Fras Le SA

BOVESPA:FRAS3

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Jessica Cristina Cantele, executive]

[Interpreted] Good morning. Welcome to the conference call of Frasle Mobility for the earnings of Q2 2024. Before beginning, we would like to make some important announcements. This video conference is being recorded. And after the presentation, it will be available at our site ri.fraslemobility.com. We have simultaneous translation in progress. To access, please click on the button interpretation represented by the globe at the bottom of the screen. [Operator Instructions]

Apart from this, we reinforce that the information given in this conference call are not guarantees of performance and involve risks and uncertainties. They refer to future events and therefore, depend on circumstances that may or may not occur. We thank you for being with us in this conference call. We have with us today the Chairman and CEO, Sergio Carvalho; COO, Anderson Pontalti, Business Director, IR and M&A, Hemerson Fernando de Souza and also the Manager of IR, [indiscernible].

Now, we will pass the floor to Anderson.

[Anderson Pontalti, executive]

[Interpreted] It's a great pleasure to meet you all. The quarter, I can say one of the most active quarters in the company with many factors, 2 of them already mentioned on this screen. We began the month of May with terrible news for us in the state of Rio Grande do Sul with the floods in the south of Brazil, our unit at Controil near Portalegre, a region that is low in São Leopoldo. The activities were interrupted in the beginning of the month, and then the activities came back slowly in the first weeks of operation. Many people were affected. Later on, we will give you more details.

And during June, we had the signing of the contract for the largest acquisition in the company's history. Later on, I will talk about this. Very gratifying moment after difficult times. And as we have been talking to you through our platform, we have now features, attributes that will make this platform experts club, giving more support to the Brazilian repair market. And now we have the experts club with many advantages for the loyal clients to our brands, especially the garages that will have advantages when buying our products.

Also we were not able to have the meeting of ESG. We will have this meeting next week, but we are airing our sustainability report on June 18. So here the QR code, where we show all our initiatives, projects, those that are still in progress and also the long-term projects related to our best practices in ESG, which are here in this report.

So as I mentioned, next Friday, on August 16, 9 to 10:30, we will be talking about the work, the progress, our public commitments, our thoughts concerning ESG. You're all welcome and this will show the alignment of our strategies with the planet, with the business, people connected to our business. This event we have together with Randoncorp.

Now talking specifically about another relevant material fact, an update about the closing of operations in Uruguay, Fanacif, so reminding you that the strategy is to optimize the footprint, better absorption of fixed costs. We have capacity available, and we absorbed these volumes in our units of Caxias do Sul and [indiscernible] and whatever we cannot manufacture, when this doesn't make sense, we will use our sourcing activity, buying from China and India. We are maintaining our commercial team in Uruguay. The sales team continues there. We have business, but we are no longer producing in Uruguay. Uruguay will be supplied by the other plants. Most of the assets and also merchandise which can be used are being transferred to these operations and the building, the physical asset is being sold.

And right now, we have negotiations. We have a forecast for total closing of the activities at the end of this month and decommissioning all the equipment, the land and leaving the asset for sale. And then we will continue with the sales office, managing the region. So a very successful project, a project that had no problems in terms of government and unions and people and talking about people, we met all the legal requirements respecting the Uruguayan legislation and also working without placement for some and training for all those employees who accepted. So we took care of the people, some were sent to other operations of Frasle mobility around the world.

We're now talking about our acquisition. We had the opportunity to talk about this in the material fact. When we signed the contract, we have BRL 2.1 billion in billing. The company will be billing BRL 1.4 billion a year. We have credits in Brazil, BRL 750 million. Also in Mexico, BRL 1 billion, and the rest comes from the follow-on that we had in 2022. It is in the company's cash. So we are okay with funding. On the 24th, we have the signing of the contract for purchase and sale, and we began already to talk to authorities. The authorities have all the documentation, and we hope that in 4 to 6 months in Mexico, we will have all the documents ready, and in December or January, we will, in fact, close the deal in an effective way. So apart from also competition rules, there are others, and everything is being executed.

After this, as you all know, Frasle has a great discipline. We have an integration plan that is ready. Right now, we cannot talk about this, but as soon as possible. After the closing, we have the integration plan ready for implementation, and we hope to map all the synergies and even other synergies that we will benefit from.

Now I'd like to pass the floor to Hemerson, who will talk about our financial results.

[Hemerson de Souza, executive]

[Interpreted] Good morning to all in our conference call. For Q2, as Anderson said, it was an intense semester with a lot of activity. And now we can talk with more granularity. In fact, if we look at a company, it's normal to have events that will impact the results. We made some decisions in a courageous way and we made an acquisition of BRL 2.1 billion, which is the largest acquisition of the company. This is very, very relevant. And also, we closed the plant Fanacif plant in Uruguay. Although there are difficulties, expenses, impairment, this also creates an important legacy of return for our future. This project, the return on investment is very fast, the acquisition, and we're convinced that we made the right decision. I would like to say what Anderson said, the impacts that are not included here concerning the situation in our state Rio Grande do Sul, if we add expenses that are known, we believe we will have another BRL 11 million in EBITDA because we had a closed plant and also we had additional expenses due to the flood. We're still suffering many contingencies linked to ports. We have many problems to be able to export and we also have inventory waiting for ships. This had an impact on the company during this quarter. Apart from logistics costs, other things we had to do for our operation. And although the operations are not all in the south of the country, 40% of our production is in the south and was impacted by the flood. We're not measuring this year because we don't have all the details, we have many costs.

Now going directly to the chart, let's talk about the revenue. Our second semester had the best results. We have nonrecurring effects concerning the floods, but it could be even better. We have a growth of almost 7% when we compare with Q2. So it is a vigorous robust growth we had in this quarter, considering all the effects that we had. We have maintained the offer of our products and the market continues -- is a booming market where the market is booming and has been very positive. In the foreign market, we also had significant progress when we evaluate order in comparison with the quarter. And in terms of the semester, we had growth in the sales in the U.S. market, very high and also at Juratek. Juratek is a smaller operation, but a good response. It was acquired a year ago, and they are selling products now with Frasle products, and we continue to work with synergies there. In the next quarters, we will have more details showing to you the track record of this acquisition in England in the U.K. with marvelous results.

On the next chart, I will detail to you the issue concerning Argentina. And here, I have to explain. Argentina, in terms of a company, we maintained the operation in Argentina; since the '90s, we have operations there. We are working with an economy that is unstable and in the last few years, we had more rules. They don't have a cash effect, but there is an accounting effect from our business in Argentina. The operation in Argentina today, if we analyze in Argentinian pesos, it's maybe one of the most profitable ones, but when we translate Argentinian pesos to our numbers in Brazil, then we have problems. So everything that happens there doesn't happen every month. So for example, we have nonrecurrent effects and you can see here the numbers as a company. So, the scenario is very difficult. Inflation dropped heavily. You can see December, 25.5%. And now in June, the inflation is 4.5%. So the government did a very good job fighting inflation and brought the country to stability. We are being paid in 180 days. So now things have changed to 30 and 60 days. So there is a very strong recession, but the main adjustments were made in terms of the impact. Possibly, the impacts will be lower from now on, smaller from now on. So we are making adjustments in our inventory.

More than 50% of the population in Argentina is under the poverty line, and consumption is going to lower-priced brands. And here, Argentina, if we adjust, we had 38% revenue and BRL 51.4 million less EBITDA due to inflationary events and effects, profit, BRL 15 million extra higher. These would take our results of the quarter to be one of the best in our history, close to 21%. But we, as a company, we did this.

Now in the next chart, I will show our segments, how we are behaving in Q2. 37% is for the [ light line ]. In commercial, we had very important records in selling friction materials for light line, brake pads and brake linings, so we never sold so many brake pads. Because we have a good line of products, the prices are very good for the products we offer and also we are launching new products, which represent 20% of our sales, products that were launched in the last 5 years. When we go to brake systems, disc and actuators for the light line, so 90% light, 10% commercial line. We have a very strong demand, but our company Controil suffered due to the flood in the south of the country, but we maintained there, many products in inventory. We have expanded our capacity continuously in order to meet the demand. So we had a very positive line. In Fremax, we are expanding the capacity with a new substation, which will allow us to produce 25% more Fremax disc brakes.

A spectacular quarter also for suspension and powertrain, especially shock absorbers. We're growing a lot in shock absorbers, and we estimated this when we purchased Nakata. We're very happy and anticipating some movements. We're close to selling 400,000 shock absorbers per month. We have sold also more in our unit in Colombia, offering these products there, especially in niche markets. Here too and in other products that we sold here, other parts, 82% light line, light vehicles, 18%, commercial. We have been also growing in this area. For example, powertrain is also supplied by Nakata.

On the next chart, I will show to you how we are doing in relation to EBITDA. First semester, we closed in accounting terms, an EBITDA of approximately 14.6%. When we look at the effects of Fanacif, the plant that we closed, the EBITDA goes to 17.4%. So there is no expense linked to floods here. Also here we had a unit, Controil that stopped for almost a month. This is not included here. And also Argentina is not included here. So thus, we had the best quarter.

So now we began last year with these numbers. We had the impact of price, BRL 186.9 million and here, we have sales expenses here that were higher in this period in relation to last year. M&A, we had costs. We had M&A expenses. One of them did not happen. Also, we had the expenses of Kuo Refacciones in Mexico and nonrecurring facts, other expenses. So, an accounting EBITDA of BRL 112 million and we arrived at BRL 162.5 million of nonrecurring. I can mention, in general, we have very well controlled costs. Raw materials, labor costs are very well controlled with some gains. We had deflation in some of these items. So we trust that the company continues in an exceptional phase.

Next chart, our operational cash flow. So we made investments, BRL 41 million. We still have cash. We used the resources from the shares we sold. We paid taxes. We had a positive [ LTG ]. We consumed BRL 84 million with the growth of the business and at the end, we have BRL 100 million in cash. CapEx, we highlight what we have done: investments in the green boiler project, cost of products. This is very important for us. We have been detailing this. We have been talking about this. And the need for working capital. Although we grew the use of working capital, it is still very well in terms of days. And here, as we have adequate inventory at the right time in the right place and this also affects our working capital. We had problems with the flood.

Now the next chart before passing the floor to Sergio. The financial data, few effects of Fanacif, BRL 47.4 million due to the restructuring of Fanacif. This impacts net profit, BRL 41.4 million in results. Here, we have financial expenses for the purchase of Kuo Refacciones. Lease resources, practically BRL 11 million and obviously, the issues related to Fanacif that was closed in Uruguay. In terms of debt, so we have BRL 100 million in cash. So therefore, we know that we need some leverage. Now also in this quarter, we took out a loan of BRL 177 million, and we amortized BRL 52 million.

Now I'd like to pass the floor to Sergio. He will talk about our results and how they are in relation to our guidance and also our perspectives for the next few months.

[Sergio Lisbão de Carvalho, executive]

[Interpreted] Once again, good morning to all. Thank you for being with us. In terms of revenue, in the first semester, we had BRL 1.8 billion. Hemerson already mentioned the previous quarter, a record quarter. In the semester, we had a growth when comparing with 2023. We know that our second semester is historically stronger, so we are very comfortable in reaching our guidance, which is BRL 3.7 billion to BRL 4 billion in revenue this year. For the foreign market, BRL 144 million in revenue, very strong growth in relation to 2023. So we're comfortable with this guidance, BRL 250 million to BRL 290 million.

Our adjusted EBITDA margin, adjusted due to the closing of the Fanacif plant in Uruguay, 17.4%. It is a drop in the first semester in relation to the first semester 2023, but we had other nonrecurring factors, for example, the impact of the floods in the south of Brazil, our operations. So we know that we will not have these floods in the second part of the year. So we had some negative factors in the first semester, nonrecurring. So we are comfortable with the end of the year.

Finally, investments, BRL 42 million in the first semester. Historically, we invest a little more in the second half of the year, and we should get at the end of the year, the numbers according to our guidance. So in a nutshell, we are comfortable that our results will be perfectly within the guidance that we informed.

Now how are we seeing our future? First of all, I'd like to say that our vision is positive, the outlook is positive for the future, but I want to divide my comments in 2 parts. First, thinking more about the short term, the rest of this year, short term. And in this sense, our vision is positive. We intend to continue to grow in the domestic market that is booming. The market is very well, strengthening our portfolio, launching new products linked to our light line. Also increasing exports and having as a driver, gaining market share in many geographies. Also, the exchange rate now is higher. Initially, it's positive, but this volatility can affect results in the short term. Apart from this, international logistics become more expensive with a higher exchange rate. We have this concern -- apart from logistics and exchange rates, also we have conflict in the Middle East. Although they don't affect our suppliers, experience shows that they can have impacts on the cost of logistics due to the war.

Anderson mentioned that we have a recession in Argentina. This reduces the buying power of consumers, and they focus on cheaper products. And on our side, we need solid strategies to offset this and maintain our results. In the long term, our vision is very positive to very positive. And we have here 2 points that are linked to the long term. First, the restructuring of Fanacif, the plant in Uruguay. We closed our plant in Uruguay in order to optimize our manufacturing activities with gains, bringing the production to Caxias do Sul and Sorocaba in São Paulo. And this optimization will be very important, will generate a lot of value for the company in the future. So we made a difficult decision, courageous decision, but thinking of the future to optimize the results within Frasle mobility.

And also thinking of expansion, Hemerson mentioned the acquisition of Kuo Refacciones, the largest purchase. We're awaiting approval from regulators, especially in Mexico, but with this acquisition, we will be consolidating in the Mexican market, in Argentina, in Brazil as the largest company in this area in Latin America. So it's a project, as we mentioned -- we mentioned this after announcing the purchase, it's a repetition of what we have done. We have a lot of synergies. We're very optimistic with the continuity of all our plans. So our short-term vision, positive, long term, ultra-positive.

Now I'd like to pass the floor to Jessica to begin our Q&A session.

[Jessica Cristina Cantele, executive]

[Interpreted] We'd like to begin our Q&A session. [Operator Instructions] Our first question comes from Fernanda Recchia from BTG Pactual.

[Fernanda Recchia, analyst]

[Interpreted] Two points. First, I'd like to explore more the acquisition of Kuo Refacciones. You gave us a lot of details about the timing for closing, but how about the timing for integration? When do you expect -- once the transaction is approved, when do you believe you will begin to have the synergies of the BRL 300 million? How much do you believe you will receive in synergies during the first year? And maybe the last point on Kuo, what do you expect in terms of growth, revenue growth? Will the margin continue? You said BRL 1.4 billion in revenue, EBITDA of EUR 313 million for 2024. So what are you expecting for 2024?

And also profitability, especially when you compare with the guidance. When you look at the first semester, the margin is closer to 15%, and the guidance is 17%. I understand that you are confirming the guidance, but you will have to deliver more than 20% margin in the second semester. So do you believe this continues? What is the last update?

[Hemerson de Souza, executive]

[Interpreted] First, yes, we have an expectation to have the approval of the purchase of Kuo in 6 months, maybe a little before, a little after. It's a complex operation in terms of overlappings because our position in Mexico is small, but the transaction is a large one. So regulators will be looking at this. They will be looking into the details for large transactions. And we know clearly the type of integration we will have. We have models like in Nakata and Juratek. It's a light integration in the beginning. Obviously, we know the fronts, some of them immediately, some will take more time. And this will affect profitability and leverage. The first synergies, are those linked to sourcing, the first synergies. Kuo Refacciones, once the regulators approved the transaction, we have 40% of what they sell, with co-manufacturing, but a little different from what we do in Nakata and Frasle mobility. So there's a learning process. We have seen at Juratek how relevant it is to work on sourcing in the world. So that's the low-hanging fruit, sourcing. We will begin rapidly to understand their offer in the area of friction to optimize production. There is a lot of space there to take our know-how to Mexico. Their plant is an older plant. So these are the main synergies in the first year. During the first year synergies are not that strong, but they are relevant. We may have 1/7 or 1/6 during the first year in terms of synergies, [indiscernible] BRL 50 million during the first year, which is fine.

And we understand, we know the operation until June. After that, we cannot give too much information. Things are doing very well. So probably after the final closing, we will have a company that is better than now. And 2024, BRL 150 million more, BRL 1.5 billion, BRL 1.6 billion that they will build this year. So in terms of margins, they will continue at the level we have today with an advantage of also having the synergies, which will help us also. We cannot give you too many details. We have an internal plan, and we're awaiting the approval of the transactions. It's very positive. Those who don't know our operation, you can see the video conference that we had at the time of the closing of the contract with more details. Please visit our website to get more information.

We continue to be very happy with this acquisition, and we know that it represents a lot for us in terms of growth in the export market, same as Nakata, the purchase of Nakata and as good as the other purchases like Fremax.

[Anderson Pontalti, executive]

[Interpreted] We will not have an adjustment in the next quarters like we had for Fanacif, the closing of the plant. We don't expect other climate conditions like the flood we have in the next quarters. And Argentina is Argentina. We have to take care of. Hemerson mentioned the impacts and now Argentina is stabilizing, inflation at 4%, 5%. This will have effect on our results. So the floods brought additional costs: donations that we made to all our employees. So this will not happen in the next quarter.

Now in terms of operations, we have a stable price. We have also the exchange rate that will affect all of us. The higher exchange rate will affect all the producers, not only us. In terms of international margins, this helps us and exports are at the top of the guidance. And this improves -- when we renew our inventory, the exchange rate was BRL 5 to $1. Now it's BRL 5.6, BRL 5.7. So the trend is to have favorable results because of the exchange rate. Argentina has ups and downs. Another risk zone, the conflicts that Sergio mentioned, affecting logistics and logistics costs and maybe some problems in sourcing. But this will not affect only us, it will affect the whole market. As Sergio said, we're optimistic in relation to the short term and ultra optimistic in relation to the medium and long term. So we imagine better margins than those we have today.

[Jessica Cristina Cantele, executive]

[Interpreted] Our next question is by Fernanda Urbano, Analyst, XP.

[Fernanda Urbano, analyst]

[Interpreted] The first, a follow-up of profitability. I understand that you had this impact one-off, but you mentioned in the release about successful negotiations for manufactured products and an increase in freight prices and commissions. Can you give us more details and also competition details about competition? The second is concerning Argentina and the long term. You mentioned a buying power that is under pressure and the sale of less premium products. So in this context, what is your strategy in Argentina? What do you expect in terms of growth and market share in the medium and long term?

[Hemerson de Souza, executive]

[Interpreted] I believe we can talk about profitability. I will try to answer 3 questions. We have good things in Argentina. And I will repeat what Pontalti just said. First, we know in detail the results of each month. The business dynamics did not change, it continues to be very positive. Our profitability in many lines is very, very good. Competition is stable. We had record sales in many product lines, for example, shock absorbers in this quarter, and also exceptional results in hydraulics and disc brakes. Our operation is very good in terms of demand and in June, we already know. So everything is very positive. Although there are some things, some impacts, the situation is positive.

Why additional costs in freight? Well, freight prices have risen. We have prices that are higher. In some areas, we are paying twice the price for freight in relation to the beginning of the year. So in Q4 last year, we said -- so we had to make some adjustments as leaders in many lines. This is not only for Frasle Mobility, it's for the whole market. So, we have been able to increase prices because of these costs, and we're also increasing productivity to avoid raising our prices too much. Other points that we can talk about, Pontalti mentioned, we don't expect nonrecurring events like the ones we had in the previous quarter, in the future. So we have this trust, which is present with us. And we see this when we exclude these nonrecurring effects.

[Sergio Lisbão de Carvalho, executive]

[Interpreted] Hemerson already covered most of this topic concerning the market situation. I'd like to mention 1 or 2 points for our dialogue here. Frasle Mobility has a portfolio of products that is very large, a large portfolio of products and we have tested the limits of this portfolio to maximize results. What do I mean by this? Today if you have 20 different product lines, 5 of them will be under attack, under stress. So we are obliged to give some discounts, but others, when you have a large volume of products, others are not under attack. We are leaders in many of these lines, so we make concessions, discounts for 5 product lines, but we have the opportunity to raise prices in the other 5 product lines that are not stressed or under attack. And the others stay the same. So this we can do because we have a large portfolio of products, and we can manage our profit margin. This is a characteristic of Frasle that is very strong and became a core competence. We have solid positions, we're expanding our portfolio of products and we are connected with the users, our clients who specify. And once again, I can say the following. We're comfortable we will be able to maintain healthy margins in a sustainable way.

[Anderson Pontalti, executive]

[Interpreted] Talk to you about Argentina. Argentina, I will also answer another question about these effects. So these effects are 100% in accounting only. So we have a complete portfolio of the right inventory, the best availability of products like in Argentina. We have a leadership position. Apart from all this, more than half, 70% of what we sell in Argentina, also helps us. We have the friction plant in Caxias do Sul that supplies. So we have additional margins. The accounting effects are important. When you have the inflation that they had, you take all that inflation, 20%, 25% in December, January, and your inventory will have a higher price due to inflation. So when you look at accumulated inflation, you make adjustments in accounting. This is a rule from – and a situation of hyperinflation. You have to correct these numbers. These effects are stronger when we have ups and downs.

So we have now inflation is much lower, 4% to 5%, and I'm very comfortable in relation to the products. Although the market wants cheaper products, we also had with the opening of the economy of the country, the possibility to introduce more lines to supplement the portfolio. And, in the past, we were not able to do this because of restrictions on imports. And so now, our offer, we're selling new products there with a greater portfolio and the volumes show this. We have a great trend to increase revenue on those products that we could not sell there. So in terms of volume and in dollars, we are doing very well in Argentina. The effects are only in accounting, reminding you, when you leave hyperinflation, [indiscernible] 3 years in Argentina because of the effects of inflation, but maybe 2025, '26, '27, we will accommodate and maybe in 2028, we will have less inflation in Argentina.

[Jessica Cristina Cantele, executive]

[Interpreted] The next question, [ Gabriel Tini, Analyst from Santander ].

[Unknown Analyst]

[Interpreted] Two questions. The first, price. Looking at disc brakes, you said you increased prices and in brake pads also competitive price. I'd like to explore more. In the other lines, were you able to increase prices? And how do you see competition in general? And the second point, the acquisition of Kuo, with leverage will you have to -- how do you see leverage in the future and M&A?

[Anderson Pontalti, executive]

[interpreted] In terms of M&A, we have a full pipeline. We say that a project like Kuo was carried out, but we have other M&As in the pipeline. We're always looking for opportunities. But we're very responsible in terms of the leverage of the company. Leverage goes up with the acquisition of Kuo, we will have to generate cash to reduce this leverage. We have other strategies of funding in the future that we cannot reveal now, but we have alternatives. And we have a plan until 2029 with new acquisitions. Acquisition doesn't have a timing, It depends on 2 sides, but the company will continue to leverage until 2x, up to 2, but we're very diligent in relation to the levels of leverage in the company. It's important to buy good assets that will generate cash to lower leverage quickly, allowing new acquisitions like the ones we have made.

Products, similar products with synergies in other geographies that with a clear map of the synergies, we will continue active in M&As. We will have to digest the acquisition of Kuo for some months and then think of other movements after we have captured what we promised. And we will continue paying dividends. This will not affect our capacity to invest. We are very conservative in terms of leverage and we have access to the market for follow-ons, if necessary. Now talking about prices, there are things that happened, we did not mention them all, that were very positive for us to be more competitive in some products. In the case of brake discs, we have more offer -- competitors came back, and it's not very significant. We had to make some price drops but in some items, we grew and in others, we had drops. We had diesel generators that supplied electricity to Fremax. And we were able to purchase additional energy. This brought a giant savings, avoiding diesel generators, so, until the new equipment is installed.

When we talk about brake pads, we had small price increases, but our market position is very competitive. Those who listen to radio will see that we made many efforts to improve our situation in São Paulo. We want to grow and in general, also, we adjusted prices in suspension because we had a great impact on freight. So we had some price increases. In hydraulics, we continue with a good demand. We had some savings, productivity and also due to the current situation. Sergio mentioned some lines that are under pressure but for example, we did not have very good prices for Corolla disc brakes, also for Compass. So we compensated the prices to have adequate prices.

[Jessica Cristina Cantele, executive]

[Interpreted] Our next question is from Gabriel Rezende from Itaú BBA.

[Gabriel Rezende, analyst]

[Interpreted] Can you comment on the exchange rate and the impact in the future? We know that Frasle has a great exposure to revenue from exports, and it seems that the exchange rate going up will help you. Can we expect that Frasle will use part of this to be more competitive, capture more market share? We know that freight is going up, maybe use this. So how is the exchange rate, how will it be used?

[Hemerson de Souza, executive]

[Interpreted] We changed a little the company's profile after we bought Nakata. We have co-manufacturing with partners. Exchange rate is always very favorable for us. So it's very positive for us. USD 100 million in advantage in relation to imports. We have more exports. So when the currency is devaluated in Brazil, this helps the company. The freight in some areas grew. We also asked our suppliers or co-manufacturers to help us with higher freight costs. Sometimes we have to make some concessions, but it has been very favorable for us. So it has been very favorable for us, the devaluation of our currency.

Jessica, Elias asked a question, he wants to know if we will buy back shares?

Most of us are shareholders. If we look at other companies, they are worth 15x EBITDA in the U.S. They work more with retail, so the market evaluates Frasle as an industrial company. We are in the automotive sector. 90% is related to aftermarket. We have space to grow with acquisitions. The ROI is high in relation to industry. We have one problem, low liquidity in the market. And when we buy Frasle shares, we understand we cannot look at this. It would be different if the company had high liquidity. So we have paid our -- we have helped our shareholders with acquisitions, and we are making efforts to improve liquidity. So right now, although there was a lot of space to grow, but liquidity, we need to improve this and I repeat, we have paid good dividends.

[Jessica Cristina Cantele, executive]

[Interpreted] The next question from Luiza Mussi, analyst from Safra.

[Luiza Mussi Tanus e Bastos, analyst]

[Interpreted] A quick question on tax. You had nonrecurring concerning Fanacif, but you also had other expenses. Is this due to Argentina? What are your expectations for the next quarter? Will it become more normal?

[Hemerson de Souza, executive]

[Interpreted] I don't know if Jessica has the details, I will have to answer, but the greatest impact is Argentina. We're evaluating to give you a full answer, but the highest -- but most of these numbers are due to operations in Argentina. So we will give you a detailed answer. We will send you a detailed answer. We will give you details of this number.

[Jessica Cristina Cantele, executive]

[Interpreted] Our last question is from [ Per from Bradesco BBI ].

[Unknown Analyst]

[Interpreted ] The synergy in the M&As is very good, but in the call, you explored what you expect from the acquisition of Kuo. Please comment what do you expect to capture in terms of synergies in Juratek and when?

[Hemerson de Souza, executive]

[Interpreted ] Well, we talked about this in the council yesterday. When we purchased Juratek, we promised GBP 5 million in synergies. We already have mapped, implemented GBP 9 million. We already have GBP 9 million in synergies. It's fantastic and we haven't launched any new products there yet. We are beginning to launch brake pads directly from our plant in China, also heavy disc brakes with Fremax brand and also Fremax disc brakes for Europe. We will launch shock absorbers and also steering and many other products from Frasle to Juratek. Although we haven't launched these lines in Juratek, synergies are at [ GBP 9 million ], almost double what we expected. Including operations and products from Brazil, we're very happy with Juratek. They didn't have 10% EBITDA and this year, they are already with 18% to 20% EBITDA; it's a mature market.

[Jessica Cristina Cantele, executive]

[Interpreted] Thank you for participating. We'd like to really conclude the Q&A session, and Anderson can now make the final comments.

[Anderson Pontalti, executive]

[Interpreted] Thank you for your time. We'd like to thank all the participants, one more quarter. We had climate problems, 2, we closed the plants, floods, Argentina, things that should not repeat. And in terms of operations, we're very comfortable in saying that the company continues to have a historical performance in the last 2, 3 years. So our governances with exchange rate inflation, we have -- we know how to deal with these problems. And after a historical quarter, a different quarter, let's say, we trust to have a very positive year within the guidance and some closer to the [ max ], but we continue working diligently. We thank you for participating. We wish you a good day, a good week. Thank you.