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

Good evening, everyone. We would like to thank the presence and participation of everyone in this video conference, where we will share the information about the acquisition of the assets of AXN company that we're bringing to the relevant fact today. This event has simultaneous translation to English and sign language interpretation. To have your audio in English, you must click on the Interpretation button on the bottom bar. To have the audio from the translator only, select Original Audio Mute. This is being recorded and made available in our website with the investors. The information in this event are not guarantee of performance, involve risks and uncertainty because they talk about future events, therefore, depend on the circumstances that can or not occur. In today's video call, we count on our CEO, Sergio Carvalho that will has his message talking about details of the operation. Following, we have Anderson Pontalti, Vice President, International COO of the Motion Control. We'll talk about this acquisition, how it connects to the company's strategy. And Paulo Prignolato, Vice President, Executive, will present the structure of the operation. Finally, Esteban Angeletti, our Finance Director will conduct the Q&A session. [Operator Instructions] I pass the floor to Sergio Carvalho for his presentation.

Thank you, Caroline. Good evening. Thank you for being with us in this call with short announcement on Friday evening. We will try to be as objective as possible. Thank you for being with us. We are very excited to share with you this realization of our company. We are going to elaborate a bit why we are so excited, why it's so important to us. What you have in your screen is our objective to try to describe a bit how has been our evolution for North America. On the left in this plot, you have a bit of our history, auto parts, especially Master, exports brakes since 2002. Fras-le, our motion control companies does exports from Brazil since the 1990s, and we had the acquisition of Haldex in 2006. In the more recent past, we had an expansion of our activities. We had the beginning of exports of Auttom and [ cells ] industrial automation. We acquired Hercules in '22. And with Fremax acquisition, we gained exports to Mexico and to the U.S. exporting brake chambers. We went to Mexico in '21. So a group of activity that increased. What we have planned, we will see on the right side is more meaningful. As we have communicated with you, our objective here, if you allow me, I'm going to start from the bottom up. We have a company in solutions -- digital solutions in the U.S. We're opening our office. We have a few projects here. DB server will be in the U.S. also. We are offering more solutions, automation, industrial automation through Auttom, have many projects in the United States. We want to bring all those disruptive technologies that we talked about to you in Brazil. We want to bring it to the United States also. In our OEM, we had acquired Hercules. Our objective now is to grow organically, expand our portfolio, maybe an acquisition in an appropriate moment, smaller acquisitions focused on niche segments. Inside motion control, we just announced this week, the conclusion of the transaction [indiscernible] since Tuesday. It's ours. This movement is very important. Besides this, we will continue to work on the expansion of disc brake products and the portfolio of the light line focused on the U.S., where we have almost nothing yet. The other lines, the blue bullet points, we're going to expand our auto parts is the objective. OEM in the U.S. expansion, we're going to bring the disruptive technologies here in cast or foundry and others. I'm talking about U.S. and growth in aftermarket also. In this OEM expansion, we have trailer segments that is very important. This slide has this objective to give you an idea, the increase of activity that we have according to what we have communicated and planned. This slide has the objective to give you a perspective of how the North American market is segmented and how it compares to Brazil. The North American market, U.S., Mexico and Canada, we are showing the U.S. numbers only here. There are many segments in the market is depressed. The volume is 245,000 units compared to the 89,000 units that we had in Brazil this last year. The American market, 360,000; North America, 400,000 units. We started to work this segment through Hercules. We're expanding the product portfolio, heavy trucks, Class 8 in the U.S. alone 254,000 units; North America, 310 -- 318,000 units in a compressed year hard or else it would be 10% higher. Heavy trucks, forgive me if I'm explaining too much. They have a unique dynamics where they accept a more expensive product as long as that brings a benefit for them. The fleet act very much. The segment has specificities, a bigger market, 300,000 units in North America alone compared to the 80,000 units that we have in Brazil. Medium trucks, Class 5, 6, 7 are 250,000 units. It's more stable. We have a standardization price. There's not a lot of freedom. It's very stable. It doesn't vary as much as the other. It's not so much cyclical work. Special vehicles. We have motor homes, trucks, special trucks, specialty vehicles, niche vehicles, concrete, unique platforms, not assembled on traditional vehicles. Special vehicles, 30,000 units. It has different dynamics. This segment margin is higher to buses, urban buses, interstate 28,000 units, 217,000 units, 243,000 in construction equipment. In aftermarket, a fleet of 21,000 vehicles or 21 million vehicles compared to the Brazilian market. What we are mentioning here to you is to give you an idea of the size of the biggest market in the world, one of the biggest, Chinese is also huge. But in the Western world, without a doubt is the biggest, a lot bigger than Brazil, and this objective. This is our objective. This trailer segment is the focus of today's talk. The trailer segment in the U.S. uses 2 types of suspensions, pneumatic, which you see in light blue, and dark blue, it's the mechanical suspension. Around 60% pneumatic, 40%, more or less air. U.S. has the unique characteristics we only have here. There's a platform that slides the suspension, and the axle is connected with these sliders. It changes its slides under the trailer to meet the law, the scale law that's different from state to state. That's why it has to slide. 60%, as I said, air suspension, of which 48% has the slider that has a high-added value and 12% where it's connected directly to the chassis. The big player here is Hendrix (sic) [ Hendrickson ] with 45% of the market, integrated product. It's not sold apart. In the blue line, the dark blue, we have 40% of mechanic suspension, 29% have the slider, 11% doesn't have the slider. Here, the axles supply is separate. The biggest player here is AXN, the company that we are acquiring. Regarding suspensions, the big vendor is Hutchens. Last year was the first year. They are increasing 23% started. AXN started last year, they're increasing. This is the context. This is a picture of the entrance of the company. This marks our entrance in the auto parts segment, geared towards trailers. AXN is not focused on trucks or specialty. They're focused in trailers. We want to expand with time, seeking other segments also. This is what we have to present to you. We want to increase volumes. It's the biggest western market, bigger than Brazil, many folds, the geographic diversification that we want in terms of currency and a strong brand. It is seen as a main player in this market. How this is inserted in our strategy? Internalization focused in North America, we spoke about this access to OEM market and the expansion in aftermarket. Synergies, we do transactions if we have synergy to enjoy the market that's in the low. We will say this it's a low market right now. So it's a very interesting moment, a strong brand, expanding our product portfolio. We are exposed to strong currency in its asset-light company. To highlight what's in green, these are the most important items, the main reasons associated to this transaction. It has to do with what we want and what we're saying. This reinforces our participation in the external market, U.S. and Canada. Here's the revenue, '24, around BRL 390 million, $65 million. EBITDA adjusted around 5%. We will say -- talk about synergy. We have -- how we can bring these margins to higher levels. The acquisition price was $12.3 million, BRL 74 million, a multiple that's interesting. We will have an inventory of this company consigned for 18 months. For cash flow, this is very interesting. This inventory is around $37 million, BRL 223 million. The inventory is in the U.S. We will reduce this stock, this inventory. In the end of 18 months, we have obliged to purchase the last inventory. You will see it's very interesting for us. The territory of the company is U.S. and Canada. We have Suspensys in Mexico. Just to remind you, the main portfolio, axles and suspension for trailers. This company was founded in 2009, has around 70 employees, has 1 factory and 1 distribution center, actually 2 currently. We're taking on one. It's in Louisville, Kentucky. 90% of sales are in the United States and the rest Canada. 90% of sales here is OEM, 10% has to do with spare parts. It's light in terms of assets. They do a lot of assembly. They don't have a lot of manufacturing, more assembly and distribution, what we are acquiring is a company that does the same that we do in spare parts access to the market. It's a name, reputation, the ease. As I said, they assemble a lot of axle suspension, buying from several American vendors. A recap of our journey. In the lower part of the slide, you see all the transactions we've had since the beginning and Master '86, the transactions in the recent past, several transactions, Castertech, Master, Flores de Cunha, Suspensys, Caster. Regarding internationalization, we brought Suspensys in 2019. The other slide we showed, '21, because with COVID we stopped and reopened in '21. We purchased EBS. You must remember 4 months ago -- 3, 4 months ago in the U.K. And now we announced AXN Heavy Duty as the newest member of our portfolio of companies. And to continue to talk about this project, Anderson Pontalti that headed this initiative for us will continue giving details for you. Anderson, The floor is yours.

Thank you so much, Sergio, Caroline. Thank you, everyone, that's with us on this call in a short notice to be with us in a special day, a celebration day. We're very happy with this acquisition for the reasons that have been mentioned by Sergio. We should remember always that we had, in the last 6, 7 years, a lot of important acquisitions with great results, well leveraged through synergies and the combination of businesses of all our business verticals. As an example, Castertech, machining, a complementary to foundry, almost fourfold it increased its cash generation. We're talking about EBITDA, the acquisition. These are public numbers. DB 30% increased in 1 year, 60% in Juratek in the U.K., showing that we can capture synergy outside of Brazil. Castertech Schroeder 8.2% increase in 2 years. Fremax, threefold in 5 years. And Nakata, our more robust acquisition, went just went from 70 and increased 3x in 3 years. This shows the capacity to capture synergy and to create value for the shareholders. Diversification is what we seek of revenue continuously and the continuation of OEM out of our vertical. It has 76% of OEM in Brazil went to 70. Aftermarket continues 9% in the composition of this vertical, but external international market has increased, going from 15% to 21% when we have a combination of business that protects us in the economic cycles and geographically protected politically also. The revenue acquired added only with these 2 units acquired by the vertical EBS last year and AXN today, we have a potential of revenue increase of around $682 million for '25, $70 million EBITDA added to Randoncorp results as a whole. This map continues to grow. We have a dominant presence in Latin America. We have Randoncorp and Farsle Mobility. Our units have relevant presence here, and we see an expansion for the Northern Hemisphere with the DBS acquisition with many positions in that geography. Juratek has a solid position in the U.K. And now adding Hercules, we take another relevant step and an important step in the United States with this acquisition. Sergio mentioned, our greenfield movement, Auttom is going to the market. This goes to the market. We start to embark on solutions combined in Brazil and other geographies, having a promising future for our business beyond our borders. Here a bit of the product portfolio in the company. The main product is axles and several combinations -- technical combinations with drum, no drum, with brake, no brake. It has a massive presence in the market with leader for trailers, supplying axles, the springs that compose this mechanical suspension to the left together with the integrated suspension and pneumatic suspension and the slider, which is very important for Randoncorp market. It's a product that's very American characteristic. We see the differences of rules from state to state. We have to reposition the axles under the trailer as a consequence to meet state legislation. This has an interesting added value. It's new to Randoncorp because we can potentialize in that geography. Here's a bit of what product -- each product represents. Axle is 80% of the revenue -- company's revenue, suspension 11%, slider is 3% and other products especially spare parts represent 6%. When we segment and this is an important and specific characteristics of '24 with the drop of the container chassis segment, this represents 30% revenue of the company. That's why we are acquiring in a retracted market. North American trailer market, including the chassis integrated reduced 35% from '23 to '24. The container chassis, the segment container chassis, 90%. We're talking about 5,000 product in the full year when it's normally 40, 45. This is a positive bias of this acquisition. Normally, this distribution with pie chart is between 60% and 70% AXN focused in container chassis and 40% or 30% focused on trailers. But this is a reality of' '24, one of the reasons of the timing of this deal on our side. Here a bit of the synergies that we can see, obviously, when we start to speak with the sales personnel or the people that are part of AXN, new ideas will come out with our business combination. We estimate already BRL 60 million of EBITDA captured in the next 5 years, which would take us to have multiple of below 1 of the acquisition where we see the synergies, especially because we are acquiring and the market is low. It will go back to normal, and this year or next year, we will have a more favorable market, and we want to gain market share, especially in trailers growing aftermarket. With this, we can offer the aftermarket line and heavy line in that geography, we have the channel. We must feed product and reposition in that geography, offering complete solutions, navigating from axles to suspension and to sliders because we have knowledge and technology of our company Suspensys in Brazil. Besides this, we have many technologies leveraged by advanced technology, IHL, where we believe we're going to create a lot of value in innovation for products in the segment that can be breakthroughs in that geography. There's a lot of things happening in our non-structured products for this type of product that can bring a competitive advantage. The cost line expenses, we believe there will be a consolidation of supply chain, what the sources are identical. This will give us better contracts, optimization, logistic costs and working capital. It's something identified during the process during the negotiation and talks with the target. Expansion and integration of global footprint. We understand there can be a possibility to use this footprint, adding product lines as well as optimization of the footprint as we did in other situations and the lowering of fixed cost. We got market increase that's retracted, but also the ease that we have as corporation to enhance our back office structure that supports the business through geographies that are already present. Basically, these are the slides that I had for you. I'd like to invite Paulo Prignolato to continue. Thank you.

Thank you, Caroline, Anderson. Good evening. I thank you for participating in this important moment and for Randon Corp talking about operations structure very quickly. As everybody knows, for some years, we were wanting this increase in North America. Due to this, we had prepared the company through companies in the U.S. that we constituted that are directly or indirectly below Randoncorp here in Brazil. So we will tell you that Randoncorp Automotive Systems, 100% of Randon Auto Parts taking adapt in the U.S. and acquiring AXN. So these credit lines are already made available. And our idea is to have a natural hedge as close to a natural hedge as possible. We will have the revenues being generated in dollar and that debt being taken in dollars in the U.S. So now probably next to January 31, we will have the payment in reals is around BRL 74 million and in 18 month's timeframe, we will make that position of the inventory, the stock. This will be married with generation of revenue. So it will be diluted during this period, always reminding that this operation must need precedented operations. I'm going to pass the floor to Caroline.

Thank you, Paulo. [Operator Instructions] We're going to the first question on this video call, comes from Victor Mizusaki from Bradesco BBI. Are you there, Victor?

Congratulations for the operations. On our side, we have 2 questions. The first one regarding AXN, regarding customers, you can give us more details maybe. What are their main customers? And how our clients and how this can help to increase competitiveness of Hercules? Second question about the operation structure. This cosign of the stock of BRL 223 million, how can we expect to be the accounting and the balance sheet will be done, it's an obligation?

Perfect, Victor. Thank you for your question and for watching or being on this call. The first question about the customers. I think you can answer with Sergio and Paulo regarding the operation -- accounting of the operation. I'll pass the floor to you regarding this.

Victor, thank you for your question. Thank you for being with us. AXN in the segment of chassis container, they are vendors for everyone, almost 100% of the market. So all the players, Stoughton Trailers, Hercules, they were vendors [indiscernible], Hyundai, ORC trailers, 7 or 8 customers that compose players that produce these products in the U.S. In the other segments, they are vendors for many to company in Canada, contain, they are vendors to Dorsey. They supply to Canadian company. They have 100 customers that produce trailers in the U.S. They are not suppliers to [ Wabash ]. They are a supplier, but not regularly exceptional. They have a great presence in the market, and they just launched an important product this year, which is a suspension that they didn't have. The perspectives are very positive.

Thank you, Sergio. Paulo, the second question about the structure of the operation regarding the accounting, the value of the inventory or stock. I pass the floor to you.

Victor, good evening. Thank you for participating. Thank you for your questions. In terms of accounting, once we take on the commitment to acquire the inventory, the stock, this value is considered passive. It's important to highlight that will happen in 18 months. It will be paid according to the generation of revenue. Thank you.

Thank you, Victor. Thank you for the answer. Let's go to our next question from the analyst, Gabriel Tinem. You can ask a question.

Two questions on my side. First one, more to margin. You said the EBITDA evolution in 5 years should [Technical Difficulty]

Gabriel, we cannot hear you, please repeat.

Well, my connection is not very good. On the side of margin, I want to understand better, leaving 5% to reach these 5 in 5 years, what must you reach in terms of target to have a medium, long-term view? Second point, you can mention the CapEx and working capital, you have a low CapEx need. I want to understand how is this?

Perfect. Thank you for the question, for being on this call. First part, the first question, Pontalti, answer. It has to do with synergies that we hope to collect and the market moment that has to do with the margin improvements. And the CapEx issue, you can answer. There's a lot of background noise.

Thank you for your questions. Thank you for being with us on this call. I would say that inside our synergies, the main one to purchase in the market when the market is low, due to this alone, we have an important dilution of the fixed cost and the margin will go up. Sergio mentioned, well, we have the potential to add value to have a complete solution integrated in suspension, sliders, mechanical suspensions, seizing this installation in the market and the potential with all our knowledge in suspension. In the medium term, we should have solutions that are very different that will be very important in tubes, drone and axles when we implement all our solutions that we already validated in Brazil in that vertical. I'm talking about non-structured themes, for example. With this, we have the condition that we'll be different in that market. We will have a distance to the competition, and we will have a brand position and a value proposition that will be higher. And next, the aftermarket line that we need to explore, we start to have complementary products produced, where we established sourcing with more robust channels, access the trailers and the network they have installed already. These are the main synergy points that we will explore -- be able to explore in the next few years.

Perfect, Pontalti. Thank you on you so much. Your answer is very complete. Sergio, regarding CapEx, the main point, you must remember, this operation doesn't demand a lot of impacts. The manufacturing is very important, and it helps us to put less capital and have an interesting return.

Perfect, Esteban. Thank you, Gabriel. Esteban has answered already exactly that. The operation of the final assembly of the products, therefore, it's asset-light and they just have several assembly lines, the new assembly line for suspensions that has just started. The investment has been made. The assembly line of axles was expanded. We don't see a big need regarding industrial means, the new products have been developed already. We have some need because we're going to launch new products the same way we always do aftermarket. We have expensive partners that work with us, that allow us to do development in an economic manner. So we don't have to pay for a full investment. So our structure allows us that with product development, we can have better Capex. Thank you, guys.

Very well. Thank you, Sergio, Pontalti. Let's go to the next question that comes from the analyst, Lucas Laghi.

Congratulations for the acquisition. Two points I'd like to explore with you. One, to add to the issue of synergy. If you can -- I don't know if you have the details if you can share the levels of profitability of the company before in the North American market, trying to estimate how much the synergy comes from the market comeback that Pontalti mentioned, doing simple math, looking at cost, we see a margin after the 16 million of EBITDA getting to 15% to 20% margin. If you look at the incumbents, the competitors, we can see the profitability level in this market. You have seen in the market before the deterioration, but thinking at this profitability level after the capturing of synergies. My second question, we have seen a lot of the market is skeptical regarding leverage. Thinking about Randon with this acquisition seems very opportune. We see Randon close to 3x EBITDA looking at '25 after the acquisition of [ IBSC ]. It's one hand what Sergio mentioned, we have a market moment that puts that valuation down and creates opportunity, and we have macro Brazil that's complicated. What is the rationale of the company capital for the future, accelerate the international expansion in the hard context of Brazil or the leverage is an issue and the focus should be synergy capture, M&As and to slow down M&A movement. 2 issues regarding capital allocation going to the future. Congratulations once again, for this movement.

Thank you, Lucas, for the question. Two important points to bring to the market, talking with the market, especially discussion leverage. And I'm sure Paulo will be able to address well. And regarding synergy and margin of the operations before the market below, Sergio, you can bring these components looking at the market before, and Pontalti can talk about the synergy revenue increase versus synergy expected in terms of cost in sourcing and back office fixed cost.

Lucas, good evening. Thank you for your question. Thank you for your participation. This company had margins around 10% in the past before the market drop. The volume was high. It is affected by international freight. Traditionally, international freight had a price per container. The price became 4x higher in the short period. Even when the volume in the U.S. was very high, inflation impacted due to logistics or post-COVID inflation. The American market doesn't have this openness. This is changing that we have from Brazil anticipating taking the inflation and passing it on to the market. The North American market is a bit more similar to Brazil in this aspect. But historically, it wasn't. I don't remember of margins like 15% in the past in this company when the volume was high. They didn't have the same, not them, but all auto parts in the U.S. It was not part of the American character to repass the value aligned with the inflection. Nowadays, it's different. This is happening now. Regarding profitability, [indiscernible] no doubt.

Thank you for your question, Lucas, and for being with us. It's always great to see you. I would say that 70% of our synergies will be leveraged in upper line because we're purchasing on the low. This is notorious. We understand the market is not in its normal level. It's coming -- it tends to come back in the short term. Second, we noticed that the company is very competitive, if we can, and we want to do this, increase value perception of this company with the composition embedded technology, keeping the level of service that we have there, we will, yes, be able to have better margins. Second, the adding of other components, other solutions beyond axles, this allows us to navigate better. And we have synergies to be explored, have accolades in the back offce. We have financial structure in other operations. We have a strong operation in Mexico, and this will make us look at U.S. as a cluster, as a cost pool that can be optimized with support structure. I would say that 70% in the upper line. Sergio mentioned that the margin of 10% historically could have better moments to increase. But once we put technology that this market needs and seeks, we believe we can add value, we can no doubt capture margins due to a technical benefit that we can deliver.

Thank you, Pontalti. Paulo, the floor is yours, talking about leverage.

Lucas, thank you so much for your question. Thank you for participating. Lucas, the point that you mentioned is very important. So we also have the concern with the macro scenario in Brazil, but let's go back a bit. We always were in the previous quarters with leverage close to 1. And in all the meetings and conferences, we were clearly seeing that our intention was to have close to 1/3 of our revenue in abroad. So we would become more and more resilient, especially in North America. Besides this, we were mentioning also with this staff, our leverage would be close to 2x the EBITDA. So you mentioned a number close to 3. Accounting-wise, we imagine that it should be a little bit below that. But if we consider EBITDA with the acquisitions, the number is lower. So we estimate that in December '25, we will reach and having almost the entire year of EBITDA a number close to the one that we mentioned with the acquisitions. In other words, 2x EBITDA, working strongly to capture all the synergies that these acquisitions exactly so we can go back to leverage levels that we had before we did it. Of course, we are going to follow the market opportunity. But our objective in the next cycle is to capture synergies, generate cash flow, reducing the leverage.

Great. That's very clear, guys. Congratulations once, again. You have a great celebration.

Thank you. Let's go to the next question from an analyst of BTG Pactual. Good evening, Samuel.

First of all, congratulations for the acquisition. I want to understand a bit better about the funding, about when you raised the resources and what was the rate?

Perfect, Samuel. Thank you for your questions and for being on the call. Also I can pass the floor to Paulo, who's going to talk about funding. I remind you, it was captured in the U.S. through a credit line that our operations already had. Paulo, if you allow me advancing in the answer. Remember -- remind you, we're preparing since we acquired Hercules when we opened [indiscernible] abroad. We established our bank relation outside of Brazil with banks outside of Brazil, preparing this movement when necessary. Without advancing too much into the answer, Paulo, I pass the floor to you if you want to add.

Samuel, thank you for your questions. Basically, it's what Esteban mentioned Today, we have a good bankability in the U.S. also. The debt has not entered the balance sheet yet. It will enter simultaneously to the date of payment. So these are credit lines that have been closed and approved. We're going to take simultaneously at the payment date, and they have normal conditions in the U.S. market based in SOFR and spread lines in dollar working capital lines, basically with the American market average. If you allow me to add, the disimbursement in the closing has to do with the asset value. The rest of the stock value will be paid as it's consumed. The idea is that the operation will generate the cash working capital.

Okay. Thank you, Samuel, for you questions. Let's go to the next one that comes from Gabriel Rezende of Itau BBA.

Congratulations for the acquisition. Two questions on our side. We want to understand a few details of the co-manufacturing. You said that it acquired it's asset light, it's interesting movements. We have seen in other segments of the company, similar movement. If you can open to us what are the geographies of the vendors? And I'm thinking about eventual risk of the new government in the U.S. seeking tariffs for imports. This can bring risk for the supply chain of the acquired company. And regarding the inventory or stock, if you can share if there is any discount linked to the $37 million that you acquired because this would imply a multiple paying that would be lower than mentioned, if there's -- you mentioned a few times that it's linked to the revenue consumption, what is the basic payment? I want to know if there's a minimum payment.

Perfect. Thank you, Gabriel, for participating in our call, for your questions. It's interesting to explore these 2 points regarding manufacturing and the tariff of the new U.S. government. I will pass to Sergio to comment. He knows this model well and from a political point of view, also. Afterwards, I will pass to [indiscernible], he can comment the stock value.

Gabriel, thank you for your question. Thank you for participating. The 2 countries that feed AXN, the most is Chile and the U.S. All the American products has components, new and local components, brake, chamber. They hire with us and the rest. In the current situation, there are a few product lines that we will bring something from Brazil also. We're going to change the scenario, but what can happen with the new Trump government is relevant. We included this, we included the concern in our model and our business model in a way that we always have conditions to seek alternatives. If this happens, what's the dynamics? If there is an increased taxation expressive for like Chinese products, the way to deal with this is that the domestic prices will increase in the following week. This has been said more than once. Movements that happened in the past, for example, if it's a long ago in the Bush deferment when the steel prices were affected the next day, the prices changed. Domestic steel increased the same amount. So if there is tariffs, the domestic prices will increase also. We have the freedom and the knowledge since we produce products in Brazil, also, we can change the supply chain also. Therefore, there is a possibility that this will happen. It is real, but we have already a plan aligned regarding this. Once again increasing carriers in the country, it's an environment where you minimize your imports. It's market that will affect margin. We developed our vision if the situation happens, this is already well aligned. I'm sorry, there's a lot of background noise.

Talking about the inventory. We have the inventory, the stock. We have the commitment with the cosigned to acquire the BRL 37 million in 18 month's timeframe. That's our obligation. At the end of 18 months, we have a residual, we acquired, but what we have done to protect regarding the inventory or stock, several points. But first, we evaluated the cost of the stock compared to the inflation of the freight that the world suffered this last year, we normalized the cost of the stock as a commitment. We excluded the stock that doesn't turnover. It's not adequate or is successively allocated and would not turn around in 18 months. And we have the conviction with the size of the business. We have a company with $65 million revenue in a bad year, like '24, with a market recession. We'll have a revenue above this level, the BRL 37 million based on the structure that is dependent in material that is asset-light with minimally added value locally, BRL 37 million is shy prepared to the annual demand or the 18 months of this operation. We -- It's mandatory. The risk of having a non-consumed stock after 18 months is very, very low. This is what I had to bring. Thank you.

Now the last question of this video conference, Andressa Varotto.

Congratulations for the acquisition. Two brief points, very fast. First, a follow-up to the previous question regarding the operation model. Can you give us more details about potential opportunities that this acquisition brings for the auto parts portfolio that Randon has in Brazil already in terms of increasing, exploring the American market? Second question, we talked a lot about the volume moment that's depressed. So asking about the recovery their lists and consulting companies are talking about a turnaround in the market, North American market in the second semester. I want to understand is if you have this expectation, more specifically talking about semi, semibox trailers, the new acquisition [indiscernible].

Thank you, Andressa, for your question and being on this videoconference also. Pontalti, I will go to you to talk about the synergy and the operation model. We see the synergy not only with our model, the integration of our auto parts as well as the way that we act in the market in the U.S. that opens a lot of possibilities with this verticalization we have. And Sergio, you can talk about the market at the moment. What we went through last year, this is already in the past as well as the perspective in the future, not only looking at '26 with the possible change of regulation in the U.S. in '27, how this can have an anticipation of acquisition in terms of trucks and trailers. Pontalti, please answer the first question.

Thank you, Andressa, for your question, and for being with us. In the previous questions about synergies, we had talked about the big possibilities that we see in this market beyond the growth. It's focused on the increase of the solution, the incorporation of axles with suspension with sliders, which are things that the company developed recently for this market. Understand, there's an important space to start to address a complete solution for the trailer manufacturers. We have in the spare part line, good possibility to embark products produced in Brazil added to what the company already produces and their contracts they already have in the agreement. And finally, we have the medium-term solutions, as I mentioned, to explore technologies that can create value in that geography. We have a high certainty that the level of competitiveness of the company is high. They went through a huge recession. The axle manufacturers, they have the highest presence in a market that drops container chassis, they were able to deliver a positive result in a very bad year. They have strength with a new product, restructured, new energy with Randoncorp with our structure to support this company, we have a promising horizon ahead of us. Thank you so much for your question.

Thank you, Andressa, for the participation. Regarding the market, our vision is that in the trailer segment, we are going through a delicate moment, the market decreased a lot. In the last month, the movement increased, protective measures, low interest rate in the U.S., even if it stopped, if it doesn't happen, at the same speed that was forecast 9 months ago, but the American economy is still robust, unemployment rate is very low. Job generation is at a reasonable level. All of this shows signs, objective signs. The truck manufacturers continued positive, preparing for '27 with the change in regulation. In '26 or the end of '25, our view in the second half of '25 will be more robust in trailer segment in the United States.

Thank you, Andressa. We want to thank everyone that participated in a Q&A session. And now, we've finished this moment. I pass the floor to Sergio Carvalho for final comments.

Guys, once again, we are acquiring access to North American market, very important to us, increasing auto parts a great fit with everything that we mentioned. Strong currency, increasing our resilience in terms of revenue, we have a lot to contribute to improve the company, the growth of this company. We are very happy. Many synergies, many things programmed to execute, communication with you unfolding of the business. Thank you for your participation. Have a great weekend. Any questions you have or channels, feel free to look for us, and we can answer any questions that you have. Have a great evening and a great weekend. [Statements in English on this transcript were spoken by an interpreter present on the live call.]