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

[Interpreted] Welcome to the conference call for earnings for Randon Corp for Q3 2023. [Operator Instructions] This conference call is being recorded. It will be available right after the closing in our website for Investor Relations ri.randndoncorp.com. Looking at our agenda, our earnings and highlights of the quarter will be presented by our CEO, Sergio Carvalho; our CFO and DRI Paulo Prignolato; and also CFO, Esteban Angeletti. Also, we will have with us in the Q&A session, the Investor Relations Director, Hemerson De Souza; and our coordinator for Investor Relations, Davi Bacichette. I invite you to participate in the Q&A session. Please click on the button Q&A at the bottom of the screen or send your question by WhatsApp. You can also participate following the guidance on the screen. If we don't have time to answer all the questions live, we will get in touch after the closing. Before passing the floor to our directors, I remind you that the information given in this conference call are not guarantees of performance and involve risks and uncertainties. They refer to future events and depend on circumstances that may or may not occur. Now I'd like to pass the floor to our CEO, Sergio Carvalho.

[Interpreted] Good morning. It's good to have you with us in this conference call for earnings for Q3 2023. We are close to the end of the year, which was very intense and full of important deliveries but also many challenges. In this sense, I would like to highlight that the continuity of our strategy and the execution of the plan for 2023 are happening within our expectations. Always every time we need, we are making corrections, the necessary adjustments, adjusting our companies to the scenarios and uncertainties, both in Brazil and abroad. And our diversification has been fundamental for us to maintain our business in a good rhythm, growing in a sustainable way and generating value for our stakeholders. I could mention many examples here in our 5 verticals. But in this quarter, I would highlight the contribution of auto parts for 2 main reasons. The first to talk about the resilient results in a complex margin. And the second to comment on a great business deal signed in the OEM markets. To bring more context, one of the points of great concern during 2023 has been the expressive drop in the volume of trucks in the market, including higher than the projections of the associations in the sector. We prepared ourselves for this drop in demand, and we look for alternatives to increase revenue and to preserve our margins. We work more intensely in the export market in replacement parts. We expanded our presence in the agricultural market. We internalize some production processes. And also, we have the commitment of all our employees to do more and more and better. And after 9 months in the current year, we have the satisfaction to share with you the excellent results of all these actions. We are being able not only to mitigate the impact on sales, but especially maintain the margin of auto parts at a level close to the years of normal markets, even exposed to the strong drop in demand. We continue also executing our strategy, conquering and strengthening partnerships with large clients. In October, we signed a contract with one of the largest OEMs of trucks and buses to supply front axles through Suspensys and also a new product in our portfolio. This strengthens our leadership position as one of the largest companies in the Brazilian automotive market. And the relevance is seen also in numbers. We believe we will add revenue in auto parts around BRL 7 billion in the next 10 years, an extra billing. So we're building the future tomorrow. An important landmark but we haven't stopped. We're working on many other projects that are transformational for our companies due to the execution of our strategy that was shared in details with you during the Randon Corp Day that we had in June. Now you will have the opportunity to see more details during the site visit that we will have on November 28 here in our plants in Caxias do Sul. Everything we have done allows us to come here to confirm the main indicators of our guidance that we gave in the beginning of the year. Esteban will present the results by business vertical, and you will observe that we have different scenarios in terms of results. But when we add up all the synergies and parts of each one of them, we have the beauty of what became Randon Corp, a strong company in the present and more and more prepared for the future. I cannot comment that within the factors that contributed a lot for this are our initiatives in sustainability. We have made progress in ESG in the last years within the 3 pillars. In this quarter, one of the deliveries was the inauguration of the photovoltaic power plant made up of 2,000 solar panels that can generate all the energy used by our CTR apart from supplying the surplus to shipping at Randon. The installation of the power plant also allowed us to deliver other solutions to our clients, which have projects with electric mobility, enabling that all vehicles developed and tested in the CTR use this clean energy. In other words, apart from having renewable energy generated in our operations, we will share this benefit with society in a direct way through development and testing of products. We will continue looking for opportunities like these with profound connection between the best ESG practices and our businesses. I'd like to closing that we're preparing our year for 2024. We still have a scenario -- many uncertainties both in the domestic and export market. On the other hand, we trust that the learning -- what we learned in previous years, the excellent results of our companies in the present and plans for the future will allow us to have another cycle of accelerated growth with growing profitability, generating positive impacts for our business and for society. Now I pass the floor to Paulo, who will continue with the presentation.

[Interpreted] Thank you, Sergio. Good morning to all those who are participating in this conference call. The last one for this year. As Sergio already mentioned, many factors brought complexity to the business environment, both in the domestic market and also in the export markets. And the consolidated numbers that I will present now are the result of strong work, hard work from our teams, focus and correct strategy, beginning with consolidated net revenue. We see in the graph beside the growth of this indicator during the year, BRL 8.3 billion year-to-date 2023, similar to the one obtained the same period in 2022. Positive highlights in the quarter were the revenues from companies acquired after Q3 2022, which together added BRL 101 million rise in the period. The continuity of good demand in the semitrailer market, supported by the positive moment of agriculture and the growth of replacement parts market, both in terms of revenue and volumes. But we also had challenges such as a drop in volumes in auto parts, the segment that had the hardest impact because of the drop in the truck market and which continues to have negative effects this year and a drop of sales in the export markets in the quarters, especially in OEMs. Now going on to revenue from the export market, we have the consolidated data. As you can observe, we had a drop in especially in the comparison with Q2 2023, which is due especially to expressive drop in demand for semitrailers in countries like Chile and Argentina because of the uncertainties in this region, less intense demand in the U.S. market, which affected the performance of our Hercules in the period. When compared to the previous quarter and greater competition in some product lines due to the reopening of the Chinese market and the drop of logistics costs. On the positive side, the impact of these factors was compensated, especially by a good performance in movement control, especially through its operations located abroad and the addition of revenues of companies acquired after Q3 2022. Hercules and Juratek, which together represented $20.8 million in Q3 2023. Concerning our EBITDA margin, we're within the interval of for guidance, and it reached 15.4% year-to-date. In this quarter, we have, as a highlight, the resilience of auto parts, which continues delivering good performance even in a challenging context and the progress of movement control, which has represented records of profitability during this year. Nevertheless, we had greater pressure from margins in some businesses, which came due to competition in certain product lines in the domestic market as well as the drop in revenues from the export market, which -- where the majority has margins that are higher than in the domestic market, especially in OEMs. Apart from this, the tax created in Argentina to increase the barriers to imports also affected the margins during this period worth approximately BRL 10 million. With this, our EBITDA -- consolidated EBITDA margin reached 13.7% in the period. In this quarter, we did not have nonrecurring events that could affect EBITDA. But we had an impact of tax for Randon Argentina worth BRL 18.8 million, which affected in a relevant way, the net result of the company. The tax is due to the end of the debt, which was considered to reduce the negative impact of Argentinian currency on our results. To know more about this, please read the explanatory notes available on our Investor Relations site. Now talking about our organic investments, we reached BRL 187 million year-to-date. We're very cautious in approving new investments, and we are giving priority to projects that will give us a quick return on investment to preserve our cash, especially in more complex times in the market. In this quarter, I would like to highlight the following investments: continuity of the project at Castertech Mogi Guacu, which will begin operations in the first semester of 2024, improvements in Hercules, our semi-trailer plant in the U.S. to continue to have great industrial -- greater industrial automation. Now on the screen, we have the net debt of the company without the numbers of Randon Bank. At the end of September, we reached a leverage of 1.35x EBITDA of the last 12 months with a net debt of BRL 2.1 billion. The drop in leverage in the last 3 months is due especially to lower need for working capital, especially due to a reduction in inventories and the reduction of the average cost of the debt. Another highlight was that S&P Global Ratings gave a corporate rating of the company on the national scale in Brazil in AA+. With a change in the perspective from stable to positive due to good profitability expectations and reduction of leverage of the company in the next few years due to our recovery in our markets and greater cash generation. I'd like to reinforce that we are committed with our financial discipline, very important and even fundamental to go through complex times like the one we have now. Our current cash position guarantees the payment and amortization of our debt until 2026. And I'd like to close my part. We have now data from the shareholders. We finalized Q3 with 44,000 shareholders. Foreigners continue expanding their position in our base getting to 25% of the total in this period. Now I'd like to pass the floor to Esteban to talk about the market and results by business vertical.

Thank you, Paulo. Good morning to all who are following us in this conference call. Continuing with our presentation, I would like to begin talking about the general view of the market. We have seen during 2023, a drop in the volumes of trucks, stronger in production, especially due to an anticipation in 2022, high interest rates for financing and selectivity of credits. OEMs, which took measures to reduce the manufacturing of trucks in 2023 with layoffs and vacation are giving signs of a small recovery, reactivating shifts and stopping and canceling stops. The sales, which in the first semester '23 were for trucks with Euro 5 engines are beginning to show a change and the products with Euro 6 are already half the sales. And we would like to say that the price of these vehicles is higher than the previous model, and many clients are buying the previous model, even with less benefits. In terms of semitrailers, you can see the growth in production and sales on an annual and also quarterly basis. Even with the drop in the truck market, the segment had a good rhythm supported by agrobusiness and the renewal of the fleet of tanks in the country. Exports had a drop, especially due to instability in South America, as Paulo mentioned. And the replacement market has benefited from the drop in the production of new vehicles and this brings more need for maintenance in the fleet. Now going on to the rail cells by vertical, let's begin with OEMs, BRL 1.2 billion in net revenue in the quarter and represented $39 million in revenue in the export market in the period. The semi-trailer volume sold in the domestic market had a growth of 17% in comparison with Q3 '22 and 40% when compared to Q2 '23. This progress happened because we signed large contracts, and we have more competitive sales, which in this strengthened our portfolio and allowed us to increase our market share, reaching 32% in the period, have an advantage of 11 percentage points in relation to the second company. Now in the export market, there was a complex scenario, especially due to political and economic policies in Chile and Argentina, which concentrate the largest volume of products. And this really had an effect in comparison with Q3 '23. Talking about Argentina. Our operation in Rosario was affected by the difficulty for us to send the chassis, which is manufactured in Brazil to that unit due to the import barriers created by the local government. With this, Randon Argentina had to stop during 2 months during this quarter. Comparing the volumes of the market -- export market in Q3 '23 and Q2 '23, apart from these issues in South America, we had a drop in demand in the U.S., which affected the performance of Hercules in the quarter. With this drop, we're using this time to organize and strengthen the manufacturing operations, preparing ourselves for a better portfolio in this unit. With this scenario, we had a pressure on EBITDA margin in Q3, which represented 4.5% in the period and 7.5% in the 9 months of 2023. We'd like to highlight the importance of this business vertical for the company, which generates demand for auto parts and reinforce that we're working strongly to recover our margins through efficiency in our plants. Now we see auto parts, BRL 847 million in net revenue, which represents a drop in relation to Q3 '22, but with a recovery in relation to Q2 '23. Sergio showed to us what we did to reduce the impact of the drop in demand from OEMs. We reached 16.4% EBITDA margin in this quarter. You can see in the graphs of net revenue per region by segment, the increase of exports to the U.S. with the sales of brakes by our controlled company master and the growth in revenue with the origin of replacement parts for semi traders. This is how we mitigated the drop in the demand from OEMs. We will continue to work to increase our offers, adding new products to our portfolio and strengthening partnerships with OEMs to defend our leadership and also have more synergies. Concerning movement control, I highlight the good performance of the companies that make up this group, which reached BRL 889 million in net revenue with an export market of 38%. Brazil replacement parts 57 and the rest were OEMs. In analyzing the revenues I highlight the following positive factors: growing demand in replacement parts for light vehicles, increase in sales of shock absorbers by the -- due to the expansion of the plant Extrema. Expansion of the sales from controlled companies in Asia with new contracts and clients and the revenue from Duratek company acquired in Q1 '23. A point of attention, we had more competition in the commercial line due to higher inventories at distributors and more competition from Chinese products in many countries due to the drop in logistics costs and also the recovery of production in China. On EBITDA margin, we had a new historical record in this quarter, reaching 21.4% in this indicator. This is only possible due to the combination of a strong demand with many initiatives made during the last few years at Fras-le. As for example, acquisitions of Nakata and Fremax, which had their results really higher with synergies because they are part of our conglomerate Fras-le mobility. Now we will talk about financial and digital services, BRL 181 million in revenue and 25.2% EBITDA margin in Q3 '23. An important growth in comparison with the same period in 2022, also with the revenue from DB company acquired this year, where -- and we can see this in the graph. Other highlights of this vertical were the change in format of sales of Randon pool sales, which is focusing on larger values, allowing operational gains, excellent profile of the clients of Randon Bank with low delinquency and the change in identity, which will be explained by the CEO, Daniel Ely.

Hello, today, I want to share with you a new moment in the history of our vertical. Now we are, hence, a brand that translates us with allowing us, we have financial and digital solutions for logistics and transportation markets hands now includes many solutions and today -- that are offered today by our units. Randon Consórcios, Randon Bank, Randon Insurance, Randon Ventures, Conexo. We know that there is a lot of space for growth with many growth opportunities in this market of mobility. Because of this, we will really increase our results, delivering new products and developing technologies, always thinking of our clients, placing them at the center of our decisions. Apart from this, we will deliver a new distribution channel, which brings together all the solutions of hands. This is our strategy, focus and ambition because since last year, we are having many actions aligned with the new strategy of our vertical -- for example, the creation of Addiante and the acquisition of DB. The future is in innovation, connected and with technology. The future is mobility. And we are here helping to create it today. We are ready to embrace the present and build the future. Well, that's it. Another vertical getting ready to grow in a consistent and robust way. Finally, I will present also the advanced technology vertical with BRL 33 million of revenue in the period. Main highlights in Q3 '23 are due to CTR, which had an increase in revenue with the recovery of demand from OEMs in hiring testing services inauguration of the photovoltaic power plant, which brings a drop in energy costs after Q4 '23. And apart from this can generate additional revenue by selling surplus energy and investments of 6 million for the creation of the testing structure in active safety, passive save and durability, known as ADAS test, advanced driver assistance systems. About NIONE, I'd like to mention the launching of the solution for pretreatment and treatment of metal services and an nanostructured additive with Niobium oxide, which increases by 70%, the resistance of products to corrosion. It combines sustainability and high performance, together with adequate painting, can bring an increase in 300% in the resistance to corrosion for the painted parts. It's sustainable. It eliminates many substances in relation to current technologies and reduces the amount of toxic vapors. Also, it needs less water and less energy. The technology is in the final testing phase, and we will begin to sell this in 2024. Now I will pass the floor to Carol to begin our Q&A session.

[Interpreted] Thank you, Esteban. Thank you, Sergio, Paulo, for the presentation. Before beginning of the Q&A session, I have a quick announcement. Unfortunately, Sergio will not be able to be with us in the Q&A session, but Paulo, Esteban, Hemerson and David are with us to answer all your questions. [Operator Instructions] So our first question comes from Lucas Marquiori, analyst from BTG.

[Interpreted] Thank you. Two topics I'd like to discuss with you. I'm trying to understand the recovery in the heavy truck market. Could you comment during the quarter, the demand, whether we should see Q4 with -- do you believe we will have normal sales in Q4, especially implements? Do you -- sir, and also, is there -- are you already recovering from the effect of Euro 6 and also CapEx next year. We know there is a new plant for Suspensys. Do you believe we will -- can you talk about the results, the investments, CapEx next year?

[Interpreted] Thank you, Lucas, for the question. I will pass the first question to Esteban. He will talk about Euro 6 and heavy truck market. And the second, Paulo to talk about CapEx, our expectations this year and next year. And Euro 6 Lucas, before passing the floor to Esteban. This year, we're having a drop in the market, a higher drop than we expected. We expected 20%. We're seeing a 35%, 40% drop in heavy truck market due to Euro 5, which sold for a longer time, 50% of all the sales in the market were Euro 5 trucks. Now Euro 6 is beginning to recover, but Esteban will comment on this market and the future.

[Interpreted] Thank you, Lucas. It's a question that we have heard a lot. Truly, it has been difficult to understand the heavy truck market. It is -- we have seen a drop that is greater than what we expected initially. We used to say that we expect that this drop in the truck production would be concentrated in the first semester, while they still had Euro 5 trucks. And in the second semester, we thought we would begin to see an increase in the production of Euro 6 trucks. What we have seen until now, 50% of all the trucks sold are still Euro 5. This is more than we expected. On the other hand, we begin to see signs of recovery of sales of Euro 6. Recently, one of the associations that gave us the sales numbers. And when we compare with September, we see a growth of 27%, almost 30%, and this shows a recovery in terms of volume -- for the year. We should continue with this drop that Fenabrave estimates at 40% in comparison with last year. In the last quarter, we begin to have seasonality in the sector. On the other hand, we're very aligned with the associations in terms of 2024. We begin to see a recovery. We believe that this will begin at the end of Q1 '24, where at least what we see today, industry production, the sale of trucks can recover 10% to 20%, which is very positive. Even in this scenario, where with auto parts dropping 40%, we have been able to protect margins. Now I'd like to pass the floor to Paulo to talk about CapEx.

[Interpreted] Okay. Thank you, Esteban. Lucas. Good morning. Thank you for participating. Thank you for your question. In terms of organic CapEx, historically, we have been around 20% to 25% of our EBITDA. And for next year, we should be around the same percentage. What has changed during the years. Our investments in M&A.

[Interpreted] Our next question comes from Luiz Capistrano, analyst from Itau.

[Interpreted] Good morning. Thank you. You mentioned in the release and during the call, the elements that affected the margin in implements. We saw the lower price. Also operations abroad in Latin America and North America drop in demand. What are the reasons? What hurt the margins during this period? The most relevant factors that hurt the profitability. And also in terms -- I'd like to know your feeling how these variables will be in the future. You said there will be seasonality at the end of the year, 20% increase next year for the domestic market. Could you focus more on market recovery, export markets, especially the U.S., which is the most promising, but also competition in the domestic market. Do you believe that the next quarters will continue to be like this one. Should you look for more market share?

[Interpreted] Luiz, thank you for the questions. Esteban can answer well, reminding you some data before Esteban. During the year, we had a share of 27% in the first semester, now 32% market share. During the year, although the market has problems with volumes. We worked with 90, 120 days. Today, we had short -- so low share, sometimes we have to make adjustments. And Esteban will comment and also answer the rest of your question, Luiz.

[Interpreted] Thank you, Luiz. This will be the topic of the quarter. I begin saying that this was a conscious decision on the part of our management to bring more volume, especially in the domestic market to participate in the bids and lots. And we have some positive effects for the company as a whole. First, we compensate part of this drop in the export market. We bring volume inside because all implements leave our company with a lot of accessories, brake pads, and this brings a lot of synergies. And finally, as Paulo mentioned in the conference call, we also had the positive effect in needing less working capital and lower debt, at least BRL 300 million less in debt to show that it was a conscious movement and David mentioned the fourth positive point, the gain in market share. Now looking forward, in terms of the export market, we saw the drop in the export market. We can divide this into 2 geographies: U.S. and Latin America. U.S., I would say, this quarter, we acquired Hercules until the second quarter. We were above our business case numbers. And in Q3, we really did what we had foreseen. There is a negative scenario in comparison with the volumes in Q1 and Q2. And we also see positive signs because we did not -- what we were not able to sell in Hercules. This is being delayed for the future quarters. So we thought 2023 would be very good for Hercules and 2024 more normal. What we're seeing now are 2 good years ahead of us for Hercules. So it is becoming positive, balancing the sales in the next years. And the markets in Latin America, yes, they had a drop in volume due to the scenario, the current situation in Chile and Argentina. These are the 2 main markets that buy our products. This also has a result in the average price. Most of the average price is built with our exports. Export products have a higher ticket and contribute a lot to sustain the average price. Since we have this combination of factors in this quarter, greater export market smaller. This also put pressure on the average price. And we had the impact of Argentina, which has an impact on our balance sheet. The higher -- the taxes that were levied and affected sales. So this led to more pressure on the profit margin. Looking forward, we're working. We're not happy with this margin. We're happy with the share, but not with the margin. We're working strongly on efficiency. And obviously, here, we want to recover the profitability of sales in the next quarters. Like we say, we want to balance between leadership and margin. And for this, we have to work hard every day. Now looking at Q4, we have to remember that there is seasonality in Q4. Apart from this, we announced in our release about an update, we will do an SAP. This will help -- this will need a stop to change our ERP during the vacation. We also have vacation, and this helped us to anticipate some sales. So we will have seasonality due to a change in software and vacation. Looking forward, in 2024, we expect a recovery in volumes and prices, bearing in mind that we see -- we don't see much competition in price next year.

[Interpreted] Now our next question comes from Andre Ferreira, Bradesco BBI.

[Interpreted] Good morning. I have 2 points here. First, in truck implements. I'd like to confirm that these campaigns were only during the quarter and that now the focus will be on recovering profitability. Do you believe these discounts will continue in Q4? Do you believe that these new contracts will bring lower prices from competitors? In terms of Hercules, I'd like -- did you know that there would be a drop. And why you believe these orders will be delayed. Do you believe this will continue? How does this impact -- how does this impact your plans to increase capacity?

[Interpreted] Thank you, Andre. Well, it's a continuation of the previous question. I believe it's a topic that is generating a lot of questions. Reminding you, Andre, the sales campaign was only in the quarter. especially for grains, trailers for grains to reduce inventory. So it was a short campaign, the point, the large lot that is another campaign. We don't believe these campaigns with discounts will continue in other quarters. Esteban can talk about prices, competition and Hercules what affected the demand in Q3 there.

[Interpreted] Perfect. Thank you, David. It's important to talk about this. David already answered concerning the sales campaign and large lots. We should see these effects because we took the orders, but we didn't deliver everything. So there should be some effect also in the Q4, and maybe a little in Q1 next year because our portfolio is 90, 120 days. So sales were made somewhere delivered in Q3 and are in the results. Others will continue to be delivered, especially in Q4. So this effect, we can continue to see in the last quarter. Now concerning the reaction of competitors, the competitive environment during the year was more healthy. The market did not drop significantly. We saw good volumes. We had good volumes, especially in related to tanks and agribusiness. We sold well. So we didn't see -- we didn't see a stronger reaction in price from competition. They have maintained their prices and thus, we were able to increase our market share. Now going on to Hercules, what we saw here is a reaction to higher interest rates in the U.S. This began to result not in cancellations, but delays in orders. Some clients that wanted to receive their trailers, delayed the delivery of the trailers to next year, maybe because of high interest rates in the U.S. So they are expecting a soft landing. And then they will probably confirm the orders next year. This doesn't change our plans. We reported here investments. We're making investments in Hercules, especially in structure, but we continue with plans to increase our sales there with semi-trailers and auto parts. We have said we want to have 30% of our revenue coming from abroad. In this quarter, we're close to 20% with the effects we mentioned, but we continue to expand our presence, especially in mature markets. Hercules like the acquisition of Hercules and the acquisition of Duratek in the U.K.

[Interpreted] Our next question comes from Gabriel Tinem from Santander.

[Interpreted] Good morning, Paulo, Esteban. Concerning auto parts, the contract you signed in October at Suspensys. Can you give us details? What will this represent in terms of CapEx and margin? And also, Castertech in Mogi, the construction of the plant and if the contract include synergies in the future.

[Interpreted] Thank you, Gabriel. Well, here, I will ask Esteban to answer about the strategy on the project as a whole. We're very proud. It's a long-term project, and then Paulo can supplement the issue of part of this project needs approval from the authorities. Esteban, please talk about the contract at Suspensys and the construction in Mogi Guacu

[Interpreted] Okay. Perfect. Thank you. Thank you for following us. In fact, we need to remember within our strategies. The first is to defend our leadership position. We are leaders in most of our products and defending leadership is difficult. Sometimes you may believe it's easy to have a high 40% leadership in market share in suspension. When you are a leader, you have to defend your position and for us to defend this leadership, we need to be close to our partners and in all the products. Now for example, in auto parts, we stopped being reactive in terms of new projects, and we became active, bringing technology, new technologies to OEMs and this made them more loyal to us. We're very happy to sign this long-term contract at Suspensys and we're working actively to look for synergies. And yes, this contract was signed, thinking --seeing this as a door that is opening to sell more auto parts. I hope I answered your question, Paulo can comment.

[Interpreted] Thank you, Gabriel, for your question. We continue with expectations bearing in mind that we need -- we will have approval from the authorities this year. Based on the guidance from our legal department, we cannot give you more details of this transaction. But as soon as we have the approval from the authorities, we will share with you additional details.

[Interpreted] Now our next question from Fernanda, analyst from XP.

[Interpreted] Good morning. Thank you. First, a follow-up on the contract of Suspensys. Yes, we saw that you need approval from the authorities. Can we expect similar contracts in the next months? Do you have an update about Addiante, as you mentioned in the previous quarter?

[Interpreted] Thank you. Thank you for the question. The first question on the contract of Suspensys and other similar contracts. Esteban can answer. And Paulo concerning Addiante, you can comment. We had a very good year at Addiante. So let's begin with Esteban and then Paulo.

[Interpreted] Thank you. Well we have the intention, the desire to sign other contracts like this one. But you should understand that these are not easy contracts. For example, a global truck is very relevant. We believe that our auto parts have the quality, our production, our management can deliver these products. So it's an issue of commercial negotiations being close to the client. And also be strong in technology. In this point, our fifth vertical advanced technology will contribute in the 3 megatrends we're working on, which is electricity. Suspensys has an electric axle, intelligent materials, not only Compos from Fras-le with materials that have steel components, one, another example where we can apply current materials, making them more robust, more lighter -- more robust and lighter. And the third megatrend, which is embedded electronics. We have Randon Smart. They connect with Addiante. Most of the products we sell, they already have Randon Smart solutions being offered to the client. We're working hard to announce new contracts, but it's not something very frequent. It's not something very easy. And since I talked about Addiante, Paulo can mention the operations.

[Interpreted] Okay. Fernanda, thank you for the participation, for your question. We're very happy with Addiante. The company is doing very well. Almost 1,000 rental contracts signed, which represents 2.5x the expected number of rental contracts this year. We're building a journey with the clients with transparency services and adding value. So based on this, it's a very positive market. Distributors of Randon also contributing in a fundamental way. Well, we should close the first year with a breakeven. The project is doing very well.

[Interpreted] The next question. Filipe Ilenza, analyst from Citibank.

[Interpreted] Well, good morning, Paulo, Esteban. Well, congratulations for the resilient results. Looking currently, 65% of auto parts and implements are financed by the group. So give us more color about the products you offer. For example, pool sales consortium. Do you -- the second question, the possibility of offering financing for auto parts. Do you believe this is possible?

[Interpreted] Thank you, Ilenza. Yes, you talked about the new brand, Hans. And remind you that although we have initiatives, the most of our focus is to support the other companies of the group. I will ask Esteban to talk more about this. What else we can have in Hans in terms of services, including logistics.

[Interpreted] Thank you, David. Paulo, if you wish to supplement. But in fact, thank you for the question. In fact, it's an important component of our strategy. I remember in the beginning of the year, when we had a credit crisis in the country, most commercial banks put restrictions and credit became more expensive. Our bank became -- our bank did more operations with clients and helped the sales of the companies because we know our clients. We've been working with our clients for a long time or our distributors. So that's why we use the bank to make our clients able to buy the accessories, implement trucks and do business. This is the objective of Randoncorp. Connect people. This is what we do. And we saw when we reviewed the strategy of this vertical, the possibility of making even more progress, creating our ecosystem in logistics. We have to remember, not only Randon Bank and Consórcios, the pool sales company. We have Randon brokerage house, also Randon start-ups to create an ecosystem for logistics to do this migration to Digital Logistics, DB that was acquired in the beginning of this year. Addiante was acquired last year. So we're creating a portfolio of services. In terms of other products, other services to be offered by hands, what we have here is insurance. We have insurance. We want to create a platform for a digital portfolio where clients and partners can do business and also rental as Addiante does. This financing, this structure that I mentioned of Hans is also at the service of our Auto Parts division. Auto Parts uses this structure. And this helps close deals. In general, this is it.

[Interpreted] It's correct, Esteban. Complete answer. Thank you. Thank you, Filipe.

[Interpreted] So our next question. Isabella Lamas, UBS.

[Interpreted] Good morning. Thank you for the opportunity. I have 2 questions. The first movement control -- it continues with a solid performance, growing in volumes. Margins are also very high. And you mentioned one of the factors is acquisitions. You are extracting synergies from acquisitions, Nakata had record margin, record revenue, Nakata shock absorbers. what are the plans for Nakata shock absorbers? You always said you want to strengthen Nakata, extract synergies. So what is -- what do you expect from Nakata next year? Are you thinking of internationalization doing cross-selling with clients abroad for Nakata? And another question. Advanced technology, a new sector, you have a lot of innovation. And today, we saw you at the exposure. You showed the new products. Do you have an update to give us about the new products. If I'm not mistaken, in ESS, you wanted to sell 100 electric axles. So what is the evolution nano-composites to how is the penetration of this product? Do you see other OEMs interested? Wanting to develop products. Randon Solar, what is the situation? Can you give us an update of this segment?

[Interpreted] Good, Bella. Thank you for the questions. Yes, we will be able to talk about all the companies, all the verticals. Well, here, Hemerson, it's good to have you here. We can talk about the excellent results in movement control, Nakata, one of the jewels of the crown, in mobility. And also, I'd like to pass the floor to Esteban to talk about all our initiatives and disruptive innovations, technology. Okay, Hemerson, can you begin. Then Esteban.

[Interpreted] Well, Isabella. First, thank you for the question. I will show our perception. We're on the stock market. We have -- I believe that some of the reasons for our success are due to the combination of business but -- what we had a lot of expansion with acquisitions. And one of them with its size, may appear, but all the acquisitions we made Fremax, Controil, and now recently Duratek. All of them are helping us to combine good stories in each one of these in a larger ecosystem. And this allows us to have interesting synergies. In Nakata -- in Nakata shock absorbers -- we made changes, structural changes in production. We moved them to a new plant. There, we also have a distribution center for all the companies. For the clients in the south and north. We had an important evolution. Access to markets that Nakata did not have in the past before the acquisition. And we created a global reference. And this has begun. So we have a strong presence of Nakata in South America, and we're creating this platform, including Colombia, Mexico, and now with Duratek, the distribution company in the U.K., we want to take Nakata products to the U.K. and to Europe. So this shows the potential of growth. The main product of Nakata is shock absorbers. When we had -- when we purchased the company, we had 16% market share. Today, we have 24%, 25% market share after 3 years. And when we purchased, we made a conference call for the acquisition, the recurring EBITDA was BRL 62 million. Now it's 3x this, 3 years later. So we are happy to be part of this ecosystem as mentioned by Esteban during the presentation. So this is what I had to say. Thank you.

[Interpreted] Hemerson since you are here. The second question has to do with advanced technology and one of the great deliveries we had last year, which is helping the result is compassed -- can you talk about recently, we had the inauguration of the plant of Compus totally automated by Alton, our manufacturing automation unit. Can you talk about the acceptance by our clients?

[Interpreted] Thank you, Esteban. Well, Compus, our start-up in mobility. The company is a little over a year old. We have solutions to optimize the use of steel using composite materials. They have lighter solutions with better designs. We also have new technologies in parts, much more refined now. In the case, our main client, we have 2 large clients in this division. One of them is Randon OEM which uses the supports and Iveco OEM with larger applications. Today, within Iveco with one part, we -- with one part, we have 3 solutions in one part. And I remind you, we began this journey to create this with composites to shield our assets and use them for other things because we know that the future will include electricity and also new developments in brakes. Although this is a little far, we may have a Compus that is much stronger than what we imagined before any disruptive technology can affect the friction area. The main client today is Iveco. We have made a lot of new projects with them, but we have conversations with all the OEMs in Brazil, and we have a pipeline of new products that are a very robust pipeline for the next few years. And this is in our Advanced Technology division. We just won an award of best supplier of Iveco. We won an award, best supplier of Iveco with our partner, who is attaching value to our pioneer work in this area.

[Interpreted] Very good Hemerson. Thank you. We continue -- we're very happy with all the fronts. In NIONE company, we have 65 projects, 35 that are more advanced. One of them, we announced a partnership with ClinTex for surface treatment. This makes the product not only lighter and more resistance. But -- it allows the companies to use less components and to be more sustainable. And every time we begin a new area. We discover new applications of NIONE. And with this, we're happy. And also, they have a great challenge at NIONE to give priority. Because you begin with many projects, but you must have focus to deliver these products and transform them into revenue. So we have a partnership. We are supplying components to Veggi for paints. We're supplying products for paints at Veggi. We know the potential is great. We want to transform this into revenue. Now concerning ESS, electric axles, the main obstacle is price. The cost of the technology is still very high for mass use. We have the 3 stages of adoption. Those who are pioneers, early adopters. And after you prove the business case, the project and then mass adoption. We're still in the beginning stages. We have sold some electric axles, but only for those who want to improve their indicators and emissions. We believe that working on cost reduction, especially in the batteries, which is the main item of cost with a lower cost in batteries, we can get to a good business case and mass adoption and then use -- and then mass adoption. Concerning Randon Solar, we -- last year, we announced this product at Fenatran. It was a prototype in the beginning stages. During this year, we're working on the validation. We have a test -- our own test facilities for tests, but we are not offering in the market. We need -- we will -- we believe we will need more time to sell this product. So in general, this is it. I hope I answered your question.

[Interpreted] So now we will have the last question from Jonathan Koutras analyst from JP.

[Interpreted] Thank you. Good afternoon. 2 questions. The first about Fras-le Mobility. I would like to know about synergies, an improvement in margins. Can Fras-le increase EBITDA margin? The second, Argentina. I know it's difficult to talk about the situation of the country. What have you done to mitigate the problems with the import permits, import barriers and what will be the effect of the next quarters?

[Interpreted] Perfect Jonathan. Thank you for the questions. So Esteban and Hemerson can comment. Hemerson, Duratek is the beginning, a very good integration you're having in Duratek, the distributor in England, the U.K., Argentina, can you talk about the business, the performance? And Esteban can talk about Randoncorp, Randon Argentina, which had a more complex quarter. Argentina is going through the situation for a long time. We've been there for a long time. We say that Argentina, you have many aspects to consider. But it is the second largest market in South America. So it's important to be present there. So first, Hemerson, then Esteban.

[Interpreted] Okay, Jonathan, thank you. In fact, the current time in Fras-le Mobility shows our journey to create synergies in -- within our businesses. So Fras-le could not do everything by itself. So we're looking at things from a different focus. And this is important when we make acquisitions. When we announce an acquisition, everyone wants to know about multiples to understand if it was good or bad. And we don't evaluate this. We look at the potential synergies that the business can bring us. We have done this, and we have tried to be transparent with the market. And we never had difficulty in having a giant evolution in synergies much more than we expected. Now Nakata, we expected in 5 years to have BRL 100 million in synergies, and we had twice this amount. We optimize the model, and we have things that were smaller in the business case and after they ended up being larger synergies. We also Duratek -- Duratek we were looking at synergies in 5 years. We expected GBP 5 million. After a year, we will make an evaluation. But I can tell you that after 9 months, we already have half of this in the business case. So we're still in the infancy, but we captured already synergies in sourcing. So we are being very effective. And as we move, we see more and more synergies. It's difficult, but we can generate value with acquisitions. So the truth is, we have been very diligent in being positive in these acquisitions. So we have good things ahead of us. At Duratek -- in Nakata, most of the synergies were already captured. We still have some, but few. Argentina is the second largest market in South America. And we're here in Caxias do Sul in the south of the country. The distance from our plant to Buenos Aires is the same as the one to Sao Paulo. But we have to live with these difficulties in Argentina. In Fras-le Mobility, Argentina represents a little under 10% of the revenue. So it was 15%, 18% of the company. Now it's 10%. We have a difficulty to manage those good times we had. Randoncorp, but in terms of sectors that we follow, there are sectors where we have more or less difficulties. We, as Fras-le Mobility, we have to manage. We have sent part of our production to Argentina. And we have surplus cash there. So we have to preserve the value of this money in Argentina. We're having difficulties in bringing this money back or to buy suppliers. So together with the corporate team, the local team, we have seen how can we work to avoid our resources from losing value due to the inflation in Argentina. It's no longer possible to do currency hedge. It has become very -- it has become very expensive in Argentina. We are continuing to offer services to our client selling small lots. We are there serving our clients and trying to do our best to continue and avoid losing our position in the market in Argentina. We are cautious, but we hope that Argentina will recover and go back to normal times. The inflation in the last 12 months in Argentina has been 140%.

[Interpreted] Thank you. I will pass the floor to Paulo to talk about Argentina. The scenario of the country and the impact we're having on our company. Paulo.

[Interpreted] Thank you for the question. This is a topic. We hope the country will recover from its problems. It's a dramatic situation. But as mentioned by Hemerson, this is also important for Randon Argentina. The results were always positive, and this helps our margins in Brazil. So it's an important market, Argentina. We have a team with a lot of experience in Argentina, both Fras-le and Randon OEM, which is very resilient in times like this. What we did in Randon Argentina in the last few months was to decrease the size of the operation and also reduce to a minimum the exchange rate exposure. We don't have debt in dollars in Argentina for more than 3 years. And the effect in the quarterly results we had -- we had the end of a debt in Brazil in order to avoid an exposure impact in our balance because the mega devaluation will happen either now or maybe next year. And we saw in the last 3 months, both in Fras-le and Randon. We had to stop sales in Argentina. Periods when you can't even quote a price in Argentina. We paralyzed sales during some days. So it's a complex situation in Argentina, but we are being able to continue.

[Interpreted] Thank you. Thank you, Paulo. I'd like to thank everyone. We're closing the Q&A session. And now I pass the floor to Paulo for his final comments.

[Interpreted] Thank you, Carol. Well, once again, I'd like to thank all the participants. It's an important time for us. Thank you, and we continue implementing our strategy. On November 28, we will have a site visit in Caxias do Sul in the south of Brazil. We hope you will be able to participate and be with us so we can talk about all these projects and we're available. If you need further clarification, please, our Investor Relations team will be available to supply any comments. Thank you.

[Interpreted] We wish you a good day. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]