Fras Le SA

BOVESPA:FRAS3

Earnings Call Transcript 2021-Q4

[Jessica Cantele, executive]

Good morning. Welcome to the conference call of Fras-le for the results of Q4 2021. My name is Jessica, I'm Investor Relations at Fras-le. And before beginning, I'd like to make some announcements.

This conference call is being recorded and will be made available in our website. We have simultaneous translation in progress. Please click on the button interpretation at the bottom of the screen. At the end of the presentation, we will have a Q&A session. [Operator Instructions]

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 Board as well as on information currently available to the company. Considerations about the future are not guarantees of performance, involve risks, uncertainties and assumptions, and these refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operational factors may affect the future results of the company and may lead to results that may differ materially from those expressed in such considerations about the future.

Now I'd like to pass the floor to our Chairman and CEO, Sergio de Carvalho, he will begin the presentation. Sergio, you have the floor.

[Sergio Lisbão de Carvalho, executive]

Thank you, Jessica. I'd like to welcome all the participants to our video conference call for the results of the last quarter of Q4 and also the full year 2021. Hemerson de Souza is with us here, he is the Director for Investor Relations, M&A and some business units of Fras-le; and also Anderson Pontalti, our Director, Superintendent of all the Fras-le units, in other words, in Brazil and also abroad; and myself. We will be making this presentation for you.

So giving you a general view of the results. Q4 2021 continued very strong in demand with good performance and operation indicators. We had a record net revenue, BRL 685.1 million, 15.1% higher than Q4 2020. We had a year with results and indicators that were historic in the company, and also orderly growth in operations, in the plants, distribution centers and all the units contribute in a positive way for these results. Sustainable and orderly growth, including also an increase in share in our current clients.

In the quarter, we had also adjustments, commitments, that may affect the perception of the quality of the results, but the adjusted or clean result, removing seasonality, is compatible.

In terms of market, clients and operations, the level of inventory at clients dropped in relation to the -- we had less orders. We had the launch of Nione as a company in December 2021, with its first product, and growing demand in markets abroad due to logistics difficulties in China. We also had synergies with Nakata in full.

I know that this week, we became 60 (sic) [ 68 ] years old. We had our 68th anniversary, always with positive results. And in the last 5 years, Fras-le has evolved in a fast way. Its revenue more than tripled in this period of 5 years. The cash -- gross cash generation more than quadrupled 4x more. So it's a very special moment within the Fras-le units.

To give you more details of what we are doing, I'd like to pass the floor to Anderson. He will continue with the presentation.

[Anderson Pontalti, executive]

Thank you, Sergio. I'd like to thank all the participants. It's a great pleasure to talk to you all. I will talk about our Fras-le universe. We had an important event, which is available in our RI channels, on our website. And as a highlight, our Director, Hemerson, once ago one of the best -- 5 best in the category of small/middle caps, evaluated by Apimec Brazil. Congratulations, Hemerson.

We also had, in terms of our event, for the third consecutive year, we were -- we received the best evaluation. And this is important. This is an event where we want to inform investors in terms of what we are doing in the best possible way. So for us, we're very proud for this recognition and the third consecutive year, the directors that participated here. So it's important, we want to continue evolving in the next few years, too.

Next slide, 3 important points. ESG, we launched this last year, so ESG is included. And we must talk about COVID 2021. We had ups and downs. We had no active cases. We had some, especially in the beginning of 2021, and this repeated itself in the beginning of 2022. This brought additional results and additional challenges to the operations, taking care of those who are around us or who work with us. So we continue the alert. We're continuing the good work in 2022 with all the protocols, so all the employees can work with safety and health inside our companies.

An important movement was to establish a partnership with Eureciclo. They do -- they track the recycling network in Brazil. Fras-le, was able, in all its brands, Fremax, Nakata, the main brands in Brazil, to establish a recycling program with Eureciclo. And 22% of our packaging made of plastic, paper or wood are already in this process with this partnership, thus reducing our impact on the environment through this initiative.

Sergio mentioned it's very important for us, Nione, the company that was launched. It was created between Fras-le and Randon. It already has its first product in the market. It's a premixture of free particles of niobium and will be added to surface materials, bringing important benefits, such as resistance to corrosion, durability, fast cure, so the cure process, or will bring many benefits to the products. We are studying many alternatives, and this is only the first of the coatings that we are developing in this unit. And there is a great potential for these coatings for the future of the company.

Now I'd like to pass the floor to Hemerson. He will talk about the numbers of Q4 and full year 2021.

[Hemerson de Souza, executive]

Good morning. It's a privilege to share with you some of the performance of Fras-le in the last year and especially Q4 2021. We tried in our messages, especially Sergio and Anderson, to show our joy in presenting these results. So truly, it's a historical year, 2021, and -- due to everything we did and to the results of what we built.

When we look at net revenue, we have more than 50% more in relation to 2020. When we look at the last year, Sergio touched upon this, Fras-le was a company of BRL 830 million in 2017. We tripled this in this period. We tripled a growth of more than 30% a year, especially robust growth in 2021, also related to the acquisition of Nakata for a full year.

In 2020, we had only 3 months of Nakata in our operations -- or 4 months, September to December. In the quarter, when we look at Q4 2020 -- and 2021 with Nakata added, we grew 15.1%. So we have been growing every quarter. And in Q4 2021, this was the best in terms of growth.

Next slide, Victor. This slide shows very well the transformation we're going through. So we -- in many ways, we have talked about what we think as a company in terms of product mix, access to markets, access to geographies. And here, we make clear, if we go back 5 years and evaluate Fras-le. Fras-le was a company with 90% of the revenue focused on friction materials, brake pads, linings. And in the last few years, with our strategy, we reduced -- or we expanded the exposure to other markets, other products, other lines and other segments. Today, friction represents close to 50%, friction materials, brake pads and linings. So we're better prepared to offer products to clients, showing the importance of our lines to clients and above all, in access to markets, whether it be domestic or abroad.

So today, we have a portfolio of products that is truly -- that truly shines in the eyes of our clients. We have 65,000 points of sale, retail, in Brazil. It's very difficult for some to operate in this market without having on their shelves at least one of our brands or some brands. I could say, why not all our brands on the shelves of the 65,000 points of sale?

This model, we have replicated not only in Brazil, but we have made progress in other geographies. And this is one of the fronts that we elected as a priority for us in the next cycles in terms of planning.

If we go to the next chart, we also show the distribution of revenue, evaluating directly. We are 40% export and 60% domestic market. This changed with the arrival of Nakata. Fras-le had 55% from abroad, with revenue from abroad. And with Nakata, which is predominantly domestic, we changed this curve. That's why we are focused on recovering our exposure in export markets. If we look at the growth, they were very strong in these lines, especially due to the arrival of Nakata in the domestic market. And in the year, in exports, we grew 32%.

If we look at the company's profile, and this, Fras-le is a company that is very connected with the dynamics of consumption, 90% of what we do has to do with aftermarket parts, purchase of parts to be used in vehicles, aftermarket products. With this mix, we are a platform for access to sell automotive material in this market. 90% of our revenue comes from this.

Of course, there is 10%, 11%. Last year, it was 11% that we sold to OEMs. It's important for us selling to OEMs because it challenges us in terms of quality and also innovation. And it's very important when we look at the size of this part, OEMs. But predominantly, we are present in aftermarket and our products have shorter cycles of life and longer when we look at actuators, but they need to be changed. And this is -- so the vehicles may continue to operate normally.

When we evaluate the destination of the parts we make, if we go back 10 years, we were 70%, 80% commercial line. In the last few years, we also changed this. We approached in a more effective way the light vehicle line today, it's 65% passenger vehicles because the fleet is much larger and consumes a lot of products.

Next chart. Well here, before talking about performance indicators, we have to talk about Q4. The effect Sergio mentioned, the effects that we had, nonrecurring effects in Q4, they affect a little the quality of the results. But we have to be fair, especially in adjusting this, so we can notice what is operation and what are items posted in accounting but which are not part of the day-to-day activities of the company.

In this quarter, we have commitments. We will give you details shortly, but especially one of these issues affected Q4, but they do not belong to Q4, and they are nonrecurring items. We have a very special client. We have a contract with them for supply, and which affects perform -- which is based on performance, exchange rate, and we reviewed the contracts with this client once a year in April.

And in April last year, one of these indicators was not perceived on our side nor on the client side. There was an adjustment to be made, a discount, even considering that last year, we had inflation because these discounts were foreseen from 2020 to 2021. So we made an accrual or provision of BRL 30 million in Q4. And in fact, in Q4, we have only 1/3 of this. So in the year, this does not represent a great impact, but affects a little the results of Q4.

If we adjusted this, Q4 would be very similar with other quarters in terms of operational performance. But we have no problem in terms of higher costs in raw materials with the exception of those already mentioned. Next April, we will readjust this, and this will represent an increase next year in April in comparison with 2021.

So with this, I would like to go over the main nonrecurring items, which is well detailed in our material. Basically, we have the benefit here, it's negative BRL 25 million, which is a reversal due to the good performance we had last year and in Argentina. In 2020, we have this -- we had this posted differently. This year, it helped the result. Also tax impacts related to income tax and CSLL on the interest rate. We had also lawsuits, but one lawsuit, BRL 19.4 million, which is in the beginning, but we can understand that it will impact the results, so it's posted. We believe this will take a long time, and we will try to reverse this since -- so we see this, we're operating correctly.

And finally, we have, with the purchase of Nakata, the return of a tax benefit, the reversal of a tax benefit, and we will use it in the next 7 years. And the result in Nakata was so good, so brilliant, so strong, that the accruals or provisions related to future performance have affected here, with BRL 24 million and has an impact on results.

When we evaluate -- and when we exclude these items, the accounting EBITDA of BRL 390 million, we would have an EBITDA of BRL 413 million. This slide shows this. If we look at the adjusted value, we're talking of a growth of 46% in relation to last year. And I will remind you that last year, we had gains of PIS/COFINS taxes, which gave us a benefit of more than BRL 90 million.

So it was a brilliant year. I mentioned this, with the exception of these adjustments. In the quarter, we're talking about BRL 83 million. If I return the 1/3 of the BRL 30 million, I mentioned the discount, then we will have a quarter with almost 15% EBITDA margin, very good considering the seasonal activities in Q4.

On the next chart, I show the result in accounting terms. We had BRL 210 million, we grew 15%. In 2021 and 2020, we have nonrecurring items. If we look in a clear way, we have a growth of more than 50%, 55%, almost 55%, from -- so from BRL 115 million to BRL 180 million, on the right, which gives us a net margin of 7%, which is very good for the type of business we have.

Of course, there are good new things, Nione, composite materials that can improve profit. But currently, this is the number that we consider very good, very robust, considering our market.

On the next chart, I want to touch upon integration with Nakata. We mentioned this is the topic that, normally, we will discuss in our meeting. The main fronts, and we showed this in Fras-le, are related to these windows here on the chart. International expansion, we are beginning to sell to our clients. Sourcing, we were very fast. And we have been surprised with the capacity to -- we have to integrate these items. Looking at Fras-le purchases and also Randon, this is very effective and gives us quick results, also spend, the same.

The tax issue, we have some items to treat. Because of the purchase of the company, we will treat this in the industrial part. We have a ramp-up for shock absorbers. We transferred the plant from Sao Paulo to Extrema. It is operating very well, but there are a few investments to be made that will make this plant even better.

And in terms of suppliers, we have 2 important fronts. First, logistics. We have -- we will talk about this in the next quarters. We will integrate our logistics using Extrema plant.

And in terms of commercial issues, we're thinking of some things to be more effective, both for Fras-le and also in terms of policies. We -- these are important points.

As I mentioned, integration of our computer systems. So we have more than BRL 16 million in synergies due to the purchase of Nakata. So we had mentioned, when we purchased Nakata, that we estimated BRL 90 million to BRL 100 million in synergies in 5 years. If we look at these BRL 16 million and multiply by 5, we're, in the first year, we're very close to reaching our plans. And today, evaluating the synergies that we have, certainly, they are much greater than BRL 100 million. And we will be talking about this in future events.

If we look at Nakata's performance of the last 5 years, we see revenue close to BRL 700 million, it's a growth of more than 30% since we acquired the company. So there are many effects. We will be selling Nakata shock absorbers to new clients. So if we look at these BRL 170 million, we can see how good the synergies have been.

And on the right, we show where the synergies come from: logistics footprint, purchases and supplies, expansion in revenue, general and others. And these topics, we're available to talk about this, if you wish.

Finally, before closing and passing the floor to Sergio, we'd like to talk about the stock market. We know the size of Fras-le. We have a great -- 64% of the shares belong to the controlling group, so we have a low liquidity considering what is possible with the shares in circulation, but we'd like to show that this liquidity in the last few years grew a lot. If we look at 2017, 8x more. And last year, average -- annual average here of the number of shares per day. And this gave us the opportunity to make progress and also increased our -- the value of our shares by 30%. So this is due to the quality of the business of Fras-le and our projects. Of course, this is an indicator that we always talk about. We want to really always have a liquidity that is compatible with our business.

So with this, I'd like to pass the floor to Sergio for his final comments and also to talk about our progress in relation to the guidance for 2022. Thank you.

[Sergio Lisbão de Carvalho, executive]

Thank you, Hemerson. Now talking about our results when compared to the guidance that we had given for 2021. As we know, and it was mentioned again, it was a very challenging year with the pandemic and all its consequences, inflation in raw materials and the need to maintain margins, also supply. But with all of this, we had this historical performance that Hemerson and Anderson mentioned.

We had a guidance of BRL 3.4 billion of gross revenue or BRL 2.4 million of net revenue, and we were able to exceed these numbers with BRL 3.6 billion in total gross revenue and BRL 2.6 billion in consolidated net revenue. The revenue from abroad also were higher than the forecast, which was $170 million. We reached $184 million. Our imports, also motivated by the additional volumes. We reached $120 million when compared with the previous guidance of $100 million.

Investments, BRL 116 million in this case when compared to the plan of -- with the guidance, BRL 106 million in investments, a little higher, but this has a lot to do with inflation, higher cost of equipment and also impact due to the exchange rate.

So in general, as mentioned, we had very good results in relation to the guidance that we gave to you. And now as mentioned today, we are showing the guidance for 2022.

Before talking about the numbers. We would like to say that our continuous improvement process, with better practices, more transparency, with you, investors, analysts, we changed the way we prepare our guidance as a result of interviews we had with some of you, based on benchmarks. And I personally, having worked in the U.S. environment, which is used to a model that is closer to the one we are showing today in terms of guidance for 2022.

So our net revenue, consolidated net revenue, BRL 2.7 billion to BRL 3 billion, with a growth -- significant growth when compared with the results of 2021. Our revenue from the export market also growing to $190 million or $210 million, in this case. And our EBITDA margin, and this is something we're introducing now, 14% to 16%.

And this is our vision for 2022, investments between BRL 90 million to BRL 120 million. Here, when we talk about investments, we mean that these are investments linked to CapEx and organic investments. This does not include M&A. And more details about this guidance is in the material that we sent to you. The drivers for these indicators are explained in detail in the document that you can access through the QR code that you see on the screen.

When we look at 2022, what is our vision? Our outlook for the next year? So on the positive side, we see a strong demand, especially for exports, strong demand for exports. Also, opportunities for expansion of the product lines in Nakata for exports. We are already doing this, preparing ourselves to export Nakata products. We have new fronts and new synergies with Nakata. You saw Hemerson show the many work fronts associated to synergies, some are already more advanced and others in the beginning phase. But many good things happening in terms of synergies with Nakata.

And also, we made a lot of progress in vaccination. We began the year suffering the impact of Omicron. It grew rapidly and is now disappearing rapidly. We see a good improvement in 2022 in relation to COVID.

In terms of concerns, inflation of raw materials is growing still in some products, especially those that are affected by oil products. And also an impact in the families' income, especially in the light line passenger cars, we know that the family's income has an impact on the market. The concerns with COVID-19, Omicron and its effects, especially its effects on our employees, this is a great concern. And the cost of logistics, international logistics, not only the issue of cost, but availability and consistency of logistics, ships for importing and exporting our products. These are our concerns.

But we see 2022 as being another positive year, a good year for our companies.

Now I'd like to pass the floor to Jessica for the next session.

[Jessica Cantele, executive]

Thank you, Sergio. Now we'd like to begin the Q&A session. [Operator Instructions]

We have 4 questions. [ Carlos ], Condor Insider. I will read them. The first question after the gains in synergies, what EBITDA margin do you intend to reach in Nakata?

[Hemerson de Souza, executive]

Thank you, Carlos, for the questions. In terms of synergies, we always show the potential. Today, we have -- we had -- we wanted to reach BRL 100 million in synergies, BRL 20 million a year in 5 years. We already have BRL 16 million and we have important things coming. These BRL 16 million are already included in our EBITDA guidance between 14%, 16%. This is the best answer. As these issues continue, it will be a great pleasure to declare in the next quarters the effects and the benefits that we have from synergies. So we already have this. And as we have new synergies, we will be informing you.

[Jessica Cantele, executive]

Thank you, Hemerson. The second is leverage. What is the ideal level of leverage?

[Hemerson de Souza, executive]

We were very conservative at Fras-le in terms of the level of leverage. We understand that it's prudent. Although we are very -- we have a resilient revenue, I always say, Fras-le is not a capital goods company. If you look at the last few years, the crisis that affected some capital goods companies, Fras-le did not suffer with this. It's a consumption product. It's a consumption product. And we are not only selling our production today, close to 30% of what we sell are items that we buy. We have global partners. This is possible because we have strong development, strong engineering, strong brands, and this gives us a great support in this way to decide if we're going to manufacture or buy.

To be very leveraged brings difficulties, so we don't have an indicator. Our covenants foresee until 3.5x. We're a little below 2x. So there is space to grow the debt to expand, yes, there is the possibility, but we don't like to be close to the guidance. So this leverage, 2x until 2.5x, is very comfortable for planning and creating value to expand our business.

[Jessica Cantele, executive]

Thank you, Hemerson. The third question, whether we see a change in scenario for 2022 in terms of the problems in Eastern Europe. Maybe Mr. Pontalti is the best person to answer about -- he is responsible for the operation in Europe. Sergio also?

[Anderson Pontalti, executive]

Thank you, [ Carlos ]. I believe we have many questions to be answered as this conflict goes forward or not. We don't know what will happen. What I'd like to mention is that we had conflicts in the past which also unbalanced the markets. We have a business model that is well shielded, although we have effects in the economy, vehicles will have to continue rolling, trucks, passenger cars, and they will need products. So the issue of between inflation, with the increase in prices of commodities and inflation in the markets, we will have to really react to this.

Now being more specific, in Europe, we have low exposure in Ukraine. Our business there is worth $1 million; in Russia, $4 million, our business. These are markets we are looking at to see truly how this can affect us. Although the products come from China, neutral -- a neutral country in this conflict and closer geographically. So we can't measure the impact, but our model, in similar problems in the past, showed that we're very robust. One example. Normally, the market doesn't like risks and the exchange rate goes up. This favors us if the exchange rate goes up when we export from Brazil.

[Sergio Lisbão de Carvalho, executive]

I believe that Anderson covered well. It's a little early to know all the implications associated to this event, which is disagreeable. But our experience shows that all these difficulties generate also opportunities. Anderson touched upon one of these opportunities. So that at Fras-le, we have this business model that is well diversified and resilient. And in the last crisis, we were able to grow and capture the opportunities that arose. So we will be alert to opportunities that may arise as a result of this conflict in Eastern Europe.

[Jessica Cantele, executive]

Thank you, Anderson, Sergio.

The last question from [ Carlos ]. Q1 2022, how we see? And will it be in line with Q4 2021?

[Hemerson de Souza, executive]

I will answer this question, [ Carlos ]. So we have already the results of January 2022 not only the Q1. 2022 has good things in terms of the expansion we did but also many difficulties that came from 2021. We noticed, in 2021, inflation, logistics problems, difficulties. And as I mentioned, we have a different situation in relation to Q4, we see an evolution of the company in the year as a whole when we look at the results of 2021.

I understand that 2022, we continue with a moderate optimism. So we began well in Q1 and the same way we signed Q4 last year. So we have maintained the business, good internal work. managing inflation difficulties. But 2022 has only 1 month. There are difficulties. The families' income dropped, so families have -- are having to choose where they will invest their money. But we have a strong circulating fleet, an old fleet that needs our parts, our products. And when we evaluate, for example, garages are working strong, repairing cars. So we're moderately optimistic, moderately optimistic. I believe this answers your question.

And obviously there is no way to foresee. But the results were good last year, Q4 with these effects. And we have to live with this. We made many acquisitions. So when we look at plans, and we know we will have some adjustments, but the rest continues very well.

[Jessica Cantele, executive]

Thank you, Hemerson. Thank you, [ Carlos ].

Now our first question, [ Pedro Fontana ], first question live.

[Unknown Analyst]

Congratulations for the results. I have 2 questions. The first, pipeline of M&A. Do we have anything new in M&A? What regions you are studying? What is the profile of possible acquisitions? And the second question, the new business divisions. Smart Composites and Nione, how is the demand? And will we have new announcements, new projects? And will you be going into new sectors in 2022?

[Sergio Lisbão de Carvalho, executive]

In terms of pipeline, Hemerson can answer.

[Hemerson de Souza, executive]

Thank you, yes. In the last years, as you know, we had expansion in organic way and also M&As. We expanded our product portfolio, our international presence. And in the last 12 months, we focused on stabilizing and integrating these acquisitions. And now we are developing plans for a new phase. Yes, we do have intention in the future, in the near future, to make acquisitions. We have important opportunities. We always have opportunities in Brazil. We will continue studying them. We would like to also have projects outside Brazil to increase our revenue in markets with strong currency.

You should remember that before creating the powerhouse of aftermarket parts, we had 55% of revenue coming from exports or units outside Brazil. With the purchase of Nakata, this dropped to 40%, and we would like to have more revenue in strong currency from abroad. I hope I was able to answer your question.

[Sergio Lisbão de Carvalho, executive]

[ Pedro ], please repeat the second question, and -- please repeat the second question on Smart Composites.

[Unknown Analyst]

Launchings, new products linked to Nione and Smart Composites.

[Sergio Lisbão de Carvalho, executive]

Thank you for the question. The answer is yes. We have a pipeline of projects that began in 2020 with the launching of these new businesses. Nione is -- we have a lot of opportunities. We're looking at the benefits that technology brings to our core products. But yes, we can have other segments, new products until now and explore nanoparticles. Many of you know this can be applied in many industries, not only in automotive. So we can talk about electronics, cosmetics, many applications that will be explored.

Now concerning Smart Composites, we have many products already with prototypes and signing contracts with clients in the automotive sector. As soon as we begin to bill and have revenue, we will inform this to you.

[Jessica Cantele, executive]

Thank you, [ Pedro ]. We have a question. [ Lucas Estevez ].

[Unknown Analyst]

Congratulations for the results. Cost, I would like to ask about cost and the impact on Fras-le, especially with the guidance. What are the assumptions in terms of price of raw materials and fuel and logistics? And what is the effect -- what will be the effect of higher fuel prices?

[Hemerson de Souza, executive]

[ Lucas ], thank you. I believe, yes, we can answer your question, supplementing each other. We evaluate here, between September, October, the effects of inflation, raw materials, linked to the business. And we look for the best results, consultancy companies to give us a vision. But no one tells us that, on February 23, we would have Russia bombing Ukraine. This affects, of course, the situation. What I can say is we have good assumptions. We understand that we will have a year with inflation. We see this, many price increases in chemicals. In metal, the stability that we had is disappearing. So discounts have disappeared in metals, prices are rising.

But we are able to manage these waves that were very difficult during 2021. We managed this. Of course, this affects the price. This makes our products more expensive. We have an impact on demand because products that are more expensive are more difficult to sell. But we work with aftermarket. Sometimes, we have a little more difficulty in some month or another. We have to also look at our competition. So although we have evaluated in a clear way, although we expect less inflation this year -- and now the exchange rate is lower, we don't know the trend for the future. The exchange rate that we used is in our report, BRL 5.4 to a dollar. Now we consider that international freight will have high prices as they are now. And if there is an increase, yes, it will affect.

And I would like to ask Anderson and Sergio to supplement this answer.

[Anderson Pontalti, executive]

I believe it's worthwhile adding something. Most of our cost in friction and a little in foundries is linked to oil and the petroleum chain. But these are commodities used by Fras-le and by all in this segment. So as Hemerson said, we have look at the -- we have to do a follow-up of what our competitors are doing and our purchase -- the purchasing power of the markets that buy our products. We believe that we won't be able to increase margins if wages don't go up.

So as I say, we have an important shielding if inflation goes up. We have opportunities in exports with a higher exchange rate.

[Unknown Analyst]

I'd like to -- you mentioned logistics. What do you expect in terms of improvements in international transportation? And how can this affect the revenue of Fras-le, bearing in mind the war? But what impact do you anticipate?

[Hemerson de Souza, executive]

Well, during 2021, we had many problems. Sometimes lack of routes, lack of containers. We had some cases where we were not able to supply some clients. This is happening. In February, it has been very difficult to manage exports. So these are things that are in our radar. We're working on these problems. Sometimes, you are not able to export $1 million, but you export next month. And this is -- we're looking at this. If we have a drop in the price of freight, it can be an opportunity.

Now we don't see clearly whether we will have difficulty in supplying one country or another. So today, our vision is that things are okay, sales opportunities are great, difficulties in production. Our clients who buy from China, this improved our situation. Freight sometimes hurts, but we're managing this. So I believe it's still early to evaluate the impact. And on a day-to-day basis, we manage things. Sometimes, we lose some revenue this month, but we recover next month.

[Jessica Cantele, executive]

Okay. Our last question. We will answer the other questions by e-mail.

Do we see nonrecurring effects in results in Q1, and also demand for friction material in the domestic market, and acquisitions in 2022?

[Hemerson de Souza, executive]

Thank you, [ Alexandre ]. Some of these questions, we already answered in previous questions. We see a good demand. We maintain our cautious optimism, moderate optimism, especially in the domestic market. There are some lines Sergio mentioned about passenger cars. Parts for passenger cars are more difficult, so not only in brakes, but in suspension, too. Demand is not very strong, but it's normal, but not the euphoria we had last year. Sergio mentioned acquisitions, we're concentrating on the ones we already made. And we want also to -- we have no nonrecurring events. But things are dynamic. And if we have nonrecurring events, we will inform this as we have done.

I will use this opportunity. We answered these questions. [ Ricardo ] from -- for one, mentioned price increases, inflation, we have answered. He also wants to know about Nakata. With a lower exchange rate, we're very positive about this. We're expanding the activities of Nakata, we will answer this by e-mail in a more complete way.

And also Victor from Bradesco, whether we have a separate team to sell Smart Composites.

Yes, we have a special team for Smart Composites. The first offer is for OEMs. We have had a lot of success with road shows, so it's a promising line, Smart Composites.

Nione, yes. It continues with CTR, our great center of innovation. And to keep active, we continue with research. We're very optimistic to give you good news in the future.

[Sergio Lisbão de Carvalho, executive]

Hemerson, if you allow me to supplement. In Nione, we began production last year. The product -- some -- the products are doing very well in the market, volumes growing. We expanded the opportunities adding. Apart from semi-trailers, we're seeing opportunities in trucks. There is a dedicated team to sell this. They are working on these products for trucks. And now also internationally with the possibility of business in Europe for Smart Composites.

Concerning Nione, the first has to do with paints and varnishes, in cooperation with [ WEG ]. So we have a dedicated effort to expand this. And many other fronts exist concerning also cast products, steel applications in semiconductors -- sorry, batteries, cosmetics industry. And the development in each segment is different, Victor. Some are more advanced with enough R&D and now selling. But we need more time to give you more details. But things are really going well. We're very optimistic with these products.

[Hemerson de Souza, executive]

Thank you, Sergio.

[Jessica Cantele, executive]

Thank you, Sergio, Anderson Hemerson. We'd like to close the Q&A session, and now Mr. Sergio will make his final comments.

[Sergio Lisbão de Carvalho, executive]

Once again, thank you for participating. Our Investor Relations team is available to continue this dialogue with you, giving you information about the status of our business.

And I thank you all once again for participating, and we will meet again in the next conference call. Thank you.

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