Iochpe-Maxion S.A. (MYPK3) Earnings Call Transcript & Summary

[Interpreted] Good morning, ladies and gentlemen. Welcome to Iochpe-Maxion's public meeting in partnership with APIMEC. In the event today representing Iochpe-Maxion, we have: Mr. Marcos Oliveira, the CEO; Elcio Ito, CFO and Investor Relations; Pieter Klinkers, CEO of Wheels division; Augusto Ribeiro Junior, CEO of the Structural Components division; and Lucy Sousa, President of APIMEC. Please proceed with your initial considerations, Lucy.

[Interpreted] Good morning to you all. I am very glad that APIMEC and Iochpe-Maxion are promoting together the Annual Meeting with analysts and investors and other stakeholders. So I'd like to thank you very much.

[Interpreted] We unfortunately cannot listen to what Lucy is saying at the moment. Excuse me, Lucy, you're on mute now.

[Interpreted] Good morning to you all. It is a pleasure to be with Maxion in this meeting. I salute all the analysts from APIMEC and investors. [Operator Instructions] Iochpe-Maxion is part of this new market. So I'll give the floor to Marcos, our -- the CEO, for the opening of this session.

[Interpreted] Thank you very much, Lucy. Good morning, and welcome to the APIMEC meeting 2020 with investors Iochpe-Maxion. I will talk about Iochpe-Maxion, the global vehicle productions, our results for the third quarter, a little bit of the future on mobility and how Iochpe-Maxion is getting ready for the future. After my presentation, Mr. Pieter Klinkers, CEO of Maxion Wheels, will be talking about innovation on the Wheels division. Mr. Augusto Ribeiro will be -- the CEO of the Structural Components division will talk about Structural Components and innovation. And then after Augusto Ribeiro, we are going to have a very brief Q&A session. During the presentations, we are going to feature a few videos that will help us show our initiatives on innovation, along with Iochpe-Maxion. All the questions may be sent to us via chat through all of the available channels. Starting with this presentation, we are on Slide #3. We talk a little bit about Iochpe-Maxion, a Brazilian multinational company with more than 100 years of history. We are the world's largest wheel producer and one of the main producers of structural components in the Americas. We have great focus on innovation and sustainable development of the automotive industry. We have 32 facilities distributed in 14 countries and more than 15,000 employees. Our average growth for the period 2010 -- 2019 has been, to date, 18.2%. On Slide #4, you have the net operating revenue of our global operations. During the year 2019, we've reached a revenue of BRL 10 billion, considering this distribution is of 30.4% in North America, 26.8% in South America, 33.8% in Europe and 9.1% in Asia and other markets. Our global presence gives us the ability to continue innovating and offering the best solution for the auto industry. On Slide #5, you can see the presence of our industrial plants. And you can see where we produce steel wheels and aluminum wheels and structural components. As you can see, we do have a global coverage. And we can meet the demands of our clients for the very different markets we cover and the segments we work with. On Slide #6, you can see some of the products that Iochpe-Maxion offers to clients: steel and aluminum wheels for light vehicles, steel wheels for commercial vehicles and agricultural machinery. From the Structural Components division, we have side rails and chassis for commercial vehicles and stamping parts for light and commercial vehicles. As a reminder, we also have some participation in partnership with AmstedMaxion. The presentation today will be focused on the auto divisions. On Slide #7, you can see the trajectory considering our profitability, considering the 7 last years -- previous years. And you can see in 2019, we've reached an EBITDA of BRL 1.096 million. And you can see that along the 7 previous years, you see a consistency, although we have faced different economic cycles in different regions and in different market dynamics and customers. And we've been maintaining this margin of around 11% in the last 7 years. Slide #8. It shows a little bit on the impact of the pandemic on the industry -- on the auto industry. And let's just remember that in the second quarter of 2020, we observed a decrease in global vehicle production. And in Brazil, this drop was of about minus 82.3%. If you compare year-over-year, this drop was around 71.2% in North America and minus 66.6% if you compare to the previous year for Europe. And during this period -- during this third quarter, we focused on safety, health of our employees and also on the liquidity of this company so that we could face this uncertain period with low visibility and so that we could be able to produce and meet our clients' demands and fulfilling our commitments and at the same time, continuing on developing solutions to our clients. After this drop, very prominent drop in the second quarter of this year and unprecedented in humankind and also in our industry, we can see the automotive industry is recovering everywhere in the world. And it's been much more accelerated than expected. The production of light vehicles for the third quarter was minus 23.3% if you compare to the third quarter last year. And this drop in North America was minus 1.6% and for Europe, minus 10.1%. You can see that there was a very fast recovery between the second and the third quarters of 2020. As a reminder, the pandemic that started in China in the first quarter of this year presented a much faster recovery if you compare to the second and the third quarter numbers. You can see the global production on Slide #9 and the projection for 2020 and the forthcoming years. This was produced by IHS Auto. And you can see that in 2019, we produced 88.9 million units. But there was a drop at the beginning of 2020 to minus 17.9%. This production in 2021 should grow 13.8% [Audio Gap] 2020. In 2022, 87.2 million vehicles. And by 2023, we should be producing 89.9 million vehicles. The recovery of the global vehicle production volumes is expected to occur in 2023. That's when we get back to the rates of 2019. Iochpe-Maxion maintains its agility and flexibility in adapting to changes in demand in different markets. And these variations are positive or negative according to the dynamics of each segment and in each country we are operating. Slide #10. We talk about some of the highlights of this third quarter of 2020. You can see that we've reached a cash position of BRL 1.6 billion with an increase of BRL 249 million if you compare it to the second quarter of the same year. We've reached the net revenue [Audio Gap] 1.1% if you compare the third quarter of this [Audio Gap] the adjusted EBITDA was of BRL 241 million with a margin of 9.6%. We've implemented reduction in costs along the year 2020 and the reduction of the third quarter [Audio Gap] 21.8% when you compare it to the third quarter of 2019. And as a reminder, of course, this disregards the exchange [Audio Gap] and the investments have been reduced by 34 -- 64% for this quarter. And this disregards the exchange rate variation. The net debt of BRL 3.738 billion in the third quarter compares to the BRL 2 billion for the previous year. The company's financial leverage represented 7x at the end of this quarter. On Slide #11, you can see the operational development, operational performance of Iochpe-Maxion per region. And these are numbers that are comparing -- are being comparable to the previous year: in South America, [ BRL 178 million ]; in Asia, BRL 215 million; and in Europe, BRL 921 million; and in North America, BRL 797 million. And if you compare this year-over-year, you see that in South America, the recovery of the automotive market has been faster. And after the worst moment of the pandemic in the second quarter, the third quarter shows a gradual recovery in all regions. In Europe, you can see the 14.7% growth. And in Asia, a little bit more -- a little growth of 0.4%. The recovery then has been faster than we all expected. After the pandemic, all regions seem to be recovering in all regions. And the international operations revenue was positively impacted by the exchange rate variation. Our consolidated revenue was of BRL 2.515 billion, that's minus 1.1% lower than the previous year. On the next slide, #12, you can see the participation by product. During the third quarter of 2020, you can see some decrease in Structural Components' participation for commercial vehicles. That is due to the decrease in the production of trucks in North and South America. You can see the aluminum wheels revenue stable and steel wheels for light vehicles somewhat stable. And all the numbers seem stable in comparison to the third quarter of last year. On Slide #13, you see the adjusted EBITDA and the margin in 2020. Our EBITDA was BRL 241 million, whereas last year, we had less -- in the previous quarter, the numbers were much lower and the return to profitability with the gradual recovery of volumes. You also see reduction of costs and expenses in the period for the margin recovery. But there is some ongoing restructuring as we are closing a factory in North America and adjusting costs and expenses to the current demand level. On Slide #14, you can see the net income or the net loss. For the second quarter, a loss of [ BRL 378 million ]. And for the third quarter, the loss decreased but is still there. And it shows a marked recovery. This is disregarding structural costs. Excluding restructuring costs, the net income in the third quarter would have been BRL 14 million. And on Slide #15, you can see the indebtedness for the company in different currencies. The gross debt composition reaches BRL 1.641 billion with a cash of above BRL 600 million. The impact is shown here due to the decrease of EBITDA impacting the third trimester -- third quarter and also showing the recovery of this period. Liquidity is now our top priority for 2020. We received [Audio Gap] and third quarter, our debt renewals and renegotiation of long-term lines and the financial covenant renegotiation, they are all under the same priority. But our short-term priority encompasses maintaining liquidity at high levels, lengthening of the debt profile and adequacy of investment and expenditure levels. Slide #16 are the 6 pillars of the strategic plan of the company. We have 8 of them: in value creation, in growth, constant improvement of our competitiveness, the development of people, of our employees, the compliance in every single area where we work globally and a very high focus on innovation. Where we will be investing more time during this meeting, to talk about our efforts in innovation. But let's remember that the future of mobility and how our efforts in terms of innovation affect Iochpe-Maxion's business in the future. So we can clearly see that the future of mobility will go through the electrification, autonomous vehicles, shared mobility, via certain micro mobility in the general context of mobility and also in smart cities, the interconnect vehicles, the locals of the city and the environment and different technologies available in order to facilitate the use of means of transportation as well as helping in the traffic jam of big cities. In Slide #18, we see that the world is in ongoing fast transformation. These are changes in social, technology aspects and, of course, in consumption habits worldwide. Slide #19 shows some of the main concerns impacting mobility in the future. The habits and concerns of users while choosing the means of transportation: consider convenience, safety, privacy, the cost of the trip and the distance to destination. The environment is clearly more and more important in the future of the decision-making on mobility: on global warming aspects, gas emissions and energetic efficiency. On the next slide, we can see that traffic jam in big urban centers is one of the concerns affecting decisions in the future of mobility. The impact on the quality of life are the cost of maintaining and using private vehicles are -- this is going to be important for deciding for mobility in the future. Clearly, in 2020, we have seen an impact of the COVID-19 and the concern that epidemics or pandemics in the future can impact consumer habits in terms such as physical distancing and the risk of infection. Slide #21 shows some of the key factors that will impact mobility in the future. Well, clearly, government decisions with -- and laws will be critical in terms of mobility in the future, either in the CO2 reduction, banning internal combustion engines, restriction of vehicle circulations. These government decisions can be sped up and supported with the use of technology into future of mobility, either in cost reduction to access to quick, innovative and practical solutions; usage of maps and real-time information; the spread of apps; 5G; embedded electronics or on-hand electronics. These impacts of technologies will be important for mobility. Also another key aspect that will impact the future of mobility is the cost and accessibility, availability of collective transportation that is safe, fast and low cost. The availability of alternatives for acquisition of personal vehicles is also going to be key in the future. Slide #22 shows the issue of property versus use. Back in the day, having a car, having our own car was very important. Today, more and more the concept that I use a car when I need is now an important part of the decision in terms of owning a vehicle. The social status is also a factor in the future of mobility. The user convenience, personal vehicle versus taxi and safety and privacy is going to be important as well. Slide #23 shows other factors that will impact the future of mobility. The necessity of commuting more and more and people working at home and e-commerce. This is going to be online shopping, this is going to be important in transportation and commuting of loads. Lifestyles, city and country side for work and study, efficiency of personal time, either for productivity matters and life -- and quality of life. I have mentioned very important elements in terms of future of mobility. And for us, at Iochpe-Maxion, we are ready for this future. And we've been getting ready for that for a while now. And on Slide #24, we can see how Iochpe-Maxion has been structuring itself to reach sustainable growth through innovation. Through our 2 divisions, Maxion Wheels and Maxion Structural Components, we have a product engineering, which focuses on current products with high technical competence, able to understand the specifications of our user -- of our clients, the requirements of different regions where we operate. And we offer products, which are more efficient and more competitive in the market. We're highly focus on advanced engineering, how we develop new products and new technologies within our businesses of Wheels and Structural Components. We're highly focused on innovation, how we can use innovation within our product lines. And the constant communication across our divisions in terms of opportunities that can benefit Iochpe-Maxion as a whole, last year, we made a decision to form an advanced center of innovation in Berlin. It's called for Maxion Advanced Technologies. This is an organization -- a small organization separated from the divisions. It's based in Berlin and focused on research for new business opportunities and disruptive ones related to the auto sector. This organization interacts with the innovation department, advanced engineering, operational efficiency, IT and the corporate offices of Iochpe-Maxion and our divisions as well. One of the first results of that initiative can be seen through the partnership that was recently announced between Maxion and REE, which is one of the innovators in vehicle -- electric vehicles platform for the future. Both in vehicles and in Structural Components, also in Wheel, we have an effective cooperation. And Mr. Pieter Klinkers will be speaking a little more during his presentation. So I'd like to go to Slide #26 and the pass the baton to Mr. Pieter Klinkers, who will be speaking on Maxion Wheels innovation.

Thank you, Marcos. My name is Pieter. I'm in charge of Maxion Wheels since 2015. On Slide #26, you see 3 beautiful wheels. But of course, these are not the only wheels we're making. If you go to Slide #27, you see actually that last year, we were making and selling 55 million wheels. And we did that in 24 plants around the world with 10,000 employees. And that generated approximately BRL 8 billion of revenue. If you go with me to Slide #28, as Marcos said, this presentation is focused on innovation. And innovation is not new for Maxion Wheels. In fact, it's our DNA. We're the first suppliers and the only suppliers to the Ford Model T, that's more than 100 years ago, wooden wheels, very different times. But I think it's fair to say DNA is part of our company when it comes to innovation. What is new maybe a little bit to the last 5 to 10 years, we've really put in place a very structured approach around innovation and a very focused approach around innovation. Because we believe there will not be less wheels in the future, but the wheels are already becoming very different than in the past. And they will still continue to develop in very diverse ways. So what are we focusing on? If you go with me to the next slide, #29, you see the 5 focus points that we have. And it may seem a little bit boring, but the first one is costs. And we've been working on cost also over 100 years. But getting our cost down through innovation is really one of our focus points. The other one is weight. Weight has become more important in the last couple of years. And we believe also, in the future, it will be even more important. Next to that is design. I think not so long ago, people thought about wheels, it needs to be round and it needs to be making the vehicle roll forward. That's still the case. But also today, they are very important from a design point of view, especially for passenger car market. So that's another focus point for us when we talk innovation. And then last but not least, I want to talk a little bit about functionality and about digitalization of connectivity when we talk about our focus points regarding innovation. So if you go with me to Slide #30, I will give you an example of what we try to do from an innovation point of view regarding cost. And this is only one example, but it's a good example, I believe. And we call it Maxion Reduced Rim Technology, RRT. Basically, it's another way to make an aluminum wheel lighter. Many people know flow forming. And that's a good, solid process, but it's an expensive process. And we have found a way get to a similar outcome but in a much more cost-effective way. And it's paying off. Customers like it. We're selling about 0.5 million wheels, this RRT technology, this year in 2020. And the order book we have is already for more than 1 million wheels and we have many new orders coming our way. People like it. And we're the only one offering this in the market right now. And this is a very good example of how innovative thinking can lead to different solutions than the standard solutions and a good profitable order book. When we talk about weight on Slide #31, you see what we do from a weight point of view in the truck wheel sector. We are the largest supplier of truck wheels in the world, by a distance. What we did the last 4, 5 years was put a lot of effort on breakthrough thinking, getting the weight out of the wheels. For a long time, the weight of the wheels was kind of stable. And we said we have to do something different to have a more radical way down on the weight. And it has paid off. We took out 20% of the weight on our standard truck wheel through innovative thinking. This is not just through investments. It's mainly through thinking different, which is innovation. And it has paid off. We have increased our market share in the truck segment all over the world just the last few years from 16% to 18%. It's a very good market share increase. And we think it's not only based on this weight story, but it's certainly playing an important role here. If you go with me to Slide #32, I talked about design and beautiful wheels before. It's becoming more and more important modern, especially in [ pass ] car, not only in [ pass ] car. But in the [ pass ] car segment, there's many ways as many people know how to walk these ways when it comes to making wheels larger and look nicer, but the trade of cars is to do it in a cost-effective way. That's what customers like the most. And one of the examples we have on making that happen is what we call multicolor paint application. You see an example on the left side of that Slide #32. It looks beautiful, and the opportunities are limitless. And we have sold the first wheels in the market already last year. This year, the volume is building up, and many of our premium OEM customers are really liking this technology, which is more cost-effective than most of the other technologies in the market. So a good way -- a good example of showing how -- also from a design point of view, innovative thinking can lead to a solution that is maybe more cost effective and may be even more beautiful than some of the other solutions known in the market. When we talk about design, when we go to Slide #33, here we see we have been trying to do and what we are doing for steel wheels. Because the only reason to buy an aluminum wheel for passenger cars is because it looks nicer, all right? It's more expensive, but it looks better. So what can we do with the steel wheel to give it a better styling? And what we have come up with as the first one, is to create a very different steel wheel, which we call VersaStyle wheel. It has a much larger ventilation holes. You see them on the bottom right of this page. And it gives OEMs the opportunity to put much nicer covers on these wheels and also change the covers over time. And so to change the styling of the vehicle in a much cheaper way and a much more cost-effective way than what is done through the application of a normal wheel, which still has a nice wheel, but this wheel is a very nice wheel, too, and it's much more cost-effective as aluminum. Now our order book there already today is about 2 million wheels in 2020. And in 2023, over 3 million wheels, and it's ramping up. And not only in places like Europe or North America, but now also in places like South America or India. And so this is a very good opportunity for us to gain market share -- further market share in this segment. Last but not the least, this is a little bit further down the road. It's about connectivity. But there's really only 2 parts, right, that touch grounds on a vehicle, and that's the tire and wheel. And the tire has been replaced after time when it wears. Now the wheel usually stays on the vehicle even when you replace the tire. So we thought measuring data, maybe the best place is not the tire. Maybe the best place is actually the wheel. And we are working with a company called ZF, a very big global supplier from Germany, on a solution that not only can measure many of the data that is needed already today, like tire pressure, which is actually mandatory in Europe for trucks from 2022. But the next one on the horizon, the big trick will be measuring loads. And we think we have found a way to make a load very effectively, and we're working together with ZF to get the prototypes on the road, still this year, so next month. There's not much time to go. Next month, we are putting prototypes on the road to prove that this concept is viable, and then we look, of course, for commercialization. So also from a connectivity point of view, the wheel can do something more than it has been doing, we believe, for the last 100 years. Now if you go with me to Slide #35, what does that all bring us in the end? I think it's fair to say that with our customer base that we already have, we maintain it and we grow it. But we also add new OEMs like Tesla, like TOGG, like INEOS, like Rivian. And maybe most important, we diversify not only our customer base, but we diversify also around mix within the customer base. And that's really what customers want. They want to have many more different wheels, not last wheels, but more different wheels, and that's what we're doing as well with the customer base that we have out there. If you go with me to Slide #36. It shows how we're doing that. When we started this more structured process, we said, for sure, we cannot all do this by ourselves. And it's not in the aim to be able to do that. There is other companies there that are better in that. They have many more resources. And let's see what we can do together. And so I think we're really proud to have built up a real global network of products. And that's, of course, our customers, the OEMS, that's our suppliers, but that's also start-ups, that's universities, and that's what we call industry powers. And we thought it would be kind of nice to give you a snapshot of some of the partners that we're working with. And so the first example that we want to show to you is the Aachen University. That's a German university, and that's not a small one. It's actually the largest technical university in Germany, and it's the major partner of the German automotive industry. It's not so far away from where I'm sitting now in Cologne Bonn , only 70 kilometers away. And so we're working together with this university on the projects that I would like to have introduced by Professor Eckstein, who is the Head of Automotive Engineering Department within the University of Aachen. There's a small video. So if you could start playing the video now, that would be good.

Welcome to the Institute for Automotive Engineering of Aachen University. My name is Lutz Eckstein. I'm Director of this institute, which has a very long tradition, more than 100 years of research on vehicles, their systems and components. Over decades, holistic infrastructure has been built up, comprising driving simulators, drive [ during test ventures ], crash facilities, [ top ] towers and, of course, a lot of tire and wheel test ventures. Tires and wheels play a very important role since they transmit all the forces between the vehicle and the road. So they are highly relevant for safety and comfort, but also for sustainability since they contribute to light-weighting design and aerodynamics of the vehicle. With Maxion Wheels, we have formed a systematic cooperation where we, on the one hand side, look into near-term potentials, looking in light-weighting design, aerodynamics, but also in making the wheel smarter. On the other hand side, we look into the future since we also work on future vehicle concepts, driverless vehicles, automated driving. And together with Maxion Wheels, we have a good partner in our largest project, which is funded by the German government. It's on driverless vehicles. And with driverless vehicles, we certainly have very different requirements when it comes to the wheel and to the tire. So we are very happy about this unique collaboration, and we look into a bright future together with Maxion Wheels. Thank you.

Hello, Mr. Pieter, you may proceed.

Thank you. I hope you like that. And so it's a big cooperation between 16 German universities, 8 industry partners that we're working with to develop this level 5 autonomous car, which has the wheel from a steering point of view, from a power point of view it has at the very [ out of sight ] cost. And of course, our aim is to provide the best possible solution from a wheel point of view. We're looking forward to make that happen. If you go with me to Slide #40, I would like to introduce REE Automotive to you. You could read it in the press. And Marcos has just talked about it, but REE Automotive is an electric platforms leader that we have been working with for some time, and now we form an official partnership. Just like we have done prior to us with companies like Mitsubishi, HINO and Mahindra. Again, it's a platform. It's very scalable, gives a lot of freedom to the end customer, to the OEM to make their own car out of it. And again, our aim is to have the best possible solution from a wheel point of view. I would like to introduce to you Daniel Barel, who's the Chief Executive Officer of REE, and he also has recorded a small video for us. So if you could show that video as well.

We're excited to partner today with Maxion in developing a brand-new wheel for our corner modules. Developing corner module is something that we've been doing for the past 7 years when we're integrating auto to drive steering, braking and suspension component into the arc of a wheel and having a brand-new wheel designed only for us, together with Maxion, and the level of innovation and global reach is a major factor in our global expansion. Maxion's innovation level is something that we've been looking for in the past few years. And this is one of the main things we're looking in a partner. It took us a few years together. But finally, we have done this. So thank you all, and keep safe.

You may proceed, Mr. Pieter.

Thank you. So our corporation -- or our task in the cooperation with REE, the cost of development and to produce a wheel that integrates all those components into [ its part ] and create a model chassis for REE's platform. Looking forward to that, too. Now if we get a little bit closer to today's world, on Slide 43, we make many aluminum wheels. And to make those wheels, we need aluminum. Our biggest supplier of aluminum is the world's largest premium aluminum producer called EGA, Emirates Global Aluminum. They have smelters in Abu Dhabi and in Dubai, and they're a big partner to the automotive industry as well as to Maxion Wheels. So I would like to introduce to you on Slide 44 Mr. Walid Al Attar, who's the Global Chief Commercial Officer, that also was so kind to say a few words about the partnership between EGA and Maxion Wheels. So if you could play that video for us as well.

Hello. My name is Walid. I'm the Chief Commercial Officer for Emirates Global Aluminum. Emirates Global Aluminum is the largest premium aluminum producer in the world. We have a heritage stretching back over 40 years, building our business from a small regional player into a global company. Today, EGA has expanded upstream and owns its own bauxite mine in Guinea, West Africa and an alumina refinery in the United Arab Emirates. I'm proud to say that Maxion has been an EGA customer since 1995. And today, our metal is used Maxion across its manufacturing plants globally. Maxion for the past 2 years has recognized EGA as a supplier of the year. I believe our organizations are like-minded. And like Maxion, we have grown our business through innovation, including to tackle global challenges. As aluminum is energy-intensive, our focus for more than 25 years has been to improve the efficiency of our aluminum smelting process. Our latest aluminum smelting technology is amongst the most energy-efficient in the world. We also work directly with key customers on innovations to help meet global challenges in that sector. We are excited about the potential of an innovation project that we are working on with Maxion today to help produce the energy industry's most cost-effective light-weight aluminum wheels. Our objective in this project is to pool our knowledge, skills and experience to produce results that meet Maxion's needs. As the world's leading premium aluminum producer, EGA is proud of its partnership with Maxion. We are committed to play our part in Maxion's success and look forward to many more years of successful partnership ahead. Please stay safe and healthy.

You may proceed, Mr. Pieter.

Thank you. And so metal is very important for us at Maxion Wheels. It represents a very, very important part of our total cost records feel are aluminum. And so we were very pleased that in 2019, we included an innovation partnership contract with EGA. This is all about material science to get the best possible metal at lowest possible costs. So this is a very good partnership for us. Last but not least, I would like to take you to Slide #46 and talk a little bit about our partnership with Michelin. I don't need to introduce Michelin, I think, big time. It is the global tire leader, selling more than 200 million tires every year. It is my pleasure to introduce Mr. Florent Menegaux who is the Global CEO of Michelin, to talk a little bit about the partnership between Michelin and Maxion Wheels. We're working on quite a few projects, 2 big ones, are called ACORUS and UPTIS. Florent will talk about that in his video. But also for our ACORUS, we will show a separate video. So if you could play 2 videos now for us, Mr. Florent Menegaux and then a video about ACORUS.

Dear Maxion partners, today, I wanted to testify to the quality of the collaboration between Michelin and Maxion. There is no life without motion. Michelin is recognized for its ability to innovate and anticipate consumer expectations. We partner with mobility players such as Maxion to offer a safer, more efficient and more responsible life in motion. For several years, with Maxion as our reference partner for the metal part, we develop solutions as revolutionary as ACORUS and UPTIS. The Golden Steering Wheel Award 2019 in Germany and the AVT ACES Awards 2020 in the U.S.A. are prestigious prices, which reward UPTIS. Maxion is a precious innovative partner to overcome challenges such as design and IO simulation. The mutual trust that has developed between our team is a major asset in pushing the boundaries of sustainable solutions combining tire and wheel. You can count on Michelin's firm intention to further strengthen this collaboration. [Presentation]

Pieter?

Thank you. So I hope you like that. On Slide 49, you can see we get quite a bit of views and likes about the ACORUS product. And we are excited to continue to progress with this project. The other project that Florent Menegaux talked about is on Slide 50. It's called UPTIS, and it's an airless mobility solution. And it's really a cooperation between a tire manufacturer and a wheel producer to see how the system can work better together. There is a metal part, and there is a rubber part in there. It's airless. And so the 2 companies are working together to promote this to the market, and we're making good progress on this solution as well. Very excited about these projects with Michelin. So if we go to Slide #51, the final slide for me. In the summary, we have been working on innovation since a long time. But really, the last 5 to 10 years, we're making a lot of progress and very excited to -- by having the whole company engaged in this. And we clearly know, we believe, where to focus and what are the customer needs. We have a very good, dedicated -- and dedicated advanced engineering and innovation team that want to execute on these projects. And last but not least, as usual, we're very focused on commercializing these ideas and these projects that we are working on. So with that, I would like to thank you for your continued support to our company and to Maxion Wheels, and also pass the word on to Augusto Ribeiro.

[Interpreted] Okay. Good morning. Thank you, Pieter. Thank you all. I am Augusto Ribeiro Junior. I've been with Iochpe for 4.5 years now. And in the last year, I have been the Chief Executive Officer for Maxion Structural Components. On Slide #53, you can see what we are. In Brazil now, we have 8 plants with more than 5,000 employees. We are in 4 countries, and we are part of the American Vision. We work with Mexico and with the Southern Cone, with Uruguay, Argentina and Brazil altogether. Slide #54, please. This is just an overview of what the division is, something like an x-ray. We have around 80% of our revenue coming from heavy vehicles and 20% coming from light vehicles. 80-20. For you to have an idea, we work with all OEMs that are traditional, but we are also starting to grow, providing parts and components to newcomers, the new OEMs, companies that are already established just like Tesla or new ones just like Rivian in the United States. Slide 55, please. On Slide 55 is just to add up to what Marcos mentioned at the beginning of his presentation. The cycle of the strategic planning for this year was sort of atypical because of the pandemic, of course. And with strategic planning, we could revisit many of the things we had planned for the next years. But considering everything that is happening, all the tendencies and changes for the situation with customer relations and everything that is happening to our clients in all the Americas, for you to have an idea, this is bottom-up, of course. As you know, innovation is something that permeates all of the pillars in a way. I am going to dive into deep a little bit more on innovation today, and I'm going to share with you how Maxion Structural Components is inserted in this universe. On Slide #56, you can see 2 very relevant projects that are already concluded, and I'd like to present to you. You have probably seen this and discussed it before with Iochpe in the past, but now we are going to show you 2 videos. One of them is going to show our plant that is located within the Renault Nissan complex in Cordoba, Argentina. It is the assembly line to manufacture of the Nissan Frontier and Renault Alaskan pickup frames. We are going to roll this out for the whole of Latin America. And the second video is of an investment that has already started and it concerns our Mexico plant. We are now working with the stamp -- we are -- we work with frames and lateral frames with Maxion Inmagusa, but this was not complete when we started with the stamping line. We have 2 videos in sequence for you to see now. The first one is concerning the Renault Nissan growth, and then the second one on Inmagusa. Thanks. [Presentation]

[Interpreted] Thank you. Those are very relevant and important projects from Argentina, specifically. There's a lot of technology implemented. And you produce heavy vehicles on a rather smaller volume of series production when compared to light vehicles that generates a whole challenge when you have this process automation. So this is a very important process for the division. Slide #59. It has 2 projects that are ongoing right now. We have one in Contagem for -- to serve as a light vehicle assembler. We are increasing line capacity in -- by 83% through automation. Basically, robots, welding lines. This is an important project for the growth and, of course, for service of this client, through innovation. We have another -- we have one more line, a third line, which is outsourcing of a stamping line production in an OEM in Brazil, large -- a large project, 11 presses transferred from the customer, 200 incremental items. This is really healthy as we see in Brazil. Project transfer equipment in an existing market that has a growth potential, which is very relevant and important. Slide #60. Actually, that's just an introduction here. We're going to talk more about innovation within structural products. You've seen Marcos and Pieter. It is a changing market. There are different needs for each client, of course. And in our division, we would behave and we are inserting everything, this innovative solution -- solutions. Slide 61 shows us that we have 3 fronts. If you consider the big players, the big OEMs, they need support in development of technologies. So when you consider Daimler, MAN or IVECO or even Fiat and other companies, they need to develop the solution. They are developing the solutions for electrification, for instance, and they need support for the new technologies. There's a second group, which is new players in this new mobility. Pieter has had REE, we have driven Tesla, which is a more solid company, but they are ahead of technology, technologies connected to this new mobility. And the smaller the company, the higher relevance of a company like Maxion, and that's because we have a domain of process production. We have access technology and technologies. Weight reduction for instance, we can speed up, not only speed up, we can bring it -- we can be self-assured that it is marketable. This is one of the advices we can offer to the new players because of who we are. And the third important role is where Maxion is inserted with the development chain. You have a chain made out of universities, tools, companies that supply to Tier 1 like one -- like us. We process and changes the material, there's a solution to be applied in the vehicle to the OEM and the other edge. So this ecosystem, that's where I'm going to show you a few examples where the Maxion components is inserted. So Slide 62, let's just zoom in the strategic plan, what would an advanced step would be in the innovation pillar. I'm not going to comment on the megatrends that Marcos has talked about at the beginning of the presentation. And these trends changed into main drivers. We translate that into the most relevant and impact items for us, for our division, for what we do. So when we talk mobility in new businesses, where we have the MAT stamp down there, that's where we use the services of what Marcos commented earlier on, the ecosystem localized group, which is dedicated to mobility in Germany. Within those drivers, we go to our action plan. That's where the division goes deeper and we bring up the processes and how to observe the topics -- customer-led approach, those are processes. How can I ensure that my innovations, my processes are considering client demands? So we have technology behind that. We have accountability. A number of actions, back days, a number of actions that ensure that. And this is so for each design, for each item, co-design innovation, I'm going to mention some of them in the upcoming slides. Slide 63. That's where the ecosystem is specifically, how Maxion Structural Components is inserted within this universe. Where there is supply -- raw material supplier, you go through service provider and research centers up until the OEMs, either they are relevant and big ones or start-ups looking for market share. Slide 64. This is the first example. We developed battery cradle for one of our clients in aluminum. What are the characteristics? Well, the current solution for commercial vehicles in electrification, this is so complex and heavy. And this is a specific example. There's a bus considering the whole load to support a battery autonomy. It can carry up to 2 ton. If the battery weighs 2 tons, let alone the structure that is used to support this structure. So the project we developed, we received the help request to produce a battery support, a battery cradle. Through our knowledge, we worked with the OEM and worked on weight reduction. And in the initial project that was supported, that was proposed by the OEM, we reduced by 64% and they have a broad knowledge of the vehicle of all parts. We are specializing chassis and stamping. So we do have a whole engineering knowledge dedicated to that. So this was a very -- this was a well-accepted and acknowledged project and the solution was approved by the client. Please play the video where Silvia Simon, Head of Procurement of Mercedes Brazil, is going to share with us some of our partnership. Please roll it. [Presentation]

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Slide 66. I'm not going to break it down. We've read a lot on this partnership. But it just reinforced the role of a company like REE and Structural Components and how important that is to help them create a solution that is marketable with proper costs within this modular solution for where platform is fixed, what changes is the -- both are specific, the cabin specifically. So this is also motivated. We've worked on definition of working technologically. Slide 67 shows some of the trend that is growing more and more, we call it co-design. It is -- I mean, a very solid characteristic more and more, as I said before. Traditional OEMs invest a great deal of their efforts of R&D in developing electric vehicles or automation -- autonomous vehicles. So we -- there's a high -- there's a big effort in this change. They spend a lot of money and resources, which brings up the necessity, in our case, opportunity to advance on the value chain while more actively engaging or in the chain or the product development stages, either the prototyping or the business step later on with the view that Maxion has experience, Maxion has in relational systems. This makes it easier to bring new projects. We have the 2 red parts. They are meaning stamping. And 2 was at the bottom in blue and gray, they are -- they can be folded. We have other layers, technologies, and it can produce the same product with different characteristics. One with lower initial investments because you don't have the tools. The other one is more expensive at the end, but then smaller costs in the future. This is called -- this is to show an OEM the capacity and alternative that each solution has. We can do that through our knowledge developed throughout the last decades. Page 68, I'd like to play -- I should play the video. We've won an innovation award from one of our clients, in this case, IVECO, we have the testimony of Marcio Querichelli, Commercial Vehicles South America President. Please roll the video.

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Slide 69 shows us an example of a partnership with the supplier. Novelis is the -- is one of the largest aluminum recyclers in the world. It also produces boards and it consumes -- I mean, we have the example, here is Novelis for the components division. This is very relevant. We developed 2 solutions in [ link ] specifically, one for electrified solutions for weight reduction. Example we mentioned before for batteries weight, et cetera, where we have a new alloy to replace rails. And this is -- we're testing that, and this is the -- this is for marketing purposes. And we have a client, we can check the possibility of -- I mean, we -- the client wants to run the test, and we verify applicability with weight reduction. And please roll the next video by Augusto Nogueira for Commercial VP of Novelis.

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Slide number 71 brings an example of technology development, in this case, a composite, not only carbon fiber and glass fiber, but also working on developing the value chain to be ready. And we need to think of the commercializing of this material. We need to think of the whole chain, not only material and tools, but also the process of manufacturing and the sale to the end customer. In Brazil, we have a participation in Rota 2030. We are playing an important role, along with research centers such as IPT, the ITA, the federal and the state universities of São Paulo. So it is important that we close the cycle of development to present as a whole solution to the client and not only an interesting and important technology that cannot be commercialized. I'll kindly ask you now to please roll the video of Dr. Jefferson de Oliveira Gomes, the President of IPT. Video on air now. [Presentation]

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