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

Good morning, and welcome, everyone, to JSL's Audio Conference to discuss results relative to the first quarter 2022. Here with us today, we have Mr. Ramon Alcaraz, JSL's CEO; Guilherme Sampaio, JSL's CFO and IRO. [Operator Instructions] This audio conference is being recorded and simultaneously translated into English. Before moving on, we'd like to state that forward-looking statements made during this audio call concerning the company's business outlook, operating and financial targets are based on assumptions and beliefs on the part of the company's management and also on information currently available. Forward-looking statements are no 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 materialize. General economic conditions, industry conditions and other operating factors might affect the future results of the company and thus lead to results that will differ considerably from those expressed in these forward-looking statements. I'd like to turn the floor over now to Mr. Ramon Alcaraz. Please, Mr. Alcaraz, you may proceed.

Good morning, everyone. It is a big pleasure for me to be here to disclose the results for Q1 2022. I can already anticipate we're really good. Even though it was a very difficult and challenging quarter, with an increase in input prices, as you all are aware. We had a net revenue in the quarter of BRL 1.3 billion, 50% up from the first quarter of 2021. An EBITDA of BRL 219 million, 72% higher than that posted in Q1 2021, which shows our capacity to produce good results even amidst a complex environment with prices going up. A net income of BRL 33 million, if we consider the adjusted number of BRL 37.2 million and a ROIC of 13.9% return on invested capital, which shows our discipline in investments. I have to say that this ROIC was 5 percentage points above that posted in Q1 2021. A free cash flow of BRL 198 million, and later, Guilherme, our CFO, will break down. A few highlights of Q1 for 2022 I'd like to mention -- and that the first -- this is the fourth quarter where we had organic growth above 2 digits. If we annualize the gross revenue for the first quarter of 2022, we already have an annual revenue above BRL 6.2 billion, 83% of the revenue when we did our IPO in the third quarter of 2020. Those results reflect an improved operating performance and continued appreciation of our asset base. I take the opportunity to announce the joining of a new member of our Board, Sylvia Leão. Sylvia, welcome to our Board. Sylvia is a professional who has large expertise in people management. Among other things, she will help us in this mission to manage over 25,000 associates in our group. Sylvia had a brilliant career in retail. She will certainly help us understand the yearns and ambitions of our clients and customers. Moving on to Page 4. We'd like to highlight our organic growth. In the wake of other quarters, has also been growing in 2 digits -- by 2 digits. In the fourth quarter of 2021, we announced a growth of 17%, which in itself is very, very good. And now we can announce a growth of 21%, 31% of which for the companies we acquired when compared those companies with themselves, Q1 2022 versus Q1 2021 and 15% in JSL alone when we compare the company with itself. Q1 2022 vis-a-vis 2021, an average weighted growth of 21%. Given that's a recurrent question that we get asked, I'd like to say that out of that growth 52% came from readjustments of current contracts and 48% came from new contracts. As I said, we have signed BRL 700 million in new contracts in this first quarter of 2022, with an average term of 40 months, 94% of which in cross-selling, in other words, contracts entered into by current customers; 52% of those contracts are in dedicated operations or those where we have a higher commitment between parts, JSL acquiring assets and on the customer side, a guarantee, especially in terms of the fixed assets, providing more resilience even in turbulent times. Also important to highlight, the segments where we have those contracts signed, I'd like to highlight 30% in pulp and paper, 26% in food and drinks and beverages and 12% in steel and mining and 11% in consumer goods. And why is this breakdown important? Because 73% of the growth we enjoyed in Q1 2022 as opposed to '21 came from those segments in those industries. In other words, we closed contracts that generate future revenue around those segments with higher growth rates. With that, I turn it over to Guilherme, our CFO, for him to go into more detail about our numbers and our company's capital structure. Guilherme, over to you.

Thank you, Ramon. Good morning, everyone. I'd like to start my presentation by talking about net revenue, which closed the quarter at BRL 1.3 billion, out of which BRL 29 million for the sales of assets, that represents 49% more in terms of service revenues and almost twice as much in terms of sales of assets when we compare that with Q1 last year. That growth reflects the consolidation of the 3 companies: TPC, Rodomeu, and Marvel, which were not consolidated in the balance sheet back then, but also coming from our organic growth, as Ramon mentioned, from JSL and the 5 acquired companies, which combined to get to 21%. When we go to results, a few points to highlight. Number one, our transparency in terms of relationship with clients and also with truck drivers and third parties led us to be more agile to accommodate mainly an increase in diesel prices, which happened both in early January and then on March 11, as Ramon mentioned, and you probably saw that newspapers also, an impact coming from your adjustments already applied, which faced inflation for our main inputs, which can be seen on this slide. For example, in the year, fuel prices went up 88%, parts 35%, tires 25%. Another important point is the quality of the companies we have acquired, which have benefited from the scale of JSL and consequently have improved their numbers as well. Moving on to the numbers. Operating results closed the quarter at BRL 156 million, a growth of 85% year-on-year and a margin of 12.3%, an expansion of 2.5 percentage points also compared with Q1 last year. EBITDA closed the quarter at BRL 219 million, a margin of 17.3%, up 2.3% from Q1 last year and 0.4% up from the fourth quarter of last year, which based on our seasonality is also worth mentioning. Net income, as expected, was impacted by an increase in CDI. However, it benefited from better operational performance and also benefited from the sales of assets, which I'll deal with in the next slide. If we remove the impact from PPA or the acquisitions, a purely accounting impact, we're talking about a net income of BRL 37.2 million in the quarter. Before moving on to the capital structure of the company, something we mentioned before, I'd like to reinforce that our best prices happens in pace with an increase in inputs. That's why we are still recomposing the margins for all contracts and recover what can be backtracked and also update our future price basis. Going on to the next slide, capital structure. We closed the quarter at BRL 1 billion in availability, BRL 365 million of which have not been drawn, which is enough to cover our debt until 2025 and 10x in the short run. Net debt closed the quarter at BRL 2.9 billion, a reflect of the volume of CapEx that we needed to make in the past quarters in addition to the acquisitions, leverage 3.3x EBITDA and 3.1x at added EBITDA, which is our reference for our financial covenants. Here, it's worth mentioning that we continue to have the same reference in terms of target for leverage around 3 times net debt EBITDA and the company's profile of being a cash-generating company provides us the comfort of having a natural deleveraging. The cost of net debt closed at 9.2% net of taxes. A question I always get asked is that today we have around BRL 300 million in terms of taxes to be recovered, which will smoothen our cash reimbursement and will contribute to the financial revenue, given that this volume is annualized by the Selic rate. Moving on to CapEx in the next slide, we closed with BRL 243 million in gross CapEx and BRL 214 million in net CapEx in the period. Out of that amount, we're talking about BRL 38 million in renewals and BRL 206 million for the expansion of new contracts vis-a-vis the BRL 4.1 billion that we reported in the previous year and the BRL 700 million, which we have reported in new sales in the first quarter. The sales of assets summed up to BRL 30 million and the margin for that moved from 9% in the first quarter of 2021 to 26% in this quarter, which shows the positive impact of inflation on our asset base. And if we look as a reference in our asset base today, we're talking about a potential valuation of about BRL 650 million. With that, I turn the floor back over to Ramon for him to talk about our sustainability agenda and also make his final remarks. Over to you, Ramon.

Thank you, Guilherme. Moving on to our sustainability agenda. I'd like to highlight that our integrated report for 2021 has been published. Another important point to emphasize, which has already been mentioned by myself in other occasions during our JSL Day, is how we value safety. It couldn't be any different in a company where we have over 25,000 employees and we need to acknowledge our customers as well. For example, we ranked among the 3 best companies in safety for Gerdau, for Braskem, another big client we have, we were acknowledged as a company to highlight in terms of SSA, as I mentioned, JSL ranked among the best companies in the supply chain for EcoVadis rating. I'll also highlight the award we received, quite important, one of our main clients, AMBEV. We ranked among the 3 best logistic operators in South America. Also to highlight our climate survey at JSL, the first year, we conduct that through WTW, a company which is recognized around the world. As we did in this first year only for JSL, we're talking about 14,500 employees, others use other models. 11,000 associates answered the survey spontaneously that accounts for 78% of participation. Out of those, we had a satisfaction index of 89%, a high number of NPS. If you know the tool, you know how NPS is a complex tool. We had 51% promoters and 8% detractors. And NPS final, very good of 63%, which ranks us in the excellent category. 96% in the question, is this company really geared towards customers' needs? And that's important because it shows that we are biased towards serving our clients and that is perceived by our employees as well. All those points reinforce recurrently what I've been saying since I joined the company, both internally and externally. My greatest dream is to transform JSL into increasingly the best company in logistic operations, not only in Brazil, but in all the countries where we operate and will operate. And we have always 3 pillars: customer satisfaction, associates motivation and achieved results. To wrap up, I'd like to emphasize our focus on execution, transforming since the IPO in September 2020, a growth of 83% in gross revenue. We are a company of BRL 6.2 billion if we analyze the first quarter of 2021 compared to BRL 3.4 billion during the IPO, 100% larger in terms of results. twice as much EBITDA since EBITDA, BRL 878 million when we analyzed the first quarter vis-a-vis BRL 440 million at the time of the IPO. We continue to negotiate with our clients as we pass on prices and especially focus on operation efficiency. Long term relationship with customers ensures long-term business because of the high level of reliability by services we provide. People, scale and balance form a solid base for us to be able to reap the benefits coming from organic growth or M&A. The speed up of our TI intact agenda is the basis for us to find new revenue sources and expand our customer base as well. With that, we conclude our presentation. And Guilherme and myself remain available for questions or comments that you may have.

[Operator Instructions] Our next question comes from Gabriel Rezende from Itau BBA.

Congrats on the results. I have 2 questions, actually. You mentioned in the release that the asset-light division, you had an impact on the automotive sector because of supply chain disruptions. If you could please share updated numbers on that topic? I think BW has announced new shutdowns in Brazil. We've seen the same happening in transportation companies. I'd like to understand an updated view of that from your end, especially vis-a-vis the robust operations that you usually carry. So what's your perception about the bottleneck in the supply chain, especially in what refers to the automotive industry. What kind of impact do you expect? And how can we expect things to move forward? Number two, after this BRL 700 million in terms of contracted revenue, how do you see Q2 going forward? We are now through April already. What can we expect for Q2 for that particular number?

Gabriel, let's start by the first question. You asked how we see the automotive industry and the impact on JSL. It's important to say that JSL is part of the chain of the automotive chain, right? And about parts we have businesses with all automakers. Of course, we transport also parts, especially for Argentina, where several cars are assembled. We do the intra logistics service. And we also do the outbound to transport brand new vehicles as well. The major impact happens on the outbound arm, new vehicles, brand new vehicles that, of course, the impact on production will impact us. And as you know, since last year, we've seen issues around the lack of components affecting car makers. But that, of course, affects new vehicles. TransMoreno is the company that we acquired and which has been suffering most because of that new cars. So, of course, that company suffers in terms of revenues, but in terms of results at the end of the day. In terms of transportation of parts, the inbound arm of what I described, we've had good results. We have been signing contracts with 2 large automakers to do international transportation. In summary, there is an impact, of course. We had a better expectation for Q1 coming from the automotive sector. The whole industry was expecting a better performance, but we still see some impact in production. There is a high expectation for Q2 because there is high demand. The problem is on the production and at some point, this will be unlocked, but we are less impacted because, especially in terms of the transportation of car parts, we're doing well. But that's the main advantage of JSL. We work across different segments. In terms of the automotive segment, they're suffering all those problems, but other segments such as consumer goods and pulp and paper, it's moving full steam. So that sort of offsets and explains our growth of 50% quarter-on-quarter. In terms of your second question about our expectations for the second quarter of 2022, it's very positive. Some segments have broken records in April. I can say beverages and food segments, which are, as I said, moving full steam. Other segments pulp and paper are also doing well. As I said, we expect the automotive industry to be unlocked. We need to see that. There is some kind of anguish right now because they need to produce cars, vehicles, which have been sold already. So, we expect that to start happening now in Q2. And we have closed -- have signed 2 contracts with 2 large automakers to transport auto parts to Argentina, Gabriel. That's what I had to share with you at this point.

Next question comes from Lucas Laghi from XP Investments.

I have 2 questions. First, about revenue. So a sequential drop and you mentioned seasonality as a reason. Could you comment on how seasonality impacted the different operations that you have dedicated operations and other arms of the company, how each of those segments was affected by seasonality in this quarter. And then also across different segments in beverages and food and so on, so that we can have a better picture of how those seasonality effects are spread across different segments. And a second question would be about CapEx. If you could also comment -- we also see seasonality on that front, especially the number of contracts when we compare different quarters. So, we'd like to understand that seasonal behavior, if I may, of the CapEx. And as you also mentioned the increase in prices for inputs, I'd like to hear what kind of impact that can have on the company's ROIC? What kind of ROIC do you expect to see going forward for the new contracts vis-a-vis investments, vis-a-vis CapEx? So those are the 2 questions I'd like to post.

Lucas, I'll start with the revenue question. Yes, in our segment, we do have this seasonality feature. The fourth quarter is usually better than the first quarter and so on and so forth. But this year, specifically, because of the contracts that we signed, we reported throughout 2021 reported contracts we signed to the tune of BRL4.1 billion in some segments. And of course, that has an impact on the subsequent months. Those contracts have an average term of 46 months, some months in 2021, which helped revenue, but most of those contracts will be accounted for in 2022, '23 and '24. And we are also reporting new contracts because that ensures future revenue regardless of the volume growing. We are adding new contracts. So that's part of the explanation of why Q1 was so good when compared with Q1 of 2021, for example. And even when we compare the fourth quarter 2021, which as I said, is the best quarter, still there is a dramatic gain in revenue in Q1. In addition to that, some segments where we operate, especially pulp and paper and food and beverages, which have different characteristics, of course, pulp and paper have to do with commodity prices and commodity movements and food and beverages have been growing exponentially since the pandemic started. Those are industries, which have been going full steam, as I said, for example, beverages, which is a segment which has a bad moment in early Q2 because of temperature changes. This year, we're seeing records being broken in terms of volumes. So, we have been benefiting from that good positive way, if I may. 73% of growth when you compare Q1 '21, '22 across all those segments: pulp, food, steel and mining and consumer goods. Why is this important? Because we closed or signed BRL 700 million in new contracts in this quarter and 79% of which happen around those segments, those 4 segments. So, we are investing in those segments, which have been detaching themselves from the number economy. They have been growing much faster. Even in the automotive sector, as it was mentioned in the last question, previous question, we have been signing excellent contracts in the automotive segment as well in terms of international logistics. As for the question about CapEx. As announced, we have signed BRL 5 billion in new contracts, I announced last year. In addition to the BRL 700 million I just mentioned, 52% were about dedicated operations, which are characterized by having a longer-term commitment and thus a higher need of CapEx. So, we made a massive investments of around BRL 750 million last year and we have BRL 200 million in Q1. You asked an important question, which is what kind of impact the increase in input prices will have on this chain? And how will those assets increase in price and cost? That has to do with the group's strategy. The group has a strategy, not only JSL, but also in Vamos to buy with a lot of anticipation. So, we are benefited by that because the CapEx that we're investing now in assets is coming from a purchase made 1 or 2 years ago. We are buying assets at a lower price, which will be positively adjusted when we sell those assets. Over to Guilherme, now.

Also important to mention, Lucas, when we price -- you talked about the impact of that on the company's ROIC. When I price this new CapEx, I already price it under this new level or at this new level. And we have had a chance to confirm this. Because of that, we have the ability to pass that on in terms of cost increases when we sell the assets.

Okay. I think that's what Ramon just said in terms of the value of assets. And so it wouldn't be reasonable to think or expect a deterioration, the levels of return, you are correct. That's a very positive point, showing that the evolution in ROIC to this new level of 14% is considerable and sustainable. Very clear.

Next question is from Victor Mizusaki from Bradesco BBI.

I have 2 questions. The first one about returns and margins. Guilherme, you said there are ongoing negotiations. My first question is if we look at the EBITDA margin for the first quarter, what can we consider to be the current margin considering that the success, the negotiations bands out and also about CapEx in the first quarter. We saw BRL 45 million in CapEx and you mentioned in the release that there are investments in technology and the purchase of equipment to improve efficiency. If you could comment on the technology front, what kind of investments are being made in more detail? And what can we expect in terms of investments for 2022 going forward?

Victor, in terms of margin -- EBITDA margins, we are quite satisfied with Q1 results, in addition to having grown revenues by 50% vis-a-vis in Q1 last year, and this was a normal quarter in 2021. So what better than that is to grow 72% in EBITDA. And that's important to say. This was a quarter which was quite challenging, with an increase in input prices, exponential increase in input prices that shows our ability to negotiate with clients in a very expedited manner. We have become very sophisticated, I can say, in terms of negotiating that, starting mid-2021 when prices started going up, I'm talking about fuel, tires, we have a commercial team, which became increasingly more sophisticated, so we become more agile, faster to negotiate. And thus, we were able to reap the opportunities that emerged. But even though you're fast and agile, sometimes you have some leftover effects quarter-on-quarter. In Q1, in March -- in mid-March, there was an increase, you will remember, of 25% in diesel oil announced by Petrobras, you remember, then of course, we were not able to pass that on in time to enjoy the benefits in Q1, but it will benefit the second Q I'm sure. So negotiations have a term to unfold and its effect on cost tends to be immediate. So, at the gas pump, the pass-through was immediate. It's difficult to anticipate the improvement in margin in Q2 because there are other effects being played out. But we understand that an EBITDA above 17%, already seems to be very interesting. So it's -- that's the starting point. We have an expectation for Q2 to start at 17%, but we need to address new variables that will appear. But as I said, we are operating a very well to machine and we are quick on the gun, quick to respond, quicker than our competition and we expect to be able to enjoy the benefits and become attractive. I'd like to say that we cannot change the wind direction, but we need to be agile in adjusting our sales, so that it will be faster than the other boats, which are participating in the same array. That's the analogy I like to use to our business. Moving to the CapEx question. You said that a lot of investments have been made in technology. That's an area that, without a doubt, we are dedicating significant efforts. The idea is to have an increasingly more digitalized company. We are a real world, real market company. Logistics is key for society, raw materials are located in point A, industries are located in point B, marketing point C, and we are building those bridges. But we can use more technology to do that. That provides agility to our process. For example, we grew 50% in revenue, but we do not need to grow necessarily 50% in back office, for example. How can I do that? With technology, digitalizing our processes and so on. That's part of the equation. Another part. I've said that, we cannot simply pass prices on and survive that. Now we cannot simply control C, control V in the price, increase in inputs. You cannot simply do that. We have to optimize costs. We have to do more with less. And once again, technology plays an important part. I can do the same amount of transportation with fewer vehicles being more productive on a per vehicle basis through technology. So, technology is vital to sustain our business. Having said that, we have been investing about 1.5% of our gross revenue in technology, 1.5%. So part of that CapEx is about technology, you are correct. And not only that, our M&A area, which today is managed by Simpar is contacting tech companies and maybe we can gain time by acquiring a tech company or a start-up or something like that. I don't know. That's we doubted out a fundamental move for us to ensure better margins and ensure the businesses sustainability.

Next question comes from Guilherme Mendes from JPMorgan.

2 questions about M&A. The first, how are you assessing acquisitions. You did mention technology just now. But considering your leverage level and the price of your shares. Historically, that has been a sort of currency you've been using. And so considering the acquisitions you've made in terms of integrating them, how has that process been going forward in terms of integrating and exploring synergies and so on? Thank you.

So our M&A strategy, we are very active on that front and very aggressive, I can say. The share price without a doubt helps when share prices go up. It does become a sort of currency for us. But we have not been using that strategy that much. For our last -- 5 last acquisitions, the share exchange was very low. We do have cash in place to make good acquisitions when we think the opportunity is good. And why do I say that? We are going through a very challenging scenario, very high interest rates, very costly input, and it's just -- not just any company that can manage that well efficiently. That has to do with the relevance that our companies have with our clients where we operate and so on. But there is no doubt that there are opportunities in every crisis. And we understand that this year, it's a year in which M&A has a very good potential. Even though this is not a demand on our end, but we, as a group, we understand this is a very timely moment for us to address that, irrespective of share prices. And you also asked about synergies to be explored. We learned before that our strategy is to preserve the companies acquired close enough to enjoy the size and the ability of JSL to buy imports, get financing lines and so on and so forth. But they remain autonomous enough to be able to manage their businesses as they did before the acquisition. That's the reason that led us to buy them. And that strategy has proven to be very successful. The companies which we acquired have been growing more than JSL that happened in 2021 and it's happening again in 2022 in a more eloquent way. In Q1, we announced 31% of organic growth of the acquired companies compared to 15% from JSL. When we break those numbers down, we also see operational numbers, which are quite interesting. So that shows that our strategy is a good one. But of course, there are synergies to be explored. We have mapped out BRL 53 million in synergies, which have to do with finance lines at lower cost and input procurement, which adds to a very significant synergistic gain that already reflected in 2021, but most of it will reflect in the numbers for 2022.

[Operator Instructions] We'll now start the Q&A session for the web. You can carry on.

Hello, everyone, this is Guilherme. I'll read the questions, some of them Ramon will answer and some I will address. First question we received via the web from Condor and they ask the following. Congratulations on the results. Questions, are there synergies to be captured? What is the leverage level that you consider ideal for the company? With an increase in interest rates, will this be a year to focus on deleveraging the company? Ramon, over to you. If you could answer the first one, I'll address the second one.

Carlos Herrera, I'll address the first question then. As I just mentioned in my previous answer, we have mapped out BRL 53 million in synergies. We have used 25% of that in 2021. So, we still have 75% of synergy gains to be captured in 2022. And I'm talking about the ones which have been mapped out, but we are sure there are other synergies still to be identified. So, we do believe that there are more synergies to be captured, lots of opportunities to be explored. And I turn it back over to Guilherme to address the other question.

Okay, Carlos. In terms of leveraging, we also provide this number and we understand that the ideal average leverage, it's 3x when compared net debt to EBITDA, right? That's a target 3x that we pursue based on our company's cash generation capacity. Deleveraging will be a natural process. So, that's the level that we consider to be ideal 3x. And then, also to your point, our financial covenants, they are linked to the added EBITDA, not the pure EBITDA. So that's important to have in mind. And also to your second question about an increase in interest rates would be the moment for us to focus on deleveraging. Well, that's an option that we have. And we opted to grow at the same rate we have been growing. So, in a year where you have high interest rates, when you have high inflation rates, we do have very good opportunities and very good project to grow organically or to have good M&A opportunities. So in line with the company's strategic strategy, we plan to continue growing, expanding, and we will maintain that same rate even if that impacts our income line in the short run. And now another question from the webcast. Next question from Leonardo. Tell us about the new M&A negotiations. Have you seen new opportunities in the macro market? Do we expect something to happen in the short run? And how about the size of the opportunities? Do we still have large targets to go after in terms of M&A?

Thank you, Leonardo. As I said, in times of crisis, it's when we see the best opportunities. Some of cry -- some are crying and some are selling paper tissues, right? So that's a good time for M&A for a few reasons. Number one, that's a segment where we've seen times of low income -- or low interest rates rather -- low interest rates and that led companies to increase their debt profiles and sign not so profitable contracts. And now they are suffering. Part of our organic growth comes from companies that unfortunately went belly up or companies that have problems with banks and so on and so -- number one, organic opportunities to grow. As I've mentioned before, this is not something easy to do to pass on prices because clients also have their own input chain. It's a conflict zone, if I may. It's difficult to pass on price adjustments. JSL has an advantage because of its close relationship -- with its proximity with clients. That, of course, opens doors. And so we managed to at least see at a table and talk about them. And then we do have this very robust ability to negotiate, show numbers, address customers in a very personalized manner. And that's when you see opportunities for new contracts for companies that might be having problems. That explains those BRL 5 billion that I've mentioned in terms of contracts, new contracts for the next 40 months, only on the organic growth side. On the inorganic front, we have other opportunities. Smaller companies are more inclined to sell because they see that there is a scenario of uncertainty and so on that favors selling the company. in our pipeline, we do have several companies being assessed now and we can already see that there is a certain openness from companies which used to be more resistant. So, we do believe we will have good M&A opportunities going forward. What's the size of the companies. As you mentioned, it's difficult to say because you have different sized companies being negotiated. But we have already announced this before. The size of the companies we have been buying are good companies, well-managed companies with revenues of around BRL 400 million and BRL 800 million. That's the average size we've been looking at. And we liked the ones we bought. That does not mean we could not look at other sized companies, larger or even smaller.

Next from [ Claudio ], a shareholder -- an individual shareholder. Congratulations on the results. Can you talk about the Marvel convertible debentures at BRL 50 million and BRL 50 million.

[ Claudio ], we are basically talking about an operation, which was intracompany operation within JSL structure. [indiscernible] and Marvel are controlled by JSL. And here, we are basically talking about a structure to finance their growth, CapEx expansion. We're talking about renewal and expansion of the fleet, especially for Marvel. And we believe that, that was a good way to support the growth of those 2 companies, issuing debentures. Marvel, once again joined the group mid last year and we are already talking about an expansion of 50% in revenue year-on-year. So that's it. And just to add that Marvel is one of the companies that has best captured the increase in consumption for some products and goods. They transport cold cuts or refrigerated goods for Brazil, Argentina, Chile, Peru. It's a company that has been growing significantly with very positive margins. So the strategy of increasing the fleet was interesting, were improved to being correct and results are now coming. Just to complement, I forgot to mention that this is a structure we put together based on market values. So, that's a structure around a normal debenture issuance where in capital is remunerated as well, just to be sure.

Next question comes from Nicholas, GTI. What is the ROIC/spread that you consider to be sustainable in the long term? And about the normalization of the gross margin for the used vehicles? So first, -- we are growing period -- given that we are growing, it's difficult for us to look at that number in a normalized fashion. What we could say is that the tier we expect today is 16% and upwards. So that, of course, tends to help the spread between the ROIC and capital costs because we are growing, we do not see that happening immediately. The value that we consider to be a reference is about 300 basis points. That would be an important number. Okay. About the gross margins on the sales of used vehicles. We've seen an appreciation happening. Inflation in inputs also helps in pricing the final assets, as Ramon mentioned before, we make anticipated acquisitions of those assets and that for the new basis, of course. But that led the appreciation of our asset base to happen to the tune of 40%. When you look at the margins growing in used vehicle sales, you see that reaching levels of 26% in the quarter. And we believe that the market will develop, but we do not see any major changes in those margins. We expect those margins to remain high. Will it continue to be 26%? I don't know, but we do expect it to be high, especially based on our ability to buy assets well and to buy those assets in an anticipated manner in terms of timing.

[Operator Instructions] This concludes the Q&A session. I'd like to turn the conference over back to Mr. Alcaraz for his final remarks. Please, Mr. Alcaraz, you may proceed.

Well, ladies and gentlemen, first of all, thank you very much for the opportunity. Thank you for the questions. It's always a chance for us to be able to think about what we do and how we work. What is our expectation going forward. We expect to have good organic growth in the wake of the acquisitions we've made since last year. We have -- quarter-on-quarter, we have been breaking records of growth, revenue and so on. And that's what we intend to continue doing. We understand that even amidst a challenging market, opportunities are there. I mentioned some of them. New contracts have shown that we have been able to reap the opportunities that have emerged in cross-selling also. And we continue to accelerate along those fronts. In terms of inorganic growth, as I also explained, we continue to be very active. We believe there are also great opportunities on that front as well. We have a very focused team, a very agile team in terms of passing on the increase in input prices, as I mentioned. The experience brings efficiency. Of course, inflation was low. It remained low for 20 years, but we were quick to respond to a scenario where inflation is spiking. And we also need to optimize cost structure and so on and so forth, as I mentioned, and we are tireless working on that to ensure operating margins, which are healthy. In terms of the TAC agenda, as we mentioned, we believe that that's the best tool for us to help optimize and increase productivity. It does not only help increase margins. It also helps us grow organically because the most -- the more productive I am, the better the price for our clients. The more technology I have, the more information I have and the more productive my client can also become. We have to have that clear in mind, we are part of the production chain. I am part of the engine. I connect raw material to industry to the final consumer. Given that, the more technology I have in place, the more agility I add to the whole process, the more we help in the so-called Brazil cost. We help the company grow organically and improve margin. It's a virtuous cycle. Also important to mention, we are a company that generates cash. So, that has an impact on income and so on and so forth and we continue to generate cash and that is key for us to provide fuel to our organic growth because we need to have CapEx and also helps us grow inorganically irrespective of our share value. So, we believe we have the right strategy in place. We have a very motivated team, very much engaged. We have just announced [indiscernible] as our new TAC officer, Marcelo Arantes, also a very experienced retail professional coming in. So those people are bringing expertise and bringing also the view on the customers and we are here to serve and to do better. And with that, we believe that quarter-on-quarter, month-on-month, we will increase our success in our strategy. So once again, thank you very much for your attention, and we remain available for questions or comments that you may have through our IR channels. We will be glad to address your issues and also to announce our strategies to face this whole scenario. Thank you very much.

JSL's audio conference is now over. Thank you for your participation. Have a nice day, everyone. [Statements in English on this transcript were spoken by an interpreter present on the live call.]