Tegma Gestão Logística S.A. (TGMA3) Earnings Call Transcript & Summary

Good day, and thank you for waiting. Welcome to Tegma Gestão Logística S.A. conference call to discuss fourth quarter 2021 earnings results. Today, we have Mr. Marcos Medeiros, CEO; and Mr. Ramón Pérez, CFO and IRO. We would like to inform you that this event is being recorded. [Operator Instructions] The replay of this event will be available right after the end of the conference call for a period of 7 days. And now I'll turn the conference call over to Mr. Marcos Medeiros, Tegma's CEO, who will start the presentation. Mr. Medeiros, you may begin.

Good day, everyone. I'm Marcos Medeiros Tegma's CEO. And on behalf of the company, I would like to thank you once again for joining us for another earnings conference call. Here with me is Ramón Pérez, our CFO and IRO; as well as Ian Nunes and Felipe Silva from our Investor Relations team. As you all know, the COVID-19 pandemic has had a global economic impact, making the business environment extremely volatile and adding uncertainty to all forward-looking statements to be made during this presentation. Tegma is providing information valid for the date of this webcast and reserves the right not to update any forward-looking statements contained in this presentation. So let's get started on Slide #3 with some highlights of the quarter. First, we highlight the proposal to pay BRL 23 million in complementary dividends and interest on capital to be approved in the shareholders' meeting on April 13. This distribution reflects the financial strength of the company. And if approved, will correspond when added to the prepayments made to distribution of 71% of the adjusted net income for the year or 60% of the net income without the constitution of tax reserves into a dividend yield of 5.7% for the year. Next, we highlight a tax credit that the joint venture Catlog recognized in the amount net of taxes of BRL 5.8 million, which impacted Tegma's equity income by BRL 2.8 million, reflecting Tegma's 49% stake in the company. The third highlight is related to our start-up accelerator, tegUP; and our first invested company, Frete Rápido. At the end of 2021, Tegma and tegUP decided to sell their stake in this startup for strategic reasons, and because we understood that this was a good opportunity. This deal led to a gain of BRL 2.6 million for the company, almost 2x the investment made in 2018. In the fourth and final highlight, we give updates on the commercial dispute that led to a delay in the receipt of payment for the provision of vehicle transportation services. This delay has impacted our working capital since mid-2021. In December 31, 2021, this issue had not yet been resolved. The balance receivable accumulated to BRL 57 million and the balance payable to BRL 20 million. At the beginning of March 2022, the company received, from the counterparty, the amount of BRL 21.7 million, which corresponds to 58% of the net balance receivable in December 31, 2021. As a result, we continue to discuss the matter so that we can settle the remaining balance as soon as possible. Moving to Slide #4. Let's talk about ESG, the ESG theme has gained even more relevance within the company as we have tried to communicate throughout the year. This quarter, we had 3 important initiatives. The effective purchase of free energy from renewable sources for 4 important Tegma basis thus reducing the consumption of potentially polluting energy. The second initiative was the launch of our diversity and inclusion program called Nossa Gente or Our People, which will be the benchmark of our commitments to an even more inclusive and diverse environment. And the third initiative is the support for the ecological restoration of an important native area in the Águas da Mantiqueira region in partnership with our client, Toyota. With this, and -- I'll give the floor to our Chief Financial Officer, Ramón Pérez, so that he can elaborate on the indicators for the quarter and the full year.

Thank you, Marcos. Good afternoon to one and all, and thank you for joining us. On Slide 5, we see at the top the performance of vehicle sales in Brazil, domestic sales. The year of 2021 was greatly impacted by the effect of the breakdown of production chains and logistics worldwide. This impacted sales in Brazil that were up only 1% over 2020. It is worth noting, though, that this performance was better than the performance of many countries with relevant economies such as Germany and South Korea, and very close to that of markets such as the United States and China. On the right, we can see that despite the great evolution quarter-on-quarter, in the year-on-year comparison, the quarter still posted a substantial drop due to car supply problems due to vehicle price increases and also due to unfavorable macroeconomic factors such as higher inflation and reduced disposable income in Brazil. Please remember that all comparisons of 2021 versus 2020 that we will make in this presentation regarding the automotive market need to take into account the fact that the second quarter of 2020 was significantly impacted by the onset of the pandemic. As such, we will focus more on the explanations for the quarter. Q4, the drop in both production and exports in Q4 '21 in the annual comparison is a reflection of the production difficulties faced by automakers in the period. Although less pronounced than in Q3 '21, these difficulties still caused severe restrictions. On Slide 6, please, we can see the operating indicators of the automotive logistics division. In the chart above, we can see a drop in our market share in 2021 versus 2020 and 2019. We remind you that this performance was a consequence of both the impact on production suffered by one of our main clients and the change in the sales mix in Brazil, which favored less representative clients for us and also hurt an important client of Tegma. Improvement in market share in Q4 '21 of 23.4%, as we show on the right, compared to the year of 2021 reflects the return of this important client to top sales of 2 of its models at the end of the year. In turn, average distance traveled in the track below was quite compromised in 2021 on account of the closing of Ford's operations in Brazil. Ford had longer trips from the Northeast of the country. Moving on to Slide 7. In the top chart, we can see a small increase in net revenue of the automotive logistics division in 2021 versus 2020, despite the reduction in the number of vehicles transported and average business traveled. The factors that contributed to the small growth were: the recovery, albeit slight, of other logistics services; the growth of the logistics operation of used vehicles, although still not very representative in the company's sales, it does have a great potential; and also tariff adjustments, which reflected the sector's inflation in the period. The same explanation applies to the stability of revenues in Q4 2021 compared with Q4 '20. Moving on to the charts below. Despite all efforts to increase productivity and control costs, the drop in volumes and reduced average distance traveled directly impacted the dilution of fixed costs of the division, leading to lower margins for this operation in fourth quarter 2021 compared with Q4 '20. Nevertheless, the division's 13.4% EBITDA margin in the chart on the right was impacted by provisions for legal claims, additional ones and at a higher level. In addition to reduced volumes and lower dilution of fixed costs as a consequence, the evolution of margins in 2021 over 2020 was quite positive. Although we cannot forget what we already mentioned. In other words, the fact that Q2 2020 was heavily impacted by a widespread reduction in operation or shutdown of plants. Moving on to Slide 8. We show the financial highlights of the Integrated Logistics division. Looking back a bit on the last 2 years, it is worth noting that the year of 2020 for this division was exceptionally positive due to higher volumes from all operations on the back of pandemic side effects in the respective markets of operation. In the top chart, we can see that the 16% drop in net revenue in 2021 was mainly a consequence of the loss of one anchor client in the warehousing operation, despite an almost 2% growth in the industrial logistics operation. The 18% year-on-year drop in Q4 2021, on the other hand, stems from the loss of this client as well as 2 atypical events. The first event refers to the delay of 2 ships that were scheduled to dock in December, but they docked only in January of 2022. And this reduced volumes handled at the end of the year by the chemicals operation. The second event concerns the household appliances operation, which also experienced a decline in volumes resulting from the end of year stoppage of the factories that we serve due to collective vacation and [ substantial ] lack of parts. In the bottom left chart, we can see EBIT margin growing both in 2021 and in Q4 '21. This performance in 2021 reflects the sale of equity interest and the recognition of tax credits. In the graph on the right, where we see adjusted EBITDA margins, we can see a margin reduction in the full year 2021 versus 2020, explained by 2 factors. Part of this reduction is due to an accounting effect of IFRS 16 because IFRS 16 does not allow EBITDA to capture the reduction of rental costs in the year 2021. The other part of the drop is due to the less profitable mix of services in chemical logistics business, the variation of the adjusted EBITDA margin of Q4 '21 year-on-year was impacted by these same reasons plus a lower revenue in the quarter, which leads to a lower dilution of fixed costs. Now moving on to Slide 9. We see Tegma's consolidated results. As already explained, 2021 was a challenging year for automotive logistics, which had to adapt to several production stoppages due to lack of parts, a shortage of parts. Revenue stability in 2021 versus 2020 in the top chart is mainly a reflection of these problems and the loss of 1 anchor client in Integrated Logistics, as explained. The new stability of revenue in Q4 2021 versus Q4 '20 on the side is largely due to the same reasons explained in the year variability. And to one-off issues, which negatively impacted the results of the Integrated Logistics division. In the bottom left chart, we can see that 2021 EBIT was higher than that of 2020 due to positive nonrecurring events, which added together amounted to BRL 14 million in 2021. In the middle graph, we can see that adjusted EBITDA in 2021 was very similar to that of 2020. The drop in adjusted EBITDA in Q4 '21 resulted from the reduction in revenue and lower dilution of fixed costs in both divisions. Net income totaled BRL 108 million in 2021, as seen in the graph on the bottom right. This stems from nonrecurring events, which altogether corresponded to BRL 26.8 million, almost BRL 27 million, explaining a good part of the growth over 2020. However, this net income would still result in a net margin of 8%, even in an adverse scenario for the country and especially for the automotive industry. Q4 '21 net income, in turn, was positively impacted by BRL 4.4 million due to events considered as nonoperational. If we exclude these, net income would be almost BRL 27 million, which would correspond to a net margin of 8.8%. Please go to Slide 10. On the left, we present CapEx for 2021, which totaled around BRL 30 million, with the most relevant investments being the acquisition of packaging for the integrated logistics of household appliances and trucks for vehicle logistics according to the ongoing plan to renew the company's own fleet. In the fourth quarter of 2021, CapEx was BRL 6 million. And there's no single project to be highlighted here. In the middle chart, we show the company's cash-to-cash cycle, which was 54 days in Q4 '21, much higher than normal levels. This increase stems from the withholding of receivables already mentioned in the beginning of the presentation. Until yesterday, that -- those receivables had already been partially paid by the counterparty. Additionally, in December 2021, we also had a nonrecurring delay from a client due to a change in their systems. But this was totally regularized in January. Net of these 2 events, our cash-to-cash cycle would be at the same level as in the third quarter of 2021. On the right, we show the company's free cash flow that was negative by BRL 8 million in 2021, much lower than in 2020. This reduction is due to the fact that in 2020, we made great use of tax credits, and there was a large release of working capital in the automotive operation. As for the full year 2021, there were the forementioned withholdings that we explained, withholdings of receivables and the delay that we mentioned. That totaled BRL 37 million on December 31, 2021, net of what we also owe in addition to the increase in investments compared to 2020. The negative free cash flow of BRL 63 million in Q4 '21 was due to the BRL 10 million increase versus September 2021 in the net balance receivable from that commercial dispute as well as the delay already solved of BRL 20 million from 1 specific client, again, because of that issue that they had when exchanging systems. And also the consumption of working capital as a result of the 40% sales increase in the automotive logistics division versus Q3 '21. Moving on to Slide 11. We can see in the top left chart that our debt remains consistent with our current cash position. And this cash position will be significantly higher after the regularization of the issues involving our receivables. In addition, the debt amortization schedule is consistent with our cash generation expectations, considering that in 2022, a large part will mature in the middle of the year. The table below shows that our net cash position of BRL 18 million is lower than at the end of last year. And this is mainly due to those nonrecurring events in our cash-to-cash cycle. The cost of our debt in December 2021, as shown in the table on the top right, remains the same as in September '21 and slightly lower than in December 2020. Below, we show our rating, which has not changed since April 2021. And our rating is A. Moving to the last slide. In the top chart, we show the evolution of our return on invested capital and our return on equity. We highlight that the ROIC of 18.4% in Q4 '21 was down 2% points quarter-on-quarter, on account of the difficulties the automotive industry has been facing with the storage of parts and components. ROE stability at the end of 2021 at around 16% reflects the company's operational resilience and also positive nonrecurring events in the second half of 2021. In the bottom left we show our track record of dividends and interest on equity paid by the company. As shown in the quarterly highlights, the proposal loss to distribute dividends and complementary interest on capital in the amount of BRL 23 million. On the right, we present information about our shares. First, in the top chart of multiples, price earnings in gray is at its lowest level in recent quarters, while enterprise value over EBITDA multiple, which was 5.4x in Q4 '21, remained in line with the previous quarter. These multiples reflect the uncertainties related to the automotive market and also related to the macroeconomic outlook. To conclude, down below, we see the performance of our stock compared to the Ibovespa index. We believe that due to the great uncertainties related to the automotive market as a whole, Tegma's shares have underperformed vis-a-vis the Ibovespa Index. With that, I thank you all for your attention and open the questions -- and can open the Q&A session.

[Operator Instructions] Our first question comes from Gabriel Rezende with Itaú BBA.

Congrats on the results. I have 2 questions, the first about market share. I'd like to see if the 23% in Q4 could be the right level for you? Or is there room for improvement considering that now one of the main clients that you serve is back? And if you can give us some data on the Fastline, that seems to be a very resilient business, particularly considering that you serve rental companies. Could you share the long-term expectations for this project, growth expectations? What can we expect in the future?

Hello. This is Ramon speaking. Thank you for the question. I will answer the first part about market share. Indeed, one of our main clients in terms of market share, General Motors, performed very well, very positively in Q4 2021. And the stoppages along the year impacted us a lot. But in the end of the year, GM became the leader in the sector. They practically returned to the pre-pandemic market share. So considering that event alone, the growth of our market share would be greater than what we actually presented. However, we have to remember another event. Ford ended their operations in Brazil in the beginning of 2021. The market expected that given the similarity in the mix of the 2 automakers that GM would absorb that demand or that they would absorb at least proportionately their market share in the market, and it didn't happen. Actually, another automaker where we have less share, acquired part of the Ford market share. It was Fiat, and Fiat for us has a lower share of our market share, although we do have operations with them. So when you put together those 2 events, the fact that Fiat's market share increased by absorbing part of the demand from Ford, I'd like to highlight that Fiat, despite that, already had a good market share with their mix of products. And that was the main reason to kind of dampening the growth of our market share, considering our main client. Regarding the future, well, it's kind of difficult to say. You could see my explanations. They're based on the performance of the automakers. So the future for Tegma will also depend on the performance, the capacity and the mix of products of these automakers. And if they are able to meet the demands of the market. So it's kind of difficult to say whether this market share will represent a stable level of market share or not. I think that this is what I can say regarding market share. Your second question was about Fastline, and I think Marcos is going to mention that.

This is Marcos. What you said is right. Fastline was created -- [ it started ] -- serving a customer here and there is not really a full business, but we realized that it could become a new business. And with a very similar characteristic of Tegma in terms of the need to gain scale. And this is why in our strategic planning, we started designing the attributes and competencies that Fastline should have. Last year, we made investment in technology because that kind of business doesn't work without technology. It doesn't gain scale, and it cannot really ensure the margins that we always seek in that kind of business. It does have a good synergy with Tegma's operations in terms of management, in terms of some common clients. But among the clients, I would highlight the rental companies. And this volume will grow organically very much in keeping with the growth and renewal of the fleets of the rental companies. We noticed some of them have placed some orders, particularly in the end of last year, but there's still a huge gap. Their fleet is becoming old. They start having higher maintenance costs and that kind of problem. They can handle a part of that. But after a certain point, it starts impacting their business. So Fastline is going to help the rental companies mobilize E&D, mobilizing fleet. An interesting thing that evolved a lot, Gabriel, compared to 2020 was that we added new services to Fastline. So we created not only transportation but we created ancillary accessory services. In other words, yards, small repairs in the vehicles. And with that, we were able to broaden the client base not only for the rental companies, but also for large fleet owners and even individuals. So we were able to take advantage of the fact that with the pandemic, they started giving collective vacation. But so -- depending on the seasonality, there was a lot of demobilization of fleets and we took advantage of that to provide services to our clients. Last year, we did about 20,000 vehicles, and we have a good outlook for 2022. Again, as Ramon mentioned, it will all depend on our clients returning to business.

Our next question comes from Pedro Pimenta with Eleven Financial.

Can you hear me now?

Yes, Pedro, we can hear you.

Well, congratulations on the results. I would like to talk a little bit more about market share as Gabriel asked, particularly with the closing of operations of Ford and Fiat capturing that market. How do you see the possibility of negotiating with Fiat? Is there any room for you to capture part of that market and perhaps recover that market share that you had? And the second question, comparing 2020 with 2021, we see an increase in the line of allowance for doubtful loans. You mentioned that there is a client that owes about BRL 50 million, a little more. Is this what is impacting that line item? And what is the financial situation of these main clients that have been impacting that line item in your balance sheet?

Pedro, this is Ramon speaking. Going back to market share. We have contracts with our clients with the automakers based on mid- to long-term contracts, which have been renewed for many years now. And there's not great mobility or variability in these contracts in the market in terms of acquiring new lines with a client, just like you mentioned. So again, I stress the expectation that the resumption in our market share, which historically was between 25% and 26% with a little bit of variation. That is a lot more linked to the performance of the automakers with which we have a higher market share than our market share. And this market share with these automakers is a lot stable, a lot more stable than our market share for the market as a whole. And that's why there is this fluctuation. So that's where the market share will come. You see these variations don't happen in the short term. You might have an automaker coming to Brazil. They're going to sign long-term contracts with a carrier, but that variation doesn't happen in the short term. And it is not through this that we're going to mitigate these variations. Another aspect that influences this is regional growth. A region to which we deliver more cars. If it grows detached from the others, of course, there will be an increase or a decrease in our market share accordingly. And your question was about provision for doubtful debts. We didn't have any significant variability regarding the provision for doubtful debt, PDD. All of these delays, particularly linked to that operation of subcontracting, which reached a significant amount in the end of the year. I'd like to underscore that this is not due to a credit risk. No provision for doubtful debt was necessary or needed to be made because of those delays, also because we have a settlement of a good part of what was past due and particularly of what was past due for longer. More than 60% of the amount receivable past due has been settled. We actually are in a privileged position regarding that because our portfolio of clients has a very high credit quality, both in automotive, logistics and in integrated logistics, both. So this was a small amount about, I think, BRL 1 million in compared to our revenues of around BRL 1 billion. So that is not very significant. This was a onetime off delay, okay? And thank you for the question.

Next question from Victor Demier with Vinci Partners.

I have 2 points to raise here. First, regarding your expectation of CapEx in 2022. If you could give us some color on that regarding the financial level of the CapEx and the qualitative level of the CapEx. Where are you considering investing the CapEx? My second question has to do with these receivables. I just want to get an understanding and ask you about the negotiation, where it stands more recently, because I understand the relevant part of that has been paid 2 weeks ago. But there's still an outstanding balance. And I would like to ask specifically about January and February of this year because the information we got, at least in the release, refers to the year-end of 2021. So if you could give us some color regarding the negotiations for January and February, that would be very useful for us.

Victor, this is Marcos speaking regarding CapEx. We plan an investment recovery given the restrictions that we had in the last 2 years in cash preservation. So around BRL 45 million, and this has been disclosed in the proposal from the management. And we have the gradual resumption of our own fleet. We recently acquired 16, we're going to buy more 16. So there's a lot of equipment that we should buy around 16 pieces of equipment per year. Also had an increment of investments in technology. Like I said, not only in Fastline, but also for the automotive division, and particularly for integrated logistics, we need to generate new solutions, new technology solutions. So this is very necessary. So we're going to invest heavily in technology. To give you an idea for technology alone, we are considering around EUR 10 million, EUR 12 million. In the road map alone -- and this is to drive Tegma's digital transformation, we talked about BRL 5 million. So [ 8 ] and about BRL 5 million for IT alone. And then we have to improve the website, other projects, purchasing -- the purchase of packaging for another client. So that's kind of it, Victor, full steam ahead and recovering a little bit of the investments that we've been making in the last 2 years because we were preserving the company's cash. But now we'll resume that, the investments, particularly in technology, that will take the company to a whole new level. Now I'll turn the floor to Ramon to answer the other question.

So talking about the delays in payment. And there's also another question by Marcelo on the same topic. So I'll answer both together. Regarding the outstanding receivables. And whether this outstanding balance will be resolved in the second quarter. And if the progress of negotiations would be an encouragement. Here's what I can tell you. In terms of the encouragement, yes. This is encouraging because they also mentioned that there was payments above the outstanding balance. In addition to the settlement that was made a few days ago, we started the payment of the -- the payments to be still paid. So the amount of outstanding balance is not increasing. So it was approximately BRL 21 million, it's actually more than that because it was a time when we had to end the calculation to disclose information to you. So what I mean is that payments are being made daily. In addition to the current maturities, everything has been paid. The current payments and the payments in arrears. So yes, I believe to answer directly to your question. if we believe that by the end of the second quarter, this outstanding balance can be solved, yes, it can be solved. And what has been happening so far is quite encouraging, particularly because the current payments are happening. In other words, the outstanding balance is not increasing, rather it is decreasing.

[Operator Instructions]

This is a question by Rafael. This is Marcos speaking. How do you see the demand of the automotive sector for 2022? The second question is, do you see any difficulties in passing through to clients the increase in fuel costs. Well, Rafael, regarding the 2022 demand, not -- still hard to predict, particularly considering what's happening in Russia and Ukraine, we still don't understand and our clients don't understand the actual impact of that, in addition to some things that we can perceive some difficulty in some logistics flows, some commodities with price increases, particularly fuel. And yes, that can impact the demand for 2022. ANFAVEA disclosed a growth of 8.4%, reaching BRL 2.15 million, something like that. So we're very much in line with that expectation. But it is very hard to predict how things will unfold. Many clients of ours announced new investments in Brazil. On the other hand, some of them are still having some stoppages here and there. They're having shift reductions and shifts returning. So there's a lot of instability out there. So it's kind of hard to predict the trend, but there are both positive and negative signs. We're in close contact with our clients to try to predict as accurately as possible. You asked a question about the fuel costs. With today's news, we already have an additional challenge. Last year, we also had many fuel price adjustments, which directly impact all of our operations. But in our business model and in our contracts, we have a provision which is like a trigger. We call it a trigger. When we reach a certain level of variation, we can negotiate with clients. So we don't negotiate this just once a year. Once a year, we negotiate the whole package of the contract, but we've been negotiating fuel more frequently. Of course, that is not a simple negotiation, but we have technical foundation to negotiate. And I would say that the results of the negotiations last year were satisfactory, and we hope it will be so looking forward. Because when we discuss the diesel price, it's a scenario discussion. It's not anything related specifically to Tegma. So clients understand what is happening. And of course, our service providers are also on the same page.

This is Ramon. I'll read the question from [ Adrian Sabra ]. Considering the normalization of working capital, Tegma has about BRL 100 million of cash surplus. Should we expect any extraordinary dividend payout? Indeed, our cash surplus in -- was BRL 18 million, and it is higher. We can't disclose exactly the amount, but it's even higher because of these payments and the regularization of the receivables. The proposal from the management is already public knowledge. We are proposing to complement the prepayments made last year, a payout of around 70% of the net reserves, so 60% of the whole net income, which is what we have been practicing in recent years. An extraordinary dividend payout, well that would be linked to a more comprehensive strategy by the company. We have been mentioning recent events, and we will continue to do so in the next conference calls, it is all linked to studies, linked to inorganic growth. M&A operations, although we don't have anything tangible to disclose or else we would have disclosed that kind of information, the strategy to have an extraordinary dividend payout would go against our inorganic growth strategy. So this is all I can say for now. An extraordinary dividend payout would go against the strategy that we are pursuing right now of inorganic growth, which will require some financial leverage.

This is Marcos. I'll read the question from Gustavo Gomez. Why domestic vehicle sales were so low? And the second question. Have clients given you an expectation of production resumption in the next months? Okay, Gustavo. Let's speak a little about the first 2 months. It was indeed very much impacted. And in the ANFAVEA press conference, they mentioned the main points impacting all that. One thing that was good news in December is that the automakers that are our clients were able to manufacture and sell a very good volume of vehicles. Automatically, they moved some collective vacation to January. So January had that effect of collective vacation. It was a month when COVID Omicron arrived in Brazil. We had very aggressive numbers of cases which led to high absenteeism. ANFAVEA reported absenteeism of 6%, 7%, which is really high. Normal absenteeism is around 2%, 2.5% tops, when you get 6%, 7% absenteeism, it's really impactful. That impacted the automakers and many clients because they lacked staff, that generated some stoppages in the month of January. And also the shortage and lack of parts and semiconductors. That was also an element that had a negative impact in the first 2 months. February started seeing some reaction, but it was not sufficient to balance the first 2 months. Some news that ANFAVEA that was a positive sign is that sales in March have posted an improvement in daily average a little over 8,000 new license plates registered. In the first 2 months, we had 6,239. In March, already 8,000. So that's a sign of recovery. And from what we heard from our clients, we believe that, again, as I mentioned in my prior answer, it will depend a lot on the impacts of the Russian-Ukrainian conflict. If we have peace, I think that as of the second quarter, we'll start a process of recovering the volume that was lost. We have another 2 questions related to Fastline. One by Marcelo Audi and the other by Felipe. I'm going to read Marcelo's question regarding Fastline. What is the order of magnitude of revenue in the next 3 years? And Felipe's question. He asks me to comment on the size of the market for Fastline and an idea of the profitability for the automotive logistics business. All right, Marcelo. Regarding an order of magnitude of revenues. If you consider 20,000 vehicles. Now regarding the revenue, I cannot really tell you this is not public information. But what I can tell you is that we handled 20,000 vehicles last year, and we're expecting around 30,000, 40,000 vehicles for 2022. And Felipe, when you talk about the size of the market, the best reference we have for that is the rental companies. Our clients are the rental companies. So when we expanded our portfolio and that allowed us to serve other types of clients including individuals, can you mention a contract with an individual. It's impossible to predict the size of the market of that. But what we can tell you, what we can perceive is a substantial potential and there are multiple -- and the automotive logistics business has a totally different profile. Regarding profitability, Felipe, we can't really communicate that because it's almost as a startup. We are focused on growing the business, gaining scale more than in profitability. But we belief that the Fastline model will give us the expected margin for this kind of business.

This is Ramon speaking. There's another question by Gustavo [indiscernible], which is, is it possible to find investment in integrated logistics assets above the return on the share of the company at this price level? Well, I think that in this question, implicit hypothesis is that there would be a buyback of shares. This is a topic that has been discussed internally. Of course, we keep doing the math about that. But firstly, I have the perception that this would have a very limited impact. So before talking about profitability, we could have a buyback of up to 10% of our free floating shares. So that would be the first comment. Second point, I would go back to one topic, which is our strategic development plan. It has as a pillar, as a [ north ], diversification. It is very clear to us that the possibility of increasing our revenue in automotive logistics, because of the reasons that we mentioned when we were discussing market share, are linked to the ability of our clients to grow because, obviously, that would impact our own revenue and our own market share. And it is also linked to the industry growth. And we can see good potential. We are well positioned to capture the growth of the automotive industry. The fleet is aging, there is a pent-up demand. So we are very well positioned. And to get to the core of your question, with integrated logistics, it is a blue ocean where we can grow. I remember -- I'd like to remind you that Tegma, since its IPO, since it went public in 2017, has been implementing a strategy that aims consolidation in the integrated logistics market. Tegma wants to grow. And of course, we seek to grow with very high returns. One of our goals is to maintain our return on investment. If we look at the EBITDA margins that we have in our integrated logistics operations, although our more recent track record has not shown a revenue increase, still, the evolution has been very positive. We have been growing very positively. So trying to summarize, not only do we believe that we can find that level of return that we seek, maintenance of our margins, but we have growth potential that we don't have in automotive logistics. We are a little more reactive there despite initiatives of Fastline that do allow growth also in that division. But we see a blue ocean, we see our growth possibility in integrated logistics. And as you know, we have to be very financially disciplined, and we will only grow with returns that are much higher than our capital investment.

We are ending today's question-and-answer session. I would like to invite Mr. Medeiros to proceed with his closing statements. Please go ahead, sir.

Once again, I would like thank everyone for their participation. And I would like to stress that we are confident that the automotive industry will be able to overcome the current difficulties of lack of parts and semiconductors. And that, with the progress of the vaccination process and reduced cases of COVID-19, the market will return to being as strong and solid as before. However as we are all aware and monitoring, we're now facing a new challenge, and it's to understand and mitigate the effects of the current situation involving Russia and the Ukraine, which we hope will be pacified as soon as possible. We will maintain our strategy of growth and diversification, as Ramon mentioned. And we will continue to invest in operating excellence and technology, reinforcing our mission even more to add value to our shareholders and clients. With that, thank you very much, and have a good rest of the day.

This concludes Tegma's conference call for today. Thank you very much for your participation. Have a good day, and thank you for using Chorus Call. [Statements in English on this transcript were spoken by an interpreter present on the live call.]