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

Good morning, everyone. Welcome to the video conference to discuss Iochpe-Maxion's Second Quarter 2023 Results. I'm Rodrigo Caraça, Investor Relations Manager of the company, and I will lead today's conference Present at today's videoconference and available for the Q&A session are Mr. Marcos de Oliveira, CEO of the company; and Mr. Renato Salum, CFO of the company; and Mr. Luis Fernando Abreu, IR and Strategy. In fine that the visual conference is being recorded and will be made available on the company's website. For those of you who need simultaneous interpretation, you can find the channels on the icon that says interpretation on the bottom of the screen, choose the language of your preference, and go on. For those of you who want to do that, you have the option of muting original or do clicking on that action. For Q&A, questions-and-answer session, we encourage you to manifest via the icon. Your name will be announced, so you can open your microphone and open. You see a request to open your mic. You can say, open and ask your question. We want to clarify that statements made during this video conference related to the company's business prospects, projections and operational and financial goals constitute beliefs and assumptions of the board of Iochpe-Maxion as well as information currently available for the company. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions and refer to future events, therefore, depend on circumstances that may or may not occur. We would like to pass the floor to Mr. Marcos de Oliveira, CEO of Iochpe-Maxion. Please, sir, proceed.

Good morning, and welcome to the video conference for release of Iochpe-Maxion's results for the second quarter of 2023. The second quarter was still characterized by global economic and geopolitical uncertainties. Despite being above historic levels, inflation maintains a lower ring trend and stabilization in several contracts. In Brazil, truck production volume continues to be negatively impacted by the transition from BRL 5 to BRL 6 with a performance lower than the one of the first quarter of '23 and by the high level of interest rates impacting the mentor vehicles in general. On the other hand, regions such as Europe and North America continue to show production levels above the initially projected period, promoting the benefit of the geographic diversification of our business model. Despite the significant drop in commercial vehicle production in Brazil, which impact that impacted our operational efficiency, the company presented in the second quarter of 2023. And a gross margin of 2.5%, above the gross margin in the previous 3 quarters. The improvement is related to the higher volume of global vehicle production and the reduction of negative temporal factors observed since the third quarter of 2022. I will now follow the slides in our presentation. Slide #2, IHS forecast for light vehicles show global production of 87 million vehicles in 2023, a growth of 5% compared to 2022. Excluding China, this growth would be of 7%. The LMC consultancies forecast for commercial vehicles shows global production of 3.246 billion units in 2023, a growth of 7% compared to year 2022, excluding China. In 2023, the market would be very similar to 2022. On Slide #3, we see the main highlights of the company in the second quarter of 2023. Our diversified business model contributed to mitigating regional impacts. We achieved net revenue of BRL 3.8 billion in the second quarter of 2023, a decrease of 9.3% compared to the second quarter of 2022. Our gross margin was 11.2% in the second quarter of ‘23, an increase of more than 2.5% compared to the previous 3 quarters. Our financial leverage was 2.72x in the second quarter of '23 compared to 2.20x in the other times in the second quarter of '22. We had a reduction of BRL 3.7 -- BRL 370.9 million in the second quarter of 2023 compared to the end of 2022. We had a total liquidity of BRL 2958.6 million in the second quarter of '23 compared to BRL 189.9 million in the second quarter of '22. And the liquidity ratio of 1.63x. We achieved 19.7% reduction CO2 to emission intensity in '22 compared to 2019 baseline. Slide #4, we can see the company's consolidated operating revenue of BRL 3.801 billion in the second quarter of ‘23, a decrease of 9.3% compared to the same quarter of '22. During the first 6 months of the year, we reached an operating revenue of BRL 7,799 million, a reduction of 7.9% compared to the first half of '22. The lower production of commercial vehicles in Brazil and the reduction in the cost of raw materials reflected in the sales prices impacted operational revenue in the first half of the year. We had a positive exchange rate variation of BRL 17.3 million in the second quarter of ‘23 and a negative exchange variation of BRL 101.2 million in the first half. In Slide #5, we can see the company's revenue by product. We see a growth in the share of aluminum wheels for light vehicles, which represented 25.4% of the company's revenue in the second quarter of '22 and now represents 31.5% in the second quarter of '22. On the other hand, we see a decrease in the participation of structural components and steel wheels for commercial vehicles. They were impacted by the drop in commercial vehicle production in Brazil. Structural components for commercial vehicles, which accounted for 24% in the second quarter of '22 now account for 19.9% and steel wheels for commercial vehicles, which accounted for 23.9% in the second quarter of '22 now accounts for 22.4% in the second quarter of '23. On Slide #6, we can see the reduction in the participation of more exposed customer customers more exposed to the production of trucks and an increase in the share of like base customers due to the drop in the production of commercial vehicles in Brazil during the second quarter of '23. On Slide #7, looking at South America operating performance, we see a net operating revenue of BRL 1.07 billion or a decrease of 20.9% compared to the second quarter of '22. South America's share in the company's operating revenue, which was 30.4% in the second quarter of '22. Now was reduced to 26.5% in the second quarter of '23. This reduction impacted the drop in the production of wheels, chassis and site members for commercial vehicles in Brazil, partially impacted by the increased production of steel and aluminum wheels for light takers. Looking at the performance of the Brazilian market in terms of vehicles produced, we can see a growth of 3.1% in the production of light vehicles in the second quarter of '23 compared to the second quarter of '22 and a drop of 37.4% in the production of commercial vehicles in that period. On Slide #8, looking at the operating performance of North America, we can see the company's net operating revenue of BRL 1.057 billion, a decrease of 17% compared to the second quarter of '22. North America share, which was 30.4% in the second quarter of '22. Now was reduced to 27.8% in the second quarter of '23. This reduction had the effect of reducing the cost of raw materials reflected in sales prices. On the other hand, the increase in the volume of stringers and stamp sets and the increase in landline wheels for light vehicles supported the company's performance in the region. Looking at market performance in terms of vehicles produced, we can see a growth of 14.9% in light vehicle production and a growth of 3.6% in commercial vehicles production in the second quarter of '23 compared to the second quarter of '22. On Slide #9, the operating performance in Europe, we can see the company's net operating revenue of BRL 1.322 billion or growth of 5.8% compared to the second quarter of '22. Europe's share in the company's net operating revenue grew 31.4% in the second quarter of '22 to 36.6% in the second quarter of '23. Despite the reduction in the cost of raw materials reflected in the selling price, the growth in the volume of aluminum wheels for light vehicles and the positive exchange variation of BRL 37 million supported the company's operating revenue in Europe. Looking at market performance in terms of vehicles products produced in Europe, we can see a 13.4% growth in light vehicle production and 13.6% growth in commercial vehicle production in the second quarter of '22 compared to the second quarter of '23. On Slide #10, looking now at Asia and other markets, we can see a net operating revenue of BRL 345 million in the second quarter of '23, with a growth of 4.3% in comparison to the second quarter of '22. Asia and other markets, which represented 7.9% in the second quarter of 2022. Now accounted for 9.1% of its share in the company's net operating revenue. The exchange variation had a negative impact of BRL 25.9 million and the increase in the volume of aluminum wheels for light vehicles and steel vehicles for light and commercial vehicles in India supported the growth in the company's net operating revenue. Now looking at market performance in vehicle produced, we can see a 2.7% growth in light vehicle production in India, a decline of 5.6% in commercial vehicle production in India, and a 6% growth in production of light vehicles in Thailand during Q2 '23 compared to the second quarter of 2022. Slide #11 now. We can see the company's growth gross profit of BRL 425 million in the second quarter of '23, a drop of 20.6% compared to the second quarter of '22. Now comparing the second quarter of 2023 against the first quarter of it, we can see a growth of 24.5% in gross profit and an increase in the company's gross margin from 8.5% in the first quarter from up to 11.2% in '23. During the first 6 months of 2023, we reached a gross profit of BRL 766 million, a reduction of 33.2% in comparison to the first semester of '22. Despite Brazil's low volume of drop production, the company's geographic diversification allowed margin growth in the second quarter of '23 compared to the first quarter of '23. Slide #12, we can see the company's EBITDA of BRL 363 million in the second quarter of ‘23 with a reduction of 32% regarding the second quarter of '22. When we compare the second quarter of '23 against the first quarter of '23, we can see an increase of 26.7% in our EBITDA and the improvement in EBITDA margin from 7.2% to 9.6% in the second quarter of '23. Over the first 6 months of the year, we reached an EBITDA of BRL 650 million, a reduction in regard to the first half of '22. On the lower right corner, we can see the reconciliation of the company's adjusted EBITDA for the second quarter of '23 and '22, and the first 6 months of '23 in the first half of '22. When we look at the adjusted EBITDA margin of the company, we can see a margin of 11.8% in the second quarter of '22 and an adjusted EBITDA margin of 9.5% in the second quarter of '23. On Slide #13, we see a net income of BRL 59 million in the second quarter of '23 compared to BRL 109 million in net profit in the second quarter of '22. When we compare the second quarter of '23, we can see a net profit of BRL 59 million versus BRL 6 million lost in the first quarter of '23. Over the first 6 months of '23, we see a net profit of BRL 43 million compared to BRL 350 million in the first half of '22. On Slide #14, we see the company's investment, which represented BRL 99 million in the second quarter of '23, a reduction of 24.9% compared to the second quarter of '22. During the first half of '23, we invested BRL 109 million, a reduction of 10.7% compared to the first half of '22. Main investments in the period were related to the increase in capacity to meet the demand of the commercial vehicle segment in North America. And the construction of the new plant of aluminum wheels for trucks in Europe. On Slide #15, we see the company's financial leverage of 2.7 to fold in the second quarter of '23, against 2.77 fold in the first quarter of 2023. We had a reduction in net debt of BRL 37.9 million compared to the end of '22. The reduction in EBITDA in the last 12 months is the main factor for the increase in leverage in the second quarter of 2023 if compared to the end of 2022. On Slide #16, we can see the liquidity ratio of 1.63-fold in the second quarter of 2023 compared to 2.6-fold at the end of 2022. We had total liquidity, which is cash equivalent of cash plus credit of BRL 2,958.6 million in the second quarter of '23 compared to BRL 3.48 billion in the first quarter of '23 million and BRL 1,892.9 million in the second quarter of '22. On Slide #17 we see the company's gross debt which had a composition in currencies of 43% in reais, 40.6% in Euros, 13.4% in dollars and 3.1% in other currencies, totaling BRL 6 billion and BRL 4.7 million in the second quarter of 2023. In the lower right corner, we see the composition of this debt as well as the cost in average term. And in the upper right-hand chart, we see the maturity of our gross debt in our coming -- in the forthcoming years. On Slide #18, we see some of the main launches of the second quarter of 2023. Stylized steel wheels for Peugeot in Europe, showing our versus style. For steel wheels, aluminum wheels for Toyota in Asia, showing wheel technology for hybrid vehicles, aluminum vehicle for aluminum wheels Ford Transit in Europe, showing the design for vehicle last mile delivery. In agricultural steer with steel wheels for John Deere in South America, showing robust wheels for agricultural vehicle applications. On Slide #19, we have some of the main awards and highlights of the second quarter. Starting with the DAF quality award awarded to Cruzeiro for in Brazil. The Quality Control Award awarded for Nantong factory in China. The Thailand Green Design Award in the energy saving category for the Saraburi plant in Thailand. The appreciation award awarded by Hyundai for the plant in Pune, India, a Supplier Industry Sustainability Contribution Award granted to Manisa plant in Turkey. The Supplier Award in the Safety Category awarded by Volkswagen for the plants in Limeira and Santo André, in Brazil and Performance Management Award awarded by DAF for the Königswinter plant in Germany. On Slide #20, some day-to-day highlights of the company. We had a reduction in CO2 emission intensity of 19.7% in '22 versus baseline 2019. It's an increase of 37% in energy use from renewable resources, reduction in the consumption of water in all of our plants, 374 new social impact projects and increased presence in communities that are close to our plants worldwide and the maintenance of good governance practices, ensuring ethics and transparency in our activities. We are now open for the periods of Q&A. Thank you.

We are now going to start our Q&A session. [Operator Instructions] First question comes from Fernanda Urbano, sell-side analyst for XP.

From our side, they have 2 things. I'd like to know if you can let us know on a politic perspective. How do you see the demand for the third quarter in Brazil? Does it make sense, we for us to expect better levels considering raw material drop prices for the third quarter? And the second thing is we would like to know a little bit more about your operations in North America. We see a drop in revenue in a year-over-year comparison. And we understand that this is going to drop your revenue. How -- what are the challenges that you see so that you can increase sales and market share in the region?

Fernanda, thank you for your question. First of all, in regard to the demand in Brazil, we see that after the launch programs we had during the second semester last year in the reduction of vehicle prices at herein Brazil as well. We see that this increase that happened at the beginning of May and June, that increase in demand, they have supported better sales numbers and the production that was occurring already during the second quarter showed positive performance as we saw with light vehicles. But in regard to commercial vehicles, the number -- the sector is still impacted. We had an increase of 37% for commercial vehicles comparing the semesters, but we see that this program of reduction reverberated very limitedly in commercial vehicles. We believe that the reduction in the interest rate for Brazil are Selic rate this trend seems to be improved for the next month. I think it's too early for us to mention that this is going to cause a specific effect for the next quarter or the next semester. But we do believe in a gradual improvement in our numbers. We have been following this up close. We have been seeing our clients' releases, their own planning. We have taken several alignment marts to adjust our capacity, adjusting that to the reduction in salaries and in workforce for the period that we've seen from our partners, but we believe in a scenario that is going to gradually become positive. But I don't -- we don't believe in a substantial improvement in the next quarter in comparison to the second quarter in terms of produced vehicles. I think the increase is going to happen, but this is going to be gradual in the next coming months and especially in the next quarter. In regard to North America, the production volume for light vehicles and commercial vehicles, they remain in interesting and positive levels, especially in regard to the company's performance. We see that there was a reduction in raw material, and this is reflected in the prices of our products. You are familiar with our dynamic for our company. One, we have an increase in raw materials. We have effects that may take a while to be transferred to the prices. And we have the opposite movement also when we have the prices of our products aligned with raw material prices. We also had the variation, of course, of raw materials compared to the prices of products. The volume of aluminum wheels has increased throughout the semester, which shows the continuous trend of growth in the demand, we expect the second semester to remain in the same level of demand and production. And we believe this is going to allow us to continue to operate our plants in a consistent manner in the next few months and semesters. As we mentioned, we have been working to increase our capacity for structural components in North America to meet this growing demand throughout the year of 2023, and this indicates a positive scenario for 2024. So we are investing in increasing capacity, so we can meet our and serve our clients in the next semesters in the year 2024.

Next question is from Luiz Capistrano, sell-side analyst from Itaú BBA.

Can you talk to us a little bit about recovering margins considering all the scenario you mentioned regarding gradual growing volumes in Brazil and the changes in the projections in the consulting companies and getting a little bit more in the detail in terms of margins? In the last semesters, we saw great back in the mismatch between the cost of your inventory and the sales prices and how this affected the second quarter and how it's going to affect the next quarters. Second question is on another completely different topic is understanding how much the opportunities affect you with this new competitors with new plants here, how that affects Europe and structural components, focusing on electric vehicles. Can you expect the same movement can this -- all this move be new opportunities for you in the market?

Luiz, thank you for your questions. Regarding margins, we have a convention in the second quarter. We have been working towards the gradual improvement of our margins for the next quarters. We see the temporary effects that had a larger impact on the last semester of last year in the first semester of this year with a reduced with a drop in the mismatch of the price of raw materials and the price of our product to see an important reduction. This is not -- has not ended still. We're still working on that for the beginning of the second semester. But we work for and expect an average margin in the second semester that is going to be evolving gradually in the second semester and in the next year compared to our gradual matters. This is a gradual process that is being occurring in the last months. We have different barrels that can affect the speed of this recovery, but we have a process where events have their able events, the most -- which the most important ones have reduced already in the semesters. We believe that in that sense, the actions we have implemented in the company in South and North America, Europe and Asia, aiming for greater efficiency in our plants as a continuous effort. We continue investing in this efficiency improvement. We are aligning plans to the demands of the market, whether we have growing or decreasing markets. So we can operate efficiently in all areas and that we do believe that in the next semesters and going into '24, we should be returning to our historical margins. The entry of new players in the various markets, not only in Brazil, there of [indiscernible] players, Chinese players who are coming into other regions in Europe and all over the globe. Their participation is important. We have a position in which we can offer our products and regarding in a way that is kind of agnostic in terms of being implemented in fuel or electric vehicles, and we are working to offer more -- more efficient products for this market. And we see the portion of new players in the global and Brazilian market as positive. As you said, we are doing the ramp-up of our first luminants were still 11 wheels in China to meet Chinese clients in the Chinese market. That is the focus of that plant, but also to continue showing our technological development, all our knowledge in the mobility area. So these clients can use our products, not only in China, but in other markets out of China also. And we believe this transition for electric vehicles is positive for your ship Max, not only in the oil segment, but also 4 structural components with the new businesses, we have been running in the -- all over the globe compared to the new players in the electrical vehicle market. And we are working to be prepared to offer this solution to clients in China, Asia, North America and Europe also.

The next question is from Andre Mazini, sell-side analyst for Citi.

The question, Marcos, asked regard in ensuring. How do you see increased capacity in Mexico? It seems like you have a large share of -- for wheels and structural components in Mexico. Could you have an M&A without causing disruption? Or would the growth in Mexico would have to be based on organic CapEx on the plans you already have or an mergers and acquisitions would be out of the picture for market reasons? And regarding what Marcos mentioned, there is a challenge regarding electrical vehicles, especially for medium and large vehicles due to the size and way of the vehicles. So structural components would be even more important to adapt to that. So we believe structure components is going to be even more important for electric commercial vehicles, like it is Formula 1 vehicles. So when you try to convert these vehicles into electric vehicles is the process. So I would like to see how you see that.

This is Luis. With regards to the first question, regarding to the market, you have to look at each product for site components, when you look at how their participation and you think of trying to reduce them, you have a more challenging situation regarding authorities. When you look at the wheels environment, especially aluminum wheels, our share is a smaller one in the North American market. So you have a completely different scenario from the other products. So you have to look at each of the products. And depending on the product, you're talking to, the growth would be more -- need to be more organic than based on M&As.

Andre, with regards to your second question, just complementing Luis's observation. Our focus through the year 2023 and for 2024, we will continue to be on strengthening our financial reports, bringing up financial leverage from 2 lot 1.5 old. We're thinking of opportunities, organic opportunities we have in the various regions we operate in. We have capacity available still in Brazil, North America, Europe. We have built a new aluminum wheel plant in China, aluminum plant in India, always aiming for organic growth opportunities we have. Not only for wheels, but for structural components also in North America in all the regions we operate in. Our main focus has been on taking advantage of our organic opportunities using our know-how, the installed capacity and how we can expand that and continue taking advantage of the market opportunities in an effective manner, growing organically. That was our focus in 2023, and we'll remain our focus for 2024. We are increasing our capacity with structural components in North America, 2 Taco commercial vehicles, and we'll continue operating in this project that is very important for '24, '25 and the following years. With regards to electrical vehicles, the effort to reduce the size and improve efficiency, energy of our products has been a technological effort. We have been focusing on in the next years, and we see a constant and consistent improvement, not only in the reduction of our steel and aluminum wheels and structural components for applications, both in light vehicles and commercial vehicles. In that line, we see very clear examples in the room of the weight of steel wheels 4 trucks that use a 43 kilos with the same size now the weight has been brought to 30 kilos, which is a very important reduction in the world of the wheels, and we are putting the same effort in the production of structural components. We believe these are areas where we can really take advantage of our experience, of our technology, knowledge to adapt our products to the different realities and the different needs of each of our clients. When you talk about an electrical vehicle that has characteristics that are similar, but different talks from others. They have different demands in terms of comparing electrical vehicles to fuel vehicles. We use the same technology, the same production process, but our engineering team will adapt our development process so that the product can meet the functional requirements of these vehicles at the lowest way in a more efficient way. The same thing for structural components. And we have been expanding our portfolio of structure components even to offer solutions for the electrical vehicles, such as battery cradles, electric battery modules and the way they are set up in a car, bus or trucks, so we can optimize the topography and optimizing tire installation process of this electrical components in the vehicle to meet functional requirements, but also be more efficient. And here, we can on the experience, the knowledge of our engineering team and structural components is one of our trends, supporting us for growth in the electric vehicle market in the future.

Our next question comes from Andressa Varotto, sell-side for UBS.

I have 2 brief questions from my end. First of all, the demand in Europe, we've seen throughout the years, very good volumes in Europe, not only with live, but also heavy-duty vehicles. I would like to know about the sustainability in regard of this demand. Is there pent-up demand for the period, or this is a problem that is caused by the semiconductors? We see some of the OEMs decreasing their numbers I would like to know from you. And another question concerns the leverage. We saw a reduction in the debtedness. I believe this is because of the debenture repurchase -- what I'd like to know about your next plans in regard to the reduction of the leverage and liability management.

Andressa, thank you for your questions. Your will reply your first question and then I'll address it to someone else to respond to your second one. In regard to the demand in Europe, it still remains very consistent, especially in the second quarter in comparison to the first semester. Our first semester with light vehicles and commercial vehicles showed volumes that were above what was expected for the market. which is the numbers we saw at the beginning of 2023. Part of this was some unmet demand. But another thing is that the transition between motor vehicle and clients are trading their vehicles into electric vehicles. And this is helping the market to keep itself in an interesting level. And when we look at the planning of our clients, we see consistency in this demand. We don't see any relevant change in the levels of the first and second quarters. And we believe this is positive and this is going to probably remain for the last, for the rest of '23. And when we look at the forecast for 2024 production, IHS and other sources we see 2024 pointing an indication of a consistent scenario of consistent demand and production for the future.

Andressa, I'm Renato. Thank you for your question. Now in terms of leverage, as Marcos mentioned, our -- the global volumes we see, they seem positive with gradual growth, especially forecast for the next semester. We had a drop in our first semester in wheels production, especially commercial in Brazil. And it contributed significantly in our EBITDA reduction for the last 12 months and approximately BRL 430 million for the first semester. So even though we had this, we had a reduction in our liquid debt and it caused us to have a reduction in our leverage. But in terms of liability management, you reply to your question, the company has a strong liquidity, which is enough for us to meet our financial demands for the next 12 months without facing any difficulties. And it allows us to really find some difficulty economical factors, if so. When we look at our term, we do have an important element for the next quarter for next year, which is around BRL 950 million, so to be paid, and we don't see any pressure in the renewal of any problem. As we said before, we had enough liquidity so that we can pay the debt apart from the BRL 500 million that we see as liquidity for the company, the RCF lines. Another thing we do not include here is a credit line with BNDES as young as 1 year and it has to be paid by in February. But we do have a limit of BRL 620 million to be, to account for it. We have for 2023 time enough so that we can analyze the alternatives we have and in regard to the reduction of interest. We do hope that strategically, we are going to have a spread really reduced because any liability management we may face for the next year, it may occur a little bit close to the last semester, if that makes sense for the company.

Okay. We have a question that was posed in the chat. A question from [ Erico Saluci ]. He is an individual investor. Can you please detail the transition from Euro 5 to Euro 6 and how it impacts the sales of wheels and components.

[ Erico ], I can give you a very straight answer. The reduction in the production of commercial vehicles in Brazil, it makes us redo makes us see a reduction in the demand for these components and also in the demand for wheels. The OEMs have produced the last semester of 2022, an additional volume of trucks that could have been -- that could be sold during the first semester of '23 within the authorized legislation for the country. And this caused an additional production of oil for the next -- for the first semester. And we can see that this is going to happen for the next semester and then it's going to be decreased for the first semester of 2024. Of course, we produce according to what is demanded by the OEMs. So when they produce more, we also produce more and sell more. And if they produce less, we also have to produce less and sell less. It is a direct effect in markets according to the demand. We believe that production level is going to gradually increase, especially for the second semester of '22, '23. And then it's going to get back to the levels of normality in 2024.

We also have another question from [ Luiz Olivera ], he is an individual investor. And he asked, should we keep on paying debt as in 2022 or pay dividends in 2022.

In regard to dividends, company policy, our stature is 37% of the net profit. And at percentage levels, this is not going to change. It's going to be 37%. What will change is the amount, the absolute value, the absolute amount of it. But as a reminder, it's always going to be 37% of the net profit.

Another question from Jonathan. He is from JPMorgan.

Marcos, Luis, Renato, can you hear me?

Yes.

I would like to follow up when we get to Europe. I would like to know a little bit more about Turkey. I believe the operation there is demand, and it's different from the rest for the rest of the year. But I would like to know, I think it's a very different operation from the rest of Europe, and it generates a lot of profit. But I would like to know if you could shed some light on Turkey.

Thank you for your question. Today, in Europe, we have a footprint that allows us to meet the requirements of our clients. We will produce steel wheel, aluminum wheels in Turkey. Steel and aluminum wheels in the Czech Republic. Steel wheel for trucks in Germany, aluminum wheels for light vehicles in Italy and steel wheels for light vehicles in Spain. Our footprint is very well integrated in Europe so that we can adjust all of our capacities according to the demands from each segment and each client. In regard to Turkey, in particular, we have a bit of a more limited capacity, which is the wheels for commercial vehicles. We have now a new plant for commercial vehicles, steel wheels for commercial vehicles. And we have started the production in that new plant in the second semester of last year. Today, we have that additional capacity for steel wheel for commercial vehicles, which was the segment where there was a bit of a limitation in capacity in that region. When we include Germany, Turkey, Czech Republic and today, we have the capacity to meet this demand. We are now well positioned to meet future demand and using this composition and integration of these different plants in the region, we do believe we can move our products so that we can meet client requirements where they need, when they need at the capacity that is required. So this view that this demand is going to remain at positive levels for the next semester this year -- for this year -- last semester and in 2024, we are well positioned so that we can make the best of the opportunities that come in the market for the European market in '23 and '24.

We have one more question, [ Daniel Hansen ]. And he says, in North America, there is a reduction in revenue, and we also see a reduction in capacity in the region. What are the effects that have impacted although we had an increase in the market? Is there any exchange improves price and mix of products morning?

[ Daniel ], Marcos has mentioned this previously. In North America, just to explain you a little bit our revenue and raw material costs and all of the components that encompass prices, they are all in dollars. In North America, we do everything in U.S. dollars. So these variations in this reduction although we have an increase of demand in the market, it's 100% related to pricing. As we said, we have a demand of price that follows the raw material prices. Just as a reference, and of course, this is not exactly what happened. In North America, we have this what we call CRU. It's the steel raw material in there. In the first semester of 2023, and you compare this with the first semester of 2022, it's 24% lower so that you understand the size of this variation with raw material when you compare year-over-year, -- there is no exchange rate influence. Of course, there is something that is affected by the mix of products. But as Marcos said, the main component is pricing and the decrease in our price because of the raw material index in North America.

Since you don't have any further questions, we would like to close the question-and-answer session. And now I would like to turn the floor over to Mr. Marcos de Oliveira for the company's final remarks.

Thank you all for participating in this call. We'll continue following market pressure exchange rates, volumes of production of our clients, are trying to adapt our production to our markets aiming at the profitability of our production. Promoting gains in efficiency, launching new products, working with our vast engineering releases, developing innovation and strengthening our results to generate -- continue generating sustainable value through time. Thank you very much. Have a good day.

Iochpe-Maxion's Second Quarter 2023 Results Video Conference Presentation is closed. Our investment relations department is available to answer your questions. Thank you very much. Have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]