Fras Le SA

BOVESPA:FRAS3

Earnings Call Analysis

Fras-le Reports Strong Q3 Performance

Fras-le Mobility's net revenue increased by 8% to nearly BRL 900 million in Q3 2023 over the same quarter last year, with year-to-date revenue up 15% at BRL 2.6 billion. EBITDA for the quarter was BRL 190 million, resulting in a margin of 21.4%. Europe displays a sales recovery while conflict regions pose a $13 million challenge. Juratek's acquisition in March contributes significantly, with BRL 50 million already added to Fras-le's revenues, indicative of a 6-7% revenue share. Despite the troubling Argentine economic situation with 140% inflation and payment term extensions, Fras-le exhibits resilience, contributing 10% to its business and effective value preservation strategies. Updated guidance anticipates 18-22% EBITDA margins, reflecting the company's robust performance. The digital initiative Auto Experts and the upcoming Universe Fras-le Mobility event highlight strategic and digital advancements.

Robust Q3 Performance with Booming Markets and Strong Margins

It's evident from the conference call that Q3 of 2023 has been momentous for the company, posting nearly BRL 900 million in revenue, marking an 8% increase from Q3 '22. Their year-to-date revenue grew by an impressive 15% to BRL 2.6 billion. A significant driver of this growth was their aftermarket parts segment, which benefitted from a 13% increase in workshop business. The executive team was proud to highlight an EBITDA of BRL 190 million and an extraordinary EBITDA margin of 21.4%, outperforming the last quarter by 4.4 percentage points.

Achieving Success Through Prudent Cost Management

The management attributes their success to judicious cost management strategies that allowed them to lower raw material and logistics expenses. Crucially, the company strategically adjusted pricing to remain competitive while emphasizing that market positions are paramount over maintaining profit margins that could hinder competitiveness.

Strategic Acquisitions and Global Market Challenges

The acquisition of Juratek in March 2023 played a notable role, contributing BRL 50 million to Fras-le Mobility's revenues, thereby bolstering its European market presence. Although global conflicts, notably in Ukraine and Russia, have posed a $13 million business challenge, the company's strong client relationships have enabled it to navigate these difficulties effectively.

The Argentine Dilemma: Navigating an Economic Crisis

Argentina's economic turmoil proved challenging, halving its business contribution to 10%, paired with an exorbitant 140% inflation rate, prolonged payment terms, and difficulties securing import permits, extending from 180 to 240 days.

Revised and Optimistic EBITDA Margin Guidance

Reflecting the strong Q3 performance, the company has revised its EBITDA margin guidance, projecting an increase from the initial 15%-18% to a more optimistic 18%-22% range. This positive adjustment showcases management's confidence in the company's continuing fiscal strength.

Fostering Investor Relations and Prepping for Digital Transformation

The company is actively working to improve its liquidity and share attractiveness, having seen an increase in institutional and individual shareholders, including a rise in foreign investment. Moreover, the digital platform, Universe Fras-le Mobility, has surpassed expectations and is continuously evolving to enhance the customer consumption experience.

CapEx and Financial Health: A Proactive Investment and Debt-Free Status

Financial stability is a highlight, with year-to-date CapEx of BRL 74.1 million dedicated to machinery for productivity and capacity expansion. Notably, the company maintains a net cash position with cash reserves surpassing debt levels, thanks to a shrewd capital increase achieved in April 2022.

Q4 Outlook: Anticipating Challenges with Strategic Planning

The management anticipates a challenging Q4 due to seasonal factors and necessary operational pauses. However, the company is proactively guiding clients to plan purchases accordingly, ensuring continued success during the upcoming ERP system upgrades.

Earnings Call Transcript 2023-Q3

[Operator]

Good morning. Welcome to the conference call of Fras-le Mobility for the earnings of Q3 2023. Before beginning, we would like to make some important announcements. This conference call is being recorded, and after the conclusion will be made available on our website, ri.fraslemobility.com. [Operator Instructions]

At the end of the presentation, there will be a Q&A session. [Operator Instructions] Apart from this, we reinforce that the information given in this conference call are not guarantees of performance. They involve risks and uncertainties. They refer to future events and therefore, depend on circumstances that may or may not occur.

We thank you for participating in our conference call. We have with us today, the CEO, Mr. Anderson Pontalti; and also Hemerson de Souza, M&A and Business; Specialist in Investor Relations, Jessica Cantele; and as a guest, the Director of Investor Relations, Esteban Angeletti.

On December 7, we will be at FREMAX in Joinville, Santa Catarina for another addition of our Investor Day. We would like to invite you all to participate in this event, which will have a visit to FREMAX in the morning and a meeting with our executives in the afternoon. You will find the link to register and the full agenda in the chat of this conference call. If you have any questions, please get in touch with our Investor Relations team.

Now I'd like to pass the floor to Hemerson, who will begin the presentation.

[Hemerson de Souza, executive]

Good morning to all participating in our conference call. It's a great pleasure to share with you a little of our performance during Q3 and year-to-date, 2023 and also to give you the vision we have for the rest of the year. We would like to highlight that we still have a strong booming market. And also, we have a lot of business in workshops, a growth of 13%. This is important for aftermarket parts. If we evaluate what we did as a company to have these benefits such as integration of logistics, synergies, all of this helps for the results we have achieved.

When we look at the markets outside Brazil, we must say that the U.S., even with inflation, not only the U.S. but Europe also make the demand sensitive, although we have noticed a certain stability, no drops, but stability and a very small growth, almost nothing.

Now talking about Argentina, we'd like to say that the economic crisis also has another point, elections. We have -- during this month, we will have elections and this may bring changes in the way the country operates. And this, in general, brings a little instability.

Later on, we will talk more. This is a topic that we like to mention, not as a great relevant point. Less than 10% of our revenue comes from Argentina, but we like to talk about this to the investors. What we have done in Argentina to mitigate the effects of potential crisis in that country.

The results, we will give you more details later, but we reached a revenue -- net revenue of almost BRL 900 million in Q3 '23, 8% higher than Q3 '22, and year-to-date, BRL 2.6 billion, 15% higher than year-to-date 2022. We had a very good performance and our EBITDA reached BRL 190 million in Q3 '23 with an EBITDA margin of 21.4% and discounting the non-recurring effects in the last quarter. This is one of the best quarters in terms of margin.

And this also affects other indicators, gross margin and the company's profit. Our gross margin, almost 36%, 4.4 percentage points above Q3 '22, same period last year. And year-to-date, 35.4%, 5.7 percentage points more.

We'd like to stress, we have said in a clear way, this performance is due to lower costs of raw materials, logistics, lower cost of logistics and other benefits in March. But in general, we have done -- we have also adjusted our prices to remain competitive. We believe that market positions are more relevant than the maintenance of profit margins that may make us less competitive. So we have been efficient. We will try to maintain our space being careful, being cautious, finding the best solution for our clients with adequate prices depending on each market.

In operations in this quarter, Juratek already contributed with Fras-le Mobility with BRL 50 million. If we annualize this, it would be BRL 200 million, which is 6%, 7% of our revenue. So we acquired this company, Juratek in March 2023. In Europe, we have seen a recovery in some countries. And we have maintained a good level of sales to that region.

And we cannot avoid mentioning, we have 2 conflicts, important conflicts, wars in the world, which, in some way, affect business. If we look at the conflict regions, we're talking about $13 million in business, which is an important amount of business. I don't want to create anxiety. We have to be alert. Conflicts, wars hurt business and the business migrates to other areas. But the relationship with the clients, the care with the clients seeing the difficulties of each market is something that our team is always doing. And we have a good relationship with these clients. We're talking about Ukraine and Russia, now Israel, all these countries that have conflicts. We hope this will end, not only because of the business, but because of human issues also.

The next chart, we will talk a little about Argentina. Argentina, we had an important drop in sales year-after-year. It was a much more important market for us. Today, Argentina represents 10% of our business. So it was almost twice this in the past, and we're surviving and making our business compatible with market reality. Just to share to you they have an inflation of 140%.

I mentioned also we have elections, which bring uncertainties and this hurts economic activity in Argentina. The import permits that we call SIRAS, we have some import permits that were given to us recently, but without detailed payment terms. In Argentina, the payments are made after 180 days, and now it's 240 days. So we are evaluating the size of our business since difference from other companies.

People manage the scarcity of resources in Argentina. We have to manage what we do well there. We have cash there, and we manage this trying to do the best in Argentina. One of them is to invest our resources in financial investments. We have been successful in preserving the value of our money. Also, we manage sales. We have preserved inventory. It's important to say that in an inflationary market, clients buy more because merchandise is safe. People know prices will go up, so they have to buy more. And we have to manage to sell, so our brands and products can be found on shelves. So we have had this discipline.

Of course, we're looking at the devaluation of Argentina's currency and the products and prices. With this, this is -- it's not a point of concern. It's not relevant in terms of size. The market is relevant. We want to be in Argentina. We want to be active in Argentina, but we have to understand this economic point, and we have to try our best.

Next chart, guidance, the results of this quarter show, we reviewed our guidance, especially EBITDA margin. We expect we have projected at the beginning of the year between 15% and 18%. And now we have a new guidance, 18% to 22% EBITDA margin, accounting data at 20.9%. If we adjust non-recurring facts 21.4%. So we had to do this review.

I will tell you what we expect, we -- based on our legacy. On the next chart, Fras-le Mobility, we will have this -- we will have our Universe Fras-le Mobility, which is our Investor Day in Joinville, December 7. We will have many participants for us. It's a great pleasure to receive you. We will be talking about the company's strategy and the future.

Here, we have important points. We have talked a lot about Auto Experts. It's a synthesis of what we have mentioned in the digital transformation of the company. It's not totally ready. It began as an electronic catalog, and we have been implementing small resources gradually to make it a consumption experience. We have still some points to implement. But today, we -- with the -- if the client places the brand of the vehicle, they can see the parts that we have. And the volume in the light line is very large. But today, with your license number, you can see what parts to use and identify where you can find our parts for your car.

We're talking about on workdays more between 13,000 and 15,000 people accessing our catalog here, almost 2 million users registered on the platform, more than 4.4 million accesses. So we can see 1.9 million using this tool. 20,000 SKUs in 10 months, 2 million license plates were inserted and almost 9,000 SKUs and also showing where the client can find our parts. Also very important, we were elected in mid-September as supplier of the year by IVECO, because of our Composs division. This is a business that we began a little over a year and being recognized as supplier of the year by an OEM is very important, especially IVECO.

So it's a business that is beginning and the proposal is to help assets. And it is today a consolidated platform and doing much more than we expected. And also we know that electricity is important, but in the future. And this is very important for us, especially in the brake division. We don't know the future, but we are getting ready. And we inaugurated an automated production line. With important support from Autom, an important company bringing these technologies for production and production integration and a dedicated line to supply IVECO. So we're very happy not only with the current business and future business with them too.

On the next chart, we talk about the results. Jessica will give more details. We can see our numbers in this quarter and showing you here level of CapEx, BRL 75 million. So very close to our guidance and the margins that we will see in an in-depth way by Jessica. And I will pass the floor to her, and then we come back to talk more about this. Thank you.

[Jessica Cristina Cantele, executive]

Thank you, Hemerson. Good morning to all participants in this earnings conference call. Continuing and detailing the company's results, we reached a net consolidated net revenue of BRL 889 million in this quarter and BRL 2.9 billion (sic) [ BRL 2.6 billion ] in year-to-date, which represents a progress of 7.9% in comparison with the previous year and 14.5% when compared to the same period in 2022 9 months.

These positive results is supported by the robust business model, where almost 90% of the net revenue is linked to aftermarket replacement parts, a sector that is growing independent of the political situation of the company, because it is linked to the recurring consumption of vehicles.

In other words, they are mandatory. They must be substituted because they are linked to security to safety. These products are sold through well-known brands with tradition, quality, and delivery, which makes us one of the main players in the replacement parts market in Brazil, where we have more than 60% of our sales.

Linked to the growth in revenue, we can mention the repositioning of prices that happened, adjustment of prices and the purchase acquisition of Juratek, which sold more than BRL 100 million. In friction materials, brake pads for Lifeline were the highlight due to the growth in the number of businesses in workshops and garages. The components for brakes, we have control, which is becoming more and more relevant with master cylinders, expanding their capacity.

Now in components for suspension and powertrain, the highlight is with shock absorbers of Nakata, due to greater productivity of the new plant and availability of products.

Now talking about the opening per market. In the domestic market, the revenue of BRL 554 million in this quarter, a growth of 12.3% in comparison with last year. And year-to-date, the growth is more than 15% here. As I mentioned, we can highlight the repositioning of the brands that happened this year and the centralization of our warehouse in [indiscernible]

In the export market, $68.5 million in Q3 '23, 8.9% more in relation to the previous year. And this growth came especially from the new business that we added in Europe, the acquisition of Juratek, that I mentioned previously.

I also highlight the strong competition, especially in Latin countries after the reopening of China and reduction of international freight prices. And as mentioned by Hemerson, the challenge to work in Argentina due to the problems, lack of funds and import barriers.

Now talking about EBITDA, our consolidated margin continued on an excellent level, 21.4% in this quarter. This result is due to the efficiency and cost management, prices and productivity. And here, we can highlight the drop in the cost of products, raw materials, gains in productivity and the good performance of our controlled units that continue strengthening the results -- consolidated results.

Here, I'd like to highlight, we did not have non-recurring events in this quarter. Our profitability continued on a good level, reaching 11.9% of the consolidated net revenue. The result -- this result due to the cash position and also the interest rates on investments. Also, operations in Argentina made investments in U.S. currency, which favored positively the financial results.

Now talking about investments. Year-to-date, we invested BRL 74.1 million. Most of this is linked to the purchase of machinery and equipment, which -- these are the investments, BRL 74.1 million, machinery to help in productivity and also expanding capacity.

Now concerning net debt, the company has net cash. The equivalent cash is higher than our debts. And this result is due to the increase in capital, the follow-on made in April 2022.

Now going on to cash flow. The highlights are higher cash generation, payment on interest JCP payment on our own capital and the payment of the acquisition, Juratek in March. Now the needs for working capital, the company had internal actions to reduce inventory adjustments in production and operations with vendors, enabling us to decrease 8 days NCG when compared to the same period last year.

Now the results shown are noticed by the indicators of ROE and ROIC, which -- where we had a progress of 4.6 and 6.5 percentage points, respectively.

I would like to pass the floor to Hemerson. He will continue with the presentation.

[Hemerson de Souza, executive]

Thank you, Jessica. Well, in general, Jessica mentioned the results. They are positive in many dimensions, and this is due to the performance of our shares in the stock market in Brazil. We expanded the number of shareholders. There is an important concentration of new institutional shareholders, also a good number of individuals and also an increase in foreign investors. We have -- we understand that although we made significant progress in our liquidity and also the daily volume of sale of shares, we have a liquidity of BRL 6 million in this Q3 of sale of shares in the stock market. And this makes it difficult for funds and large investors to be part of our shareholders.

Although we have many qualified, many from abroad, there is some difficulty because of the liquidity of our shares. And we are conscious of this, and we're working on this to increase the liquidity of our shares in the stock market. So 5, 6 years ago, this liquidity was 5% of these numbers we have today. So there is still space to increase the liquidity. Another positive point where we are part of small caps in the stock market in September. We have also -- we have participated strongly in events and also other actions to show our case to investors and thus create more interest and a better valuation of Fras-le.

So I always see Fras-le as a different company in relation to automotive companies. We're a company of automotive consumption. 90% of what we sell is directly linked with the fleet in the streets. It is not new cars, and we have 10% from OEMs in Brazil, in the U.S. and growing now in Europe. But although this market is very relevant, our position is centered on replacement parts. This represents 90%.

On the next chart, I would like to show to you a vision of what we have for the future and what we are trying to do, the performance continues very robust. We are very careful in taking care of our clients, and we are alert to our competitors. We compete with global players. We have impacts from different geographies and many directions. The export market has a fierce competition, fierce competition in the export market since March this year. China is back after restrictions due to the pandemic and has come -- is working very strongly in Latin America with attractive prices, and we have to be ready for this.

In the markets where we have more profitability, these are the export markets. So there was pressure for lower prices. And this demand that we reposition ourselves in some cases to maintain our competitiveness. And I'd like to make clear that the market decides the price, although we have a leadership position in -- for many products, we are very resilient in maintaining our competitiveness. And this is not only by lowering prices in a client or in the market.

We must have fortresses, efficiency, productivity, our size being more effective also in purchasing and sourcing. What I call legacy. And this you can see in the results that we have had. Obviously, we were favored by some actions and lower raw material prices, lower raw material prices, but the whole company, the way we produce, the way we access the markets, this has given us an excellent legacy to preserve margins.

Q3, we were able to have success. Argentina, we are always alert. It's not mega important, but we're talking about 10% of our sales. So we're looking at Argentina. We are very close to them. So we'd like to highlight. We will have a more a quarter that is more tight. Seasonally, Q4 concentrates some movements of Fras-le Mobility. So the next quarter will be tight, will be difficult. We will have some stops, and we will also have vacation.

We're discussing this the last year -- the last week of the year and the beginning of 2024. So we are alerting clients to make their purchases. And we have had a lot of success. We never had great problems. We will have a new ERP. We have to stop the systems and make adjustments in our ERP to come back with more strength to help our market.

Having said this, I will pass the floor to Monica, and we'd like to begin the Q&A session. I would like to apologize due to logistics problem, we had difficulty in connecting Anderson. Sergio also was not able to participate, but we will be here to answer questions. And if you need more clarification, we will answer after our conference call. So Monica, you have the floor.

[Monica Rech, executive]

Thank you, Hemerson. Our first question comes from Luiz, investor -- individual investor. He says, we're going through a challenging times in the domestic market in all the segments. What are the reasons that led to this situation? And what can you tell us about the short and medium term?

[Hemerson de Souza, executive]

Thank you, Luiz, for your question. I believe you referred to the macroeconomic scenario in Brazil. It is a fact. Yes, we have, in many sectors, more difficulty when we evaluate demand in the market. There are many factors for this. We still have low economic growth in Brazil. We have -- we're -- we have high interest rates that are dropping. We have a controlled inflation. But as a country, we have interferences from other economies. We suffer when we have -- for example, our interest rates are dropping, but mature markets are increasing their interest rates. In the U.S. market, although inflation stabilized, this brings many uncertainties, and this penalizes the stock market in Brazil, the higher interest rates in the U.S. But in terms of business, we noticed that this affects the market.

The U.S. market this year has been this year, a stable market. And the U.S. market is stable. We have new businesses there that should help us. Going back to the domestic market, we have sectors that have more difficulty. In the heavy line, we have blocks and brake pads. This has been more difficult this year, more competition for brake pads. But in general, economic activity with problems, bring these difficulties to us. We balance things well because we have global exposure. Sometimes one sector is bad, we sell another in another country, in another market, in another product line.

I say that Nakata's products are doing very well, well positioned and growing their share in many of their products. We had a difficult year for engines. We have noticed an increase in competition in many markets, not only in Brazil, in Latin America with Chinese products. And we have to really face these things. We have to maintain our competitiveness and also protecting our market share in a healthy way.

In some markets, we have to lower prices. We have to make the necessary adjustments in prices, payment conditions, payment terms, sometimes different actions to maintain our share. But we believe that the replacement market is safe and these movements are normal. We are coming from a pandemic when there were uncertainties. And now we have more stability, and this is normally the market will have these actions. There will be -- the market will ask for concessions. We don't see in any way any depression in sales, but we see more competition than we had in the previous years.

[Monica Rech, executive]

Our next question is by audio for [ Gabriel ] analyst from Santander. Gabriel, you have the floor.

[Unknown Analyst]

Good morning, Hemerson, Jessica, Esteban. We saw an increase in competition in the export markets having an impact on price. You mentioned this. Can you give us more color about evolution of market share in the export market? And concerning Argentina and look at the measures you took, the strategy for Argentina is to not increase the exposure, avoid increasing exposure in Argentina.

[Hemerson de Souza, executive]

Well, Argentina quickly, we want a very positive market for Fras-le. We manufacture here, and we distribute in Argentina. Today, the scarcity of products allows us to have a good profitability in Argentina. We're talking about sales in a difficult market and problems in the currency. We have respect for the clients. The country, we know that these times of difficulty will end. We want to be present, we want to give support. Now it's difficult to maintain the size our market share. We want to maintain our size, but we cannot expand. We don't see ways to expand.

Like I said, we have managed what we can do well in Argentina. We have -- we have cash. We have to protect what we built different from other businesses. We follow many sectors where we have difficulties in operations, sometimes due to lack of cash, difficulty to buy inputs. So we have a relevant -- we have a relevant size. But today, we're maintaining the way it is, the size it is and protecting what we have, the resources that we generated there.

So we are a large company. Well, there are many difficulties for foreign suppliers, China, Turkey those who help us by manufacturing. Now competitiveness, we've seen this from the beginning of the year, a greater pressure on price. I can mention Colombia, Mexico, Chile has been very difficult. We lowered prices. In some cases, we made adjustments to maintain our competitiveness and our size in these countries. This has been important. We cannot lose the market positions that we built. So we cannot lose our position there.

So we made adjustments in prices, we lowered prices. On average, 9% to 12% discounts. We've had these cases. There's exchange variation. There's logistic costs. There is deflation in metals. So we're transferring this to our clients. And this happens also in the domestic market. We have made important concessions to maintain our position and to maintain our competitiveness in relation to our competitors. We understand in a clear way. The market is sovereign. The market tells us the price. So we're maintaining our competitiveness and our profitability. There are many good things happening. But in some markets, we have had to lower prices.

Your second question, clear. Second point, concerning organic growth, we see CapEx in this quarter. And in Q4, I believe you will have more. Can you give us more color about the main investments, the main investments and the strategy concerning Fremax. We chose this year to have our Investor Day in Fremax to make evidence those who want to participate on December 7. And it's a good date. Those who want to go to the value day on the 8th, we will offer transportation for Jaraguá, although we want -- we would like the participants to go to both the events.

We have had more difficulty in CapEx investments. Sometimes this includes imported machines, things that take some time. But we have a good vision to use more the guidance for Q4. At Fremax, we had -- we received a license -- we had a license already. And now we have an installation license to begin to build a substation. This will give us 25% additional capacity with a new substation. We have made investments in control, in hydraulics, master cylinders. We want to continue -- and very important, we have noticed for some years, we have participated in bids for brake pads for heavy vehicles. We have worked with many clients, European, American, and we have made important investments that will become mature part of them in this quarter and the rest in other quarters.

Our plant -- we have a plant in Alabama in Caxias do Sul. We want to expand production of these items in China. These are the main points in CapEx. But we have a relevant position for next year. Automation of our storage in stream automation, in stream, in our storage facilities. And we continue to work on new synergies. So we will, in Q4, we have new businesses also becoming mature.

[Unknown Analyst]

Very clear, Hemerson. Thank you.

[Monica Rech, executive]

Our next question comes from Lucas Marquiori, analyst from BTG. Lucas, you have the floor.

[Lucas Marquiori, analyst]

Two questions. First, margin, Hemerson, we want to understand -- you reviewed the guidance. Margin continued above 20%. It's much higher than the historical leverage. What can we use for as margin for the next quarters, next year? And the second question, growth as a whole. I don't know if I understood well, you talked about CapEx. Your growth was strong in the first semester then dropped. What would be a growth -- a fair growth rate? Is it single digit for next year? Do you have an idea of growth for next year, discounting M&As?

[Hemerson de Souza, executive]

Thank you, Lucas. Thank you for your questions, very relevant. I have said this many times recurring margin. First, we have a new level due to the combination of our business and acquisitions, synergies that we have in these new businesses, higher productivity levels in our plants and diversification that allows us to be present and act in a different way in each geography. So if you look at the companies, one is doing well. One is doing even better. So the diversification has helped us to be resilient. And this has helped us.

We have also strengthened this with acquisitions. So we created a legacy. It's difficult to say the size. Next year, we will have a guidance, but we have given you a vision for this year. The guidance is 18% to 22% in profit. So it's no longer 14% as in the past. So we have 18% to 22% for profit. This is a level we are conscious that it allows us to be competitive. We have partnerships with our clients, which allows us to grow.

And I will also answer your second question. I can't tell you if it's 18%, 20%. I can't give you a number. We're preparing the numbers for next year. We were efficient. We were efficient in maintaining all conditions for this moment. We're waiting for new opportunities. We have to understand that the market position we reached is more important, then of course, we have to support good margins for the business, for the growth, for -- to give a good return to shareholders. But we're defending our position. And during the year, it's not something that is beginning now.

But the support that is higher than the legacy. And our guidance shows this. Next year, when we have a new guidance, we will be able to tell you. I'm not saying we will have drops. When we talk about growth, Lucas, we don't have a formal guidance, but we had a follow-on of shares. So we have been preparing the company for the future. We made one acquisition, although we had a benefit today. The money we have is to be invested in new M&As, but acquisition is not something guarantee that will happen tomorrow after tomorrow.

So we are working to find good stories to give us the return we want. So we have created value through M&A in the last few years, and this helps us to maintain these margins. We will only buy if it makes sense for our strategy and for our business. So I have said we have a condition that allows us to really dream that we will grow in a double -- with double-digit numbers. And also growth of market share. If we look at, for example, shock absorbers, we had 16% this year. We will get close to 24%. So we have a higher market share for shock absorbers.

In Fremax, we had a restriction in capacity. Although we have to understand the market, we understand clearly the need to have more products for the U.S. market. So we have to respect also competition, control, we grew in market share. In friction, it's difficult because we are leaders, but we can make progress in Colombia, in Chile and Latin America. In Mexico, we have a very small presence. We have made progress in Europe. So there are many possibilities. We have the comfort to say. Organically, we can grow for some time with 2 digits. Of course, we will build these levels with new acquisitions, to really use this platform for new business. And this will be part of our strategy for growth, and it's part of our DNA for the business.

When this happens, like Juratek exceptional sales, good margins, in the next quarter, we will show to you exceptional results. So we reached the synergies and beyond what we expected in terms of synergies. So this will help us to continue to grow. So this is the level. I don't see us dropping. We had a good Q3, better than last year. But the market in some lines has been more tight, but we're moderately optimistic. We're moderately optimistic. Let's work now. We will work hard in this direction, but there are difficulties. Lucas, I can't tell you -- I can't give you a number. But with our guidance, we see a certain comfort in this line. Thank you.

[Monica Rech, executive]

Our next question is also from Andre Ferreira, Bradesco. Andre, you have the floor.

[Andre Ferreira, analyst]

Good morning. Congratulations for the results. Two questions. First, about competition from China. Which product lines have the highest competition from China? Are these products -- which products are suffering competition? And also, for example, the U.S. wants brake pads without copper. You have experience in materials. Talk about this. Are there other rules from other countries that can have an impact on you, apart from brake pads without copper as demanded by the U.S.?

[Hemerson de Souza, executive]

Very good, Andre. I will begin from the second one. So copper-free is a rule for many U.S. states and also Europe. And we are pioneers. Since 2016, we have solutions in this area. Our product is very competitive and very efficient at our clients. So in Europe, in the next few years, there will be a law for particulate material. We will need a greater control, especially for brake products, particulate that happens during the braking process. We have invested in this. We have research noticing these changes. And yes, they bring to us the possibility of being pioneers in these areas lead the market.

I can tell you that some businesses, we have been pioneer in research. We have a high investment in research and development, R&D, and we have a partnership with Randoncorp, using their experience in labs, but Fras-le Mobility has one of the best chemical and test labs. And some of you already know you can come to visit these labs. We invest a lot in research and development, R&D at Fras-le. This is brake friction, but also rotors and the demands are lower in other areas. But we have been very effective in bringing these solutions as pioneers concerning competition with Chinese products. There is -- this happens more in rotors, this brake pads and break disks. But here, we have another fortress. We are very effective in giving support to the market, apart from price.

What is apart from price? What value does the client buy? They want services. They want to know delivery time. If you sell, do you deliver because sometimes we see an invasion of new players. They sell at a good price, but they don't promise services. They don't deliver -- quality is a problem, things that are relevant for the client, guarantees, service our fortress. We have been able to fight also in this direction. Of course, price is important. But we have led in other areas.

And this was stronger in the beginning of the second semester of the year. We are prepared to compete with these countries, but Latin America as a whole, Mexico and DN countries, too. In Brazil, we have local competitors. We have respect for our competitors. Some are faster in terms of discipline. We are an important company, an important reference in the market. We are everything that Fras-le does is observed by the rest. We're very cautious to preserve our relationship with the clients, our size and to compete in an honest and fair way.

We have large competitors, multinationals. And we operate in the same market where we are always defending ourselves, defending our position. That's it. We have been -- we have -- we're always fighting to be leaders, to be pioneers. And services were -- for example, sometimes a new vehicle is launched. We are ready. We're leaders, we are pioneers. And this is -- and also the services. This is what our clients want from us.

[Monica Rech, executive]

Our next question comes from Fernanda, analyst from XP.

[Unknown Analyst]

Congratulations for the results. Just a follow-up, 2 questions. The first, price, it became clear in other geographies. I'd like to know the prices in the domestic market with local competitors. Are you giving discounts in the domestic market? And the discount reached 9% to 12%, as you did in other regions. Do you believe you will have to give discounts in Brazil? Also, Juratek, you mentioned that synergies are higher than you expected. What are the synergies that haven't been captured with Juratek and will be captured in the future?

[Hemerson de Souza, executive]

Thank you, Fernanda. Good question. The lack of products and logistics difficulties have had an impact on export markets. In the export market, we had to give more discounts. Not only this includes logistics costs, reminding you that logistics, a container that cost $1,200, went to $12,000. This was a year ago. So this had an impact on our way to grow and had an impact on the prices. So we had to respond in a more clear way in these markets where freight was expensive.

And then now with normal market conditions, the domestic market, we did not have relevant price increases. We had inflation from materials and the margins we have today come from the competitiveness that we won automating processes, growing -- increasing our purchase volume. And we have been giving some discounts in some lines. I mentioned, the tightest ones have been linked to heavy line, more discounts in heavy line. We have made concessions, not only price but promotions, payment terms. And we don't see today anything that could be bad for business. There is nothing forcing us to lower prices even more.

The whole market had the impact of inflation. And this, no one is doing magic. We have market positions. We have to defend them and we do what is best to support the clients. I don't see a great pressure the market is buying. And in some sectors, we have had more attention.

Concerning Juratek, we like to make an analysis a year after the acquisition. But yes, the synergies are very in line with what we had planned, very good. We have been able to grow many -- in many areas, many lines. Sourcing has been very important to have these synergies, but also the launches of new product lines that will happen when we grow the business in the U.K. and England. This takes 12 to 24 months. But we will give you a detailed report. The synergies are stronger than we expected.

[Monica Rech, executive]

Now the last question from Luis Otávio from Itaú. And I like to reinforce that the other questions that came by chat will be answered by e-mail. Luis, you have the floor.

[Unknown Analyst]

Thank you for the space. Congratulations for the results. Two pieces of information. You gave us an idea of organic growth for Fras-le, 10% to 15% and then price pressure. This assumption, 10% for next year growth. This includes volume and price. Do you have an expectation that prices will drop? Would you have to compensate this with more volume? And the second question, very direct level of inventory at distributors in Brazil and in the world, in the markets where you are present. How do you see the volume of inventory? Is it normal? Is it a threat? Is it healthy?

[Hemerson de Souza, executive]

Congratulations. Thank you, Luis. Okay, an important point. We noticed growth in volumes in some lines. We made already the concessions that had to be made. The concessions we made in Latin America, we have been making price adjustments for a year. Since November last year, we have done this in some markets because we noticed stronger competition. So most of this was already done.

Yes. in Q3, we saw this. We will have a more difficult year. We have to grow volumes with that, we will do this. We don't see inflation next year. We don't see pressure from inflation. It's going to be a year, it's going to be a difficult year next year. It's not a formal guidance. We have a feeling that we can grow. It's not a formal guidance next year when we prepare the budget, we will be able to give you all the indicators.

So there is not much space for price, but there is for growth, although our geographic exposures brings us many opportunities. For example, Colombia, Mexico, sometimes the growth is small, but it's exponential like in the U.K., Juratek, all of this helps, our diversification helps. And our inventories at distributors show this perception that growth was not very strong in this quarter.

Our clients are working with lower levels of inventory. After the pandemic, the inventories rose a lot because there was scarcity. Today, there is price stability, regular supply, they don't need high inventories. We noticed this in some sectors. In brake discs. We had some difficult months because our clients went back to lower inventories. The sellout is good. But the sell-in shows this difference and its inventory adjustment. It's balanced. It's balanced, very balanced.

So having said this, we continue with moderate optimism to maintain our results in the next quarters.

[Monica Rech, executive]

The Q&A session is concluded. Hemerson, would you like to make a final comment?

[Hemerson de Souza, executive]

Yes, I'd like to thank everybody for participating for the interest in Fras-le Mobility. It's a great pleasure to answer questions, talk about the current conditions and we're available for any other clarifications that may be necessary. Our team is ready. We wish you a good day, and we will meet again. Thank you.