Localiza Rent a Car SA
BOVESPA:RENT3
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Good morning. Welcome to Localiza Rent a Car's conference call confirming the results of the second quarter, first-half 2018. We have here Mr. Mauricio Teixeira, CFO; and Mrs. Nora Lanari, Investor Relations Director. And we would like to inform that the numbers here presented are in millions of Brazilian reals and based on IFRS. The presentation will be recorded. [Operator Instructions] The conference call audio is being presented simultaneously in real-time at www.localiza.com/ir. This slide presentation can be found for download also in our webcast.
Before proceeding, we would like to clarify that any declaration that might be done during this teleconference relative to the business perspective and financial goals and et cetera, are projections of the Board that may or not come true. Investors should understand that political and macroeconomical factors and other operational factors may affect the future of the company and lead to results that are different from our business perspective.
And now to begin our conference, I turn the floor to the CFO, Mauricio Teixeira.
Good morning. Thank you for your presence. To begin with, I would like to emphasize that exactly 1 year after we reached the mark of a 150,000 cars, we have now surpassed 200,000 cars, closing the semester with 280,532 (sic) [ 208,532 ] cars on the platform.
In the second quarter of this year, we maintained strong growth with an increase -- a 47.9% increase in RAC in Car Rental division 21.4% in Fleet Rental. And another quarter of value generation for our shareholders. And this happened even with the companies that had so many challenges with slower recovery of the economy, the truckers' strike in May and June and the elections news generated an uncertainty about the macro environment. The truckers' strike that culminated with widespread lack of fuel was an opportunity to strengthen our brand reputation and commitment to our principle of valuing customers. Our teams have made no effort -- have made lots of effort to maintain Localiza's quality and promoting the best possible customer service.
In the Car Rental division, we honored every reservations existing and did not pass the increase into a price to our customers. In addition, we offered upgrades in order to compensate unavailability of the booked car.
On the other hand, if rental block is to make the reservations when necessary in some rental locations impacting our volume. We estimate that revenues were impacted by approximately BRL 15 million. We also had additional cost of about BRL 2 million associated with costs of supply and logistics.
In the Seminovos, semi new, the customer flow fell on the days of strike and World Cup games. We estimated about 2,000 cars were not sold during those events, with total impact of about BRL 83 million in revenues.
Another effect that impacted on our second quarter result was the fact of the premium of profit sharing that occurs in the second quarter of each year with higher than the amount provisioned in 2017. This occurred because we reached record in volumes, revenues, EBITDA and profit.
Besides that, we had an impact of the bargain agreement for our Minas Gerais' state employees that was retroactive to December 2017. The sum of this effect penalize EBITDA in about BRL 39 million and net income by BRL 29 million.
And if we were to exclude such effects, we would have similar results for the one we had in the first quarter of 2018. In addition, we also took advantage of our strong cash position to do a short-term cash management and reduce the carrying cost. We decided not to discount credit cards receivable and we anticipate that some payments to suppliers, we have profitability above our assessment. The net impact of these two actions was a total of BRL 260 million in working capital and with the financial result.
And you should note that these are short-term commitments and disbursements would happen anyhow in the third quarter of this year Localiza also achieved in-person awards. We had the first place among the most innovative companies in transportation and logistics according to Valor Econômico newspaper. In addition, we were included in the ranking of the best companies to work in the state of Minas Gerais by great places to work. And we received the award from the government of Minas Gerais. Our CEO, Eugenio Mattar, was recognized as one of the 15 best CEOs in Brazil by Forbes magazine. We remain committed to our growth strategy with data generation, looking for better long-term return for our shareholders through innovation, continuous improvement in management, finances and operations.
And we're going out to see the highlights of the second quarter. On Page 3, in the webcast, you can see the operational highlights. In the second quarter 2018, the company continued to present solid results, consistent with its performance in 2017. RAC, once again, grew a lot with 47.9% increase in daily volume compared to the same quarter of the previous year.
In Fleet Rental, we also had a significant performance in terms of growth with volume increase of 21.4% as compared to the second quarter of 2017.
Seminovos, semi news closed the quarter with more than 23,000 cars sold, even with the impact of the strike and of the World Cup that affected sales volume in around 2,000 cars. As I mentioned before, our fleet overcame the mark of 200,000 cars, reaching 208,552 vehicles with growth in all segments.
On Page 4, we can see the financial highlights of this quarter. Net revenues grew 29.3% with EBITDA growing 16.4%, EBIT increasing 17.5% and net income 9.7%. If we exclude the strike, World Cup and extraordinary personnel or staff effects. With the effects, EBITDA grew 30% and net income would have reached around a BRL 171 million.
In order to give you more details of the result, I hand the floor to Mrs. Nora Lanari, Investor Relations manager.
Thank you, Mauricio. Good afternoon, everyone. Giving a little more detail about the results of the quarter, I would like to start with the Car Rental Division. As you can see on Page 5, in the second quarter, the company continued the growth base and revenues rose 41.3% due to a 47.9% growth in volumes.
On Slide 6, we notice that the average RAC daily rates decreased by 6.2% in the second quarter 2018 compared with the same period of the previous year, impacted by the stronger mix in the lower Tier segment and the competitive landscape. The average rental rate in comparison to the first quarter 2018 is impacted by the end of the high peak season. The utilization rate was also affected mainly by the truckers' strike, that culminated in the need to block new reservations and higher no-show and the daily rental segments.
On Page 7, we show that the owned branch network was expended by 7 new locations in the first semester, of which 3 were formerly operated by French franchisees.
Moving to Slide 8. In the Fleet Rental division, the pace of growth remained accelerated in the last quarter. Here, the daily rate on average is down 6%, mainly reflecting the pricing of the new contract in a context of lower interest rate, which is why the ROIC spread minus the cost after tax debt should not be affected.
Moving onto Slide 9, we show the variation of the fleet in the period. The strong daily volume of the first quarter 2018 and the growth observed in the second quarter 2018 demanded additional purchases of cars to increase the fleet. We bought 39,541 cars and sold 23,626 units. The result was a result increase of 15,915 cars and a net investment of BRL 672.4 million in the second quarter 2018.
On Slide 10 we show the network of Seminovos or semi news, which reached 100 stores. A total number of 48,914 cars sold in the first quarter 2018. The sales car in the second quarter '18 were impacted by the low number of cars available at the store for sale in the beginning of the quarter, the truckers' strike and the World Cup. We estimated the impact of about 2,000 cars on this quarter's sales. New stores will be open in the second half of the year to meet the fleet renewal needs.
On Slide 11, we show the end of period fleet, which was a highlight for this quarter reaching 208,552 cars.
Turning on to Page 12. We see consolidated net revenue growth of 29.3% compared to the second quarter 2017, with rental revenue growing by 33.1%. In Seminovos, the increase was 26.5%, even with an estimated impact of BRL 83 million due to the truck drivers' strike and the World Cup.
Moving onto Page 13, consolidated EBITDA gained 16.4% and this is a result of the growth in the company's business divisions. The RAC EBITDA margin is down in relation to the second quarter 2017 due to the effect of the truckers' drive and higher payroll expenses. Excluding such effect, the margins would have been around 35%.
Fleet Rental gained 2.8 basis point in margin due to productivity gains and lower fleet age.
Seminovos had a margin decrease of 3.5 percentage points, which reflect the reduction of the depreciation of the RAC cars, which has been occurring for 12 months causing the book value of the cars to be closer to car sale price. In addition, the segment also suffered the impacts of the truck drivers' strike, World Cup and personnel payroll expenses. Without these specific effects of the quarter, the margin would have been approximately 4%.
We estimate that the consolidated EBITDA would have been approximately BRL 39 million higher, totaling about BRL 287 million if the previously mentioned effects did not occur.
In relation to the depreciation on Page 14, we see that the Car and Fleet Rental followed different trends. In RAC, the average annualized depreciation was BRL 758.5 per car, down by 46.9% when compared to the first half of 2017 due to the increase in average price of cars sold and the higher efficiency of the company in the purchase and sales of its assets. In fleet management, we see an increase in the level of depreciation to BRL 3,329 in this semester. This number reflects the fleet mix and our estimates in relation to its sale price at the end of the cycle.
On Page 15, we can see that the lower EBITDA margins of RAC and Seminovos or semi news reflected an EBIT of Car Rentals, which fell 4.9 percentage points. EBIT margins in Fleet Rental has fallen due to the factors already mentioned, higher depreciation with lower Seminovos' margins, offset by the drop in interest rates.
Consolidated EBIT totaled BRL 276.9 million, an increase of 17.5% even considering the impact of strike and the payroll expenses. The decrease in the interest rate allows a lower EBIT margin maintaining the spread, which is the ROIC after taxes over a greater base of capital resulting in an increase of the company's value generation.
Net income for the second quarter, on Page 16, increased 9.7% compared with the second quarter 2017. Excluding nonrecurring effects, we estimated that the consolidated profit would have been higher than BRL 29 million, total of a [ BRL 171 million ] for the second quarter 2018.
On Slide 17, we demonstrate the cash generation of BRL 245.5 million before the growth of the fleet. In this quarter, aiming at a more efficient cash management, the company decided to suspend the anticipation of credit card -- credit receivables and took advantage of the opportunities to anticipate accounts payable to suppliers. The net impact of those measures was a reduction of [ BRL 260.2 million ] in the working capital of the company, highlighted in the line cash effects of discounts of credit cards receivables and anticipation of payable to suppliers. These obligations are short termed and would be disbursed in 2018.
As we can see on Page 18, the investment in the fleet and the effects of credit card receivables and suppliers generated an impact on net debt, which closed the quarter at BRL 4.6 billion.
And you see on Page 19 that, this quarter the net debt EBITDA ratio reached 3.1x, a healthy level considering the company's growth rate as well as the covenants, which are 4x. If we had not anticipated the payment of suppliers and maintained a discount of credit card receivables, the ratio net debt EBITDA would have been 2.9x. We understand that the level of current leverage is at a comfortable level given the flexibility of our assets, the strong cash position and the term of our debt shown on Slide 20 and considering current interest rates.
On June 30, 2018, the cash position of the company was BRL 1.7 billion. And on July 18, 2018, the company announced the fifth issuance of debentures of Localiza fleet in the amount of BRL 300 million.
In addition, the prepayment of CCBI was approved in a total amount of a BRL 190 million, both are expected to occur within the next 10 days.
Localiza's strong cash position ensured greater flexibility for the company in terms of the new issuances and higher prepayments of debt with the goal of reducing the average cost and increasing the duration of the consolidated debt. In the second quarter 2018, we prepaid the ninth issuance of Localiza's debenture, which had an interest rate of 113.2% of the CDI. And we raised a loan of a 108% of CDI with an average maturity of 4.5 years.
Finally, I would like to turn over the call to Mauricio for him to close.
To close, I'd like to highlight the evolution of ROIC spread versus cost of debt that you can see on Page 22. In the first half, we maintained the level of spread of last year with a much higher asset capital base, resulting in higher value generation to our shareholders. This is the goal we will always pursue to growth with value generation. We now open for questions.
[Operator Instructions] Our first question is from Victor Mizusaki, Bradesco BBI.
I have two questions. The first one in relation to the RAC that we see a 7% drop? And could you further elaborate on what impacted on that? What was done? And what we can expect in the near future? And what was the impact on that in ROIC of RAC? And also, second question in relation to suppliers, how much can we expect in net profit gain per year?
Thank you for your question. In relation to the average tariffs, their financials are different, if we consider YOY and other aspects. So let's consider 7% drop, as I mentioned, of the first -- from the first to the second quarter of this year. And here we see a reduction -- 7% reduction in the mean tariff, especially because of seasonality. You know the demand pick of the 7 January brings it up. And of course, more by people, not by companies. And on the second quarter -- second quarter, yes, we see a change towards lower rates become irrelevant. So we see after the second quarter this effect. And you have to consider a competitive environment throughout this quarter. When we talk about YOY, you see that as we saw in the graph that the seasonality effect considered for quarters are very similar to what we delivered in the second quarter. When I see what year-on-year, the strongest explanation of this drop is that we have a larger mix. We have more long-term segments that will bring the mean rate a little bit lower. We will not guarantee if that comes forward, because that depends on what the growth of the different business will be. And also, on the competitive environment. And the third quarter will be similar, more similar to the second quarter in terms of mix. And in the fourth one, we see, especially at the end of the year, a trend towards mean rate a little bit higher, because we'll have more physical persons renting cars.
Victor, in relation to your second question, as you can see, we can apply -- we have applied the cash above 99% in CDI. And we noticed that does not make sense in this environment to discount credit cards receivable paying a percentage above CDI to put the money in cash at 99% paying companies. Because I have a very comfortable cash and a strong cash. On the other side, sometimes we had opportunity of some suppliers that want to be paid beforehand and they give a good discount, better than what we would get in investing the money. And so it depends on the volume that we have. Because we need demand. Nowadays, we have demand and from some suppliers to that are asking to be prepaid, considering volumes that we have today for working capital, this impact in 12 months the profit around BRL 10 million. But it will depend on the volume that we have each month. And Victor, and U.S. have other impact of the mean rates on RAC -- ROIC. We are looking at the consolidated level and understand that this drop in interest rates will give us some flexibility to have a lower EBIT maintaining this trend. So this trend is maintained, considering last year -- the end of last year, 8 percentage points on top of a much larger capital basis. So we do have this buffer. And of course, we understand that these prices have been bringing volume. And we -- if we took aside the strike, the margin would have been very healthy.
Next question comes from Murilo Freiberger from Bank of America Merrill Lynch.
There are two points that we would like to ask about. The first one is related to ROIC. Recent scenario in which -- and because of the drop, the cost of capital is not so high that would allow the competition to have a better performance. So then you brought ROIC close to 3%, I think this was your strategy. And I believe that we can work with this level of return assuming that you are not going to -- the cost of capital and ROIC spread to go much higher. And the second question related to semi news so that I can understand a little bit better this strategy and how -- because the volume was lower than what we saw in the first quarter, and we also saw that the fleet has been renewed. So the depreciation is very low, meaning that the sales price is very healthy. And there is room that has -- can be considered in the sales price so that we can encourage the price of sales at a lower volume, should you want to do that? So I would like to know what's your strategy for the period to come. So as for margin, is there anything in your mind and related to the volume and the price of depreciation? Or do you think that this spread was related to the opening of new stores?
Murilo, thank you very much for the questions. Let me start with the first question related to the level of spread. We are very comfortable with this 8 percentage points of spread level that can be moved both up or down. We cannot forget that 30% level of ROIC includes the effects of the World Cup and also the truckers' strike. So if we do not consider those effects, we are not going to see anything so different from what we saw recorded in the first quarter of 2018. So from our viewpoint, this spread level is very comfortable for us. In relation to the semi news along the second half of the year, we have to consider the stores that were open. And the effect will be considered for the next year. I would like to remind you that our purchases -- focused on the second half of the year, purchases were divided by 40% in the first half and 60% in the second half of the year. So our budget for 2018, we considered an acceleration of the sales for the second half of the year. Obviously, there is an impact from the World Cup and for the truckers' strike, but if we add those 2 effects, we had a reduction of 2,000 cars in our sales. But even considering those effects, we are not far from the budget. We are in line with the budget, somehow. And we have big challenges in the second half. We just increased the level for the quarter to increase the price for the renewal of the fleet. Of course, when you are not so focused on semi news, you have less pressure in relation to pricing in the second half or cash generation will have to be higher. And this price can have some impact on the margin. And for Seminovos, we do not have any policy of pushing the price down to form a basis. Otherwise, the effect on the depreciation can be very significant. So there is no policy of encouraging other prices, because we are thinking about the inventory. And Murilo, just to add, the inventory is -- reflects of what we saw considering the volumes that we have to sell in the third and fourth quarters. So we have a list of prices for prices and we also consider the models of cars, which are sold on a monthly basis. And we consider this price and the depreciation of that reflects the price that we are going to apply in the second half of the year.
Next question Rogério Araújo, UBS.
I would like to have two follow-ups. The first one is related to RAC rates. Do you believe that they were also affected by the truckers' strike? In other words, does the company have to give discounts because it observed the drop in demand? And do you have an idea of the extent of the impact? And the other one is related to Seminovos or semi news. We saw that was a drop of sales by store by month, so we would like you to provide more color on this? What happened at the end of June when this was normalized? If there was anything more at the macro level? Or was it something related to the World Cup? And also, could you describe how July spends in terms of performance? And where we stand?
Rogério, thank you. The strikes started in May and the supply was resumed before the holiday in the month of June. To bring the utilization rate to a normalized level, we encourage demand. But we wouldn't say that part of the drop is justified by this strike. There is some effect, but we also have to consider the seasonality and also when we compare to the results of the previous year. So I do not believe that this is so significant in terms of effect. When we talk about semi news, the sale is impacted because 2,000 cars were not sold and our inventory levels were a bit lower, because we grew specially in the area of Car Rentals. So we have to hold back the increase of the fleet and this availability is going to be recovered in the second month of the quarter. But at the end of the month, we saw the effect of the strike in addition to the effect of the World Cup. So if we think about the SG&A, the sales per store would be more normalized and the SG&A would be a little bit lower. What we noticed is that there is a trend that those levels are going to be recovered, especially, from what we saw in the retail segment. Retail has already recovered the purchase levels and the wholesale -- wholesaling area was a bit lower as a reflect of what is happening to the retailing area. So they are connected. And obviously, this is not a guidance, but we believe that those levels are going to go back to normalized levels in the third quarter.
Next question, Bruno Amorim.
I have two questions. The first in relation to -- sorry, could you give more details on the breakdown on -- of, as you commented RACs having BRL 10 million impacts, BRL 15 million in revenue. And could you -- how do you quantify on the impact on the revenue, BRL 33 million, would have a gross margin of 12% in semi news, so the impact in Seminovos of about BRL 10 million in EBITDA. So let's say BRL 17 million in RAC, BRL 10 million in semi news and we could think BRL 27 million in impact on us. And to get to the BRL 39 million, you mentioned, you would have to explain it BRL 12 million. So I would like to understand whether I am thinking right? And whether those BRL 12 million would be attributable to the distribution on profit participation?
Your question is very good. It's exactly that, the difference will be BRL 12 million, BRL 13 million, which are attributed to the payment we do for PLR in the second quarter, because our goals were -- we went beyond our goals. So this is the mathematics. And also, we had that agreement. So we paid PLR retroactively and the agreement we had in the United States went back to December 2017. So the answer is yes. More details on that. You can have on the ITR number 21. So you're going to have, "what was additionally paid in the second quarter of this year."
And the second question, you comment a lot about the ROIC spread in relation to the after taxes debt. I would like to know whether in the company you take into account also the EBIT. And how do you look at it? More like a spread on SELIC or you look at 10 years bond because we have seen a deterioration on the bonds and Brazilian bonds, which is a risk-free calculation. So I would like to know what your base on it, ROIC versus another one, or is it ROIC versus after-tax payment debt?
Internally, or considering growth and following result, we do follow the [indiscernible] cost. And it considers the 10-year risk-free rates. So we always compare with the debt cost, but internally, mentally, we follow, considering the value generation for the shareholders, because we have a weighted capital structure.
Okay. And considering this deterioration in the scenario of bonds -- senior bonds, and this has concerned you? Have a change of plans? Or would you rather look at this in a high frequency base? Or would you rather see the average that would not impact your plans right now?
This review we do on year-on-yearly basis. So it is a little bit volatile within the year. It improved on last few weeks. So -- but it's not result any changes in plans.
[Operator Instructions] Next question, [ Alvaro ] [indiscernible].
My question is on prices and utilization rates in RAC. I would like to understand whether you see stabilization in prices for the next 2 years? And what policies are you taking into account in order to recover the utilization rates?
[ Alvaro ], thank you for your questions. We believe that use is in adequate levels. And of course, for the second quarter it drops a little bit, because, as we have explained, we had a strike, so it's 2 or 3 percentage points above what we expected. But it is, from our vantage point, in very good standards in order to increase our backlog, because we don't have cards available. And in terms of our strategies, it's a little bit different when you talk about Car Rental and Fleet Rental. Fleet Rental has -- is more relevant in cars or depreciation and interest rates are more relevant. So if we think that interest rates will open then this will reflect on Fleet Rental. Bear in mind that the agreements have last for like 2 to 3 years. So they are indexed by inflation. So inflation is pressed over for the Fleet Rental every year. And in Cars Rental, this is more -- a more nervous market, but it's like every day basis. So we have to monitor the competitive environment, macroeconomical environment, the finance strategies, analyzing segments. So it's more difficult to give an expectation of the next 2 years. I believe that what we can convey to you is that by the end of the day, we are looking at the ROIC spread and the damage -- and the debt. If the ROIC is healthy, we do not have to increase the price of rental. Our objective is to increase affordability for -- to have a larger backlog. So we are going to have leverage. Many of the cars will be covered and we will not increase prices for the final customer. So increasing prices will be in the long run, when we no longer can use this leverage or when the growth risks over the company becomes moderate. So -- but we depend on the macro environment and competitive environment in order to define those strategies.
Pedro Bruno, next question from Santander.
My question is a follow-up on the first question asked by Victor, and the last one related to average rate on the utilization rate, that you just commented on 2 percentage points higher than as a utilization rate related to the effect of the strike. I would say that it's in line with what happened last year. The question's related to the variation of the average rate, which was assigned to this mix change for the company. And this is what you have been communicating in the first half of the year, which makes sense. My question is shouldn't we have a higher utilization rate for the second half if we look into the future considering the mix change year-on-year? And if effect the average rate is falling due to this mix? Is my rating wrong, or am I not seeing something?
Obviously, the mixes of longer terms tends to pull the utilization rate up. But of course, if this is the case, we have to increase the fleet. When we talk about average utilization rate of 79%, so there are some stores that are at the limit and some of them are below it. We do not want to lose businesses because we do not have available fleet. So we believe that from 77% to 79% is the limit. It's a level where we work comfortably advised. We are going to lose businesses. This percentage allow -- allows us to expand the fleet, because if we work above that, we have the risk of losing clients. And we want to meet the demands of our clients. So it's very difficult to consider exceeding those limits without losing businesses.
Next question Lucas Marquiori from Banco Safra.
This is [ Mauricio ] in fact. First, I would like to ask about margin of the fleet. I can see that EBITDA margin has been growing along the years. And we understand that this market has been ever more competitive. And we saw that you have been making adjustments, lowering the prices. So what's your plan for this market whose competitiveness is very high? So how -- have you being able to maintain a high margin in terms of organization of the fleet? And how many stores? This is another question, and what are the number of stores you intend to open and the CapEx?
Lucas, thank you very much for the question. Let me start answering your first question. When we look at average age of fleet, this is what we see. From the second quarter 2017 from 19.2 months to 15.3 months. So obviously, this demand less maintenance. And we centralize the operations area. And we have been gaining productivity in process costs. We have been more efficient in the management of our fleet. Both considering the -- considering all the situation, we have been able to capture some gains in maintenance cost. But for fleet, I have an additional benefit, which the drop in the average age of the fleet. So the tariff price takes into consideration a lower interest rate. But we cannot forget that we always look at the interest curve. We are looking ahead in 2 or 3 years. So we consider all those trends signalized by the market. So this gains, this synergies is innovation gains. And this is the message that we have been conveying to the market. We are working hard on improving productivity, improving internal efficiency. This year, we do not promise anything in terms of operational leverage, because we are focusing on internal processes. And of course, we have our eyes in capturing these improvements. Last year, we opened 15 new stores. And the number is going to be a bit lower than that as we expect. So we are likely to see some stores opening during the half and the number will be more concentrated by the end of the year.
Next question in English, Stephen Trent, Citi.
I apologize, I had some trouble hearing part of your responses. But I'm curious. Two questions, one with respect to the competitive landscape, now that we've seen some consolidation. I'm wondering what sort of price trends you are seeing from your competitors? And second question with respect to utilization rates, any indication at this point that the election cycle could give utilization rates a boost in the fourth quarter?
Thank you, Steve, for your questions. I may begin with the second one in relation to the rate of use. Elections, we -- today we understand that has a more regional effect on our volumes because the base of the fleet is much larger today than it was like 4 years ago. We do not expect much impact in the rate of use just because of election. Of course, for the third quarter, we have the effect of the winter vacations, some effect on election, but the margin should not change much. When we talk about competitive environment, we see a competitive environment that's quite bold, but it's been stable. If we look at the last 6, 9 months, so we have not seen less aggressive -- competitors are not less aggressive nor more aggressive but has been competitive quite intensively.
[Operator Instructions]
We have received 2, 3 questions, and I'm going to start with the first one. [ Mauricio ] from redcars.com congratulating us for our results and asking about the blockage, how much it interferes on mean rates?
Well, we do not open a lot of our segments but we can emphasize that we do not have much concentration in one or the other segment, one or another channel. So our revenue bases and customer bases is quite diverse.
The other question is from [ Bruno ]. He is a physical investor. And I want to congratulate -- an individual investor, and I want to congratulate you. What concerns me, as an investor, is in relation to the net debt and EBITDA, what's the healthy limit in the long run for this ratio?
Thank you for the question. We are looking at 3.1. But we haven't mentioned that 3.1, 3.2 we consider it comfortable and healthy. We have 4x EBITDA, so we want to have buffer and we saw the growth we had last year of 50% indirect volume and the last semester -- last half. And we have to invest in [indiscernible] fleet first and then have the result on EBITDA. So naturally, the growth rate will not be -- if it's not very high, the leverage goes down. So we tend to invest first and then check the results. We are concerned about having a high cash and do not have much to pay in the years ahead. We negotiated some debt in 7 years -- 5, 7 years, nothing in the short term. And all this makes us comfortable -- and this level is comfortable and generates revenue for our shareholders. It's 25% on uptick. And we have a debt of 10% CDI. So we always monitor CDI control. We control it every month that we consider that at the level of growth we are, that's quite healthy.
And the next question to the Gabriela from Eleven. Thank you for your question. I would like to know if the drop in depreciation with best prices will have any effect on the secondary market of vehicles.
Actually, our depreciation -- mean depreciation per car has been dropping since last year. Just give you reference, the first quarter last year, it was around BRL 1,500 per car, in the next quarter, around BRL 1,000 per car and now we have a trend towards less than a BRL 1,000, except related -- not so much related to increasing demand, but more in the increase of the price of new cars. We are buying well and selling well and we have reduced our sales expenses. So we can reduce the level of depreciation of the fleet. While the price of the new cars go up, we can also bring up the Seminovos. So the -- it's more impacted by the price of the news more than by demand. But demand is at a healthy level. We see the level of availability of credit is good, interest rates are low, so that helps demand and retail and the margin has been better. So we don't see any problem in demand, but we do also don't see a boom in demand. It's stable. So the effect is positive.
And the last question before we go back to the call. There is another question here. So Pedro from Prada.
I would like to understand what's the company stand in the future utilization rate of the -- and how can this impact the company?
Pedro, today, electrical cars are very expensive in Brazil. We do not believe that this profit is feasible in the long term. And if it we are going to be considering the future we'll make adjustments very quickly. And we have the hybrid model and we use ethanol. But if electric car is the car to be used, we are ready to make adjustments to our fleet. Just to add, and the inclusion of electric cars is going to be gradual in Brazil, especially in relation to the points to -- for the cars to be recharged. So the technology for quick recharge is improving quite quickly. And if the car has to be returned to the agency to be recharged, this is going to be unfeasible. And since we renew our fleet every 12 months, so very quickly, we are going to have this update in relation to this new mix depending on what the market is using. We do not think this is a problem in the future. We are going to make the proper adjustments considering what's going to happen in the world.
Next question comes from Victor Mizusaki from Bradesco BBI.
Thank you for the follow-up. But I have a point to raise in relation to average rate and the mixes. You said -- you mentioned long-term agreement with a lower average rate, which is going to affect the price of the rate. Does that mean that it is impacted by Uber? Or what kind of products are affecting your rate?
Victor, thank you for your question. It's not only Uber. Of course, it plays a role. But we discussed in general terms for this long-term segment but this is not concentrated on a single segment.
[Operator Instructions] Localiza's conference call is completed. We thank you for attending this conference, and have a good day you all.