SIMPAR S.A. (SIMH3) Earnings Call Transcript & Summary

Good morning, and welcome to the conference call of Simpar to discuss the earnings regarding the Third -- the First Quarter 2022. Today with us, we have Mr. Fernando Simoes, CEO; and Denys Ferrez, Executive VP of Corporate Finance and Investor Relations Officer. [Operator Instructions] Before moving on, we would like to let you know that any statements made during this conference call relative to the company's business outlooks, projections, operating and financial goals are based on Simpar's management beliefs and assumptions and rely on information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions since they refer to future events. And therefore depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect the future results of the company and will lead to results that will materially differ from those in the forward-looking statements. We'll now turn the call to Mr. Fernando Simoes. Mr. Simoes, you may go on.

Good morning, everyone. I would like to thank you all for joining. We are starting the conference call for the earnings of SIMPAR in the first quarter 2022 and we are going to start on Page 2, where we show solid growth and transformation of our results, in line with our strategic planning. We are starting to reap the fruit of our investments made in recent years. Some of our highlights for first Q '22, net income of BRL 329 million, which means growth of 92% year-on-year. EBITDA of BRL 1.5 billion, growth of more than 100% in the same period. Total net revenue of BRL 4.6 billion, net revenue from services of BRL 3.6 billion, which is growth of 60% over the net revenues from services in the same period last year. Return on invested capital 14%, plus 6.3 percentage points year-on-year and a return on equity of BRL 32.3 million plus 12.8 percentage points year-on-year. Net CapEx in the last 12 months of BRL 10.4 billion, the CapEx is basically for those assets that haven't started operations yet, therefore are not reflected in the numbers of our presentation. Still on Page 2, which show the main highlights that contribute to the solid growth and transformation on results. We have a unique management model with independent operations aligned by culture and values that ensure the longevity of our business. We have diversification and growth, organic and through acquisitions. We are present in several services in the real economy and what does it mean? Basically, we are in activities essentially connected to improving productivity, so that we contribute for our clients to produce more the industry those that hire us have more productivity. And in several sectors of economy, agribusiness, automotive, food, health, we have discipline that is very strong in preserving business margins by means of costs and also always having the right prices for new services and renegotiating pass-throughs, increases in prices whenever we need and when we have increases in costs, that ensures our margin and the continuity of our business in a healthy way with competitive return. We have focus and continuous care with strengthening our commercial partnership with suppliers and clients. It is only possible to have the numbers we are showing you today with solid growth and transformation on results with this management model made by our people, that is the main competitive advantage that transform and develop our business. I enjoy the opportunity to thank our team of all our subsidiaries controlled by SIMPAR for the work, dedication, focus on the business and development of our companies. Going to Page 3, we have a new level of sustainable profit, with transformation in our companies. We had quarterly net income in first Q '22 of BRL 329 million. This is growth of 92% over the same period last year. It's important to highlight that out of the BRL 329 million of net income for the first quarter '22, we already had the impact of cost because of the increase of interest rates and we are still not seeing the results of part of the CapEx that was invested in the last 12 months. If you think the last 12 months altogether, we had net income of BRL 1,486 million, which is 12% higher than last year. It is this transformation that has been built along the last years in line with our strategic plan and executed by our people. Let's go now to Page 4, where we talk about JSL. JSL has had recurrent growth in gross revenue. We had BRL 6 billion with an expansion of operating margins. The team led by [ Ramon ] has developed excellent work continuously negotiating with clients to pass through costs that have been huge and the negotiation is not easy because the industry has had its own difficulties. But together with the clients, we have been able to seek solutions to keep our margins and therefore have sustainable growth. We had net revenue from services of EUR1,268 million, that's almost 50% above the same period last year, EBITDA of BRL 220 million, 72% growth year-on-year and net income of BRL 33 million, which is minus 21% year-on-year due to the strong increase of interest rate, which is part of our plan of continuously growing, improving operating margins and with that being supportive of -- and supporting the interest increase. Since the IPO, we had 5 acquisitions that have contributed to our organic growth. We have a combined average organic growth with acquired company and JSL of 21%, but acquired companies alone 31%. We closed new contracts in the first quarter '22 of BRL 700 million. We improved our EBIT by 2.5 percentage points and by 2.3 percentage points our EBITDA, so even with increase of costs, the renegotiation with clients we are improving operating margins. And growth since the IPO was 71% if we analyze the first quarter '22 and compare to the revenue we had before the pandemic in 2019. Now we are going to go to Page 5, showing the main highlights for Movida. Movida has been the sector's public company that most grows in Brazil. Together with growth, it has continuous evolution of profitability, which really places the company on a little level. So this development improvement of margins is only possible because this is a company with DNA culture and values that are strong. The team makes a difference, but we also offer customers what they want services, automation of processes and a new fleet today are of the listed companies. Movida has the newest fleet with an average age of 9 months old. The result is net revenue from services of BRL 992 million, 87% growth year-on-year, EBITDA of BRL 863 million, growth of 183% year-on-year and net income for the first quarter '22 of BRL 258 million, up 136% year-on-year. Demand has been resilient throughout the pandemic, we reinforced even more our partnership with OEMs, which enabled the company to buy 21,000 cars in the first Q '22, an increase of 94% year-on-year. Today, Movida, as I mentioned, we have the newest fleet in the market with an average age in the rental car business of 9 months, all-time high return on invested capital of 16.4% and return on equity of 34.6% in the last 12 months. Fleet evolution is still -- on Page 5 to your right, we grew 57% from the first quarter one to the first quarter '22. We closed the quarter with 191,942 cars, almost 192,000 cars, which was only possible because the determination work of our people and the partnership of our company with OEMs, which really makes a difference in supply, continuous development and even more important to attract our customers and offer them the products that they want and that they deserve. With that, we have increased customer loyalty and our share among the individual consumers, which has much contributed to our margins and results in a very sustainable manner. On Page 6, we show the main highlights for Vamos. We closed with a backlog of BRL 9 billion. It is a transformation in company scale. Net revenue from services of BRL 899 million, growth of almost 90% year-on-year. EBITDA in the first quarter '22 of BRL 362 million, up by 77% year-on-year and net income of BRL 122 million, up 66% year-on-year. Still on Page 6, we have made some acquisitions with Vamos that are complementary to our business in the customization industries, such as BMB and Truckvan and the acquisition of HM becoming the forklift rental company in Brazil that provides intralogistics services and Monarca that was [indiscernible] for our increase in dealerships and footprint in the Midwest within agri business, contracted capital of BRL 1.6 billion in the first Q '22 and BRL 1.3 billion in new assets for rental. These assets were acquired, negotiated more than a year ago and they are being delivered now in very good conditions to us and had huge appreciation. We estimate about 36% over the book value, which makes us very competitive for new rental contract. We have ready to deliver trucks to our customers and these are future results to come, but they are already contracted because they were sold before or because they will be higher, ready to deliver at very competitive prices. We had return on invested capital -- return on equity, I'm sorry, up 21.6% in first quarter '22, last 12 months and return on invested capital of 14.3%. To you're right, we see the contracted future revenue that is our rental backlog with growth between 2019 to the first quarter '22 of 310%, with BRL 8,865 million. It is a company with a huge transformation and scale and growth that is sustainable. And all CapEx that has been invested is still is not shown in the numbers that you're seeing today. So we have the foundation ready for a new cycle of growth, again reaping the fruit of everything that was made in Vamos in the past. On Page 7, we talk about Original, our light dealership arm. Without considering any acquired company, Original had revenue from services up BRL 210 million, up by 19% year-on-year, EBITDA of BRL 13 million, up 8% year-on-year and net income of BRL 5 million, up minus 2% year-on-year. It's important to highlight that the numbers are just for Original vehicles alone without considered any acquired companies. In line with our strategic plans as announced, we have made some acquisition such as Sagamar and Group 1. We are very happy with the announcement we made last week. We acquired Autostar, the largest luxury vehicle dealership in the city of Sao Paulo with recognition of its management, Mauricio Portella and we are very happy that the shareholders of Autostar became a partner of Original dealership that is consolidating the acquisitions. Mauricio Portella, in addition to shareholder will keep -- continue as the owner of the Autostar business that will enable him to continue the excellent work in a company that is a luxury reference in the city of Sao Paulo. After authorization of [ Kadi ] and OEMs, we are going from BRL 800,000 million to BRL 4.2 million. Again, we have 20 brands of light vehicles and 4 brands for our motorcycles. These dealerships are very strategic in Marino, Parana, Santa Catarina and in the state of Sao Paulo. It's important to mention that all groups of dealerships acquired having their DNA taking care of people. They have executives, managers, salespeople that are excellent, that focus on the customers and that have brands that are recognized by their quality. We are very happy with the movements we were able to accomplish and very optimistic about the development of our light vehicles dealerships. On Page 8, we talk about BBC, our bank. As you know, we have just turned into a multiple bank whose objective is to strengthen SIMPAR's ecosystem, with a completely independent management focus on the bank, its target and objectives to develop in a sustainable manner, without the team has devoted to create systems and automation structures, both in back office and at the front end together with customers. The numbers are still varying sapient, but the team is prepared with systems and with management in place to start providing financial services that are complementary to the SIMPAR ecosystem. And then that will bring huge benefits for customer loyalty and amongst our supplier base and also to seek opportunities in used assets in SIMPAR Group as a whole, Vamos, Movida, dealerships and trucks. Now going to Page 9, we talk about CS Brasil fleet management and outsourcing with drivers with manpower. CS Frotas was merged into Movida and consolidated in Movida. In CS Brasil, we have cars and trucks with manpower, that is CS Brasil provides the driver. As you can see on Page 9, we went from revenue of -- in 2019 of BRL 150 million to the first Q '22 of BRL 240 million annualized, that is growth of 72%. We have EBITDA of BRL 21 million and revenue from services of BRL 106 million. Although, we had a net loss. Going to Page 10, we talk about CS Infra. As we mentioned, all our concessions are being consolidated under CS Infra. And we also acquired a Ciclus, whose net revenue from services in the first quarter '22 was BRL 99 million, EBITDA of BRL 43 million and net income of BRL 15 million. It grew 13% year-on-year in net revenue from services. EBITDA had a 4% growth and net income 5%. We are completing the work to start operations of 2 power generators, biogas driven. Basically, the idea is to generate 2.8 megawatts and this energy is going to be used in the treatment station to reduce cost and generation of new carbon credit. CS Rodovias to your right is located in [ POE ] as we announced, it is under construction. We had just the license that was passed on May 2. CS Portos, CS Rodovias has already a CEO, the leader of the operation and CS Portos with the management team, the CEO, and we expect to sign the final agreement in the end of May '22. BRT Sorocaba we are with work underway and the idea is to work with the third and last corridor. And now I'm going to turn to Denys Ferrez that is going to talk about Simpar consolidated results.

Good morning, everyone. I'm going to start then to talk about first Q '22 financial highlights consolidated on Page 11. We had substantial increase in all indicators on this page. Starting with net revenue on the left top, we had BRL 4.6 billion, an all-time high and an increase of 75% year-on-year. Net revenue from services reached BRL 3.6 billion, also a substantial increase of 60% year-on-year. And when we annualize this numbers of the first quarter compared to the whole of the year '21, we have a trend of strong expansion with an increase of around 30% both in total net revenue first quarter annualized and in net revenue from services. EBITDA top right show the strong margin expansion, growth of 9.4 percentage points, reaching 42.3% which led to an all-time high in the quarter of BRL 1.513 billion, 106% higher than the same period last year, that is double the amount. And again when we come back to the exercising of annualizing first quarter numbers and that because of the changes in level of operations that the company is having due to continuous investments in expansion. We would reach BRL 6 billion, which is an increase of 44% when we compare with the whole of '21. EBIT operating income in the period was also an all-time high, BRL 1.136 billion with margin of 31.8%, which is an expansion of 8.6 percentage points compared to the same period last year and nominal growth 120%. That is more than double in EBIT quarter-on-quarter. And once again because of the continuous development of the company by annualizing a bit of the first quarter, we would have BRL 4.5 billion, which is 40% higher than that of the whole of the year 2021. Net income in the quarter reached BRL 329 million. This is almost double the same period last year, an increase of 92% with a net margin of 7.2%. And the net income of controller was BRL 192 million. That is -- it doubled compared to the same period last year. Going now to the next slide, Slide #12, we show again consolidated numbers for our long-term debt profile. So with the liability management we conducted last year, we keep a very comfortable amortization schedule and a very strong liquidity position of BRL 11.6 billion, considering fundings that were executed in April '22 of BRL 1.1 billion. In addition, it's important to say that the company has about BRL 2 billion in undrawn revolving credit lines available to the group at any time. Net debt reached BRL 27 billion when we exclude the cash position, the net debt was BRL 17.7 billion at the end of the quarter. Specifically about the holding, we had net debt of BRL 2.6 billion, in line with the closing of last year, basically comprising gross debt of BRL 5.3 billion and a robust cash position of BRL 2.7 billion, with average term for net debt of close to 9 years. On the next slide now that we already talked about our debt payment schedule, we show that volumes invested by the company. To your left, you can see that we invested in the first quarter BRL 2.5 billion, which is basically a threefold increase of what we had in the first quarter last year, which shows the pace of growth that we are following. And that on annualized numbers would be that we are probably going to invest 20% more than last year. And obviously, the numbers that we showed you today show the benefit and the quality of these investments. But all that, it's important to mention is being done still while keeping our net debt EBITDA ratio, that is our leverage showing continuous improvement, which is our target and we said that before to get at the end of the year with this indicator below that of the previous year. So to your right, we closed last year at 3.4x leverage. In the first quarter '22, we are closing at 3.3% due to all the investments we made. But there is something very important. If you take a look of the running rate, which is basically the current volume of cash, this indicator should be around 2.8x. That is when we annualize the pace of investments in the first quarter vis-a-vis is the group's reality, much more than the 12 months, again because of the strength that is motivated by growth, then the running rate annualized would show at an leverage of 2.8x. I think this is a very valuable piece of information. Going to the next slide, Slide 14, we show that all the investments made in our businesses that have already proved their resilience in such troubled times in the past have a suitable return. You see return on invested capital in the first quarter '22 last 12 months reached 14%. It is the highest level as seen in the company since 2018. And as a consequence, return on equity reached 32.3%, also last 12 months starting as of the first quarter of '22. With that, I'm going to turn the call back to Fernando. Fernando, please.

Thanks, Denys. On Page 15, well, the transformation of our result reflects our management model, which really makes it possible for us to intensify the development of all our businesses. To close, I would like to invite you to consider that our growth speed has been driven by the agile execution of our team and sustained by business footprint in core services of real economy with customization and innovation at the customer services. I'll give you an example. Movida is a company that is controlled by SIMPAR and that has have reinvested in fleet expansion and modernization. This is what customers want, build them individual or companies. They want services and products. They have cars that are 9 months old, one of the competition of those cars at 15 months old. Customers that have our services will come back and we have customer loyalty. Discipline in capital invested, intelligence and the pricing of services that promote sustainable business growth, focus on generating value to our customers and in command return to our shareholders. An example, in logistics, we have had constant price increases and we are making possible to pass through this cost together with clients. An example in Movida, we really transformed our CapEx amount per car. We changed the level of prices of cars purchased and we're able to increase our daily rates to customers, although offering a differentiated product and keeping their preference because we respect and we build with our customers partnership and services in the long-term. That's only possible because we have independent companies with a management model with strong culture and values that enable us to be at regardless of the economic scenarios. We continue to operate diversified businesses with resiliency revenues, high development potential and profitability. We have solid corporate foundations and we have strategic plans that are clear by company, by activity, by business and with the commitment of execution from our teams. That ensures the continuity of sustainable development and a long-term survival of all companies that are controlled by SIMPAR. Once again, I thank you very much for joining us today. And now we are going to open for your questions and Denys and I can clarify any questions that you may have. Thank you.

[Operator Instructions] Our first question comes from Victor Mizusaki from Bradesco BBI.

I have 2 questions. The first, Fernando, as you mentioned, a significant part of the CapEx for the first quarter was conducted by Movida. And if I'm not mistaken in the beginning of April, SIMPAR announced their increase in stake in Movida. Thinking at the holding level, does it make sense to consider that the group today sees Movida amongst all companies, the one that has the best return on invested capital, potential to grow and valuation. Does it make sense to think this way? And the second question as for the pace of acquisitions at Original, with the 3 acquisitions, Original now is past BRL 4 billion in revenues. Do you still have room for new acquisitions?

This is Fernando speaking. Okay, let's talk about Movida's CapEx. In the last 12 months, the CapEx was more than BRL 10.5 billion. In the first quarter, it was more than BRL 2.5 billion. And most of it was for Movida. Movida, we now have the inventory and it is prepared, but it is developing as much as others. If you go back, even JSL Logistics also have important CapEx and is developed in asset-light and asset heavy operations. So what I can say, Victor, when we talk about our unique positioning, it's because all the companies that are controlled by SIMPAR do show huge potential to grow and develop. The stock price, well, it's very hard to say. The Portuguese have a saying, people, things are worse, the price people are willing to pay. So the market has to see it. So for one reason or another, every now and then it's difficult to buy stake at a company, either because you have a business to happen or because you have some kind of blockade. So sometimes we don't do things at other companies than SIMPAR for reasons other than valuation. Valuation, we saw that the numbers are being transformational numbers, operating margins for you to take a look for instance at JSL. So that's what it is. But Movida specifically, well, I'm always suspicious and I think that the best relation is not only in between the companies, but compared to the competition, Movida is second to none. We have 192,000 cars, we have scale. Quite humbly, our people, our management and I monitor that through the Board. Movida has been very assertive in its strategic moves. Today, our average fleet age is 9 months. Movida really contributed to change the market with automatic cars, air conditioning. In 2014, half of the rental fleet did not have an air conditioning. I say we had black, silver cars, poly or gold. We didn't have what we have today. So Movida with the fleet today that is 9 months old, the competition is 15, 16 months old on average. And that is bringing again new customers, individuals or corporations that is really changing our numbers. And if you take a look at the first quarter, you are going to see that the purchases that Movida has made in recent years have appreciated even more. So this is our belief that of the transformation that Movida went through and what is to come and that's why we increased the stake in this company. So that's about Movida. But sometimes, we cannot invest in others because of some strategic move, because of an MA and because of that. Talking about the dealerships. Well, dealerships in Brazil, you have very good groups, very good chains, very good management, but you still have a lot of opportunity because it is a fragmented market, different from other countries in the world that are a lot more consolidated. So we do believe that we have an opportunity for this move in Brazil. We started as you saw, we are buying assets that are high quality because of the brands that we present because of their geographic area, location, but even more important that have very good teams and people and some shareholders becoming shareholders of Original and continuing to be the business owners. So I'm very happy and I do believe that we have lots of opportunities to continue to develop the dealership business by means of M&A. That's what we see for the future. I'm sorry, a long answer, but just to give you an overall snapshot of our position today.

Our next question comes from Luiz Capistrano from ItauBBA.

Congratulations on your results. I have 2 groups of questions. The first is a follow-up on Victor's question about Original's strategy. You've made it clear that this is a market that is almost a blue ocean with loads of opportunities, especially on M&As that have been transformational.. My question is about your M&A strategy. Is the focus on a specific region? And I'm talking about the future, a specific brand, as you mentioned, the last acquisition showed that premium areas and brands. Are we going to continue to see things along this line or more in line with the market average? So I would like to know a bit about your direction in Original strategy and the business is getting more and more robust, you are investing in dealerships. Do you think this is going to be a listed company in the future? And if yes, is there a minimum size you would like to reach in terms of EBITDA or revenue to go to market? And then I'll ask the second question.

Luiz, this is Fernando. Original, it is part of our strategic plan and we study opportunities by brand, region. But again, what is the most valuable people and management, I'm going to give you an example and to start, we just announced, we are very happy. We are partners of the current shareholders. They stayed with a stake in Original holding. So the founder, Mauricio Portella continues as the business owner, but we have a fantastic management team. We know them, they are in Sao Paulo. But UAB, in addition to high luxury in Parana, they have very premium brands in Sao Paulo, ABC regions and others. So complementarities very important in brands or regions, Marino is growing so much. We have premium brands there, but we have more economic cars. So we are looking into complementarity. This is -- that has always been our strategy, brands and regions that can complement one another. This is what we are looking to. And the second part, yes, in Brazil, there are always people that want to generate liquidity or they are tired and dealerships are no different. So we have opportunities. We have already a very strong group with BRL 4.2 billion, but we intend to continue the movement with the strategic brands, strategic regions and quality businesses with people that are committed and recognized by deliveries. IPO. Well, we always look at our businesses, thinking of their future and this is part of being a holding, having companies under it that are completely independent. But the IPO can never be the final objective. It is a consequence because it generate value to shareholders, contributes to governance is aligned with the brands that are working with us and that is welcomed by the market. It may happen in the future. In terms of size, well, that you know better than myself. More than size is to have a prospect of growth with people of quality. And if it happens, if we have an opportunity to grow, use the money to generate value to shareholders and contribute to long-term survival, we might have an [indiscernible], it doesn't mean that we will, but we might. Thank you.

Very clear, Fernando. My second question, another exercise that I was doing because today you are with a very comfortable cash position, which gives you the comfort for M&A strategies. And here, I'm not talking about Original, but all businesses. If you think almost I'm doing the math, you had a very strong cash position of BRL 2.7 billion. And with the funding of April, you're going up to 3.7%. And then I go i.e. I go to a calculation of a power part in M&A. If we exclude interest and taxes, think of last year, perhaps this year is going to be a little higher, talking about BRL 700 million, you would have BRL 2.8 billion. And then we have favorables with a bit less control. And that's my question for us to give us an insight, dividends receivable from subsidiary, dividends payable and a minimum cash position that you would like to keep at the holding to generate comfort to creditors. So if you could give us a bit more color about the 3 points, just for me to be able to think of your firepower for this year in M&A's or other investments? If you will?

Luiz, this is Denys. Well, the group is in constant development. And likewise, the financial department is always planning for the next move. So the snapshot of the moment is what it is a liquidity of BRL 11 billion, the holding, as you showed. But because we are already looking into 2023, it's also very important to mention that we have BRL 7.4 billion available, of which BRL 1 billion has already been executed, BRL 4.6 billion to be executed and the revolving credit line that I mentioned. So this is beyond '22. When you think of acquisitions, we had the cash made beforehand the end of last year, we raised BRL 1.5 billion with an average term of 9 years, specifically talking about the holding. And whenever you have a movement, you do not stop thinking of specific funds packed to acquisitions. But we are doing that in a very cautious way for me not to be dependent on the market whether the line is available or not. But if it is, you can keep liquidity and have specific loans for acquisition. So we have credit that is already directed to SIMPAR with more than BRL 1 billion, BRL 1.5 billion. And if you think of a minimum cash position, we are talking about BRL 2 billion. Now you see that in past cash flow has a concentration of payment in 2031. And this is what we agreed with those that trusted their money for a long term, which is the development of the group. So the long-term structure is a given continued liquidity thinking already about the year of '23 is a given and the option of funds for acquisitions that are specific is also given. So I would say, minimum cash level at holding for growth would be EUR2 billion, but we already have more than that okay?

And just to add -- I'm sorry, this is Fernando speaking. As an executive and a Board member, if you take a look at our group 4 or 5 years ago and you think of all the CapEx made in the last 3 years -- and the level of results of the company today. Remember, we always have the option to use the cash and have CapEx are not, not only M&A. We have Vamos with a backlog of trucks. We have Movida, the strength of the results and the alternatives that we have to generate cash in addition to Deny's strategy that really is excellent. We have so many alternatives and the strength of our results today that really enable us to make any move with confidence and sustainability.

Our next question comes from Guilherme Mendes from JPMorgan.

I also have 2 questions. First about OEMs. How do you see OEMs resuming production? What are your expectations for the next quarter? So what is your feel as a holding company? And do you think there are any risks for the purchase of cars as of the second quarter, but more specifically in the second half of the year? And the second question about CS Infra. What is the main assets that you are looking into? And what kind of return do you want to consider for new projects?

Guilherme, this is Fernando speaking. Guilherme, let me tell you something, predictability of OEMs is a bit complicated. We have been in a very comfortable position because of our partnership with OEMs. We really changed average tickets at Movida, Vamos as well, but Vamos we have longer-term relations. And in Movida, we were able to have better daily rates, which was really important and Movida was able to do that. And it was the first in the market to really partner with OEMs. And I think this is something that we have been doing throughout the history of JSL, 65 years, 40 of which in the relationship with OEMs. I particularly have been relating to OEM for more than 30 years and that really gives us the comfort of negotiating. Of course, it sites defending their companies, but also working together. And I think that just for the fact that Movida has the newest fleet, the quality of cars it has, I think this is a major difference. Risks of the automotive industry for the coming months exists and it's been a bit of a peak and valley journey. OEMs themselves do not have much predictability. And why is that? Because sometimes, their direct suppliers do not have a problem. Their first tier do not have a problem. But sometimes, it is the suppliers of their suppliers. For instance, people are talking about the harness from Ukraine, but it's not only that. And because in logistics, we had lots of problems, for instance, with sea lines, most of the inputs that come from abroad. You have tires coming by air, believe it or not, the raw material. It's good that the airplanes are quick, but you have a problem in production. You are going to know that the plane is not coming 4 or 5 days before. With ships, you had a lot more predictability. So peaks and valleys will happen and the second half of '22 is still going to be very hard to predict. As of '23, I think things are going to go a bit more back to normal. This is what we have been hearing from OEMs. And in our group, we believe that we are going to continue to have a preference and conditions, and we have ready-to-deliver assets to our clients. So that's a bit of automotive industry, ups and downs. CS Infra. We are looking into concessions, infrastructure. We had a strategic movement that was approved by the majority of our shareholders for Ciclus, but we are looking into things that are focused on services. And the portfolio is very broad with less invested CapEx and mostly services and that the CapEx cannot impair our capital structure or our other businesses. So, we don't want to go crazy with CapEx investments in concession, but we believe that city, state or federal administrations will focus on services to really change the lives of people and improve the quality of life. As for returns, I'm going to turn to Denys.

Hi, Guilherme. Without writing it on stone, we are part of the segment to create value. And then, each initiative has a specific characteristics in funding, and risks and other alternatives. So, I would tell you what we have already in the company based on funding that has been committed and that supports 80% of the CapEx that Fernando mentioned, things that are to operate, we are thinking of 25% to 30%. But once again, this has to be looked into case by case, but I'm using it as reference, just for you to have an idea of how we look at opportunities, okay?

Our next question comes from Werner Roger from Trigono Capital.

Congratulations on your results. As shareholders, we are very aligned and as happy with the results. I have a bit more of a macro scenario question, but that involves the company. How are you feeling the willingness of entrepreneurs in outsourcing services in the current interest rate scenario? Are they less willing to expand partners and businesses or quite the opposite? Because of the interest rate environment, efficiency is even more important, and it makes sense to use SIMPAR services. And given the importance of logistics and the economy as a whole, how do you feel the economy is going, especially in the last month? Do you think it is in a stoppage? The real economy, the segments in which you were involved, do you think that it has come to a halt? Where do you think growth is going to?

Fernando here. Well, in the ecosystem of companies controlled by SIMPAR, I'm not going to say it's good or bad, but at difficult times of interest rates, everybody is rethinking what to do. I think that when credit is easy and interest rates are high, those entrepreneurs that don't think much, they just do anything. At an environment like today, people rethink their prices, which is good for us. And if you do the math, outsourcing is better. So when the interest is high and the economy as is, the industry does their math more. And with that, we have opportunities to grow. If you think of -- we grew 21% year-on-year, considering JSL and the acquired companies. And that is the industry looking for opportunities and also because our competition, unfortunately, is more frail because they really cannot keep pace with the current time. So, JSL is being able to improve its operating margins. So you need to work together with clients in a sustainable way. So I'm talking about productivity needs and outsourcing in the case of Vamos trucks, machinery, Movida with cars, huge opportunities. Vamos has still a [ varying CPF ] market. The rental of trucks, machinery and equipment is just starting, and it has developed excellent work. and Movida that's more mature. But still, the rental of brand new cars, weekend rentals, the kind of car, the mix of Movida, a newer fleet has really been bringing lots of people breaking records after record on weekends in the booking of rental cars. So, we are advancing all our businesses quite strongly in a time where the market is a little more difficult and people and the industry are rethinking their practices. I always joke around with Denys and Barreto and we always thought what was going to happen in the pandemic and we have been very positively surprised. Things are happening. The automotive industry, of course, they are having problems in supply, but in foods and beverage, the industry in general, they are developing. We haven't really felt a valley. We probably are going to have that if interest rates go up. But so far, I don't know if people are not traveling. People are enjoying that the pandemic kind of easing down, but we are not really feeling the opposite and lots of opportunities for organic growth. I don't know if Denys has anything to comment.

No, that's it. I think that one thing complements the other. But it is -- for those that are not in the real economy, we don't know, but this is what we feel as well.

The next questions came on the webcast platform and are going to be answered by the company in the order they were collected. I'm going to turn the call to Fernando Simoes to answer the questions.

Well, this is Denys. I'm going to answer the questions that were posted on the web. We have one question from Lucas Barbosa from Santander. He says what is SIMPAR's strategy to grow in light vehicle dealerships. So you went to luxury, was it coincidence? Are you going to focus on the segment? Do you have opportunities of other dealerships in less premium brands, giving the production of cars in this niche is being more affected? Thanks, Lucas. Part of our strategy at SIMPAR is to diversify businesses and second sectors that are complementary and resilient. So at Original, as dealerships, we want to have dealership networks in regions, brands and models that are independent, but complementary because if you have a problem in economy, you have a lot more resilience in development and growth. So you're going to see luxury, you're going to see premium, and you're going to see economic as well, more affordable areas in different regions and therefore, contributing to our revenues and results. Next question, Fernando, comes from [ Ricardo ], an individual investor. The question is, do you believe there is a risk of substantial drop in prices of cars if the commodities go down.

[ Ricardo ], quite honestly, I never saw prices going down substantially within cars. So to answer your question, no, I do not believe the prices are going to go down substantially. Quite the opposite. I think that prices were depressed. And I think this is a level that is fairer and more balanced if you think of the exchange rate and everything. So, I think the level is here to stay.

The next question comes from [indiscernible] which is the following. In view of growth opportunities and higher interest rates, why has the company decided to have a more aggressive dividend payout recently? I'm going to answer the first, but I would like to tell you the following. Although it's true with the pace of growth, the idea is to pay the minimum mandatory dividend. From time to time, we have been doing that every 5, 6 years. If I will remember by heart, the last was 2016. So it's a way of every, I don't know, 5 years, to give back a bit to shareholders. Now, when we look at this, we also think of the future and the certainty of development. So, if you think of the cash generation in the first quarter, we had a substantial change and along years, we have been quite assertive in between investing and generating cash. Our businesses are resilient. The company is based on contracts signed. So when we think of the future, we think of a very comfortable situation to make the decision. And why is that? Because we are always thinking of reducing leverage year after year. So this is our projection. Rest assured, we see contracts connected to investments made, for instance, the BRL 2.5 billion Fernando mentioned in the first quarter, is 3x higher than what we had in the first quarter '21. And leverage was not affected if you take a look at our reported figures. So since 2016 onwards, we continued to improve our capital structure, measured by a reduction in leverage. We have a history of assertiveness in generation of cash connected to investments, the BRL 2.5 billion have not yet reflected in our numbers. And when we project all that aligned with our funding plan and credit lines available to the company and the expansion of cash generation, we see that we can grow, respecting our gradual improvement in capital structure. So this is something that the company has already been practicing. But indeed, generally, we have the minimum payout, but every now and then, we'll make the exception. Fernando?

I think Denys has answered the question and it is what it is. We'll have a strategic plan that is being followed, and we are very comfortable that the dividend paid out, although different from our history, does not mean that it's going to be always at this level. But we understand that every now and then, we can do it again. This is the recognition for the shareholders that believe in us and also reflecting the new level of results of the company. So to date, the company is at the new level of results and cash generation in a very responsible manner, but sharing a bit with shareholders. What I can assure you is that, you have a new company level to be perceived in terms of cash generation and results. And this answer is also the answer of a similar question from Rafael.

Next question comes from [ Luciana ] and is the following. How do you see the direct and indirect impact clients in the group's businesses with the increase in fuel prices?

Luciana, increasing fuel prices has an impact on the lives of everyone on the day to day. But what's important -- what has happened in the last 12 months, I've never seen fuels going up so high so frequently. It seems that they are completely out of control. But logistics, which is where fuels impacted most has been working in an excellent manner with clients, passing through prices without losing clients. And in terms of logistics, most of revenue comes from internal logistics and others that the client provides fuels in dedicated operations, for instance, where you don't have double taxation. So with that, we have a slightly lower impact. So what I can say is that we are prepared. We have been developing well, and we have been working regardless of increases. So, of course, for the whole of the economy, it is a problem. And the pandemic also made people willing to use their own cars, other than use of public transportation and traveling on weekends. So, fuel has not really affected any of our companies in their development and growth.

Well, I think that the last question on the web, unless we have more, that comes from [indiscernible] and says, when are we going to see an inflection point in results regarding financial expenses? Is it as of the second quarter '22 are we to see the beginning of this inflection? Well, John, this is Denys. Well, thanks very much for your question. And I would like to emphasize some points. First, the inflection itself in terms of rates, it depends on the market. And it seems that as of the second quarter '22 that may happen. But what's important to highlight is that this is not a concern. And why isn't it a concern? Perhaps, I will say against something that has been said before. We are 65 years old and this is a business model that was built to operate in an inflationary environment. That means that our contracts just already include pass-through prices. And in logistics, you have dedicated operations with dedicated investments. And you have very specific formulas, well structured, to reflect the reality of each contract and that's how we got here. So if interest rates are going up, if the trend is ascending, it is not a concern for us. And it's also important to mention along the same line is that we have been showing the evolution of our returns, and that brings us the certainty in our pricing. Of course, if you have a pace of growth that is very accelerated, and you have time to start collecting the benefits of investments, you sometimes have a gap between the investment made and the benefit of the investments made. But going back to your point, the market seems to show that as of the second quarter, we are going to have an inflection. But I would like to highlight the quality of our contracts, the quality of the group's businesses and our history of 65 years. Okay. With that, we are closing our questions on the web, and I'm going back to the operator for the conclusion or if we have any questions, let's answer them. Otherwise, let's close the call.

Just to add to what Denys mentioned to, I agree with him 100%. And also, I would like for you to think of something and that I'm going to mention in my final message. The only thing I want you to consider is that the interest that we saw in '14, '15, '16, let alone before when we were building Movida and transforming Vamos because Vamos, as a legal entity, is 4, 5 years, but it was being built in the past and we didn't have the level of results we have today. So sometimes, you see profits a bit repressed, but operating margins are going to increase with phenomenal scale. And you're going to see that the cash generation today is much higher than what we need to expand our business or to renew our assets. So we are very comfortable. We have very solid contracts, and I think that's it. Now, we are going to turn to the operator, and then I would like just to have a final remark. Thank you very much.

Since there are no questions, we are going to turn the call to Mr. Fernando Simoes for his final considerations. Please, Fernando Simoes, you may go on.

Once again, I would like to thank you all. We have more than 160 attendants. Thank you so much. I would like to tell you that our results do not completely reflect our company today. Once again, in the last 12 months, we had CapEx of more than BRL 10 billion, assets that are in operation and that are -- 2 start operations in the first quarter alone, BRL 2.5 billion CapEx, not even BRL 1 being seen in our results, and that gives you the opportunity of assessing what the company is going to be in the future. It's not showing acquired companies or Sagamar in the dealership network. It has not been consolidated yet. And remember, the quality of assets we have been buying, creating the group that is really differentiated. In the dealership segment, more than 20 brands, several regions in Brazil with different services and know-how in Maringa, Sao Paulo, et cetera. Now, talking a bit about the future and sharing with you what I see. We are going to have the opportunity of being together on SIMPAR Day on May 26. We are going to send you all the invite. But talking about the future, we are comfortable with the quality of our development, growth and maintaining our results. Rest assured that today, we have a completely different company with solid, sustainable transformational growth. Now you can tell me. What about the market? The interest rate is going up. The industry is being affected. I will tell you something. I don't see any difference from you. But what I can tell you is that we have a management model and unique positioning in SIMPAR and its subsidiaries. And that enables us to be part of an ecosystem in a market of real economies, services, industry, mobility, the more challenging, the more opportunities for us to develop. How were you -- how we were, I'm sorry, in the beginning of the pandemic and how we are today. In the past 2016, '17 and today, the numbers are up, but the numbers are up because we planned ourselves for that. See how much Vamos prepared itself with inventory purchases were 1, 1.5 years ago, no one buying. Vamos establishing a partnership with OEM. It is prepared to provide services to its clients. With the dealership metric of trucks, tractors, that is really transformed. Movida, we talked about that. The growth of its fleet, CS Brasil with the proof of the majority of shareholders from 120,000 to 190,000 cars, the newest fleet in Brazil. And if you go to rent a car, and you have a 9-month car, you keep it, you want to stay, you have customer loyalty. And the company has got it right and has been able to have better prices, daily rates, taking care of its people and customers. And we talked about the dealerships, the transformation, and we are sure that we still have a lot more to do. JSL, logistics, net income is in line with our plan, with our capital structure. We acquired some companies, increasing debtedness, the interest rate is part of that. But even with the increase of cost, you are improving margins. Our team is improving margins, passing through prices to clients and improving our operating margins and return. So our management model, our people have made a difference. Our net income is better in the first quarter, even with an increase in costs and interest rates and increasing financial cost. Take a look at our net results this year, which reflects the increase in the financial cost. So a new level of results that are here to stay with operating margins that will increase, reflecting our gain of scale. So once again, thank you very much for your opportunity, for your attention. Thank God, we have wonderful people with excellent businesses. We are very much confident that this cycle and better operational margins are here to stay, and we are even going to be more transformational for the future. Don't forget that you're going to get the invitation for our SIMPAR Day on May 26, and it's going to be a pleasure to answer your questions and to be closer to us and the main managers of our companies. We are confident about our future, our development. We'd like to thank our people, more than 36,000 employees today. Our leaders that make a difference, the people that work hard every day. Thanks for them, our family -- their family members, our Board members that have been paramount to our future and to you all that many of you that have been following us for many years. Thank you very much on behalf of all of us and have an excellent weekend. Thank you.

SIMPAR's conference call is now closed. We thank you very much for attending and wish you a good day.