Tupy S.A. (TUPY3) Earnings Call Transcript & Summary

Good morning. Thank you very much for waiting. Welcome to the conference call on the acquisition of MWM by Tupy. [Operator Instructions] We inform that this conference call is being recorded. The company would like to remind you that this event is also being transmitted simultaneously by Internet via webcast. It can be accessed at tupy.com.br/ri, where you will find the slide presentation. The company clarifies that any declarations made during this conference on the business perspectives, projections or operational financial goals concerning the business of Tupy are forecast based on the expectations of the management concerning the future of the company. These expectations are highly dependent on market conditions and international market conditions and also the sector, therefore, are subject to change. With us, we have Mr. Fernando Cestari de Rizzo, CEO of Tupy; Thiago Struminski, CFO of the company; and José Eduardo Luzzi, CEO of MWM of Brazil. Mr. Fernando, you may proceed.

Good morning. I would like to thank you all for your presence in this presentation. And here, we begin a new chapter of Tupy. Apart from our CFO, Thiago Struminski, we also have the CEO of MWM and a business partner of Tupy for many years. He will be with us, and we would like you to accompany the slides as we show them to follow the content that we prepared. Before preparing, before talking about the acquisition of MWM, I would like to give you a general view of the company, opportunities that motivated us to do this combination. Going on to Slides 4 and 5, I believe many of you know MWM Brazil. It's a strong brand and with strong recognition during its 70 years in the country with more than 4.6 million engines produced, this company has reinvented itself with an entrepreneur culture. MWM Brazil is a traditional company, manufacturer of engines that is transforming itself to a different model, supplementing Tupy and also takes care of the needs of our clients. Currently, MWM manufacturers engines designed and with intellectual property belonging to clients with a business model called manufacturer contract. Apart from this, MWM is a leader in generators. And because of this, participates in a new sector, the growing decarbonization of agro business in the country. With the manufacturer generators that can be used with biogas as well as engines converted to biomethane and natural gas for use in transportation of cargo and urban buses and agricultural machines. This also shows our -- the entrance of Tupy as a supplier of components. So products in MWM are present in transportation, agriculture, mining, construction and naval and also generation of energy, sectors that are essential for economic growth and linked to the global CapEx with long -- with sound long-term fundaments. Although we have a relevant and promising market in Brazil, MWM also exports to 45 countries. In 2021, the exports of MWM represented 13% of the revenue. We are now together with a company that has a great intellectual capital. And this will be a very good working with Tupy. On Slide #7, I'd like to say that both companies are alert to opportunities that decarbonization can bring. The 2 have prepared themselves to work in a multifuel market, exploring gaps and opportunities in these new technologies. We decided to find feasible solutions for decarbonization that will give us energy safety. This transition is one of the challenges that our clients have, but not the only one. Discussions on consumption habits, connectivity, autonomous vehicles are really being studied. With this, there is space to offer a new value proposal in this industry. While our clients may be concerned exclusively with designs, Tupy MWM are prepared to deliver the subcomponents or complete engines. We're talking about machining services, assembly and testing, so added value to all our products. Also, technologies to use biofuels available and that are not being used currently like biomethane, biogas in engines or in electricity generators. Also we're talking about the use of hydrogen, the fuel of the future in cargo transportation, and installations of renewable energy. We talk also about generators for electricity, for emergencies, supplying energy for hospitals, data centers, transmission towers, 5G, home, supermarkets and agro business. For -- also for poultry and also renewable energies and also to use the gases from the decomposition of waste from agro business and also recycling of lithium batteries and other items related to renewable energies like solar energy. Thus, we are in a strategic position. On Slide #8, we show that the scenario that were built -- we show the scenario we're building in this new company, better prepared in helping clients in their challenges and offering a complete value proposal. Together, MWM and Tupy will be a unique company in the market with foundry services to assembly, engineering and management of all the value chain for components. Two companies that are important in the international market due to their engineering and technological innovation. Slide 9, I would like Jose Luzzi to comment, and I will be back.

Thank you, Fernando, good morning. On Slide #9, I will share with you our business model with manufacturing contract and auto manufacturing with third-party engines. With 30 years of experience, the portfolio offered by MWM machining of blocks and heads, assembly components like short blocks and including the assembly of complete engines. But the scope offered goes beyond. It is also the qualification of vendor's logistics management and operation. We manage the import of -- importation of components and engineering services that we will detail later. The engines after the assembly are tested in production environments and our engineering department runs tests and validates these tests in our technological center. We have 25 labs to test more than the performance, torque, but also to guarantee the durability, temperature, use of fuel and emission control, a complete service offered to clients with experience accumulated in the development of engines, MWM has dedicated itself to the development of engines for new fuels, notably biofuels, always with a guarantee from technicians, engineers and equipment of our company.

Thank you. On Slide 10, with the acquisition of the operations of Teksid, Bety in Aveiro, our client base grew and we began to supply to all the manufacturers of trucks, agricultural machines, construction machines and engines. On Slide 10, we would like to talk about our great focus on our client base and thus leave a very clear message to the partners we have for decades. During our history, Tupy is dedicated to supplying materials and processes, casting and machining components in accordance with the specs of the clients. This operation represents an additional effort on the part of Tupy. With our technical competence and that of MWM, we will extend the services they offer to all our current clients. This because MWM is linked to an OEM, which does not allow the expansion of its services. Now we will have a new company not linked to an OEM. On Slide 11, we show the highly qualified team of MWM. It is a reference in technology and quality and has used all its competence that was always dedicated to the production of engines to render services for assembly and certification. MWM and its management brings an excellent intellectual capital with experienced leaders, entrepreneurship and an operation that adopts technologies for Industry 4.0 and has technical credibility in our industry. On Slide 12, we show on the graph how one company supplements the other with our client base and the technical capacity of MWM. This new value proposal for industry makes more sense due to the challenges in the next decades. Together, we will be ready to supply assembled engines, tested engines, to the great data also client base of Tupy and also improve the products of our clients. On Slide 13, I would like Luzzi once again to talk about the products that we manufacture today.

Thank you, Fernando. Well, on Slide 13, we would like to highlight that this new company is born with manufacturing contracts from Brazilian industry, Europe and also North America for trucks and machines. To show you our leadership, more than 20% of the trucks sold in Brazil use engines that were assembled by MWM. Medium, heavy and extra heavy trucks, such as Volkswagen trucks and buses, 41 years of partnership with Volkswagen trucks. MWM is also present in agriculture with engines for irrigation systems, tractors and other machines. Going on to Slide 14. Apart from the technical credibility and assets like machining, assembly lines, labs, test cells, MWM has great knowledge in conversion to biofuels, biomethane natural gas, biogas and biodiesel as a result of the investments in R&D that are also a characteristic of the company. Like Tupy, it has engineers that have a lot of experience, the knowledge that we have in metallurgy and materials engineering will be strengthened and grow. Also R&D already announced by Tupy tech like hydrogen, hybrid vehicles, recycling of batteries will also benefit from this knowledge because many of the fields that we are trying to understand and use already have applications in MWM. All of these supported by the partnerships with universities, research institutes in Brazil and abroad, with investment in R&D that is part of the way we do engineering at Tupy since the '70s.

On Slide 15, we will show a little of what this new company will bring with Tupy going into new important sectors. Each one has its strong points and points in common. There are businesses where the cost of development, approval and testing are high but they were absorbed. And from now on, the ROIC is very high, and all of them have a high perspective for growth. On Slide 16, I will talk a little about decarbonization. MWM has developed many businesses in this sector, especially directed to Brazilian agro business having as a platform, the manufacturing of generators and conversion of engines to biogas, myomethane, natural gas, biodiesel and hydrogen. In Brazil and in the U.S., there are many high-quality fuels that are going to the atmosphere due to the decomposition of biomatter. Its use can generate electricity, mechanical force and reduce the environmental impact. To give you an idea, the impact of a molecule of methane in climate change is that of 20 to 50x greater than CO2. It is generated when we have decomposition of matter in hydroelectric reservoirs and especially in cattle raising and in the production of sugarcane. But this biomethane can really power a truck and generate electricity in small properties, a world of opportunities that I invite you to analyze. These are initiatives that are already led by MWM. They are a reality and Luzzi will comment this on the next slide.

On Slide 17, we can see the great portfolio of products and services that are offered by MWM for decarbonization and generation of energy or mobility. The use of biogas and biomethane for the production of electricity and use in truck and bus fleets is the main route for the decarbonization of industry. Here, we're talking about ethanol, sugar and biogas is the size of Brazilian agro business, the potential for production is that of 120 million cubic meters per day. This is equivalent to 4x the capacity of the gas that comes from Bolivia. So to give you an idea, this biogas would be enough to substitute 35% of the demand for electricity or supply 70% of the consumption of diesel in Brazil. The consumption in rural properties, small and medium, will happen to produce electricity with generators developed by MWM. In large properties, like sugar mills and ethanol mills, the volume of biogas will enable the production of biomethane through existing networks of natural gas or sold locally. The production, close to the location of consumption makes sense, especially in a scenario with decarbonization with energy safety. So talking about wastes that are considered a negative externality becoming raw materials for the production of biogas, we'd like to remind you that farms are in distant locations from electricity lines and many times connected to long transmission lines that are subject to many problems, so this will supply local energy. There are many opportunities with the abundance of biomass in Brazil. If we consider the production of electricity in 2021, it is a potential equivalent to 2.5x the hydroelectric power plant of the Itaipu. There are other markets with potential for biogas like landfills and also sewer treatment stations where we have solutions available. Now, Fernando?

Okay. So on Slide 18, we will talk about aftermarket parts from MWM. Although it's a new sector for Tupy, it is not for MWM. They do this since they arrived in Brazil. Aftermarket parts are important for the Brazilian market. Compared to the sales of MWM in 2001 with 2021, the growth was 35%. The company supplies aftermarket parts for diesel engines, gas, biogas engines and generators. All these components are consolidated in a very efficient operation located in the city of Jundiaí. It's important to remind you that there is a great fleet of MWM engines in operation in South America that use these aftermarket parts. This activity has great capillarity in South America with a great distribution network for parts, more than 600 points of sale. MWM also has technical assistance with more than 300 accredited workshops and garages in the country. For Tupy, it never made sense to work with aftermarket parts. But even with a longer life cycle, blocks and heads also require parts. With the acquisition, some components offered by Tupy will be included in the current structure, enabling the sale in new markets. Slide 19. Slide 19, we show another business where MWM is present, which is for ships with our own products and representing some international partners offering solutions for ships and also embedded and also generators. This sector also benefits from parts and our accredited partners. We have a long coast with great potential to expand the transportation by sea. This is receiving stimulus by policies. We have the program [indiscernible] One of the objectives is to leverage the capacity in this model. So MWM has a lot of tradition in developing and producing engines for boats and ships. And since last year, has participated also in leisure boats. Fernando, this movement that we announced today is part of our strategy of growth that we have showed in the last 4 years. On Slide 21, we will show the strategy of Tupy, which is built on solid base, a lot of data analysis and scenarios, the support of specialists that help us especially in our Innovation and Strategy Committee. Thus, we can anticipate scenarios, leading the business to markets that need our knowledge and competence. The same -- we see the same in MWM's team. We admire them, and we will receive them with admiration. With the companies we have brought, we can now lead the current business and work on new opportunities, which are inherent to the new economy. The initiatives announced by Tupy Tech in the last quarter will be accelerated by the experience that MWM has in decarbonization. Like the new business that MWM has developed, they will benefit from our platform of innovation and digital transformation, led by Tupy UP. This really supplements the architecture we have at Tupy with many opportunities to make progress in new avenues of growth adjacent to ours but with great diversification. This diversification means not only having exclusive contracts with OEMs, but also to expand in aftermarket parts and energy with new types of businesses and clients that will grow in agro business in Brazil. We're also talking about diversification of revenue, with the exposure of Tupy to an even greater base -- client base and different sectors, sectors that are anticyclical that reinforce our resilience to the fluctuations in the market. On Slide 22, the price of acquisition enterprise value is BRL 865 million with multiple similar to what the company is being negotiated, which will be paid after the business is closed, depending on the approval from antitrust organizations in Brazil and also a general assembly we will have. Slide 24 reinforce that together, MWM and Tupy will be a unique company with services that will go from foundry to assembly, but with a qualified engineering team in each step of the process, being able to manage the vendor network with parts and components for engines. Combined, these 2 companies are better and offer a value proposal that is connected to the current challenges of the clients and society. Finally, on behalf of all the employees of Tupy, we would like to thank the trust and support, especially from our management council and our controlling shareholders that have given support to the strategy for Tupy to become a larger company. I thank you very much. And now we'd like to begin the Q&A session.

[Operator Instructions] The first question comes from Lucas Marquiori, BTG Pactual.

First, I'd like to congratulate you for the acquisition, Fernando. We wish you great success. Congratulations. Two questions. The first, understanding the manufacturing that MWM has, Fernando. What will you win in terms of negotiation power with OEMs now you have an integrated company? And how this will help the company in negotiating power? Please talk about this. How do you -- will you improve your negotiating power? Scale? What kind of advantage do you have now in negotiating with OEMs? And the second point, you mentioned in the release and in the presentation, that the disbursement and the capital structure still depends on approvals from shareholders, but seem to be as a company that acquired Teksid and now an acquisition of almost 1 billion. What can we expand in terms of numbers, leverage so we can estimate the impacts on the year-end report?

Lucas, thank you for the questions. First, the objective is not to create pricing power. The objective, first, we will not compete with our clients. Tupy will not develop engines. Tupy will render services to current clients. And with this, we understand that we will create more efficiency in the system. In reality, we understand that there are a lot of inefficiencies. Our clients have problems, and we understand that in some product lines, it makes sense for them to outsource some processes. And that's what we want. We see a multifuel world. We see that engines used in Brazil will be different from those in the U.S. It will depend on the fuels that you will have available in each region. And for this, you will need to adapt, convert and you will need reliable partners. So where do we see synergies in the expansion of these services? We understand today that Tupy, before this transaction, Tupy does not have the sufficient knowledge to go beyond machining. We want to go beyond machining. We want to work with assembly, we export containers with $40,000, $50,000 in value with gross blocks and heads. These components could leave Brazil or from Mexico already machined, preassembled with many components included that would facilitate the work of our clients. So we like to make an analogy with Foxconn. In the case of Apple, they design the cell phones, they outsource the manufacturer and the development of vendors. So we're trying to build a complete vendor. A complete vendor. We will not be competitors, and this is not the intention of this transaction. So there are no companies with this capacity. MWM is a great opportunity because it has a strong history of development, knowledge, incredible labs, manufacturing lines, machining lines and above all, technological capital and intellectual capital. This is what we are bringing. Because with this condition, we will have much more credibility, as Luzzi said, many trucks in Brazil, more than 20% of the trucks in Brazil have engines assembled and tested in MWM. This will allow us to give this step to grow in this sense. So what we see here? As we show in one of the graphs, a universe of growth that exists to add machining, preassembly not necessarily a ready engine. It can be heads that are ready, blocks that are preassembled with basic components where Brazil and Mexico are very competitive. So second part, Thiago, but this is the idea. And why did we go after MWM? Because our clients have great challenges of connectivity, investments in other areas, changes in the business model, challenges in decarbonization, smaller series for some countries, and we believe that the company will be ready and has credibility from foundry to machining, to assembly, testing, approval, logistics management of these engines to deliver all of these. MWM showed this. The Brazilian leader -- leaders in Brazil use engines from MWM from medium to extra heavy trucks.

Lucas, concerning the second part, we had a leverage of 1.5 in Q4 2021. Q4 was hurt by the acquisition of Teksid. So naturally, as the months go by, the company decreases the leverage as the disbursement in MWM should be close to that of Q4 2022 -- around Q4 2022, the debt will go from 2.2 to 2.5, far from the covenant. So we are in a comfortable position for this acquisition.

Just a follow-up question. Are you informing the numbers of MWM? And last year, for example, manufacturing, can you give us the details about the revenue from each line of MWM?

We don't have the authorization yet. After we have approval from the authorities, we can say -- most of the revenue, we can say comes from manufacturing. More than half of MWM comes from manufacturing.

Our next question comes from Luiz Capistrano, ItauBBA.

Congratulations for the acquisition. I need more detail on profitability and margins of MWM. So we can estimate an EBITDA and a margin around 8%. The question is, is it similar to Teksid? Do you see -- do you believe this margin can reach the margin levels of Tupy? And how long this would take? Will it be more similar to Teksid, 5 years or less? And how do you see the evolution? And also where the synergies are for this margin to go -- to be higher? And to understand if these 8%, as you said, it is less capital intensive, so we can think of a ROIC in line with Tupy. Can you give us more details about these points?

Thank you for the question. It is a different model from Teksid. Teksid, we are rebuilding the margins. We hope to show that during 2022, MWM has a working capital that is more protected. So answering your question, the ROIC is higher, yes. And the growth is there stimulating the market to outsource the machining and assembly that is -- that today is done internally. So it's more of expansion. It's expansion of margins, not rebuilding as is the case with Teksid.

Our next question is in English and comes from...

[indiscernible] While you are working on the synergies from Teksid, which are your expectations regarding leverage considering this acquisition?

Well, as we mentioned in the previous question, we hope in the next quarters to show the rebuilding or the increase of margins at Teksid. Naturally, the company will deleverage. We hope that during Q4, which is where we will close the deal, in Q4, we will be around 2.2 to 2.5x net debt, which is far from our commitments, and we can do this comfortably.

Our next question comes from Victor Mizusaki, Bradesco BBI.

Congratulations for the operation. I have 2 questions. The first, on Slide 12, you show the potential of cross-selling in this operation with Tupy and MWM based on the clients of Tupy. First, I'd like to understand what this means in terms of revenue -- potential revenue, and if you're going to take the MWM operation to Portugal. And also the agreement with MWM NorthStar, will there be restrictions for the markets where MWM can operate?

Well, beginning with the second part, Victor, Navistar continues to be a client of MWM. MWM exports products to Mexico that are used in equipment of Navistar International in Mexico. And also components to the U.S., engine blocks that are machined and preassembled for heavy engines and also heads that are assembled, supplied by MWM for Navistar in the U.S. for aftermarket. Now considering Slide 12, Slide 12 shows the potential that we see in this business. We believe that we're building a company. I highlighted this, we want to be a supplier of services to our current clients. So when we looked at the acquisition of Teksid, we supplied to -- we supply products to all the clients. This shows that the networks are becoming more local. This can favor this. And we're creating a company that has conditions, technical conditions to carry out these projects, machine, preassembled and depending on the client, the needs, the opportunities, we will be able to negotiate this with all our clients. Clients have engines with -- from previous generations for certain countries, certain parts of the world, where we have differences in emissions and components. We explored this in Tupy with a variety of products we sell to the same client. This is a typical example. We call these legacy engines that are products that have low series. They are important for the clients. They are profitable for them with specific engines, low volume, which it may make sense for them to outsource this. We believe we will show this to clients gradually. MWM has a strong history. They already assembled engines for GM. They already assembled engines for Volvo, for Navistar International, Volkswagen trucks, MAN Germany, for Isuzu. And this favorable history supports this movement and makes it grow. So we have -- and why didn't MWM grow? Because it was linked to an OEM. And an OEM would not transfer these things to other OEMs. With Tupy, we have better conditions to make this business grow and expand. And here comes the main synergy, and the reason why we began this discussion some time ago. After that, we also learned in decarbonization and in also parts, these are areas where we see an enormous potential for growth for Brazil with interesting margins. And we understand that we can have an interesting growth rate in the next few years because of the conditions, the need to decarbonize, energy safety. Every 5G tower needs a generator, farms will need to use this with biomethane and so forth. So shipbuilding is growing in Brazil. Aftermarket is very great in Brazil, we can explore new avenues of growth. So this is our strategy, and now we have a diversified Tupy and with opportunities for growth in all our business lines.

This point that you mentioned in the beginning, concerning MWM assembling products and exporting to Navistar, do you believe it makes sense to have this operation in Mexico, too? Would you have tax benefits in Mexico?

No, it will grow a lot in Mexico. USMCA, NAFTA determined some rules to add value to products. You need to be in the region. But first, the operation in Brazil grows by itself. Brazil has lower volumes. Many companies import engines in Brazil. Sometimes they are our clients. We export the engine block and the engine comes back exported to Brazil. So the operation in Brazil is good. Now in Mexico, Tupy is very well positioned. USMCA, we have a lot of capacity for blocks and heads in the U.S., more than 300,000 tons. North America imports a lot of blocks and heads from other regions. This process will continue. And here, we have a company enabled to supply more. For these clients that have so many other challenges that demand a lot of capital, this solution becomes very interesting because the idea is to have, under the same roof, different products so we can make the system more efficient for all the industry, making the industry more efficient. So we have to talk about this with all of you. It's very early to talk about this, but we will meet you in events. We will have Tupy Day soon, where we will have all these avenues of growth.

Our next question comes from Lucas Barbosa, Santander.

Congratulations for the transaction. Could you comment on the synergies? Do you believe you will dilute SG&A and R&D? Or are they only in the opportunities of cross-selling?

Lucas, No. We -- actually, yes, we see great opportunities. These are specific needs. MWM is a lean company. But in reality, the opportunity comes from the growth of the sectors where MWM is present. So we see not only growth in contract manufacturing, which is the word we will use to talk about machining assembling and testing. We will be able to offer more but also in these sectors of decarbonization, ships and others. The focus is to grow the business in all these fronts in the next few years.

Our next question comes from Marcelo Motta, JPMorgan.

Do you believe there could be restrictions from antitrust authorities because of the overlap in aftermarket? Do you see -- do you believe it could take longer to get the approval?

Marcelo, Thiago answering. We don't believe there will be great difficulties in antitrust authorities. So it is -- also, we don't see any need to get approvals in other jurisdictions. We believe it will be a fast process.

Our next question comes from André Mazini, Citibank.

Congratulations for the acquisition. How does the acquisition help you to diversify in renewal energies, recycling of batteries? You will also make -- will be working with other fuels, renewable fuels? So how does this fit into your strategy in this area?

Thank you for the question. Of course, we're strongly involved in alternative fuels. In Tupy, we're working with material-specific machining. We announced a project for hydrogen for engines, for truck engines, cargo, construction vehicles. We believe this will be the solution in the long term. We will talk more about this in our Tupy Day meeting. We have others also, biodiesel, biomethane. So MWM is fully involved in this with R&D focused on this for conversion of engines, testing to avoid losing power for the use of these fuels. This is a process that grows a lot. With the combination of the engineering in Tupy to improve materials, improve machining, geometry design and with MWM's team for product development and application. What we see, an important point, we will see niche applications. There will be many niche applications, some entities that will use a lot of biomethane. Others will use biogas, others will use biodiesel, others will use ethanol. And with this, natural gas will be an important fuel for the generation of electricity and transportation. Natural gas, Brazil has an enormous potential to export natural gas. So we are prepared, first, to help our clients to convert, adapt engines with a lot of technology with factory guarantee. So offering engineering services, and obviously, why? This will be a characteristic of Brazil. The engines in Germany will have different characteristics. In the U.S., the engines will be different. In the U.S., they -- in Mexico, they will be different. So we will have solutions for a multifuel world. We will have to explore and use all the opportunities of fuels that today are discarded, all the methane that goes to the atmosphere for macro business that can be captured to make tractors run, trucks in farms running on this, being able to produce electricity in small rural properties. And this will come from products that MWM has for a long time. So these are different businesses, diversified. So we have new avenues of growth that are totally linked to our current business. So we need to learn about this. And as we said, we believe a lot in hydrogen. Hydrogen will need high pressure for modern trucks that will be used in Europe and the U.S., too, as there is hydrogen available. We also need good materials. We need to work with our materials, machining and collaborate in the development of these ideas and this potential. We have seen -- I believe you saw all of Tupy's clients have initiatives to use hydrogen. And we will have great launches. We have a lot of assets in this environment. And obviously, with this combination, we will be able to make new alliances, collaborate with their projects and explore the opportunities that we saw in these sectors.

[Operator Instructions] Our next question comes from [ Antonio Luis Rizzo ] from [indiscernible].

Could you talk about the link between MWM and then Navistar? The technical center in Melrose Park, is it part of this transaction?

No. The technical center in Melrose Park is not part of the transaction. It is part of the international company. We're talking only about the plant in Brazil that has machining, assembly research center and assembly of generations and the distribution center in Jundiai. So that -- this is what is included here. Navistar is the current controller of MWM and also a client of MWM.

Our next question comes from [ John Lane ].

This acquisition, does it imply -- will it result in the payment of minimum dividends in the next few years? Will MWM come with a relevant debt? Can you capture synergy in the cost of capital with lower interest rates?

When we look at our history between 2016, 2018, before beginning this cycle of acquisitions, we had a dividend yield above 7%. We -- when we announced Teksid, we lowered, we will be more cautious during the integration of MWM. And after that, we believe, yes, there will be a time when we will increase the amount of dividends to shareholders. First, we will see the exact capital consumption. But we trust with our cash generation -- we trust in our cash generation. And later, we will increase the dividends to shareholders.

The question in relation to MWM's debt. The MWM has almost no debt, but the scale it will bring us will help in negotiating new debts.

The next question comes from [ Paulo Vasconcellos ], [ Finvest ].

How will you do the disbursement? Will you take out new loans for the disbursement?

We will, yes. We will issue a new debt. There are many alternatives today available to us. Of course, we have to understand the conditions of the market. We have some time to make this decision. This should happen -- the disbursement should happen in the Q4.

[Operator Instructions] Ladies and gentlemen, we would like to conclude the Q&A session of Tupy. I'd like to pass the floor to Mr. Jose Eduardo for his final comments.

Thank you. This is José Eduardo Luzzi. In the final comments, I would like to give some more details about the avenues of growth mentioned by Fernando Rizzo. Today, companies, industries, agrobusiness and governments in Brazil are all committed with goals involving the reduction of carbon levels. They have a holistic vision in all aspects where there is a generation of carbon and they are going after neutral levels. But they want a solution that is feasible for Brazil, not only in terms of the environment, but also social and economic. These are the 3 pillars of sustainability: environment, social, economic. Brazil has the greatest diversity of biomass but explores only 2% of the potential. The biofuels and natural gas, to ensure energy safety with generators, with biofuels or for the mobility of vehicles is the alternative that is best for countries with the characteristics of Brazil. Here, I refer to the availability of biofuels, the infrastructure and social economic conditions. The recent measures announced by the Federal Government, giving incentives to the production and use of biomethane, this, in the new law for gas, will make more feasible the use of biogas, accelerating production, distribution and use in Brazil. Apart from Brazil, India, African countries, Latin America, including Mexico, are also markets where biofuels are considered as an excellent alternative for decarbonization for the production of electricity with renewable sources, or as fuels for mobility, as I mentioned earlier. In line with this reality, the map of the initiatives for decarbonization that we are offering, as shown previously, have had great interest from many sectors in the Brazilian economy for generation of electricity or transportation with support from Municipal, State and Federal Governments. The potential and the scalability is enormous. MWM has the lowest time to market to implement these things. It's technical competence that guarantees the same performance in engines with biomethane as the ones in diesel with the lowest operational cost and credibility and support -- after sales support. And the fact that we have engineering in Brazil with technologies approved gives us a great competitive edge. Now considering the production of engines for third parties. We have been doing this for 30 years and adding value and allowed us to develop unique competencies to offer a complete solution for OEMs in all the world, including support -- engineering support. We have manufactured many engines for Japanese companies and U.S. companies. Brazil, with a strong auto parts industry, with up-to-date technology, quality and competitive costs, is ready to be a place for production of these engines while OEMs focus on new technologies. We can say the same of Mexico, where Tupy is strong with local production. So I see here 2 winning companies, 2 leaders with common strategies and competencies, so there's an enormous potential for diversification growth and adding value to our current clients and future clients. And finally, Fernando, I'd like to say that we, from MWM, are honored and motivated to be part of this historical moment and for joining hands with Tupy. Thank you.

Thank you, Luzzi. To conclude, this is a movement of a company that is in constant transformation. For this, we're investing in disruptive technology startups and digital transformation in projects for recycling batteries, hydrogen, biofuels, new processes, new business models. We believe that knowledge, and not the product, enables us to be successful in the future. When we conclude this acquisition, we will be a much larger company, exploring opportunities in the new economy with a portfolio of products and services that is larger and will add even more value to our clients, especially in their journey in decarbonization. The acquisition of the plants from Teksid gave us scale. This acquisition gives us new avenues of growth and value. I am available with the RI team to give any necessary clarifications. And I'd like to thank you, I'd like to thank all the employees of Tupy and MWM involved in this process. Thank you. We wish you a good afternoon.

The conference call of Tupy is concluded. We thank you all for participating, and we wish you a good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]