Mills Locacao Servicos E Logistica SA

BOVESPA:MILS3

Earnings Call Transcript 2022-Q3

[Operator]

Good morning, and thank you for holding. Welcome to the earnings live for the third quarter of 2022 with Mills. I highlight that if you need simultaneous translation that this tool is available on the platform. For that, simply click on the interpretation button on the globe item at the bottom of your screen and select the language of your preference. See the Portuguese or English.

For those who are listening to the conference in English, the option to mute original audio in Portugal is by clicking new to original audio. We inform that this conference call is being recorded and will be made available at the company's IR site, where the complete material of the earnings release is available. [Operator Instructions]

Note that the information contained in this presentation and statements that may be made during the conference call related to the company's perspectives and business as well as projections are forecasts based on the management's expectations regarding the future of Mills. Such forward-looking statements are not a guarantee of performance. They involve macroeconomic conditions, market risks and other factors.

I will turn the floor to Sergio Kariya, Mills' CEO.

[Sergio Kariya, executive]

Good morning. We thank you for your presence in our earnings live for the third quarter of '22. We begin this meeting reinforcing the message that we are very aware of our current position and where we want to get to. We celebrated this year, 70 years since the company's foundation in August. And our history is a motive of pride. We are a resilient company, both in the execution of our daily work and in the integration of new companies during this growth journey.

We work in a company that is already a reference in the Rental segment. We are the benchmark for elevating platforms and complete leaders in the rental of this type of equipment, holding 30% of market share in Brazil.

It's also worth noting that in mid-2022, the Excess 50 Ranking published by Excess International, a global reference in the industry, points Mills as the 24th largest elevating platform rental company in the world. We combine a robust capital structure with low indebtedness level with a cash-generating operation, strong financial points for us to move forward in our growth plans as Carol will talk about next when assessing our results.

We are a listed company and have been for more than 10 years with a mature corporate governance process, a dedicated team and experienced leadership in maintaining transparency and respect to our shareholders, employees, customers and suppliers.

Nova Mills has a robust base to consolidate the expanding market. The rental market is still very fragmented with huge potential for growth. We started our activity in the heavy Rental segment, combining Triengel's experience and relevant professionals in this industry for Mills to continue emphasizing its vocation for leadership.

We also added to these points that the growth that we experienced is planned and executed with discipline without losing pace to guarantee that our margins and returns remain attractive. As you see in our history, each of the M&As that we carried out has added learnings, know-how and made us faster to harvest results from such investments.

Our operations are well structured to provide the best service as a light and heavy equipment rental provider, which sustains the ambition of being a one-stop shop company in rentals. Today, we are already partners of our more than 8,400 customers, improving security and efficiency of their activities and operations. Our expected capillarity puts us close to various companies, and we have the appetite to serve many other Brazilian companies in all regions.

Finally, it is clear that we have many drivers in our favor. Generation of value to shareholders and to other stakeholders is always in our horizon. With that said, we'll move on to the highlights of the period in the next slide.

For the highlights, I have the pleasure of announcing that our third quarter of 2022 registered a record net revenue at BRL 282 million and BRL 65 million of consolidated net profit. These numbers are 46% and 106% higher, respectively, in the year-on-year comparison. These figures reiterate our vision about the potential of the Rental business in Brazil and gives us confidence in the strategy and execution capacity of our company and our team.

The ROIC is at a -- maintained at a high level, above 20%, while adjusted EBITDA reached BRL 131 million at a margin of 46%. Considering the growth in our results, another highlight is the strong capital allocation of the company. We have invested BRL 206 million this quarter, representing an amount almost 13x higher than the amount registered on the third quarter of '21. This value considers the acquisition of Triengel in the total amount of BRL 134 million, in addition to the BRL 72 million referring to the acquisition of equipment for rental, investments in technology, consumer goods and the adjustment of branches.

In addition, we continue with our geographic expansion. Mills has reached the mark of 53 branches throughout Brazil, which strengthens the differential of being close to our customers constantly seeking to increase penetration of the concept of machine and equipment rentals. What full of a greater profitability for our shareholders, as far as the company's share buyback program, we have acquired 1 million shares in the third quarter of '22 with a financial disbursement of BRL 7 million. And there is still a balance of more than 9 million shares for us to buy back until September 23.

We confirm Mills' entry in the Yellow Line market with the conclusion of Triengel's acquisition on September 13. We have already received and rented the first pieces of machine. And the revenues will bring results next year. And as informed, we have executives dedicated to grow in this segment. The advantages of this movement are clear. The relevant addressable market, as we had already demonstrated of more than BRL 25 billion, disbursement in a process of consolidation. Diversification of our product portfolio, which have commercial and/or operating synergies and a greater predictability of cash flow, those who what we seek in terms of long-term contract profile and the increase of the exposure to more resilient segments in the economy.

I also point that in October and November, 2 relevant banks have announced they will begin covering our shares, BTG Pactual and Itau BBA, with target prices of BRL 18 and BRL 19, respectively. We have been working actively, seeking more exposure and an increase in liquidity as our growth plans continue to develop with responsibility, guaranteeing quality in the service provided. We are prepared and optimistic to enjoy all of the opportunities ahead.

To highlight our operational economic and financial performance. We have also moved forward in our sustainability journey over the last 3 months. I have the pleasure of announcing many important accomplishments. For example, at the end of August, our employees certified us for the second consecutive time as one of the Best Places To Work at to the assessment process of GPTW, Great Place To Work.

As a reflection of our commitment to increase the number of women in leadership positions by 2025, Mills was listed on the top 10 female leadership ranking for the Teva Index, an indicator that maps women leadership in companies around Brazil. We have launched a tool that fosters environmental sustainability in our business chain, our CO2 emission calculator.

I reinforce that our team is a team who works together to meet the objectives. And that's why we celebrate another quarter of accomplishments today.

I turn over to our CFO and IRO, Caroline Pepe, who will present our financial results.

[Caroline Pepe, executive]

Good morning. Thank you, Kariya. Let's look at Mills' performance on the third quarter of '22 as of Slide 6. Starting this quarter, we report our rental fleet following the market practices, in consolidated numbers, considering the total of pieces of machinery and equipment at the business units, including light, platforms, generators, compressors or heavy the Yellow Line equipment.

In the last quarter, the fleet increased to 475 in absolute numbers, exceeding the mark of 10,000 pieces of equipment, which replacement value is higher than BRL 3 billion. These numbers are a result of our organic and inorganic investments. In our schedule, we have more than BRL 600 million in contracted orders by the end of '23, where approximately BRL 200 million are still for the fourth quarter of '22, which will add 800 pieces of equipment to our fleet. As the new equipment arrives, we will evaluate the equipment rental demand to determine the number of machines to sell in the secondary market.

The company works to maximize the machinery life cycle purchase rental and sale. The price is practiced in the sale of elevating platforms or use elevating platforms corresponds today to 30% to 35% of the value of a new asset with an average age of 12 to 15 years.

In the case of Yellow Line, the equipment life cycle and the value of the sale depends greatly on the area of activity, our meter and intensity of use. So with that, we estimate sales values between 30% and 60% of the replacement price of the machine and cycles between 4 and 10 years.

As announced by Valor Economico in September, only federal projects already signed or auctioned as of 2019 for investment in the infrastructure add approximately to BRL 925 billion for the next 10 years, according to the Ministry of Finance.

Mills is fully prepared to make the most of this long economic expansion cycle, participating in the development of Brazil, and we have available a robust fleet of equipment for rental, expertise in the management and maintenance of assets as well as know-how to make this operation profitable.

On Slide 7, we present our rental revenue per segment of activity. Our revenue's diversified base guarantees greater resilience to negative impacts of economic cycles as we serve different sectors. In addition to the 33% of revenue originated with the construction industry, 14% are from customers in the steelworks and metalwork sector, 9% from chemical and petrochemical industry, 8% for service and so on, as you can see on the chart. The entry in the Yellow Line market will contribute to increase our share as well in these and other segments that are relevant in the economy such as agribusiness and ports.

In another perspective, we highlighted as we have a diverse base of customers with the 20 largest customers representing 16% of revenue in this quarter, and the 5 largest customers are responsible for only 7%. This makes us resilient to face economic cycles as we don't depend on any single customer or industry.

In addition, this fiberization of revenue or rental net revenue demonstrates the evolution of equipment rental activity, greater penetration of the concept of the use of live platforms in Brazil and the success of implementation of our diversification stage strategy for the revenue and customer base.

On the following slides, we can see how the operational performance translates into the financial performance of this business unit. Net revenue at rental amounted to BRL 241 million with significant growth at 43% compared to the third quarter of '21. This increase is mainly explained by the higher rental revenue that increased 49% in this period. The increase of BRL 72 million in revenue was due to the increase of volume rented; a reflection of the increase in the size of the fleet; and the higher usage rate and the higher average ticket, especially due to price increase. The increase in rented volume is a result both of the increase of market share in places where Mills already worked. And in the opening of new branches that reflect the company's strong growth strategy seeking to maximize capital allocation.

It's important to note that the results of this quarter consider only 1 month of the heavy rental results, with the conclusion of an acquisition of 100% of our Triengel and the arrival of the first pieces of equipment in the Yellow Line in September. Sales revenue in the third quarter of '22 is in line with the values presented in the third quarter of '21.

In 3Q '22, 121 semi new light equipments were sold compared to 140 units in the third quarter of '21. In addition to the increase in the average sale price, there was also a change in the difference in the mix of equipment impacting total revenue.

When compared to the previous quarter, net revenue in the third quarter of '22 was up 11.9%, mostly due to 11.7% increase in the rental revenue and a higher sales revenue. The increase of 22.6% in sales revenue was due to the largest sale of semi new equipment as a result of the arrival of new platforms for rental.

Compared to the previous revenue -- the previous quarter, net revenue increased 12%, also due to the greater rental revenue and greater sales revenue driven by the sale of semi new machines. In the quarter, adjusted EBITDA amounted to BRL 113 million, an amount 53% higher than in the third quarter of '21 and 12% higher when compared to the second quarter of '22. EBITDA margin reached 47% with an annual increase of 3 percentage points.

On Slide 10, we now move on to the units of formwork insuring. In the third quarter of '22, net revenue was up 72% compared to the previous year, due to the higher revenue with rentals that increased 88% in this period as a result of the higher average ticket practice and the higher rented volume.

Compared to the previous quarter, net revenue expanded 28%, a result of a higher rental revenue that was 31% above the second quarter of '22. Adjusted EBITDA at this business unit amounted to BRL 18 million, a value that is 207% larger than what was recorded in the third quarter of '21 and an EBITDA margin of 44% due to the increase in demand from the Infrastructure segment.

As we said before, the company, over the last few years, has reduced its capacity and form work insuring, and the total weight of equipment at this business unit today is at about 51,000 tonnes.

Mills has the capacity to meet the construction sectors' growing demand, both through the supply of form or insuring used in major engineering works and in the rental of machines and equipment used in the different activities of the segment.

Looking at the consolidated results on Slide 12, we see that Nova Mills continues to grow at a fast pace in a profitable way, with significant advances at each quarter. Net revenue was 46% higher year-on-year and 14% higher compared to the second quarter of 2022, amounting to BRL 282 million. This increase in revenue is a result of our initiatives to reach higher and higher levels of results, expanding our customer base further and expanding Mills' activities around the country. We have already opened 13 branches this year, and we have more than 8,400 customers.

Consolidated adjusted EBITDA amounted to BRL 131 million, 64% above the third quarter of '21, with a margin of 46%, which demonstrates the continuous evolution of profitability, also driving cash generation.

On Slide 13, we see the evolution of net income. That increased 106% compared to the third quarter of '21, totaling BRL 65 million in the period, with a net margin of 23% compared to 16% of margin in the same period of the previous year.

In the second quarter of '22, there was a write-down on the income tax, the surplus referring to the acquisition of SK Rental causing the deferment of BRL 14 million in income tax in the period. This benefit has not impacted the third quarter of '22. Therefore, if we exclude this benefit, the effective rate for the second quarter of '22 would be 26%, in line with the 25% on the third quarter of '22.

In turn, net margin without the effect would be 19% in the second quarter of '22 compared to 23% in the third quarter of '22. We remain a company with a strong cash generation capacity, registering operational cash, adjusted operational cash flow of BRL 97 million in the quarter and a use of BRL 76 million of adjusted free cash flow impacted mostly by the disbursement referring to the payment of the Triengel acquisition. Our commitment is with an efficient operation and proactive financial management, generate increasing results and maximize return to our shareholders. We have a very well-defined strategy with a clear growth road map, both in the organic path and inorganic path.

On Slide 14, we show the company's debt profile on September 30, 2022. The duration -- average duration of our debt is of 2.4 years with a spread of 2.3% per year above CDI.

The first chart shows that net debt comes from a gross margin of 478 million square, 468 million is the principal and 10 million is referring to interest. Excluding our BRL 417 million in cash registered in the third quarter of '22, we have a net debt position of BRL 61 million and indebtedness of 0.1x net debt over EBITDA. We have 21% of the debt planned for payments in the short term and 79% for payment in parts of 12 months by 2027, according to the time line, you can see in the chart below. 85% of the debt refers to the 3 debentures issued in 2020 and 2022.

As mentioned before, the company's efforts have been recognized, and S&P rated the company with BrAA- in August 22. Our strong balance sheet, strong cash generation and financial responsibility have also enabled an improvement on Mills' rating as released by Fitch Ratings in September 22, and it is now a higher level from its A versus A-.

The low level of indebtedness makes us comfortable and gives us opportunity to continue with our growth strategy, both organic and inorganic. We maintained our discipline in the capital structure management and are prepared to grow and make the most of the opportunities in the market.

Finally, on Slide 15, I would like to point that the company's consolidated ROIC is at 23.2%, a value that is higher than our average cost of debt showing resilience and profitability even in a scenario with high interest rates.

Our ROE was up 15.9% in the quarter compared to 6% in the third quarter of '21. Please note that the company presented growth of 76% in the value of its shares in the first 9 months of '22 and 110% until yesterday's market close, a result of the market's positive perception of the good businesses and good results released by the company in the last period and of what's to come in the future.

To finalize, I would like to reinforce that we are a company that is constantly seeking to generate value to all its stakeholders through a business model that fosters sustainability, through the use of asset optimization and efficient, profitable and responsible operations. We remain motivated in our path towards becoming a one-stop shop rental company. We already provide a wide range of machines and equipment and keep a close eye in products -- new products that can add synergy to our portfolio, always offering our customers, operational excellence, reliability and differentiated service.

We remain available to our shareholders and investors and reinforce our commitment with the delivery of positive results to all of those who believe in Mills. We are now available to clarify any of your doubts. Thank you.

[Operator]

[Operator Instructions] Our first question, Fernanda Recchia, sell-side analyst, BTG Pactual.

[Fernanda Recchia, analyst]

Can you all hear me?

[Sergio Kariya, executive]

Good morning, Fernanda. We're hearing.

[Fernanda Recchia, analyst]

Congratulations on the results. Two points that I'd like to talk about. First, about Yellow Line. If you can tell us -- we know you used to have the 225% of organic CapEx. I understand it's not a representative. Share was done in Q3. So how much should we think about in terms of allocation in fourth quarter and first quarter of '23? And thinking about coming years, how should we expect this recurrence of investments in Yellow Line? Could we assume a level close to 400 million per year? Does it make sense to think about an annual investment along these lines?

And the other question is about productivity. This quarter, you stopped releasing the usage rate. So trying to get a proxy for rental rates, what would be the average -- we would use the revenue divided by replacement costs, getting to a level of 2.5 per month, and that remains flat, right? So I'd like to understand, how much of the flight performance was impacted by mix, especially yellow line that I understand the yield is still slightly lower than the average you were achieving. And looking forward, what we should expect in terms of productivity?

[Sergio Kariya, executive]

Thank you, Fernanda, for your questions. Let me start with the first one. We have already started receiving some pieces of equipment in this fourth quarter of this year, but this equipment will start generating revenue in the first quarter of next year. Most of the investment made BRL 225 million so that we can go to BRL 5 million BRLs, will be received by the middle of next year. So I would not expect a lot of revenue realized yet in the fourth quarter, will start in the first quarter of next year onwards.

As for CapEx recurrence, we're not opening this information being conservative. We're only seeking long-term contracts. There's a lot of demand with shorter -- the terms that are shorter than 1 year. So we're declining. We're focusing on long-term contracts. And the idea is that as soon as we are more comfortable allocated with all the pieces of equipment we acquired, we will seek new investments. And then potentially, we may start to open some of the volume to the market of what we expect. So at this time, we're not releasing this.

As for productivity, I think your math is right. The rental rates, what you need to watch is that it's always based on gross revenue. I don't know if you looked at gross revenue or net revenue. But what has been bear eye and the Triengel impact is very small at this time. We had half a month, just over half a month consolidated in our balance sheet.

But effectively, when you look at our business, we have been increasing volume a lot, not only in the number of machines that we rent, but also our use is going up. So I'd say rental rate prices remains practically stable. There's a slight improvement upwards, but it was not -- there was no big impact from the second to the third quarter of 2022.

Our expectation for next year is to continue trending inflation adjustments as well as price increases or if there is, in the case of elevating platforms, how this impact will be from the U.S. dollar. As I like to remind you, we always look at replacement prices. The prices we pay for an acquisition, not historical price. So we adjust our pricing levels according to prices practiced in the market. So we do expect a price adjustment for 2023. I think I answered it all, right?

[Fernanda Recchia, analyst]

Yes, you did.

[Operator]

Our next question is Luiz Capistrano, sell-side analyst, Itau BBA.

[Luiz Capistrano, analyst]

Thank you for this opportunity. Congratulations on the results. They're quite strong. I have some doubt to start with something straight to the point specific and interesting information that Carol mentioned of 600 million orders of equipment by the end of the year.

Can you say if those 225 of Yellow Line are part of the 600 or not? And the 600, do they also include more Yellow Line in addition to the 225? I understand that 225 was for the first quarter, and 600 is longer, until '23. So if you can give us more details, that would be great.

Another point is that you said -- you talked about this ambition of becoming a one-stop rental company and that you're always looking at new products. Of course, the company has just entered Yellow Line, there's still a way to start to ramp up in the segment. But what do you look at that would have a similar pressure now with the Yellow Line. That is a large, attractive market and that is a complement to your business? What types of other brands or machines you don't sell today that could fit into the subscription?

[Sergio Kariya, executive]

Okay, Luiz. So I'll start answering your first question about the orders. those 600 million are orders we have contracted and will be delivered between this year and next year. For this year, we'll get -- we will receive BRL 200 million in equipment, so that's about 800 pieces of equipment from our fleet, including both Yellow Line and elevated platforms.

[Caroline Pepe, executive]

The second question, I'll take it. So Luiz, when you look at our portfolio, starting with lights, we have not only platforms, generators, compressors and lighting towers, we are expanding this portfolio as a whole. And in heavy, there's adjacent areas that complement the Yellow Line equipment. So since we're seeking to answer the customers' intralogistics market, seeking longer-term contracts, service provision in terms of our customers' production, other needs end up arising that are very close, for example, trucks or forklifts in some cases. So it makes sense for us to look at it in a close near future to extend the portfolio.

In the long term, the idea is once we are within the customer's fabric, we're inside. Considering you have more than 8,400 customers, seeing what their main needs are, we'll be able to provide them with a complete product portfolio. So that's always how we look at it. We look at the core product, seek the adjacent products, what makes sense. And with that, we increased our product portfolio.

[Luiz Capistrano, analyst]

Excellent Kariya, just a follow-up question. I understand that you see or you envision this expansion to trucks and forklifts. But I think there's no time line, right? You have just entered in yellow line you have a strong focus on that, right? We're not saying it's a remote possibility that you would make any movement in these 2 products next year or not.

[Sergio Kariya, executive]

Luiz, some of the pricing quotes that we're getting with the micro in the market, trucks are very integrated with Yellow Lines. It's very close. The customer enters the market, quoting equipments for like ground of movements, the Yellow Line equipment.

In the majority of cases, they also quote trucks. So we are participating on bids with different types of product lines.

[Luiz Capistrano, analyst]

So just to make it clear then, this type of truck we're talking about is a highway truck for logistics, outbound logistics or is more specific on site for mining.

[Sergio Kariya, executive]

Yes, Luiz. It's all inbound that we're seeking. So it's these types of trucks.

And when you join Yellow Line, you also need the water truck -- water tank trucks and other types of trucks that the customer ends up needing. So we supply this fleet. You have this Yellow Line equipment and the trucks for the inbound logistics. We're not looking at anything outside of this. It's all to meet the needs of the core of the Yellow Line.

[Operator]

[Operator Instructions] Our next question, Carlos Roberto, Investor TC.

[Carlos Roberto, analyst]

Is it enabled?

[Sergio Kariya, executive]

Yes, Carlos, we can hear you.

[Carlos Roberto, analyst]

No, it's a pleasure to be here with you at all quarters we meet. Now first, I'd like to congratulate the company. The EBITDA was very expressive in this entry of Yellow Line as well. Now I have a bit of a more complex question. What do you see in terms of the next administration? How can that impact the company. It's quite easy.

[Sergio Kariya, executive]

Yes, always with an easy question, right? Okay. So Carlos, of course we're watching. There was some indication yesterday with Lula's speech. And I think there is a tax eye for us to look at in Brazil and how it's going to behave in terms of foreign exchange, interest, long-term interest rate went up yesterday, and this is very important and significant. But still, we're very optimistic. As Carol said, about the auctions and concessions pipelines, which have already been done, we have almost BRL 1 trillion to be invested in the country, which will be the driver that it will be very important to our business. The rental business in general, not only light equipment but heavy as well. And what we're seeking, when you look at the rental market itself, it has an opportunity in terms of penetration and consolidation that is not dependent on the government administration. So the cycle of equipment, considering the volumes and the market becoming more professionalized, various important players coming up to support customers in rental and outsourcing of fleets, it's always also going to be an important lever.

So we are optimistic with what we see for the future, but of course, cautious. As regards to the tax policy and all the impacts or potential impacts in interest rates, foreign exchange rates, increase of the GDP and so on. So of course, we are paying attention.

[Carlos Roberto, analyst]

Thank you for your answer. I think all of us, all investors, can you hear me? All investors are a little apprehensive, but a lot of what I saw yesterday is just white noise. You saw it. This always comes to this with many billions and then it starts to dehydrate and reduce as our country usually season. We expect fiscal responsibility from the coming administration. Otherwise, there will be impact in interest rates, foreign exchange, everything. So I know for FX, the company is prepared today. The company bought equipment, the equipment is dollarized. So congratulations on your results. And we always expect a lot more from you.

[Operator]

Next question, Pedro Martins, buy-side analyst.

[Pedro Martins, analyst]

Congratulations on the results. Carol, I just wanted to ask you about leverage with this CapEx. What can we expect in terms of leverage for next year? I think this year is quite clear with CapEx and everything. But for next year, what you expect to close the year in terms of leverage? I know it depends on how you're going to accelerate the CapEx or not. But do you have a plan today? What can we expect?

[Sergio Kariya, executive]

Pedro, thank you for your question. About leverage, I think we need to be cautious at this time. So we have some uncertainties in terms of the political economic scenario. Today, we have a comfortable balance and the company generates a lot of cash. We have an important expectation of cash generation for next year. This year has been relevant as well. So we're going to use both sources, both funding loans and our cash generation to be able to take on the following organic and inorganic opportunities that the market may come to prepare and that we may win.

So I don't imagine for the next year, a high leverage scenario. If I had to give you a number, I'd say we would not get to anything higher than 2, maybe 1.5 in the net debt over EBITDA ratio, precisely due to the caution of this time as well as our cash generation capacity.

[Pedro Martins, analyst]

Excellent. If I can add another question, combining it to the previous question about the macro scenario. Your M&A pace with us that you're looking at a lot of things for a long time, are you going to take a break now to watch how the tax scenario is going to be? Or is it independent? And there's going to be room to breathe in the balance. Are you going to use this room to breathe and keep a limited leverage? Or just wait and see what happens to decide whether to make bigger movements or smaller movements?

[Camila Conrado, executive]

Well, Pedro, Talking about M&A, we haven't stopped. We still have traction. We're talking to the market, looking at opportunities. Of course, there is -- we have to look at pricing of each one of these companies considering the higher possible higher interest rates for the future. And we see M&A, in many cases, as a lower risk somehow because you acquired the company, of course, there's all the challenge of integration.

But since we have a very well structured integration process, the post-merger integration, we see this as risk as quite mitigated and we make acquisitions of contracts that are already running. It's different from organic growth and increasing equipment with all the execution risk. So we see this balance at this time where were little bit more of uncertainty, it is more interesting to look at mergers and acquisitions, inorganic movements, especially on Yellow Line, that we're growing and learning more about the markets. We're in the learning curve.

[Operator]

Next question, Eduardo [ Floris ], UBS BB.

[Unknown Analyst]

Good morning. Well, it's a pleasure to be here with you. Congratulations on the results. As a result of financial and operational strategy that has been very well developed, it's quite impressive to see the results you've been presenting. My question is about the synergies. In this one-stop shop concept, the entry of Yellow Line, combined to the fact that you have multiple points of sale points of distribution, makes me think that within the one-stop shop concept, maybe you could also expand rental, for example, for heavy vehicles or maybe even fleet management. How do you see this in the short to medium-term horizon, considering that fleet management is market that is becoming consolidated, it is up. So if there may be interest from the company in the segment.

[Sergio Kariya, executive]

Eduardo, thank you for your question. So let me talk about the synergies a little bit. We have 53 branches today. So opening 4 other branches by the end of the year. So we'll finish the year with almost 60 addresses. And the idea of synergies with the hedges. It's over time to train and develop so that all branches have the capacity to provide maintenance for 100% of our fleet. We don't have that yet. We're in this learning curve process to train and prepare our technicians, our mechanics at the point. What we're already using is all this commercial strength because in 100% of the locations, we have not only the technical team, not only mechanics, but commercial teams as well.

So we're going to use -- we are already using this force. And synergies that maybe we've been talking a little less about with the formwork and shoring people as well. We have an extremely long-term relationship with 100% of construction development companies, and we're also using that to come closer with the Yellow Line equipment to the construction infrastructure market. And that's the idea.

[Unknown Analyst]

I don't know exactly what you mean about outsourcing or fleets. We're not focusing on cars.

[Sergio Kariya, executive]

Yes. No, that was a little bit on this point. If you could maybe use this commercial force that you have in a one-stop shop concept and not use customers to manage fleets. That would be cars, yes. light vehicles or even heavy vehicles, a little bit closer to the Yellow Line. Yes, heavy vehicles make sense. That's what we're looking at on the Yellow Line side. But I'd say that in this space, we have a lot of room to continue growing and expanding diversification or diversifying too widely and too fast brings execution risks. So we are moving forward at a pace that we understand even conservative because we always seek to serve customers in a differentiated way, offering the best product, best service, best quality and uptime of equipment with premium equipment, not offering price, offering quality. That's the difference we want to seek.

So yes, using the branches for synergies, but in the adjacent areas, it is first time with Yellow Line. We need to capture this synergy conversion and then the adjacent products to the yellow line.

[Operator]

Our next question is Mauricio Ramani, buy-side analyst.

[Mauricio Ramani, analyst]

Congratulations on the results. The results of former insuring have improved greatly this quarter. What are the perspectives for the segment?

[Sergio Kariya, executive]

Mauricio, thank you for your question. We're also obviously very optimistic with this unit. As we said, the auctions/concessions that have already been realized amounting to almost BRL 1 trillion were for not only light and heavy vehicles, but of course, for more ensuring as well. And we have been negotiating. I think in terms of a time line, we go when way ahead or way before any infrastructure works with formwork insuring. We participate in the design of the project execution that the drawing or the outline of the design. So we help the customer solve that. And then later, maybe the Yellow Line and trucks will go in, elevating platforms, generators, compressors.

So we are participating in many discussions with customers for these infrastructure works. So our contracted backlog today for formwork and shoring is very robust. And as you can also see, the price has been -- is being adjusted. It was quite compressed in 2014 until recently. But now we're starting to rebalance this business economically, also a result of the new prices of steel, aluminum, that obviously affects our equipment.

So we've been increasing prices a lot, and this will be harvested in coming quarters as well as the volume expansion. Our formwork and shoring business is still compressed in terms of use because the heavier works in Brazil, and we have a lot of equipment for the construction of bridges and tunnels and so on are still not occurring at a high volume. But we expect that over coming years, this will start to converge and improve.

[Operator]

As there are no further questions, we close the Q&A session at this time. I would like to turn the floor to Mr. Sergio Kariya for his final remarks. Please, you may go ahead.

[Sergio Kariya, executive]

Thank you, everyone, for your presence. You're at our third quarter 2022 earnings live. Our Investor Relations team will be available. Thank you, everyone. Have a good day.