Mills Locacao Servicos E Logistica SA

BOVESPA:MILS3

Earnings Call Analysis

Earnings Call Transcript 2023-Q2

[Operator]

Good afternoon and thank you for holding. Welcome to Mills live to discuss the earnings of the second quarter of 2023. If you need simultaneous translation, this tool is available on the platform. Simply click the Interpretation button at the globe icon on the bottom of the screen and select the language you prefer, Portuguese or English. For those who are listening to the conference in English, there is the option to click on mute original audio. We inform that this videoconference is being recorded and will be made available at the company's IR website, where you may find all materials of this earnings release.[Operator Instructions] Note that the information contained in this presentation, and the forward-looking statements that may be made during this conference call relating to the company's business prospects, and projections are based on the management's expectations regarding the future of Mills. Forward-looking statements are not a guarantee of performance. They involve macroeconomic risks or macroeconomic conditions, market risks and other factors.I will now turn the floor to Sergio Kariya, Mills' CEO.

[Sergio Kariya, executive]

Good afternoon. It's a great pleasure to meet again to comment on Mills' second quarter of 2023 results. We're proud of what we've done so far and excited with what we're seeing ahead for the second half of '23.On Slide 3, we show the period's highlights. This quarter, we had earnings expansion across all business units, demonstrating our resilience and consistency with our growth strategy. Consolidated gross revenue reached BRL 385 million of the second quarter of '23, up 30.7% compared to the second quarter of '22.Growth was significant in all business unit with an increase of 27% in rental and 79% in Formwork and Shoring compared to the second quarter of '22. Regarding the rental fleet, there was a net addition of 200 machines with an increase of nearly 21% when compared to the second quarter of '22.We ended the quarter with a total of 11,500 pieces of equipment in the fleet, maintaining our leadership in the elevating platform rental market and with the largest electric fleet in Latin America. In addition to having more than tripled Triengel's fleet in less than a year after its acquisition, and becoming already a relevant player in this broad heavy equipment market.We remain confident that our technical excellence, customer-focused culture, capillarity and scale are Mills strengths, and set us apart in the conduction of our business. We posted record adjusted EBITDA of BRL 168 million, the margin almost 50% of the quarter. Net income was BRL 64 million with a margin of almost 20%.We continue to have room on our balance sheet for growth with leverage at 0.7x net debt over adjusted EBITDA. We are certain that the low leverage enhances our use of opportunities in the short and medium term.Investments totaled BRL 81 million in the second quarter this year. And in this quarter, we received the last large PAC of orders for '21 and '22 for the elevating platforms. Our focus in the second half will be to raise productivity given the increase in the fleet in recent months. We also made acquisitions of Yellow Line equipment and continue to make investments along with the signing of new contract, and actively seeking M&A opportunities to bring both knowledge and accelerate growth.The adjusted ROIC recorded in Q2 was 22.1%, reinforcing our commitment with the return for investors in every deal made. Also on this front, we announced IoE for the fiscal year of '23 in the amount of BRL 18 million in the quarter, totaling already BRL 37 million in the year. The advancements on the ESG front have included the start of the fourth cycle of the Transformar Program with the opening of 220 positions in 15 different cities. This is a Mills initiative that grants scholarships for technical courses, focusing on families in social vulnerability, aiming to support the communities where we are present.We also celebrated the rise of 4 positions in the gender diversity ranking at the Teva index, reaching the fifth position. Another important event that brings us great pride was the release of the GPTW ranking early August, placing us in the 15th position among the Best Companies to Work for in Rio de Janeiro. By building a strong and inspiring organizational culture, Mills positions itself as a company that recognizes the importance of human capital to its success.To conclude this slide, I think it's important to mention that the recently announced cut of 50 bps in the interest rate announced by the Central Bank is the beginning of what seem to be a cycle of lower interest rates and consequent boost to the Brazilian economy. This is great news that added to the investment pipeline, including the practices being announced today. The company's great appetite to reach new heights, the expertise of our team and the competitive advantages of the company motivates us to be very excited for the period to come.Moving to the next slide. We can illustrate the proof of the thesis of entering the heavy equipment sector in less than a year after the start of operation. Our heavy unit involves Yellow Line equipment it's implement in trucks. The Yellow Line market is broad and scattered with plenty of opportunity for consolidation, and a very robust pipeline ahead. We replicated changes, business model quickly, and tripled the fleet in less than a year. And even without having the scale of major players, we were able to form partnerships with OEMs, and we were able to acquire a good discount due to our intention to grow and seek a long-term relationship.We increased the diversification of our revenue to resilient sectors of the economies, such as agribusiness and mining support. In the second quarter of this year, agribusiness revenue accounted for 10% of the rentals unit. We are seeing many opportunities and signing contracts through cross-selling, between our business unit.We have already contracts involving our 3 business units, Formwork and Shoring, Yellow Line equipment and platforms with the same client. We increased our revenue predictability by closing long-term contracts, and we have an average duration today of nearly 3 years. This is another important step in Mills' growth and consolidation of our strategy to be a one-stop shop equipment rental company.Carol, I turn the floor to you to comment on the financial aspects of the quarter.

[Caroline Pepe, executive]

Good afternoon, everyone. Kariya, thank you very much for the introduction.On Slide 6, we begin by commenting on the results of the combined rental business unit, which accounted for 83% of our revenue in the second quarter of '23, and includes light and heavy equipment. We have grown our fleet in this business unit by 21% over the last 12 months and the current replacement value is BRL 4 billion. Mills is already a reference in the rental sector, being a benchmark for elevating platform, and an absolute leader in the rental of this type of equipment.We started less than a year ago, our operations in the heavy rental segment, adding the experience of Triengel, tripling its size and hiring relevant professionals in the sector so that Mills continues to emphasize its vocation for leadership and consolidate itself as the largest Brazilian rental company, one-stop shop with complete solutions for customers. We are not intimidated by the competition because we know that our hard and consistent work is what has led us here.We believe that rental is a service that adds value. We have primary maintenance, experienced and trained technicians focused on the needs of each customer in order to always offer the best solution. Our value proposition standout for its focus on ensuring the service quality, safety, and productivity, reinforcing our culture of cultivating fostering long-term relationships with both our customers and suppliers.On Slide 7, we show the evolution of our diversification strategy, seeking greater resilience to Brazilian economic cycles. The rental business unit served customers from a variety of industries that we've demonstrated in the chart on the left of the slide. The distribution between the sectors is more disbursed and it is worth noting the greater penetration in the Agribusiness segment, a resilient sector of the economy, which today totaled 10% of our rental in revenue with an increase of 4 percentage points compared to the fourth quarter of '23.We are diligent with the distribution of our portfolio at a healthy level also in the second quarter. We have more than 8400 clients and approximately 80% of our revenue is pulverized, which reduces the risk of a portfolio concentrated in a few customers. We have the constant concern to increase our client portfolio and the share of wallet in each of them, because we are confident that partnerships are key to success.Yellow Line market is deep, and we believe in the consolidation and growth potential of this market. We believe in the buy to rent conversion and guarantee our customers the best solution with the best equipment, working for the longest possible time and with the necessary safety for the operators.Let's go to the financial highlights of the Rental business unit on Slide 8. Compared to the second quarter of '22, our net revenue grew 30% mainly due to the increase in rented volume and rental prices. Sales of new and semi-new equipment accounted for 8% of the business units net revenue in the quarter versus 6% in the same period last year. The renewal of our fleet is part of our commitment to optimize this lifecycle and with the mix of our fleet.In light equipment, being close to our customers is important, and we also offer solutions that optimize this contracting and mobilization through our logistics project, bringing even more quality to the service provided. There are 56 branches ready to serve customers throughout Brazil.Speaking of the Yellow Line, our solution is complete, and we have learned a lot so far. Contracts are analyzed individually as project finance. We price each of them according to the use, wear and residual value of the equipment. We have signed long-term contract with an average duration of 3 years and brought greater revenue and cash predictability to the company.We improved our EBITDA margin compared to the first quarter of '23 by 2 percentage points. It is important to mention that we had expenses with the adjustment of the company's structure in the amount of BRL 1.1 million. If we exclude these one-off expenses, we would be left with the margin in line with the second quarter of '22, a period in which there was not yet the Yellow Line structure at Mills. We understand that we have more opportunities for cost and expense dilution as the Yellow Line business becomes more relevant, and as the number of the branches increases. These structural adjustments carried out in the second quarter of '23 do not affect our ability to grow, and we reaffirm our commitment to continue increasing our efficiency.Moving onto the result of Formwork and Shoring as we had predicted in our last communication with the market. We have observed a good momentum, and relevant growth in the performance of this business unit, mainly due to the pipeline of infrastructure works and the resumption of the civil construction industry.Net revenue increased 79% compared to the second quarter of '22, mainly due to the better prices in place. When we look at adjusted EBITDA, we see a value 175% higher than in the second quarter of '22 with growth of 21 percentage points in the EBITDA margin in the year-on-year comparison. In comparison with the previous quarter, it is necessary to compare the results by excluding the strategic one-off sale of semi-new assets of BRL 10 million in the first quarter of '23 and removing as well the expenses with the structure adaptation in the second quarter of '23 of BRL 700,000. With this, we see an improvement in pro forma adjusted EBITDA from 58.6% in the first quarter to 60.5% in the second quarter.On Slide 12, we show Mills consolidated results, the comparison with the second quarter of last year. We can see growth in all business units, which generated a 36.5% increase in net revenue. Compared to the previous quarter, growth was 7.4% excluding the strategic one-off sale in the Formwork and Shoring unit in the first quarter. Adjusted EBITDA was 42.4% higher compared to the previous year and the margin was higher by 2 percentage points, totaling 49.7%.I'd like to draw your attention to our pro forma adjusted EBITDA margin, where in the first quarter of '23 we had an extraordinary revenue from a strategic one-off sale in Formwork and Shoring. And on the second quarter, we had an expense related to the adaptation of structure, which will bring annual savings of BRL 10.5 million. If we exclude these 2 one-off event, we would have gone from a margin of 48.7% in the first quarter of '23, to 50.2% in the second quarter of '23. We remain confident that our pillars and our strategy form a solid foundation for Mills' growth.On Slide 13, the chart on the left shows that our net income reached BRL 64 million in the second quarter of '23, 1.4% higher than the second quarter of '22. The BRL 900,000 variation in the period is the result of the increase in EBITDA in the second quarter of '23, being impacted also by a higher financial expense as a consequence of higher gross debt. The refund of the deferred income tax by SK Rental, that was an acquisition in the second quarter of '22 in the amount of BRL 14.2 million and the increase in depreciation expenses as a result of the fleet increase. Net margin went from 25.5% in the second quarter of '22 to 19% in the second quarter of '23, mainly due to the increase in financial expenses in the second quarter of '23 and that refund of the deferred income tax of SK Rentals in the second quarter of '22.Excluding the effect of SK's chargeback, the net margin in the second quarter of '22 would have been 19.7% at the same level as the -- as registered in the second quarter of '23. The effective rate of income tax and social contribution in the period was 28%.Cash flow, on the other hand, demonstrates that the company continues to generate operating cash, and the reduction in flows is mainly explained by the disbursements related to the acquisitions of rental assets made in previous periods, and the payment of profit sharing to employees in the 2022's results that occurred in the second quarter of '23.I'd like to emphasize that we are attentive to address our pace of investment according to the movement of the economy and optimize the allocation of capital at Mills, seeking the best return for our shareholders. In light rental, we received in the second quarter of '23, the last large batch of orders strong '21 and '22. In the second half of the year, our focus will be on raising productivity given the increase in machines in recent months. With that, we postponed most of the purchase orders related to the new machines to 2024. In heavy equipment, we continue to invest along with the signing of new contract and evaluate strategic opportunities for equipment acquisition and M&A to accelerate growth.To conclude on Slide 14, I present our capital structure, highlighting our solid balance sheet and low indebtedness, which allows us to capture growth opportunities. We closed the first quarter with gross debt of BRL 953 million, BRL 523 million in cash and BRL 430 million in net debt. Our gross debt is composed almost entirely of debentures and has 89% of its payment expected for the long-term. We maintained our average cost at CDI plus 2.24% in the second quarter of '23 compared to the first quarter of '23.I would also like to mention the funding -- our fund-raising in foreign currency amounting to BRL 100 million with swap for rate hedge and exchange variation at a cost of CDI plus 2%, below the average cost of the company, reinforcing our continuous search to improve the capital structure and optimize Mills' cost of debt. The spending was made through 2 banking institutions, 1 of the issues was completed without covenants and in the second issuance we were able to improve our covenants performing the increasing robustness of our balance sheet. The indicators were more flexible than previous issues. The net debt over EBITDA ratio went from 2.5x to 3x and the short-term net debt over EBITDA went from 0.75x to 1x. Leverage reached 0.7x net debt over adjusted EBITDA ratio in the last 12 month. This guarantees us another quarter of fulfilled covenant. We have room to leverage the company, an appetite to do so, to continue to grow in our Light and Heavy segments.Given everything we've said, I can only thank again Mills' employees for their tireless efforts and constant dedication. We invite our shareholders, investors and stakeholders to continue following our journey, because you are an important part of what we're building.Kariya, thank you, and the floor is yours.

[Sergio Kariya, executive]

Thank you, Carol. To close our presentation, I want to highlight some points that demonstrate our strategy to leverage the company's growth in all businesses. We believe that the recovery of the macroeconomic scenario, driven by the reduction in the interest rates, and the strong pipeline of infrastructure investments that we will have in the coming years in Brazil will be very positive for the company.Going to the Light Equipment segment. We must continue our work of disseminating the concept of the elevating platforms, showing that it is the safest equipment, and the most productive for our customers. In the coming months, we'll have an increase in the utilization rates due to the maturing of the strong investments we've made in platforms in the fourth quarter of last year, and in the first quarter this year, due to the increased demand in the second half.We continue with an appetite to grow the number of branches and should open around 5 branches this year. In addition, our ramp-up at the branches we opened last year continues. We have several directed commercial actions by region, that -- with a focus on increasing penetration in new and current customers.In Heavy Equipment, this segment is an important avenue for growth, and it will be increasingly relevant to the company's results. With a large and pulverized addressable market still with low penetration of the concept of equipment rentals, we see many opportunities for consolidation by our organic and inorganic growth. The concept of buy versus rent, it's still little disseminated in Brazil. And we've been able to help spread this concept by showing the benefits that rental offer to our customers. We are seeing significant cross-selling opportunities between the businesses. We have already signed, as I said, contract involving Formwork and Shoring platforms and Yellow Line. We continue to increase our cash generation predictability with long-term contracts.In Formwork and Shoring, we prepared this business unit to be strong cash generator in the coming years, and we have a positive scenario for the coming years. The infrastructure sector continues to heat up, especially with this exposure to the new PAC, the construction market also continued with strong demand, and will benefit from this next cycle of interest rate reduction. We focus on the profitability of the business, which will have strong cash generation given the low need for investment in coming years.Finally, I'd like to mention that we have a balance sheet with room for leverage and to seize opportunities. We combine a robust low debt capital structure with a cash -- generating operation, financial strength so that we can advance our growth plans and consolidate the expanding market. The growth we experienced is planned and executed with discipline, driven by our M&A experienced over the past 2 years without losing pace to ensure that our margins and returns are attractive.Our operation is very well structured to offer the best service as a rental provider of light and heavy equipment, which support the ambition of being a one-stop shop rental company. We have many levers in our favor, such as our capillarity and robust balance, always offering our customers operational excellence, reliability and differentiated service.We thank you for joining us and are available to take your questions. Thank you.

[Operator]

[Operator Instructions] First question Luiz Capistrano, sell-side analyst Itau BBA.

[Luiz Capistrano, analyst]

I'd like to discuss 2 things, first you mentioned briefly, but it'd be nice to hear more about exposure in the government's program the PAC that Kariya mentioned at the end of his speech. It would be interesting to understand now that we have more details with the recent announcement made by the President, what do you think in terms of the size of the program? It attracts our attention in Italy compared to recent program, should we be really bit excited or any expectation on the timeline from when they should start reflecting on your results? I think it's going to be overlapping with the effect on that infrastructure pipeline that was already bid in recent years. So if you can give us more details these PAC program, it would be excellent.The second point that I'd like to share more you've been mentioning on releases in today on your speech about better utilization rate, especially on elevating platforms for the second half. What we can expect in terms of margin improvement. Do you have numbers that can help us and guide us in terms of utilization thinking of EBITDA margin of the Rental segment?

[Sergio Kariya, executive]

Luiz, the first point on your question about the new PAC, P-A-C, I think the main point there is that there strong investment in the Minha Casa, Minha Vida housing program, both for financing and construction. It is important to say, we had little penetration there. But everything else the resumption of works of highways or ports, airports that may potentially be resumed during this project. We have exposure there for all of our 3 business units for Formwork and Shoring with the works on the previous PAC program to be concluded for elevating platforms as well and now with our entry in the Yellow Line equipment. As for the elevating platform for the second half, just last month, we've been seeing strong traction in terms of demand. We were stable relatively between the first and second quarters, and we started to see a relevant inflection since last month. And this month, the first 10 days of the month we're -- no different and we're very optimistic.As for margins, our pricing is stable. We are maintaining a stable. We're not yet seeking -- considering that in our viewpoint there is no room yet for us to raise prices at this time. Maybe during the second half of the year. But in terms of margin through prices, it should not increase. What should increase is a little bit of what Carol was saying. Further in the second quarter, we had some adjustments in G&A. We had a one-off impact in terms of expenses that had almost BRL 2 million impact and in the next 12 months annualizing the -- the savings should be of around BRL 10 million, and that should help the margin as well as the dilution as we will continue to grow in the Yellow Line. Light equipment will probably benefit from the G&A dilution and the reduction we did, but not as much in terms of price as I said.

[Luiz Capistrano, analyst]

That's very clear.

[Operator]

[Operator Instructions] Next question, Felipe, Investor, and it is the following. And this -- as far as macroeconomic scenario, the company -- did the company see an increase on the delinquency from its customers?

[Caroline Pepe, executive]

Thank you for your question. Actually, we had better results in terms of delinquency in this period, even better results when we compare it to the previous year. We are watchful of this topic. We're keeping track of it very closely. But until the second quarter, we do not feel that on Mills' results.

[Operator]

[Operator Instructions] Next question, Carlos buy-side analysts. And Carlos's question is, can you explain a little bit more of the cash flow to us highlight the strong disbursement in suppliers and minus BRL 81 million. How should this line evolve and the profit share of BRL 26 million, how should this evolve and what metrics are considered here?

[Caroline Pepe, executive]

For your first question, cash flow is a reflection of the equipment purchase that we made in the fourth quarter and the first quarter. We had an increase a net increase of 1,000 pieces of equipment to our fleet. So these equipment came very strongly in the fourth quarter and in the first quarter and that's why we see a higher disbursement in the first half. When you look at the second half, we'll go back to the historical levels of Mills' cash conversion between 80% and 85%. What happens in the first half of the year, we have a lower conversion. But if we look at the second half of last year, conversion was more than 95%. So on average, we can expect to maintain our cash conversion from EBITDA to cash, between 80% to 85%. It's a one-off, effect in the first half of the year because of that strong arrival of equipment.As for your second question, we have a target of BRL 26 million. We had a payment now referring to the targets met in '22. The year 2022 was very positive where we exceeded our targets, and our targets are combination of corporate and individual targets. In terms of corporate targets, we have targets linked to the organizations financial results performance, we have targets related to sustainability, and to our operations. So it's a set of corporate targets. And then we have a second set of targets, which are individual or relating to a specific group, which are specific targets for each one of the department, but that's how we break it down. The main indicators of our profit sharing program. And Carlos, just to add in the long-term, the company -- executives are always aligning through the delta atop for [ EBITDA ] generation and that's -- based on that we do the payment of executives.

[Operator]

Next question, Carlos Alberto, Investor.

[Unknown Analyst]

Good afternoon. Congratulations for the results. We spent the last year talking about the Phoenix project with this CapEx already, how is this already used CapEx impacting the company's OpEx now with the machine ready?

[Caroline Pepe, executive]

Carlos, Phoenix too has very few machines for this year, '23. We did almost all of it last year and a lot of these equipments are already on rent. So they're already generating revenue to the company. So both CapEx and OpEx, depending on the classification that we had in the maintenance of those assets have already been allocated we're already allocated last here. As I said, very few for this year of '23 and the equipments are already rental ready, either already rented or ready for the right time to be rented. And just adding until now, we have 732 machines that went through maintenance through the Phoenix projects, and they are already re-leased, cleared.

[Operator]

[Operator Instructions] Next question again, Carlos Alberto, Investor. His question is, have you already analyzed the debt issuance via CRIO or CRA with a lower cost?

[Caroline Pepe, executive]

We're always looking at alternatives and financial instruments for the debt in the market and the issue that we had at the end of the year, we looked at the detail of CRA, but we were able to get a better cost through debentures. So the entry in agribusiness, we know allows us to be exposed to new financial instrument. So we're constantly looking into this and analyzing them to choose the best option, but CRA and CRI are 2 instruments that are always in our pipeline. We're always looking at them.

[Operator]

[Operator Instructions] Next question, Matteo Solaris buy-side analysts Market Makers.

[Unknown Analyst]

Good afternoon. Congratulations on the results. Could you give us more details about the process to acquire new clients in the Yellow Line and how is idleness?

[Sergio Kariya, executive]

Matteo, thank you for your question. I think it's interesting to talk about this. We talked a lot about this during our speech. We tripled the size of the fleet acquired with Triengel via organic growth. We already have 80% of utilization rate of these equipments, and we're very optimistic considering what we see in terms of pipeline. And this strongly proves the thesis that the market is deep. Just to remind you again we've been declining on all short-term contracts. We're focusing the company's efforts to the strategy that we're seeking to increase predictability of cash flow, focusing on long-term contracts and the pipeline is very strong, we're very optimistic for the second half.

[Operator]

Next question [ Caio Loserda ], buy-side analyst, Venture. The question is how do you see the Yellow Line market vis-a-vis the competition and contract level?

[Sergio Kariya, executive]

Caio, adding to the answer that I was giving earlier, the market is quite deep. So of course, we meet different players, depending on the type of market we are looking at. But it's rare for us to take always the same players on. So it shows again the dispersion of the market versus how extensive this market is. And that's why this kind of proves our thesis in terms of the size and expansion of the market, and we are very optimistic. Looking forward with this business units with heavy equipment and so on.

[Operator]

Next question, Marcelo Arazi sell side analyst, BTG Pactual.

[Marcelo Arazi, analyst]

We saw an increase of exposure to the agribusiness industry, which has been proving very resilient. How do you see this exposure from here on out, do you think of any M&A in order to grow faster in this industry?

[Sergio Kariya, executive]

Thank you, Marcelo. Yes, we're still focused on the Yellow Line market acquisitions not only in the agribusiness industry, but also in view of other industries. I think it's important for the company, as we did with Triengel to add knowledge for us to be able to accelerate growth after acquisition. We've been growing in other areas in our other main pillars in the Yellow Line markets organically.And in agribusiness, I think there's always the crop season and the off season and the off season that's usually the phase when the company end up contracting has already gone. It's come and gone and so, from the second quarter on the quarter, volumes start to -- the volume start to reduce.It doesn't end, but it goes down and we work to increase this exposure. If you looked at one year ago, we had 1% of agribusiness share in Mills' results, and with the acquisition of Triengel we went to 6 and today we're at 10%. So we've been working hard and focused on growing in more perennial industries, more resilient sectors of the Brazilian economy.

[Operator]

Next question, Marcelo from Everest.

[Unknown Analyst]

There is 2 questions. As for the investments in shipyards announced that this PAC program, would that be a potential line of business for growth for the company. And the second question is the percentage of exposure of the revenues to agribusiness. The company expects to reach in the long-term?

[Sergio Kariya, executive]

Well, Marcelo about shipyard, yes, in the past, we had relevant spare when there were a number of shipyards being built. We do participate today in the shipyards, and so in the South Rio de Janeiro, the Northeast of the country and without a doubt, an increase of investments in this industry will bring more opportunities for us to increase our exposure. We're optimistic with that.Agribusiness is a little bit of - what I will say, and we don't have a specific target. We're focused on growing, and increasing our share our positive exposure in this -- in the most resilient sectors of Brazil's GDP.

[Operator]

Next question, [ Felipe Zubeti ], Investor. Without giving us a guidance, what's the perspective of increase of indebtedness to increase market share in Yellow Line?

[Sergio Kariya, executive]

On the long-term, of course, this is not a guidance. But on the long-term, we want a better balance. If you remember, when we gave the presentation introducing Yellow Line on News Day 2 years ago. We wanted to bring a product that would increase the company's participation in longer-term contracts that could also join the company into more perennial sectors, where there's less application for elevating platforms. For example, that's why it strengthened our thesis for entering Yellow Line and heavy equipment. And as a result, over time, the company wants to balance this in order to bring again revenue predictability. So we want this business unit to gain important relevance. But regardless, we're still looking at all adjacent products that are related to the products we have, so that we can add. As we mentioned in our presentation, what we are seeking for the long-term is to be a one-stop shop company. So that's the central goal, and we're seeking that and moving towards that end.

[Operator]

Our next question, Carlos Alberto, Investor at Alford Capital.

[Unknown Analyst]

Oil and gas scenario for Mills, have you ever thought about this industry?

[Sergio Kariya, executive]

Yes. And we already participate in the oil and gas industry. Not only refineries, we're present with generators, compressors, and elevating platforms. I think there was a question about shipyards earlier. Shipyards and their participation in the oil and gas industry, we also have equipment there. And of course, the investments that will be made in this area also open a path for us to continue to grow. We participate of renovations. When there is FPSOs or tips, renovation that's very constant in our application. So we do participate. And as I said, today, especially in elevating platforms, generators and compressors.

[Operator]

Next question, Alexandra Assaf.

[Unknown Analyst]

Congratulations for the results. Does the company consider making any international M&A?

[Sergio Kariya, executive]

Well, Alexandra, we have a lot of room in Brazil with everything we're looking at, everything we want to offer our clients and the product, there's -- a lot of base in the country to diversify the portfolio to get a better market recovery -- market coverage. So our focus at this time is 100% on the domestic territory.

[Operator]

[Operator Instructions] Next question from Hugo.

[Unknown Analyst]

About the oil and gas scenario for Mills. That question was already answered, Hugo Carlos' question.

[Operator]

Moving to the next one, Mauricio, buy-side analyst.

[Unknown Analyst]

Congratulations for the results. Is there a lot of platforms entering Brazil? How does this affect the competitive environment?

[Sergio Kariya, executive]

Mauricio, what happened actually considering the stress on the supply chain, was the concentration of equipment entry in the fourth quarter of last year and the first quarter this year, which led to a slight imbalance between supply and demand, but it was a one-off event. We're already seeing this balance restored, demand continue to grow. So we were able to balance this off, and we're seeing growth for the second half of the year. And then it goes back to its natural course considering that the global supply market is already regaining balance in terms of lead time, and so on. And we see a normal pace of business, the normal course of business from here on out. We're optimistic with the second half as we said, and we're seeing a traction of demand, our closings of well started to grow in June very strongly. So we're very optimistic for the second half of the year.

[Operator]

We now close the question-and-answer session. And I would like to turn the floor to Mr. Sergio Kariya for his final remarks. Please, Kariya, you may go ahead.

[Sergio Kariya, executive]

Thank you, everyone, for your interest and participation at our earnings conference call for the second quarter of 2023. Our Investor Relations team is at your disposal if you have any doubts. Thank you very much. Have a good afternoon and great weekend.[Statements in English on this transcript were spoken by an interpreter present on the live call.]