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

Good morning, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to Iochpe-Maxion's Fourth Quarter 2020 Earnings Conference Call. Present at the conference today and available for the Q&A sessions are: Mr. Marcos de Oliveira, Chief Executive Officer; along with Mr. Elcio Ito, Chief Financial and Investor Relations Officer; and Luis Abreu, Strategy, M&A and Investor Relations Director. We would like to inform that this conference call is being broadcast online at the company's website, www.iochpe.com.br, and the presentation is available for download at the Investors Information section. [Operator Instructions] Before proceeding, we would like to mention that forward-looking statements are based on beliefs and assumptions of Iochpe-Maxion's management and on information currently available to the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they are related to future events and therefore, depend on circumstances that may or may not occur. Now Marcos Oliveira, Iochpe-Maxion's CEO, will have the floor and now open this conference call.

Good morning, and welcome to the teleconference on the fourth quarter 2020 earnings for Iochpe-Maxion. Any further information is available on Iochpe's website. 2020 brought the environment with the coronavirus, and our priorities since then has been the preserving of the integrity of all of our employees, their family and community following protocols and following all the guidelines of any authorities involved in this situation. We have compared the auto production with all the other markets from 2019, from the COVID-19 situation and how this has affected the global economy. It is very clear that the auto production has dropped since then, and around 60% drop in Europe; 70% in Asia; and around 30% in Brazil. The recovery has been accelerated from the third quarter on. And when we got to the fourth quarter, our indexes were close to the numbers we had in 2019. The fast-paced recovery in our industry has showed their efforts in the supply chain, especially in Brazil. Considering all the timely actions from the company, we managed to decrease loss, but we also predicted some inefficiencies with overtime increase and overtime and additional efforts with tool changing. And this has impacted negatively our fourth quarter. On Slide #2, you will be able to see the global recovery according to IHS Automotive. You will be able to see that the global industry in 2019 has dropped around 16% in 2020 for 75,000 vehicles. And on the second quarter, this has decreased according to the previous slide. The perspective today for IHS is a growth in the production this year, but an increase of 13% to take the production to around 78,000 vehicles for this year. This drop and further recovery excludes China from -- excluding China from the global market is around 20% in 2020. And a little fast-paced recovery of 17% on the following year, and that is due to the very prominent decrease over the previous year. This is due to the adaptability in variation of scenario. On Slide #3, you will be able to see some of the highlights of the fourth quarter for Iochpe-Maxion. We had an increase of 21.8% increase in the net revenue if compared to 4Q '19. Our EBITDA, as adjusted, is BRL 237.4 million with an 8.3% margin. Our operating expenses have been reduced in 7.6% for the 4Q '20, in this regard, to the currency exchange that was applied during that period. The investments were around in a reduction of 36.9% and -- in 4Q '20 in comparison to the previous quarter -- in the previous year. The cash positions were BRL 1.6 billion in cash, with an increase of 148.5% if compared to the same quarter in the previous year. Our financial leverage, which is the net debt divided by the adjusted EBITDA, as adjusted, is 6.46x and a reduction comparing to the third quarter of '20. We gathered funds of around BRL 940 million with a maturity of 7 years in the fourth quarter. We had some expenses of around BRL 78.4 million for the fourth quarter of 2020. These were around BRL 171 million for the year of 2020. On Slide #4, you will be able to see our consolidated net operating revenue of BRL 2.849 million for 4Q '20, with a growth of 21.8% if compared to the quarter -- equivalent quarter of the previous year. This is due to the market recovery, which was positively impacted by the currency exchange. During the whole year of 2020, our net operating revenue was around BRL 8 million, which was a drop of around 2% if compared to the year 2019. On Slide #5, you will see the operational performance of the main areas in which we act, and we'll start with South America. You can see that the net operating revenue in this area, especially in Brazil, has grown 7.8% if compared to 4Q '19, and this has reached BRL 662 million in 2020. The participation in South America has dropped around 3 percentage points from 26.2% to 23.2% in 4Q '20. The Brazilian auto market, in terms of produced vehicles, we can observe that there has been a drop in light vehicles of around 1.2%. And with a more robust performance of commercial vehicles, with growth of commercial vehicles up 17.1% if compared to the same quarter of the previous year. On Slide #6, if you observe the North America region, the net operating revenue was around BRL 793 million if compared to the previous -- if compared to the same quarter of the previous year, there has been a growth of 24.3%. On 4Q '19, the participation in consolidated net operating revenue was around 27.3%, and for this year, the number is 27.8%, which represent a very light increase. We see a 0.5% increase for the light vehicles and a growth of 3.8% in the production of commercial vehicles. On Slide #7, we'll now look at the European numbers. The net operating revenue for the company in that region was BRL 1.093 million, with a growth that represents 26.9%. The participation in consolidated net operation revenue has grown from 36.8% from 4Q '19 to 38.3% for 4Q 20. In terms of produced vehicles for the European market, we can see a growth of 0.8% in the production of light vehicles for 4Q '20 and a drop of 14.9% in the production of commercial vehicles. On Slide #8, if you look at the numbers for the Asian market, the net operating revenue has grown 33.5% and has reached BRL 302 million in the fourth quarter and the participation of Asia and other markets in consolidated net operating revenue has grown from 9.7% to 10.6% on 4Q '20. The company's consolidated net operating revenue has been impacted by the currency devaluation and also by the ramp-up of India's new aluminum plant. If you look at the main markets in terms of a number of produced vehicles in the fourth quarter, you can see a growth of 19.5% in the production of light vehicles in India, and a growth of 6.6% on commercial vehicles in India, and a relatively similar number -- market for Thailand with a growth of 0.5% in the production of light vehicles in this market. On Slide #9, if you look at the net operating revenue per product, you will see that the participation of aluminum wheels has been similar if you compare 4Q '19 and 4Q '20, which represents 34% of the net operating revenue in the company. The growth with steel wheels for light vehicles has grown from 26% to 28%. There was a slight vehicles on steel wheels for commercial vehicles from 19% to 20%, a slight decrease in the participation of cultural components for light vehicles. On the structural components for commercial vehicles, from 19% to 16%. On Slide #10, you can verify the net operating revenue per customer, and this has been affected by the dynamics of different market segments as observed in different markets. And Slide #11, the gross revenues -- the gross profit for the company has decreased 9.2% in the fourth Q '20 and the increase of the gross profit for the fourth quarter is related to the growth of global vehicle production recovery and also to growth in the company. The growth -- gross margin has been negatively impacted due to increases in overtime, increased tooling changes and changes in production programs. And throughout the year, the gross profit was BRL 565 million, with 6.5%. In Slide #12, you can see the adjusted EBITDA for company is of BRL 237 million for 4Q '20, an adjusted EBITDA margin of 8.3% for this period. Throughout the whole year of 2020, we had an adjusted EBITDA of BRL 544 million compared to BRL 1.109 million for 2019. And on the table, you can see the effects of restructuring and impairments during the fourth quarter of 2020, which represented 78.4% -- BRL 78.4 million. And the effect throughout the year of 2020 was of BRL 171 million for the year, just remembering that the 4Q '19 benefited from the positive outcome of the lawsuit concerning the exclusion of ICMS tax on the basis of PIS/COFINS taxes of BRL 16 million. Excluding this effect, the adjusted EBITDA for Q4 '20 would have grown 13.1% when compared to the same period for the previous year. On Slide 13, we can observe the net loss of the company of BRL 130 million for the fourth quarter of 2020 when compared to the BRL 39 million positive profit of 4Q '19. We had a loss of BRL 492 million compared to the -- a profit of BRL 337 million in 2019. In Slide 14, we can see capital expenditures for the company, which were of BRL 105 million for 4Q '20 a reduction of approximately 27.2% when compared to the same period of the previous year. Throughout the year of 2020, company investments were of BRL 369 million, a reduction of 28.4% when compared to the year 2019. Excluding the effects of exchange variation, the reduction in capital expenditure would have been of 36.9% of 4Q '20 and 37% throughout the whole year of 2020. Slide 15, financial leverage for the company was of 6.46x in 4Q '20, with net debt of BRL 3.515 billion when compared to financial leverage, just 7.02x for 3Q '20 with a net debt of BRL 3.739 billion. When we look at cash and short-term debt, we had 0.84x for 4Q '20 compared to 0.7x for 3Q '20. In Slide 16, when we look at the company's indebtedness, we can observe cash for 4Q '20 was BRL 1.605 billion with a net debt of BRL 3.5 billion and the net debt represented 45.65 -- and 43 -- 45% in real, and 6% in other currencies. For 4Q '20, the composition of our long-term short-term debt represented 63% for long-term and 37% for short term. Looking the pro forma effect for 4Q '20, based on -- considering the financial lines obtained in 2020 with Brazilian development banks, the pro forma shows a debt -- a long-term debt of 81% and 19% for short term. Slide 17, we can observe some of our main initiatives for 2020. Despite all challenges related to the pandemic and all actions to manage all the changes in production programs in our clients and the demand throughout the year 2020, always minding the financial health of the company and the health of our contributors, we have implemented many initiatives that were important for the company. We had a ramp-up of new aluminum wheel plants in India and structural components in Mexico. This will continue throughout year 2021. We had the launch of our first Iochpe-Maxion sustainability report. We have also, in the carbon disposure report, we had a score of B minus in the climate change category, higher than the industry's average, which is score D, and the global average which registers as score C. We have advanced new business with current automakers and new comers in the electric segments -- electric vehicle segment and the marketing of new products and innovations developed by the company throughout the last few years. Among several initiatives of the company, we have a partnership with REE Automotive, with the goal of developing alternatives for mobility, with the participation of our wheels and structural components divisions. Diversity and inclusion have always been important for Iochpe-Maxion, and they have gained a reinforcement, where they start in the end of 2020 and beginning of '21 with our project, Unique and United, reinforcing the company's commitment to diversity and inclusion. We continue advancing with the digitization projects, with emphasis on -- in the management, engineering, commercial areas, with emphasis on asset condition -- asset condition monitoring and predictive maintenance projects. Despite the challenges we had this year, we are very positive regarding the year 2021. The structuring processes we have conducted during the year 2020 position us more adequately in face of a gradual recovery scenario in global vehicle production. At the same time, we continue attending to the production of vehicles around the world and adapting to situations of supply chain adjustments regarding the important effects of COVID-19. With that, we would like to open the session for Q&A.

[Operator Instructions] The first question comes from Pedro [indiscernible] from [indiscernible].

I have 2 questions, in fact. First regards how do you see the year 2021 in terms of revenues and adjustments you have to have? The second one has to do with this leverage. Do you think you will have to make some capital increases in the future for the year?

Pedro, thank you for your questions. We have no guidance regarding EBITDA revenues for the company for the next quarter or for the year. But we look at automotive demand of the main markets we work in, and it's very much aligned to the numbers we have -- that have been presented by IHS Automotive. That shows an important recovery in the main automotive markets: Europe, North America and South American market, throughout the year 2021 compared to the year 2019. We know there are some -- still some uncertainties related to the availability and some concerns regarding lockdown and potential impact of the short-term and long-term demand on some markets in -- as a result of this lockdown. But what we have observed in our conversations with our clients and regarding the perspective for their production planning is that there is a demand, it is present. And despite the possibility of some variation in short-term because of the availability of some materials such as semiconductors and some impacts of short-term regarding actions of lockdown that limit mobility and imposed social distancing, this demand would be met throughout the year of 2021. So when we look at our planning for 2021, aligned [ without ] the restructuring actions that we have implemented throughout 2020 with the closing of some of our steel wheel plants in North America and throughout the -- some other actions throughout the world, we feel that we are very well positioned for the current demand and for the demand forecast for the year 2021. And when we observed the production trends for the first 2 months of this year, January and February, they are very much aligned with our own planning -- in-depth planning for 2021. That's why, despite the uncertainties regarding short-term for semiconductors and potential lockdown actions, we continue very positive for the whole year 2021 because we believe there is demand, both for light vehicles and commercial vehicles in the main markets where we work. One of the initiatives we have as a company this year is to continue with a lot of attention to our balance sheet. That's why we have reduced our investments last year and the previous year into 2020. And we continue in 2021, operating with a lower level of investments when compared to the previous years. We have observed the years 2018, 2019, our investment in CapEx was a bit over 45% of the EBITDA generated by the company. In these years, 2018, 2019, were growth years. And when we look at 2021, these investments are closer to the 30% level than we were at last year. So this focus on the company's balance is very important. Our liquidity is very well-established for the year 2020. And now in the beginning of '21, at the end of -- the beginning of the year, we don't see any growth of capital.

This is Elcio. Just to add on to the leverage. I'd like to add up and reinforce that there has been a reduction in the leverage of this company, very much due to the net indebtedness. There has been a reduction of BRL 24 million, which has contributed to the generation of cash. And when we look at 2021 and we look at the impact of the second quarter of this year, we can see this measuring. We are going to go through the third quarter with a more normalized EBITDA with a reduction that is very substantial in leverage. And as the quarters come, we are going to feel the negative initial impact. But as they perform and the volume starts getting back on track, we are going to see an increase in EBITDA. So there are some temporary impacts on this leverage, and this is going to be disseminated by the next quarter, and then there will be more effects on the following quarters.

Our next question comes from Marcelo Motta, JPMorgan Bank.

I also have 2 questions. The first one, if you could please comment on the price of raw material and how Iochpe goes by this? I know has been some unlocking of short term, and this has been happening for the last few months, and we've seen this impacting margin. And also concerning restructuring, I'd like to know if you can bring us any detail on the restructuring for the next semesters. I'd like to know how these initiatives are being developed.

Marcelo, regarding the price of raw material, historically, what we do, and this has been very consistent, there is a very strong effort from the company in transferring this increase into the clients, considering the importance of this cost. This is not going to be different from the previous years, but we are implementing in the whole world globally. We have some preestablished formulas with our customers, and they are -- they get adjusted as the raw material prices vary. Sometimes, there is a very light time lag, considering the months that take for these adjustments to happen. And there may be some periods in which there is a little disparity, but these are all recovered because they -- the raw material do suffer some variation, but they suffer and affected by the same effect. Some of the regions are different. There -- some of the regions do not work on formulas, and the prices are negotiated, but they are implemented as close as possible to what the increase was for the raw material. So there may be some disparities as far as timing is concerned, but the variation is short, considering the period. And throughout the year, they get adjusted very fast.

If you could please comment on restructuring?

Well, thank you very much for your question. There has been a large movement since last year from the day we've announced. And this year, there may be some things left, minor things left to be done this year. But the plan of restructuring that we have, have been already concluded for last year. There are some adjustments for this year though. We have worked a lot last year with our team just to understand the impact of COVID-19, not only on 2020, but also to look into the future and to understand the dynamics for 2021 and 2022, and check on every segment we act and try to implement all the actions so that the actions may remain and take an effect along 2020 and act in a long-term for the coming years. Considering the United States, the steel plant has the intention of improving the leverage of the company, for example. And all the actions have been implemented regarding the reduction of the administrative costs, with the objective that this helps the company in the short, long and medium terms. And as they all get recovered gradually, there are levels of productions, the effect of such actions are going to prove to be more and more important for our operations. So we are looking into taking all of the actions that are required to gain that visibility. And unfortunately, last year was very difficult and it was very important that we could put these projects into action. And in 2021, if anything is left as actions to be taken, they will be in no comparison to what we had last year. But we are paying attention to what is happening in the market. And if there is any adjustment that is required, we are going to consider that. But everything that has been done last year is enough to position the company into an operational performance for 2021.

Our next question is from Victor Mizusaki, Bradesco BDI.

I have 2 questions. The first one is the follow-up regarding cost reduction. If you could bring some more detail on how much -- how this may impact margin for 2021? And if you could please comment all the initiatives that were implemented in 2020, and what they bring as reductions on debt? And I'd like to know about the BNDES new debt. I'd like to know the impact of this on the first quarter. And how can we expect this to impact the cash management and the excess, if there is any, to pay for this debt, how you probably keep data from the market to answer this question? And I'd like to know from you on this.

Victor, this is Elcio. Let me just start and then Marcos can add up to anything I say. Your first question regarding cost reduction and restructuring, Marcos was saying that we position ourselves this way. Our size, if compared to all the prospectives and the size of the industry and everything we are facing with this, the process of restructuring, we have implemented, consider structurals, and this is so that we can get back to the historical margin we had as fast as we can. And obviously, as the market and the volume on the global industry gets back to the normal numbers, this is the -- this is a positive tendency of -- that the margins -- that we're going to get back on track. We have made all the adjustments so that we could get back to what we had as historical margins and the market is operating, considering even lower projections for 2020 in comparison to '19. Our operational margins will get back to numbers that are a bit above what we expect. So considering the BNDES debt. From the very beginning, when we had the pandemic crisis, the focus was to generate the company -- so the cash, around BRL 20 million, we increased by BRL 1.6 billion for the next month, and we will reduce this cash along these months as we get more comfortable regarding the industry itself. So it is not our objective to keep this level of cash. We are going to decrease this as we -- as this debt gets paid, and you're going to be observing this along these next months. And just to add, the refinancing -- and part of the money on refinancing comes from the growth cash we have. And we have already signed a few contracts on refund. So part of the money is going to come from that, and also from the year's cash that was generated as well and the refinancing that we can always carry on with. These operations are essentially eliminating possibilities of refinancing for 2021, and we are going to start working and continue to evolve and using the opportunities of improving all the capital structures of the company.

Our next question comes from Catherine Kiselar, Banco do Brasil.

I have 2 questions. The first one is regarding the new plants in India and Mexico. If you could please add how this impacts for fourth quarter? And I'd like to know on the investments -- on the initiatives on these plants. What can we expect for this year? My second question is in regard to the participation of the company on mobility. We -- I know you've gained a lot -- different contracts and new contracts due to this, and what is the expectancy of market participation? And what is your idea on competitive environment? And I'd like to know if Iochpe is looking into acting on other segments.

Catherine, thank you very much for your question. Starting with your second question, and then we get back to your first. Regarding new vehicles, the company is well positioned with the products it has in terms of new technology, whether they are autonomous or electric vehicles. Considering wheels and structural components, the company is still very relevant for future vehicles. Whether it's steel or aluminum, or older materials, our products are still very relevant with a participation that is not being impacted by the transition into new technologies. What we see and what we've been working with is that we are looking into new opportunities to add value to the products that we have so that they can still be more relevant for the future, even more, and considering the future and how -- what the future can bring to the vehicles and the products that we have. And one thing that we could mention, and there are a few specific things that are interesting that I'd like to say, is that in case of wheels, we have a very strong effort in the reduction of the weight of our products, considering steel and aluminum. So that these products use less energy in their use and in their product -- production and in utilization. And so that these products actually support our clients in decreasing emissions, and so that they can be used in electric cars, for example, and be efficient on this. And in this aspect, we have several examples. One of these examples that is very clear is a wheel for commercial products, for trucks made of steel. One steel -- one wheel that we've produced 10 years ago, that weighed more than 40 kilos. Today, this same wheel is delivered to our clients, and it weighs around 31 kilos with the purpose of looking into decreasing to 25 kilos in the near future. This is making our products more attractive and more efficient to our clients, and we are going to be on top of mind for them in the near future. Considering this example with steel wheel, we also have another one for aluminum steel wheel. Our technology -- our IT technology, that has been grown in the next -- in the last years. And this has to do with the design and projects of this wheel. And this uses less material to make this product more useful and lighter without being effective. There are other initiatives. We have the VersaStyle wheel, and its backbone is made of steel. It looks like an aluminum still because we've added material and designed to make it more efficient. We also have examples on the structural components. We have developed new structural components on support for batteries of vehicles that operate electrically. The skateboard of the vehicle is one of the activities we are developing. And we also have initiative with REE. REE operates with electric vehicles, and we are going -- we are making our products more and more relevant for the future. And this has been very well accepted and seen by our clients, including the traditional European and North American vehicle factories. And they are seeing our initiative very positively, and we are taking part in some of their internal development and many new projects. And also, this is happening to newcomers, new clients who are starting their business, and they're -- those working with autonomous and electric vehicles, we are -- we have been bringing more opportunities because they see our technical competence and our technology. And they see what our wheels and structures can bring and add to their vehicles in the future. I believe that throughout the years '21 and '22, we are going to see -- we are going to be able to bring more information on these projects as they get developed, as they are developing, and we will be able to talk about this more specifically. But I can tell you that this was one of the highlights for last year. Despite all the difficulties we faced, despite all the problems we had with the COVID-19, but the opportunities for new businesses was very good. And this is a path we've started last year, and we are going to continue for the next years with a lot of results. We are very confident with our technological and technical ability and our teams and our possibilities to add value to these products in the future. In regard to your first question, as I mentioned, we are still ramping up with the plant in India. We've advanced in 2020. We've modulated some of the investments that have been made in 2020, considering the decrease in demand and the global auto market. We are gradually following this in 2021. We are increasing our capacity so that we can meet the demands that is related to the production of new vehicles with new clients in the India market. Most of the investment has been made in 2019 and 2020. And now in 2021, we will gradually increase the capacity of production based on the volumes. These are smaller investments that are within this forecast mentioned before and closer to 30% of our EBITDA generation for the year. Same thing for the stamping factory in Mexico. We started the ramp-up of this plant in 2020, but the investment has already been made. So now, essentially, we will be -- investments, usually sometimes made by our clients in tooling to be able to use this capacity. And I believe for 2021, we will gradually increase this. But essentially, the investment in stamping in Mexico has already been made. Throughout the year 2021, in addition to supporting the gradual growth of the aluminum plant in India that I mentioned, we are building our new aluminum wheel plant in China. The plant is being built throughout this year. We started in 2020. We delayed the start of the production of the plant due to the start of the pandemic. In China itself, it will be occurring throughout 2021, and we intend to start operation of production in greater volume in the beginning of the year 2022. But also, this investment is contemplated in our forecast that I mentioned. We also have projected for 2021, some basic investments on security and safety and health in our companies, the commitment we have in that area and also the investment for the launching of new products. As I mentioned, we have won some new programs throughout 2020, some programs that are noticed in 2021, others that will be noticed in 2022, in able -- to be able to make feasible the launching of these new products. But they are also foreseen in the CapEx forecast I mentioned. Also, the efficiency of our investments is very much aligned to the growth of our revenues in our plants and also in an improvement in productivity of our operations all around the world, which is a continuous effort made in the last few years.

Considering the question, do you see other changes in competitiveness due to the pandemic? If you could give us a brief view?

I would say that the competitive scenario, in general, has been maintained similar to the period before the pandemics, I'd say, in general. In some segments, in some countries and regions, there are some competitors that were affected in their long term capacity, and that might present us with some new opportunities for the future. Also, in -- at this time, if you look at the general scenario, I'd say it's similar to the one before the pandemics. And I'd say that during the pandemics, we gained some additional business that we were not contemplating at the time due to some clients not being very confident, and the possibility of some of our components being able to deliver in some products in the future. That happened specifically in some regions, with some products, and we believe also that also, there are some smaller players that are -- might be going through some difficult times even after the pandemics.

Our next question comes from webcast in English from Augusto Ensiki of HSBC.

Augusto, thank you for the question. Augusto's question has to do specifically to the impact of the inefficiencies of the fourth quarter regarding the issues with raw materials, and what would be the impact in the first quarter of 2021, and what we're doing about it. Augusto, what I can tell you is that the main effects in the fourth quarter mainly had to do with a larger amount of overtime. We had to take -- to manage the availability of raw material. We had at each specific time and therefore, meet the demands of our clients. And also, to a large number of changes in toolings, which was way higher than what we do in normal operation conditions, especially, in fact, because we had used the raw materials that were available at the time. That happened in different countries, but mainly in Brazil, which was more affected than other countries' impact. But I'd say that we have excluded these effects in our margins for the fourth trimester of 2020, would have been very similar to the adjusted margins of 4Q '19. The margins would have been very similar from -- comparing the 2 years, '19 and '20. This impact, in the start of 2021, have already reduced a lot, I'd say, mainly, especially starting from March and April. We still see some effects of this, mainly when we started the year in the beginning of January and February. But I'd say that we're already moving to normality. So we do believe that now in March and April, we already have things back to normal. But anyways, what we had saw happening in January and February was way lower than what we saw happening in the fourth quarter of the previous years. And obviously, what we have done, and this is a continuous effort by the company, we always try to find flexibility in our production processes in able -- to be able to react to these situations, causing the less possible impact on the market and preventing the loss of opportunities this might generate. Globally, our team is very experienced with a lot of knowledge and ability to do the best that can be done with what we have, and we have been increasing this flexibility more and more with our production processes in order to mitigate part of the effects of unavailability of raw materials and other factors that might affect our business.

Our next question is also from webcast, comes from [indiscernible] from [indiscernible].

Is there a prediction for the start of operation of the China plant and its productivity?

[indiscernible], the plant in China is aluminum, well planned with the goal of starting operations in 2022, with initial capacity estimated at 2 million wheels per year, and the goal is to meet the demands of the Chinese market. The focus is meeting the demands of the Chinese market. We have one wheel plant -- steel wheel plant in China, but we don't have one for aluminum wheels, and it's important for us to have this capacity to be able to meet the demands of -- the growing demand of the Chinese market.

Our next question comes from [ Eric Salucci ], [indiscernible].

How does the company see the end of production of Ford's plants in Brazil? How does this affect the company?

We have closely observed this event. And we can say that from our perspective, we do and did tend to Ford with the same products we do provide to other clients. And despite being very sorry for seeing this production capacity in Brazil disappearing, we believe that the products sold by Ford will be sold by other clients, other manufacturers. And we provide these clients with products similar to those provided to Ford. So we believe that we'll be able to sell these products to other OEMs. It's really a pity to lose this production capacity in Brazil, but we believe that the impact for the company is negligible. It's very small because you can sell these products to other clients, other manufacturers.

Due to time, we are now closing the Q&A session. I would like to pass the floor to Mr. Marcos for his final considerations.

As mentioned previously, despite the challenges we found in the last year, we are very positive regarding the year 2021. The process -- restructuring processes we performed in 2020 put us in a better position to manage the gradual increase in volumes in global production. We keep attentive to demand for vehicles all around the world, adapting to the situations of the supply chain and also the still important effects of the pandemics. We are still focused on the development of new products and the automotive market. We have advanced in very important projects in 2020, like the growth in volume in the aluminum plant -- wheel plants in India, the implementation of greater production in the plant in Thailand. And also, we increased our participation in the new trends in mobility, making new deals for components and electric vehicles in large and newcomers in the automotive markets. And regardless the scenario of the industry, we're still focused on the gains in productivity, launching of new products gained in 2020, strengthening of our balance, new developments of our advanced engineering, the digitization of our production and innovation to keep adding value to our products. Thank you very much for your participation.

Iochpe-Maxion conference call is concluded. Thank you very much for your participation, and thank you for using Chorus Call. [Statements in English on this transcript were spoken by an interpreter present on the live call.]