WEG S.A. (WEGE3) Earnings Call Transcript & Summary

[Presentation] [Interpreted] Good morning. Welcome to the 2023 WEG Day. My name is Andre Salgueiro. And I'd like to express my appreciation for your attendance and for all of you who are online. I'd like to also thank the presence of Mr. Decio da Silva, the Chairman of the Board, and all the C-level professionals who are present here today. For us at WEG, it's a great pleasure to welcome you today for sharing with some of our projects and opportunities for growth the companies have in the upcoming years. This year, the meeting is going to start slightly differently. We're going to have the first Q&A session, followed by a coffee break. And then when we resume our activities. We're going to return with Andre Rodrigues and Schmelzer Jr. to update you on financial aspects and strategic plans for the company. After Harry's presentation, we're going to have a second Q&A session for you to entertain all questions concerning today. I hope you all have an excellent meeting. I would like to invite to come up stage Mr. Decio da Silva for us initial remarks and greetings. Thank you so much.

[Interpreted] Good morning, ladies and gentlemen, shareholders who are present here today, buyer side, and sell side analysts. I'd like to greet our President, Harry Schmelzer Jr. our CEO, our advisers, our Board members, Directors of WEG Brazil, and overseas who are following our WEG Day. WEG, on September 16 this year, became 62 years old. And during this period, there were 3 Chairman of the Board. Mr. Da Silva for 28 years, the Chairman of the Board. I had the privilege and the honor to run the company for 18 years. Then Harry has been 16 years as CEO, our third CEO. We always understood that a mandate of leaders cannot be too short because there's no time for climbing the learning curve for acquiring experience and for the consolidation of leadership. On the other hand, rather long mandates do not allow for fresh looks and may be detrimental to innovation and sometimes even be over-reliant on the part or the person who has this job. According to the material fact that was announced to the market, we, according to a succession plan that is extremely well-coordinated with our CEO, Harry Schmelzer, we have decided that Harry's cycle as the CEO of the company is going to come to a close on March 31, next year. Harry had a remarkable performance, leading a fantastic [indiscernible] of C-level executives of this company. During the 16 years, the growth of the company was 15%. Consistency in solid 15 years, 15 grow 15 for long periods of time is really remarkable. The profit grew precisely on the same proportion, really close to 15% by considering this 16-year period. As you all know, our most important indicator, and this is the one that defines the variable earnings and compensation of our executives is ROIC. And the closing of the Q3 indicated that WEG has 25.4% of ROIC. I usually say that in a company, we have to take a look at many indicators. But if I had to observe just 2 of them being located in Brazil, I would keep ROIC as number one. And the second one, cash flow generation, which is extremely important for the financial life of a country that is restricken by inflation and interest rates that are rather high. Yesterday, WEG closed the day with BRL 142 billion valuation. The second largest company in valuation terms in Brazil. And over the last 2 or 3 years, we had always among the top 10 when considered market valuation. In this period of 16 years, the company made 35 acquisitions, always faithful to speed in implementation of strategies. More so to be the ones enjoying that concept of a control of expenditures, just to provide an example, and referring to the long term looking back on the job of Chairman of the Board, 34 years ago, our Administrative expenses were 10% approximately a little more than 10% of ROIC. In those days, we had, as we still do today, which is our management model, we had our business units, motors, transformers, automation and so on and so forth. But before talking about the shared centers for services even before that era, WEG had understood that they had to focus on all the company support areas and keep a business unit model that provides focus and speed, all technology on the customers of each one of our businesses. But we had to try and be a lighter company, so to speak. In the year 2000, this administrative expense was reduced from the '90s all the way to the 2000s and was 6.6. Last year, the closing of 2022 was 2.9. This year, until its third quarter by some nonrecurring expenses, it increased a little bit to BRL 3.2 billion. This is the effect of scale. Scale has to create efficiency, and this is the focus that we try keep. I think that for companies to be winners they need two things. To have a very well-established strategy like WEG, which focuses on new market trends like decarbonization, energy transition, digital world or digital transformation to mention just a few. This is extremely important, but not enough to have winning company, in my opinion. It has to be complemented with the world-class execution, execution that focuses on operational efficiency that tries to reduce costs and that more provides a -- they lead service that makes its customer base to see values in the services they deliver. I would like to conclude by quoting Morgan Housel's book, a recent book that says, we live in a world of transformation. There's no doubt about it, but there are things that have to be there forever. Inspired on this quote, we hope that our -- well, we are going to change leadership. We're going to evolve. But core principle of our company must be forever, that our governance model and management model may evolve, but its principles are kept forever. That the mission of going sustainably and continuously keeping simplicity are forever. That continued training of leaders are forever. And finally, that the dreams of the 3 founders are forever. Thank you.

[Interpreted] Thank you, Decio, for your words. I would like to invite Alberto Kuba to come up stage and greet us too.

[Interpreted] Good morning, everyone. Good afternoon, good evening for those who are online. I think everyone was caught by surprise today. I was caught by surprise, too. Basically when I learned about this major opportunity that I had to have today. I would like to express my appreciation to Decio, to the Board of Director, to the CEO, Harry, for trust that is deposited in me. It's a great honor to have been picked at the CEO of such an important company like WEG. And as the CEO, a major position to be the successor of Harry, if he's not the best CEO of Brazil, he is one of the best. The first time I stepped on WEG was back in 1997 in a program that we had, Now Our Home. When I was being trained as an electrical engineer, second years of electrical engineer, the people who welcomed me and presented the company to me spoke so passionately about the company and so motivated, that made decide to one day work at the company as the CEO said in 2001, I made my trading here. In 2002 I was hired as a trainee in the commercial department. In those days, nobody spoke about diversity and I thought I had moved to Germany because there were no Japanese-background people here. 22 years have elapsed so far where I built half of my career overseas. I spent 10 years in China as Decio told you. And in those days, there were no Chinese workers at WEG, and so they sent the one could look more like the Chinese and I was really happy to build a company jointly with my Chinese colleagues, and I'm really proud of it when I look back. More recently their new challenge was to spend 1 year in the U.S., knowing our most important market and developing our motion driver strategy and preparing myself jointly with Andre and [indiscernible] for our [indiscernible] acquisition, which was our acquisition there. A company that was a competitor today, is part of our family of companies. Our founders left us a legacy. A culture of simplicity, austerity, ownership. This sense of deciding everything as an owner. Major execution, this is a long-term vision and the eagerness to do things ever better. Along all those years in values perpetuated under the leadership of Decio, who was the President when I joined the company. The last 15 years, I had the wonderful leadership of Harry Schmelzer Jr., where we grew constantly and continuously building a company that was ever better with ever more value, building ever more value, and transforming the lives of more than 40,000 employees around the world. My major challenge to continue with this legacy developing our business jointly with our C-level executives and taking these values to the numerous companies WEG is expanding to and we at WEG learn that we have to our deliver and baton off our button to the best level possible. I did that on WEG Motor and on April 1, next year, I will be wearing the cap CEO of WEG with the commitment of working hard with energy for WEG to continue to grow continuously and sustainably, being the company we are all proud of. Thank you so much.

[Interpreted] Thank you very much for your nice words, and I hope that you have a very successful career in your new mandate that will start in April. Now the floor is with Harry.

[Interpreted] Good morning, and welcome you're all to WEG Day. And you know that at this moment, when my succession is announced, two things spring to my mind. The first thing is, it's a picture that I was given as a present when I was getting the position of CEO after Decio. And this painting shows a relay run. And in this relay-run picture, there were two people representative. He and I, and he was passing the baton to me. And now it's my turn to pass the baton to Kuba. And I am happy that WEG had several athletes to be considered for leading this race. And I congratulate Kuba for being chosen, and I wish him a lot of success. It has a very successful team of executives, and you will see that is gratifying and it will give you a lot of pleasure to build and to keep on building. WEG has such a talented team of executives that we have, an extraordinary team of executives. So I congratulate him, once again. I would also like to take opportunity of this moment to manifest my gratitude to all my fellow Directors and also to the fellows that had been with me, Directors that have already retired because we all have built notable results together. It is beyond any doubt that I am leaving the CEO position on March 31. Very proud for all we have built together. And the second thing that springs to mind at this moment is when I took over the CEO of the first that I gave. The reporter asked me Harry, what is the legacy that you would like to leave your successor? And at that moment, I didn't even know what I was going to do. And the first thing I said, well, the first legacy that I have to leave is to learn something. For the first 3 years here, I'll have to learn. I'll have to show why I was chosen for this position. But now I am reflecting upon this legacy and doubtless, the people that are closer to me will remember many things. They will remember many things related to the way I worked, to related it to the values, the way I conducted a few good things and good bad things. But without any doubts, the legacy is not a personal thing. The legacy is the result, and it's the result that was built together with such an extraordinary team, such a brilliant team of executives. So thank you very much to all of you. Thanks to the trust from Board of Directors, from the shareholders, and the excellent relationship that we have always had with all of you from the Capital Market. Thank you very much.

[Interpreted] Harry, thank you very much for your kind words .We are now moving on with our event, but I would just like to remind you that the presentations that are going to be made here, they are available in our Investor Relations site at weg.com.net and I'll now call Carlos Grillo to take on the floor to talk about electric mobility.

[Interpreted] Please, can I have the presentation here on the screen? Good morning, everyone. Let's move on. My name is Carlos Grillo. I am Chief Officer of WEG Digital and System. This is quite new business unit that from automation and systems for us are four systems. The electric mobility system, which I'm going to talk about right now. The energy storing units, digital systems, and automation and electrification systems. So that's why we're going to talk about electric mobility. I think any analysis that we are to do about electric mobility, be any institute evaluation or [indiscernible], the trend is always positive. Electric mobility is going to be a future path for electric transition and it's inevitable. So the numbers are positive. But when we talk about and when we analyze Brazil, something for the last 8 months, we can see that about 15,000 cars have been electrified or have been licensed in Brazil. That is a very interesting figure. But later when we are talking about EV charge, I'm going to address back to this number. So about 50,000 EV were licensed in the first 8 months of the year. And let's start by the traction systems for electric vehicles. WEG has a very big history in this. We're also talking about past history. Since 2001, we have step on this business. So that's brought a lot of knowledge and technology processes and knowledge people are dedicated for 20 years to this topic. Some things went right, some things changed. The technology and didn't work out so well. Well, we're missing one slide here. From some time -- there are more robust movement, especially mobility for heavy vehicles. This is a general view of ours for electric mobility. You can see that we are going to talk a lot about EVs and charging station acted to electrification. And that's why Carlos Prinz is going to talk about transmission and distribution and transforming. So behind this, there is a whole support of electricity reaching it. And we can see in the world in heating up of all these activities since controlling and protection panels, transmission distribution, they're storing part as well. So for WEG, this is our businesses that all march together, although they are distributed in different business units. Let's talk about EVs. For us, there is a clusterization that is very clear for is the light vehicles or and utility vehicles and heavy vehicles. And WEG is working a little bit different along all these segments. And this is a slide that was missing before after when I was talking about history. So we were evolving a long time. A lot in the heavy vehicles business. So what are our products? They are the traction systems, the auxiliary systems, and the power supply. So we are working on these three segments in electric traction, on the focus increased on heavy vehicles. And when we look at frequency inverters, which is a key component. We also use this clusterization, but the inverter has a characteristic of clusterization that is connected to the voltage. So that has an impact on technology in our production scale, and we have 3 very clear niche of market. For inverters, for this is connected to the voltage, the higher the voltage, the higher the inverters and motors. Motors, we are proud to have a very reasonable offer of electric motors, and that brings to WEG a larger scale in terms of technology, engineering, suppliers, and industrial processes. Today, we have a wide array of motors for electric traction. That covers a very interesting range, starting with the light vehicles up to the heavy electric vehicles, especially urban buses. Another product that derivates and it's very near electric motors is the transmission. WEG is working with some clients on this area and has prepared itself increasingly to supply this market that integrates the engine to the transmission system. Another important product connected to electrification. And we have invested in the last 2, 3 years in what we call the battery packs. And what is the battery pack? The pack is a structure that contains a series of battery cells. It is very well standardized the battery that is this guy here has a standardized format, et cetera. So we buy the cells, there is no Brazilian production of the cells. We assemble what we call the pack, which is a customized engineering family that integrates this structure into the vehicle. And this integration, apart from the [indiscernible], which is the battery storage system, which is an electronic system has a managing software. So there is an iteration with vehicles. So there is an engineering work behind this to integrate it with the vehicle. So that is part of this product that we are developing, evolving and supplying. It has an autonomous and intelligent system for suppression for thermal runway, that is the undue heating of the battery. Although our technology is very adequate, our cell technology is very adequate for heavy vehicles that is less sensible to this phenomenon that has electronic protection, electric protections, monitoring systems. So there is a series of ingredients that makes this product a very sophisticated one and very apt for being used in a heavy vehicle. And it can also have a traceability system for a second line of the battery, which is very important because that is connected for a connected to the circular economy concept. So that has to do with that system that I spoke before about energy storage. Today, battery. I'm not sure all of you know of this, but the battery of electric vehicle anyone, but I'll use the example of a bus in which segment we are better positioned, it's going to decrease its utility during life. It decays over time. Obviously, the system maximizes the life, the charging, recharge, and the equilibrium of the tensions of the cell, but that happens at a given time. So depending on each case, we can say that at a given moment when it has only 80% life left, the battery is not suitable anymore for these vehicles. So we can't [indiscernible] and that can vary according to the number of circles, but it can be a long decade or anyway, it will happen at a given time. So at the end of this life, the natural thing would be to recycle. But at WEG, we have a very specific product for energy storage in which this cell, this battery pack can be used directly in this starch system. So that is our vision. Today we're also selling this. We are selling energy storing systems and we are in need that these cells grow old, that the case so that we have more cells for doing this. But soon enough, we are going to have more sales available for this. Well, obviously, there is the recycling process after the second life given to the batteries. So you remove it from the pack, you evaluate -- there's a sample of pack, you recycle the electronics, you can use it in battery energy systems. And later on, you can still recycle the material of this battery. And this trend is going to increase over time because these materials that were somewhere in the world they start coming into the cities, Sao Paulo, et cetera. So this is also a trend for the recycling of batteries. Going back to our vision. Here, let's talk about the charging stations. This diagram here looks a little heavy, but it's very important because it pictures WEG's vision, where lies all the opportunities for charging vehicles, and this is effectively where we are working on. We can separate in two pictures here, the heavy and utility vehicles. So we can also separate the light vehicles, we can use we can charge them at home. You can charge them in a condominium, the company where you work or a destination where you're going. So this is a trend. They are heavy in a similar way, although you will do that in their garages and the distribution centers for trucks. And obviously, during the [indiscernible], the route you will have this need. So for each of this niche, there is a product and a strategy that we will work differently. And also, there are different clients. And when we look at the residential use, we believe that we are well positioned today. WEG supplies along with 24 automakers. And when we think about the destination, then we are thinking about centers, recharging centers. It's not only one isolated charging station, but with more units. So we are working in centers. And this specific news is charging center for the biggest hub in Latin America, which is a Volvo office in Sao Paulo. It's a charging hub, the biggest in Latin America. So we have hundreds of charging equipment. So this is a track that we see that is going to increasingly be used. Another opportunity, and this is what we have been asked for. If you have an electric vehicle, you will think about your travel, you will want to know where the charging stations are. So there is a big concern of people. So we have to create those charging station hubs at add back. We also think that we are well positioned. And one big example of this is this news made by Volvo that they want to consolidate electric vehicles in Brazil, and it is investing a significant sum in charging station hubs for rapid charging with 101 hubs. And WEG was happy enough to be chosen as the main supplier to conduct this project. In a similar way, which is very well known for those of you who go around roads of Brazil. The [indiscernible] Network, I think they have about 50 gas stations, petrol stations around Brazil. And WEG was chosen by this network to supply 25 electric charging hubs. And [indiscernible] is obviously going to do this in all their network as they grow. So as time goes by in the next 1, 2 years, this network of charging station on route is getting consolidated. It's the same way that we can see in Europe. Another example that makes us also proud is this the equatorial route in the [indiscernible], and WEG was also the main supplier for this charging hubs that were placed along these roads. These are the station ones that go up to 180 kilowatts. And if you are thinking about buying EV, you have to consider what is the capacity of battery how many kilowatt hours your battery is? 60? 40-kilowatt hours? That gives you a very good autonomy. 180-kilowatt hour, that would be fantastic. 180-kilowatt hour you can charge in 1 hour at a 180 kilowatt-hour station. So that's just quick maths that you can do to answer your doubts about EVs. And something that we're thinking about urban transportation for bus, which is to create a very complete offer, and a turnkey solution for this niche of clients. It will bring a synergy, as I've shown you at the diagram with the traditional businesses such as substations, electric panels, cubicles, protection devices and skid. It's been a bit difficult for this public for the urban bus companies. It's not a people that deals with electricity, such as our traditional clients. So we are showing this kind of solutions for them. Recently, we also have our digital platforms supporting systems and the offer of a complete package, not only the design, but also the execution, installation, and maintenance. One of the great difficulties of the rapid charging is availability. If you have an EV, you may have noticed that when you get to a charging station, there is a sign saying that it's out of order. So that's very common because these are very complex stations. They have software. You have to update. As you update your cell phone, you have to update the charging stations. You have to update your smart TV. That happens too with charging stations. So we also have this offer of maintenance for keeping them all -- making them available at all times. And in parallel with all that, our digital arm, developing a lot of solutions to give support the EV [indiscernible] for managing the fleet of vehicles. And here in the middle is a very interesting product, which is what we call the Smart Charging System. That's a system that brings intelligence to a system, to a public environment, to a condominium, for instance. A condominium needs to have a system that gives support the gradual introduction of stations. This is a typical example of one of our applications in which you have charging station in the condominium. And the residents of this condominium will get interested in placing their own charging stations? And how can that be done? With the smart charger, you measure at the entrance of the condiment and see what demand it has and created an internal network through the connectivity that this charging stations possess, and you manage this demand never overcoming the allowed limit. That is very interesting for brownfield applications, but it rapidly became also advantage for greenfield applications. If there are cities, municipalities, local ruling. How do you do? You dimension it for each place for each vacancy that good if you have a very big transformer. But we know that this is not suitable for a new system for any of the residents. So that became a very interesting application as well for greenfield projects. We also believe that a strong point of ours, it's our integrators network. WEG has over 140 integrators that work with a higher or less involvement this giving support for electric vehicles charging infrastructure in Brazil. And our line of products, I'm showing you this first hand is our range of products from AC charging stations, compact but intelligent ones up to our G3 station, which is the new station that we intend to reach 720 kilowatts. This is a launch, something we're launching and making public right now is by using recycled material, effectively been recycled for the manufacturing of this charging stations for the WEMOB Park, [indiscernible] launches the WEMOB Park, EASY. It's a very interesting launch that was called upon by an automaker, which is the portable charging station customized in the color of the vehicle, but this is not only a simple charging, traditional charging station, it is intelligent. It communicates with the vehicle. It has a series of electric protections, which was extremely necessary for this automaker, also made with 100% recycled material. [indiscernible] launch is our high-power charging station, which is a Generation 3 charging station with a capacity of charging 4 vehicles simultaneously. It's a very modern equipment that has a very generous display, allowing for the client to make his own marketing while someone who's charging his vehicle some general figures. What is WEMOB represent through WEG, we have produced over 10,000 charging stations. And we have kept the 3-digit growth. Obviously that in proportion of the WEG size is one-digit only. But in terms of this in the world for this electric mobility is a big thing. So I go back to the Brazilian electric vehicle fleet is about 70,000 plug-in vehicles. So the last 8 months of the year, 50,000 EVs were licensed. But there are even some hybrid, but these are all the plug-in ones. So 70,000 units, today, we have in our Brazilian market. And we have we sell mostly in Brazil, and we have sold 10,000. So one for each 7 cars. I have an EV. My wife has also one. And we have only 1 charging station. So this proportion is very well distributed in our view. In internationalization point of view, it's something that we're starting now. It's called to start with the serious offerings in terms of markets and products and specifically in terms of certification that immense effort in engineering in the offer of our products. And we are taking part in -- we are exposing ourselves in this market, certifying our products in different markets, or by giving support to our clients that initially are in Brazil, but also have some influence in other places in the world, specifically the auto makers that produce in Brazil and other parts of the world. In the growth strategy, this is something that we have already announced different moments. This is our Plant 8. It's almost ready and possibly it's going to start operation in the beginning of 2024, and it allows for the continuous and gradual growth of production according to the demand as it grows, we will be able to meet it. Another relevant thing is the investment in the [indiscernible] plant, which was an investment of BRL 100 million investment, and we have reached already perhaps 30% of this built area. We are doing it in a segregated way. We have 140 new employees, and it will probably start operation in the beginning of 2024, and it will have invested a lot of this plant. So as to have a very automated one, using electric and automation solutions. That is AMR, Autonomous Mobile Vehicle Robot made by WEG. That allows us for reaching, getting, and transporting materials inside the plant. So it's aligned as well with electric mobility. Another investment we have made was to create a specific area with dedicated people, specialists, people to oversee the assembly and manufacturing of the charging stations associated with our panels, control panels, which is where the DNA of this construction lies, but it is starting to have a life of its own. And the other one is the very the smaller -- the AC charging station that has to have a more aggressive lead time because of the volumes and it needs to have heavy automation in their making. And specifically, in this case, if you can notice here, there is the need of testing. There's a lot of labs, and these tests are all automated. Automated, because the charge of the firmware is very important for this kind of equipment. Going back to our diagram here, and just to remind you briefly on electric vehicles, charging stations, and I could dwell the whole morning talking about all these other aspects here. We have noticed a great demand -- increased demand, the energy transition has called for that. And we see that WEG is also structuring itself around this offer investing. Yesterday was another announcement shown these new investments. And I think that Carlos is going to speak about that later on this part that supports behind the scene this electric mobility. And to wrap it up, our last slide, I'm still in time. I could say that today, we are focusing in the reinforcement of our position of electric mobility in Brazil. We are very focused on it. And we've had, in our view, very good results. We are already in a very expressive and relevant moment to increase our participation in Latin America. We are also working heavily on that. And as always, you have to have products, you have to have the capacity to deliver these products in time, and we are going to continue our capacity, our expansion of the production capacity. So we are concentrating on electric mobility with these investments and these actions.

[Interpreted] Thank you, Grillo. Electric mobility is certainly a very hot topic for people who work here. And it often comes up in our presentation. So I'd like to invite now, Carlos Prinz, who's going to talk to us about WEG transmission and distribution.

[Interpreted] Good morning, everyone. Good afternoon, good evening for those of you who are joining us remotely. I'm really happy to be here with you to show you a little bit of our T&D business, Transmission & Distribution. Let me start by showing you some figures concerning our T&D. We have 13 plants. Five of them located here in Brazil, and 8 of them overseas, I'd like to show you in further details, which are these plants and our market coverage strategies were more than 5,200 employees, 62% of them are in Brazil and 38% of are abroad. Today, we are the largest manufacturers of transformers in Latin America and maybe one of our major strengths are a complete line of transformers. Most world manufacturers specialized on some product lines, some of them on power distribution, others on medium-sized transformers or large-sized transformers. But WEG has the complete line from small light pole transformer to large pieces of machinery for hydroelectric power plants, solar power plants up to 550 kilovolts, which, today, are certified by the major power utilities of the markets we operate. Last year, I told you that the most important challenge we would have ahead of us, especially in the U.S. market would be to enter on the very large power utilities in the U.S. Last year, we were able to advance a lot. Today, we have been accredited by the largest power utilities in the U.S. The doors are wide open, not only accredited and certified, but we're supplying transformers to them. We have more than 500 substation supplied to the market, not only Brazilian market. But today, we have our substation business centers that build, there are 20 substations in all our target markets. We are Brazilian leaders in the Substation and Mobile Solutions segment. And the other things that sets us apart from our competitors is that we have a network of technical assistance and representatives. This undoubtedly is also one of the most important strengths we have and is a unique strategy. Our sales force through representative and our technical assistance network is really important. Here, I briefly show you some milestone of that transformers. We started back in 1981, 20 years after the foundation of the company, we bought in 1981, 50% of a small transformer manufacturer for rural areas, small transformers attached to light poles. Now I leap to 2006 when we started our internationalization process. We established a joint venture with the Mexican company called Voltran. This association continues. So far, we have almost 80% of this business. We also kept Voltran, we kept that brand that is very prestigious in the Mexican market. In 2007, we bought another transformer manufacturer in the city of Gravatai in Rio Grande do Sul state. In 2008, we removed all lines, we started our disconnector manufacturing line, very important component for substations. In 2009, we built in greenfield, our power transformer in Mexico for 550-kilovolts transformer. In 2013, we started out our activities in South Africa with industrial transformers. And in 2015, we made the second acquisition in Africa, more dedicated to large transformers up to 40 MVA. In 2015, we started our journey in Colombia through another acquisition of industrial transformers for oil and gas industry in that country. In 2017, we started operating directly in the U.S. through the acquisition of two plants, one of distribution transformers and the other one, power transformers. In 2020, we expanded in Brazil, our transformer business through the acquisition of the Betim plant, state-of-the-art plant, internationally recognized as one of the best transformer plants in the world, up to 800 kilovolts. In 2021, we built the third transformer plant in the U.S., this one fully dedicated to renewables, solar transformers mostly. And in 2022, we bought out Balteau in Minas Gerais state also an instrument former up to 550 kilovolts. This is briefly our history. I will move faster, a little faster on the slide here. You think that all transformers are the same, the little box with 3 ceramic components. But all lines, all product lines are very specialized and dedicated because the loads they deal with are changing according to the application. Transformer for -- same power transformer for a given industry is totally different from a solar power transformer. The way of designing the project is totally different. That's why I tell you that WEG is the only manufacturer that has a full and complete line of transformers, all types. Here, we split, very clearly, the solar application transformer has an engineering of its own, which is different from the wind power transformer and also large transformer, special transformers also, rectifier -- rectifying transformers. Here at the bottom, you can see the Balteau transformers. They are medium and high voltage up to 550-kilovolt transformers. And maybe the most important step we took over the last 2 years is this today, all WEG transformers have a channel for digitization. I'll show you the latest developments, but I can assure you that over the last 2 years, we took the leadership position, providing digital solutions for transformers. Today, transformers, and you'll see up next also substations are not only monitored, but also taken care of both considering the building up of gases and stuff, and the health of the bushings, and the ceramic, insulators, the whole machine is monitored. I compare it to a person at the ICU measuring all vital signs, such is the condition of monitoring we have to this piece of machinery. Here at the bottom, you have all the substations line. And here, I wanted to highlight 3 products that are now out of the oven, so to speak. The first one is the full monitoring of substation. Here, we're not only going to monitor the WEG producer, the power and current transformers at the most important transformer and the disconnectors, regardless of all vendors regardless of being WEG's or not. The other product is the merging unit, which is [indiscernible], fully interconnected through fiber optics to substations, those copper wiring or cables are no longer used. This is all monitor through fiber optics. And from this little box emerging unit controlling the substation. And finally, our green hydrogen solution, we developed our rectifier transformer up to 150 Kiloamperes. This is an extremely sophisticated giant piece of machinery, 150 Megaamperes is really challenging to operate, but it was fully developed by us. For just any hydrogen system will have a solution at the rectifier and also power substations, turnkey substation that is. This is product I want to highlight also. WEG, undoubtedly, in Brazil is leader in the overhauling of transformers. This is a market that for many years, had this gap. It was a market of large transformers. There are just a few specialized companies in the world that deal with, especially, well, this is an excellent opportunity for business. And this is also a way of contributing towards the emission -- the reduction of greenhouse gases. When WEG overhauls a transformers, and I'm referring to large size machines, we're able to reuse the whole transformer. We use the tank of the transformer. We reuse the core, silicon steel core. We are able to overhaul it providing 30%, 40% more power than it was, and it leaves the plant overhaul in plant with 2 years guarantee and ready to operate for 30 years more. So this is a very important contribution that we are giving in the environment. Here, I'd like to show you the locations of our plants. And I'll take the opportunity also to show you here or better to update you about our market strategy. Let us start by Brazil. In Brazil, we have 5 manufacturing plants, one of them in Gravatai in the state of Rio Grande do Sul. The other one in Minas Gerais, Itajuba. These five plants, manufacturing plants will operate synergically with 2 African plants. In South Africa, we have 2 manufacturing plants up to 45 MVA, 145 kV. Just for you to have an idea of how synergically they operate and the importance of this joint operation. This year, we have been placed orders to provide 7 transformers in 2024, 145 kV for the whole of Africa to provide transformer to the whole of Africa. And this was possible because we had a foothold in Africa. Can you imagine 400-ton transformers, 45 MVA. They will also be supplied to Brazil. So we have to take advantage of the strength of operating synergically with South Africa. Likewise, the Colombia manufacturing plant of up to 30 MVA transformers operate synergically with the Brazilian manufacturing plants. For you to have an idea, more than 50% of transformers that we provide to Colombia are manufactured in Brazil, the other half produced in Colombia, and this is only possible, thanks to this joint operation or collaborations that we have with the Colombian plant. So these transformers also have a social component attached to it. When we sell a component anywhere in the world, of course, we sell it to the power utility of that country. And in most countries that we operate are privately owned, but there are also a state run. And so having a local production creates for job the opportunity for WEG to export machines we oftentimes don't produce in Brazil. And to conclude, our strategy, I will refer to North America. As I told you, we have 5 manufacturing plants, three of them in the U.S., where we produce transformers up to 60 MVA, and we'll have 2 manufacturing plants in Mexico where we manufacture the large-sized transformers. And the 5 plants, the Mexican and Americans plants operate in integrated. Most components are manufactured in Mexico to enhance our competitiveness. These five plants in North America operate synergically and harmonically. Now referring to the future of our operations. Undoubtedly, we are getting ready for the growing market that we envision for the T&D market. Since 2018, we've been growing at a rate of 6.5% physically. This is physically in MVA year. This is extremely important. Today, our manufacturing plants are operating at full capacity and we are to continue growing. In GVA year, we estimate an 8.4% physical growth a year that is higher than the rate we had been growing so far. In built area, our growth is going to be estimated to 10.3% by 2026. It's important to highlight here that basically, this growth rate by 2026 considers just a little, the investments that we've announced on Wednesday. These are investments that are underway, and are part of the package we have announced. Well, the question is, will WEG have planned enough for this growing demand in Brazil and for the markets we operate in? Yes, WEG will have plans to deal with that. Now I will refer to the opportunities that we have waited for our T&D business. This is schematic, depicts the most traditional markets. Transmission, generation, infrastructure, solar energy, industry, wind energy, energy distributors, all these groups, all these packages of businesses, they need transformers and substations. And the good news is that all new businesses, when we are talking about electric mobility, energy storage, everything needs in a great scale, transformers and electric substations. And I'm talking about all the new trends that we hear about that are already taking place need transformers and substations. A little bit here about Brazil. These are public figures on our [indiscernible] for electrical expansion plans. Brazil should invest up into 2032 about BRL 16 billion per year. And the main focus here is to bring this energy. The renewables from the north and northeast to the consumption centers in the southeast, center, west and southern parts of the country. And that is a reality already. Here, I am showing you a little bit of auction expectations for the coming years. These are preannounced auctions. Some of them are already confirmed in 2023, we're going to have now in December. The last one, the last auction of the year involves about BRL 18 billion. There is a share of dedicated [indiscernible], that does not take part, but it has all the peripheral components for this line of HVDC. And the first auction for 2024 is in March an approximate value of BRL 20 billion. And a second auction has been announced for the second half of the year. So if you consider 2023 and '24 with historical curve of the past auctions, we see a very good window of opportunity. Now speaking about the U.S. market, we have also opportunities there. People talk a lot about Inflactionary Reduction Act. But these are fact from the energy department in the United States is that there is a gap of 400 GVA so this deficit in transformers for a short-term for the next 4 years, 400 GVA, just for you to have an idea. A typical hydro plant produces about 15 GVA. So see the size of this gap in the need of transformers that you have ahead of us in the United States. So I'm talking about new endeavors. And besides, there is the subscription movement, especially in substations in the coal plants. So they are going to be replaced. So the transformer market in the U.S. should grow in the coming years, and the projection, the forecast is long up to 2031, it should grow from 5% to 7% yearly. And what's important. For all this growing demand and this need, WEG is in position is ready. We have the technology. And as I have previously mentioned, we have access to the main investors in utilities in the U.S. We are ready and in place to take advantage of this moment. Now speaking about Mexico, they are starting an investment wave. You possibly are following the number of companies that are installing themselves in Mexico, there is an increasing demand for data centers, for industrial condominiums, and we are taking part in substations in industrial condominiums. Just for you to have an idea, 300 MVA 350-kilovolts feeding this industrial condominium. So these are impressive numbers. The generation of clean energy is -- it's [indiscernible] in Mexico. It's still handled by the government, but obviously, it's going to increase and take off very soon. Besides there is an opportunity for WEG to take part in a stronger way also been able to increase its market share in Mexico. Now speaking about Colombia now. Here the expectation is that the energy metrics for renewable clean energies will increase up to 20%, 30% at a pace from 5% to 15%. And not a very interesting thing that is happening in Colombia is that there is a gradually modernization of substations, 10, 15 MVA being repowered and replaced for one that has a higher capacity. And we also see that this trend in Colombia is going to last for a longer period. Let me now show to you speaking about the scenarios and opportunity that I spoke, what are our growth strategies? What are we getting ready for these opportunities? First, these investments that I like to call the day-to-day, the year-to-year investments that are the more ordinary and common ones, we have in Blumenau, enlarging our renewable transformer for wind and solar energy, and we are investing also on a verticalization, making radiators, tanks, transforming our manufacturing plants in automated manufacturing plants in order to increase our productivity and competitivity. In Itajai, we are finishing a new sector, a new manufacturing plant for vacuum and pregnated transformers to follow WEG automation in their skids with the inverters. And in Gravatai, we are expanding our medium power transformers line. We are building a new line since the winding, the coiling, and also investing in the improvement of our capacity, the increasing of capacity of our boiler work. And now speaking about investments that we consider more strategic in Brazil. The first one is in Betim. Betim is acquisition, as I shown made in 2020 in the transformer up to 800 kilovolts. And we are investing in Betim, BRL 200 million, basically in order to increase the capacity and build a new manufacturing plans for radiators. And in Itajuba, another very important investment, we are doubling our transformer for medium voltage transformer we're doubling this capacity there. And now speaking about the investments abroad. In the U.S., we are expanding our capacity to meet the demands of the renewables. In Mexico, we are expanding the manufacturing of power transformers. So these are ongoing investments. And in South Africa, we are also expanding our heavy-duty transformers production capacity. And in Mexico, we are building a new transfer extra high voltage dedicated to 500 kilovolts. And this manufacturing plan has been built on a plot of land that we have acquired as an opportunity for the whole WEG group to be able to grow in the North American market. This manufacturing plant for you to locate yourself, it's very similar to the manufacturing plan that we have for the larger transformers in Betim. It is basically the same design, the same built area, 33,000 square meters of plant. And besides that, we are starting a BRL 190 million investments in order to build a new manufacturing plant of transforms up to [ 150 ] kilovolts in Colombia. Now here is thinking about not only Colombia but also about Chile, Peru, thinking about Central America as well. And to wrap up my presentation, I would like to supply a summary of our key messages of our actions, our focus. On maintaining the focus on the markets of Americas and Africa -- Sub-Saharan African as I mentioned, the expansion of our production capacity, intensify increasingly the synergy between our manufacturing plants, especially in North America and following the same verticalization process that we have in Brazil in order to make them more competitive in the North American market to participate very actively in the expansion of the business in renewable and transmission of energy. And here, an important aspect is to internationalize the Balteau which works basically in Brazil. In Brazilian market to increase the transmission, the participation in the transmission auctions to continue strong in the renewables area and expand our capacity in manufacturing products for this area. That was all. Thank you very much.

Thank you. Thank you, Carlos. I would ask you to stay on the floor because we're going to have our Q&A session. Now Grillo, please, if you can come up the floor -- the stage as well. So we're going to have our first session of Q&A. And whoever would like to ask a question, please raise your hand and identify yourself and stand as you were asking, so that we can also show you on the camera for those of who are at home or in their offices.

Good morning. Thank you for this event and for welcoming us. Here is Lucas from BTG. I have a question in our transformers area along the time, we were educated, so to speak, to educate to see the verticalization of motors, we always discuss as how verticalized was the motor manufacturing. I would like you to compare how verticalize is that production of transformers and how the -- how much is internal or not in -- also whether it's true or not, with this investments that you have announced on Wednesday, whether you are on the way of [ verticalizing ] more in Mexico, the operations in the United States, if that somehow allows you and helps you to closer to the production gap in Brazil with the operations abroad as well. So I'd like to hear you speaking about this a little bit.

Very well. Well, speaking about the verticalization here in Brazil for you to have an idea, the transformer -- a large transformer what Brazil doesn't produce is the bushing, the isolators and the subload computer. So everything else, the copper wire, the construction of the tank the building of the radiators, the [ conservers ]. Everything is produced internally. Luckily, core we buy the steel directly from the steel maker, and we assembled the core. So our level of verticalization here in Brazil is doubtless at the same level of ag motors and abroad we have started this process and part of the investments that we have demonstrated will help and support this idea. For you to have an idea, we have concluded in March the building of our boiler works in Mexico, which is a very extremely automated, robotized one and it is going to supply tanks for the Mexico as well as for the 3 manufacturing plants of the United States. So abroad, we are -- do not have the same level of verticalization, but that is an opportunity that is contemplated in our investments and is going to allow us to be even more competitive mainly in that market. Have I answered your question.

Alberto Valerio from BSBB (sic) [ UBS ]. It's very emotive of the transition at the beginning. About electric mobility, I have a question. How is the competition in this very growing market. What can we expect in the margins in this market whether I know it's at its beginning, but it will be a leverage for the growth in the future in this transition moment?

Well, competition is out there. Obviously. It's a new market with several players, but WEG is well positioned in Brazil with a line of products that is very robust in our view. And our presence, especially when you're talking about EV charging is a product that is very well connected to the transmission system, all the electrification of building and everything else. So we believe that our position in Brazil is a strong word with integrators with technical support, maintenance with lead times that are very competitive. It's been a difference. It's been something that has made WEG stand apart. And in the electric traction, these are projects that I call they're not a B2B project. They are engineering to engineering, E2E. They have a very high customization. They're not shelf products. And in this aspect, the strength of WEG engineering in a very accelerated because of our experience in inverters and motors, it has been. It's making it stand apart as well with the project that we have participated and show it to our clients. Obviously, WEG has still a little participation. But in the case of electric traction, Brazil is a strong player in the automotive industry and many players have invited us to participate in international projects.

Lucas Laghi from XP. First, I'd like to wish success for Harry and for Kuba in the succession plan. And as the first point, I would like to explore with you the T&D market, especially when we talk about the U.S. market, but I think that we have this context of the -- that is helping the demand. I would like to understand the competitive market in terms of the capacity increase expansion in the U.S. and you're seeing it as a transformer. And that was made for -- made to supply the U.S. T&D market. So how you're going -- how are you thinking about the competition in this market? And how do you evaluate the future cycle of this segment in the coming years as the incentives -- the government incentives are going to diminish. And would it be reasonable to think about an oversupply scenario as you have this T&D investments or whether you expect in a structural stronger demand for this market, even in a context without the incentives from the government. So I think it's -- this is the context in the T&D segment in the United States, please elaborate on this.

Let me comment upon the second part of your question, which would be the continuity of expansion of the market. I was 2 years ago at the Board meeting of WEG transformers, U.S., and I had the opportunity to talk to the presidents of four major utilities in the U.S. Of course, there is the opportunity to get subsidies for ITC, which is part of IRA, but their need in T&D is transformers. As I told you, there's a gap of 400 GVA for the near future. And all of them requested me loads for '27, '28. So you can see this is a long-lasting cycle and it's going to last longer, I mean, what people is looking into the T&D business is for the opportunity to get credit lines. Yes, they see that for generation. But once the generation system solar or wind, obtains this credit. It's integrated to the consumer center will occur regardless of those subsidies. Yes, we can see those cycles in a very long-lasting fashion. As far as the movement of competitors is concerned, I think WEG has a major competitive edge by producing from Mexico -- I mean, producing in Mexico and supplying from there. All our integrated production system between the U.S. and Mexico is there. We have the right operational costs. And as I told you, in earlier, we are [ verticalizing ] those manufacturing plants. I have no doubt that WEG is really competitive and the growth rates we've been showing are proof of that.

Our question is addressed to Grillo to explore some more of electric mobility. What segments do you imagine will have more potential for creating value charging stations, lightweight vehicles, utility vehicles, heavy vehicles. And do you believe that having local production is really important for growing here?

We believe that this growth is homogeneal. There is no way of detecting electric traction products and power products like recharging stations and batteries. In our vision, the growth of light vehicles will be really grow big, I mean, we've been focusing on recharging stations because of that. We see many opportunities there. And this naturally is a market that local position has makes the difference, involving what I told you, the DC charging hubs, the building of electric charging infrastructure. So if you import an equipment and just deployed if you don't update those and you don't have them with good maintenance and stuff, it's no use. So we noticed that and believe this is what sets us apart from competitors. As far as the power trend is concerned, our focus has been heavy vehicles, buses and trucks. And right now, the bus segment has really heated up and city holds municipal government that are encouraging electric mobility. Brazil is the second largest market for electric buses in the world. And we believe that we are helping build this market in Brazil.

Good morning, Marcelo Motta from JPMorgan. A question to both of you, what you see your presentation, you referred to a lot of sensors and monitoring the charging station, et cetera. Considering a 5-year business plan, will there be a part of your revenues coming from those? Or do you see the possibility of creating a new line, for example, softer for charging and how does it impact the revenues?

Well, this digitalization movement is not new in WEG. We have been working on it for a few years. And what have we noticed, digitalization is something that enables us, it's not a different for the business in terms of hardware. It's necessary. You have to have something to make it possible. And along this journey, we have identified for certain niches, the transmission and distribution is one of the examples, in which the digitalization, the monitoring of the operation condition, the health of the asset, obviously, it had a very high cost, so you have to monitor. It will bring opportunities for services, for recurrent revenue. And it is much bigger or it tends to be bigger than the very subscription of the software. So we have noticed this, and we've have walked towards this. So our projects are censoring and monitoring our develop around this. So we've developed this in the last 3 years, hardware, software, productivity, cybersecurity aspect. There's a lot of demand that need your attention. So we note, we believe that part of the business is going to be connected to the recurrent revenue linked to services.

Good morning, Lucas Barbosa from Santander Bank. My question is about the international strategy for internationalization for EV charging station. If you notice, it's clear that WEG is going to be a dominant player in Latin America, but thinking like Europe is evolving well with a rigorous goals, then United States too, Asia as well. So I'd like to learn how is WEG's strategy in regards to whether you want to joined these markets, would you like to start with a specific product like a rapid charging stations, so as to increase or share other products and how to position in -- with utilities with charging or gas stations with the end consumers, whether you have any interest in [ resend ] consumers residential one to gain penetration. So just elucidate a little bit on this.

In the external market, we are starting our first steps, and there are several channels since -- from the residential charging stations in which the competitivity is a drive. We need to have price. And there is the hubs for recharging that the service is very differential. We're starting the markets. The same thing how is happening in Europe. But it all starts with the product. So if you don't have a certified product and charging station is already a regulated market, there are several interesting regulations that will impact the product, things are very simple if you have a blackout or shutdown, and you have to reload all the charging stations you have to have market. In the European market, specifically, they have a random time to reoperate, to get back in operation. They cannot get back to operation all at the same time. So we are at a stage in which we were understanding and choosing the ways and see what products that we should accelerate the production of.

So we have time for 2 or 3, 3 people raising their heads, but we only have time for one more question. But later on, we'll have an opportunity. So we'll prioritize the ones that have already raised in the next session.

André Mazini from Citigroup. The question from batteries, as you said, the models and the cells that are not made in Brazil, they come from abroad and here is just assemble and pack. So where exactly do you bring them, the cell. In Asia, they have the CLT, Samsung, Panasonic. So do they come from there as well? How do you think of diversifying the chemicals, the chemical is not well defined. What is the ending chemical of the batteries, the geography, the geopolitics of the battery. And the second, I would like to make a follow-up on Lucas, if Trump comes back to the government, he is less endorsing of renewables. So this T&D investments would change a little bit if you have Trump coming back to government. So perhaps you will need less transmission lines with this new scenario in the United States.

As far as battery sales are concerned, today, WEG buys them from suppliers from Asia, not only from one vendor because this is a standardized -- relatively standardized product, China is #1 producer of battery cell. As far as chemistry of batteries are concerned, there is uncertainty of who's going to win in the future, but we've been investing a lot on trying to understand. We have laboratories and projects running with universities and research institutes. There's a strong group dedicated to that. And we've noticed that this chemistry is going to differentiate themselves never more [ LFT and MC ], which are the top of mind. Once they will differentiate, but in function of the application, a mining truck takes a load of ore and is back in 30 minutes and does it 20 times a day is a chemistry that is more susceptible to volumes of reloading -- recharging, excuse me, in this case. So there are projects with Unicomp, for example, studying that. So it will come to a point where this is going to be standardized.

Well, answering the second part of your question, the perception we have this comes from our customers' comments too at the utilities, this moment is going to last regardless of government administrations. And this is happening worldwide. I think this cycle is going to continue.

Thank you for your questions. Thank you once again to Grillo and Carlos for their presentation. Now we're going to break for coffee. And for those who are online, following, we are resuming our activity very soon at 10:20 Brazilian time -- 11:20 Brazilian time, apologize. [Break]

Now we're going to have a presentation on financial update. Andre, you have the floor.

People who are following remotely from home or the office. I'm here to provide an update on WEG's finances. Well, our revenue on the first month of the year, we grew 9.2%. Well, we have the opportunity to talk about each one of the businesses. The area that is showing the best performance was generation, transmission and distribution with 13% of growth rate. I think that relative to last year, the foreign market is becoming more relevant with 53% -- accounting for 53% of the external revenues. The message here is the diversification of our products -- diversification of products. Our presence in -- has helped us show growth rates for different market cycles, even in a year that after a strong demand over the last 3 years, the market returning to normal, we are still finding opportunities for growth. When we talk about short cycle, we can say that, yes, indeed, we're having a good performance both at the domestic and external market. And as in the long cycle part, an excellent opportunity for industrial businesses of WEG in the generation distribution, transmission and distribution. I will talk about each part of the four business pillars of WEG. When we talk about a electro-electronical industrial equipment, which is the major part of our revenues accounted for almost half of our revenues with 32% of our revenues in the foreign market. Here, we're talking about industrial motors inductors and industrial automation equipment. Our diversification of products and the constant development of our products and the exposition in segments that have been contributing as oil and gas, mining, water, sanitation, pulp and paper and agri business has taken to a growth rate of 8% accumulated. That is, when we talk about Generation Transmission and Distribution, GTD, we're talking about transformers, power transformers, distribution transformers, and also solutions geared towards energy transmission and renewable solar, wind, hydropower. We can say that, in Brazil we had a performance that was really positive in transformers and a good portfolio of products in the wind power, but we're not able to compensate solar energy in this year. When we move to the foreign market now, the GTD in the external market is concentrated in T&D, thanks to the exceptional moment we're going through, both in North America, Mexico and the U.S., especially with an exceptional growth of 56%. Now motors for the appliance industry. Since earlier this year, we've been announcing that this year was more of our normalization. And after the pandemics, where there was high demand in Brazil. The good news is that when we start analyzing the orders that were placed, we believe this is going to become ever more consistent and the domestic market is going to respond. And the foreign market has to do with our units in Mexico and the U.S. As far as coatings and partnerships, we're talking about the industrial paint, powder industrial coatings and varnishes, and liquid coatings for domestic and for industrial use. We had good news that as in commercial motors, the portfolio of orders have been -- our order book backlog have been improving over the last year. Now talking about our operational results. When we analyze the performance of the first 9 years -- month of the year, almost 30% of growth, undoubtedly, the fact that WEG is -- been constantly presenting cost reduction plans and rationalization of expenses and the results, an improvement of results -- financial results of long-cycle operations and foreign operations and the product mix have been contributing positively for the operational growth rates and margins. When we consider the historical margin of this accumulated product is the best of this first 9 months of the year, 32% is very healthy and attractive -- very sound and attractive. As Decio said, the most important performance indicator of the company is ROIC, return on invested capital, our ability to develop good return businesses and the allocation of capital and our CapEx plan has led us to achieve an exceptional performance of 35.4% in the 9 -- 4 months of the year. And we expect that we will constantly return attractive returns. Decio said cash flow and ROIC, as in 2023 to the first quarter, EBITDA in generation of operational cash flow. If we consider this series until 2020, we have an average of EBITDA conversion and operational cash flow of 94%. What happened right after 2020 when we had an exceptional period is that during the pandemic, we made a strategic decision of enhance our operational capital -- working capital flow, which impacted in turn the conversion of EBITDA in working capital. The good piece of news is that the first quarter the accumulator over the last 12 months, we are returning close to normality. And it's crucial this operational cash flow for financing or funding the operating results for enhancing our performance. As I told you, during the pandemic, we had made the right decision, a strategic decision of increasing our stocks so that no customers of WEG would have lack of products provided by the company because we were ready to supply them on this disruption on the supply chain that the world has experienced. Now we are getting back to normality and there was a positive evolution in our stocks and in the deadlines for receiving it. Now talking about an increase of 60% of investment expected in the first 9 months, we reached BRL 1.220 billion. The focus on the company's investment continue to be the same, be it through the expansion of capacity, increase of internalization, automation and robotization of our plants. Throughout the years, WEG has been investing between 3% and 5% of its net operational revenues -- operating revenues. But in average, we always operate in this level -- at this level. Carlos Prinz and Grillo had the opportunity to talk about investment in their investment business users. Now I will talk briefly about the other business users in which WEG is investing and placing its investments. Now starting by India. India, our history in that country started 12 years back, a little longer than that, when we built on average -- medium voltage generators, manufactured the low-voltage motor plant, and now we are expanding this unit to start producing wind turbines. This country has a strong potential, very attractive market for our products and WEG is concluding and taking a new strategic step extremely important with the conclusion of this expansion for the end of this year. Up next, a unit that constantly has been receiving capacity expansion and investment in China that is and winning market share in that country is the Rugao plant. It's the most modern plant we have in the group. The other important step taken was this investment of $12 million that will assist us to increase the local verticalization with the -- according to the Jaraguá do Sul model taken it elsewhere to the world. Carlos also mentioned about a very important purchase a plot of land, 640 square meters were bought in Mexico. After this acquisition, Mexico, we will have 1 plus -- more than 1 million square meters. And thanks to this investment, we will be able to, in the future, continue expanding our business to meet the demands of North America. One of the most important markets for WEG in addition to being close to our facilities, which will help us integrate our production processes more effectively and continue with our verticalization processes. Portugal, a new unit -- on the left-hand side also. And thanks to this unit, we will be able to expand our production capacity of large-sized motors and anti-explosion motors migrating [indiscernible] operation tools, this plant, gaining more productivity and enhancing our production capacity. I refer to the plants abroad, but we also invest in Brazil. We continue to do so. Investment in Itajai in Industrial Automation plant trying to achieve ever more verticalization of production and production expansion for outlets -- power outlets and circuit breakers and switches. Now to conclude the investment chapter. Also in Jaraguá do Sul, we're expanding our plants, our productive units to be able to expand our production capacity of components. And thanks to this investment at motors, we're going to increase 25% additionally, our production capacity when all these investments are concluded. To conclude my presentation, the take-home messages I want to leave here are: first half, we're going to continue work to deliver ever more sound EBITDA and ROIC results. Continuing enhancing our competitive edges like verticalization, our continuous productivity gain plans, our through robotization, automation WEG will continue to develop, and we'll continue to deliver something that sets us apart from our competitors. The other thing I mentioned is the normalization of the working cash flow, working capital cash flow. The good piece of news is that we consider the last 12 months, the conversion of EBITDA in work operating resources or cash will be crucial for us to continue financing our investment process and investment increased to support our growth process aligned with our mission of continuously and sustainably growing. Thank you. That was my presentation.

Thank you, Andre. And now I'd like to invite to come on stage, Harry, to make his presentation about WEG's strategy.

Good morning, everyone. I'm going to make a brief description. In order to show you why WEG is optimistic in the project of continuing to grow in spite of analysis that the economy is slowing, and recently, we have seen an industrial boom and now there is an accommodation that's worrisome. But we keep optimistic at least within WEG. And we think that we are going to continue to grow, and there are several initiatives, not only on the part of WEG, but also the market in which it operates and it's exposed to has a lot of opportunities. And this is why I will try to convey to you. The first thing for that to happen, well, I'll give you an overview of the last 3 years. You know that after the pandemic there was a strong demand for industrial products, and there's a strong demand for industrial products. WEG was able, and WEG is still a very agile company in spite of being that big, and it was able to do very rapid investments to eliminate bottlenecks and the logistic areas, everyone had problems, but WEG was very successful in dealing with this, and it was able to supply a great part of this growing demand. And that allied to some investments that we were already been doing -- have been in sales structures. And that allowed WEG to gain market share. And WEG had this market share gains, not only with the increase of the sales through the increase of demand. But it had the best positioning in several markets in which we operated, especially in the load voltage and inverter -- low voltage motors and inverters, it has grown and there's both markets. It was not only the growth in the demand but also there is a growth for these products specifically. In the last 2 years, we have a markedly growth in the revenues from solar energy, especially in '22 and '23, we suffered a bit and transmission and distribution since '21, we're still growing from '21, '22 and '23. These were significant figures, very impressive numbers. And all of this brought margins improvements, and there was -- and that was brought along to 2020 -- '23. So these topics were all dealt with today. WEG has invested in three very important business that will be very important for WEG in engineering products and wind generation, you knew that we had a 2.1, we went to 4.2 megawatt turbine. And soon we're going to have the 7-megawatt wind turbine, and that will bring good opportunities for the future. You saw Grillo mentioning what the situation is in the digital opportunities, and there are a lot of opportunities and WEG is prepared, especially for the Brazilian market, and the battery storage system business. And that was -- that brought us this increase in the years, the growth in the years '21, '22, '23 and an average of 9%. And moving on to two fails, 2023, and somebody asked me yesterday, China, we were also impacted by the decreased Chinese economy. And the impact is -- it affected not only WEG revenues, it impacts a lot of consumption and the consumption of products all over the world. China has had an important role in this, the conflict in Europe as well. So there was a sort of an accommodation from this great demand of industrial products that were previously and WEG has also felt that especially after the third quarter. And that was also influenced by the high interest rate, the lower projected gross domestic product GDP and slowly, this scenario was changed from the great demand. So how does WEG view this ahead of us -- undoubtedly, there was a decrease in the GDP. This is a macro numbers. And for 2024, there is still forecasted a small decrease in regards to 2023. And we can say that in short cycle products, we are feeling certain accommodations, so to speak, I wouldn't like to say a fault, but there is a more accommodation of price. It has to do with pricing. The raw materials go down, and that is reflected for the short-cycle products. And then we can see now trying to be optimistic in '25, a very good projections for the GDP. And here is an index that I haven't brought, but there is one called the Purchasing Management Index. It's for the purchasing -- the procurement area. So for the short term, they are trying to analyze how the next month order book is. Every month, they ask the same question. And and the same month that you are analyzing today for the next year. And in 2022, it was forecasted that things will be stable or to a lower tendency. And reality, it was lower than 50, saying that it wouldn't get to any better. And in fact, it was not in the red. But when you ask this today for October 2024, the number is green again, is blue. Already forecasting for October 2024, that production is going to be better. The order book will be stronger, and that coincides with this growth in the GDP forecasted for 2025 is sort of a coincidence. And when we talk about macro for Germany. It was very bad as well as it was for China, not only for Germany, Europe in general and the tendency is for things to get better for 2025. What important is macro analysis, are the opportunities that are taking place in what is called the energetic transition, that is an umbrella name for a lot of initiatives that are out there, but there is also the nearshoring and the shoring back to the States, and that is bringing a lot of opportunities. Carlos has mentioned a few of them, the new shoring, reshoring. The lot of industrial condominiums that are building in Mexico for the near shoring. So that is bringing lots of opportunities to Mexico. A lot of companies are also placing themselves are returning to manufacturer in the United States. That is bringing more opportunities for ourselves, and that what happened last year. We can see that we are getting opportunities with this new movement and all the investments for the Inflationary Reduction Act, with investments in infrastructure, the U.S. has a lot of subsidies and incentives for energy sector to grow -- for the energy industry to grow. So that is positive. Electric mobility -- Grillo has mentioned, what is going on in Brazil and our focus on electric mobility. When we forecast our revenue. We talk about Brazil. It's a lot focused on public transportation, buses, and we have expressive figures already and very important ones for the short term, let's say, medium term as well. But this is something that starts from here and then that will spread all over the world, creating a track record. We believe a lot in this market, and it is where we are investing and new opportunities will come up like EV charging as was mentioned here before, And this is something that I would say that in the short term, we'll see good results. And when we talk about electric mobility in terms of the world, oil and gas has always been important for WEG and it still is, but we're not seeing any slowing in investments in this area. Oil and gas, they are going to invest in carbon capturing and sequestration, green hydrogen, synthetic fuels, several things to come. But for batteries, for mining will have to play an important role and more investments are needed and WEG has a very consolidated position in Australia, South Africa, Chile, Brazil -- WEG mining with various industry in which WEG spans out is in the mining industry. New opportunity for traditional products of WEG, also talking about an energetic transition, low-carbon nitrogen, carbon sequestration and storing, synthetic fuels and biofuels, all these investments. They will need motors and inverters, conversers -- converters, and if green hydrogen -- if Brazil here will have production of green hydrogen including for expectations, the partner for the suppliers for all this plants will be WEG, not only WEG, but I'm sure that WEG will take part in it. And as an offer of product, this is going to be very important because the people that put together this -- these plants -- these hydrogen making plants, our EPC contractors that have a very close relationship with WEG. And for WEG will be with them, helping them supplying their contracts. But WEG is ready not only to count on the development of Brazilian companies developing and now I was recalled a number of electrolyzers. And also those that are outside. And WEG is closer by because it has a relationship. So WEG is in position to be a partner in this as well for all this sequestration carbon, storage of carbon synthetic bio-fuels. This transformation counts on the presence and the know-how of WEG. We have an internal structure that is working specifically on this, the energetic efficiency and decarbonization. This about the decarbonization is irreversible in all areas. I'm not only talking about electric vehicles, all the world, everyone is seeking to decarbonize their productions, industries, companies. And in order to do that, it will have to get more electrified, in order to substitute fossil fuels. So they will have to get electricity instead. So they'll have to electrify. And besides having more electric consumption. They have to have more efficient products. And we can see all over the world. You know that at -- there was -- with strong demand on the part of certain government to have more efficient motors and engines and that has -- is again another 10 but also a trend and also very common what is happening is a replacement of engines and motors, choosing more efficient ones. So imagine the change -- the replacement of assets for a bus company in Sao Paulo -- that the light bulbs is a soft problems, but we're witnessing something like this, we are looking for more efficient technologies. And we also mentioned in one meeting of ours about digitalization area, WEG in the automation area is very strong as well. Automation for manufacturing and processes. And this area of automation with the digitalization, the search for efficiency in the processes and manufacturing will in order to save energy and to produce more of the energy, that means, decarbonization, to use less resources getting more production. That will also bring an increase of the demand for digitalization product. So this is all positive for all the businesses that we are involved with. The renewables -- it's the base for all of this transformation. Energy storage also goes along with this. It's a consequence of this renewables -- and the equipment for the protection and management of electric system, WEG -- switch gears -- Brazil has plants in Brazil, Colombia, South Africa. Have I forgotten anyone, Grillo? Mexico? And we are now saying how we can expand also expand this expertise all over the world. So all of the opportunities that are happening in the market, WEG is very interested is investing in these areas and getting ready to take the most of it. And what is the strategy? What are the directions to follow. Well, this is now more of a complement, what is the global strategy of WEG in a general way? WEG is still is going for a 2-digit growth. And when I spoke about legacy, I now remember one and that was back in 2008, when we're -- perhaps 2009 -- when we decided to make the vision statement of WEG as a sustainable and continuous growth. I was very marked for WEG because with this sentence, with this mission statement, nobody grows without innovating if they did not develop leadership in people and invest in technology and WEG will not stop doing this. Because this is something that has worked well and has allowed us to grow continuously and sustainably. So we'll go for a 2-digit sustainable growth, and how we do this. The growth avenues is going to be through internalization. WEG every year takes a step towards this direction -- is not only to grow in the same place x percent. What is a new place, a new segment. So every year, we have to take a new and different step, so you can notice this in all our actions. Besides, of course, growing in all the markets in which we are already present. WEG has made a strong commitment for opening new businesses in order to help build a more sustainable world. All new businesses that WEG is involved with renewable energy, energy storage, electric mobility. We are involved in all this businesses for a more sustainable world, which ends up being an electricity world, a world in which we are already involved but always going in that direction. So more and better, WEG does not forget about that. We are a company that has different side other than marketed product. We're also a company that is worried about management cost. We are a cost-cutting company, we'll do that all the time. We increase our efficiency and our processes. We do not have a strategy that chooses only one thing. We work on several fronts at the same time. Mergers and acquisition strategy is going to go on. Recently, we have one of our big ones, and that strategy is going to be maintained for -- in order to conquer new markets, bring new industries into the company, new technologies that we still don't have. And the business model is only a two-item strategy. It is still going to have this fiscal discipline, this investment discipline and the verticalization strategy. This is a WEG in a nutshell, is financial discipline, and we believe that we know how to do and to make well every product that we do -- that we manufacture. And now specifically, talking about the external market, we intend to continue advancing in electric motors, new manufacturing plans and expansions we are going to invest in China, India, Mexico, Portugal, Turkey to incorporate the Regal Rexnord businesses which has plants in the United States, Mexico, Canada, Netherlands, Italy, India and China. And when we talk about Regal Rexnord, it's not talking only about electric motors, we are bringing in also -- two or three joint -- two alternator manufacturing plants, one in Mexico, one in China. There's WEG alternators was not a consolidated company in the international market, but now we are going to be. So our strategy for that industry as well changes. And these are only the highlights there are several others, but inverters and gear boxes -- gear motors were also -- we also had a growth that was above the average. When Kuba stayed for almost 8 months in the United States, he dealing with this to implement the strategy for days in the U.S. and Manfred in Europe as well doing the same thing. And you know that WEG has a very good participation in low-voltage motors and the drives. Our participation is not that good, but we are very competitive. And we have products but we are lacking at the moment is to invest in supporting structured the approach, service sales and to put this all together and to also put the gears so that we can work this. And this offers have to be directed to industries in which WEG is not very well present. Regal Rexnord, it has a very important presence in food and beverages. WEG also has a presence, an important one, in food and beverages, but in Europe, not in the U.S. market. So this presence in food and beverages, will use the gear motors from -- and drives -- so this will give us a new channel of entering this market and offering a complete package and to take opportunities -- to -- best of opportunities to grow in TD in the Americas -- continue to develop the traditional businesses and motor drives and controls and generation, distribution -- transmission and distribution, and that has to work all the time. In order to maintain its position and be updating this market in order to supply and service the best possible way, to expand the offer and solutions for electrification, automation and digitalization. This is going to be an area in which WEG is going to make several new offers in terms of new products in switchgears, automation. We have several digital products for all industries, WEG is very strong in the industrial area, infrastructure. We have advanced a lot in infrastructure. We are talking about ports, airports. And now we are moving on to the buildings area, construction such as this -- we want to strengthen our position in the construction and building areas. So we are going to increase our offer in this area as well. And we are seeking to create synergies with our existing businesses to strengthen the solutions for renewable energies. And here I include to offer electric solar wind energy, storage and whatever new comes up in the renewable area. Green hydrogen, we are speaking in a broad sense here. We have to structure ourselves in order to work with all these renewable energies that come up. And participation and new segments, the powertrain for buses and trucks and lorries. Yesterday, somebody asked me, in Brazil in the short term, what is going to be more successful? And I think that is going to give the more participation is powertrain for buses, trucks and charging stations. And this is speeding up and it's going to be something very important in the next 3 to 4 years. And lastly, I'd like to talk about ESG. WEG has always been a company that was very well recognized by the market. As an example, in governance in social participation in the communities in which it operates and has always been a benchmark, a reference for other companies. And in the last few years, WEG decided to structure this in a more robust way, not only dealing with this as we were dealing with, but to guarantee that we are increasingly present in this section, not only in Brazil, but also abroad. I think that 1/3 of our employees are abroad, 12 thousands or so abroad. So we have to start involving everything, and we have that structure ourselves around this. We have a sustainability policy that encompasses everyone and everything and social investment policy. And here, we have two recognitions. You can see what has already changed. With all this we have done in the last 2 years, the Sustainalytics. And this is new for me, too. We are among the least level of risks in this industry. And what is not new for me is the EcoVadis. We were bronze medalists. And this is from a group of 100,000 companies and as a bronze medalist we were classified in sustainability among the 50 best classified. So we were among the 50 best. Two year on, we are with the gold category. That means we are among the 5% -- the 5 top companies that are best classified. And above that, there is a platinum category, which is only 1%. But that was a very important leap that we are able to create in these 2 last years. And here is just to show one of the programs. We have -- there zero -- neutral carbon, the Scope 1 and 2 for 2021, which was to reduce 52% of the emission of greenhouse gases, and for 2022, our goal was to reducing 15%, and we were able to do it. We have over 700 projects in the reduction of emissions that are already concluded, but are ongoing. And every one month have seen this that now WEG has a contract of self-production of renewables. An important percentage is self-made and we are going to extend that to other markets -- to other worlds. It's not the same proportion, it's 90% as we have in Brazil. Whether we're doing this in Germany, Portugal, in a general way, we have 75% of our energy produced by ourselves. Well, that is energy that we used to consume -- are coming from renewables, either being produced by ourselves or certified. So growth in all markets continue to expand abroad solutions geared towards energy transition and move towards ever more ESG. This is my presentation. Now thank you so much. Thank you, Harry. Now I would like to invite Andre Rodrigues to come also to the stage. We're going to start the second Q&A session. Those of you who are going to address your questions, please identify yourselves, and the speakers are going to entertain your questions. We're starting back there.

Congratulations for this meeting. Andre, Harry. Two questions, one for Harry, the other one for Andre. The first one is about the global industry and reclassification -- and the customer trying to bring prices down. What is the position of WEG concerning pricification of products because you've changed your approach on how you position yourselves and your product. This is the first question. Andre, now concerning Regal Rexnord acquisition, how do you see the time line for margin accommodation or reaccommodation of margins in the next years for us to understand how the EBITDA margin is going to behave. Can you please touch on those points? First off, concerning price. I think this is a dynamic. It's the decision to position WEG -- this is WEG dynamic, as I told you. 2023, 2022, the price of imports increased greatly raw materials and the demand was good. In the short term, it is possible to transfer that short run is 3, 4 months. You can transfer this price to the market and consumer accepted reasonably well. Now in 2023 -- still increase in price, but copper decreased a little bit, still prices dropped -- their prices. And obviously, WEG does not common to reduce our prices. So we have contract agreement with so many customers. So the price pressure -- it's coming because the price of raw materials inputs was reduced and is subject to renegotiation as with steel prices are reduced. There is not a reduction in demand, but we have to adjust our prices because this is fair. We accepted a price increase in raw materials. And now when there is a reduction people have to accept it. Things comes gradually, let's say, as far as the Regal Rexnord acquistion, we submitted this process -- this purchase, and we have to be analyzed by this antitrust Board and on the third quarter, we're going to receive authorization to do the closing and start the integration process. And that has been acquired by Regal Rexnord. When we announced this acquisition, well, this is 1-digit margin by Regal that is smaller than WEG's, okay, compared to WEG's revenues last year accounted from 7% to 8% of the group's revenues. So it's natural that during integration, we're going to have a reduction in our consolidated margin. This is a process.

A company that has many business units and is present in many countries, this is an integration process that is not simple. And even considering all that, the good piece of news is that we are really prepared to continue this process this integration process and coming to fruition -- bring it to fruition, where WEG is strongly present -- team that is very well prepared in Mexico, in India, in China, in numerous countries. So first, we're going to have a reduction in the consolidated margin. And throughout the integration process, we are going to bring the margins in each country's closer. It's still too early. Let's see when we're going to approve this and to trust Board analysis and continue from there on. Good morning. This is from BDI. We are used to seeing WEG with fantastic growth rates. And part of it, as some segments start getting to a mature level, a new product or application, I would like to understand, excluding maybe the electric mobility part, considering the opportunities from now on for new products or applications. How would you harness those opportunities? And can you please comment, how is that going to be on the market? Well, market estimates, we have been doing this exercise at WEG. But as you know, this is really hard. We work with many scenarios. For example, energy storage when this business is going to happen in Brazil. In 3 years' time, in 5 years, it depends on this, on that. There are many scenarios involved. So because of those scenarios -- possible scenarios, WEG projects investment levels for development for structuring to be ready to invest faster once the market starts taking off. But we have a huge -- we have numerous initiatives. I mean, what WEG sees in addition to electric mobility, what WEG sees -- envisions is energy storage possibilities, automation -- industrial automation, processing industry and also manufacturing industry. We have MES. Now we are moving towards digital. The difficult thing is to establish how big this market is going to be and how fast this movement is going to take place. Even though wind power, we haven't fully enjoyed the potential of wind power here. The market is not doing very well right now. But the potential for wind power generation is huge in Brazil. If you consider this plus green hydrogen, there is no green hydrogen without wind power and solar power, Brazil is going to be a major producer of green hydrogen. We are going to supply compressors and everything else, but we are not going -- we won't be able to estimate that without considering the potential businesses we are investing in, and possible scenarios for that. But we are part of this two-digit growth project. Some of them will go beyond two-digit. Some of them will take longer to achieve the two-digit growth rate. But this is on our spreadsheets. We create the scenario. We play out where we're going to invest the money and -- but I won't be able to tell you one by one, assigning figures to it because it depends on many scenarios.

Daniel Gasparete. Two questions again. I'll -- you spoke about Regal, can you tell us something about the expectations for November? And second, about the evolution of our OIC. It would be fair to think that if we consider the fantastic evolution, maybe the future will be the accommodation of ROIC because of Regal is going to also enter the group.

Well, what we announced contemplates that explanation. The new rule has been established from January 1, it enforced at the expectation that we had earlier this year, that we would have the impact of our structured gears towards that -- that would impact half of the benefit that we have, is going to be confirmed from January 1 onwards with all our structure and -- we're going to see the rates that are around 17% and will be close to 20%. This is a fact. And the good news is that this confirmed what we had as an expectation, considering everything you mentioned concern, return on invested capital, this is going to be accommodated. You mentioned it very well. There is this normalization, price accommodation or reaccommodation or normalization process, when we are to operate investment on the upper range -- Regal integration. But the message here, despite accommodation, the accommodation, we're going to work to deliver really attractive above average returns.

Thank you, Salgado. Harry, Andre Rodrigues, thank you for entertaining one more question. Valerio from EBS. Two mention, 2 points. We are going through a transition according to that's his words, there are good things that stay and others that will be changed -- values, sustainability, organic growth. As far as segments are concerned, what stays, what continues to be a pillar at WEG, what can be removed from the portfolio and focus on other values? Rodrigo, can you please elaborate some more about India and investments in that country? Can you please tell us how much what's the capacity there that is being used in India.

As far as segment is concerned, I'm going to first make a definition of what we have. WEG was a company, manufacturer of motors, transformers, automation, items and automation systems to meet the demands of the manufacturing industry infrastructure, and now we're moving towards building. We are moving towards building construction, this is the macro of WEG. Now we are moving to other segments, other industries. WEG is really strong. Well, in Brazil, we are in all industries to sell our solutions, our products and for developing customized products. But abroad, I would say that WEG -- and now I will refer specifically to motors and drives, more specifically. We have to strengthen ourselves in food and beverage water and waterways. These are segments or sectors or industry. We are strong in oil and gas and mining. We are really strong in manufacturing pumps, some compressors. So WEG's movement, and we've been doing this for 2 years, is creating a specific structure to specialize ourselves for water and water waste -- specializing ourselves to service the food and beverage. We are very well in Brazil, but I'm referring to the overseas market, okay? Motion drive -- this is what is relevant about our work to deliver results and medium run. And the energy sector our most important area is the Americas, okay? Substations and so on and so forth, we are not changing anything in that respect. Let me see -- well, energy, automation, let me see. But I think that what I should highlight is this an alternatives we are going to plan something for them. Now referring to India, as I told you, it's a really important country for WEG. Differently from other countries, we started greenfield plant in medium and high-voltage motors plant there in just a short time, we became market leaders and the largest irrigation project through different river beds, okay? We supply the motors. And we made the important decision of starting with low voltage. India -- in India, the low-voltage market -- motor market in Brazil is larger than Brazil. So we really hope this is going to grow ever more. It's a greenfield plant. We start slowly because we are in a hurry. We started first with an assembly line, not investing right away to produce all components. And this winning of market share was part of our plans. We broke grounds 2 years ago. Next step to be taken in India is wind turbine. One of the most important markets in the world, we are about to conclude the certification of our machine there. Joao Paulo may correct me if I'm wrong, the largest wind turbine that will be made available in India on this certification process is ours. That's why we are expanding our capacity. And next year, after this certification, we were going to supply our 2.4 megawatt wind turbine to the Indian market. His microphone is off, unfortunately. His microphone is off. Okay. We are concluding the Q&A session. Thanks, Harry, Andre, once again. Thank you so much again for Decio's participation. Harry, all our Board, special thanks to the organizers of this meeting, our marketing teams, our IT team, all our suppliers, service providers that made this effort to deliver. A QR code will be shown on screen. And those of you who are present here attending this meeting, can scan it and answer this survey, because your feedback is extremely important. We want to improve our meeting ever more. Thank you so much for your attendance and see you again next year. [Statements in English on this transcript were Spoken by an interpreter present on the live call.]