How Rumo (RAIL3) and MRS (MRSA3) have been balancing expansion and leverage

Article originally published on Investing.com, written by Camila Affonso, Partner at Leggio Group, in partnership with columnist Carlos Heitor Campani.

Today's article was developed in partnership with Camila Affonso, Partner at Leggio Group, and her team of consultants specializing in Supply Chain strategy and transformation. In this edition, we examine the financial performance of two rail transportation companies listed on the B3: Rumo (RAIL3) and MRS (MRSA3B), presenting an instructive look at recent market dynamics through these companies' numbers.

To understand these companies' results, it's first necessary to understand the role railroads play in the national economy. Brazil has a highly significant agricultural and mineral commodities chain. Considering agribusiness across its broader value chain — inputs, agricultural production, industrial processing, and logistics and trading services — the sector accounts for more than a fifth of national GDP.

The growth of agribusiness in the Center-West region and the importance of mining in the Southeast have sustained high transport volumes for more than a decade. Soybeans, corn, iron ore, and other commodities travel thousands of kilometers from production areas to shipping points, and logistics costs directly influence the domestic and international competitiveness of these supply chains. In a country of continental scale, rail efficiency isn't just an operational gain — it's a strategic structural factor for growth.

This sector operates under long-term concessions, with contractual commitments around investment and capacity. Unlike companies in other sectors, the rail investment cycle is capital-intensive, often running into the billions of reais, meaning cash generation needs to keep pace with the amounts invested.

Within this context, we're using Rumo and MRS as instructive examples, since both are publicly listed (and therefore disclose their results) and have distinct operating profiles — whether in terms of predominant cargo type, network size, services provided, investment intensity, or how they've structured their expansion and leverage. The results reviewed here cover the past four years, from 2021 to 2025.

Rumo is the country's largest independent rail operator, managing approximately 13,500 km of track connecting the Center-West, South, and Southeast regions, in addition to owning port and transshipment terminals. Its strategy in recent years has been closely tied to capacity expansion and the consolidation of corridors used for grain shipments. According to the company, it transported approximately 50 million tons in 2024.

MRS, meanwhile, operates a more concentrated network along the Southeast corridor, connecting Minas Gerais, Rio de Janeiro, and São Paulo, spanning roughly 1,600 km. Its cargo profile is more closely tied to mining and heavy industry, with a strong presence of iron ore and steel products. According to the company, it transported approximately 202 million tons in 2024.

Looking at both companies' market capitalization (as of this publication date), we find approximately R$31.4 billion for Rumo and R$15.5 billion for MRS. This gap also shows up when we look at the scale of operations through the companies' net revenue growth over the period. See the chart below.

Source: Companies' Financial Statements

The chart reveals two simultaneous trends. The first is structural scale growth at both companies. Rumo more than doubles its quarterly revenue between 2021 and 2025, moving from levels near R$1.7 billion to more than R$3.7 billion. This growth isn't a one-off — it tracks the expansion of agricultural production and the company's own network buildout. Over the period, this included the operational consolidation of the Malha Central network and progress on the rail extension project in Mato Grosso, with the development and rollout of new segments expanding the network's capacity.

MRS also doubles its revenue over the period, growing from approximately R$1.0 billion to around R$2.0 billion per quarter, with consistent growth throughout. The scale gap by the end of the series is notable — by 2025, Rumo's net revenue is nearly double that of MRS.

The second, more interesting comparison is EBITDA margin, where despite operating at very different revenue scales, both companies run in a similar average range of close to 50%. Rumo shows sharper swings over the period, with alternating stretches of margin expansion and compression.

That said, this behavior is typical of companies in an expansion phase, subject to operational variation, adjustments, and greater sensitivity to project timing. The -7.4% EBITDA margin in Q2 2024 stemmed from the recognition of non-recurring items, particularly an impairment on the Malha Sul network and adjustments related to the divestiture of terminals; excluding those items, adjusted EBITDA margin came in at 59.9%, above the same period the previous year.

MRS, by contrast, shows a more stable margin trajectory, with less abrupt swings and operating profitability staying within a relatively more consistent range.

That said, revenue and operating margin shouldn't be assessed in isolation. In rail infrastructure, revenue and capacity growth are tied to long-term investment cycles. Network expansion, asset modernization, and increased logistics capacity require substantial capital and directly affect the debt structure over time.

With that in mind, alongside revenue and margin, it's also worth looking at the trajectory of operating leverage — defined as a strategy of using third-party capital or other financial instruments to increase the potential return on an investment, essentially using debt to finance asset investments. The ratio of net debt to EBITDA offers a measure of capital intensity and how financial exposure has evolved. As shown in the chart below, leverage dynamics between 2021 and 2025 diverge between the two companies.

Source: Companies' Financial Statements

For Rumo, the net debt-to-EBITDA ratio rose through 2021 and early 2022, reaching around 2.8x, consistent with the network expansion and capacity growth cycle underway at the time. Starting in 2023, the ratio declined to levels near 1.4x in 2024, reflecting lower leverage. In 2025, there's a renewed increase, though still below the earlier peak. Current financial covenants cap leverage at 3.5x comprehensive net debt/EBITDA, and the ratio has remained below that threshold throughout the period observed.

At MRS, the trajectory is more gradual. Leverage starts from a lower level in 2021 and increases gradually from 2023 through 2025, approaching 1.4x, without major swings. This behavior is consistent with a lower-intensity expansion model. MRS is subject to covenants in its debt agreements, with terms that vary by instrument; the most restrictive clause requires maintaining a net debt/EBITDA ratio below 4.5x.

In comparison, then, Rumo shows faster scale growth over the period, accompanied by greater margin variability and more pronounced leverage cycles. MRS shows a steadier evolution, both in profitability and leverage. Between 2021 and 2025, both companies benefited from the structural strength of Brazilian exports. The difference isn't in the sector's relevance or market size, but in the strategy each company adopted to capture growth and the capital intensity taken on along the way.

The analysis discussed here is just a starting point for understanding the numbers and strategies behind companies in this sector. When assessing rail assets, looking at revenue or margin in isolation isn't enough. Operational expansion, cash generation, and leverage trajectory all need to be evaluated together, alongside other factors. A best-in-class approach to the sector starts from that integration, assessing infrastructure with an eye toward investment opportunities, risks, and capital sustainability. This lens makes it possible to compare results within the same sector and understand how growth is aligned with financial discipline and the consistent creation of value at scale.

Disclaimer: The financial results and assessments presented here are not investment recommendations. This article is intended solely as an impartial, independent analysis of publicly listed companies whose results are publicly available.

*Carlos Heitor Campani holds a PhD in Finance and serves as Academic Director of iluminus – Academia de Finanças, Partner at CHC Treinamento e Consultoria, and Researcher at the Cátedra Brasilprev em Previdência and at ENS – Escola de Negócios e Seguros (School of Business and Insurance).

*Camila Affonso is a Partner at Leggio Group, Director of the Infrastructure Department at FIESP, holds a Master's in Corporate Finance from the Université de Bordeaux, a Specialization in Finance from COPPEAD/UFRJ, and degrees in Production Engineering and Mathematics from UFRJ.

Link to the article published on Investing.com: https://br.investing.com/analysis/como-a-rumo-rail3-e-a-mrs-mrsa3-vem-equilibrando--expansao-e-alavancagem-200475723