Fras Le SA

BOVESPA:FRAS3

Earnings Call Transcript 2021-Q2

[Jessica Cantele, executive]

Good morning. Welcome to the conference call of Fras-le for the Earnings of Q2 2021. My name is Jessica. I'm Investor Relations Officer at Fras-le, and before beginning, I would like to give you some information and a brief disclaimer. This video conference is being recorded and will be made available on our site. We have simultaneous translation in progress. To access, please click on the button Interpretation and choose your language. The Q&A session will be opened at the end of the presentation. Questions may be sent in writing through the button Q&A or via audio and using Raise Hand.

Apart from this, we'd like to clarify that any declarations made during this conference call concerning the business perspectives of the company, projections, operational financial goals are based on beliefs and assumptions of the company's management and also on information currently available to the company. Considerations about the future are not guarantees of performance and involve risks and uncertainties. Please refer to future events, and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions and industry conditions and other factors may affect the future results of the company and may lead to results that may differ materially from those expressed here.

I wish you all a good conference call, and I'd like to pass the floor to Mr. Sergio de Carvalho to begin the presentation. Sir, you have the floor.

[Sergio Lisbão de Carvalho, executive]

Thank you, Jessica. Good morning. We'd like to welcome you all to our conference call for Fras-le for the earnings of Q2 2021. We traditionally have conference calls, and this is the first time that we have a video conference in order to improve our approximation of our transparency. In this presentation, we will have Hemerson de Souza, our General Director and M&A Director; Anderson Pontalti is General Director of Fras-le apart from our Investor Relations team.

We'd like to begin with the highlights and the general view. We had excellent results in Q2, representing the best performance in the history of the company. This performance happens in a quarter when we had a second wave of COVID-19 and a lockdown, adequacy of inventories at distributors helped especially in the light line. Also it happens at a time when we have an inflation in raw materials -- a stronger inflation in raw materials, and we also have Nakata with good results.

And now giving the results of the integration for this acquisition. In terms of markets, clients, operations, the markets are booming with many orders coming in, both on a domestic level and also in our operations and exports outside Brazil. Fras-le gained more clients due to its capacity and its ability to deliver and also offer services with technology. We have some restrictions in supply at Controil and at Fremax due to the lack of capacity when compared with the rest and also the plant of Nakata in Extrema is already operational in a ramp-up phase, and we will have the inauguration of this new plant this week in August.

Now I'd like to pass the floor to Mr. Anderson Pontalti, who will continue the presentation.

[Anderson Pontalti, executive]

Thank you, Sergio. Good morning. Thank you for being with us today. Apart from the results, Fras-le is prepared for the future. Our long-term vision has been prepared, and I bring 2 important points in building value for the future. The first, smart composites. We had mentioned this to the market, to the shareholders that Fras-le was investing in research and development, R&D, in products and intelligent materials for the electric vehicles. Electric vehicles will request lighter materials and with less noise to give autonomy to the companies. Also, these vehicles will decrease pollution for being lighter and requesting less energy to transport people and goods.

So Fras-le also said that another way of protecting the business would be to make progress in the railway business, and we're doing this. The first product of this line of materials is already in production. In Q3, it will be sold. We will give more news about this, but it's a very important strategy for the future of the company. And everything we have collected from clients, all the news, has shown us that this is the right position. So we're very motivated with the future of this business in the company.

With the recent acquisition of Nakata, we are beginning to capture -- we have a plan to capture between BRL 90 million and BRL 100 million in synergies in the first 5 years after the acquisition. Less than a year, the low-hanging fruit were already captured. We can already see BRL 45 million of synergies, BRL 9 million a year, and this is very good for our plan.

In this number, we have not added the synergies of having a single site. We're transferring the plant from Diadema to Extrema, together with our distribution center, and there, we can capture synergies for the whole site. The plant is now more modern, more up to date, our shock absorber plant. And as a consequence, certainly, we should have more synergies than the BRL 190 million to BRL 100 million that are planned.

Now concerning ESG, we have 3 important points to highlight. We have to talk about COVID. It's still a reality. The pandemic, it is present, but Fras-le prepared itself very well for this topic. In advance, I'd like to say that only all -- for example, we have applied thousands of tests in our employees for COVID. We have very strict control measures from leaving the bus to getting to the operation. When we have a case that is suspect, we isolate the area and we apply tests to all those around. We had no internal contamination that would give us greater concerns, but we continue with strict control and because the coronavirus is not over, and we want to continue our operation in a healthy way, protecting our employees.

In relation to governance, we approved our policy for compensation of the managers -- of the management, governance in the sense of transparency, talking in a better way with the market and making all this information available. So a very important time for us.

On June 1, we launched our ESG ambition together with the global pact of the UN and also we gave our sustainability report. We launched our sustainability work. Five pillars are the main. These are where we're focusing our attention. The first, ethics and responsibility, excellence in security, commitment with the environment, prosperity for all and sustainable innovation. These are the 5 pillars we will work on in the next few years. And within the same event, we declared 5 goals, public goals, to 0 serious accidents. We want to double the number of women in leadership positions until 2025.

In terms of diversity, we want to reduce by 40%. The greenhouse effect cancels by 2025 and also to 0 the launching of waste in industrial landfills. Also, we want to expand the revenue from new products, products that will be more friendly with the environment and that need less materials inputs and products that are easy to dispose of. This is part of our policy for ESG.

Next slide, please. And I invite you all to access our sustainability report on our website. And here, we'd like to see the video. Now let's watch the video.

[Presentation]

[Anderson Pontalti, executive]

We are doing our part in innovation and sustainability. That is why in 2020, we are working to support society. We make donations, facial protection to health professionals. We innovated in expanding the CTR, and we continue expanding and diversifying and welcoming diversity. So we are here to do our part. We reduced energy consumption by 10.6%. We recycled or recovered 93% of our waste, and we made reverse logistics, and also, we invested in social actions. All of this for our 4,600 employees, always thinking of a better world. Would you like to know more, please access our Sustainability Report 2020.

Next slide, please. So I invite you all. This was only a brief thing. The report is available. There, you can see all the initiatives in great detail.

Now I'd like to invite Mr. Hemerson to continue the presentation.

[Hemerson de Souza, executive]

Thank you, Anderson. I'd like to thank all the participants in our video conference. As Sergio said, it's the first time we have a video conference, and we are thus changing the way we communicate to the market. Well, we're very happy. We talked about good numbers. We're very proud to us to really have had success in the strategy we designed and which was successful for the challenges of maintaining growth, profitability, creating opportunities and exploring points that are relevant and important for us as a company. And in this quarter, we have a growth in excess of 100% in revenue, and basically, we have to be fair. We are comparing this growth with a period that was very weak in 2020.

I remember that Q2 2020 had the beginning of the coronavirus crisis. We had the month of April and part of May when there were great problems. And in 2020, we didn't have Nakata. This year, we have Nakata. Apart from having Nakata, we have a different market situation, but this helps us to have a good comparison. But yes, we're executing a strategy that reinforces our position in geographies, product mix. We are also seeing a stronger economic recovery, and this has brought benefits to us.

Proof of this is the result that we show right now, 17% EBITDA, almost 17% EBITDA, growing more than the revenue. When we see the growth of 141% higher than Q2 '20, the EBITDA -- but we have concerns, especially the ones linked to availability, inflation in raw materials, higher prices in raw materials, many concerns to begin to pass this on to prices, negotiating with clients. Inflation is never something very good. And now we have different problems. We have noticed many logistic problems, both in exports and also in imports. And the price of ocean freight, which really increased a lot, sometimes 10x more expensive than we had before coronavirus.

Next slide, please. Here, we give more details about revenue. We will talk more about the semester, BRL 1.240 billion that we reached. 75% of all the year of 2020, showing that our business is robust with an excellent situation as a company. Sergio will talk later on.

This brings us the need to review our guidance now placing these indicators. And if we evaluate, we have a good balance between what we do in brakes friction and other lines that are more reason for Fras-le, 50%-50%. We had this in the previous quarter, 51% for nonfriction and 49% for friction, 50-50. This shows the balance. This shows that we are a robust company, and we should continue growing in the market.

Next slide, please. Here, we detail more about where this revenue comes from. And one of the secrets of our business model in this composition of having a balance between domestic market and exports. With the arrival of Nakata, we had an imbalance. In the past, we had 50-50. Today, 40% for export; 60%, domestic market. But if we evaluate the BRL 772 million that we made in relation to last year, 75% -- the equivalent of 75% of last year in 1 semester and actually 84%. And in the export market, 66% those BRL 470 million in relation to BRL 750 million of all of last year. And we continue almost 90% connected to the aftermarket parts, which is much more resilient, much more robust. The fact that we don't have new vehicles in the market and also the price of new vehicles of OEMs helps us to have higher prices for used vehicles.

And our basis, our clients are -- used vehicles -- our clients are coming from used vehicles, so we should continue with our business strategy to be strong. And we have a composition that is different from other companies, for example, around those 60% of our market comes from light vehicles. This gives us a much larger fleet, and since we work with aftermarket parts, this has benefits for us.

Also, when we talk about the export market, we have revenue in U.S. currency, although a little lower than last year the exchange rate, this diversification favors the company, not only in Brazil but in many markets where we are present.

Next chart, we will talk about EBITDA. Here, we show also the robust situation. I will talk about the semester, BRL 227 million in EBITDA or 18.3%. When we compare to 2020, we're talking about 70% of last year's performance in one semester of this year. We're very proud. In 2020, we have a strong nonrecurring -- in fact, the gains that we had on taxes, tax credits, this year, we don't have the tax credits. So this shows the quality of the operational results of Fras-le.

When we go to the net results, we have BRL 104 million in profits in the first semester in comparison with BRL 182 million of all of last year. This year, a growth of more than 700% and very robust situation when we look at what we did in all of 2020 when we had also the credits -- tax credits.

The next chart, we will detail more on working capital. NCG and working capital. Our working capital shows the good situation. We have distribution centers around the world. So we have to maintain adequate inventories. We also offer credit to clients, growing credits. But above all, in terms of inventories because of the inflation we had with raw materials, inflation has a higher volume of money in a number of days it's more equalized.

And also, I'd like to mention that we don't have a year with the revenues from Nakata. If we annualize Nakata, we have 79 days, which is an indicator below 2020, which have this difficulty in comparison for not having a year's results of Nakata. And it's a little higher than in our best years but the level that we understand is adequate for what we are doing today. We have more inventory, more raw materials because of the inflation we have and the logistics problem and also for growing our -- the number of clients.

When we look at free cash flows, we see what we did in acquisitions. And this year, the need to expand our debt -- we expanded our debt by BRL 81 million. And this shows the working -- here, the working capital having an impact on free cash flow.

Now I would -- I will pass the floor back to Sergio, and he will talk about the -- our reviewed guidance. All the indicators are in our release and in the material that we made available, there are more details. Later on, we can talk about more detail in the questions in the Q&A session.

[Sergio Lisbão de Carvalho, executive]

Thank you, Hemerson. In line with these excellent results that Hemerson showed to us, we believe that we would need also to update our guidance for the market, not only for the good performance also but also the reality, inflation in raw materials and to have a better alignment for the business that we have right now. For example, greater imports from Nakata due to our new plant and the parts we need for the new shock absorber plant.

In our new guidance, we're looking at a gross -- total gross revenue of BRL 3.4 billion, 13% higher when compared to the previous guidance. Net revenue -- consolidated net revenue, BRL 2.4 billion or 14% higher.

Revenue from export market maintained at $170 million. The imports now going from $60 million to $100 million, so 67% variance. And this has to do with what I said shortly, concerning the operation of the shock absorber plant of Nakata and also 6% increase in our investment forecast aiming at -- in order to expand our production capacity. I remind you all that the revenues are the sum of the units without adding other things.

Now talking about our vision of the future, the outlook. First, the positive side, a great alignment between all the units. They have had a very good performance. The market is booming, a strong market. We are increasing our production capacity at Controil. We're investing to increase the capacity at Fremax. We have the ramp-up of the new operation of Nakata, now in Extrema in the state of Minas Gerais. We have a lot of significant progress in Brazil as a whole, but in locations, where we have our operations. Also now with more vaccination, this will allow us a greater continuity in relation to the market. But also internally, it will allow us to work with in a more calm situation and less absenteeism since we have held protocols that are very strict. So every time an employee turns positive, we do a follow-up of all the people who interacted with that person, and we keep them away from work until we run all the tests. So we have had a significant amount of absenteeism. This should improve with greater vaccination.

And in terms of concerns or growing inflation -- higher inflation for raw materials, as Hemerson said, direct materials, indirect materials and also the supply of inputs, I would say, especially right now, the logistics costs, we refer here to ocean freight, international ocean freight, which is -- which has become a problem with impact on inputs on the receiving of inputs, inbound and also in outbound hurting and making more difficult our exports due to the erratic presence of ships and low availability of containers.

Now I'd like to pass the floor to Jessica, and she will begin the Q&A session.

[Jessica Cantele, executive]

[Operator Instructions]

We have a question from Lucas, live.

[Lucas Marquiori, analyst]

Sergio, Hemerson, Jessica, congratulations for the results. Two questions. Following the strategy for expansion, diversifying portfolio in geographies, could you talk more about the pipeline in M&As? And the second question concerning inflation for raw materials and logistics, how much should this impact the margins? And with what speed can you increase prices to reflect the increase in inputs?

Thank you, Lucas, for the questions. I will -- Sergio can answer about the pipeline of M&A, and then I would like Anderson to talk to about the inflation.

[Sergio Lisbão de Carvalho, executive]

Yes, Hemerson. Lucas, thank you for the question. We are living a very special time for Fras-le companies where all the acquisitions are doing very well. All the synergies are being captured, all the operations are contributing for these results, and our intention is to continue in this journey. We believe that we finished a chapter in Fras-le. Now we have to digest a little and make progress in the integration of this last transaction, Nakata, before we can begin a new cycle, so we have to work on the company's debt, we need to -- in order to begin a new phase. What I can anticipate to you is that, yes, we have many projects, important projects, that are aligned with our strategy. And yes, we have the intention to go after acquisitions at the right time. So currently, we want to make more progress in the integration and reduce the company's debt.

[Hemerson de Souza, executive]

Sergio, if you allow me to supplement, we had the opportunity in the past. If you wish, you can see in our channels, there is this link. We talk a little about how we think of the Cycle 2 of expansion. It is -- we're more willing to recover our work and expand our presence outside Brazil. And we have an important legacy within everything we did, as Sergio said. The opportunities and synergies we have, we're seeing them become a reality, especially in Nakata. This is all important. We need to dedicate time and attention to the integration of Nakata. But this didn't stop us from maintaining our pipeline of projects and looking at opportunities in the future.

So as Sergio said, when we have a better situation in our debt, we will be able to talk more about this and begin to work on the pipeline. So I invite you to watch Universe Fras-le. And it shows very well our strategy for the next few years, including maintenance and growth via acquisitions.

Anderson, can you answer the next part?

[Anderson Pontalti, executive]

Thank you, Lucas, for the question. I will divide into 3, the answer. These are different markets. For example, light line Brazil, and heavy line Brazil and exports. But yes, it's true that the costs are going up. The average cost of borrowing inventory are going up. All of the inflation is not reflected in the results. We still have growing inflation, and we will see the effect in Q3, Q4. But also, the company is already positioned with higher prices in the market where possible.

So when I divide into 3, in the light line, we have a market that is more elastic, sometimes you can, but it depends on 2 factors. It depends on the competitors, their appetite to increase prices and have a balance in their results; and the consumption power of the families, when you have a product that is 30%, 40% higher. The income is the same. Companies don't have a higher income and the consumption power of individuals is important.

So we have anticipated ourselves, we have mitigated costs with many alternatives and also changing the source of products and improvements to increase the competitiveness of the company. In the heavy line, it's a market that is very strong, agriculture. Commodities are very strong and the whole transportation chain is well capitalized, so it's easier to increase prices. And we believe margins should continue very healthy. In exports, it's a different game. When you look, we all know that the world is suffering with inflation, not only Brazil, but the percentage of inflation in Brazil is higher than China, India, which are markets that produce products that are similar to ours and supply markets where we are also present. So there is a sensitivity. There is a limit for price increases, but margins will continue healthy. This is our strategy. We noticed that this is possible with our actions but not like we had in the first semester.

[Jessica Cantele, executive]

We have some questions that came in writing. The first, Ricardo.

Please talk about the inventory at distributors, especially light vehicles, brake pads. So we believe that now when there is a small production of new cars by OEMs because of the lack of chips, we should have more sale of used cars. So the difference in contracts, relationship with distributors in relation to heavy vehicles, the demand for heavy vehicles is better or the inventory is explained by other factors?

[Hemerson de Souza, executive]

I believe we can, together, Sergio and Anderson, supplement. I will begin talking about the inventories. A short while ago, we had a difficulty for -- in supplying the demand we had, not only us, the whole industry. All the market agents bought to try to take care of their demand. They bought from Fras-le, from competitors, too. And when industry also adapted its capacity, we saw this internally with Controil and Fremax. We still have portfolios for months of products to deliver.

So some competitors delivered, we delivered more, so that distributors have a better inventory, more adequate inventory. And many had difficulties in March, end of February, beginning of March because of the lockdowns in many places. This also caused problems to sales. But when we look at workshops, we see that there are -- they have more clients than before to fix the cars, and this helps. It's a fact that we will have an aftermarket that is strong, intense and robust in the future.

Now concerning heavy vehicles, distributors, some are more focused, some are less focused. Some that are in the light line and heavy line. And in fact, for heavy vehicles, the situation is different. As Pontalti said, we have agribusiness that is very strong, more industrial consumption because of economic recovery, assume more expressive, more resilient -- the market is more resilient. The price inflation is a problem for consumers and this will bring some problems to maintain the growth and also maintain the vehicles, although people are giving priority to individual transportation because of the pandemic.

Sergio and Anderson, please feel free to supplement.

[Anderson Pontalti, executive]

Well, I believe it's -- the answer is very good. Yes. Sergio, would you like to supplement?

[Sergio Lisbão de Carvalho, executive]

[indiscernible] Yes. Next question.

[Jessica Cantele, executive]

So the next question, Antonio [ Reesa ]. Two questions. The first, please measure the learning curve with Nakata and what Nakata taught us and the fact that Nakata is a strong importer? Does this change the culture of the company?

I believe Sergio is the best person to answer this because of your knowledge of the integration of Nakata.

[Sergio Lisbão de Carvalho, executive]

Thank you for the question. I would say that what we're discovering in this period after the acquisition of Nakata is showing what we knew in the period before the acquisition. So we look at Nakata as a company that had a strong brand, a very good relationship with distributors and end clients. They made a great effort to reach mechanics, owners of small stores. So this helped us. This is something that attracted us.

And the second has to do with the business model of Nakata to do the sourcing. They have internal production of shock absorbers, but many components that are -- their project -- but the manufacturer is done in Asia. So to develop products, quality products in a consistent way, with a consistent quality, so this is what we saw. So after the acquisition, we are really seeing that what we saw was correct. Nakata is very good in these characteristics. And yes, we're expanding these positive characteristics and bringing them to our other operations.

So the Nakata model, we are going to take the Nakata model to Colombia to do something very similar there. And we also have important practices such as our development of strategies for the future. Many processes we have associated to our vision of people, environment that we are taking part of this culture to Nakata.

Well, the relevant point here is that the synergies, as Anderson mentioned, they are much greater than what we had imagined. So we're very happy with the initiative, with the acquisition, with the learning and with the results, too.

[Hemerson de Souza, executive]

Very well, Sergio, I would supplement saying that the transfer of the plant from Diadema, Sao Paulo to Extrema in Minas Gerais reinforces the model of having part of the production locally because this brings us many benefits and also to deal with difficult situations like the issue of freight, which rose very much. So this doesn't change the characteristic of Fras-le of having local production according to the second question.

So we continue being a manufacturer, but our model is like this. When people say, "What is the great edge?" Fras-le is a company that has access to clients and markets and has also a good service to these clients through -- with a robust sourcing, qualified sourcing, customized sourcing for our business or because we have production. This mix helps us very much. So we're not only an industry, we're an industry that is connected to commerce, to retail, obviously, specialized retail in auto parts. And makes this makes us unique even when we look at the stock market in Brazil. This is what I wanted to share, and this doesn't change with the arrival of Nakata.

Next question?

[Jessica Cantele, executive]

The next question, [indiscernible]. How is the perspective of -- how are the volumes in the next quarters? Are you considering a follow-on in the short term to be ready for acquisitions.

[Hemerson de Souza, executive]

I will answer the second part, and then I'll share with Anderson the first part concerning perspectives about volumes.

Well, we, as I mentioned before, we -- yes, we know that we want to continue with the strategy that we had until now to grow according to opportunities and also maintain the diversification and access to markets through acquisitions. So in a very clear way, we know that the next -- in the next years, we will continue, and we want to have a greater participation in the export market and a growing presence. This will require resources. We have space to increase our debt, the business we did, the purchases we made have brought us robust cash situation, but there are also problems. It's normal to evaluate a follow-on or sale of shares as a possibility. Today, we don't have this in mind.

So this is a recurring question we always receive. Yes, we have been very clear in looking at the opportunities we have talked to our shareholders to see what is the right time. And right now, we're focusing on capturing the synergies from Nakata, as Anderson mentioned, which are spectacular, much greater than what we had imagined initially. And when we define financing sources for expansion, we will share this with the market. And we will be proud to tell you and show to you if we sell shares, which is one of the options we have.

Pontalti and Sergio would like to talk about the results in the next semesters. The question is on volume.

[Sergio Lisbão de Carvalho, executive]

Volumes will continue strong. Thank you for the question. When we look at the geopolitical protection, we have markets that have different situations. But the consolidated situation is very positive, and we see strong volumes for the rest of the year. The U.S. has a lot of liquidity. Of course, we're concerned with the delta variant, the possible lockdowns in the future. It's -- there is some uncertainty, but the U.S. economy is very strong. Argentina is an important market for Fras-le. The volumes are very important for us. We have inventories there, so we are gaining share. In Brazil, our capillarity is always increasing, and the volumes are a consequence of all of this. So we're at a very positive time. So there is the issue of some inventories in the light line at distributors, but this is temporary because the trend, especially the brake season, it's all -- this happens always during vacation at the end of the year. So we're happy with the volumes and also with the future.

[Jessica Cantele, executive]

Our next question is from [indiscernible]. He congratulates us for the results. Is there the intention to increase investments and growth in advertising with greater exposure of the brands in social networks and digital influencers.

[Sergio Lisbão de Carvalho, executive]

Thank you for the question. In fact, one of the things we learned with Nakata is to have a -- to give greater support to marketing. Nakata is an exceptional brand, and we want to be closer to the clients via many channels, social networks and digital media are some of the ways to do this. We have an effective participation in racing. We advertise on stock car. We have had marketing actions there. And also, we sponsor truck racing via Fras-le, and this shows our engagement and support. We have space to do more. We have learned a lot with Nakata in terms of how to do this better. So maybe if -- so through our networks, please get in touch with us.

[Jessica Cantele, executive]

Our next question comes from [ Carla Tinoku ]. She would like to see if we can detail more about the products with smart materials.

[Hemerson de Souza, executive]

Sergio, I believe you can explain more about this. We mentioned in our release that during this month, we will have launches in this area, and we will be able to explain more.

[Sergio Lisbão de Carvalho, executive]

Thank you for the question, Carla. When we talk about smart composites, there are many categories of products or technologies. It's not a single category. So Anderson already mentioned that we began production this month, one product, which is a structural product. It's a part that uses the technology that Fras-le has, chemical engineering, which processes the products, formulas, through presses, temperature pressure. So these products are made using technologies and knowhow that we have internally. And the first is the structural part that holds truck bumpers. This is very promising. We have a reduction in weights when compared with the equivalent part in steel, a giant decrease in weight. This part is more economical, lighter with greater facility of installation and lasting longer.

So we will expand our portfolio of products in the same line, but there are many other projects with composite materials with other technologies that we will announce in the future. Hemerson mentioned that soon we will give you more news about this, but the perspectives are very good, the outlook is very good. And as Anderson said, we're very motivated with the benefits that this will bring to our company.

We presented this technology to truck OEM company and they immediately created a work group dedicated to work with us. And they want us to make various developments simultaneously. We had to say no. We want to develop this one first, be successful and then we can go on to other products. So the outlook is very positive for the future. And in the long term, we have no doubt that smart composites will have a significant percentage in the revenue of the company.

[Anderson Pontalti, executive]

I would like to say, Sergio, with an additional comment. We're so motivated with this solution and others that will come that we're patenting -- actually, it's patented in Brazil, we're going to patent it in all the world. We will give you more details. We believe it will give us good results, not only in our market but in the international market, too.

[Sergio Lisbão de Carvalho, executive]

Thank you, Pontalti. So we gave you some details of how to grow in the future. And we have a lot of information on the Universe Fras-le. You can watch this and see our entry in this market, the opportunities and also the challenges in the automotive market. So if you wish to see more details, please watch the event that we had Universe Fras-le. As we launch products, we will talk more and show you be giving you more news about this.

[Jessica Cantele, executive]

Now I'd like to close the Q&A session. I thank you all for participating. If you need any clarification, please talk to Investor Relations. And now Sergio will make his final comments.

[Sergio Lisbão de Carvalho, executive]

Thank you, Jessica. Once again, thank you for the questions, for participating. So we are available here for any clarification. If you need, feel free to contact us. Please get in touch with us, with our IR department, and we will be happy to give you more clarity. Thank you. We wish you a good day.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]