Fras-le S.A. (FRAS3) Earnings Call Transcript & Summary

Good morning, welcome to Fras-le Mobility videoconference to present the results of the third quarter of 2025. Before we start, we would like to do a few announcements -- important announcement. This video conference is being reported. [Operator Instructions] Besides this, we reinforce that information in this video conference are not a guarantee of performance, involve risks and uncertainty regarding future events depending on circumstances that can not -- can and cannot happen. We thank you for being with us in another results video conference. We have with us today our President, Daniel Randon; CEO, Anderson Pontalti, Business Director; Business Director, M&A, Hemerson de Souza our our IR specialist, Jessica Cantele; as I guess, the Manager, [indiscernible]-- for participating in the video conference, but has recorded a message.

Hello. Good morning. It's a pleasure to be with you with you with this results video conference of Fras-le Mobility. I thank the presence of all the analysts, investors, partners and colleagues that follow us. I'd like to start highlighting an important evolution in our governance structure. Since September 1, I took on the position of President of the company, while Anderson Pontalti is now in the position of CEO of Fras-le Mobility. This transition represents a natural movement in our corporate governance model. strengthening executive management, ensuring the continuity of our long-term strategy. Hemerson has a consolidated trajectory in and in [ corp ] companies with deep business knowledge and leadership aligned to our values. I am fully confident in his capacity to conduce Fras-le Mobility in this new phase marked by growth, innovation and sustainable value generation. I record my thank you to [ Sarta ] that will now act as executive senior adviser. This contribution was essential in the international growth of Fras-le Mobility and he will continue to support with his experience and strategic vision we are starting a new cycle with an even more robust governance and a leadership team that's prepared to continue to deliver results that are consistent and sustainable. I'd like to highlight two recent achievements that reinforce our evolution trajectory. Our units in Alabama, United States and China has a certification trusted information security assessment exchange, a global reference an information security in automobile industry. This achievement reinforces our commitment to the highest standard for data protection, increasing the trust of our clients and international partners. We conclude the sixth emission of debentures of Fras-le Mobility. The first one in the market. This operation represents a relevant advance in our capital strategy, strengthening the financial structure of the company and increasing our capacity to invest innovation and expansion. I congratulate the teams involved by these achievements that demonstrate our discipline and execution. Operational solidity and focus on sustainable growth. ESG is and always will be a strategic focus for Randoncorp and its controlled companies like Fras-le Mobility. The journey of commitment in our ESG mission is directly connected to sustainable growth of our companies. This vision reflects in our initiatives and in the decision making, but it will be demonstrated by my colleagues in this presentation. With this, I pass the floor to Hemerson that will present the main results and highlights of this quarter. Thank you so much.

Good morning, everyone that participates in our video conference of the third quarter results. The 9 months of the year. We are divided in this presentation by Jessica Anderson and myself. I start first thanking the excellent. The vote and the results we have, with the Extel award, several distinctions in this program. We do our work that's consistent in our trajectory trying to make explicit the growing drivers of Fras-le and the possibilities we have to leverage our business and the results that we bring operationally reflects and we are thankful for the distinction that the market gives us. I'm going to thank -- we will continue motivated to continue to do this excellent work. Going to the next chart, we invite you those [ train ] Sao Paulo, I know we closed the in-person positions. This event will be all done online also to participate the Universo Fras-le Mobility event that will happen on November 18, 9 a.m. We will be in person in Sao Paulo. As I mentioned, distributing this in the network online. It will be a stage to speak more about what we have done, strategies results, present results, then we will also have the possibility to be more increase our range and detailed also regarding the synergy process that we are bringing of the console in Mexico the acquisition. We won't go into too much detail on this conference. In the next quarter, we will go more deep in the materials, but bringing a reasonable dimension of what we are doing, sharing with the market in this event, Universo Fras-le. Everybody is invited to watch us in the stream and those that will be in person, it will be a pleasure to meet you in Sao Paulo on November 18. The next slide, we bring the numbers of what we do, what we did the 9 months of the year compared to what we have of public guidance. We closed a revenue of BRL 4.1 billion for a guidance of $5.4 billion to BRL 5.8 billion going towards the gap that we wanted. Regarding the market -- external market performance, we have a guidance of BRL 500 million to BRL 540 million. We are at BRL 387 million also converging to reach the gap that we proposed same way. We accumulated 18.5% of EBITDA margin above the guidance base. Therefore, we are -- we believe we will be in the interval and in terms of net investment, we invested BRL 123 million in the first 9 months, which brings us to the guidance of BRL 170 million to BRL 210 million. we will be very close to invest the resources and the CapEx and the projects for investment that we have in the range that we proposed. It's a quick extract. Now we will detail a little bit more. But we have, in terms of results. Next slide, we're talking a bit the highlights of this quarter where ROIC adjusted is of 20.3%. When we exclude the nonrecurring or one-offs. We are 1.6x the leverage when we consider the pro forma 12 months of TACOMA. Remember that the acquisition of Dacomsa, we reached 3x the revenue annually constantly with our own revenue generation and the capital acquisition in July. We are converting to an adequate level. And what we mentioned publicly, when we do an acquisition, we quickly have the possibility to reallocate, make -- the company making it ready for new movements regarding the market as a whole. We have noticed in the domestic market, the level of purchasing is more selective by dealers, it has to do with this application of resources in stock. We saw the 9 months a reduction in stock from the dealers. The cost of capital is currently very high in the country. On the other side, the movement has already happened. We noticed now can add equation to normalized levels. We don't have the stock reduction effect impacting sales. External market, we do have a caution -- higher caution globally due to the trade war scenario that we are seeing. This affects some markets. Specifically, we have had a tighter market in Mexico, TACOMA as a comparison grows low single digit. We had the forecast to have a moderate growth this year. We're growing 3% to 4% of revenue reflected at the moment and the proximity to the United States. This movement impacts our market. On the other hand, we have done good investments in the maintenance of what we call operational fronts, optimizing an important part cost, do it raw material or sourcing the [indiscernible] reinforcing that we're going to have a lot more -- we will be more on the results that we have regarding Dacomsa and Fras-le Mobility event, I invite you to watch it and those that will be in person, it will be a pleasure to meet you. It will be important for us to talk more about this important acquisition and it brings to us relevant results, especially for future cycles of Fras-le Mobility, repeating the success that we have recent acquisitions like Fremax and Firatech. Going to the next slide, we are talking about the revenue. It's worth highlighting here. As I said, we have robust growth when we compare the combined growth of organic and nonorganic 43%. We had the Dacomsa numbers here. As we mentioned, we reduced a lot the position or we increase, let me put it in other words, the spare parts market Dacomsa is -- it has this location, and it makes us a player connected to consumer goods, automobile consumer goods, obviously, the 7% for spare parts keeps us competitive, efficient and productive, which makes us the same way competitive and spare parts. When we look at organic growth, it's close to 8%. It reduces a bit the space that we want to be to grow two digits at least. But it's a cut out of the moment that we are living especially in heavy vehicles in the United States and Brazil. eyes have suffered with a lower demand in the United States, decreasing production of commercial vehicles, especially the past 8, 25% in the first month and a lower demand for consumer items. Sales in the United States reflects in a lower use of the fleet and affects spare parts. It's rare, but it's happening. Brazil same way. We have a little bit more heated market of heavies. We are not losing market position. On the other hand, reinforcing some lines or position, but the market is a bit more tight and this reflects in revenue, obviously. It's is not a structural scenario. It's a momentaneous. And the U.S. for next year is still not favorable. We believe it will be equivalent to these months. Even so 43% is the first -- the best quarter in the history of Fras-le Mobility in terms of size of the revenue nominated with the potential of the acquisition of Dacomsa, but it's a reflection of our strategy. We have an acquisition, but it's the fruit of the work of the team from management of Fras-le has done to condition organic growth combined with nonorganic growth, which raises us to a robust growth CAGR above 30%. We reduced a bit the ex position. We grew our position to -- the [ Gonsabroad ] motor items with higher relevance in the breakdown according to family of products. I reinforce that the motor segment is not a line that we had as our portfolio. It has been a great surprise. We are creating avenues to grow more with these lines above all the North American market also with perspective to grow in other perspectives that we are not in. I remind you that in the quarter, we have good growth in disc brakes the capacity implemented at 3 [ mats ] and comfort shock absorbers, we have grown market share of about 30% in truck observers. In Brazil. It was a little bit more than 15% in 2020, showing the efficiency of combining businesses and the synergies we have with Nakata the growth in the market of it inside [indiscernible] Nakata forecast also important to say an RP change by the 29 and 11th of January. Also, we have told the customers place your orders before this period. This favors the fourth quarter sales for the writing comfort where we have suspension in track observer. Going to 11 -- on Slide 11, there's a bridge of the revenue from last year, the 9 months of '24 and the 9 months of '24 to '25. The commercial line that is -- has highest reduction by many reasons, but impacted no doubt by production of vehicles, especially in the North American market. ends up impacting a bit the revenue. Our revenue, obviously, here, 90% is friction for brakes commercial. When we look at the sales breakdown, we're close to 80% connected it to the [ light ] line of vehicles and SUVs, light vehicles -- this number is closer to 25% commercial, reflected with the effects of the reduction in maintenance growth in light vehicles. When we look at commercial sales, 1/3 United States, were decided in other markets, 1/3 Brazil is a bit more than 1/3, around 45%. A big relevance in this report, especially in the United States itself for commercial vehicles that concentrates 90% of the sales that we do here at Fras-le Mobility in these companies. Obviously, we have nonorganic growth. The concept has contributed a lot this pivotal moment in the life line. truck absorbers light brakes and [ routers ], disc brakes, according to the Nakata capacity that I mentioned before, it's worth highlighting other markets also. The European market is suffering, Russia, Ukraine issue reduces the size of our market because we sell to these geographies. No changes in the tariff scenario. We continue to pay the same tariffs. We had in the last quarter, as mentioned clearly the sales to U.S. reduced in this 9 months, not to the tariffs. We pass these to the market. On 12, we opened the Internet external revenue. Internal grew 10%, going to BRL 1.9 billion revenue versus BRL 1.7 billion last year in the 9 months, this quarter on 9 months. The quarter, specifically growing 10%. And going to 632 external market. Dacomsa brings the -- impacts this growth. Now we hear from Jessica, later Anderson and then Q&A.

Good morning, everyone. Thank you very much Continuing with the presentation, I'm going to talk a little bit about the highlights, operational highlights. EBITDA adjusted in the third quarter totaled BRL 860.2 million, a margin of 19.1%. This result reinforces for consistency and profitability generation, even facing a challenging macroeconomic scenario as it was highlighted by Anderson. This performance is referred to several actions, management and efficiency in manufacturing and Amazon highlighted the Nakata performance growth in truck absorber leveraged by the anticipation of orders regarding the migration of SAP that will happen now in the end of the year and remote achieved 100% of the capacity, installed capacity after the installation of the substation -- energy substation. Dacomsa also contributes -- there's a lot of representativity in this number because there's a mix of products of hire added value favors our composition of margin on the other hand. We faced several pressures and challenges volume reduction for commercial vehicle brakes in [indiscernible] the fixed cost in manufacturing in [indiscernible] and the Alabama unit also the devaluation of the exchange dollar [indiscernible] affects the export margin. Even with all these adverse points, we were able to deliver an EBITDA margin in our guidance for the fourth year forecast. We had a nonrecurring event, an additional BRL 1.6 million regarding a gain in a lawsuit that was recorded in the second quarter this year. I'm going to talk about our financial performance. Cash flow was -- free cash flow was negative, impacted by a few factors inside investments. As a highlight, we have the investment of BRL 18.5 million. In Dacomsa that are for the maintenance of the manufacturing and updating of machinery. The financial results presented higher expenses for -- due to the SELIC rate and a higher credit level higher, especially for the acquisition of Dacomsa. When we go to the line of tax and social contributions in this quarter, we have an effect of [indiscernible] of 3 1% benefited by [indiscernible] interest on their own capital in progress generated an asset or of BRL 30.1 million. So that's why on a liquid that's lower this year. And accumulated, it's 19 points 17.55%. About the variation of increase if any 2 days, the second quarter of the year, that's an improvement due to the extension of the deadlines to the suppliers, anticipation of receivables and adjust in stock, especially in the distribution center in Argentina. Regarding dividends of the [ GACP ] biggest payment on interest on capital in our history, almost BRL 91 million, the equivalent of BRL 0.34 per share, reinforcing our commitment of paying our shareholders. Finally, in the integralization of capital, the highlight was our offer of shares concluded in July this year, we captured BRL 231 million liquid. Net sorry, next. We finished the quarter with a net profit of BRL 107 million of growth. Marked liquid margin of 7.1%, reflecting all the factors that are listed before the effect of liquidity contributed for this result and accumulated. As I mentioned, we have BRL [ 17.55 ] million. Regarding our capital structure, leverage finished the quarter in 1.7x, a reduction of 0.5% in the second quarter this year. And if we consider EBITDA for Dacomsa, that's indicated it goes to 1.6x. Hemerson mentioned this in the beginning, results are the factors that I mentioned. I won't repeat myself, but one that we should highlight when we look at leverage. I'll pass the floor to Anderson that's going to comment our perspectives for the next quarter.

Thank you, Jessica, Hemerson, Monica. It's a pleasure to be with you. Thank you for making the time saving the time to be with be with Fras-le and Hemerson, [indiscernible] his presentation, Jessica has mentioned what we have in our horizon. Before I go point by point. I'd like to the reading that we had a favorable environment. We started to do this in the end of the year from January, February. We understand the market dynamics of having in Brazil and U.S., that would reflect, obviously, an impact in revenue. We took the adjustment measures from the company in the second quarter. And we came back strong to do the best quarter in the history of the company in this third quarter plan we imagined it would happen -- it would happen. We already passed through the instability. If it's 6 months or 1 year, because we're creating a lot of value still with the past acquisitions above all Dacomsa that's still not reflected on the results, and we were able to discuss the details of this in Universo Fras-le event. I hope you will be there. Looking specifically is where parts was always a resilient market defensive. And we might have a reduction in the power of consumption of families. In the reduction of attractiveness of premium products. It didn't happen to Fras-le. We continue with the revenue of resilience -- the numbers are record since the pandemic started. This guarantees a revenue resilience in the spare parts market, be it Brazil, be it Mexico or Argentina external environment, we mentioned it continues to be uncertain for a lot of us. Integration of Dacomsa will bring wonderful things for Fras-le Mobility. We're very positively surprised with the potential that we see, and we have [indiscernible] to the North American market, understanding the market, understanding the players, and we believe that this acquisition was more than right in the perfect timing also. Market has a fragility in terms of competitors of Fras-le Mobility. Declared Chapter 11 sums doing a movement, reducing their footprint in the North American market before the current government that weakens the presence of these companies in the market. This generates opportunities for organic growth for rosy in the future. Argentina, despite a higher volatility politically in terms of exchange rate, it's still a very resilient important market, always important for Fras-le because we generate margin in the chain, continues strong. We're getting the stock markets, right, and this has to do with clarification. Many years, the demand in Argentina was a nonreal demand for parts. And now we have higher professional level in services [indiscernible] to cash that's better. We can transit with a lower stock level at that geography now, and we continue, obviously, competitive in a market that will be more competitive once it's open. Excellent quarter, great quarters to come. We are adjusted for the current market conditions. We can have an improvement in the market and the environment for heavy line in the future, this will bring right future for the company that will adjust to the demand in blocks being able to grow in the original truck segment. Like in the U.S., we have installed capacity, and we can act fast paying attention to the cost issue to go through the uncertainty moment. companies from our sector that perform, as well as Fras-le. In this moment are not many. And the surprise in the balance sheet for the last quarters for those that are more exposed to the market has been harder for them. We are able to navigate with naturality.

[Operator Instructions] First question from Gabriel, analyst from Santander.

Thank you for the opportunity. I have a first question focused on the distributor behavior. We saw that -- at least this year, we see this behavior. The cost of capital is higher even so the additional capacity of Fremax was used fast. I want to know more about the reception and the movement. We do the share moving on. And the second point, focused in the leverage, we see the company achieved 1.7 EBITDA. I want to understand going forward, exploring the cash flow and optimization and the organic side. These are the topics area.

Thank you for your question. we want to start talking about the distributor behavior and Fremax that was able to in the internal market peaking capacity and their share. And there some can tell us about the head forward regarding leverage and future movement.

Thank you for your question, Gabriel. Thank you, Jessica. In the first quarter this year, yes, due to uncertainty that we went through and the cost of capital that was higher, all the customers chose to have lower risk choices or staying with lower stock levels to have a lower exposition to this cost. This we lived in the beginning of the year and once the stock equalized, purchasing was being replenished as the market consumed what we know the sellout of customers. How do they so? They are growing around 7% to 8%. and Fras-le is going above that. lore with these clients. This is price, and we have the inflation. But we have noticed that due to also our constant investment, the perception of value of our brands, financing. Workshop financing, we're doing training, AD qualification, visiting many areas of influence specific mechanic areas in Brazil. This makes our brand more and more desired. This allows us to navigate with better prices than the competition. Above all, we guarantee the profitability with our parts. What we want in the future and in the present and the future to keep the high profitability, not just for us and for our customer. Our parts for this to happen must be pulled by the market. This is something we saw by Fremax. We have premium positioning the position with a level of service and coverage in the portfolio that's extremely relevant and the market is eager from our parts may have an effort guided effort to not have [indiscernible] capacity that has been used. It's a mix of many things. brand perception, level of service relationship with the main dealers that are capitalized, have more strength when the market is weak because they can provide a level of service because they have the financial level to keep the stock to allow this level of service to happen. The ones that have less capital have to do a few things that might leave holes in the market, theoretically have a lower presence with Fras-le Mobility. What I can say is that Fras-le shares in the dealers in our markets. It has been a very good year for spare parts in Brazil. And it's not different from Mexico. The market in Mexico had a retraction and we had an increase in Mexico retraction very well, it allow me we still have a dominant position in some lines. We have a lot of space to grow organically the other lines. The snapshot of these 9 months to growing 8% or reality is more than that. It's simply connected to a few market issues that affected [indiscernible] or positioned?

I'm going to talk about leverage here. In fact, we have a quick addition. You can see it's not just connected to isolated events. Obviously, we have the capturing Trophol-1. That's a benefit. But cash flow reduced this quarter. It's a mantra as seen as we buy a company, we observe the spaces and the optimization that can be made. We don't focus in the first year. We don't want to lose any service to the customer. We don't want to lose support to the market status. But [indiscernible] has a relevant opportunity for us to do better with cash flow. This will be in our focus. It didn't make a big difference this year despite the fact that we have negotiated with suppliers extension of deadlines, which benefits, which is small. If we look at the full potential that we see there. Obviously, the growth in revenue our maintenance, active maintenance and very good levels of profitability will benefit to leverage. We look at this with a very good perspective that we continue to be a company that has the strategy, sales space to grow non-organically. We continue to have projects of acquisitions that are active in a given moment, they will need resources for us to implement them. I reinforce that in Mexico specifically, the possibility to be able to do small acquisitions in our constructure and have a relevant growth opportunity to leverage the organic growth that we have that is more limited to the exposition that we have a market share in the dominant lines like motors and brakes. So a lot of positive space is reserved and leverage must be adequate to continue this way.

Next question from [indiscernible], the welcome. Your mic is open, you can ask the question.

Thank you, Monica. Good morning, [indiscernible]. Congratulations for the results. I want to explore a bit the comment that you made in the release and you have debated a few points. It would be worth mentioning that the growth in the level that we're used to in the year of '26. I want to understand how do you see what are the main drivers here. If we should come from the concept, accelerating growth if it's compared with the heaviest market accelerating in Brazil, what is the main driver -- that's the first question. Second, understanding if we can expect the impact of tariffs U.S., Brazil, a bit worse in the fourth quarter compared to the third quarter when we look at the dynamics of growth of revenue, understanding how we could understand the data that the tariff terms at the end of the quarter if this effect is more intense in the fourth quarter.

Thank you, Gabriel, for your questions. To talk about the growth drivers for '26, Anderson, you can start, and then Amazon can add the question about tariffs, U.S. Emerson, in those that are in the U.S. are best positioned to talk about this.

Gabriel, thank you for your question. It's a pleasure to talk to you. If we analyze the second quarter for [ MAX ] with all the offer an important growth, Nakata is growing market share. in suspension and steering will bring more growth for next year. Dacomsa, no doubt, we'll be able to navigate a bigger growth in the line of products that we got deliver better competivity through sourcing or a combination of raw materials we believe that pretech can gain market share in Mexico next year are friction line. For two reasons, we are delivering value, improving the footprint and there is work of formulation to be done. -- we see there's a lot of space in the market. The competitors are leaving space in the market. We believe we will get a share of this. We're preparing increasing the level of production from now on. Another point, we want to navigate a level of growth in motors in the United States next year already. We are positioning the stock in the U.S. We can talk about this on Tuesday, 2 points of stock in the United States to meet the level of the demand that the market is -- we are reinforcing the strategy and the business model in the United States. I believe that the heavy client in the United States, second quarter next year can be more positive. If the market has a high bias. If uncertainty reduces in the United States, automatically, the market will get excited and they do this fast. The immediate effect is the vehicles that are stated due to lack of parts that are better conditions. They are -- generate a buffer of backlog of spare parts, That's huge. This can happen. Some over next year. We're getting more in the third or fourth quarter when the market gets excited, the markets start to run and many of them are -- have a deficit in terms of maintenance. So I believe there's an upside that's not considered in our forecast, but there are signs that we can -- this will happen. We don't know when exactly. So it's a bit of all of this uncertainty we have. We have a year all of [indiscernible] marks that's sold for next year in the higher offer. Allow me to add Anderson, we are living a moment the way we see it more complex of sales in the United States, especially I see that worst and [indiscernible] normal to grow less recompose and the perspective is more favorable second semester next year, we'll compose this. We won't have a more complex moment that we're living today. And there are families of products where we continue to have a low position in terms of market share. And the combinations that we have today of businesses, Dacomsa and the global footprint being additional competitiveness. We have done, as I mentioned, we want to do more in the Fras-le universe. The results are excellent, not just for the concept when we think about synergies. But for the current business. When we have a package of 10 plus 10 is 20. No, the benefit is for everyone. We have a perspective to continue to advance and to grow. Next year, we have haven't stock talked about this possibility to continue to support the market that's favorable, being able to grow bias of adding many things and projects starting next year, small additions of sales, favorable -- regarding what we talked about being a composition that grows 2 digits regularly. Going to your second question, talking about the impact that tariffs can bring I don't see this will change the dynamics. The market was depressed with or without tariffs, not the tariffs that leveraged a reduction in tariffs simply are an additional issue that reflects in the end to the customer. We made a huge effort to reflect as little as possible to the customer we have increased competitiveness, looked at different suppliers. Many actions to have the less impact possible. I see a bias of construction. The tariff might be smaller even this -- still this year -- still on this year. I don't think it's an ingredient that can impact sales. The global situation is what brings the reduction not so much in the tariffs. And the bias of the tariffs is that they can be lower moving forward in terms of value demand. We have some segments that are impacted. We should have lower tariffs with the agreements with the United States going forward.

You mentioned in South America, the contact demands attention regarding price and new market entries. I want to know if you can comment a bit, what's the pricing strategy that you have if we can detail the new companies that are entering, how this impacts the competitive market question regarding the [indiscernible] system should benefit the fourth quarter from what I understood, but is there an impact of this in the first quarter?

Thank you, Luisa, for your questions. Quickly talking about large moment period of Nakata. Then I pass the floor to the others, we forecast a period that will impact indirectly, 9 days without operates in the first quarter of the year at Nakata Operation comes back on January 11. Yes, we will period where sales are impacted. This anticipation of orders that happens now in the third and fourth quarter. It will happen in the first quarter will have a small impact regarding this moment. Now to talk a bit about South America and to add I pass the floor to Emerson can talk about new entries Latin America. Competivity in these regions. Thank you, Luis, for your question. What we noticed competition overall, always existed. You have levels and moments that are different, more aggressive with retracted markets. This impact profitability, especially, we are aggressive to give maintenance to our positioning or market shares. We have cleared that losing market share is a lot worse than losing margin momentaneously. Why do I say this? Market position is what you achieved with time. It's the level of service, quality of product service at the end with the end customer. All of this reflects our impact to the position you have with the market share that you build takes time. We are talking about shock absorbers that went from 14%, 15% from '18, over 30% and 25%. And the perspective we have, this takes time to build, but you can lose quickly as a mistake in terms of quality or not supporting the market. We see with control. contrary the past, was doing wonderfully well, growing positions, relevant position. Then we had the floods in the [indiscernible] zoo, 1 year ago, 1, 1.5 years, and we couldn't supply the market, we lost market share. Now it's very expensive to win market share. We have to reaffirm the commitment to the customer repositioning products sales campaign, promotions, it takes time. What we do when there's a moment of uncertainty and higher competition is to focus in the market position. Profitability must be combined somehow, but market position is very relevant. We have done movements of maintenance -- we didn't reflect in our margins because these are smaller markets for us. We have a distribution center in Colombia, a good market position. It's important to highlight it's a market that we want to grow still. Because of Mexico, we have seen stronger growth in white label and people that import from Asia or other sources does reflect in terms of position loss, but affects competition a few lines. What is the response now. First, you defend, then you see what you do -- we are looking at what we want to do. This combination of the synergies that we're going to bring the combined efforts of TACOMSA Fras-le Mobility, the [indiscernible] will allow us to be more aggressive in terms of market position because we're going to gain space with adequate price and at the same time, space to grow market share. This reduces our exposition for the size of the advantage that the distributor or a new competitor can see in those markets. It's not structural, it's not relevant. And obviously is part of it, and we need to defend -- we didn't lose any market share. We grew in many lines, even with the adverse scenarios in a few lines. From now on, -- we have a good medication for these markets to recover profitability into advanced market position is what we want to do, like we did many times in where we act. Do you have anything to add, Anderson?

And I'd like to remember that we have a dominant position in all sources of revenue that we use in our product lines. We have the same conditions of an Asian player operating in our market, where we have something additional. We have the brands and the channels. We have a very relevant position to protect and some very fortunate when we need to recompose the market, maintain market share costs a little bit, and we recover it in the future guys it's clear.

We have another question from Gabriel [indiscernible].

For the opportunity quick if you can mention the fact of liquid that you show, law was a positive surprise. How this can eventually -- what does it mean for the next quarter especially.

This historically Fernando. Thank you for your question. You must remember the spare parts takes longer. More defensive when it feels on lower magnitude. If an assembly goes 34% repetitions, 5 to 10 activity, economic activity happens product running -- the return is not different recovery assumption. The vehicle has be repaired new repair the truck comes before a new vehicle. It's our vision -- it feels later, lower magnitude, and it comes back faster and lower magnitude when the new vehicles markets return it returns very relevant for Brazil. We're going to have a record of trading of used vehicles. It's fantastic who buys and used vehicle doesn't know. You don't know the history of spare parts and warranting everybody review. This generates an additional power consumption that's fantastic. Year after year market vehicles resales is growing. This is fundamental. It has to do with the fleet aging that's growing in the entire world. It's an additional boost for Fras-le business. Besides growing our market share, the market is more dynamic to it. And the workshops are at historic levels, we see spare parts as a big game. Intermodal is a fair that shows the dynamics of the markets the flow of containers in the U.S., 40% occupation historically should operate in 75% to 80%. It means that the import market is 50% is normal level. It's a huge decrease. It will come back. This drop has to do with uncertainty. You asked about the trigger of these things to come back. I think that the biggest the factor that's impacting this uncertainty. I think the economic policy from the United States and the international relations of this policy bring a level of uncertainty that all market players be the manufacturers, distributors or the consumption has delayed decisions. This is generating a huge backlog that in the future needs to be recovered, and this will impact in the first moment, spare parties. And political -- are heating of the triggers or threats sitting down I noticed personally. It's not a company position. I see that things are coming down. The temperature of the conversation is lower. Trump is more moderate in his talks, and it can generate a bit more trust in the future. It's the way we see. We are prepared to take things restart. We will fully seize the opportunity.

Our last question from Jonathan. JP Morgan analyst.

Thank you, Monica. Thank you for the space. Two questions. First, the cost of the product, the opening is very vocal in these quarters. talking about the product, the opening is a positive surprise. The question is how much friction can be diluted represents 40%. So the floor plan used to be higher partly on the long run. 20%, 30% of friction? Second question about working capital. A relevant improvement in terms of [indiscernible] if you about improvements moving forward. I think there's a normalization next year due to the constant nature [indiscernible] is investing working capital. We see that they will stabilize around 30 days at the [indiscernible]

Thank you, Jonathan, for your questions. going for H1. Anderson, there's some can comment the product portfolio dilution -- of the friction line, Samarco can talk about working capital. adoration class we move the friction in Increase in sales product, we continue to grow, will continue to grow in friction. When we decided in the past we chose to increase the product portfolio as a counterpart, the potential of the electric vehicle growth should lower the demand -- it is confirming in some aspects. We have seen marketed at the plate. We see the power China is in this market. But there's a lot of questions and little answers. We believe electric vehicles will find their niche and there will be a specific size in the future. This market does not transform in a horizon of 10, 15 years or 20 years. It takes long especially in the geographies where we are present where the average age is high. Imagine a fleet of 13, 14 years, how many years it would take to be 100% electric. At least 13, 14 years. If I stop combustion vehicles and 100% is electric than the market would disappear. This is a very long term. We don't see a big change in behavior. We like friction we are loving the very steering because we're able to unlock the value. The Nakata brand is very powerful. We see its value outside of Brazil also our capacity or leverage in this line is amazing. And this is a line that depends on vehicle proportion independent of the proportion. So it's fully protected by the future motors. We are enjoying very much and has the same issues as -- it has an interesting situation that we learned, it's possible to have better margins in this line. because it's a line has less players. Second, because the part -- the total cost of repair represents less than brake repair you to recondition for engine. The total cost is less. Nobody risks the service with lower quality parts those that have a solid brand in the market consolidate better. It's a line that we look with the care. We're going to invest strongly to penetrate more in the United States and we are convinced there's a lot of space in other job. So my answer is I believe we will continue to grow friction, but the other lines have a bigger potential in our business model inside what we see today. Tendencies that the representativity of friction will go to [indiscernible]. We have nonorganic projects of acquisitions. They can leverage even more the portfolio in different types of products. Thank you for your question, for your participation owing to the point to talk a bit. Can you talk in another moment. Working capital has been learning in all the positions. In the first moment, we don't want to do drastic changes. We don't want to lose a level of service perception of low quality or an intervention that's not good. It's the heart. If I service or nonadequate delaying orders, creating a backlog is we need to continue running as is, then we start to understand the elements that can bring to us opportunities for improvement. We know that [indiscernible] has opportunity to do better in terms of resource application, working capital, we're going to focus a lot on this next year, but reinforcing without losing the qualification that the company has in terms of market service. Remember that Mexico, if we look at its full size, it's a bit bigger than the south of Brazil we are almost in the middle of the country from end to end is 8 hours. It's different from Brazil, if you leave Kasias to get to Sao Paulo takes almost 1 day, 18 hours. No, there, you can do it fast. Obviously, the routes we take the worst route you take 30 hours to deliver end-to-end -- so there's this different level service in Brazil, and this brings a higher stock level. You don't have the precision to end up doing a service where a distributor does where it's more than in Brazil and Mexico. And this has -- is based on margin. I would say Dacomsa will not be Fras-le. Won't have 60 days, 65 days of working capital employed because they have an important distribution channel but it won't be what it is today. I think something in the middle, we will converge, we're going towards the Fras-le numbers show us this construction quarter-by-quarter reduction of working capital. First wave was extension of deadline will impact the end of the year with reductions. But we have other opportunities to explore and it will be clear in the next year not this one and not in the first quarters of '26, closer to the end of the next year. I hope that we can be prudent and do the best work possible using the less resources possible with an excellent level of service.

I want to thank everyone's participation and the RI team is available for any other questions or clarifications on my need. Thank you so much. Have an excellent day, everyone. Thank you. Thank you, everyone. [Statements in English on this transcript were spoken by an interpreter present on the live call.]