, 2006;
R
epurchase of 799 debentures of fifth issue on July 28, 2006, at the amount of
C
onversion of 2,750 second issue debentures on June 16, 2006, at the amount
R$13,854;
of R$30,674.
P
ayment of interest of fifth issue debentures on December 4, 2006, at the amount
Payment
of interest of fifth issue debentures on September 1, 2006, at the amount
of R$21,668;
of R$16,838;
P
ayment of interest of third issue debentures on December 4, 2006, at the amount
Payment
of interest of forth issue debentures on October 2, 2006, at the amount
of R$11,448;
51
of R$10,751;
all | américa latina logística AND ITS SUBSIDIARIES |
1 7 . Lease and concessions
the agreement, the Company still has the obligation of tendering to Delara Brasil
Ltda. 18,625,800 shares, of which 7,006,800 are common shares and 11,619,000 are
2006
Lease
ALL Brasil
ALL Intermodal
Ferroban
Novoeste
Concession
ALL Brasil
ALL Argentina
Ferroban
Novoeste
2005
Current
liabilities
Long-term
liabilities
Current
liabilities
Long-term
liabilities
9,104
3,104
40,152
9,154
8,575
49,865
490
4,690
2,756
2,307
664,373
On December 31, 2006, the share quotation at market value is R$4.28.
This capital dilution event is disclosed in the prospectuses of public issuance of
(c) Ferroban
Partial spin-off to Ferrovia Centro Atlântica (FCA).
On August 29, 2005, the partial spin-off between Ferroban and Ferrovia Centro
4,190
9,380
16,990
parties executed a term extending the performance of this obligation to July 2007.
debentures and shares of the Company.
364,909
243,435
490
4,292
preferred shares, issued by the Company at R$0.1043 per unit. On July 31, 2006, the
Atlântica S.A. (FCA) was carried out, and FCA started being responsible for 35.6% of
22,909
52,621
the total concession and lease amounts.
Payments of the concession and lease agreements
The indirect subsidiary Ferroban cancelled the payment of the amounts related to
a) ALL Brasil
the lease agreement to RFFSA - in settlement, judicially protected, by an injunction
Lease and concession amounts of the subsidiary ALL do Brasil are appropriated on
granted on April 7, 2005 and subsequently postponed on July 8, 2005. On September
a straight-line basis under liabilities and results over the period of the respective
28, 2005, these injunctions were cancelled by judicial decision pronounced by the
agreements, accrued of IGP-DI variation and interest at agreed rates. Amounts
Federal Regional Court (TRF) of Rio de Janeiro, becoming not postponable, thus, that
relating to the grace period (1997 to 1999) have been restated and paid over the
Ferroban made the judicial deposit of the outstanding lease amounts, as a way to
remaining concession period.
guarantee the Court and ensure the continuity of the judicial discussion, as well as
the regularity and payment of its concession before ANTT and before the National
(b) ALL Intermodal
Treasury Secretariat (STN).
On July 23, 2001, the subsidiary ALL Intermodal and Delara Brasil Ltda. executed a
The payments are being made by means of judicial deposits at the amount of the debt.
facilities, machinery, equipment and vehicles, expired in July 2006. At the end of
Considering that Ferronorte depends on Ferroban’s lines, to the continuity of its
52
lease agreement regarding the assets and rights of Delara, including real estate,
all | américa latina logística AND ITS SUBSIDIARIES |
transportation operations, started in the States of Mato Grosso and Mato Grosso
Desincorporation of the operations of the Bauru-Mairinque segment
do Sul and ended in Santos (SP), Ferronorte entered with Ferroban, on January 10,
To comply with the Investment Agreement, entered into on May 5, 2005, which
2006, into a Private Instrument of Guarantee Agreement, by which it made the
aims at the conduction of the restructuring, the desincorporation of the operations
judicial deposit in favor of Ferroban, at the amount of R$22,177.
of the Bauru-Mairinque segment was set forth in the 2005 and 2006 Business Plan of
the subsidiary, and this operation starts being made by Novoeste as from October 1,
Considering that Brasil Ferrovias holds 83.66% of Ferroban’s capital, directly and
2005, in view of the Memorandum of Understanding dated September 23, 2005.
indirectly, Brasil Ferrovias entered, on January 10, 2006, into a Private Instrument of
Guarantee Agreement, by which it made the judicial deposit in favor of Ferroban,
ANTT approved the desincorporation of the operations by means of Resolution
at the amount of R$184,517.
#1,010, published in the Official Gazette of the Federal Government on July 28, 2005.
The final implementation of this operation will be ratified by ANTT.
Thus the quarterly installments are being paid by means of judicial deposits made
by Ferronorte and comprised by the Private Instruments of Guarantee Agreement
(d) Ferronorte
with Ferroban.
On May 19, 1989 the indirect subsidiary Ferronorte entered with the Federal
Government into a Concession Agreement for the establishment of a cargo rail
The term of the guarantee rendered both by Brasil Ferrovias and Ferronorte in favor of
transportation system, comprising the construction, operation, exploration and
Ferroban started on the date on which the judicial deposit was made and will be ended
conservation of a railroad between Cuiabá (MT) and: a) Uberaba/Uberlândia (MG),
on the date on which the Federal Court decides its destination. For the rendering of
b) Santa Fé do Sul (SP), c) Porto Velho (RO) and d) Santarém (PA). The term of this
this guarantee, Ferroban will pay Brasil Ferrovias and Ferronorte the equivalent to the
concession lasts 90 years, renewable for the same period and 10 years may be
positive difference between the 100% CDI rate and the 100% TR rate.
granted before the end of the contractual term.
In case the judicial decision determines the conversion into income of the Federal
The Agreement does not provide for payment obligations on the account of the
Government, total or partial, of the judicial deposit, Ferroban will become, as
Concession, however, it sets forth certain responsibilities on the account of the
from this date, debtor of Brasil Ferrovias and Ferronorte, respectively, of the exact
Company, such as: a) not to make sub-concession, b) to submit to the permanent
amount of the judicial deposit, with all the additions it receives. Ferroban must
inspection of the Federal Government, c) compliance with rules, technical
pay its overdue debits to Brasil Ferrovias and Ferronorte, in the maximum term
specifications and national standards of the Ministry of Transportation and d) to
of 90 days, counted from the finding of the judicial deposits, Ferronorte may use,
comply with all the legal provisions applicable to the granted services, specially
also, any time, and as long as resolved at the Extraordinary General Meeting of
those related to environment protection.
the Companies, the guarantee amount for capital payment in Ferroban, or give it
The concession extinguishment and the consequent termination of the Concession
use the amounts rather as capital payment in Ferroban.
Agreement may take place due to the following factors: a) amicable covenant of the
53
away so that its parent company, Brasil Ferrovias, does it. Thus, Brasil Ferrovias may
all | américa latina logística AND ITS SUBSIDIARIES |
parties, antedated of negotiations and financial adjustments due by one party to
another; b) end of the contractual term; c) expropriation or redemption, by public
interest in connection with the Concession, by means of the proper indemnification;
d) annulment for illegality of the Concession or agreement; e) severe and continued
infractions made by one of the parties, which cause damages to the quality and
efficiency of the services; f) by expropriation by the Federal Government of the
granted services or by a Law that makes the agreement, formally or materially,
impossible. In the event of expropriation the Company’s shareholders will be
indemnified by the fair amount of the assets linked to the concession, determined
at the time of the expropriation.
(e) Novoeste
Due to a judicial discussion, this indirect subsidiary cancelled the concession and
lease payment.
As described in note 11, the indirect subsidiary acquired Treasury Financial Bills (LFTs)
and National Treasury Bills (LNTs) as guarantee to pledge the concession and lease
amounts due to RFFSA – in settlement and to the Federal Government, resulting
from a judicial pleading related to the economic unbalance process of Novoeste
which is under judicial discussion. Thus, for the amounts referring to the quarterly
installments of the concession and lease agreements new additional LFTs are being
54
acquired at sufficient amounts for the coverage of those amounts.
all | américa latina logística AND ITS SUBSIDIARIES |
1 8 . J udicia l deposits and prov isions for contin g encies
Judicial deposits
The subsidiaries are involved in various proceedings
Possible and remote
incurred in the normal course of their businesses. The
2006
2005
2006
2005
2006
2005
15,842
1,244
11,669
2,796
8,133
1,340
3,819
975
1,578
310,716
24,816
132
5,116
5,449
1,101
4,338
907
17,979
735
35,000
4,000
Company’s management believes that the solution of such
issues shall not produce an effect significantly different
185
50,501
11,021
1,290
from the amount provisioned, which corresponds to the
amounts of shares considered “probable”.
(a) Labor contingencies
96,364
5,135
5,421
The subsidiaries discuss various labor claims, and on
December 31, 2006 the Company recorded a provision
of R$356,625, in the consolidated, to deal with those
cases in which its attorneys deem as probable losses.
3,216
783
4,306
22,462
1,752
17
4,684
6,500
284,833
3,953
9,690
1,016
4,162
11,499
21,810
2,323
9,155
1,755
378,140
2,945
783
24,155
442,794
79,944
7,982
20,333
83,072
6,613
448
1,122
15,500
10,000
70,005
6,157
1,356
755
53,907
are: salary parity, overtime, additional payment for
hazardous conditions, additional payment for unhealthy
conditions, transfer additional, among others.
481,022
(b) Civil and regulatory contingencies
The subsidiaries are parties in various civil actions
involving petitions, action for damages in general: such
as collisions in level crossings, rail running over, traffic
accident, possessory actions in general, execution suit
41,354
6,895
2,038
27,314
15,523
Among the subject-matters of the labor claims, there
of extrajudicial bonds and others. Based on the opinion
of its legal advisers and the courts standing, they
keep records for the probable losses at the amount
118,407
of R$37,220.
55
Labor claims
ALL Brasil
ALL Intermodal
ALL Central
ALL Mesopotámica
Brasil Ferrovias
Ferroban
Novoeste
Portofer
Ferronorte
Civil and regulatory
claims
ALL Brasil
ALL Intermodal
Brasil Ferrovias
Ferroban
Novoeste
Portofer
Ferronorte
Tax claims
ALL Brasil
ALL Intermodal
ALL Holding
ALL Armazéns
Brasil Ferrovias
Ferroban
Novoeste
Portofer
Ferronorte
Probable
Contingencies
all | américa latina logística AND ITS SUBSIDIARIES |
Among the relevant actions, although with a remote chance of loss, on behalf of ALL
was reversed by the Regional Federal Court of Rio de Janeiro. The proceeding still has
Brasil, there is an indemnification action being handled in the State of Rio de Janeiro,
no judgment and awaits for the realization of expert report. The total value related to
under the number 2003.51.01.023238-1, in which RFFSA pleads abandonment of
the lease installments, in the amount of R$284,690, is being deposited in court.
public property and rail segments, requiring the restoration of various stations
and the maintenance of the right of way. It is worth pointing out that ALL, in
The aforementioned situation is also applicable to Novoeste, however, its proceeding
strict compliance with the Concession and Lease Agreements, is performing the
is in progress in the 16th Federal District Court of Rio de Janeiro. The amount related
maintenance of many rail segments and also the restoration of stations which are
to the due installments represents R$208,903 and Novoeste is posting bond through
being returned to RFFSA in perfect condition of conservation and use.
the issue of government bonds (Treasury Financial Bills – LFT). This LFT is recorded
under long-term investments.
The civil liabilities classified as possible or remote in Brasil Ferrovias are mainly
caused by judicial actions resulting from popular action, questioning the
(c) Tax contingencies
voluntary redundancy plans promoted by Ferroban, which require the payment
Main tax issues under discussion are those derived from lawsuits having as plaintiff
of indemnifying differences, calculated as the difference between the amount
or defendant, ALL group and to which chances of losses are deemed as possible or
effectively paid by PABI’s and the amount due for the utilization of the unilateral
remote. Therefore, no provision was made for such issues.
indemnification criterion, established in Clause 4.49 of the Collective Bargaining
Agreement, under penalty of invalidation of the privatization process and actions
In April 2005, ALL Brasil obtained a favorable decision at the Court of Justice of the
related to indemnification for accidents and expropriations of the right of way of
State of Rio Grande do Sul in relation to the tax deficiency notice of Rio Grande
the railway bed.
do Sul State Department, which charged the Company as a result of use of ICMS
credit over the acquisition of assets and equipment destined to the recovery
Currently, both Ferroban and Novoeste question in court the economic and financial
and renovation of fixed assets. The assessment amount under discussion is
unbalance of the Lease and Concession Agreements. In July 2000, Ferroban filed a
approximately R$16,800, and ALL has already collected the amount of R$11,192
Declaratory Action in the 20th Federal District Court of Rio de Janeiro questioning
to the State of Rio Grande do Sul’s public coffers, and it interrupted the payment
the economic and financial unbalance of the Lease and Concession Agreements,
of the remaining balance of R$5,670, due to a favorable decision of the Court of
due to the high disbursement incurred by the Company for the payment of labor
Justice of the State of Rio Grande do Sul, already confirmed by the Superior Court
judicial proceedings and other expenses involved.
of Justice – STJ. Currently, the proceeding is awaiting for court decision in the
Supreme Federal Court – STF. The Company’s chance of loss in the proceeding
under discussion is remote, according to understanding already rendered by
lease and concession installments, as well as discontinuance of the payment of due
the courts (annulment action 110660892). In addition, the Supplementary Law
and falling due installments until the effective expert inspection for determination of
87/96 authorized the full use of right to the credit in the acquisition of assets
the adequate value. In July 2005, the injunction was granted, but in September 2005, it
destined to the permanent assets.
56
Ferroban required an expert inspection for determination of the new value of the
all | américa latina logística AND ITS SUBSIDIARIES |
The State Treasury Department of Paraná and São Paulo drawn up tax deficiency
Ferronorte filed an Action for Annulment of tax debit, taking into consideration that
notices against ALL Brasil, current amounts of which amount to approximately
the company was sued for not paying ICSM in the transportation of goods destined
R$38,000, due to non-payment of ICMS referring to the rendering of goods freight
abroad. Amount involved: R$9,800 thousand. Change of success: probable.
transportation services destined to exports and use of ICMS credits supposedly
not authorized by laws. ALL already has favorable decisions as the matter under
(d) Environmental contingencies
discussion and courts already positioned about the non-levy of ICMS over goods
Considering the notices of infraction with imposition of fine penalty, the
exports. In April 2006, ALL Brasil obtained a favorable decision at the Taxpayers
environmental contingencies of ALL Brasil amount to R$3,547; Ferroban, R$10,265;
Council of Paraná, confirmed by the Public Finance Court of the State of Paraná
Ferronorte, R$3,188; Novoeste, R$282; and Portofer, R$20.8, totaling R$17,330.
in relation to the tax assessments existing in the State of Paraná (administrative
proceedings 6146502-2 and 6146495-6), establishing that in operations destined to
Such values result from notices from FEPAM (RS), CETESB (SP) and IBAMA, in great
exports there is immunity, as mentioned in Article 155, Paragraph 2, X, “a” of CF/88.
majority due to the implementation/extension of marshalling yards without the
In view of this, there was a decrease in liabilities exposed to risk related to ICMS
respective environmental license, contamination of the soil and water due to the
– exports at approximately R$18,000, recorded as extemporaneous credits under
overflow of products and non-compliance with the conditions imposed by such
the item “taxes recoverable”.,
operating license. In all the situations, the companies involved are executing Terms
of Conduct Adjustment, with a view to reducing the applied penalties by 90%,
ALL Brasil has approximately R$6,500 and Ferroban approximately R$2,900 in
pursuant to legal disposition, as well as adopting all the prevention and reparation
IPTU (building and territorial urban tax) debts in relation to the real properties
actions regarding the environment. The provision for the environmental area is
over which rail passes through, owned by the federal government, which, in
recorded along with the civil provision of concessionaires, in an amount equivalent
view of concession granted, are under the possession of the federal government
to 10% of the value of the notices of infraction.
for the execution of rail transportation public services. Nevertheless, the Brazilian
Federal Constitution provides that there is no levy of taxes over assets owned by
the federal government; reason that the possibility of loss in such proceedings
is remote.
Ferroban was sued for not paying PIS and COFINS in relation to the mutual traffic and
right of way revenues, at the amount of R$21,000, in the period from 1999 to 2002
(cumulative PIS and COFINS). The company understands that the chance of loss is
remote, once the amounts under discussion have already been paid, previously, by
57
the concessionaries responsible for the transportation in the origin.
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
1 9 . C redits and debts fro m re l ated co m panies
Parent Company
Long-term assets
ALL Argentina
ALL Central
ALL Brasil
ALL Intermodal
ALL Equipamentos
ALL Tecnologia
ALL Armazéns Gerais
Brasil Ferrovias
Novoeste Brasil
Ferronorte
Santa Fé Vagões S.A.
Caianda Participações S.A.
Portofer
Geodex Communications do Brasil S.A
Logispar
Boswells
Long-term liabilities
2006
2005
2006
529
74
2,684
1,314
24
2,408
4,611
2,067
Service revenue
2005
2006
2005
960
960
960
960
1,000
54
807
1,860
364
3,390
241
1
1
4,956
27,033
29,319
6,654
12,029
5,956
Consolidado
Long-term assets
Terminal XXXIX
Santa Fé Vagões S.A.
Caianda Participações S.A.
Geodex Communications do Brasil S.A.
Rhall Terminais
2006
2005
6,098
2,425
268
1
2006
627
1
23
6,099
58
Long-term liabilities
2,694
650
2005
all | américa latina logística AND ITS SUBSIDIARIES |
The related-party transactions are performed under usual market conditions.
Regarding other balances with related parties, there is no interest levy in the
transactions, which reflect, besides the normal operations, financial coverage
As part of the restructuring process of Brasil Ferrovias and Novoeste Brasil,
transactions.
ALL – América Latina Logística S.A. (“ALL”) transferred funds to its indirect
subsidiaries Ferronorte, Nova Ferroban and Novoeste, as Advances for Future
The parent company’s service rendering revenues against the subsidiary ALL Brasil
Capital Increase (AFAC), pursuant to “Private Instrument of Advances for Future
at the amount of R$960, refers to consulting services rendered.
Capital Increase” executed on May 29, 2006. Until June 30, 2006 a R$226,690
amount had been transferred to Ferronorte and to Nova Ferroban, and
R$18,450 to Novoeste, by ALL.
Also on May 29, 2006, Brasil Ferrovias and Novoeste entered into another “Private
2 0 . P rov ision for unrea l i z ed profit
Instrument of Advances for Future Capital Increase” with their direct subsidiaries
Ferronorte, Nova Ferroban and Novoeste, transferring the responsibility for the
On September 30, 2001, the parent company sold to the subsidiary ALL Brasil
advances received from the Company to Brasil Ferrovias and Novoeste Brasil.
the right to use the lines from Presidente Epitácio to Rubião Junior and from
Pinhalzinho/Apiaí to Iperó at the market value of R$22,387, supported by an
On July 3, 2006, an addendum to the “Private Instrument of Advances for Future
appraisal report prepared by independent experts as of that date. On December
Capital Increase” was entered into, under the denomination of “Advances for
31, 2001, the parent company established a provision of R$19,312 for unrealized
Future Subscription and Payment of Debentures”, with a view to converting the
profit from this operation, recorded in long-term liabilities. In the years ended
advances recorded in Brasil Ferrovias and Novoeste Brasil, into debt with the
December 31, 2006 and 2005, the amount of R$744 was realized.
parent company ALL. This agreement establishes that the managers of Brasil
Ferrovias, Novoeste Brasil and ALL undertake to carry out the issue, subscription
and payment of the debentures until December 31, 2006. The interest rate was
established at 100% of the Interbank Deposits (DI) daily average rates, plus 4% p.a.
as surcharge.
Thus, in the third quarter of 2006, the advances recorded in Brasil Ferrovias and
Novoeste Brasil until June 30, 2006, in the amount of R$226,690 and R$18,450 were
reclassified to debts with related parties, restated by the aforementioned rates.
The balance of the debt on December 31, 2006 represents R$642,690 in Brasil
59
Ferrovias and R$53,121 in Novoeste Brasil, according to note 11.
all | américa latina logística AND ITS SUBSIDIARIES |
2 1 . D eferred inco m e
Subsidiaries
ALL Brasil
ALL Intermodal
Ferroban
2006
2005
7,642
640
17,161
25,443
8,019
673
8,692
ALL Brasil: this refers to an assignment agreement of the right of way for optical
2 2 . S hareho l ders ’ e q uit y
fibers alongside the track granted in the form of capital contribution to the
associated company Geodex Communications do Brasil S.A., at the contractual
(a) Capital stock
amount of R$10,000, which is being appropriated to results on a straight-line
The Company’s subscribed and paid-up capital stock is represented as follows:
basis over the remaining term of the assignment of rights.
ALL Intermodal: this refers to the deferred revenue originated in the capital stock
payment by means of land granted under loan for use by ALL Intermodal to
Rhall Terminais Ltda., appropriated on a straight-line basis over the remaining
2006
2005
986,120,805
1,884,474,520
78,244,265
144,472,750
2,870,595,325
222,717,015
concession period.
Ferroban: this results from agreements entered into with communication
companies, whose purpose is the assignment of the right of way of the track for
the passage of optical fiber cables for the effectiveness period of the Concession
Agreement of the Public Service of Cargo Rail Transportation (until 2028), linearly
60
appropriated to the result for the remaining term of the assignment of right.
Common
Preferred
all | américa latina logística AND ITS SUBSIDIARIES |
The Extraordinary General Meeting as of March 10, 2005, approved the splitting
On September 5, 2006, the split of the total shares issued by the Company was
of the total shares issued by the Company, so that each share, regardless of type,
approved at a General Meeting, so that each share started to be represented by
was split into 5 shares of the same type, and the Company’s capital stock was
10 shares of the same type.
divided into 216,090,630 shares, 76,918,990 of which are common shares and
139,171,640 are preferred shares, all non-par registered book-entry shares.
(b) Distribution of dividends and interest on own capital
Shareholders are assured a minimum mandatory dividend of 25% on the adjusted
At the Company’s Board of Directors’ meeting as of March 10, 2005 and according
net income in accordance with Article 202 of Law 6,404/76. The calculation basis for
to the Notice to Shareholders published on March 11, 2005, the option, during
dividends, according to the present legislation, is as follows:
the period between March 16, 2005 and May 12, 2005 (“Conversion Period”),
to convert preferred shares issued by the Company into common shares
and vice versa and/or to issue Units, was attributed to all the Company’s
shareholders, in compliance with the provision in the Company’s Bylaws and
other conditions published.
Units are deposit certificates which represent four preferred shares and one
common share issued by the Company.
The Company’s authorized capital is R$3,000,000, and the Board of Directors is
the appropriate body to resolve on the Capital increase within the referred limit,
2006
2005
Net income for the year
(-) Legal reserve
74,679
(3,734)
169,820
(8,491)
Dividends calculation basis
70,945
161,329
Dividends
Interest on own capital
2,738
15,000
17,738
1,915
20,332
20,000
40,332
2,993
Withholding income tax on interest on own capital
and there are not other limitations or conditions to make the capital increase
within the authorized capital limit.
As a result of commitments undertaken pursuant to financing agreements, the
the subscription of new shares issued by the Company, except for the issuance
parent company may not distribute dividends in excess of the minimum mandatory
of shares in paragraph 3 of Article 171 of Law 6,404/76.
ones up to 2011.
The Company’s subscribed capital stock increased from R$688,782 on December
(c) Profit reserve
31, 2005 to R$2,136,535 on December 31, 2006, upon the subscription of
Pursuant to Brazil’s corporate law, the legal reserve is established at 5% of net
643,425,175 new shares, 203,678,155 of which are common shares and 439,747,020
income for the year, prior to any other appropriations, and shall not exceed 20%
are preferred shares.
of capital stock.
61
All the Company’s shareholders have a preemptive right, in equal conditions, to
all | américa latina logística AND ITS SUBSIDIARIES |
The investment reserve is based on statutory provisions, which are supported with
its discretion, by a Committee specially made up for this purpose, which may,
the Company’s investment plan by means of use and sources subject to the Board
periodically, create stock option programs defined by a pre-determined period,
of Directors, and pursuant to Article 194 of Law 6,404/76, which determines that
as well as to set forth, within the qualified individuals, those to whom options will
this reserve shall not exceed subscribed capital stock, at an amount not less than
be granted.
twenty-five percent (25%) and not exceeding seventy-five per cent (75%) of the net
income for the year adjusted in accordance with Article 202 of Law 6,404/76, with a
The Plan sets forth the conditions for the grant of the stock option of preferred
view to financing the expansion of the Company’s and its subsidiaries’ activities, also
and common shares, in order to enable the Beneficiary the receipt of a multiple
through the subscription of capital increases or the development of new ventures.
number of shares for the formation of share deposit certificates composed of
1 common share and 4 preferred shares issued by the Company (“UNITS”). The
(d) Advances for future capital increases
number of stock options is limited, in the grant year of these acquisitions, to 8% of
The amounts received as advances for future capital increase, resulting from
the shares representing the Company’s capital stock.
contributions to the Stock Option Plan, described in Note 24, are presented in a
Shareholders’ Equity account.
The Plan, established under an individual agreement between the Company and the
Beneficiary, has as applicable conditions, the payment of 10% of the share amount, at
(e) Managers’ compensation
the moment of the execution of the agreement and exercise of the option, acquiring,
In the minutes of a General Meeting held on March 27, 2006, the amount of
consequently, the right to make every year acquisitions of 18% of the total share
R$192 was determined as annual global compensation for the members of the
number, where the Beneficiary has exercised his/her right, and restated by the IGP-M
Fiscal Council, and as annual global amount for the Managers’ compensation the
(General Market Price Index), up to the end of the fifth year.
amount of up to R$15,000, these compensations are valid until the next Annual
General Meeting.
The shares will be delivered to the Beneficiary only after the course of the terms
and contributions set forth in the agreement. The following conditions are
exceptions for the delivery of the shares: withdrawal of the Beneficiary from the
Company “without cause”; retirement, decease or permanent disability, and it is
at the Company’s discretion the delivery of the shares or reimbursement of the
contributions made.
At an Extraordinary General Meeting held on April 1, 1999, the shareholders
On March 7, 2005, the Plan’s Committee created by the Board of Directors approved
approved the Company’s Stock Option Plan (“Plan”), targeted at board members,
the creation of its fifth program, which is different from the others in two aspects: a) it
executive officers, top managers and outsourced service providers of the Company
sets forth the use of the Beneficiaries in each fiscal year of at least 50% of the amounts
(“Beneficiaries”). The plan is managed by the Company’s Board of Directors, or at
received by means of the variable compensation program, net of taxes and social
62
2 3 . S toc k option p l an
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charges, for the payment of the contributions for the acquisition of shares, under
sell a number of shares equivalent to the difference between (a) the balance of the
penalty of reduction proportional to the number of shares, and b) possibility of early
shares related to the previous Programs and (b) the total shares whose acquisition
issue of shares as from the second reference date of the contributions, in the events
option was granted to the beneficiary within the scope of the 2006 Program,
where the Beneficiary has already made the payment of 30% of his/her contributions.
without losing the right to the exercise of making contributions for acquisition of
The Company does not have the obligation to buyback, at any moment, the shares
shares of the 2006 Program. For each share sold beyond the limit indicated above,
acquired in the referred Plan.
the beneficiary will lose the right to make the contribution for acquisition of 1 (one)
share related to the 2006 Program. In case on March 1, 2006 the beneficiary has,
On March 1, 2006, the Plan Management Committee approved the creation of the
among merged and non-merged shares referring to previous Programs, a number
2006 Stock Option Program (“2006 Program”) and established that (i) the number
of shares lower or equal to the one attributed to him/her in the 2006 Program,
of shares integrating the 2006 Program is 4,500,000 shares: 900,000 common
for each share sold related to previous Programs, the beneficiary will lose the
shares and 3,600,000 preferred shares, corresponding to 2.0% of the Company’s
right to make the contribution for the acquisition of 1 (one) share related to the
capital stock, and (ii) the price per share is R$23.00. The 2006 Program comprises
2006 Program.
two groups of beneficiaries, with different types of agreement, referred herein as
“Agreement A” and “Agreement B”. The Agreement A has the same characteristics
The conditions, nature, amounts and prices shown below are in compliance with
established for the 2005 Program. The Agreement B is different from the Agreement
CVM Deliberation 371/2000.
A in two aspects:
The summary of the movement of the stock options for the period ended
(i) the acquisition of the right to make the contributions for the acquisition of
December 31, 2006 is shown as follows:
shares changes from 18% per year, as in the Agreement A, to 5% in the first year,
10% in the second, 15% in the third, 25% in the fourth and 35% in the fifth and last
year. In case the beneficiary of the Agreement B is fired, the Plan Management
Committee may, at its discretion, change the acquisition schedule of the right
to make contributions for the acquisition of shares, to 18% per year, such as the
schedule of the Agreement A.
(ii) the right to make contributions for the acquisition of shares is subject to the
decision of the beneficiary as to the sale of shares resulting from the Stock Option
Programs of the previous years. In case on March 1, 2006 the beneficiary has, among
merged and non-merged shares referring to the Programs of previous years, a
Number of Shares
Shares to be exercised on December 31, 2005
Grants on March 1, 2006
Grants cancelled in the year
Grants exercised in the year
Shares to be exercised on December 31, 2006
Weighted average price per share to be exercised
59,871,600
45,000,000
(5,270,385)
(9,840,100)
89,761,115
1.676
63
number of shares higher than the one attributed to him/her, the beneficiary may
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The Company accounts for the contributions, based on the individual controls of
For the specific case of contributions of 30% made for the acquisition of options,
each beneficiary, as advance for future capital increase, composing the shareholders’
the Company accounts for the capital increase as from the second reference date,
equity and after the duly deliberation at a General Meeting, the due amount is
in compliance with Law 6,404/76.
recorded as capital stock.
24. Determination of the income tax and social
contribution – parent company
Income Tax
2006
2005
2006
2005
74,679
163,853
74,679
163,853
19,500
5,453
55,112
15,506
7,102
35,900
7,264
35,900
7,264
4,961
19,500
5,453
55,112
15,506
7,102
102,673
48,125
102,673
48,125
(15,000)
(100,318)
(37,098)
(20,000)
(186,757)
(1,775)
(15,000)
(100,318)
(37,098)
(20,000)
(186,757)
(1,775)
(152,416)
(208,532)
(152,416)
(208,532)
Calculation basis for purposes of IR and CS
24,936
3,446
24,936
3,446
Tax losses and offset negative bases
(7,481)
(1,034)
(7,481)
(1,034)
Final calculation basis
17,455
2,412
17,455
2,412
25%
25%
9%
9%
4,340
579
1,571
217
Earnings before income tax and
social contribution on income
(+) Additions
∙ Interest on own capital
∙ Goodwill amortization in subsidiary
∙ Provision for investment loss
∙ Hedge settlement
∙ Other
(-) Exclusions
∙ Interest on own capital
∙ Equity interest income
∙ Other
Rate
64
Social Contribution
Charges for the year
4,961
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The reconciliation of the effective income tax and social contribution rate on the
income before taxes with the provision for income tax and social contribution has
not been shown for purposes of these consolidated financial statements, as the
parent Company and its domestic and foreign subsidiaries are subject to different
taxes and rates.
2 5 . N et financia l inco m e
Interest on debentures
Interest on indebtedness
Hedge
Financial taxes (CPMF / IOF)
Interest on lease and concession
Exchange variation on subsidiaries abroad
Other
Total financing expenses
Revenue on financial investment
Compensation on debentures
Total financing expenses
Net financial income
Consolidated
2005
2006
2005
(127,426)
(873)
17,578
(8,600)
(69,139)
(695)
(4,671)
(3,376)
(20,271)
(6,370)
(160,353)
(221,890)
17,578
(24,706)
(157,006)
(13,129)
(92,832)
(69,581)
(97,806)
(4,671)
(9,655)
(47,536)
(22,524)
(50,061)
(139,592)
(84,341)
(652,338)
(301,924)
57,150
98,451
45,489
29,516
314,985
174,085
155,601
75,005
314,985
174,085
16,009
(9,336)
(337,353)
(127,839)
65
Parent Company
2006
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2 6 . I nsurance – conso l idated ( U naudited )
2 7 . financia l instru m ents
The Companies maintain insurance policies in amounts considered sufficient by
On December 31, 2006, the Company and its subsidiaries had the following main
management to cover possible losses, as follows:
financial instruments:
Financial investments: evaluated at cost, accrued of interest until the balance sheet
date, the rates of which were compatible with market conditions prevailing on that date.
Line of business
Coverage by event
Sum insured
Rail operating risks
Property – property damage and
loss of profits
150,000
Operations, pollution, employer,
vehicles (contingencies) and port
25,500
Investments: as described in Note 13, these refer to investments in closely-held
subsidiaries and/or investments appraised at the equity method, representing
strategic significance to the Company’s operations.
Civil liability - rail operations
Insurance for rail freight
Civil liability of the rail freight carrier
(RCTF-C); rail risk (RF)
Significant balances with related parties: as described in Note 12, they are realized
in normal market conditions.
30,000
Loans and financings: as described in Note 16, these include agreed charges and
Civil liability – trucks
Damages to third parties on
domestic and international routes
Insurance for road freight
Civil liability of the road freight
carrier (RCTR-C) – accidents and
(RCF-DC) theft; international road
transportation
500
exchange swap effects, commented as follows, when applicable.
Debentures: the market value of the debentures issued by the Company and its
1,500
subsidiaries approximates their face value on December 31, 2006.
The main risk factors affecting the Company’s and its subsidiaries’ businesses are
as follows:
(a) Credit risk
The Company and its subsidiaries are potentially subject to credit risks arising from
their trade accounts receivable, and the procedures adopted to minimize commercial
risks include the selection of customers through adequate credit analyses, the
The total coverage of the policies above, on December 31, 2006, is R$207,500.
definition of sales limits and short-term maturity of trade notes. Estimated losses with
66
these debtors are fully provisioned.
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(b) Exchange rate risk
The Company and its subsidiaries are subject to the effects of exchange rate
fluctuations in connection with their foreign currency transactions.
To the extent that there are foreign currency-denominated debts, the Company
and its subsidiaries, in order to protect its equity position in relation to fluctuations
of the Brazilian currency, they contract currency swap operations (US$ x CDI between 85% and 105%) for the total consolidated foreign currency-denominated
debt (Note 16). The gains verified in such operations, amounting to R$1,633 for the
period ended on December 31, 2006 (on December 31, 2005 – losses of R$23,176),
additionally in December 2005, the parent company contracted hedge operation
to protect investments in Argentina against fluctuations of Peso against Real. The
gain verified in the period amounts to R$12,907 (loss of R$4,671 on December 31,
2005), which was recognized as financial result.
2 8 . Lease
The indirect subsidiary Ferronorte is leaseholder with purchase option, by means
Assets
Current
Liabilities
Long-term
Liabilities
Charges
(p.a.)
Remaining term
18,380
7,066
9% + dollar
variation
5 semesters
These agreements position on December 31, 2006 is as follows:
Locomotives
Dash 9
67
of lease agreements.
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2 9 . P ri vate socia l securit y
The indirect subsidiary Ferrovia Novoeste sponsors a private pension plan with the
In addition to the total financial coverage of actuarial liabilities, the plan has a
company HSBC Fundo de Pensão. The plan has prevailing characteristics in the
surplus with which a pension fund that amounts to R$1,059 on December 31,
defined contribution modality during the funds accumulation period. The only
2006 was made. The Fund was established by remaining balances of contributions
defined benefit, in the accumulation stage, is a benefit equivalent to six salaries,
from the sponsor, coming from withdrawals of participants who made a partial
paid in the event of death, disability and retirement process, calculated according
redemption.
to formulas and conditions established in the plan’s regulation.
The contributions are made on average, in the proportion of 80% by the sponsor
and 20% by the active participants, as established in actuarial technical note.
The plan is reviewed by an independent actuary, annually, and the last version was
concluded in December 2006.
2006
2005
2006
2005
Sponsor contributions:
Participants
Net assets
273
513
Participation payroll
4,148
7,699
8,096
7,380
Normal contribution
0.98%
2.32%
The plan also has a defined benefit portion in the concession phase, whose
actuarial liability refers to life annuities granted to its participants. The present
value of the actuarial liability, calculated based on the mortality table AT-83 and
on a financial discount rate of 6%, amounts to R$1,020 on December 31, 2006,
68
totally coverage by financial assets.
all
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américa latina
latina logística
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AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
3 0 . S upp l e m entar y infor m ation state m ent of cash f low
Operating activities
Net income for the year
Expenses (revenues) not affecting cash and cash equivalents
Depreciation and amortization
Lease and concessions
Equity accounting
Provision for unsecured liabilities
Goodwill amortization
Provision for loss in investment addressed to sale
Cost in disposal of long-term investment
Gain in disposal of permanent assets
Exchange variation on subsidiaries abroad
Deferred income tax and social contribution
Provision of unrealized profit
Realization of deferred income
Interest on taxes paid in installments
Provision for contingencies
Exchange variation and charges on financing and debentures
Result of unrealized swap activities
Constitution (realization) of allowance for doubtful accounts
Minority interest
Increase in assets
Trade accounts receivable
Supplies
Recoverable taxes
Dividends and interest on own capital
Other assets
Increase (decrease) in liabilities
Suppliers
Payroll and related charges
Taxes, charges and contributions
Lease and concessions payable
Dividends and interest on own capital
Other liabilities
Cash generated (used) by operating activities
Consolidated
2005
2006
2005
74,679
169,820
76,060
171,198
(186,757)
130,893
152,533
(1,444)
55,386
72,054
(1,241)
9,231
55,112
17,794
9,434
2,041
(203,779)
103,461
5,453
55,112
(20,486)
(744)
7,264
(6,763)
(744)
43,252
(21,049)
39,349
5,352
37,940
27,521
(13,451)
(105,473)
(5,112)
(124,036)
(2,627)
(23,195)
(1,091)
(26,913)
1,083
(1,057)
(6,510)
(22,641)
(179)
(22,794)
(108,890)
6,585
(1,736)
(1,661)
(1,053)
13,129
(16,359)
(1,162)
(1,061)
22,524
(14,662)
(521)
33,184
19,411
165,052
(2,678)
18,391
122
669,269
24,342
11,651
151,595
27,847
2,814
31
531,391
(30,959)
(29,825)
(31,755)
(12,605)
(4,658)
(72,765)
487
(92,052)
(9,728)
(99,756)
(192,718)
(202,512)
27,580
(63,786)
(22,519)
(221,877)
(675,832)
(98,615)
103,754
2,558
32,986
(53,123)
6,585
(40,476)
52,284
483,919
69
Parent Company
2006
all
all || américa
américa latina
latina logística
logística AND
AND ITS
ITS SUBSIDIARIES
SUBSIDIARIES ||
Parent Company
Investing activities
Acquisition of interest
Disposal of interest
Proposal dividends and interest on own capital
Capital structure, net of cash of company acquired in the year
Acquisition of fixed assets
Disposal of fixed assets
Investment in deferred assets
Cash generated (used) in investing activities
2005
2006
2005
(1,331,846)
(32,589)
(1,417,224)
(50)
1,061
122,483
53,646
26,334
(372,354)
(5,278)
(1,768,522)
(255,276)
2,106
(5,557)
(257,716)
205,673
(91,811)
(278,706)
65,266
(40,332)
(4,108)
2,947
2,207,200
(989,370)
234,881
(221,170)
1,448,224
(17,738)
(37,525)
(10,896)
65,266
(40,332)
(19,432)
(4,091)
1,342,549
(141,071)
2,599,895
15,122
Increase (decrease) in cash and cash equivalents
19,785
(121,067)
732,758
241,325
Increase (decrease) in cash and cash equivalents
Closing balance of cash and cash equivalents
250,282
270,067
371,349
250,282
1,006,282
1,739,040
764,957
1,006,282
Increase (decrease) in cash and cash equivalents
19,785
(121,067)
732,758
241,325
Financing activities
Financing
Fund raising
Amortization
Acquisition of debentures
Capital increase and AFAC
Proposed dividends and interest on own capital
Realized swap transactions
Related parties
Cash generated (used) by financing activities
70
Consolidated
2006
(4,511)
(1,213,874)
21,057
1,400,200
(832,815)
(658,588)
1,448,223
(17,738)
19,857
(16,950)
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M E S S AG E TO S H A R E H O L D E R S
we faced the stoppage of farmers, which interrupted flows of agricultural
transportation for 25 days, both in Midwestern and Southern Brazil. Even though,
We are pleased to present the results for 2006, a year which will be remembered
the volume of agricultural commodities grew by 13.4%, from 10.2 billion RTK, in
as transformational for our business. The period shows the strength of ALL’s
2005, to 11.6 billion RTK, in 2006.
fundamentals and competitive advantages, for we achieved our financial goals facing
an adverse agricultural market and managed, with agility, to increase our volume in
In the industrial market, we continued our growth curve above 20% in intermodal
the ports and reach new industrial segments. 2006 also will be remembered for
volumes, main steel products, refrigerated cargos and containers. In the highway
the largest acquisition of our history, the purchase, in May, of Brasil Ferrovias, totally
market we maintained our strategy of focusing on dedicated operations and grew
carried out through the capital markets, focusing on the States of Midwestern Brazil
by 44% our operating result, reaching new operations in the Beverages (AmBev),
and in São Paulo. These markets have a low presence of the railroad modal and with
Consumption (Unilever) and Automotive (Renault) segments.
a great growth opportunity from the railroad infrastructure recovery.
In Argentina, even facing a weak soybean, corn and wheat crop, our volume grew by
The good results achieved have only been possible through our staff commitment,
6%, basically pushed by the improvement in our operating indicators. The reliability of
which has worked with the solid intent of delivering the best service to our
our assets and the safety level had a significant improvement in the year. For the first
clients, with safety and constant productivity gains. This commitment is a
time, we entered into long-term agreements with investments of clients, such as AGD,
result of a meritocratic culture, incessant in cost reduction and in the search
Iecsa, Agrenco and Cia Argentina de Granos.
for results.
In Brasil Ferrovias, we promoted a significant reduction in the cost base. During
The year of 2006 was transformational for ALL for five main reasons:
the second half of 2006, period in which the company was already totally under
the management of ALL, EBITDAR grew by 86%, increasing from R$92 million
in 2H05 to R$171 million in 2H06. Every cost adjustment, both personnel and
was comprised of a 25% increase in Ebitdar of ALL Brasil, to R$547 million, and a
renegotiation of agreements with suppliers and financial debts has already been
9% increase in Ebitdar of ALL Argentina, to P$64 million. Our consolidated revenue
made, totaling a gain of synergies higher than R$80 million. The adjustment
grew by 15% compared to 2005, to R$1,430 million, and in 2006 the consolidated
process had a cost of R$400 million and all existing liabilities are presented in
volume had a 10.6% growth, reaching 22.047 billion RTK.
the 2006 balance sheet.
Our ability to provide integrated logistics solutions to clients, associated with
With the acquisition of Brasil Ferrovias, we leveraged the net debt/Ebitda ratio from
the tireless focus on the reduction of expenses and productivity gains, allowed
the level of 0.2x at the end of 2005 to 3.8x at the end of 2006. The debt of R$1.6 billion
us to grow in an adverse scenario in the agricultural market, with an unfavorable
of Brasil Ferrovias, incorporated to our balance sheet, has a long-term profile, taken
foreign exchange and depreciated prices in the first half of the year. In May,
with BNDES and governmental bodies, with more attractive rates than the market,
71
1. EBITDAR grew by 23% over 2005, reaching R$591 million in 2006. This growth
all | américa latina logística AND ITS SUBSIDIARIES |
and with present value in a very positive level. Our result and cash generation growth
starts showing small results, will take from two to three years to be concluded.
curve makes us calm concerning the financing and reduction of this indebtedness
The operational and administrative systems have already been implemented and
as planned. In addition, the intensive use of the EVA, both in the corporate level and
our Operational Control Center (CCO) already controls by satellite from Curitiba the
in our business units, allowed us to grow at the same time we kept on reducing the
railroad operations in our entire network in Brazil. We created five more operational
invested capital, so that we can obtain a growing free cash flow.
production units and two business units in São Paulo. Our management system
by guidelines, individual goals and performance championships has already been
Our Investor Relations areas has dedicated itself a lot in the proximity and education
implemented for all our employees. Therefore, all processes, procedures and goals
of our business with the financial market, as we are the only logistics publicly-held
have already been consolidated and we have been operating in a unified manner
company in Brazil, with superior corporative governance practices and being
since January 2007.
followed closely by more than 10 prime analysts and investors all over the world.
The performance of our shares, with a 377% appreciation since their launch in
3. Good improvement in the service, productivity and safety levels. We reached
June 2004, compared to a 114% appreciation of IBOVESPA in the period, is the
new levels of productivity and reliability for railcars and locomotives, with an
acknowledgment of our transparency and demonstrates the trust of the capital
improvement in the terminals turnover and the remunerated/km of our trucks. The
markets in the fundamentals of our business. In addition, we are already in the
diesel consumption (liters/000gtk) was again reduced by 3% over 2005, and we had
Ibovespa and IBrX-50 indexes and have received several awards for our Investor
significant gains in the services and material purchases contracts.
Relations website.
In 2006, we had our best performance in operational safety, rewarding the discipline
2. The history of ALL is repeated with the acquisition of Brasil Ferrovias. In May
in the compliance with the conduction procedures, with audits in 100% of mountain
2006, we acquired, through an exchange of shares, the operations of Brasil Ferrovias,
range travels and strong use of technology. Thus, we improved our gravity indicators
preserving ALL’s cash for the restructuring and investment process in the operational
and the number of accidents, with 12.2 accidents by million of train/km in the southern
recovery of this network and its assets. It had 4.7 thousand of railroad, 7.8 thousand
rail network, against 83.2 in 1997, which made ALL southern rail network one of the
railcars and 280 locomotives. The history of ALL is repeated with the opportunity
safest cargo railroads of the world.
of operationally changing Brasil Ferrovias into a viable railroad operation and
starting to commercially grow its share in the transportation matrix. For comparison
Our clients’ satisfaction survey showed an improvement in relation to 2005,
purposes, currently the railroad share in the Port of Santos stands at 27%, against
rewarding our quality policies in the execution of operational processes. The
60% in Paranaguá.
commercial proximity with our clients has been the key to accelerate our growth
with joint expansion projects.
The operational indicators of safety, track conditions, reliability of locomotives
4. Strong advance in sales agreements and investments of clients and of
operation in Southern Brazil. We believe this improvement process, which already
our own. We entered into several long-term sales agreements, ensuring new
72
and turnover of railcars show significant gaps to those already reached by our
all | américa latina logística AND ITS SUBSIDIARIES |
volumes and investments of clients, showing the trust and acknowledgment
of the 2nd generation Board Computer, the implementation of detectors of
with our service level and their strategic decision to expand their businesses
railcar derailment and barrier falls, and the development of CCP (Yard Circulation
in ALL’s influence area. There were more than 1,500 railcars, among new and
Control), which will allow us to manage the maneuvers and movement of railcars
refurbished ones, from clients such as Bunge, Coamo, Álcool PR, Klabin, Sadia,
in the yards. Since the privatization, in 1997, more than R$1.2 billion was invested
Votorantim, Ipiranga, among others. We also had terminals inaugurated in ALL’s
in new technologies, track, rolling stock and training.
operational areas such as the plate terminal of Masisa, in São Paulo, of Standard,
for container, in Cambé and Cascavel, of Meridian, for grains, in Maringá, and
5. Improvement of our employees’ satisfaction and integration with the
the duplication of Pasa, for sugar, in Paranaguá.
community. More than 4.7 thousand employees were trained by our Corporate
University in technical and management courses, and we obtained a significant
Various new operations were added to the company, strengthening our presence
improvement in our internal research of the organizational environment. This was
in Brazil and Argentina as an Intermodal Logistics Operator, growing in dedicated
also a year of great proximity with the community, where important projects of
operations, storage, transfers, urban distribution and border services. As an
Corporate Responsibility were developed, such as the Talent Workshop project that
example, we have the management of the whole logistics network of Calpar,
graduates youngsters from public schools in Basic Engineering, the signaling of
of Bunge Fertilizantes PR, and of the supply of High Maltose to Ambev’s plants,
more than 200 Level Crossings in places with a wide circulation of vehicles and the
in addition to the dedicated highway operations of Unilever, Ford, Scania and
Environmental Train program that benefited more than one thousand youngsters
White Martins. In the 4th quarter, we also took over the entire intermodal logistics
from the communities close to the railroad. We are already in the newly created
of refrigerated products of Sadia in west Paraná and the dedicated highway
Bovespa Corporate Sustainability Index (ISE), the first Latin American indicator
operation of Renault in Mercosur.
targeted at companies with a responsible attitude towards the environment,
society, clients, suppliers and governments.
Within the several projects developed, we highlight the two most important
ones. The first one is the new port in Zarate, Argentina, with a static capacity of
2007 Outlook: Operational reliability to grow in volume and result
150 thousand tonnes/year, under construction by Agrenco, which will allow a
The strong Balance allows us to concretize our growth and investment plan,
better outflow of the Argentine and Paraguayan crop. The second one is TGG,
regardless of the financial market fluctuations. In 2007, the commercial market
new grains terminal in the port of Santos, with static capacity of 240,000 tonnes,
scenario is very promising, with the recovery of the grain crop and the growth
built in a partnership between Bunge, Amaggi and ALL. These two large-extent
trend for industrial volumes. The adaptation of 40 locomotives and refurbishment
projects, which significantly increase the railroad competitiveness, will be under
of 1,800 railcars of the dead fleet, improvement in track, port terminals and
operation as from February 2007.
information system have already been provided to support the ambitious growth
planned. By means of the right allocation of these investments, we are working to
give one more step towards growth, with significant profitability and productivity
added up to R$300 million, focusing on information technology, with the launch
results in 2007.
73
ALL also continues its policy of intense investments of its own. In 2006 investments
all | américa latina logística AND ITS SUBSIDIARIES |
Finally, we would like to thank all our clients, suppliers and regulation bodies
for the support shown during these years, our shareholders for the constant
support, and our employees, who in every moment show a differentiated
commitment, always in pursuit of our vision, which is “To be the best logistics
company of Latin America”.
2 0 0 6 M A N AG E M E N T R E P O R T
The purpose of América Latina Logística S.A. (Holding) is the
interest in other companies, as shareholder or partner, and it
develops, through its subsidiaries, activities related to cargo
Wilson Delara
Chairman of the Board of Directors
Alexandre Behring
Vice Chairman of the Board of Directors
Bernardo Hees
Chief Executive Officer
transportation and logistics. Its main subsidiaries are ALL do
Brasil, Southern Rail Network concessionaire of RFFSA (Federal
Railway System) and the southern portion of São Paulo rail
network, Brasil Ferrovias and Novoeste Brasil, holding companies
that control railroad concessionaires in the States of São Paulo,
Mato Grosso do Sul and Mato Grosso, ALL Argentina, which
controls ALL Central and ALL Mesopotâmica in Argentina, and
ALL Intermodal, a logistics company which explores cargo
intermodal transportation services and activities related to
the road transportation services and logistics operations. The
consolidated results, unless otherwise indicated, exclude
results coming from our stake in Santa Fé Vagões, in which ALL
holds a 40% interest, as well as the results of Brasil Ferrovias S.A.
(a wholly-owned subsidiary) and Novoeste Brasil S.A. (a whollyowned subsidiary), acquired in May 2006. In this report, the term
“Brasil Ferrovias”, except when differently indicated, refers to both
74
companies Brasil Ferrovias and Novoeste Brasil.
all | américa latina logística AND ITS SUBSIDIARIES |
F I N A N C I A L A N D O P E R AT I O N A L H I G H L I G H T S
Consolidated Results
ebitdar (R$ million)
12491249
20052005
454 454
20002000
393 393
19991999
19981998
19971997
CAGR 25%
616 616
20012001
271 271
20032003
CAGR 25%
821 821
20022002
351 351
20042004
990 990
20032003
482 482
20052005
10841084
20042004
591 591
20062006
226 226
195 195
190 190
20022002
127 127
20012001
90 90
20002000
62 62
19991999
19981998
9
19971997
CAGR 59%
14661466
20062006
CAGR 59%
Gross revenue (R$ million)
36 36
9
in 2005 to R$591.1 million in 2006. ALL’s two largest business units, Agricultural
in 2005 to 22,047 million RTK in 2006, (b) gross revenue by 17.4%, from R$1,249.3
Commodities and Industrial Products, accounted for 98% of the incremental EBITDAR
million in 2005 to R$1,466.5 million in 2006, (c) EBITDA by 11.7%, from R$457.9 million
of R$109.2 million in 2006, with growth rates of 26.9% and 20.2% respectively, when
in 2005 to R$511.3 million in 2006 and (d) EBITDAR by 22.7%, from R$481.8 million
compared to 2005. EBITDA in the year, recorded by the Highway Services business
75
During the year, ALL increased (a) total volumes by 10.6%, from 19,929 million RTK
all | américa latina logística AND ITS SUBSIDIARIES |
unit, shifted from R$5.9 million in 2005 to R$8.5 million in 2006. The products that
contributed most for EBITDA growth were soybean, sugar, corn and fertilizers in
agricultural commodities and pulp and paper, containers and steel products in
industrialized products.
We continued to improve our EBITDAR margins, which increased more than two
percentage points, from 44.3% in 2005 to 46.5% in 2006. Margin increases occurred
in all lines of businesses and were a result of the operational leverage, the increase in
the freight average value, increase in diesel price and continued productivity gains.
46%
54%
Industrial Products
Agricultural Commodities
Revenue Breakdown by Segment
Revenue Breakdown by Modal
18%
46%
54%
Industrial Products
9%
Highway
Intermodal
Agricultural Commodities
Railroad
76
73%
18%
9%
Highway
all | américa latina logística AND ITS SUBSIDIARIES |
ALL’s consolidated net income increased by 0.9% in 2006, reaching R$172.7
Since its privatization in 1997, more than R$1.4 billion was destined to new
million compared to R$171.2 million in 2005, mainly due to the increase in
technologies, assets, operations and training. In 2006, the consolidated investments
EBITDA, partially offset by interest expenses in view of an increase in leverage.
totaled R$312 million, versus R$255.3 million in 2005, with a 22% growth. The increase
The Net Debt/EBITDA ratio grew from 0.2X in 2005 to 3.8X in 2006, mainly
in investments of Brazilian operations reflects: (a) the acquisition and refurbishment
reflecting the acquisition of Brasil Ferrovias, which was highly leveraged. The net
of second-hand locomotives in the United States; (b) higher investments in return
debt/shareholders’ equity ratio rose from 0.1X to 1.1X in the same period.
of profile and maintenance of track; (c) the acquisition of new trucks and (d) logistic
systems. In Argentina, total investments increased from R$23.5 million in 2005 to
R$29.3 million in 2006, mainly due to the increase in expansion investments in
locomotives and railcars.
Net Debt/EBITDA
Consolidated Investments (R$ million)
255
24
15.0x
312
Consolidated
29
Argentina
283
Brazil
232
12.0x
188
11.7x
33
9.0x
121
25
3.6x
4.3x
4.7x
3.2x
2.3x
3.0x
3.8x
1999
2000
2001
2002
2003
24
24
95
87
92
14
81
15
88
67
0.0x
1998
67
40
2.0x
0.5x
1997
96
103
2004
40
0.2x
2005
2006
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
77
6.0x
155
111 116
all | américa latina logística AND ITS SUBSIDIARIES |
A LL B R A S I L
In 2006, ALL Brasil’s net income reached R$162.0 million, 18.5% lower than the
R$198.8 million posted in 2005. The reduction was a result of (i) the increase
in financial expenses due to the higher leverage with the acquisition of Brasil
Ferrovias, and (ii) the provisions of R$55 million for losses with a possible sale of
Geodex and R$18.8 million related to receivables from Ferropar, partially offset
by the EBITDA growth in the period.
EBITDAR (R$ million)
1092 1092
2005 2005
2000 2000
1999 1999
1998 1998
78
1997 1997
335 335
274 274
226 226
195 195
CAGR 24%
520 520
2001 2001
239 239
2003 2003
CAGR 24%
705 705
2002 2002
310 310
2004 2004
854 854
2003 2003
437 437
2005 2005
937 937
2004 2004
547 547
2006 2006
164 164
2002 2002
123 123
2001 2001
82
2000 2000
1999 1999
1998 1998
9
1997 1997
50
36
9
50
36
82
CAGR 58%
1312 1312
2006 2006
CAGR 58%
Gross Revenue (R$ million)
all | américa latina logística AND ITS SUBSIDIARIES |
Gross revenue from Brazilian operations increased by 20.1%, from R$1,092.0 million
Below, 2006 results opened by business unit.
to R$1,312.0 million, while total transported volume climbed from 15.8 billion RTK
to 17.7 billion RTK in 2006. EBITDAR posted a 25.1% growth, increasing from R$436.8
AGRICULTURAL COMMODITIES BUSINESS UNIT
million in 2005 to R$546.7 million in 2006, with a growth of 2.0 percentage points
in EBITDAR Margin, from 46.8% in 2005 to 48.8% in 2006. The significant growth of
The volume of agricultural commodities increased by 13.4% in 2006, from 10,192
EBITDAR and EBITDAR Margin reflects a high operational leverage of the business
million RTK in 2005 to 11,554 million RTK, in spite of the interruptions occurred
and strict cost controls.
in May in our rail network due to protests of farmers against the domestic
agricultural policy. This result was favored by the strong growth in the crop of
Rio Grande do Sul in 2006, which in 2005 was almost destroyed by the strong
drought in the State.
FIXED COST (R$ million)
127
2006
2005
122
2005
123
2004
5.4
AGRICULTURAL5.6
COMMODITIES - MARKET SHARE BY PORT
5.7
2004
124
2003
2002
2006
5.9
2003
122
2002
0ARANAGUÉ
6.1
3ÎO&RANCISCODO3UL
DIESEL CONSUMPTION (Liters/ thousand GTK)
2IO'RANDE
4OTAL
2005
2004
2003
2002
5.4
5.6
5.7
5.9
6.1
79
2006
all | américa latina logística AND ITS SUBSIDIARIES |
EBITDAR of agricultural commodities increased by 26.9%, from R$304.0 million in
2005 to R$385.6 million, mainly due to the expansion of volume and yield, while the
Agricultural Commodities
(RTK million)
Soybean
Soy Bran
Fertilizers
Sugar
Corn
Wheat
Rice
Other
Total
2006
2005
% Variation
4,939.3
1,506.3
1,499.9
1,447.0
1,016.6
466.9
509.4
168.3
11,553.7
3,593.8
2,019.4
1,273.3
1,045.6
725.3
832.3
461.7
240.7
10,192.0
37.4 %
-25.4 %
17.8 %
38.4 %
40.2 %
-43.9 %
10.3 %
-30.1%
13.4 %
EBITDAR margin decreased from 58.4% to 58.2% in the same period, dropping 0.2
percentage point. EBITDA of the Business Unit (after railcar rental expenses related
to new railcars purchased by clients) increased by 10.8%, from R$284.6 million in
2005 to R$315.5 million in 2006, while the EBITDA margin fell 7 percentage points,
from 54.7% to 47.6%.
INDUSTRIAL PRODUCTS BUSINESS UNIT
During the year, the volume of the industrial products business unit increased
by 9.2%, from 5,627 million RTK in 2005 to 6,142 million RTK in 2006. This increase
mainly resulted from a growth in the transported volume of 21.9% in intermodal
At the end of the year, our market share fell from 68% in 2005 to 64% in 2006, due to
flows, with market share gains in almost all segments. It is worth pointing out the
the better market conditions in our coverage area, mainly in the State of Rio Grande
growth in containers (22.6%), steel products (37.0%) and wood (22.1%). In the fuel,
do Sul, where the crop had an increase of nearly 50% in 2006. Exports of agricultural
vegetable oil and cement segments – which are almost exclusively transported
commodities through the ports served by ALL increased by 24.9% in 2006 when
by railroad in our operation area – our market share is currently high and our
compared to 2005, while ALL’s volume in these ports increased by 17.1% in the same
performance depends on the industry growth in our coverage area. In this segment,
period. The volume growth was a result mainly of increases in sugar (38%), soybean
we had a total volume increase of 2.6% in 2006 compared to 2005, with a growth
(37%), corn (40%) and fertilizers (18%).
of 11.1% in civil construction, 4.1% in fuels and a reduction of 31.8% in vegetable
oils due to the migration of crushing companies from Brazil to Argentina.
Agricultural commodities gross revenue increased by 27.3% to R$766.8 million in
2006 against R$602.4 million in 2005, while net revenue increased by 27.3%, from
R$520.3 million in 2005 to R$662.2 million in 2006. The average yield, measured by
R$/thousand RTK, had a 12.3% rise compared to the previous year, mainly due to:
(i) higher prices in our sales agreements, (ii) the transfer of increases in diesel price
80
and (iii) the change in the mix of transported products.
all | américa latina logística AND ITS SUBSIDIARIES |
The EBITDAR margin fell 0.3 percentage point in 2006, from 45.4% in 2005 to
45.1%. EBITDA of the Business Unit (after railcar rental expenses related to new
Intermodal Industrial
Products
(RTK million)
Steel products
Wood, Pulp and Paper
Food products
Containers
Other
Total
2006
2005
% Variation
644.2
437.1
440.4
687.7
106.2
2,315.6
470.1
358.0
362.3
561.1
147.8
1,899.4
37.0 %
22.1 %
21.5 %
22.6 %
-28.2 %
21.9 %
railcars purchased by clients) increased by 16.8%, from R$122.3 million in 2005 to
R$142.8 million in 2006, while the EBITDA margin dropped 1.5 percentage point,
from 43.7% to 42.2%.
HIGHWAY SERVICES BUSINESS UNIT
During 2006, the volume of highway services was negatively affected by the
process of changing this strategic unit into a more profitable business. In
2006, we reduced some little profitable operations, as we established higher
Pure Iron Industrial
Products
(RTK million)
Fuel
Vegetable Oil
Civil Construction
Total
2006
2005
% Variation
profitability goals. The change in the client base also resulted in a new mix of
flows with smaller average distance and, consequently, smaller total volume and
2,405.4
245.0
1,175.5
3,826.0
2,309.8
359.5
1,058.1
3,727.3
4.1 %
-31.8 %
11.1 %
2.6 %
higher average yield, measured in R$/RK, contributing to a better profitability.
For instance, in 2006, we discontinued one of the operations of urban
distribution of products of Ambev and, recently, included the transportation
of water bottles for Minalba in the State of São Paulo, an operation which has
better margins.
The revenue decreased by 9.5% in 2006, reaching R$139.0 million, as a result
Industrial products gross revenue increased by 20.9%, from R$336.0 million in
of a 15.9% reduction in volumes, from 55.9 million RK in 2005 to 47.0 million RK
2005 to R$406.2 million in 2006, pushed by an increase in volume of 9.2% and an
in 2006, partially offset by a 7.6% increase in the average yield. EBITDA of the
increase in yield, measured by R$/thousand RTK, of 10.8%, mainly reflecting the
highway services unit increased by 43.5% in 2006, from R$5.9 million in 2005
change in the mix of transported products, and an increase in diesel..
to R$8.5 million in 2006, while the EBITDA margin grew from 4.4% in 2005 to
7.1%. The improvement in profitability reflects the discontinuance process of
non-profitable operations and the establishment of a minimum return level for
in 2005 to R$152.5 million, mainly due to increases in volume and average yield.
new operations.
81
EBITDAR of industrial products increased by 20.2% in 2006, from R$126.9 million
all | américa latina logística AND ITS SUBSIDIARIES |
ARGENTINA OPERATIONS
221
2006
2006
203
2005
2005
CAGR 28%
163
2004
139
2003
126
2002
2003
2002
65
2001
2004
2001
2
Agricultural Commodities
2006
2005
% Variation
(Thousands of RTK)
Soybean
Soy Bran
Fertilizers
Sunflower
Sugar
Corn
Wheat
24
Rice
Other
Total
428.2
64
49.4
111.5 58
52.1
0.0
115.0
34.2
6.3
0.0
796.6
225.9
43.8
69.6
54.3
10.9
151.5
66.2
5.5
2.1
629.7
89.6 %
12.7 %
60.2 %
-4.0 %
na
-24.1 %
-48.4 %
14.4 %
na
26.5 %
46
33
CAGR 99%
GROSS REVENUE (P$ million)
EBITDAR (P$ million)
629.7 million RTK to 796.6 million RTK. In addition to the higher productivity of the
58
46
2004
33
2003
24
2002
rolling stock, the strong increase in the volumes of agricultural commodities during
CAGR 99%
2005
2001
In 2006, the increase in the volume of agricultural commodities stood at 26.5%, from
64
2006
the year reflects: (i) favorable conditions of the crop in Argentina, (ii) the Company’s
decision to allocate capacity in the higher margin businesses to the detriment of
volumes in lower margin industrial flows.
2
Industrial Products
Gross revenue of ALL Argentina increased by 8.6% in 2006, from P$203.3 million in
2005 to P$220.7 million, due to an increase of 2.5% in the average fee, from P$49.5
per thousand RTK in 2005 to P$50.7 per thousand RTK, and of 5.9% in volume, from
4,110 million RTK in 2005 to 4,352 million RTK. The average fee increase mainly reflects
the transfer of inflation, while volume growth resulted in productivity gains, partially
offset by a change in the mix of freights - with an increase in the share of lower density
products, such as agricultural commodities, and reduction in the share of higher
82
density products, such as stones.
(Thousands of RTK)
Vegetable Oil
Products
Wood
Food Products
Civil Construction
Container
Other
Total
2006
2005
% Variation
37.6
381.3
326.4
343.3
1,772.2
477.9
216.3
3,554.9
40.4
453.9
336.9
397.5
1,647.1
407.5
196.8
3,480.1
-7.0 %
-16.0 %
-3.1 %
-13.6 %
7.6 %
17.3 %
9.9 %
2.2 %
all | américa latina logística AND ITS SUBSIDIARIES |
The volume of industrial products grew by 2.2% in 2006 compared to 2005, due
After the acquisition, the share of agricultural commodities in our mix of cargos
to the allocation of more railcars to the flows of agricultural commodities to the
increased from 50% to 75% of ALL’s total revenue. With time, we should reach
detriment of lower profitable industrial flows - in particular, stones in the civil
once again a higher balance between agricultural and industrial commodities
construction segment.
closer to 50/50.
EBITDAR grew from P$58.2 million in 2005 to P$63.5 million in 2005, or 9.1%,
Since May 10 up to December, a transition team of ALL’s executives managed Brasil
reflecting an increase in volumes and a strong yield growth. In spite of the
Ferrovias with the mission to restructure the company and prepare it for the total
increase in labor costs due to the negotiation of salaries with labor unions,
integration in 2007. Since January 1, 2007, ALL and Brasil Ferrovias are operating in
the EBITDAR margin reached 29.5%, in line with the previous year.
a totally integrated way, with unified teams, systems and rail networks.
In 2006, EBITDAR grew by 6.8%, from R$228.4 million to R$244.0 million and the
EBITDAR margin increased by 2.3 percentage points, from 30.9% to 33.2%. The
BRASIL FERROVIAS
revenue decreased by 1.7%, from R$839.1 million to R$825.0 million and the volume
fell 5.8%, from 9,844 million RTK in 2005 to 9,273 million RTK in 2006. In 2H06, period
On May 9, after 6 months of negotiations, we concluded the acquisition of
in which Brasil Ferrovias was under the management of ALL, EBITDAR increased by
Brasil Ferrovias. After having all the necessary approvals and the compliance
85.6%, from R$91.9 million in 2H05 to R$170.6 million in 2H06, mainly reflecting a
with all previous conditions, the operation was concluded on June 16, through
strong reduction in the cost base. Revenue decreased by 5.0%, from R$411.8 million
the exchange of shares, with no payment in cash. Brasil Ferrovias operates
in 2H05 to R$391.4 million due to the drop of volume of 5.9%, from 4,857 million RTK
two railroad systems: (i) one narrow gauge next to the rail network of ALL,
in 2H05 to 4,570 million RTK.
which connects our current network to the States of Mato Grosso do Sul and
São Paulo and to the port of Santos; and (ii) a broad gauge system which
In similar conditions to the ones of ALL after its privatization in 1997, Brasil
connects the State of Mato Grosso to the port of Santos through the State of
Ferrovias was a company with weak operating performance, reduced moral and
São Paulo. The two systems are interconnected in Campinas and the railroad
a history of negative results, however with a large growth potential. We have
that connects Campinas to Santos is a mixed gauge railroad.
the challenge to restructure Brasil Ferrovias with actions aimed at (i) reaching
productivity and safety levels similar to the ones of ALL; (ii) implementing the
The acquisition is an important advance in our strategy of giving ALL access
same culture of obsessive cost control and (iii) reaching compatible levels of
to important markets, such as the State of São Paulo, and to the States of
volumes and revenues in 2 to 3 years.
Mato Grosso and Mato Grosso do Sul, which constitute the current Brazilian
In 2H06, we had an important progress towards our main goal concerning Brasil
both in volume of agricultural commodities and in movement of containers.
Ferrovias in 2006, which is to create a corporate culture focused on results, as
83
agricultural frontier, and to the port of Santos, the largest one of the country
all | américa latina logística AND ITS SUBSIDIARIES |
we did in ALL. We are better positioned to complete the restructuring process
than we were in 1997, for we count on 9 years of experience of our team. We
continue to be confident in the large potential of this opportunity.
CVM Instruction no. 381 as of January 14, 2003
ALL - América Latina Logística S.A. in compliance with the Official Letter/CVM/SEP/
GEA-2/no. 305/05 and CVM Instruction no. 381 as of January 14, 2003 (ratified by
the Directive Release /CVM/SEP/SNC/no. 02/2005 as of March 20, 2005) informs the
market the services contracted by the Company and carried out by its independent
auditor Ernst & Young (“Auditor”) during 2006:
(i) Due diligence services for the acquisition of the companies Brasil Ferrovias
S.A. and Novoeste Brasil S.A., based on an agreement entered into in the first
quarter of 2006, whose fees and expenses totaled approximately R$800,000.00, with
duration of 50 days. These fees represent 44.6% of the total external audit fees;
(ii) Review services of the corporate model resulting from the acquisition of
investments in Brasil Ferrovias and Novoeste Brasil, in accordance with the agreement
entered into in May 4, 2006 in the amount of R$91,900.00. The service lasted 2 weeks.
84
These fees represented 5% of the total external audit fees.
ALL - América Latina Logística
Financial Statements 2006
10 years Always ahead
Rua Emilio Bertolini, 100
Vila Oficinas - CEP 82920.030
Curitiba - PR - Brasil
Tel.: 55 41 2141-7555
fax: 55 41 2141-7484
e-mail: ir@all-logistica.com
F i n a n c i a l
S t a t e m e n t s
2 0 0 6