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

Good morning, ladies and gentlemen. Welcome to the SIMPAR video conference to discuss the capital increase of SIMPAR, Vamos and Movida. This video conference is being recorded, and the replay will be made available on the company's website, ri.simpar.com.br. The presentation will also be available for download. [Operator Instructions] Before proceeding, I would like to emphasize that forward-looking statements are based on the beliefs and assumptions of SIMPAR's management and on information currently available on the company. These statements may involve risks and uncertainties as they relate to future events and therefore, depend on circumstances that may or may not occur. Investors, analysts and journalists should bear in mind that events related to the macroeconomic environment, the industry and other factors may cause actual results to differ materially from those expressed in the respective forward-looking statements. Joining us today is Mr. Denys Ferrez, Executive Vice President of Corporate Finance and Investor Relations Officer of the company. I would now like to turn the floor over to Mr. Denys Ferrez, who will begin the presentation. Please, Mr. Denys, you may proceed.

Good morning, everyone. It is my pleasure to join you this morning to this transparent forum. We'll be giving you further details on the operation that was announced last night. We invited you to this video conference this morning, not a lot in advance, but we already have about 500 people joining us. So let me be quite straightforward here in the presentation, so we can address your questions. Let me tell you what the transaction is about. The transaction is about private capital increase for SIMPAR, Movida, Vamos within the capital threshold that's been authorized in the minutes and statute of each of the companies. And according to the agreed value, the base can be BRL 2.2 billion and maximum BRL 3.1 billion in capital increase. The transaction for SIMPAR can reach maximum BRL 2 billion, depending on the market participation -- the shareholders' participation. This transaction is for shareholders. And there is also another possibility. There can be a partial completion with BRL 1.4 billion that is already -- that is already for sure. The price for this capital increase will be BRL 11.24 per share, which accounts for 5% as compared to yesterday's market closing, March 5, 2026, and it's anchored by the controlling shareholder holding BNDESPAR and other institutional investors. At Movida, this capital increase can reach BRL 750 million with the possibility of a partial increase of BRL 500 million at BRL 11.72 per share, which is about 10% as compared to yesterday's market closing, anchored by SIMPAR and BNDESPAR. The proportion is about 65% of the total amount. At Vamos, increase can reach BRL 600 million, minimum BRL 400 million, BRL 3.85 per share anchored by SIMPAR and BNDESPAR. Proportion will be 65% of the total amount. In addition to this capital increase, in this transaction, there is a purchase option for JSL so that we can acquire up to 14,200,000 ordinary shares of JSL, paying the smallest amount between the fixed price of BRL 7.89 or the equivalent to 95% of JSLG3 closing price on the trading session immediately prior to the option exercise date. The exercise period is up to 30 days after the ratification of SIMPAR's capital increase. The objective here is the following. This operation is in line with the strategic planning of the companies and the execution of long-term initiatives. The focus is efficiency, sustainable development and the enhancement of logistics, mobility and infrastructure, driving innovation in these sectors and contributing to the country's competitiveness. It's important to highlight that these businesses will directly optimize our capital structure for our customers since they can be driven to their own business, increasing our productivity, making them more competitive and also optimizing our processes if we look at the supply chain. We believe this will contribute to increasing value generation. We will increase our capital structure so that we are even more comfortable in developing our businesses that are extremely resilient. If you think of people's real lives and will cater to practically all the sectors in the Brazilian economy. This should also privilege the way the shares are priced since we're going to foster and increase the participation of shareholders in the company's capital as well as the controllers' capital. Preference rights, and this is important. We got many individuals who are shareholders. So let me highlight that the preference rights will be uniform. Conditions are absolutely the same for every single shareholder who's part of the company until the deadline I will mention. So every single shareholder who's interested in keeping their participation in shares, they will have the opportunity to do so, and this will be done equitatively. There is no -- absolutely no difference among the shareholders. That's why we're making a private capital increase because we wanted to make sure our shareholders can take this opportunity since they trust us and they've been by our side as we develop our business. Now with regards to preemptive rights, shareholders who is part of our company up until March 10, so shareholders registered in the ownership base as of March 10 will be entitled to preemptive rights. Negotiations will begin as of the 11th. Now Slide #3. Here, we see the breakdown of capital increase by company. First, SIMPAR. And you can see how much each investor can invest minimum and maximum amounts. You can also see the amounts for Movida and Vamos. Once again, it's important to highlight that we're increasing our private capital increase that can reach up to BRL 3.1 billion. And if it happens partially, we can reach BRL 2.2 billion. Moving on to Slide #4. On this slide, we show the corporate structure for SIMPAR, Movida and Vamos before and also after these events or potential events, especially for Movida and Vamos. Now to be straightforward here, let's talk about SIMPAR controlling shareholders, individuals and also the holding that controls SIMPAR. Before the transaction, they hold 66.6%. To your right-hand side, if you think of SIMPAR, in light blue, you see maximum capital increase and in black, the minimum capital increase numbers. As you can see, relevant majority participation that will range from 51.4% to 56.4% of the total amount depending on the market participation. Now for BNDESPAR, maximum 10% and minimum 9.7% of SIMPAR. Moving on to Movida. SIMPAR controlling shareholder holds 69.7%. And after the event, this percentage for majority controlling shareholders will range from 60.9% to 63.5% within the minimum and maximum amounts. Now for Vamos, SIMPAR holds 62.2%. This is the current picture before the possible capital increase. And after that, SIMPAR would still have relevant majority participation ranging from 56.2% to 58%. And BNDESPAR would be between 6.4% and 4.5% in Vamos. Now as to Movida, I failed to mention that, but BNDESPAR would range from 5.6% to 8%, depending on the scenario. Moving on to Slide #5. As far as we can see, this transaction strengthens our long-term value creation in line with our strategic planning in the companies. We're talking about high-quality investors that have a long-term perspective and that, for sure, contribute to our governance, which is something we care a lot about. As you can see in all our previous transactions, the ones that have possible conflicts of interest, the controlling shareholders at JSP or SIMPAR, they took this opportunity to minority shareholders, so they could also be involved in the decision. So that comes to show that throughout the years, we've been respecting every single one of our investors equally. Of course, that strengthens and increases investors' confidence in our management model after BNDESPAR, after the observations that were made throughout the years, you could see how the company has developed. And I'll give you some examples on our outcomes in terms of ROI. And of course, the increase to our capital structure will also increase or improve our competitiveness in every single aspect, especially with regards to getting funding so that we can keep up with our businesses. We have very resilient companies. We always count on the support and confidence of the market, but there will also be a positive increase and improvement as we increase our capital. On the next slide, #6, I would like to give you concrete figures on what this will actually mean in terms of value creation. And let's talk about some figures then. At the top left-hand corner on Slide #6, you can see the results of our investments at Ciclus Rio all the way to the divestment period. This investment was made in November '21. It was monetized and you were informed late last year. So it took 4 years. There was a twofold capital multiplication with an internal return rate of 27% a year. So this is a concrete case with a beginning, middle and end. And we have 3 other examples now. Movida to your top right-hand corner. This investment was made. The IPO happened in February '27 (sic) [ 2017 ] and in February '26, after 14 years (sic) [ 7 years ] when you see the volume of money that was invested in February '17 by the SIMPAR Group, there was a fivefold capital multiplication. And within this 14 years (sic) [ 7 years ] the internal return rate was 24% a year. "He said '27, but he meant '17. He corrects himself." At the lower left-hand corner, Vamos, January '21 after the IPO to date, we're talking 5 years. There was a sevenfold capital multiplication in our own investments, those that were made and accumulated to date. That accounts for 66% internal return rate. For JSL, which was the beginning of our businesses and the services we catered, considering how far we've got, everything started from JSL as of September 2020, when the company was separated with a pure logistics company. And after we went for the company's IPO separately, well, it's been 5 years since we did it. Our capital -- the capital invested showed a sixfold multiplication, an internal return rate of 44%. These metrics are based on the share closing prices of yesterday. And we all know that we're not going through the most favorable moment in the stock market nowadays. But still, you see this quite expressive figures. Now moving on to Slide #7. Let's talk about our shareholders' agreements, the agreements that will be celebrated. SIMPAR, Movida and Vamos, along with BNDESPAR includes the participation of BNDESPAR to many institutions or to many departments in the company's administration. So the rights to nominate 1 member to the Board of Directors to the Statutory Audit Committee and to the Financial Committee and a 6-month lockup for all shares held by BNDESPAR, JSP and also by SIMPAR, the controlling shareholder of Movida and Vamos. Slide #8, please. Still on the shareholders' agreement. Here are some items. Veto rights to BNDESPAR. In broad strokes, this is a protective item. The operational mechanics, while the way the company develops will be the same. However, there are some protective items that I will talk about. If there is any increase in capital in the company that is not done in cash, BNDESPAR has the right of giving an opinion before that happens. So the right of veto. So approval of any capital increase at SIMPAR is not paid in cash, except capitalization of company's earnings, dividends, capital increase resulting from corporate reorganization, exercise of stock options by employees and conversion of convertible securities issued with preemptive rights granted to SIMPAR shareholders, they can be part of the emission of such bonds. Another right BNDESPAR has is that -- well, let me start over. In some cases, if there are some movements that may trigger early maturity of some of our debt contracts, then they have the right to appreciate that and veto that. That is to say that if we operate the way we've always done, and we don't think differently if we operate within our covenant limits that have already been agreed with our lenders, then nothing will change. But if there are such events, they could trigger early maturity. And then we'll have to have a waiver with lenders, but BNDESPAR would have the right to veto that if they think this is the right way to go. Acquisition of equity interests, acquisition of fixed assets, approval of capital investments and distribution of dividends or interest on equity above the mandatory minimum. Then next item, exit from the Novo Mercado or cancellation of registration as a publicly held company within the CVM. And also, they have the right to veto if they want to listing SIMPAR on a stock exchange outside Brazil, except through ADRs provided the primary listing remains in Brazil. These veto rights I mentioned are part of the specific shareholders' agreement for SIMPAR. Now with regards to Movida and Vamos shareholders' agreements, there is no extra veto or formal right to block approvals on day-to-day operations of the companies. That is important to make clear to you. With that, we move on to the next slide to show you the time line of this transaction. That's the plan. We announced the transaction yesterday, March 5, 2026. The record date will be March 10, including the 10th for shareholders entitled to preemptive rights. So those who are part of our shareholders base will be part of that. As of the 11th, we'll begin the period to exercise preemptive rights. This period will go until April 9. That's when we end the period to exercise preemptive rights. Now from the 9th to April 14, we'll see the results of preemptive rights exercises. And then on April 5, we'll begin the period to exercise what we call unsubscribed shares. This period will go all the way to April 22. That's the end of the period to exercise unsubscribed shares. And we're only going to have one round for unsubscribed shares. So after April 22 until the 27th, we're going to look at the results of subscriptions for the unsubscribed shares. We'll finish that on April 27, and we'll see the final result. And then we'll ratify the private capital increase on April 28. That's when the approval will happen. Now considering the operational broadness of the SIMPAR Group and of course, of all the investments that we have with BNDESPAR, this will be appreciated by CADE and the Central Bank. But considering our expectations, this should be the time line. This should be the proper time line. With that, we're going to move on to our questions-and-answers session.

[Operator Instructions] The first question comes from Matheus Sant'Anna from Bradesco BBI.

I have 2 questions. Number one, why are we not investing in JSL as well? And the second question is, for SIMPAR, there is a clause that BNDESPAR can't make nominations to the Board. At Vamos and Movida, I don't think we have the same clause. Do you intend to add this clause to these other companies as well?

Matheus, thank you for your question. Now as to JSL, as many of you know, JSL has been having an approach that demands less CapEx. On services, we only have logistics services that do not engage with these many investments. And with trucks, we've been renting. So with that, the company's demand for capital is lower despite the growth. So it becomes sort of a cash generator. And you can see that in the company's results. With this operation, we're having this holistic perspective towards the group. BNDES had to be involved. There was this firm commitment, but we didn't really identify the need to use capital. That's why JSL is not involved. It's worth mentioning as well that we didn't include the company to the scope, and there was a declaration of strong dividends in the past. With regards to the nomination, the first item in terms of publicly exposed people, this item has been included to SIMPAR's statutory. In the shareholders' agreement, for BNDESPAR, we only have characterization of the experience, the background and the professionalism of the person being nominated. So it's a technical characterization so that we can all benefit from this nomination. Now with regards to the other companies, we usually make all our concepts uniform. But again, this will be a decision made by the assembly of these companies. So after the general meeting, this will be decided, but we tend to have more uniformity with SIMPAR and the other companies. Did that answer your question?

Yes, sure, Denys.

Next question by Andressa Varotto from UBS.

I would like to underpin a specific point with regards to minority shareholders. They're going to follow the offer under the same conditions. Can you reinforce or repeat the conditions, please?

Andressa, thank you very much for your question. We see that since last night, people have been having questions on that. The participation of BNDESPAR with this long-term perspective, that is in line with the controlling shareholders. That creates a lot of value for sure to the company, especially considering that for future growth, we're fully convinced of the opportunities we have ahead for all the businesses. So initially, this movement was initiated by the controlling shareholders. And we decided to go for the private capital increase approach because we wanted to preserve this right and this opportunity for minority shareholders to have equal conditions so they can keep their relative participation in each of the companies. Once again, this reinforces the extent to which we respect our shareholders' base. We're doing this with the best of intent on the shareholders and on the companies. Everything that's good for the company will also be good for shareholders. And as you saw, it's important to say that there is no difference. This will be an individual decision of each investor if they want to follow the company or not. Now let me take this opportunity and say that if they do not want to follow. As of the 11th, they will have preference rights with a specific ticker that will be created and negotiated in the stock market. As far as I can see, this creates a lot of value because this will contribute to the discount rate, and this will improve people's risk perception. This should also contribute to the capital cost depending on the level you want to operate. And to me, this will create great value to all shareholders. They will have the opportunity of negotiating these rights. So there's an economic benefit here, too. If this is properly interpreted, they can also monetize that. Did that answer your question, Andressa?

Yes, Denys. Very clear.

Next question, Mr. Luiz Pecanha from Safra.

With regards to the capitalization process, what are the expected results for the short term and for the company's capital cost for the 3 companies in equity and in debt?

Thank you for your question. Well, I don't think it would be adequate to give you estimates. I can't really give you estimates. But when you look at the history data, when I look at the discount perception rates for equity, it's easy to see that a change in those numbers would create a lot of value. Now with regards to that, we've always had the ability of growing at regular market prices. We have good relations with the market. I'm talking about the institutional market, local market, foreign market, individuals who we respect a lot, but we also have great relations with all banking institutions. So we've always made positive progress within regular prices. I don't think it would be adequate or allowed to give you figures, Luiz. But there was another question, right?

Oh, no, the question was on capital cost. But if I may, I may ask you another question on the need of capital for the short term. This capitalization will reduce this capital need. Or do you have -- will you have to issue new bonds for that?

Okay. Let me answer that. Historically, I had the opportunity of the part of the group for the past 18 years, and I can tell you that we have great financial responsibility. Money has always been ahead of our needs. So there's been specific announcements for Movida, for example. We had done our homework already, and we always try to anticipate these needs. So this had already been thought of. They don't depend on this movement. Now you talk about capital opportunity. The strategy that we communicated to you, the strategy communicated by SIMPAR and all the companies will remain the same. At this point, our focus is to extract results out of everything we have already built. Now our obligation is to optimize these resources and look for the smartest ways to use it. At SIMPAR, the objective we have announced was to reduce or bring the net debt to 0. That will be a great contribution, but we'll also try to reduce the gross balance of our debt that began as we build what we now have.

The question-and-answer session is now closed. I'd like to hand the floor over to Mr. Denys Ferrez for his final remarks.

Well, I would like to thank everyone. I want to say that due to this event, we'll have higher quality investor relations with a focus on the long term, in line with what we have already done. If you look at SIMPAR as a group, if you look at the third quarter and annualize this data, the revenue would be roughly BRL 50 billion. Cash generation is almost BRL 12 billion annualized rate with a growth rate. If you look at data when the IPO happened to date, CAGR, 23% a year and cash generation, 28% a year. When I joined the company, the revenue was BRL 1 billion. Our revenue now is 50-fold. Investment volume to gain scale in these businesses and to have this leadership position over the past 5 years is something that went above BRL 60 billion. I don't really know other groups that made this huge investment. If I'm not mistaken, this places us as the fourth largest group investment-wise in Brazil. We have more than 56,000 employees. They are responsible to deliver these results and to have customer focus. From one single company, we developed another 8 that are very well positioned that are leaders in their segment. We grew our governance. We're the largest truck buying group in Brazil, the second largest light vehicle purchaser in the country. We pay more than BRL 1.8 billion -- BRL 1.8 million to independent truck drivers. We put great effort to make sure this relation is productive and useful in both ends. We're training people, making people more professional and considering our business model that puts the customer at the core, we've been showing that we are resilient overcoming global and local economic cycles, and we are certain based on our principles and our culture, along with our people that we can go even beyond that. I'm at your service. If you need my help, the IR team, Victor, Marilo and Ariel are at your service to answer questions you may have by e-mail or by phone. And I wish you a great day. Thank you very much.

SIMPAR's video conference is now closed. Thank you for your participation, and have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]