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

Good morning to all. Welcome to the conference call for results of Randon, where we will talk about Q2 2022, bringing the main highlights of the company in this period. On the screen, we have our disclaimer, reminding you that information shown today are not guarantees of performance. They involve risks, uncertainties and assumptions. They refer to future events and depend on circumstances that may or may not occur. On our agenda, we will have our CEO, Sergio Carvalho, talking about our business. Then the CFO, Paulo Prignolato, will explain our consolidated results. And finally, Esteban Angeletti, Finance and Investor Relations Director, will show the performance by business verticals. After the presentations, we will have the Q&A session. [Operator Instructions] The event is being recorded and the recording will be made available on our website's Investor Relations after the end of the conference. We would like to begin the presentations, beginning with our CEO, Sergio Carvalho.

Greetings to all. Thank you very much for being with us, and we have another video conference to talk about Q2 2022. It's a great satisfaction to share with you information about this period that was challenging, but which was also full of deliveries and important initiatives for us. As you know, we're going through a scenario of -- that is more complex for the market with high interest rates, inflation and difficulties in global supply chains. These factors have affected some of our segments with greater intensity, for example, road implements. But even with this, with our diversified business model, we have sectors that are having a very good performance, for example, auto parts and especially the aftermarket at Fras-le. I reinforce that even with this more difficult dynamics in the short term, when we look forward, all of our business verticals have opportunities for expansion and internationalization, increasing the portfolio and gains in efficiency. We're working very hard in this sense. Soon I will give you details about some of these initiatives. I would like to begin talking about our numbers, and then Paulo and Esteban will explain in greater detail. In this quarter, once again, we reached a record revenue, reaching BRL 2.8 billion in net revenue, consolidated net revenue. To get to this level, each vertical had its relevance, and I would like to highlight this message. Our business model has evolved, has become more robust and with many opportunities for us to explore. Our revenue from the export market reached $112.5 million, an important increase of 60% when we compare with the same period in 2021. In the quarter, EBITDA and net profit were a little lower than in comparison with other years, but at good levels. Talking about CapEx, BRL 72 million in the quarter, especially for maintenance of our assets and gains in productivity. As always, we're being very cautious in our investments. Our net debt, without the numbers of Randon Bank, reached BRL 2.1 billion, and we maintained our leverage at a good level. We continue delivering an excellent profitability on the capital invested. But I would like to call your attention to the graph that you are seeing on the screen now. Here, we can see the consistency of our results quarter after quarter. Even with the challenges -- with all the challenges that I mentioned, our revenues continue growing. We continue with a good generation of gross cash flow and create profitability. This is the resilience we want. We are sure that it will be more and more present in our results with the many initiatives that we have in different fronts, for example, linked to innovation, internationalization, increase of portfolio, operational efficiency and sustainability. In this quarter, we had many new -- we had a lot of news in each one of them, and I want to share them with you, beginning with the innovation. We launched a product line of New R, our OEM vertical, which is totally connected to our commitment to offer solutions that will add value to our clients, reducing their cost of operation. These new semitrailers also have a more modern design and have solutions for modularity, electromobility and a lot of embedded technology. The great highlight is the aluminum bulk truck, which allows our clients to carry an extra ton of cargo, and this increases competitiveness and brings benefits for the environment. On the screen, you can see the QR code to see the video launching the New R Line and to see more details. Another important highlight in innovation was the regulation that allows a system of semitrailer with electric traction on Brazilian roads. Our e-Sys system was so innovative that there was no regulation for this product. So apart from creating the solution, we have to help build the laws with the government. We have 2 models with e-Sys system running at clients, being used by clients for a test. One is a bulk truck, one is a refrigerated truck. And this is the final validation of this technology that should be sold until the end of the year. I would like to talk to you now about an important point in our company linked to our strategy of internationalization. On July 7, we had a material fact, the purchase of Hercules Enterprises, a manufacturer of semitrailers located in the U.S. As you know, we want to expand our export revenues, revenues in strong currencies, especially in developed markets, increasing the resilience of our business. The U.S. is a geography that is fundamental of this strategy since they are the largest market of semitrailers in the Western world with many opportunities for us. This year, they will produce more than 420,000 semitrailers in many segments in the U.S. market. In other words, 5 to 6x larger than the Brazilian market. We know that there are many synergies to capture in this market in the operation and the verticals, and also exporting auto parts that will equip semitrailers and access the local market being sold to other manufacturers. Apart from M&A, we have another front to reinforce our entrance in the U.S.: the exports of semitrailers from our Brazilian plants. Recently, we closed an important deal that will be sent in Q3 to a new client, and there are more possibilities in this area. Another point that we have dedicated ourselves is in the efficiency of our operations. We want global levels of excellence. And our RTS industry is having a fundamental role. I will comment some projects that we implemented in the quarter. But we also have many others that are in progress, and we will continue sharing with you the news about these projects. I'll begin talking about the increase in production capacity at Master, our controlled company. Now they have an automated forge and also with robots. We also inaugurated a new system for warehousing of parts, increasing speed and safety in the use of materials. Another example is the automation of the Ecoplate panels that are on the sides of our bulk trucks. In the past, this was totally manual. Now we have sales with robots. It is more competitive for our operation and has many advantages in terms of safety and quality. I invite you to watch a video. You can access with your QR code. You will see this line working. Another project that is very important for productivity aligned to the expansion of the portfolio was the inauguration Jost Campinas. This new plant was totally built to be the most modern solution in operational efficiency, and this caught the attention even of our partners in Jost Germany. All this work done by RTS. This unit expands the number of products offered by the company, and now has the manufacturing of components for buses now with a presence in the city of Campinas, a very strategic location close to suppliers and clients. I would like to talk about another topic that is fundamental for us, the sustainability. In Q2, we launched another addition of our report. The first and the second edition of our Event Ambition ESG. You can see the files and the recording of the event on our website. We made an important announcement in this event, an investment of BRL 100 million up to 2030 in renewable energies. We have a commitment to reduce by 40% our emissions of greenhouse effect gases until this date. And we have projects in progress, such as we're building 2 photovoltaic power plants, one for CTR [indiscernible], and the other in Fras-le in China. We know that it's the beginning of a journey, but we're very happy with these deliveries and with what we can still do. Other reasons, the recognition of the Randon companies as the best by Exame Magazine and ranking in MERCO. We have evolved a lot in the last few years and receiving these awards shows us that we're on the right track. Now going on to the final part of my presentation, I would like to talk about our Randon Day. I'd like to thank you, investors, analysts that were there in person or remotely. More than a thousand people watching and participating in our live event. We were very happy with all this interest in our company and the possibility of giving more details how we're building the future today. Reminding you -- that those who were not there, we have the recording available. Everything is available on our Investor Relations website. This event, together with our participation in conferences and the way we -- our relationship with the capital markets and governance were the reason for us to be a highlight for the third consecutive year in Institutional Investor. We led all the 8 categories in the ranking, in capital goods and also small caps. We're very happy, and we thank you -- we thank them for the recognition. We continue evolving in our governance, communicating in a transparent way to the market and trying to expand and improve the quality of our messages. Thank you. Now I'd like to pass the floor to Paulo, who will continue the presentation.

Thank you, Sergio, and thank you to all in our conference call for results. I'd like to reinforce for -- Sergio's thanks for the award we won from Institutional Investor. I'd like to thank all the teams of Randon who worked with us for the evolution of the governance of the company and our good practices. I would like to begin talking about our markets, especially trucks and semitrailers. We saw a drop in demand when comparing with the numbers of 2021. When we look at the market of trucks, there was a lack of semiconductors affecting this segment. Even year-to-date, the numbers are close to those registered this year. When looking at the market for semitrailers, the complexity and the challenges are a little greater. Although agro business continues with excellent performance, giving support to most of the demand, other sectors such as those linked to consumption goods have felt with greater intensity the effects of the higher interest rates and inflation. With this, the business environment has been more challenging, especially in the domestic markets. Even with this, in the first half of the year, we sold 40,000 implements when we look at the history of the Brazilian market. Looking outside the Brazilian borders, we have a more positive performance when we compare exports for trucks and semitrailers. This is due to the recovery of the economy in some geographies, for example, some of our neighbors and also agribusiness. Like Brazil, it's an important factor for demand. Now going on to the numbers of Randon, I would like to begin with net revenue, another quarter with a record BRL 2.8 billion. And as a highlight, I bring some factors. First, aftermarket had very good performance in commercial vehicles and light vehicles. We had a growth in exports in almost all the product lines, and also the price increases because of inflation also allowed us to increase revenue even with the drop in volumes in some segments. And our acquisitions and purchase of larger companies added BRL 79 million in Q2. In the analysis by business vertical, we see the importance of diversification. Our 3 main verticals have a relevant participation, each one with different characteristics and supplementing the others. By product, we have a good distribution, being the most representative semitrailers; then axles with 13%; and friction materials, which represented 12.6% of our net revenue. When we look at the markets that demand our products, 57% of the net revenue came from OEMs and the aftermarket price, which has gained relevance, reaching 20.6% of our total. Now revenue from export market, we reached $112 million, a growth of 58% in the comparison with the same period 2021. And as main factors for this growth, I highlight agrobusiness in South America. The increase of the average price of products sold due to inflation being passed on to clients and new clients and contracts obtained. Now revenue of the export market by geography. We see that sales to Mercosur and Chile represented 54% of the total, and this is due to exports for OEMs that have a higher average price in this region. The sales to the U.S., Mexico and Canada represented 23% and had origins especially for movement control. This geography becomes more and more important with the beginning of exports of semitrailers to the U.S., already mentioned by Sergio. On the screen now, you can see the graph with the performance of EBITDA and EBITDA margin. Our margin was under pressure due to the higher production cost and difficulty in increasing prices. Although we took measures to mitigate the impact, the scenario of global instability in the quarter put pressure on some raw materials that are important for our production process. Apart from this, we had to work with different strategies to sell products in inventory and to increase production, especially in OEMs. The positive point was the recovery of market leadership, but this put pressure on margins. The other business verticals also had challenges to maintain profitability, but with a different market dynamics. In movement control, for example, it was possible to recover prices due to inflation. I would like to stress that we have worked intensely in controlling expenses to contribute and have a good maintenance and good levels of profitability even in a more complex scenario. On this graph, we see that our net result continues positive, but is impacted by the factors that I mentioned and also the financial result, especially due to the higher interest rates. Going on to financial highlights, I'll begin talking about our net debt. At the end of June, reached BRL 2.1 billion, 1.5x EBITDA of the last 12 months. As you can see on the graph, we had an improvement of this indicator in the quarter, especially due to the follow-on. In the same period, the cost of debt went up from 13.1% to 15% a year due to the increase of the SELIC rate. The need for working capital of the company without the numbers of Randon Bank reached BRL 3.1 billion. The accounts were clients and inventory, as you can see on the screen. But I would like to stress that we have many actions to reduce our debt, and this can be seen in Q2 and will increase in the next month. Now talking about investments made in the quarter, in total BRL 459 million, distributed among CapEx, in nonorganic investments and integralization of capital. Before Sergio mentioned initiatives and projects, part of these resources -- where these resources were invested. And now, for example, here we see capital integralization. Of these, BRL 300 million went to the follow-on, an event where we increased our share in Fras-le to 52.6%. To conclude, I would like to talk about our performance in capital markets. At the end of June, our market cap was BRL 2.9 billion, RAPT4 our share -- and RAPT3, BRL 8.5. Our average daily volume of shares, BRL 24 million in Q2 2022, with a drop when we compare with the same period in 2021. Our shareholders: here, we have a profile based on the total shares. At the end of June, 39.6% of the shares were in the hands of the controller, and then institutional investors with 23.1% and 20.3% from foreign investors. The rest is distributed among legal entities and individuals. And we now decided the interest on capital, BRL 70.4 million. And here, we can see $0.21 per share, totaling BRL 70.4 million for those who had our shares. I would like to conclude. And now I pass the floor to Esteban.

Thank you, Paulo. Good morning, and thank you for following our conference call. It's very good to share with you another quarter full of important facts and consistent numbers. Sergio and Paulo already approached the market, our main numbers and some initiatives that happened in the quarter. Now I will detail what happened in each vertical relevant items. Beginning with OEMs, we have here the main numbers. As you can see, we had very good revenues in the domestic market and export market. But as we had mentioned in the last quarter, the current scenario with a very competitive market put pressure on margins during this quarter. I highlight the following points of this vertical. An increase in net revenue, 22% in comparison with Q2 2021. And this is due to the pricing increases. Delivery of 7,240 semitrailers in the domestic market and exports, an increase of 12% in relation to last year. Also more railway cars, but still lower than in the same period in 2021. Volumes sold to the export market reached 36% due to the increase in demand in South America, especially Chile. Analyzing the revenues of this vertical by line of product, we see the diversification of business. We have 1/3 of our sales coming from less cyclic sectors or supplementary businesses as aftermarket and railway trucks. Even semitrailers in the domestic market, which represents most of the revenue, has a great exposure to agro business. And we have relevant data for you. In Q2, 69% of the semitrailers sold were for agro business. Now talking more specifically about EBITDA. We had impacts on margins in a more strong way due to the higher cost of inputs and strategic decisions to recover market share and reduce inventory. And thus, we are now market leaders again in the quarter and year-to-date. And with this graph, you can see the distribution of market share in Q2. Now talking about auto parts, commercial vehicles, 1/3 of our revenues. I would like to highlight growth of 36% in net revenue in comparison with Q2 '21, especially due to price increases, product mix and revenue from Castertech, almost BRL 60 million in this quarter. A reduction in volumes in comparison with -- due to production stops at OEFs (sic) [ OEMs ] and a deacceleration in semitrailers. And a small drop here in the quarter, especially due to inflation in the supply chain. Now you can see the distribution of net revenue by segment. Sales to OEMs represented 90% of the total. But I highlight the balance with the other segments for trucks and semitrailers. Apart from this, we should highlight that we have worked hard to get new clients and new projects. One example is our controlled company, Castertech, which has increased its exposure to agro business with greater capacity of casting and machining. This allowed the company to close a contract for an important client in agricultural machines. Now I would like to talk about movement control, which had record revenue with a positive market scenario. I will share my presentation, highlighting points in the domestic market and export sales. Now talking more specifically about the Brazilian market, I highlight 57% of the revenue were aftermarket, which was very strong due to the low availability of new vehicles. Also, strong demand of brake linings for commercial vehicles because of agro business. The record sales of shock absorbers by Nakata, our controlled company, and the improvement in the availability of imported products. Now in the export market, $83 million export market in Q2 represented almost 40% of the revenue. I highlight the following points. Strong demand in exports of friction material for the commercial line and disc brakes for passenger vehicles. The U.S. market is buying and selling very well. Gradual recovery of the European market that suffered most from the Ukraine war. Now we are increasing prices in many product lines for Europe, allowing us to mitigate the impact of inflation. As you know, the results of this vertical have to do with Fras-le, also a company in the stock market. If you want to have more details about Fras-le, please access this site, ri.fras-le.com. Now going on to financials and digital services. We have important movements for -- to expand the offer of services, and I bring the following highlights: progress of 58% in the revenue in comparison with the previous quarter, BRL 118 million; an increase in the number of quotas sold, with a good performance in the agro business; and higher interest rates, making this financing more attractive; greater number of operations at Randon Bank and with a robust credit portfolio. But we also had a growth of CPV, a higher -- we had to pay more for higher interest rates. And we had an increase in administrative expenses due to the payment of commissions due to the high volume of pool sales quotas. So this higher expense put pressure on margin, but the revenue will come in the medium and long term, helping the margins of the company in the next quarters. Finally, we have advanced technology vertical. As you were able to see -- well, as Sergio explained, this vertical has been very important for Randon companies. RTS industry, for example, giving support to transformation and new technologies for our industrial operations. CTR also gave support to Randon. They have telemetry and brings many -- bring many benefits to clients, generating data for vehicle maintenance and also gains in efficiency and productivity. In this vertical, we had a net revenue of BRL 39 million with an EBIT of BRL 126 million. Removing the -- removing this other factor, I would like to say that Q4 will be more representative. And the objective is to give support to the other verticals without the generation of results. As the use of this vertical become more relevant, so EBITDA should become positive. And in this sense, it's important to say that we're building and developing many projects with great opportunities to reap the results. NIONE, our controlled company in -- with -- NIONE is an example. We're supplying this technology to a business partner, but we have many other projects in progress for growth, not only of this unit, but also Randon companies as a whole. Thus, I'd like to conclude my presentation. I would like to thank the award and the participation of all of you in our Investor Day. Now I'd like to pass the floor to [ David ] for our Q&A session.

Good morning. We'd like to begin -- I'd like to thank Esteban, Sergio, Paulo. We'd like to begin our Q&A session. [Operator Instructions] We'd like to begin with Lucas Marquiori from BTG Bank.

2 topics in road implements. The first, maybe, discuss -- if you could discuss the strategy? We saw the first semester market share was volatile. We know some projects to grow capacity. Can you give us an update in terms of your strategy for road implements? Are you trying to preserve share or increase price or be the lead price maker as we saw in Q2, maybe go back to volume? And second. Sergio mentioned in his presentation an export contract for implements to the U.S. And with Hercules, your strategy to grow in the U.S. Could you comment on this contract? Is it relevant, the size, in units? So I know Brazil is very competitive for implements in the U.S. market. Could this be another avenue of growth?

I would like to share the answer with Sergio, and then Sergio can give us more details. Lucas, I understand that the 2 questions are interrelated, strategy for implements. And we have been saying that this strategy is growing also outside Brazil. When we look at the history of Randon, we have been market leaders, having a share of 36%, 40%. And it becomes more difficult to grow when you are the leader. That's why we are after new geographies. We are recognized in exports, especially in Mercosur, Chile, as mentioned, and Africa. But we know that the great volume, the best volume is in the Northern Hemisphere, in Europe, the U.S. and Asia. And the U.S. is -- the U.S. continent, as a whole, is a geography where we believe there is a good penetration for our product. We're working with exports; brownfield; with the acquisition, Hercules; or greenfield, increasing organically our operations in the U.S. That's where we have exports. We cannot mention the name of the clients nor volumes. We can say that it's one of the largest exports to the U.S. market in the company's history. And once again, we believe this is only the beginning not only to take semitrailers, but also auto parts to supply to other OEMs in the U.S. Going back to the domestic market. We mentioned in the last quarter that the whole year we would have a balance between market share and profitability. And we are -- we want both together. We want to become market leaders with a good profitability. But this is something difficult. The balance is very difficult. And this is the dynamics for the rest of the year. We want to continue as leaders, market leaders. But if the market is not paying the price we believe is the right one -- and we will do our best to mitigate this impact and maintain our margin. Sergio?

Perfect, Lucas. Esteban explained things well in the answer. What we're doing, Lucas, is like what we -- similar to what we have insisted. We have a model for the OEM division that is more resilient in relation to market changes. We have growth in railway cars, and also aftermarket has grown. International part of our OEM division is growing. All of this with the same objective: we want to have more consistency, more resilience in revenues. And within the domestic market, we invested a lot last year. And this year, in increasing capacity, we created Araraquara 2, taking the production of railway cars and semitrailers to expand capacity in a more significant way. We changed the production of certain products within our plans, also with the objective of having more capacity. We made heavy investments in automation. And we have, thus, a greater installed capacity. The market, when we compare with 2021, it's not as strong as in 2021. And the way, especially in the medium term, is to continue growing well in these sectors through technology. As we announced, for example, our concept bulk truck. We heard about the e-Sys, the Randon trailer that is hybrid. And we launched recently our New R, our new trucks with giant advantages in terms of performance. And this is being a great success for us, our new bulk truck with more capacity. So we're maintaining our leadership position. We recovered from the anomalies that we described in the last report when we had a lot of sales, but we needed better licenses for penetration in the market. And we advanced in penetration in relation to our competitors. As Esteban said, we made a greater effort for margin. But we're not going into any suicide price war. We will not engage in price wars to preserve the health of the business. We have large volumes, but we will not do things that don't make sense in financial terms. Randon companies have a synergistic model. For example, we have margins, some -- that we have in different units. So even when you look at one vertical, you have to remember that we have margin in auto parts and financial services. So a lot of synergy, a lot of symbiosis in our operational model. I hope I answered your question. Esteban mentioned exports, U.S. market. We're working to finalize the transaction of Hercules. We will produce in the U.S. And in August, we began exports of finished products to the U.S. market in a competitive way in spite of very high ocean freight prices. And we will produce a substantial number of units this year. We should send 800 units to the U.S.

Our next question comes from Lucas Laghi, XP.

I have a more specific point, when we talk about margin -- lower margins. And here, thinking of 2 specific points in relation to OEMs and auto parts for commercial vehicles. Beginning with OEM, we saw an increase in the unit price of road implements and a strong increase in relation to last year due to the higher costs. And in this context, a recovery of market share. This margin drop, when we compare, is it due to lower inventory of expensive products? Can we expect something different in the next quarters? Or is it -- or did the product mix affect greater part anticipation of higher value-added products, which makes it difficult to compare? So first, OEMs. And in relation to auto parts for commercial vehicles, we know that this vertical has contracts with OEMs. So can we think that the drop in margin in this segment was due to more difficulty in increasing prices and that it may improve in Q3, 4? These 2 points.

Let's join this with another question from [ Gustavo ]. Same question. Margins and perspectives in the future to recover margins. So beginning with OEMs, Lucas and [ Gustavo ], there were 2 points. One is the comparison basis. When we compare with Q1 last year, we already alerted that there was a positive effect between price increases. The market was very strong last year. And our strategy, anticipating the purchase of raw materials. So our comparison base had this. We had been able to anticipate price increases, and we were producing with inventory raw materials we bought at a lower price. And we had said that these 2 curves would meet, the cost curve and price curve. This happened in this quarter, in Q2 2022. What we see in OEMs is a combination of factors. We have drop in volumes, mix and price. These are the factors. Talking about mix, what happened -- and this has to do with the average price. We had a delay in the sale of bulk trucks. Normally, we sell more at the beginning of the year. This did not happen for many factors. One, the higher interest rates, uncertainty in the economy and the uncertainty due to the fertilizer issue. And thus, clients for agro business delayed orders. But this is being recovered in the second semester. So the fact that in the second semester that we have a greater number of bulk trucks should affect -- have an effect due to a lower ticket in relation to Q1 '22. Now concerning auto parts. Here, we have the mix. Mix helped a lot; like OEMs, higher ticket. But we had a drop in volume. And this put pressure on the margins of auto parts during this quarter. Some of our clients, OEMs, stopped. They had some production stops sometimes due to lack of components or due to decrease in inventory, and this put pressure on margin. We hope that as the supply chain becomes normal, we should see these margins going back to a more balanced level. And to close this topic of margin, I'd like to highlight that we have a diversified portfolio. This helps. And we had Fras-le and control movement that defended the margins of the group due to their resilience. So Fras-le helped in a positive way for the margin of the group. So this is the rationale. Sergio mentioned this previously in Lucas Marquiori's question concerning OEMs. But this strategy of diversification is helping. Sergio and Paulo, if you wish to supplement.

I believe you covered the topic very well. Well, we'd like to go on to the next question from Luiz Capistrano, Itau BBA.

We talked a lot about the dynamics of each business. I have 2 questions. But I would like to also talk about guidance. An update, more detail about the strategy for road implements, the balance between market share and price. I believe you closed Q1 with high inventory anticipating the effects of the war. And then raw materials had a price drop. I'd like to talk about Q2, Q3. The inventory on June 30, do they have the price of raw materials that are higher than in August? Should this have a negative impact on margins due to the higher prices in Q1? And also competition. You made price increases and the competition did not increase their prices, but costs went up. So are we still -- are competitors holding prices back? And also your guidance. When we look at revenue, it seems that it's -- do you believe -- are you comfortable with the range? Now concerning margin, if we look at second semester, that is -- it seems that margin is at the bottom of the range. And also this discussion: how do you see the guidance? Are you comfortable for margin? Do you believe margin will drop?

I will answer this question together with Sergio. Sergio, if you want to talk about competition. Paulo, if you want to talk about guidance. I'd like to begin talking about inventory, and then I will pass the floor to Sergio and Paulo. Concerning inventory, Luiz, in fact, we had higher inventories at the end of the first semester. But I don't see a significant impact in terms of cost. There is a trend of stabilization for cost, no threats like we had last year of higher costs. But we have an inventory that won't have a great impact on future sales. In relation to prices, the market is more rational in comparison with 2016. But I would say that things are more normal in terms of price. We don't see significant price wars because competitors, manufacturers that survive the crisis, learned their lesson to preserve cash. Sergio, if you want to talk about manufacturers and competitors, competition.

I understand that the question is focused on OEMs. Focusing on OEMs?

Yes.

Okay, Luiz. In 2021, we had an abnormal dynamics. We had a rapid growth. The market grew -- sorry, 34% rapid growth. And this caught many producers without production capacity in relation to demand. When we saw restrictions in capacity, we had the opportunity to improve margins: since I can't produce enough, I can maximize my results with what I can produce. In 2022, things are different. The markets had a drop. It's still a very good market, I can tell you. But the volumes are lower. And we expanded our production capacity, and we're back with our historical demands. So removing this anomaly that I mentioned in the last meeting that we had, in our last conference call, we're back to our penetration: June, 10% ahead of our competitors; in May, 7% ahead of our competitors. And this dynamics in 2022. Esteban mentioned the issue of raw material inflation, capacity to increase prices. This is having an impact on some margins. But we are sure that for us, Randon companies -- we cannot forget that we are diversified. We will continue with our aggressiveness. We won't do -- engage in price wars. Being aggressive is something; doing mad things is another. We will invest in technology with marvelous new launches, calling a lot of attention. And this allows us to bring a lot of value to the market and to us in terms of margin.

To close the question from Luiz, guidance on revenue and margin. We have been following our guidance, what we defined, and we made projections. What we can say in relation to the guidance, we trust strongly and we confirm the guidance that we gave at the beginning of the year. This is the best way to position ourselves. The objective is to maintain this range due to many variables: markets, mix, export volumes. And we have a lot of volatility that should continue. So we confirm our guidance, Luiz.

Well, going on to the next question, [ Renata Carvalho ].

I have 2 questions, a follow-up in relation to the guidance. You're having a good performance in the export market. And I believe the guidance was made before these new things in the U.S. Is there the possibility to have an improvement? And the international market, implements. I believe that the company before announcing the acquisition of Hercules said there was an intention to go to mature markets. It could be Europe or the U.S. My question after this acquisition, in the short term, is Europe discarded? Or is there a possibility of new facts in Europe?

I will answer this question with Paulo. Paulo, if you want to comment on the guidance, export revenues. And Sergio, possibility of having operations in Europe or expanding operations in Europe.

Our positioning is to confirm the guidance. Of course, we work hard to surpass the indicators. But right now, we're confirming the guidance, including exports. If during the next months we feel a significant variance, we will inform the markets. It's not the case now.

While concerning Europe, yes, if you can comment, Sergio.

We have been talking about going into mature markets. U.S. was the most recent case, but the possibility of making progress in other geographies like Europe. We have a presence in Europe through our controlled company, through Fras-le. And with Fras-le's portfolio, we believe the European market can be an option for us for expansion. But when we talk about semitrailers, we don't see Europe as a priority for semitrailers. We believe we have better conditions to develop our business model in the U.S. market, and we can capture value in an easier way in the U.S. market than in the European market. So we're looking at the OEM division and auto parts, auto parts for commercial vehicles in the U.S. market. The U.S. market is a greater priority.

Well, the next question, Pedro Fontana, Bradesco BBI.

Congratulations for the results. Recently, Randon launched its distribution company. What is the strategy? Do you intend to internalize the distribution network?

Sergio, I believe you are the best person to comment on this question.

The direct answer is, no, we don't plan to internalize our distribution network. So why did we do this with venues? For many reasons. First, that is where we already have infrastructure. It's our central area and our development model. The distributors have to work not only in the sale of the product, but also with services and parts. And we had difficulties in making progress and we saw an opportunity when doing this to act as a laboratory for many different mechanisms of sales and services. So it's an incubator. We're experimenting different models. We saw that a different model would -- when we see it's more adequate, then we ask the others to use it. We don't have any intention to internalize. We're very happy with our distribution network. We want to continue developing them and helping them.

We have time for one more question. Okay, the last question. Jonathan -- reminding you that questions not answered now, we will get in touch and answer them later. So now the last question, Jonathan.

It's a follow-up about the U.S. What is the advantage? Is it due to efficiency, more competitive prices? Sergio mentioned some of this. Can you give us more details?

Talking about this important movement, Sergio will give more details. But as a backdrop, it's a market that is 5 to 6x larger than the Brazilian market and different characteristics both at clients and OEMs, competitors; a more fragmented market; a niche market. Like Hercules, they have a smaller portfolio than we have in Brazil. So we see a great possibility of growth through greenfield, expanding the operation with our own knowledge or consolidation in the U.S. market. And Sergio on other occasions mentioned in the Investor Day concerning competitiveness of our manufacturer in relation to U.S. plants. A competitive edge that is very important to penetrate the U.S. market.

Yes, Esteban. So we -- concerning this market, as reported, 360,000 units, plus container trucks, 420,000 trucks. It's a very large market. If we get to 5% penetration, 20,000; 10%, 40,000 units. So it's a very large market, the U.S. market, in some segments: trucks, auto parts for trucks. Parts for trucks is very modern, competitive, efficient. But in semitrailers, things are a little different. You remember that I made comments. Esteban mentioned the operations in this segment. Most of them, they don't have investments compatible with the ones we make in Brazil. So if you visit today, it would be a time tunnel, a great difference between the U.S. and us. So what do we want to do? We want -- we can use an analogy of -- for example, of crawling, walking and running. We want to participate in niches to learn more. The way they sell the products, there is a little difference. We need to absorb more of their culture and then expand rapidly to other niches, walking. And then we want to run. Then distributing the products and adding more technology in the next phase. And we remind you, we don't want to participate there as everyone participates. The U.S. market is horizontal. They buy from the same players. And most of the added value is what is below: suspension, brakes. And this has a great value. And we've predicted all of this. So our model in terms of integration is very different. This will give us a great advantage. So we will bring more value to our clients, to our companies. And this value creation -- we'll use different tools as we go forward, as we crawl, walk and run.

[ David ]?

Okay. We're closing our conference call. I will pass the floor to Sergio for his final comments. Sergio?

We continue very optimistic concerning the future of our company. We will continue on our journey with transparency, professionalism. If you have -- you need more clarification on the questions we were not able to answer, we will answer through other means. And if you need more clarification, we have our Investor Relations team. We're available to answer your questions and make the clarifications. Thank you, and we wish you a good day.