Randoncorp S.A. (RAPT4) Earnings Call Transcript & Summary

Good afternoon, everyone, and please welcome. So the idea is to talk a little about our advances of the ESG schedule. I'd like to thank the presence of everyone here, the authorities, the class entity representatives, the communities, the Ministry of Work, of Labor, the [ class entity ] representatives, our Secretary of Environment and all the authorities present here. And also of the people who are watching us online, on the streaming on YouTube. And also to mention that Fras-le is an open company, and it's part of all the Randon companies also with our ESG ambitions. ESG at Randon is linked to our strategic planning. So as we said, the ESG stands for environment, social and governance, this is a work that Randon has been doing, looking all -- at all the stakeholders from the suppliers to the community going through all the workmates, our shareholders. And most of all, our clients within our vision to look at these global trends, but also the local needs that the companies have of being able to reinforce the purpose of connecting people and wealth, generating prosperity. And that reinforces our principles, which are the sustained basis from the values my father, Randon, my uncle, they started in 1949. That brought us here but also with a very clear purpose of serving well our clients, reinforcing our role with the community, society. And pandemic has sped up the need for the companies, meaning that the companies who don't have a clear purpose, who don't grow in a sustainable way, meeting these needs of the environment, undoubtedly, they will face difficulties, they will struggle to grow in a sustainable way. And mainly looking for the community support, also the public sector and the customer support as well. Using my hand to hold a lot of things here. When we -- when our ESG ambition came through, we were talking about the pillars, the 5 pillars we have: innovation, sustainability, prosperity for everyone. And this topic, we look as an opportunity. We look at an investment we are presenting, and Randon has been doing in its history as an opportunity of growth, of development. And we have always worked with people on the way of challenging them, from -- since the leadership is changing their mindset but also working in a more cooperative way, which is the example of the [ LX ] Institute, such as also mentioning connects to the space we are here. And it's a way of contributing to the community. And when talking about our 16,000 employees, they are our 16,000 protagonists. These people today, they hold the information, the leaderships, they have provided all the support to reinforce -- to enable them to help us with our purpose to connect people and mainly to continue our planning -- serving our clients properly, the society and all who are working for a better world. When we talk about the highlights of the journey, we know it's not a way of 1 day only. We are talking about our ESG ambition, but we're talking about 73 years of Randon. The governance itself started very strong on the '70s. When Randon became an open capital company, an open company, public company, and we learned that the company wasn't alone that we had partners, shareholders who contribute but it's an evolution that contributes more and more when we look to our future, how Randon companies will be in 5, 10, 20 years' time, not only in environment but also social and governance as well. And here, I'd like to stand out since 2001 in the last 20 years, the main moves the company has done, the main actions, working with opportunity with sustainable growth and contributing, so the company can -- it can be a difference on competitiveness. When we look all this governance vision, this is what we place here is a constant walk, and we have always been in touch with the customers, with the community to see what can be done, mainly looking to the future. When we look at our highlights of our ESG journey, we want to talk more about the future because the future is charging us. We are talking about CO2 credits, which is a new opportunity, renewable energies. And when we challenge our team also with our -- Sergio Carvalho, our CEO who will come further in to present the Green Route, Rota Verde program, undoubtedly that reinforce the need of the company to place very bold goals, tangible but bold. And that commitment came with the council to keep on investing on goals that will help the company to reduce the serious accidents by 0, also amplify the net income generated by new products and double the female leaders in the next 5 years, and also reducing to 0 the waste disposal in industrial landfills and the discharge of influence -- of effluents. And in 2030, our most ambitious goal. It seems long time, but it isn't, our idea today is to reinforce this 2030 idea. So we want to reduce by 40% the emissions of the greenhouse gas effect because this is our role. We can't just wait, the public sectors or other third parties do that because each one of the companies is responsible. And that's why we have -- stand that out and we have been doing that constantly. Florescer, the blooming program, that program was in the vein of our founder of Raul Randon. He always saw opportunities in developing the young generations. And today, we still have that program going with Institute of Instituto Elisabetha Randon with Maurien. Maurien helps carrying on that. The project that is much bigger today. And we believe the education, we always say that transforming our state, our country with education. We believe that. And Randon has been doing that for like 20 years, and I reinforce that these things like ESG, they are things that they are already in our principles and our values. What we're doing in the last year, since last year is to disclose this to show these ambitions in a strong way, so the leadership can pursue these goals. And we are counting on the support of public and private sectors with our clients, our communities, our suppliers in order to reach these goals. And we want to mention once again the social role of the private sector. And we're very proud that part of this almost 16,000 kids and teenagers who were served by the program, they come back to working in the company or even in other companies in our region. So for us, today, we are today educating over 1,000 teenagers with other people, other companies together and the Instituto Elisabetha Randon provides the support, the materials. And this is a good number of young people who are well served on their counter shifting school. And we know that if we want to change the world, it has to be through qualification, through education in teenagers. And I will share with you now a quick video on Instituto Elisabetha Randon, so you can know what it is because it's our social branch, it's our social way of connecting all of our stakeholders. [Presentation]

Hello, everyone. Good afternoon. I'm very happy to be here once again to talk about such an important topic. Thank you so much for being here, for your presence. I'd like to start talking about -- this date, you are looking at the screen July 28, that date is the date in 30 days, in which humankind will have used all the natural resources, our planet can produce, can use in the period of a year. And that means that after July 28, we will be using the overdraft (sic) [ overshoot ], so to speak, of the natural resources, which are so important for our survival. All these calculations, they have been done by an international entity, the Global Footprint Network based on data, on the consumption, over the demand also based on the efficiency of transformation of product based on population and on the ability of regenerating itself, of replacing such natural resources. The slide you see on the screen shows the evolution of this overshoot date, these overload days over the last 50 years, more or less. At the beginning, you can see we started the graph in 1971 where this overshoot day finished -- sorry, the overshot days started in December. It took us a year to use the resources of a year -- to use all the resources of the planet. But as -- I see some people may not see all the slides. We're showing a graph where the 50 years, and you can see the evolution of the overshoot today. And what is the day we use 100% of resources and this year will be in July. So by the end of this year, we will have used the resources equivalent to 1.75 planet earths. And if you can, please watch the graph, the year of 2020, we had a slightly different behavior, a bit more favorable, beneficial. And this behavior, the date was a bit late, which happened in May. That has a lot to do with the reduction of global activities because of the pandemic, and that trend has to change. That's unacceptable. We can't change this trend stopping the activities of the planet. All this pandemic, you know very well the level of impact in economies, in families. The poverty that this generated the starvation, the hunger. We need to find a solution for balance. And for us, we believe for Randon, we created this in 2020. We created -- was launched in 2021. Rota Verde, the Green Route. It's a very wide program because it involves actions, involves goals, covering 3 different verticals, 3 different areas of environment. But all of them, if I can put it this way, to improve our ecological efficiency. We have activities in the sense of fighting the climate changes, also on the sense of improving our operational efficiency and also activities of improving our transformations, our processes, the circular economy, reverse logistics to name a few. So this is our answer. As I mentioned, we created it in 2020. We started to generate this program. Our intention here, honestly, was to launch the program in the second quarter of 2020. But because of the pandemic, we had other priorities, and we launched the program in 2021. As I said, it's a very wide program because it involves a number of innovations, of fronts. And some of them we brought to the public light, and we made our commitments public. But the program itself, it's much wider than our public commitments. And one of the points is the reduction of 40% by 2030 of the greenhouse gas emissions. We also have the expansion of developing products and processes which are more eco-friendly. Also, more circular economy activities, reverse logistics. And I'm sure that throughout this presentation, we will share with you some of these projects. And besides that, we have the challenge to send these waste in landfills and also the discharge of effluents by 2025. The effluents we have been treating them 100% for a long time, but we don't reuse 100%, and that's what we want to do now, use 100% by 2025. Our results in 2021, we had a reduction of 16% of the energy consumption comparing to the year before. Our conversion rate, raw material conversion rate, what we bought as compared to what stays in the end of products, we reached the number of 94% comparing to 83% of the previous year. We had 77% of the waste recovered and deviated (sic) [ diverted ] from the discharge. Also on our logistics, reverse logistics, we got 2 tons of materials back, mainly through Fras-le. Friction materials around 1 ton and disc breaks around 1.1 ton back home. We brought back home to be reprocessed, melted and use them in our casting of new products. And we have reused 50% of our treated water. In 2021, we invested around BRL 14 million. This investment is BRL 5 million more than comparing to 2020. And the main uses of these resources were on the treating and transportation of wastes, the treatment of emissions of effluents, other analysis in environmental processes. Our programs for the 40% reduction on the greenhouse gas effect is very complex. The renovation, renewable energy is a very important part of our program. And to talk about this program, we have our Superintendent Director of Fras-le, of the vertical Fras-le and movement control of Fras-le, who is also our corporate leader for health, safety and the environment. Anderson Pontalti will talk more about this topic. Thank you.

Good afternoon, everybody. Very pleased to be here with you this afternoon. Thank you so much for the ones who are here in person. For the ones who are watching us online, thank you for your time. To understand our ESG route, the Green Route as Sergio said, my mission today here is to talk a bit more about more specific projects, but mainly our commitment of reducing in 40% the greenhouse gas effects by 2030. With -- I have 3 elements here in my hand. I need to figure that out. So in order to fight these climate changes, as [ seed ] sense, we need to give back to the world what the world gives us, which is a good place to live. From the world we extract our food, our life. We live as a community in this planet, and it's only right to try our best to give back to the planet what the planet gives us. More specifically about Randon, our greenhouse gas emission sources are divided in 4. The first are the stationary equipment the ovens, the presses which use the energy to run. The second most important -- I'm sorry, this is the second most important. The most relevant is the electric used in all of our operations. And here, we aim to get energy as clean as possible and the fuels of industrial vehicles so we can move our cars within our operations. The other sources not mention here, they are less -- in less number, but also good impact. We have a clear strategy of reducing 18 tons of emissions by 2030. And we have already done a complex inventory of the generation of the emission, and we understand the electrification is very important -- has a very important role. Why electrification? Because is in the sense that we don't have forklifts anymore. We don't have movements with combustion anymore. In the photovoltaic power plants, I will talk a lot further in a very -- we're very proud to launch 2 projects this year. We want to have more and more energy being photovoltaic or eolic or even PCH, but our idea is to change this energy consumption to a cleaner source. And we need to talk about the emissions of GLP of natural gases used mainly in our ovens, in our greenhouses and any other segments that we have. The use of diesel is used in some operations, and we want to make a reduction, a significant reduction. And we're talking 18 tons of CO2 gas which will be not -- will not be emitted until 2030, that's our ambition. And how can we get there? 50% of this energy comes from new sources, renewable sources. Some of them are ongoing, we need to get certified and other require investments. Reduction of 30% of the natural gas consumption used in our processes, we need to find other alternatives or less need for consumption of the gas itself or alternatives that can get this [ form ] in renewable sources of energy. Reduction of 65% on the consumption of diesel. We have some generators running by diesel in these specific units. We have diesel on our transportation vehicles within the company and the same way the CNV and GLP (sic) [ LPG ], which are very used on the greenhouses and moving the forklifts. And here, we have to talk about replacing the equipment, equipment which use renewable energies, which give us bigger greenhouse effect in our planet. Now specifically about this, we are very proud to say that, and I need to congratulate everyone involved in this process because in 2022, we will be using -- they will be operating 2 power plants inside Randon. The first one is the power -- the photovoltaic power plant, which be operating in our training center. 100% of the energy used by this unit will be sourced by solar energy. And the exceeding energy will be able to be used in implements in the expedition area. We're talking about 1.5 hectares of solar panels spread, investing BRL 7.2 million, generating almost 2,000 megawatts per year in this unit, and this will be in production by the end of this year. In December, it will be concluded, will be finished. In January, every month starts with a perfect new operation helping us there. There's a very relevant strategic factor that many of us -- many of you have been seeing our capital inputs, our products are being developed on the way of making our world green, reducing CO2, like the electrical access, lighter products, which, obviously, demands smaller, lower electrical consumption for movement for transportation, and we are preparing the company for electrification. And because the training center is our main center of innovation and competence on developing electrified projects, for us, it's very rewarding to be able to connect that on the training center itself because it generates the green product, making green products in the future. So it's nice that we have this strategic link there that is very clear. But we don't stop there. Our teams are so engaged that we went further. We will not buy the solution of photovoltaic panels. We know they are available. We went to learn how to develop competencies to learn on the value so we can speed up, we can connect more units with this technology and also replicate this model in our clients and our suppliers or other interested companies. We want to create a competence for installing photovoltaic panels on the units. This is our entrepreneurship. We learn with what we do. We don't want to just buy. We want to do. We want to go a bit further, and our second company listed here, Fras-le has an operational plant in China. And 4 years ago, we expanded this plant and we are covering the roofs with photovoltaic plates generating energy. 20% of the energy used in that plant will be fed, will be sourced by these plates. We have 5 buildings in that operation, they are all -- they will all be fed or they will be sourced by that. Here, we're talking about 1 hectare of installed area with the generation of 1,200 megawatts per year. And here, we also have very relevant strategic points. China has extreme temperatures, much cold, much heat, and the energy consumption there is very high and the energy is coal-based, and the pollution rates are so high at some points that the companies they are -- they have to reduce or even close their operations. And if you have these investments in the companies, you are the last one in line to stop, which assures us to keep on working even with the pollution levels, the pollution rates being high. And I'm happy to announce here to go here Luciane, who will cover the other projects. Luciane is responsible for health, safety, environment. Thank you, and I wish you all a good event.

Good afternoon, everybody. I will be talking now, some ESG projects, the zero challenge. I will be detailing a little now which projects we will be doing in order to reach as soon as possible within the goals of our public commitment. The first of them is the zero challenge. The first of the zero challenges is to reduce the discharge of effluents to 0 by 2025. And that means we want to place all of our waste as raw material entering in the processes being raw materials for other processes, and then we have some information which are very relevant. Today, 100% of our metal scrap generated within the companies is already sent for recycling processes. And just to remember, this is our biggest volume of waste within Randon Companies. And more than that, 80% of this metal scrap is recycled internally. We manage to do our circular economy inside the company, placing this waste within our casts. But also inside the casts, we have a very big challenge because we have the casts sand that today is the biggest amount of waste. We need to find destinations and alternatives of processes in which this sand is raw material. In 2021, we signed a contract. We have the eco sand project, sound. We signed a contract with Fagundes Group because we dedicated a lot, testing, analyzing and looking for alternatives. And now we are on a bidding process for the destination of the sand. The second commitment is to reduce by 0, the discharge of effluents, which means reusing 100% of them. We treat 100% of our effluents. And what we do is to recirculate 50% of our volume in our internal operations. Basically, to wash tools, wash parts, wash gas parts cooling. Some areas we have designed that we have in operation, and we want to keep going. We want to continue and reach the 100% treated effluents. Also, we have 2 big fronts when we talk about the Heidrick resources, the effluents and also using the rainwater collection on the sense that sometimes we don't need the drinkable water for these operations, and 100% are our treated effluents. And within these alternatives, we have been searching and working to allow 100% of reuse. We are talking about a technology, the reverse technology that gives a better quality in the sense of reuse in our industrial process. So for more noble things within our industrial process. Besides, we have some adaptations of piping systems, which will enable us to reuse. Important information I want to share today. We have 5 big treatment -- units of treatment. Each one of them on a different site. Today, we are in the Interlagos site, which serves a number of companies, and that is replicated in other areas in which we have industrial plants, industrial sites of Randon. To reduce serious accidents by 0 is a commitment we consider very relevant because we're talking about preserving health, physical integrity of our people. And this is a commitment, a public commitment we have been following within our ESG ambition. And we have placed some strategies so we can fulfill these commitments. We have been working with many initiatives. As I share here, some of them were launched in 2018. And some alternatives of projects, we are placing here in order to meet these goals and to be constantly meeting these goals. The culture of safety, we have 5 attitudes of safety. And we have our motto, an attitude can change a life. And there, we work the concept that we all have a commitment regarding this issue. We are all responsible for the safety of all of our people, and we want that to be spread inside the companies in a very consistent way. We call that active care. This was launched in 2018. And since then, it has been happening with very continuous, interesting action to work on this behavior area. We have also created mapping and classification of the critical risks, and we call them critical risks adopting international methodologies, the HRN, which makes this definition of severity criteria, exposition, probability, frequency number of people, a number of criteria in which we can classify the risks and find a road map in which we can prioritize our investments and projects for the elimination or minimization of these risks. So here, we have this methodology being used applied to all of our units, and we can manage to make a big driver inside the company. So actions can be taken as fast as possible. And within this line of action decision-making, only last year, we invested BRL 40 million on the elimination of critical risks. This is very relevant. Some of them are listed here. Some of the projects, the process automation, some adaptations of machines and equipment, the elimination of industrial vehicles with internal circulation. Some of the projects we have allocated these investments. And I'd like to mention also the computational view on risk control, also the using autonomous vehicles in -- while moving inside the company, projects of high consistency for this commitment to be fulfilled fully. And now you will see a video that our Director of Technology and Innovation, he is -- he couldn't be here today. He's working on a business trip, Cesar Ferreira. You will be watching his contribution and his message regarding the ESG. Thank you very much.

Good afternoon. I'm Cesar Ferreira, Director of Innovation and Technology of Products. First of all, sorry for not being able to be with you today. I'm on a business trip, and I couldn't make this happen. I have been invited to bring you some details on how Randon has boosted the net profits. Today, I'm inside RTS, which is designed to develop automation solutions for Randon. We have acquired a sister company, a familiar company. We have been working in a very -- with a good synergy in order to provide automation solutions for Randon. It's very prepared to serve the market, but it's a company who will keep on serving better the clients which are the market companies that use this technology, these competencies we have inside Randon. Speaking about new products, established groups, vocational groups to develop, to speed up the automation process. But I haven't mentioned the part of this puzzle, which is redesigning Elisabetha Randon Institute since last year became a science and technology institute. In this structure today, we have over 30 professionals highly qualified. We're talking about people with masters, with PhDs, who have been researching in a number of different areas but are very focused on mobility vehicle electrification, loaded electronics and new materials. And one of the things that happened here was the easiest solution in which we recover energy, when we load this energy can bring over 20% of the fuel reduction of the mechanical horsepower, meaning that it has a very important impact of the business on the cost of the operation also with a result, important result on the CO2 emissions done by this vehicle. We are burning 20% less diesel. And this, together with Fras-le used intelligent materials. And why we call them intelligent materials? Because they are not simple uses of fibers. It's a different way of thinking these components using building concepts innovative for engineering. These solutions, they have been so innovative that they allowed Fras-le to create a new business innovation called Fras-le Smart Composites, and I can tell you today that our substances or even hundreds of millions of thousands of components in our in our trailers, semitrailers. And they will provide solutions created with this target, reduce the weight and increase the effectiveness because these solutions that Fras-le have been creating, using smart composed materials, they aim to reduce the weight of these components, and this is what have been -- has been found out. All these research, these investments in researches of new materials done through [ IHR ], they also brought new innovations. This group has recently developed methodologies, patented globally of niobium nanoparticles. And that solution allows us to establish a production process of nanoparticles of niobium. And the relevance of that discovery is so big that it has [ incentivated ] the organization to create a new company, NIONE, which today produce in high-scale nanoparticles of niobium, which can be used for transforming a number of materials from surfaces such as sprays and varnishes with properties, reducing the corrosion of parts in which they are applied to transformations of materials such as resins, metal alloys, cosmetics, the pharmaceutical industry. The number of applications is very big. These particles, they are so small, they can change the molecule chain of structures, and that allows us to find very different solutions. This is another thing we know we will transform a lot of the portfolio of products from Randon. Please, you can wait for news because they are coming soon. In a general overview, I want to show you in a clear way how things are done at Randon, but nothing better than numbers. And I would like to highlight some values that are very important for you to understand how the innovation is treated inside Randon. We have invested around BRL 95 million in processes of development. BRL 95 million is a very relevant value, 144 new products with almost 50 patents requested. That's only in 2021. This number only reinforced what we presented of how innovation of products is important for Randon, not talking just about disruptive innovation, but the incremented. They are always based in some pillars increasing of efficiency, reduction of the environmental impact with less emissions of the greenhouse gases and also very aligned with our ESG policies. And this, I will close my participation, and I would like to thank you for your participation.

Good afternoon. I would like to bring our commitment on sustainability with focus on diversity in which we comply on duplication, duplicate the number of women in leadership positions by 2025. I'd like to highlight here some actions we have been doing in the last few years in focus on education and awareness for this topic within our groups in Randon. We had our Plural journey, which were courses, web seminars targeted to the qualification of our leadership. 100% of our leaderships were aware on that topic. Also, the diversity tour in which talks, internal conversations, which were mediated by our diversity group in order to foster reflections on diversity, the perception of diversity by people on the routines of Randon. We have a number of actions related to communication and awareness. In the year of 2021, we have 1,700 people watching that in which we take celebration dates or schedules of fights for rights aimed to minority groups in which we can launch communication to our workers, to our employees about these actions. We have worked some instruments for promotion of equity. So in 2021, we updated the code -- we reviewed and updated the code of ethical conduct. And in this moment, we committed and reinforced our role regarding diversity and inclusion and bringing that role to all of our employees to reinforce the role of everyone in that journey in which we all have our part of responsibility to move on. We are constantly reviewing, updating our processes of communication to work the journeys targeted to immigrants or other ways to make the governance of diversity. This year, we have -- we will launch our committees and our affinity groups, so we can talk about diversity, looking at the differences we have inside the company, including 5 groups: gender, ethnic/racial, LGBTQA+, people with disabilities and generations. In the gender equity front, we have launched the female mentoring program. This program wants to boost to speed up the development on the competencies and in the career for the female leaders, aiming to generate a better representativeness on the leadership positions of Randon which goes -- which meets our commitment of increasing leadership positions. In the first cycle, we had 26 women generating this sharing of experiences, generating the strategic views for our companies in order to get new positions. In this cycle happening right now we are working with 14 pairs, and the idea is to expand the cycle to have more women developed in our company. I would like to invite Sergio and Daniel to the stage again.

So once again, thank you for being here. Thank you, our partners for presenting. So many actions Randon has been doing on the ESG ambition, which has contributing for new opportunities, new business and even the recognition, Sergio. Last week, Sergio was in São Paulo receiving an award for Randon Company, the best companies of ESG carried out by [indiscernible] magazine and Randon with [indiscernible] other so important -- such important companies was recognized. But for the first year of our ambition, many recognitions and the engagement of our leadership here. It's an engagement that comes -- not just coming from Daniel but from Sergio, but for all leaderships. And this is the difference that makes things happen. When you see ESG as an ambition as a purpose, of Randon, it's much easier, the execution and the commitment of people who start to see opportunities. Anderson brought this also, the other speech -- the other speakers, Luciane, Thamis. The photovoltaic power plants, they generate new business or new opportunities, new jobs, more taxes, more added value to our community, which is very important. It's very clear to reach this goal besides the commitment we can reach the number of 50% of our energy being renewed. We also need money. We need capital. What we want to open -- share with you today is that Randon is committed by -- until 2030. We want to invest a big number to reach our mission to reduce 40% of the greenhouse effect emissions, and we will invest BRL 100 million by 2030 in order to reach these goals. And who knows, may even overcome all these ambitions and all these goals. We want to be committed. We want to have a long-term view because we know it will add value to the company, to the community, to the partners and all the clients.

BRL 100 million of investments. So only in renewable energies, only -- just to remember what Daniel said, Anderson said, we have a commitment for reducing by 40% the greenhouse gas emissions, reducing 18 tons of CO2. And to reach that number, 50% of that will come through the renewable energies, which are associated to this BRL 100 million of investments. We will invest more than that because we need to look at the other 50% as well. As Anderson mentioned, our target, our goal to reduce the consumption of gas used in our companies, of diesel, of moving equipment, all that will demand investments, additional investments. So this BRL 100 million, they are just associated to the 50% of energy, of renewable energy. And since we're here, Daniel and I, we would like to show you the emission of our sustainability report, both from Randon and Fras-le. These reports, they have -- they are very specific. They are transparent. They have details on the main programs associated on the 5 challenges we have made public. And what we would like to do is to show a small video showing these sustainability reports with the participation of people who are highly committed to this event. And after these videos, Daniel and I will also say goodbye, we will be finishing our meeting today. So please the video, and thank you. [Presentation]