Grupo Traxión, S.A.B. de C.V. (TRAXIONA) Earnings Call Transcript & Summary

Hello. Good morning, everyone, and welcome to Traxión Day 2022. I am Ana Paula Ordorica and I am delighted to be hosting this event once again. Traxión has greatly evolved in all fronts. But perhaps the most relevant of all would be the technological transformation the company has undergone in recent years. Today's topic is precisely technological innovation. In order to talk about this, we've got Aby Lijtszain, Co-Founder and Executive President; Rodolfo Mercado, the CEO; Wolf Silverstein, Finance Director; and Antonio Tejedo, VP of Investment Relations, who will show us with a lot of detail, how using different technologies have played a fundamental role in the growth, the operation and the strategy of the company. In the last 2 years, Traxión has broken records in different metrics and have been positioned as the leading company in this sector. All of this, thanks to the design of their business model and focusing technological development for asset-light businesses. No doubt Traxión development has truly been outstanding. I want to leave you now with Aby, who will be telling you about the technological transformation Traxión is undergoing. Also amongst us are the directors -- directive Board of the company who will be introducing different aspects of Traxión. We will be waiting for your questions at the end of the presentation so that this member of Directors Board can answer them.

Thank you, Ana Paula, and welcome to Traxión Day 2022. The technological innovation in the logistic industry is a reality. This is a global trend where the player who arise first with a competitive technological platform will have an advantaged position in all fronts. This transformation, it is a necessary evolution process in order to satisfy our customer needs in an effective and profitable fashion. Technological platforms will be the winners, and they will have a very relevant participation within a fragmented market that's seen honest growth. Technology reduces cost, increases efficiency and provides transparency, visibility, security and precision while it minimizes the intensity of the necessary capital to grow. Therefore, logistic processes are optimized and allow us to provide customers that are more and more sophisticated in their requirements. One of the main pillars under which I founded Traxión 10 years ago is the technological innovation. In this sense, for many years now, we've migrated towards a model based on the latest technology that not only has it allowed us to be placed in an advantaged position throughout the pandemic, but it's also allowed us to develop business lines that have [ draws ] growth and have allowed us to take leverage in a lot of commercial muscle and operative infrastructure. Perhaps the most relevant aspect is that for us, the technological transformation has been the foundation for the development of our asset-light businesses, and it is precisely innovation that will help us to continue strengthening these business lines. Technological platforms, mobile apps and logistics services that allow us to make money with relatively little investment will grow and will become a very relevant part of our business. A year ago, we presented our segment of logistics and technology whose scope was to dedicate a segment exclusively for asset-light businesses. As you've seen, this segment has delivered outstanding results, and we hope it will become a greater part of the business on a medium term. Especially throughout the first quarter of 2022, the income of our digital apps and technological platform grew over 86%. This business is the one that has the greatest expansion potential within the company. Through this focus, we have gained market participation, increased our service level, our effectiveness and our profitability. In Traxión, we work for the supply chain from end to end, and we create an added value for all of our interest groups and stakeholders. In only 10 years, Traxión is amongst the biggest mobility companies in Latin America. We are one of the logistic platforms 4PL most important in Mexico. We are in the first places between 3PL service companies that are the largest ones in the company. We have transformed in one of the suppliers for solutions in the last mile that is the most relevant within the market. We've created a digital platform that connect customers with transporters and optimizes their expense through a unique marketplace within the industry. We applied the latest technology in our traditional businesses in order to provide greater transparency, security and tranquility to our customers. This represents, by far, our most important competitive advantage, which is the biggest hindrance for entering our sector. In the segment of mobility of people, we are the biggest player. We operate with the latest technology in order to guarantee security and effectiveness of the service. And we have become a key participant in the development of this business in Mexico. I want to introduce Gustavo Redondo to you, the person responsible for our logistics and technology segment so that he can show us how the Traxporta app works. We'll go to one of our operating centers.

Thank you, Aby, and welcome to our digital operation centers of Traxporta. Today, I'm going to be showing the working of our digital operation model, an innovative model within the market. Since we operate 100% in an asset-light business model that allow us to be fast and flexible in the expansion strategy we have for our business. For this, Traxión has developed Traxporta, a digital company with the latest technology platform of world class based on the market needs for transportation. This is an avant-garde platform that places it in a competitive position within the market. Traxporta is an app created in order to put in contact customers with transporters. Customers post their loading needs. We [ automatize ] this process through a device and will get to know the rates in real time through our rating system, offering complete transparency. On the other side, transporters will also have visibility of all of the posted loads, therefore, selecting the best option in accordance to their capabilities and availability. Our operation team supervises and monitors loads through a control tower, obtain the estimated route, the exact recollection point and the ETA, as well as a specific follow-up of all of the loading events, including temperature. Additionally, this control tower generates a status that the load is found at all times, providing like this greater control and certainty, translating this to an added value service for our customers. The moment of the delivery, we collect all evidence in accordance to the settings and configurations of our customer, like images of the load, the moment of the delivery, corresponding signatures, amount and other relevant details of the process, providing transparency and visibility, both to customers and transporters. Transporters have the capability of sending evidence through their application in order to increase invoicing and starting the payment process, which allows for greater transparency and reliability for both parties. At the end, it's an optimal process from end-to-end with satisfied customers, certified transporters and a highly trained and effective support team. Aside from being the #1 app in Mexico, Traxporta looks to standardize the transportation industry with that of countries such as the United States through technologies that will allow us to perform the loading process as a natural transparent fashion for all participants. The business model followed by Traxporta undertakes exponential growth. Traxporta is in a scalable platform with low investment requirements in order to satisfy our customer needs by using the available capability of third parties. Our focus in our customer service and our people are key for the success of our digital model.

That's right. And today, Traxión is an undisputable leader in the supply chain. We are the only company in Mexico capable of providing the supply chain from end to end by using our own infrastructure. This allows us to offer 100% visibility at all times to our customers to be more price competitive, more effective in our operation and, of course, much more profitable. Our strategy for this type of business continues in increasing our market [ growth ] in different logistics services that integrate supply chains, particularly those that serve the e-commerce channel whose penetration has increasingly and significantly grow in the last 2 years. It's very important to highlight this growth and penetration. According to a recent study, the Mexican Sales Online Association, electronic commerce grew 27% in 2001 (sic) [ 2021 ] after having grown 81% in 2020. Penetration moved from 9% in 2020 to over 11% in 2021, comparing it with less than 3% between 2016 and 2017. In 2021, the e-commerce channel totalized over MXN 400 billion, a considerably higher figure than the pre-COVID estimates. We hope that the e-commerce channel will continue growing and penetrating Mexico in a significant fashion. In this way, we expect for marketplaces to continue with accelerated growth that the omnichannel will take greater relevancy and that small- and medium-sized companies will enter a greater scale ecosystem. Therefore, fintech will be a fundamental piece and cross-border activity will have a greater push forward. Particularly, cross-border e-commerce shows great growth potential and penetration in Mexico by being one of the countries with greater activity on this environment. According to some studies, around 65% of online shoppers in Mexico prefer shopping in the United States, China and Japan. This represents for companies such as Traxión a huge development opportunity for logistics services that will use technology as base of added value as brokerage, storage and handling of packages and custom. In Traxión, we've developed services for logistics solutions that are customized like automated sorting, multi-carrier fulfillment, inverse logistics and logistics solution of the last and half mile, which has placed us in one of the best options for foreign customers within the market of the electronic cross-border commerce. All of this is translated for Traxión in a greater demand of logistics services that are properly developed and competitive. The company is very well positioned to capitalize on all those opportunities in an agile, effective way in order to continue taking advantage of our scale. Finally, we want to leverage the use of technology along with our commercial muscle and the great operative infrastructure Traxión has in order to guarantee the level of service our customers require and to be more competitive related to our price. Once again, the technological innovation is our most important competitive advantage. Likewise, innovation and disruptive developments are key characteristics that have allowed us to have an advantaged position from where we can capitalize on opportunities. Now I will show some examples of our capabilities within the supply chain. In our 3PL division, we supply storage services to leading international companies. Our most important competitive advantage and key differentiator has always been the implementation of avant-garde technologies that guarantee the level of service demanded by our customers. Thanks to this, we've transformed in one of the key pieces for the functioning of supply chains and the reliability and precision of our processes constitute a very important attribute within our service offer. Before products get to our facilities, we use interfaces with customers in order to synchronize the transportation from the product to the warehouse. We use technological tools of the latest generation to guarantee the reliability and trustability of the products that accesses our storage in terms of quantity and quality. The use of devices and technological apps used within our operating processes has allowed us to completely eliminate human error and increase the quality of our deliverables at levels that surpass the standards of the different services within the industry of logistics services and storage. The adoption of a high-quality service focused in the end-to-end has allowed us to surpass the KPIs in a firm conviction of exceeding the expectation of our customers. This dynamic keeps us with a disruptive way of thinking in order to constantly challenge the way in which we execute our processes with the commitment of continuous improvement. Traxión entered the last-mile service when we acquired the Redpack challenge in May 2018. For the past 4 years, we've moved from being a package and messages company to being a specialist in the last mile e-commerce solution. We've also increased throughout this period this division in ourselves over 4x and have increased the deliveries of the last mile over 3x its original size and today has the capacity of delivering over 15 million deliveries per year with a level superior to 95% in service. We currently continue with the digital transformation process that will allow us to offer more innovative technological solutions to make the delivery process more agile in a world where customers are more sophisticated, demanding and want immediate response filled with information in real time. We currently have our own infrastructure that allow us to increase our delivery time, offering more competitive prices and keep the highest level of effectiveness. Our portfolio of the last-mile solutions for Traxión has evolved. Today, we focus on e-commerce, international sense, B2B, B2C, retail, cross-border, consolidated loads and very recently, we entered the pharmaceutical vertical with the business of distribution of medicine and medical accessories and supplies. Our last-mile division is an agile operation that continues to evolve and adapts to our customers' needs. Through this technological evolution, we reinforce the commitment of supporting the national economy while positioning between the biggest companies of this segment in Mexico and, no doubt, as the best alternative for the last-mile solution.

The load mobility is the basic activity for the country's economy. It's about a mature business completely fragmented and dominated by family companies. However, it still represents huge expansion and improvement opportunities. In this segment, our strategy is to continue migrating operative capacity through services with greater specialization that have greater profitability, such as cooling load and petrochemical transportation as well as fuel and other materials that might need higher technical levels for their operation. On the other hand, we'll continue expanding our regular load services through Traxporta, our digital app. This will provide us with a greater exposition to the asset-light model from Traxión and will provide greater operative capabilities in order to increase our specialized services for load mobility. We want to increase our advantage of customer base by offering even greater services, greater capabilities and generating more synergies with this application. As a result, we expect to optimize the utilization of our fleet, meaning generating greater volume, increasing the income per kilometer while improving on the cost. In other words, we intend to take more mileage of our current fleet, selling them more expensive and operating them cheaper as we've been doing for the past 4 years. Let's remember that since the end of 2018, after we integrate the acquisition of Bisonte and the asset of Roncalli, our complete load fleet has grown less than by 7%, while the volume of mileage has expanded in over 16%. This means that progressively, we are more effective without the need of actually increasing our fleet. I also believe it's important to mention that ever since the end of 2018, we have built a fairly strong position in the cooling load business, especially at the Bajio region. Today, we operate at around 300 cool boxes through EGOBA, and we intend to increase such capacity by 20% during 2022. Today, we've got great prestige within the service, and our plan is to continue increasing these capabilities by winning on leadership and market quota such as we've done with other services. Likewise, within the segment, technology, it is an entry barrier fairly important, which represents our most relevant competitive advantage. With the use of different technologies, we can guarantee a high level of service while providing greater security, tranquility and transparency to all of our customers. We developed a technological platform that's fairly advanced and allows us to be one step ahead of their customer needs and far ahead of all of our competitors. In the load mobility segment, we have a lot of competitive advantages, one of which would be the diversity of our services. Ever since we were founded in 2011, we've integrated a service load portfolio, the biggest one and most complete in the sector, all of this through successful acquisition of leading companies in each of their niches. Today, we have leading positions in several services such as cross-border, especially within the market in New Laredo, intermodal load in ports, railroads, regional load, and we operate in different load service specialize that position us as one of the best options for our customers. In this way, we have highly specialized equipment, such as loadable self-load, auto tanks, cool boxes and other types of trailers that have allowed us to take care of a much faster market with much higher margins. Additionally, we operate one of the biggest fleets, most diverse and most modern in Mexico. We've got over 30 alliances with American load operators to guarantee the cross-border service, and to the final destination, which constitutes a fundamental part of the supply chains and commerce between Mexico and the U.S. Now regarding technology, we use the latest generation system that allow us to optimize resources and providing transparency and tranquility to our customers. We have advanced accident prevention systems. We've conducted exhaustive tests for IT in some circuits, which have allowed us to change processes and improve routes, fuel consumption and operator performance. On the other hand, we've implemented digitalization processes for deliveries and documenting evidence better with special alarm systems for cool loads. All of the above positions our Mobility segment as one of the most competitive ones within the industry whose service level overpassed the expectation of our customers. So for us, it's a matter of great proud that our services, operative scale and our geographical footprint contribute to move Mexican economy and commerce.

Traxión is the leader in people mobility market mainly towards and to industrial parks. Being a pioneer with over 24 years of experience, we are a very relevant player for the evolution of this service in Mexico. For many years, the expansion of industrial parks has developed to several miles from urban centers, while the infrastructure of public transportation hasn't evolved at the same rhythm. This way, we have contributed to the development of the manufacturing centers in Mexico and of those industries that have come to open operations in Mexico by providing them with mobility services of a world-class level. We've developed a very robust infrastructure of mobility services for people with capabilities of execution 24/7 unique within our market, taking care of customers in all sizes, shapes and forms with different needs with one of the most important geographical footprints within the sector. Not only do we move people, but we supply a holistic mobility solution for big players in diverse industries. We have supported in a very significant fashion, the industrial development of Mexico through our scale, experience and execution capabilities, which are superior. Our fleet is the biggest and most modern fleet in Mexico, which positions us in an advantaged position, particularly with customers who require services with a very high-quality services and grand scale operation that is very complicated to take care of by smaller competitors. It is also a business with very appealing growth opportunities mainly in the industrial regions that are in constant expansion within our country that present different mobility problematics. At Traxión, we supply a very effective alternative with high added value solutions, both for the companies as for the users. One of our main key differentiators is the technology that we have acquired and developed through time which can generate financial intelligence and operative intelligence by providing transparency and reliability to our customers. Among many other advantages, it also allows users to be on time, less tired increasing the productivity and effectiveness they have, which, at the same time, is a benefit that is translated to our customers. We believe our technological infrastructure with constant innovation focus is difficult to replicate, which allows us to remain one step ahead within the market. Within this segment, we work with world-class customers. We provide our services through different agreements and long-term relations whose incomes can be predictable and that they have different cost and expense structures that have been previously estimated, which represents another great advantage for us by understanding the metrics and profitability of each of our customers at all times. Likewise, similarly, our experience with this type of agreements allow us to respond to our customers' requirements with greater agility and transparency, which has translated in very solid commercial relations with the long term. Now I would like to introduce Elías Dana, the CEO of our People Mobility Division in order for him to show us the capabilities and scale of this segment.

Thank you very much, Wolf. Welcome to the People Mobility Operations Center. From here, we manage the operation of our 6,500 units that everyday perform over 40,000 trips, go over 1 million kilometers and mobilize 1.2 million users who use our services to move from and to their workstations or schools. Within the People Mobility division of Traxión are over 8,000 collaborated located at 25 different cities within the country. They use our technology in order to guarantee our over 500 customers, the highest level of quality within their service, punctuality, security, effectiveness and profitability through a scalable operative model based on processes endpoint technology. This operative model has been no doubt a key piece in order to increasingly sustain a double-digit growth for the past 5 years. Just like in the rest of the Traxión's segments, in the People Mobility segment, technology is one of our most important competitive advantages. We have developed a very unique monitoring and control platform that through satellite tracking allows us to know in real time the status of our operation and controlling precisely each of our units, operators and mileage. With automatized flow of nominal dispensation and invoicing, which provides transparency to our customers and ensures a high level of service. Our telemetric platform is a very relevant piece for this model. For through this, we can measure different security indicators such as driving habits and hours of driving. We've also integrated support tools for operators such as anticollision system and other security apps. With this, we can generate information with which we've designed predictive programs in real time to improve the development both of the operators for the unit as well as developing constant training plans by using distant learning tools. On the other hand, it allows us to know the status of our unit at all times, just like any type of failing or error with which we can generate preventive maintenance plans and real maintenance plans, which allows us to significantly diminish mechanical failures and accelerating our reaction time, which optimizes the maintenance costs and elongates our unit's lifespan. Traxión is a great logistical that supplies high levels of added value. We use software design routes that allow us to perform the tracing of effective routes and providing a better service, adapting to our customer needs in a better way, monitoring the circuits and, as a result, constant improvement of the profitability for each of our agreements. We have been pioneers in the use of logistic optimizers that use advanced algorithms and present different improvements of the operation scenarios. Perhaps one of our biggest strengths would be the connectivity with our users. Through the LiPU Go, our mobile app, each of them has access to information on real time, such as the status of the route, number of stops, notifications and alarms, as well as their ETA. Likewise, we've designed different technological tools specific for different types of services. So just for example, our smart control app for managing different inputs that allows us to supply better services and increasing the effectiveness of our customers. Every minute, we're recollecting millions of data that are safeguarded in our data center. With the help of robotized processes and the use of artificial intelligence, we can generate dashboards for better decision-making and therefore, continue increasing the quality, effectiveness and security within our services. This way, we have managed to build the biggest people mobility company in Mexico and most modern one. Our operation will not stop here. Every moment of the day we're performing some trip, mobilizing millions of people who at the same time are moving the industry in Mexico. Historically, Traxión has delivered financial and operative results that are outstanding. Particularly between 2019 and 2021, Traxión increased their income for over 20%, while the EBITDA increased in over 33%. Also, the net utility increased by 92.4% and the operative net flow grew almost 8%, something particularly important given the complexity that we've undergone in these recent years. 2020 and 2021 were very challenging years because of the sanitary contingency. But they were also record years for Traxión in several metrics, both financial as commercial and operative. These excellent results were given thanks to 2 factors, mainly. The first one is a design of our business model, which is founded in 3 main pillars: diversification, financial discipline and technological innovation, which has helped us face the dynamic environment of demand as well as operative changes. And secondly, the positioning of our asset-light businesses, specifically those that function for the e-commerce channel being capable of capitalizing the opportunities of growth and penetration that this channel has throughout this crisis as well as continue developing our digital platforms, which allowed us to increase at the same time, our participation in other logistics services. In February, when we gave our '22 results guide known, we did it through a very complicated landscape at a global level, altered by the conflict in Eastern Europe, among other factors. Today, the volatility resulting from such conflict prevails and disruptions in the supply chain are even more pronounced. However, in Mexico, we continue observing very strong demand levels in all 3 segments of our business, and we're very well positioned to capture these opportunities through our commercial muscle, our people and the great operative or operation infrastructure. Therefore, the CapEx plan is moving forward as we established, and we expect the delays in the delivery of new units will continue throughout the rest of the year. Nevertheless, ever since 2021, we anticipated and planned our needs, which is something that today has become a great competitive advantage that we expect will allow us to cover our customer needs as well as the market needs in a much more effective way. As many of you know, for Traxión, sustainability is key. Since we're leaders within our sector, we must also have, therefore, the commitment of being leaders in environmental, social and governance topics. For this, I would like to introduce Daniel Wasserteil, our Sustainability Director and responsible for strengthening and expanding our strategies. Daniel will give us a little bit more color on what we can expect in the future in ESG-related topics.

Our sustainability strategy is based in 4 axes: governance, people, planet and growth. We're building a very solid strategy focused in continuous improvement and leading in the sector. We report on the most important global standards such as SASB, TCFD, and GRI. We're part of the world pact of the United Nations, and we respond to the CDP and CSA. In 2021, Traxión was included in the Sustainability MILA Pacific Alliance Index from the Dow Jones Index family. We operate from a very robust cooperative governance with the Council of Administration that are expert, and we also have increased our -- we have our first member as a woman at the beginning of 2020 to join us. As part of our risk management, we have identified the risk of climate change and we're working for adopting a mitigation plan. We attract and develop the best talent and promote diversity and inclusion. 37% of our positions of high and middle management are occupied by women. We're working for health and wellbeing of all of our corroborator with initiatives and campaigns of preventive medicine. Also since 2021, we've been strengthening our programs for training at all levels of the operation. We offer transportation and logistics, effective use of our resources as well as increasing the performance of fuel and ensuring the good development of our engines. Several of our companies are awarded with the distinctive of excellent environmental development provided by SEMARNAT by saving up to 20% in the ton emission of carbon issued to the atmosphere. As you can see, sustainability is an essential part of our business model. We have a very robust strategy for the past 4 years in order to continue being at axis point and a reference point within the market.

As I've been telling you for many quarters now, Traxión is taking back the inorganic growth activity. Through this strategy, what we're searching for is to access businesses that will add value to our asset-light focus and will allow us to strengthen our platforms, offer services as well as technological infrastructure. We have been analyzing several different initiatives and different negotiation process analysis. So we hope soon to be sharing good news with you. As well as you know in March last year, we just announced a signature in order to acquire Medistik, a leading 4PL company that supplies logistics solution for the distribution of medicine and medical services and accessories through an asset-light focus. With this acquisition, Traxión will incorporate the pharmaceutical vertical to our logistics 4PL services and last-mile services as well as to the e-commerce and consumption lines. This acquisition represents an incomparable value proposal, given their high level of service, modern infrastructure, cost optimization model, total product visibility and exhaustive quality insurance processes. The main synergies that we hope to perform are in the commercial part. We see great potential for multiplying sales within this business light in the short term. Likewise, there are several different operatives and commercial and financial synergies that will allow us to contribute to improve the rentability of our transaction and the profitability of our transaction. This business line can generate margins over 35%. The price that we agreed for this company was of MXN 1.537 billion that will be paid with our own resources and the debt that has come from the available lines. The operation is still subject to regulatory approval, which we hope to obtain soon. Thank you very much, everyone, for your attention.

Thank you very much, Aby, and all of our team at Traxión for this very complete explanation of what they've done and what's coming very soon for Traxión. We are now opening the floor for your questions in order for our Board of Directors to be able to answer. Let's start with the first question. This can be in English or Spanish, we will have translation.

The key elements for nearshoring to be successful are logistics and mobility. This is precisely our business. Traxión has a leadership position in cross-border, extensive exposure to key industries, together with the strongest commercial force and superior execution capabilities that will help clients grow. So in summary, the more nearshoring in Mexico, the better for Traxión.

Aby, when you went to [indiscernible], you said you want to enter e-commerce and you did it. Then you said that you wanted the pharmaceutical division and now you've entered with a very solid position. What can you tell us about today? What is it that you like now?

Thank you, Ana Paula. Well, I really like Traxporta's business. I think it has a massive potential for growth as well as a big business opportunity in the cross-border services.

And how does this competitive landscape for transport will look like?

Well, I see that Traxporta has a lot of competitive advantages. First of all, the technology we have. Secondly, our commercial force that we already have within the industry. Thirdly, our operative capacity, our operation capacity. Fourth, our balance solidity. All of this has made Traxporta, 1.5 years after its creation, allows me to estimate that we are 4x the size of our competitor size. And in this level of business, scalability and size is very important.

What would be your valuation expectation for Traxporta precisely?

That's a very tough question. But what I can tell you is that I've seen some similar companies that are evaluated between 5 to 10x in their sales in other places around the world. So we expect Traxporta at a short term to be selling over $100 million. This is why I ask you to do the math.

Okay. And how important is cross-border businesses and how important can it be?

Hello, everyone. Cross-border business is something that we've been preparing with the infrastructure of the business. It's been growing for many years now. So we expect now that the sales for cross-border, like direct cross-border sales for our business right now are at around 25%. And indirectly at around 50%. So it is a very important position for our company, and it's a service that we've been working very hard to develop and take care of within the market.

How do you expect to maintain quality of service as you use third-party drivers?

First and foremost, we always certify the third parties in order to upload them in our platforms. So that's the way we guarantee that the level of service is maintained.

What is the next vertical that you see has a future work within our company?

No doubt, technology businesses, especially apps. This is where we see a very, very promising future.

What limits do we have in growth? Meaning, why can -- what can you not grow today at a greater rhythm taking into account the positive tendencies that we're seeing, for example, with nearshoring?

I mean, we don't really have a direct [ limitant ] because the growth that we're having in the logistic aspect in this third party of services, we're really exploiting the services. So we believe that us, as Traxión, with this technology, with the development that we have had in this platform, we have all of the capacities in order to fill our customers' needs, especially in the cross-border sector.

What is the future of the ESG strategy within Traxión?

Thank you. The ESG strategy future of our company lies in strengthening the current strategy. Environmentally, we will have KPIs that are much more specific. We'll continue with our emission reduction strategy, and in broad terms, we'll continue promoting different initiatives through Traxión Foundation and different social programs. And regarding governance, we will be trying to improve our inclusion and diversity programs joined to what we already have today.

How will you minimize threats that imply business with a public center where you have recently entered, specifically this health sector?

Right. So we see this business and this customer as any other business or any other customers we have within the organization. We will do it by offering a good service, having better infrastructure as well as training our people as best as possible for everyone who works within the organization. So we don't really see this is going to be anything different from what we've been doing for many, many years at Traxión now.

How much or how many times can we grow Medistik sales in the next years?

Yes. We bought Medistik and we haven't still made the full operation with the full transaction. We expect this to be around the beginning of third quarter of this year. This company was expected to sell this year around $30 million. And we easily think we can double this exposure in a full year by the end of one full year. So we think at least $60 million will be the next growth we are expecting in Medistik and in the full pharma business.

When you mentioned that you will continue growing inorganically, in that regard, which segment and how can you finance the acquisition?

So we're going to be focusing mainly in the asset-light division. So we are targeting to buy companies that will help us to grow Traxporta or also to reinforce our cross-border business. And we have a strong balance sheet, and we're planning to finance and to have the company on a net debt-to-EBITDA below 2.5x.

How do you imagine the company in 5 years in terms of financial results, segments, geographical exposition, et cetera. What business do you believe have a greater growth potential?

Well, no doubt, I think that the asset-light business at Traxión will definitely be one of the main aspects here. We see a double-digit sustainable growth and this, we think, is extremely interesting because it will allow us to increase the profitability of our company in a sustainable fashion with a very aggressive growth as well.

Now regarding fuel cost, how do you see them at the [ CP ]? How does it hit the profitability now since the first quarter of 2020? You mentioned it as an element of margin pressure?

Fuel is a key cost for us. It's one of our most important operation cost, of course. We've undergone ever since the end of this first quarter, very high volatility in price of fuel and petrol in general that prevails up to today. But having said that, and with the perspective of doing this pass through of moving this price to our customers, this is an activity that we've always undertaken. It's an activity that's continuously done in Traxión ever since we were created, the pass-through. The thing is that this volatility is prevailing, and we expect to have a volatility probably by the end of this year.

Thank you, Antonio. And what are the projections for Medistik, percentage of your own resources and debt percentage?

Thank you very much. Well, in order to finance the operation like Aby said for the Medistik operation, we will be using both our own resources as well as different credit lines we have available right now. It will be a mix between both parties. And with this, we will be integrating as Rodolfo said. And hopefully, by the third quarter, we'll be looking at the different figures of the company.

Thank you, Wolf. So in what horizon does Traxión see to lead the asset-light business in Traxporta to other LatAm countries or other places around the world?

Well, we definitely think that the Traxión logistics and technology model could reach other countries with greater ease. This is why we expect in the near future to be present in other countries within this division.

Thank you, Aby. Now in the line of a more sustainable line, is there any proposal for trying to become -- of having a more electric fleet without affecting the profitability levels?

Yes, we are currently performing some tests. We are doing some analysis of this fleet, of course. We believe and we want to help with the situation. In Mexico, unfortunately, I fear, there's not a completely sustainable development in order to develop this, but we do want to be one of the main companies and perhaps the arrow head in order to start developing these technologies in Mexico.

And what is your opinion of the margins in the logistics and technology aspects for the future? How do we see the margins?

Well, thinking about the past and the future around maybe 10%, 15%, which are the margins that we see in this division. As we continue to consolidate our businesses and integrating the different niches where we want to have. We want to increase the different margins. But right now, we say maybe 10% to 15% margin.

Thank you, Wolf. And what would be the identified risks by Traxión for the expectation of high inflation and of lower economic growth in Mexico perspectives for this and next year? And how is the company getting ready to make face to this?

Thank you, Ana Paula. As we've mentioned from the very beginning of this question-and-answer session, there is a clear trend and tendency for nearshoring. Mexico has a very high manufacturing capability, very high to replicate in Latin America. It's right down south from one of the main economies around the world. So geographically, the country is very well positioned. We have access to 2 oceans. We're very competitive in a long list of industries: automotive, aerospace, manufacturing, fabrics, et cetera, which allows Mexico to remain a very appealing investment destination. And on the other hand, we have also the internal consumption, which is large, and that's one of the main engines that move our business.

Thank you, Antonio. And what's your opinion of the valuation of start-up focus on logistics like Nuvocargo, Nowports, et cetera? Do you think any disruption is heading our way?

These are very interesting valuation. I do certainly think a disruption is heading here. However, Traxión is very well positioned right now with Traxporta in order to also access these business levels -- models.

Thank you, Aby. Now the cross-border model is something that you've considered in the next flow, first-mile custom clearance, last mile in a B2C and B2C model for the pharma vertical?

We're only getting started with this pharma model. Of course, we're assessing all alternatives that this product and type of service can undertake. We will have a great synergy of products with a cross-border part as well as the acquisition of Medistik and what we're developing currently. So we do think we'll be able to integrate the whole change that this industry needs within our country.

Investment needs in the medium term versus capital structure today, do you need to do an equity offering?

Okay. So actually, the company's leveraged at around 1.6x net debt-to-EBITDA. So we still have capacity to grow and to do some acquisitions. So we don't see a follow-on in the near future.

Thank you, Aby. Logistics and Technology division grew revenue and EBITDA 40% and 60% last year. What is the level of growth rate you are expecting in the next years?

So for this division, as we already mentioned, we expect to grow more than the other divisions because again, we don't have to invest in heavy assets. So it will be much more easier for us with our technology and our people to grow more. So we expect to continue with a double-digit growth for the next future also.

And how can you make business stakeholders to have adherence to the use of technology developed by Traxión?

Well, I think today, it's very easy to have adherence to technology that is developed in a series of industries and businesses today. If we look at user -- percentage of users online, if we see it online, we can see that these trends have increased. People today, even if they're 50, 60 years old, are online users. Everything is on via mobile phone. Therefore, we believe that the adherence of these digital services is one of the foundations for Traxión and it goes focused on that on the use of these technologies.

And how much has the competition grown in comparison to you since the pandemic?

Well, we find ourselves in an industry that is growing year-by-year, which is something that benefits all players. However, I believe that Traxión is positioned with great competitive advantages that have allowed us to offer and to remain higher than the industry -- above industry average.

Thank you, Aby. And if the price of fuel remains as high this year and next year, how do you think customers will react?

Well, as we've already mentioned, fuel is definitely a very important operative cost for us. Obviously, we have always translated this increasing prices to our customers, to our agreements. And it's something that's going to happen. It's not a matter of if it's going to happen. It's going to happen, it's just a matter of when. We hope to see in the last quarters of this year to see these translation.

Okay. And how do you expect these app technology, which is amazing, to be translated to all different companies of the group?

Well, we don't really need to look very further because we believe that these apps and services and technologies are collaborators. They use them and they -- they use them a lot of times. Not only our collaborators, but also our customers. They've been greatly benefited by having use of these apps. So it is an automatic thrust that they have when we develop this technology is being able to use all of this.

Thank you very much. And thank you so much for having asked all of these questions. We have one more here. Are you exclusively focused on B2C or B2B? And do you use 100% third-party couriers? Or do you also leverage your own fleet?

Yes. So our strategy is mainly to go B2B because that's the strength that Traxión has in Mexico with more than 1,000 clients.

What are the investment needs in the medium term versus capital structure today? Do you need to do an equity offering?

I think we already answered this one. But again, as Aby just mentioned before, with our investment needs, we still are below 2x net debt-to-EBITDA. So we can right now fund or raise -- we'll have to raise, so we can fund our own plans. So right now, we're not thinking or focusing in a follow-on.

And Wolf, on the new CapEx, what is the incremental ROIC you are expecting for those investments?

As part of our business plans, all of our projects compete between them. So our minimum that we are expecting is at 14% in terms of ROIC and 20% in IRR.

For new investors, can you remind us what is the lag between the fuel increases and the pass-through to clients in the following months?

Let's bear in mind that the pass-through process is an ongoing concern of the company since inception. In fact, this is a standard practice in the whole industry for -- since 60 years ago. If -- the pass-through period depends on how steep the price increase is. If you remember, when we had this fuel price increase at the beginning of 2018, it took us almost 4 months to implement 100% pass-through to clients. In this case, there is no -- there was an increase in prices, but volatility in oil prices, in global oil prices, not only in fuel prices, prevails. So it's -- it's a process that is going to take longer, perhaps. We started doing that at the beginning of the second quarter. We're going to start seeing the results in the third and fourth quarter.

What are the synergies that you will be implementing Medistik regarding processes and other technologies?

Well, we see that one of the most important synergies is going to be the commercial one. Additional to the commercial aspect, we will also have more infrastructure in order to increase the services that are offered to our customers. We have a very robust system that will also contribute with the Medistik operation, and it will also allow us to continue strengthening the financial development, the advancement of Medistik in order for it to have an aggressive growth at a short term.

Thank you, Aby. How will the cargo of Traxporta work? What happens to the contracts you already have?

Traxporta -- as Aby said, we expect Traxporta to represent or to sell at least $200 million in the short term. In our projections, that would be around 10% -- around 5% of total revenues in the short term.

All right. Well, thank you very much for all of the questions that you've sent so far. We will now hear some words from our Traxión CEO, Aby Lijtszain.

Thank you so much, everyone, for having joined us today. As you have seen, technological transformation has been a fundamental part for Traxión's evolution, and it is a key piece for the growth and expansion of our company. New technologies are the foundation for our disruptive advancement for moving on. 2 years ago, we migrated to an asset-light model that has had high levels of commercial acceptance and has provided us with outstanding results. This model represents today around 28% of consolidated income. And we continue expecting greater relevance for material in our operations and for it to become a bigger part of the business in the medium term. In recent years, we've undergone a change of paradigm in consumption patterns that are here to stay and that have redefined the supply chain. Thanks to our planning, technology and commercial muscle, we were able to take advantage of these changes and to capitalize on opportunities, something that today has led us to occupy a leading position within the supply chain. We really like businesses that are related to digital apps such as Traxporta and also all of those related to the cross-border business, where we have a solid leading position and we see great future expansion potential. Today, Traxión is a point of reference for the logistic and transportation business in Mexico. We'll continue to move roundly, maintaining our commitment in the creation of value. Traxión has 10 years of innovating and 5 years of growing along with the market. I have nothing further than thank all of our stakeholders for their trust and Traxión's team, who I have the privilege of leading, because without their efforts, none of this would be possible. It's an honor to have you all on board. Thank you, and see you soon.