JSL S.A. (JSLG3) Earnings Call Transcript & Summary

Good morning, and welcome to JSL conference call to discuss the earnings regarding the first quarter 2020. Today with us are Mr. Fernando Simões, CEO; and Denys Ferrez, IR and CFO. [Operator Instructions] We would like to inform you that this conference call is being recorded and simultaneously translated into English. Before moving on, we would like to let you know that any statements made during this conference call relative to the company's business prospects, projections, operating and financial goals are based on the beliefs and assumptions of JSL management and rely on information that is currently available for the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect the future results of the company and lead to results that will materially differ from those expressed in such forward-looking statements. Now we are going to turn the floor to Mr. Fernando Simões. Please, Mr. Simões, you may go on.

Good morning, everyone. We are starting the release of our earnings for the first quarter 2020. On behalf of everyone from JSL, I would like to thank you for attending and for your time. Before going on to our numbers, we are going to start on Page 2 when we talk about the moment we are unfortunately going through and some social and corporate actions that our group is taking. You can see on Page 2 in the upper chart, we talk about our employees because the most important thing is to take care of our people. We have developed several actions to develop support material information, preventive measures; also, having most of our administrative staff working in home office, although we still have 1/3 of our people in our offices. These are essential jobs that have to be done in our buildings. We have a 24-hour service called Connected To You, Ligado em Você. We also work physically with our office, opening the environment as much as possible with windows open. We gave cars for the people in operations so that they don't have to use public transportation, but they take along other colleagues. In terms of clients, it's the same. We spared no efforts to ensure the continuity of essential operations to our client operations that are important for society, which has been crucial for the sustainability of our business. Cleaning -- specialized, rotation of people, prevention tips and working faster towards our customer needs by means of Movida, by extension time to pay for our most important customers, that is -- we are embracing our clients for together find the best way to go through this difficult time. Another important factor is -- that's paramount is the community. We donated more than BRL 1 million in PPEs to the most deprived regions in which we operate with our work. We are also engaging several supporting logistics operations in different states as in São Paulo in the distribution of food baskets, which has been paramount to get to the most deprived people of the state of São Paulo. Also the work that we have been developing with truck drivers, extremely important for Brazilian logistics. And some of the actions of the several we carried out are: First, those that carry our loads, especially in the mid-distance, received full baskets so that they can eat during the days. We provide hand sanitizers. We have a communication channel and we talk about how to prevent from COVID-19. And also, in the operations that were interrupted, we reallocated truck drivers in other operations that are working. And also, we allocated out-of-service truck drivers in donation logistics. These services are, again, contributing to those that need the most, as I mentioned, the distribution of food baskets in the city of São Paulo. And remember, the Connected To You program, it is a center where you have legal, medical, psychological support so that they have everything that they need. So these are some of the actions that we have been carrying out. And we believe that with this, we are contributing to the ecosystem in [Audio Gap] adds to what is going on. We, in JSL, are very happy to know that through our work, we can decrease the pain of those that need the most. Now when we are going to talk about the main numbers in -- of our quarter, we go to Page 3 to talk about the main highlights of the first Q '20. We have adjusted net income of BRL 83 million in the first quarter '20. That is growth of 37%, reflecting all the bases that were built in recent years. And that is very much in line with our business plans that we have been sharing with you in last calls. We had consolidated net revenue from services of BRL 1.7 billion, which means growth of 3%, while adjusted EBITDA grew 18%, totaling BRL 562 billion (sic) [ BRL 562 million ], 32.8% EBITDA margin that is 4.2 percentage points higher than the first Q '19, again in line with the group's strategic plans. That is lower revenues that we are getting from several corporate bases that were built, CapEx that was invested in recent years but an increase of margin that is in line with our business plan. We reinforced our cash at the end of the first Q '20, and that's sufficient to cover 2.5x our short-term debt amortization. And we closed with leverage of 3.6x, which is down by 12% year-on-year. As we released shortly, we had the approval of the Board of Directors to reorganize our operations in the end of the 2 stages. We are going to have a holding company and the largest road logistics company in Brazil with the largest portfolio of services. When we talk about JSL Logistics, we recorded net income of BRL 19.7 million, stable year-on-year, if we disregard extraordinary revenues of the first Q '19. Remember that in the first Q '20, we also had the cost of implementation of new operations. And still, we had EBITDA of BRL 110 million. In Vamos, we reached net income of BRL 36.6 million that means growth of 16.2%; with EBITDA of BRL 139 million, 14.5% (sic) [ 15.3% ] above that of the previous year; and operating income with growth of 30.7%. Vamos continues to combine growth and profitability on a unique business platform with major opportunities to grow even in difficult times. CS Brasil reached net income of BRL 16 million, which means growth of 44% year-on-year; EBITDA of BRL 83 million, growth of 48%; and operating income 86% higher than the previous year. And again, in our strategic plan, we are going to have more share in fleet management and with significant reduction in other business lines, again according to plan. Movida reached adjusted net income of BRL 55 million, growth of 31%; and adjusted EBITDA of BRL 225 million, which is growth of 55%. Again, that confirms our continuous operating evolution in all business areas. It's important to remind that the main highlights of the first Q '20 unfortunately were being impacted by COVID-19 in the last 15 days of March. Now we are going to go to Page 4, where we talk about JSL main financial results, consolidated basis. In the first Q '20, we had service net revenues of BRL 1.710 billion, growth of 3% over the same period last year; totally, therefore, BRL 2.357 billion. Still on Page 4 in the upper-right corner, we talk about consolidated EBITDA of BRL 562 million, growth of 18% with margin of 32.8%, an increase of 4.2 percentage points over the same period last year. And when we talk about adjusted net income still on Page 4 but in the lower part of the slide, in the first quarter, we had BRL 83 million net income. That is margin of 3.5% and growth of 37% over the same period last year. Now I'm going to turn the call over to Denys that is going to talk about our company's main numbers with a bit more color. Denys?

Well, thank you, Fernando. Good morning, everyone. I'm going to start with Slide #5, basically reconciliating our adjusted net income to our reported net income. As Fernando mentioned in previous slides, we had adjusted net income of BRL 83.2 million. The nature of adjustment is basically a [ reflects ] of what was presented in Movida's results yesterday. That is in the short term, there will be a mismatch between the demand and supply of cars in Brazil. The mismatch, in our view, is because of a higher supply of seminovos by fleet owners, financial institutions and others; lower interest rates with lower installment, making it easier to buy a brand-new car; and the resumption of work of OEMs that are going to focus more on retail, as it was mentioned in Movida conference call. So in JSL consolidated results, we bring the [ reflects ] of adjustments made in Movida. Again, these are effects that do not have a cash impact. So they are noncash. And if they prove to be higher than necessary, these are provisions that can be reversed. So again, just to qualify the adjustment and the origin of adjustment, we have BRL 193 million in the impairment of assets, which represents approximately 2% of our total operating assets; BRL 50 million to the impairment of receivables, reflecting a conservative standing that is considering delinquency levels in the short term. And again, in the impairment of assets or the impairment of receivables, remember that we are thinking in the short term. And then at the smaller amounts, you have the tax consequences that are [ reflects ] of these adjustments. With that, the reporting result was BRL 86.3 million negative. Going on to the next slide, we talk a bit about the investments made in the first quarter '20. Remember, this is a period that in what was previous coronavirus. We had net investments of BRL 995 million, with BRL 1.670 billion gross CapEx and then BRL 675 million in the sale of assets. The most important amount was the amount of Movida, net investment of BRL 600 million; then Vamos, BRL 220 million; and Logistics, BRL 122 million net CapEx. If we take a look at the nature of our net CapEx, once again, we see that our net CapEx was basically directed to expanding our business. Now we are going to go on to the next slide, where we talk about JSL, that business consolidated basis. This is our time line for group debt amortization in -- on March 31, 2020. In blue, first -- our first column, we show our liquidity that added up to BRL 4.1 billion approximately. And when we compare to short-term maturity, that totaled BRL 1.6 billion, that represented approximately 2.5x short-term maturity. In the last conference call, we updated you about the liquidity that we had at that point. So this number of approximately BRL 4 billion in liquidity was a number that you were all aware of. I use this opportunity to tell you that when closing April, the total liquidity of the company continued to be at the level of BRL 4 billion, to be more precise BRL 4.2 billion in liquidity. This liquidity gives us the comfort to continue meeting all our obligations end to end and also enables us to devote our full attention to make adjustments to our operations and to seek for opportunities of higher efficiency and economy. Another important point to mention is that we have experienced a drop in interest rates. If you take a look at our exposure to interest rates, we have approximately 75% exposed to CDI oscillations. Through that -- with that, we have a protection against a higher rate, but also, we have the benefits of enjoying a drop in interest rates. So with the drop of rate, the average cost of the company was about 4.5% a year with a trend to go down as you know that the interest rates in Brazil are going down. As for the other topic that we have been asked a lot, our covenants. Again, I show you that we are quite comfortable with regard to our covenants. As we can see, we had a net debt added EBITDA ratio at 1.7x. Our maximum is 3.5, and this is the idea of maintaining covenants. EBITDA added over net interest, we are at 6.4x. The minimum would be 2x, again quite comfortable, and the concept here is also maintenance. And the final indicator that applies to international bonds, net debt over EBITDA ratio, the traditional way to see things is 3.6x, and our maximum is 4.4x. And here, there is a different concept, which is the concept of incurrence, which means if we go up the maximum limit, it was subject to some specific conditions that in a simple way to mention also bring an additional opportunity of leverage of almost 1x our EBITDA. That does not cause an acceleration of our indebtedness, and the comments are just to show you that right now, we are quite comfortable at our covenants. Going to the next slide, Slide #8, we talk about our profitability breakdown going to each company of the group and also show you consolidated numbers. Remember, we talk about the results that we have in Movida, and we are talking about the last 12 months. So starting on the left side, Vamos contributed with BRL 37 million with a ROIC of 12%; Movida, BRL 55 million adjusted net income and ROIC of 10.3%; CS Brasil, net income of BRL 16 million and ROIC of 9.2%; Logistics, net income of BRL 20 million, ROIC of 8.1%; Original, the dealership, had BRL 200,000 and ROIC, 11.2%; and BBC Leasing with BRL 2 million net income and ROIC of 25%. With that, return on invested capital in the last 12 months, consolidated numbers, was 10.4%, which was one of our objectives, you remember, of reaching 2 digits. So in the first quarter, again, excluding prospective impact of COVID-19, the group presented a return on capital -- invested capital above 10%, 10.4% to be more precise. With that, net income from companies reached BRL 130 million -- sorry, gross income, BRL 130 million. Minus financial expenses and taxes, we had adjusted net income of BRL 83 million, an increase of 37% year-on-year. With that, I'm going to turn the call back to Fernando, please.

Thank you, Denys. So moving on here, I'm going to go to Page 9, and I'll talk about the results of the first quarter '20. So JSL Logistics with net revenue from services of BRL 656 million; EBITDA, BRL 110 million that is 16.8% margin; and net income of BRL 20 million. Although when we compare for the same period last year, we do see a significant negative impact, it's important to remember that, that was due to nonrecurring actions in the first quarter '20. If we remove those actions, the first quarter '20 is in line with the first quarter '19, even contaminated by 15 days of March under the effects of COVID. In Movida, net revenue from services, BRL 452 million, growth of 20%; BRL 225 million in EBITDA with margin of 49%, growth of 55.2% in EBITDA; and net income of BRL 55 million. As we can see in Movida, margin growth is way above that annual growth, which is in line with our business plan and in line with the quality of execution of the team, improving our margins based on what was built. Vamos, our truck machinery and equipment rental company with long-term contracts, net revenues in the first quarter '20, BRL 250 million, EBITDA of BRL 139 million. In that, net income of the first quarter was BRL 37 million. That shows growth in revenue of 4.3%. That's in income of 16.2%, and in EBIT, 30.7%. So when we talk about CS Brasil now, we had revenues of BRL 171 million; EBITDA, BRL 83 million; and net income of BRL 16 million. BBC, Original, both companies, although smaller, are really complementary to our other companies. With JSL consolidated numbers, we present a net revenue from services of BRL 1.710 billion; EBITDA of BRL 562 million; with consolidated net income, adjusted numbers of BRL 83 million that is a margin of 3.5%. As we can see, increasing revenues was at 3%, and EBITDA increased by 18.4%. Net income increased 36%. So these results are part of our strategic plan, focusing on business mixes that have greater margins and the company working with differentiated teams separated per company, basically extracting the best of each business. And with that, we can improve our results even growing revenues lower. Remember that our base counts on our people and our company. Although we do not know all the challenges we have ahead of us, we know that we are big. We are going through difficult times. And we are comfortable, together with our corporate team, to tell you that we are confident and prepared to go through this difficult time. Now we can go to Page #10 and we talk about some of our challenges and consequences. Again, within governance and transparency, it's very important to share with you the impact on each business and the impact from consequences that we believe. On Page 10, main facts and consequences. Logistics. We had significant drop in volumes in some segments, for example, automotive almost with no operation in the second week of March and April. With that, clients want longer payment terms, greater production efficiency because they want to have the best cost effectiveness as possible, and increasing demand for outsourcing. These are the main facts of Logistics in the first quarter '19. Therefore, our diversification in Logistics, in a way, made it easier for us to cope with the drop in volumes. For you to have an idea, we had a drop in Logistics of 20.8%. Very few competitors can give clients longer payment terms. Once again, truck drivers were valued, and the Logistics system team is paramount to food supply and also the supply of fuel and education. With that, the company is not only valued but seek providers that can give them the confidence of operations. So these are the main facts and consequences and opportunities for Logistics. In Vamos, we had more focus on accounts receivables in some segments. Again, I'm going to make it clear. We haven't had any problems so far. We have more companies looking to rent heavy vehicles and a growth in demand for special services, for example companies that want to sell their fleet to us and rent from us. With that, our delinquency ratio is as usual and we have an opportunity to grow with low risk and better returns. And again, regardless of the scenario we're going through, Vamos proves to be a special company. In CS Brasil, we see a greater need for fleet outsourcing, maintenance of long-term agreements and decrease in urban transportation only with the significant drop of passengers. With that, as a consequence, in CS Brasil, we have regularity and opportunity to grow in public fleet management, low reliance on urban transportation and therefore, a resilience of our revenue. In Movida, the main factors that are impacted by COVID were a reduction in the rent-a-car business, the quarantine impact in seminovos stores, the growth in demand for special products, new clients, and also significant impact on the price of seminovos. As a consequence, again, our great diversification in Movida made it easier for us to cope with the drop in RAC. The greater use of digital channels supported the sales of seminovos. We sold more than 3,500 cars only in the month of April. And we have opportunities to grow in new products, accelerating the rental to individuals. We believe that we have a huge opportunity for growing it well. And once again, BBC, Original, smaller businesses, extremely strategic and complementary to the others. And although there are some facts that impacted them, the consequences to the group are very small. So on this page, we try to give you some facts and consequences of COVID-19 and how they affect our business. To close, we are going to go to Page 11, where we tell you a bit of what we did in a nutshell and how we are prepared to work during and post COVID-19. One thing is right: the moment is sad and difficult but it shall pass. We are taking care of our people and communities where we operate deeply. We are working with our clients to keep their operations and ensure supply of the clients of our clients. And our team, in a nimble way, has strengthened the liquidity of our company. All that said, we can say that we are very comfortable to prepare to the next step. What I would tell you -- and again, I'm not being euphoric but rather responsible. We do believe our companies, all of them, the way that we are positioned as a business with our quality teams, with our differentiated controls, all companies have potential to develop when we go through this difficult time. First, we wanted to be more and more compact, steady and nimble to move on. And now we have to see where we are happy. In JSL Logistics, we have huge opportunities to grow organically. Customers want services. Unfortunately, many of our competitors are much more frail, and the government is demanding people to keep up with their tax responsibilities. And our sector, unfortunately, is very informal. So us, as a company, has a huge opportunity to grow organically and through acquisitions. In Vamos, the rental of heavy assets, if a company does their math, they do not buy assets. And everyone is doing their math now, bringing us more values and opportunities. Vamos can have investments, scale and more partnership with OEMs, be more competitive with better returns. Movida is prepared to meet the growing demand of our customers and products through its unique positioning. As you know, Movida, the team DNA is to be a simple, agile company, modern and with a DNA to serve and create alliances with customers, especially individuals in long-term relationships. And CS Brasil, based on its history in recent years, it makes us to believe the growth of -- its growth maintenance in public fleet management, which is the segment that gives us the best return and resilience. With that, our business transformation is supported by our team, our customers, our assets, our service portfolio and mainly a long-term relationship. That gives us the comfort that we are ready to develop and capture opportunities that we are seeing now. Some of the main reasons that give us this confidence is the business transformation we went through recent years, supported by a special team with active customers and a service portfolio with a mix of industries and segments with long-term relationships. And to close, I would like to tell you all that the base of our support is strong governance with the right people, with simplicity, agility and diversification. All these are key to go through this time and capture opportunities. Once again, on behalf of our team, I would like to thank you all for attending the call. And now we are going to open for your questions. Denys and I are here to basically answer any of your questions. Once again, thank you very much.

[Operator Instructions] Lucas Laghi from Santander would like to ask a question.

So I have some questions. First, with regards to Vamos, we see in the first quarter you had an increase of BRL 400 million in your backlog. And in your transparency, you showed a bit of numbers in -- of April. Just for me to be clear, can we think of a backlog composition that is also impacted by the coronavirus? I would like to understand a bit of the backlog of Vamos and how you are working with the future revenues in terms of contracts. And I'll ask you the next question after you give me this answer.

Lucas, this is Fernando. Well, Lucas, we are not living in a fantasy island, but we are a completely different company. This is an extremely efficient business in Brazil. The trends to rent machinery, equipment is huge. The country has been developing this way, and the company continues to go away. It's impressive that now, during and post COVID, we continue with a very high demand, perhaps even higher than before. So I think Vamos is just on the right path, developing itself, being very judicious in terms of credit. But remember, whenever industries, service industry, food industry, have a problem, they want to review their model and they see rental is something that contributes to best cost, make them -- makes them lighter, more efficiency. And that has been generating great opportunity for Vamos for -- even to change the scale in the purchase and management of assets, so without creating expectations that this trend is to keep seeing Vamos develop. And just to add to that, Lucas, it is within our plans. It is following what we had seen and what we have agreed with the executives of Vamos since last year.

Okay. Now going back, thinking of JSL Logistics operations, perhaps a major potential for Logistics in a crisis is that you would have a more asset-light structure because of the impact of the automotive industry that you mentioned. And industries we are more capital-intensive, like pulp and paper and mining, would show a better need. Is it correct to think of Logistics this way for the month of April, for instance? And commodities operations like pulp and paper, are they recovering? Because we do see a relevant drop. You say it's a one-off. Are you thinking in April, May, that you are recovering the more capital-intensive segment even in a COVID scenario?

Okay. Lucas, this is Denys. Let's just start from the beginning. You are right. Today, Logistics structure has a cost structure that is variable. If you think of cost -- cash base, I would say 35% are fixed costs. What we consider in the 35% are personnel, and most of these people are connected to the existence of our operating activity. So even this in a limit could be variable. But practically 35% of our cash cost is fixed, and most of it is variable. So you're right in your understanding. This breakdown originates from the fact that 65% of our revenues being on what you call asset-light operations. And therefore, you have an immediate cost adjustment if you do not have demand or you have, I don't know, collective vacations or you have a slowdown as this happened in automotive. In operations, where we have invested capital -- and you're right, you're talking about the commodities segment, that was a one-off situation. They are moving on. We have 2 different situations: One, a long-term customer for more than 10 years, several contract renewals, had the contract terminated in December. And because of their plans, they restarted the contract 5 years but just as of March. So that brings us to stability. Another client, because of their claims, started to have a different regional direction. With that, we had a higher cost with that customer. We are investing in a new region of the country with them, and the part of fixed costs that were the counterpart to the revenues that were going down were -- was reimbursed to us. So again, we are showing resilience. Everything is okay. Things are moving as of April.

And just to add, this is Fernando Lucas. This is what we are always saying. If we have no assets, we have some kind of counterparts for -- from customers because we have the capital -- the CapEx invested.

Yes, it's very clear, and congratulations on your results.

Thank you, Lucas.

Lucas Marquiori from BTG Pactual would like to ask a question.

I also have 2 questions. I would like to explore the Logistics division a bit better. We have seen a sector demand in Logistics of increasing fractionated transportation, e-commerce, this change in consumer profile. I know that you are very much focused on long-haul, but are you thinking of going into e-commerce services given the structural migration of demand to online commerce? This is the first question. And the second question, Denys, Fernando, if you could give us a bit of a view. You talked about 2.5x cash to pay short-term debt. I would like to know the amount of what you have in automotive companies, light and heavy vehicles, if you're going to make payments, if you're going to extend terms with automotive companies just for us to understand that because we know it's an important part of your business.

Okay. When we talk about Logistics, it's very important for us to consider that, thank god, we have a huge diversification of indices of segments. In the material facts, we talked about our revenues, and that's what it is. We have diversification and we are in segments that are crucial for society: foods, drugs, mining, pulp and paper. Pulp and paper is crucial for the making of packaging. So that has given us huge comfort. There are areas like automotive and electric -- electronic appliances that's very important to us, but we know that they came to a complete halt. When we talk about e-commerce, of course, everybody is home ordering things. And we know that e-commerce is perhaps moving faster than expected. Things that we're expecting to happen in the next 3, 4 years are happening now. Quite frankly, Lucas, we do not have plans to go into e-commerce. Vamos has been renting trucks and equipment for e-commerce. Movida as well are renting cars for deliveries, delivery apps and et cetera. But as a group, somehow, we enjoy from this diversification. But in Logistics, it's not a business that we are focusing on, to go on e-commerce. We believe it might become a better business but -- because it's gaining scale. The problem with e-commerce is that you would need a car to deliver something in the south side and then you didn't have the flexibility to go to the north side. So that can get better, but we don't think that it's all going to be e-commerce. I think that there is room for everything.

Lucas, this is Denys. And you talked about our focus. You reminded me of something very important. Our focus has been to support industries in a scenario like this. We talk about globalization, supply chains being reduced, the dollar at the level that we have today. This is an incentive to local production. And I think that perhaps we have an opportunity from now on to enjoy even at a weaker scenario of the local industry thriving, which is something that we have been working with for many years. The second, OEM, is that it?

Yes. The amount you have to pay to OEMs and you have room to negotiate with them.

Okay. The amount -- you have that in our release, is BRL 1.7 billion. Remember that the company has an asset base of BRL 9 billion. So it's normal to have that in your turnover. In this BRL 1.7 billion, you have contracts closed by bundles with guaranteed funding. And then obviously, you have the normal turnover of Movida. And as Movida showed yesterday in its earnings release, it continues to operate its sales even in a scenario where some did not expect that, thanks to the digitalization that Movida was successfully able to perform. So that gives us the comfort to operate. Of course, we are negotiating. We have been able to accomplish many things especially due to the relevance of Vamos in this scenario, but there is always room to negotiate. And because things are scalable because of our cash, I believe that outside the BRL 4.3 billion, we would have possibility to access an extra BRL 2 billion. So we are very comfortable. The schedule is quite okay to us. But to answering your question if there is room to negotiation, there is always room to negotiate.

The question comes from Bradesco BBI.

Congratulations. I have 2 questions. The first with regard to the [ same par ] operation and how that cannot affect the Logistics business, can we consider if Logistics is separated, that makes it easier for us to have M&A movement? And about your investment plan for 2020, think about your CapEx budget, and at the same time, we see a scenario, as you mentioned, that both for the rental of light and heavy vehicles, we are going to have an increasing demand. And at the same time, there is a concern of coronavirus and a possible contingency of your investment plan. How can these 2 things impact the CapEx of JSL?

This is Fernando speaking. Okay. It's part of our strategic plan and has been so for many years. We have always been talking about that to the market of splitting the company. That is to have a pure holding company and to have a logistics company that is independent with its own corporate taxpayer number. We already have it pro forma, but we want Logistics to be a company just like Vamos and Movida, et cetera. And that is for us to improve our management to have a better focus on development and generate more value to shareholders. And with that, we'll have more visibility to our investors and the financial market that support our growth. So there are several reasons for that. And also, it can give us opportunities for M&A movement that can contribute to generate our value and to develop in Logistics alone. So that makes things easier, Victor, for several reasons. When we talk about CapEx, and I'll let Denys complement my answer, what I would like to tell you is that today, we are learning more and more. We know yesterday, little of today, but we are prepared to operate the tomorrow, taking as much care as possible. And we are prepared for that. Our focus is to resume our growth, go back to our levels, keep our leverage levels in control. And even reduced, we might have changes. It might go up a little but under control. And we are prepared to make the investments that Vamos demand, and we are prepared to support Movida's growth post COVID. We have to be realistic. The rent-a-car right now is going to go down. You're going to have a lower demand, so you're going to decrease, but then we are going to resume growth. You know that Movida's team has developed fantastic work with new platforms to reach other areas, individuals and work with the rent-a-car business in a very special manner. So we are prepared. You know that we don't give you CapEx guidance, but what I can tell you, that we are quite selective in our CapEx and we want to get better return on our CapEx with more quality contracts and better results. So we are ready to seize opportunities in Movida, in Vamos, in Logistics. And it's interesting that even in Logistics, we closed a new contract even amidst this turmoil we are going through. Denys, I don't know if you want to add.

Yes. Fernando was very thorough. But I think it's good to emphasize one fact: CapEx is discretionary. You invest if you're comfortable, if you feel safe, if you have the right prices. Otherwise, it's not mandatory. It's not maintenance CapEx. I think this is something that is very important to remind you all because the company has the flexibility.

Okay. And just one last question, I'm sorry. When we see Movida's results for the first quarter, they did have a provision for bad credit. Do you think it might be also be -- or it also be necessary for JSL because of the corporate market? And in terms of customer relationship, what kind of discussions are you having in terms of working capital? Fernando asked in the beginning that customers want to extend payment terms. Can that put an extra pressure on your cash position?

Fernando, would you like to take that?

Well, customers asking longer time, this is part of our strategy. The automotive industry, to come back, they want to who have longer prices, the food industry as well because no one know what's going on. So flexibility to large companies, this is our mission. We have to negotiate with them. But longer terms are also healthy terms. We have no problems today -- and Denys can say that better than I can, with our customers in Logistics that would be a concern for us.

Yes. This is Denys. When you saw the provision in Movida, it's not that the other business didn't consider that. Of course, we considered that we decided not to make changes. In fact, in Logistics, delinquency was even slightly better. So again, this is something that is an opportunity for you to show the value of the company because of our size, because of our governance. Customers want quality, long-term relationships as well. So we provide a quite different scenario. Of course, we took everything into consideration. And if there is a need, we might do that. We are always monitoring, but it's not the case, not right now.

[Operator Instructions] Heloisa Cruz from Stoxos would like to ask a question.

Congratulations on your results. I have 2 questions. The first, I would like to know if there is any opportunity for your debt in dollar that is not hedged caused any strong impact on your balance sheet. We have seen that with companies with hedge and without hedge. And second question, within Vamos results and other companies that have allocated assets, what is the trend given take-or-pay contracts? A similar result in EBITDA or better revenue, that is a one-off extension of margin when the assets are not running. Is that your expectation?

Heloisa, this is Denys. Thanks for your first question. Indeed, this is a point that we should have highlighted. Yes, with the exchange rate at the level it is, people have questions if you have hedged inside a bundle. We have a full hedge that was performed in the most traditional manner, principal and interest. Remember the JSL governance, derivative exposure in foreign currency is a resolution of the Board of Directors. No executives can make the decision or sign a contract without the approval of our Board. And the Board said that we have to have full hedge of exchange rates without any limitation and that the company has to live on the effect of 100% on the Brazilian real. So we have no exposure to the exchange rate in any of our debt. We are fully re-hedged, okay? Second question, the assets, at least the assets that we have, are being operated. They are running. So I do not see a margin expansion happening because Vamos, for instance, is evolving in customer penetration. So due to the contract structure, clients are going to privilege the use of Vamos assets. And in Logistics take or pay, the industry continues to run. This is as we mentioned in our initial expectations. So I do not see a one-off expansion, okay?

Yes. Sure. Just one more question. Are you having lots of commercial renegotiations, extension of the payment terms? Or are you more or less as usual?

As Fernando mentioned, we are more or less as usual. We do not have any problems, as I mentioned. We always share the stresses with you. In Logistics, we have competitors that are having cash difficulties. And unfortunately, we know that our competitive -- the competitors that were based on the automotive industry and are being highly effective. But we are enjoying opportunities. Customers want longer term, and we are offering longer payment terms to large customers that want to increase volume. And we say, "Well, do you want to have better term? You're paying with 30 days. You can pay me with 90 days but you increase your volumes." So we are using payment terms to contribute to higher volume for the future. But we haven't had any customer that is really stressed or has a special need. We are not going through this time.

[ Roberts ] from [ Capital ] would like to ask a question.

Congratulations on your results. I have 2 questions. One, with regards to Logistics, the automotive sector had a strong retraction and some term automotive industries are coming back. I would like to know what the segment is like now. Do you think they are recovering for deep losses and if automotive companies, OEMs are already talking about resuming production and how the company is preparing for that? And then another question with regard to Vamos and suppliers. If OEMs are coming with discounts, do you still have an opportunity of this tax? The company has financial capacity. If you can use to renew your fleet and even other automotive parts, replacement parts, tires, to use this moment that the market that is more frail to have better purchases not only with vehicles but also replacement parts, filters, tires that are used by the company.

This is Fernando. What happens is that OEMs are coming back. If you take a comparison of end of March and April, in April, there was a -- completely a halt, but now it is already starting to resume and that's why we think we don't know. But the floor was April with a drop of 24%. So that was the floor, but I never thought I was going to live this in my life. So it's coming back in the beginning of May. Of course, it takes time to go to business as usual, but it's coming back. And with that, we are working with them on the day to day so thank God, our customers have demand and we have to supply their production lines. And we are working and our clients working with all due care, but they are going back to work and we are very happy about that. When you talk about brand-new cars or trucks, this is not something that we can tell you now but I agree with you. I believe we are going to have opportunities in terms of prices and payment terms because of our relationship with OEMs that is in name of partnership, but this is something that Movida and Vamos can enjoy a lot because Vamos and Movida can buy at special terms. If the sales go back to normal, well, no one will produce more than what they found. The trend is to produce what you sell. And with the dollar at the rate it is, we are going to have higher prices for brand-new cars. The price is going to go up. And it is a time where you can have opportunity, but it is a transient opportunity because I believe prices are going up. And remember, our CapEx is here to stay. If we are using less CapEx now, we might be more competitive and use our scale in the future. And again, remember, we can tomorrow decide to have a plant purchased because we know we are going to renew our trucks further on because we have very predictable contracts. So we can enjoy this understanding to make -- to do better businesses. As for replacement parts and tires, there is an opportunity but a lot more one-off because they're also going back more gradually. And again, one-off because rubber, for instance, is an export product. And so it is subject to the dollar rate. But again, there is always opportunities for advantages.

Okay. With regard to segments, is there any other segment that is standing out, mining or any other segment? And within it, the OEMs, they are all talking about the impact of the exchange rate in the assembling line of tires because they're made of rubber and, as you mentioned, subject to the exchange rate. So don't you think that necessarily prices are going to go up? Just adding because if you act now, perhaps you are not going to pay for the higher prices that there will be in the future.

Okay. Thank you very much.

As there are no further questions, I'm going to turn the call to Mr. Simões for his final remarks. Please, Mr. Simões, you may go on.

Well, I would like to thank you for the opportunity of having you here. We have more than 280 people attending. Thanks for your time. And I would like to make some comments about what we are living. It's important to say what we did, where we are and where we believe we are going. First, it's important to reinforce that we had a lot of care with our people. We had more than 1,000 direct employees being monitored with a suspicion of disease and that were moved away from operations. We have now more -- less than 400. We even moved our employees by playing from one place to the other to protect them better, basically removed our employees from public transportation to have them being driven by cars. We have a lot of that going on. The team has always made a point to have cash and even reinforced cash, as Denys showed to you. We took the preventive measures that were necessary to keep all actions in our customers that were necessary. Pulp and paper, mining, food, we spared no effort to do everything that we had to do. That is our obligation before our customers. And this is what we have to do: work hard. We supported the communities that needs the most in the areas in which we operate. And we paid special attention to truck drivers, supporting them, having a special channel to take care of them with the food basket that will take them 6 days. So these are all key actions not only in terms of social actions but also as a team to continue to provide services to our customers. We know little of our tomorrow, but we are working very much today to have a better future. And in view of this scenario, what have we been doing? We have diversification, and we always talk about that. That gives us resilience of revenues. In Logistics, we have inbound operations, urban distribution, a short- and long-haul transportation, integrated operations with railway and others. We are in food sectors, mining, agribusiness, automotive. And a little area, as you saw in our material facts, we had a drop in revenues, but all the other business continues to show resilience. In Movida, under the control of JSL, has never been a company that only worked with a driver app. It has always had a strong diversification of its businesses. With that, we believe we depend on everyone but not on one exclusively. At Vamos, it's the same. It has agribusiness. It has e-commerce. It has a food industry. This diversification has ensured resilience of our revenues in the main segments in a very, very comfortable way, and that allows us to tell you that in April, we believe the revenue reached the lowest. We are working in the market, understanding the needs of our customers post pandemic. In April and May, we were able to understand the needs to make strong adjustments and that we shared with you. We have been making adjustments inside our company in terms of our structure, in terms of our people, in terms of our assets, making assets available to sale. We are adding agility to be leaner, to have lower costs. And with that, we believe that we are going to be much lighter and much more prepared to be agile. And what do we want to do? We are prepared with that to support all our companies to develop during and after the pandemic, seize opportunities in Logistics, as I mentioned, organic, consolidation, even more strategic partnerships with our clients; have Movida in a different positioning. Remember that Movida, in addition to diversification, is a new light company focused on individuals and with the strategic alliances in all channels in which it operates. And that shows the numbers of Movida in April, how nimble the company has been to make decisions and execute even better. And Vamos is quite impressive, in addition to all its resilience right now, a huge opportunity to grow and improve margins; CS Brasil, resilient stock revenues, growth in fleet management. I say CS Brasil is a mixture of Movida and Vamos. It's Movida because it's lighter and it has longer-term contracts like Vamos. Remember that the company divested from public transportation. Our public transportation has a share of less than 10% in CS Brasil. This is a difficult segment, but the impact is much less because of its sites. So what do we believe? We believe we are living sad times, difficult times. The economy as a whole can deteriorate. We are working very hard. And we believe that post pandemic, we are going to be at an even better place that we are, much better than our competitors and strongly together with our clients to enjoy a new cycle of growth perhaps with different bases. We understand the reality. No one is being highly euphoric. Quite the opposite, we have our 2 feet on the ground. But certainly post the pandemic and over our base, we may be starting a new cycle of growth. Once again, thank you very much for attending. We have more than 200 people with us. We thank our team that prepared all the materials and met the times even amidst the pandemic. We thank our customers and markets to support us, to be with us and also answering our questions and teaching us to live with the pandemic. We are respecting social distancing. Then I would like to make a special thanks. There are lots of people working from home office more than people in the office, but the company has only been able to reach its April numbers because we have lots of people working hard in our office to make the necessary adjustments we need fast so that we can go through the difficult times in a differentiated manner and that we come out of the tunnel in a stronger position. We thank all our employees that have been working. On behalf of our team, I thank you all for your time, attention to our earnings release. I'm sorry I took a bit longer than usual, but these are special times and I think that they deserve a specific transparency to where we are heading. Thank you. Best regards. Peace and health. Thank you.

JSL's conference call is now closed. We thank you for your participation and wish you a good day. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]