Vibra Energia SA
BOVESPA:VBBR3
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Vibra Energia SA
Earnings Call Analysis
Q2-2024 Analysis
Vibra Energia SA
In the second quarter of 2024, Vibra reported strong financial performance, achieving an adjusted EBITDA margin of BRL 176 per cubic meter, marking the fourth consecutive quarter above BRL 150. The company also posted a net income of BRL 867 million, reflecting an impressive growth of over 500% compared to the same period last year. This performance underscores Vibra's successful management strategies, particularly in maintaining profitability amidst varying market conditions.
The return on invested capital (ROIC) reached a record high of 19.6% in Q2, establishing Vibra as a leader in capital efficiency within its industry. The company's leverage is well-managed with a net debt level at BRL 17.3 billion and cash reserves at BRL 6.9 billion, maintaining a leverage ratio of 1.1x. Vibra is focusing on optimizing capital allocation, supported by a substantial buyback program potentially worth BRL 1.2 billion.
Vibra is on a path to gradually regain its market share, which was impacted in the last 12 months. The management indicated expectations to restore previous market share levels within 12 to 15 months, highlighting a strategic focus on sustainable growth and profitability. They aim to enhance customer relationships and leverage branding initiatives in their service station network, which commands a market share of 43.5% in premium fuels.
The company reported an 8.8 million cubic meters sales volume in Q2, with a quarter-over-quarter increase of 2.6%. In retail, Vibra's branded network captured 31.1% of the market share, with a same-store sales growth of 9.4% year-over-year. The lubricants sector, particularly the Lubrax brand, saw a staggering revenue growth of nearly 40%, indicating strong performance and demand in this segment.
Vibra outlined its capital expenditure plans, estimating BRL 1.1 billion to BRL 1.5 billion for the year, alongside a dividend payback of BRL 1.6 billion for 2024. The management's commitment to consistent investment in improving operational efficiency and enhancing product offerings positions the company for future growth. They remain optimistic about the second half of the year, anticipating improved results driven by a favorable crop season and recovering market dynamics.
Vibra has been recognized as a leader in sustainability, recently winning the 'Best of ESG 2024' award from EXAME magazine. Their ongoing commitment to environmental, social, and governance (ESG) practices will enhance their brand reputation and attract investor interest. The company's forward-looking strategies and projects are expected to contribute positively to long-term growth and stakeholder value.
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Good morning, and welcome to Vibra's second quarter 2024 video call. This conference is being recorded. You'll be able to watch the video on the website of the company. And the presentation slide deck is also available for download. [Operator Instructions]
Prospective statements are based on the management's suppositions and beliefs and currently available information. These statements may involve risks and uncertainties because they are related to future events and, therefore, depend on circumstances that may or may not come true. Investors, analysts and journalists must take into account that macroeconomic events, industry events and other factors may materially change the results when compared to the ones expressed in the prospective statements. In this conference, we have Ernesto Pousada, the CEO; and Augusto Ribeiro, CFO; and some other executives as well.
Now I'll turn it over to Mr. Posada, who's going to start the presentation. So Mr. Posada, you have the floor.
Good morning, everyone. It's a pleasure to be here with you to share with you our 2024 Q2 results. And it's the fourth quarter in a row in which we have EBITDA margins above BRL 150 per cubic meter. So the management that's been driving this result, our management has enabled us to have -- well, they were very different quarters though. And some of them, there was an oversupply of products. There were some quarters that were part in terms of product. Still, the company has been able to experience all of these periods with more than BRL 150 per cubic meter margin, bringing our results to a new level.
In other words, we are showing a management model that's been successful and consistency and there's been consistency in results delivered, so, for 4 quarters in a row. Adjusted EBITDA margin is BRL 176 per cubic meter. And ROIC, it was almost 20%. So the management focus has been having ROIC as one of the most important metrics for the company. Another very important point of information here, piece of information is the recovery of our market share. As we've been saying in the past calls, this gradual and selective recovery that we see now Vibra has recovered market share and what is important without hurting profitability.
There was also a quarter-over-quarter volume increase of 2.6%. As I said, we will see market share recovery and growth in volumes and according to our promise last quarter, so we are walking the talk, we reduced our stock in the first quarter, there was the business decision that we made. We decided to have a slightly higher inventory in Q1, and now we reduced our inventory. And through that, we generated BRL 800 million. And we've completed our first transformation office experience, we call it customer in the vein.
And there are a number of programs that have been well underway with a focus on the increase of additive mix, the growth in lubricants in the company, a better restructuring of our trading activities as well. And all of these broad projects, because of no silver bullet, you know, each one of these projects are helping us to sustainably improve our margins. So what gives us the sustainability of this consistency margins for 4 quarter, that's not based on only market factors. That's all the management work that's been underway and also the activities of the transformation office, that in every month, we monitor the project status.
So, my team and I, spend one morning a week monitoring the project status and they're on the right track, improving the company's margin gradually. And in the coming quarters, we expect the margin to grow even further. And in this past quarter, there was also the approval of interest on net equity of BRL 120 million. And also, we opened our buyback program that might achieve BRL 1.2 billion.
So I'll turn it over to Augusto.
Good morning, everyone. Thank you, Ernesto. So with better margins and ROIC, BRL 176 per cubic meter in Q2 is a record for a second quarter, just like the ROIC 19.6% is also a record high for us, BRL 1.5 million of adjusted EBITDA with a 70% increase when compared to the same period last year, 8.8 million of cubic meters of sales volume. And net income of BRL 867 million, so nearly BRL 1 billion. So a significant growth of more than 500% when compared to the same period last year. The company leverage is 1.1x, excluding -- or including actually, the 1HQ effect. So without that effect, the leverage would be 1.4x by the end of Q2.
We've been showing a slide like this in the past calls because this is one of the main reasons driving this consistent growth we see in profitability year-over-year, which is our unrivaled human capital. We do believe that having people who know the market in depth and who are very engaged in our goals, and they help us sustain this pace of continuous improvement that we've been seeing in the past 1.5 years.
Our adjusted EBITDA margin was 176 in Q2. And as you see in expenses was to have a major focus on expensive management, our expenses should grow. Of course, there is required investments, and so they must be matching our profitability ambitions. But when we extract volume effects, expenses are below the inflation in the same period. So we're trying to manage that as best as possible, and we've been successful, we believe, in controlling our expenses.
Here we see capital allocation. It should be mentioned that our liability management at the end of BRL 1.4 billion, and we had resources coming in at the end of Q2, and the payment of the debt of the beginning of Q3. So of course, there was a very good quarter in terms of cash and leverage. But just bear in mind that our net debt was not increased significantly. It would be BRL 17.3 billion, and our cash is BRL 6.9 billion. Net income, as I mentioned before, growing significantly year-over-year at BRL 867 million of CapEx. Our estimate for this year is BRL 1.1 billion, BRL 1.5 billion. And our dividend, as was mentioned, we announced the dividend payback of '24 in the second half of 2024, and this year, we are paying BRL 1.6 billion. This is the second highest amount in the history of the company.
This is a slide on our service station network, and the focus there is relationship. We do have a market share in additive enhanced and premium fuels of 43.5%. And we are growing in the additive and premium mix. The volume mix was 20.6%, it was 20.2 the average of last year. And the market -- and it's 2.5 percentage points above what it used to be, now it's 27.7%.
Our adjusted EBITDA was BRL 886 billion in the service network and is a 14% growth and compared to last year. And the market share and the branded network with 31.1% in June '24 and non-branded, 5.1% market share at Q2 end. These are the growth avenues in retail, 8,000 service stations at the end of the quarter and increasing volumes by 4%. In the BR Mania store, there was a 14% growth in sales worth EUR 418 million in Q2. And the same-store sales growth was 9.4% versus 2023.
In lubricants, the revenue growth in Lubrax starts with nearly 40% year-over-year, and gross profit growth for lubricants was 13% year-over-year in terms both of volume and margin. And we are also growing considerably in cross-sell in B2B in which there was a 5.6% increase in the B2B channel in terms of lubricant sales.
Now this is a B2B slide, as we mentioned before, we focus on market share and profitability. Adjusted EBITDA of BRL 689 million, a growth of more than 200% when compared to last year and nearly 20% growth when compared to Q1 this year and 3.3 cubic meters in the B2B volumes. So it's 1.2% higher than Q1 and a slight decrease compared to last year. And that explained in the second slide, there was a stability in diesel oil year-over-year, a significant increase compared to the third quarter.
Jet fuel been increase when compared to last year, the industry a bit better and with an 11.5% increase in volume. And because of seasonality of Q2 and compared to Q1, there was a 5% decrease compared to Q1 to Q2 2024. And lubricants with a significant growth both against last year and also versus the first quarter this year.
And consequently, I'd like to draw your attention to this 31.3% market share in B2B in June 2024. The last time we had a above 31% was in November 2021. So we're still focused on growing market share in B2B and also profitability in this channel.
Comerce Energia, the investments are still maturing. Draw your attention that we ended the first project cycle that were approved when Comerce was acquired. So this is the milestone, 100% of the project, the first wave of product of projects were concluded. We have 84 plants in distributed generation. It is still deleveraging, we had a reduction at the end of Q2 of 1x of leverage, and it's now 7.6x EBITDA in Q2. So from now on, and because of that, the company, we will go on decreasing that because the project maturation and cash maturation become more relevant, and the LPM over the next 12 months move forward in time.
To conclude the ESG slide, there are 2 awards that we wanted to share with you. First place is the best of ESG 2024 according to EXAME magazine in fuels and energy transition category. Also for the third time, we've received the MIT Technology Review, we were in the -- actually, we're in MIT Technology Review as one of the 20 most innovative companies in Brazil. We are very happy with these 2 recognitions that we received.
And also, we published our sustainability report. If you haven't seen it, to review it. I think it's really nice, and I think you should review it.
And with that, I conclude the presentation. We can now open the floor for questions.
[Operator Instructions] The first question is asked by Monique Greco from Itau.
Congratulations for your performance. I have 2 questions actually. The first, Ernesto, is about something you mentioned during your presentation. The results are really consistent in terms of profitability and expense reduction combined with the gradual market share recovery.
So in this strengthening of your management model that you say is important for the consistent results, who do you think is in processes or in the decision-making process, do you think have been the most important ones on this journey? So what would you say would have been the key ones? And what do you still see in terms of improvement margins for your management practices?
And the second question is about your Q2 effect. When compared to Q1, the recurring margin dynamics was different when you look at B2B and service station chain. There was an increase in B2B margin combined with increased market share. But in your gas stations, there was a margin reduction, could you go into more detail about that difference? Can we conclude that you needed to hurt your service statement margin to prioritize market share?
On your first question, our management model has a number of important aspects I'll speak about. First, is our transformation office. I'll give a step back. In the company, we are trying to establish pace, intensity and discipline, which is key for us to be able to achieve results. What does that mean? Every third Tuesday in the month, we have a morning meeting in which we follow up on the transformation office project to monitor project status and see what else needs to be done. It's a very active meeting, a whole morning meeting.
And we believe that the small and midsized projects, when combined, they can bring our margin to a new level. That's transformational actually. It's not a silver bullet. But it's a number of projects. And some of these projects have come in and out of the transformation office. For instance, the retail price in centralization is a project that's being concluded already. We expect more results from that, but this is already implemented in daily routine and this is just an example. There's some other examples, and there's also the ideation dynamics, so that new projects in [indiscernible] used in the transformation office. This transformation office is expected to go on working, bringing results in terms of pace, intensity and discipline.
Also, the business dynamics is important for Vibra. Every morning at 8:30, we have a meeting to discuss the demand of the previous day and the month-to-date, and what we need to do. Sometimes I'm not -- I can't attend, but the VPs are also always attended this meeting we have every morning at 8:30 a.m. so as to establish this pace and intensity that our business requires our business is really dynamic. So this routine of result-focused management is indeed transforming the company.
At the same time, we bring on new projects that little by little are changing -- bringing our margins to new levels. So I'm really confident that we are going to go further in terms of margins. There are many possibilities and opportunities, that we still can seize. So there's still potential in Vibra's core business to generate more value.
And maybe Augusto wants to add on but I'd like to move on to your second question. We see the B2B segment last year, B2B, there was a drop in volume, but increase in margin. But if you see the performance in terms of results was not very good and our performance was based most on retail. This year we are starting on a [indiscernible] accelerating our B2B initiatives. So there are still some lower-hanging fruits in B2B that we can use to improve the EBITDA more quickly, just like we accelerated our action plan for B2B.
It's a -- I see that there's no problem in retail actually. There was a competitiveness issue intra-quarter dynamics was very decent. Early on, it was really poor, but that it got better. And we improved our results with new B2B projects. And for the second half of the year, we are already on a very good level of results.
So Ernesto mentioned that we are accelerating some projects in B2B, and we always have the monitoring meetings every day. And I mentioned before that we are -- we changed many processes in the company. And one of the major changes was in pacing. And our management model is not something that just was ready from the get-go. It was all based on Ernesto's experience from his background and experience of the leaders have in other markets and together would be with putting some things that fit well with each other and some of them may be even replicating other projects. So we needed to stabler a pace for the company and then accelerate the pace because there are many opportunities for acceleration. And then there's a metrics, the way you will analyze the root causes of problems and there's people.
At Vibra, as I mentioned before, we have strong people who know the market in depth, and we are highly engaged with our goals. So that helps us to deliver on our goals. And then technology. We have great technology, but we need to go on and investing more, using AI, data analysis, data science. So, looking at the business model as a whole we have been having good results, but we are still enhancing our management model, and I think this is going to help us grow even further in the future.
Next question is going to be asked by Pedro Soares, BTG Pactual.
My first question is about profitability and market share. If you take a step back and as you mentioned earlier today, 1 year ago, after the results of Q1 and 2 last year, the company and the whole industry had margins below BRL 100 per cubic meter. And now 1 year later, even with the Russian diesel oil and other issues in spite of all the issues, you have margins that well above BRL 150 per cubic meter. So there's been an improvement also in your market share, in your branded station, but still there was a decline in market share in the past 12 months in the network as a whole?
Does that justify the better profitability and are [indiscernible] high levels with your most profitable customer? So now we no longer have tax complexities and the Russian diesel oil is no longer a competitive advantage for smaller businesses. Does it make sense for us to go on thinking that you've had this margin as of the 12 months or is it more than that? But now with a fair recovery not only in your profitable network but also in the other volumes that are [indiscernible] originate prices?
I have 2 other quick questions. If you could give us an update on tax credit, especially for your expectations and monetization in case there's a favorable development? And with Comerc, if you could give us an update on the discussions regarding potential decision of exercising the purchase of the remaining stakes before the established deadline or any update regarding that?
Pedro, you asked about margins and market share. At Vibra, we decided that in our service stations, we would focus on unbranded distinctions. And our effort was to recover the margins in the industry in a direction that we believed in. So we focused and prioritize sales through our branded stations, with that we reduced our market share in non-branded sections. The same goes to B2B, we reduced our market [ CRR ] and increased elsewhere and increased our sales to direct customers.
In the second half of the year, what we expect is that we are going to move forward. Vibra will recover its market share. In 12 months, we did lose market share, but we are going to recover our previous market share in 12 to 15 months. We're not doing anything abrupt. We are working in a sustainable way. We want sustained results. So we want to work with customers who value Vibra as a supplier. We wanted to develop relationship with customers, customers that will help us get to new sales channels.
Gradually, there's a process of service station selection. At the same time, new service stations -- and with all of that, we will be growing market share, gradually, but sustainably. I think this is an important point. We decreased the market share to become more profitable, and we can achieve -- we recovered the same market share, but in a sustainable way, sustaining margins or even increasing margins, which is what we believe will happen. Margins will go up and gradually we will recover market share.
And I repeat, the number might seem the same in terms of market share going forward. In 12 months down the road, we might achieve the same market that we had before. But the way we're going to get there is different. We're going to get there sustainably and with relevant margins. so this is the trend in the 2 or 3 past months is what we expect going forward. And we will gradually increase market share because we lost market share, but protecting our margins at the same time.
But as to 194, well, we are waiting for, the jury still out and we are waiting for the results. So there isn't much I can say about that. As to Comerc, as I mentioned before, we are happy with the business performance so far. It's now entering to a deleveraging cycle as EBITDA becomes stable. EBITDA is BRL 1 billion roughly, 70% or 80% of the projects have had their prices defined. So there's confidence in the cash that the company can generate. We're happy with the investments there, and the results have been good for the organization.
Next question is going to be asked by Luiz Carvalho, UBS.
Once again congratulations on your results. I have 3 questions. Ernesto, in your presentation, you spoke about ROIC, which is close to 20%, which is a significant recovery -- what do you think is a sustainable ROIC for the company in the long run?
Second question, I'd like you to tell us about capital allocation. There's the buyback program. The announcement that JPC has been announcement. There's opportunities or a commitment going forward with Comerc as well. How do you see your capital allocation strategy given that your leverage level is now very comfortable? Accelerating buyback according to share valuation or maybe pay extraordinary dividends, what can we expect?
The third question, maybe to Augusto, if you could give us a break down of the risk effects of the diesel oil and tell us about the Russian diesel oil import that you participated in recently. There was [indiscernible] license cancellation and they were very important in the state of Sao Paulo. If you could please quantify those affects, I would appreciate it.
Luiz, ROIC is the most important metric for the company's management. My metric and my whole team, all the top management of the company. Our long-term incentive is driven mostly by the ROIC. It's difficult for me to tell you what is the ROIC level. I don't want to determine -- establish some number because there's some variables. We are at high level now. Also because the result of the last year were not as good.
So the first half of this year was much better in terms of EBITDA when compared to the first half last year. What you can expect is that we will maximize all of the different elements that drive the ROIC. Strategic and in the long run, we will always be looking at our capital base. This is something we do all the time, and we are very rigorous when it comes to capital allocation. Even the tactical capital allocation. The management model, as I mentioned, includes a monthly meeting every first Monday of the month where we discuss capital allocation.
So CapEx and new branded stations, why we are investing in this or that. So we are very rigorous in capital allocation, very rigorous in maximizing our EBITDA, very strict in inventory management. We understand that ROIC is also a long-term metric. We need also to monitor other elements. Just like Q1, inventory levels were higher, we know that that affects ROIC. However, that was the right thing to do at that time for us to have best results. So there's always going to be some ROIC variations because we understand that this is a long-term metric and we intend to keep enhancing it.
So we have been very proactive trying to maximize the returns for shareholders. We announced the buyback dividends over so we always try to maximize our capital allocation. As to [indiscernible] I think you must have noted that there's been an increase in issues the government and the regulatory agencies in general have been doing -- have been more active in that regard. There's no increase in illegal actions in Brazil. There's an increase in the initiatives against illegal operations in Brazil. Otherwise, we would have felt that in a way. So there's more initiatives against illegal operations. There are no -- there's no increase in illegal operations themselves. So ICL is being very active and Ernesto has been engaged in that, Henry, our legal VP also working.
From the business point of view, there's been an improvement in freight costs. You can hire some areas within Brazil without taking -- without so much of a tax issue. Prices in some regions, both the product and gas or the [indiscernible] also, diesel oil in the case of [indiscernible] I don't mean that there's been a margin repositioning in the market, but you see an environment where competition is doing better. We do not have a solution ethanol monophase needs to be regulated in Congress. But the prospects are more favorable -- favoring fair competition than it was like 3 years ago, for instance. So we believe that the improvement trend will be there in the coming years and the Vibra and other market players have been very active and also some agencies like ICL have been very active.
Just to complement, this is an agenda that is important for every player in this industry. We're working with the ICL Institute led by [indiscernible] for legal. And in the media, you've seen great coverage for this initiative and we see sometimes a growth of volume of margins in some specific regions within Brazil when these initiatives are effective, like in Sao Paulo or south of Brazil, Parana, state of Sao Paulo, state of Parana. We already feel that in gasoline in the state of Sao Paulo there's been an improvement in the competitive environment in the state of Sao Paulo.
And I think more and more, this is going to be a level playing field. And if that's the case, Vibra has scale and power and opportunities for growth, which are unmatched. So this is the major opportunity I see, with a fewer illegal operations, which I'm confident will happen gradually. And if there's fair play, we are very competitive and we will be able to grow significantly in this business that you might think there's no growth potential, but I think there's great growth potential if we're all on a level playing field.
Next Vicente Falanga from Bradesco BBI.
I have 2 questions. I'd like to know more about what you in terms of market dynamics, volume margins, Russian imports. This is the first question.
And the second question is about Comerc, BRL 111 million EBITDA, if you divided that by further 48 plans, it means that it is -- it's a little bit under BRL 1 billion EBITDA. When you acquired Comerc, I think the objective is by 2025, 2026, the goal was EUR 1.5 billion. Do you think that's feasible? And which are the projects that might help you get there?
Thank you for your questions, Vicente. So you asked about the market dynamics in the second half of the year. So what we see, I think, is something that we see every year. The first half of the year is usually more challenging. And we had margins of above BRL 150. When it's BRL 150, it means that we exclude tax effects and other effects. Otherwise, the margin would be even higher the adjusted margin, as I also mentioned. But the margin was 150 -- the recurring margin was more than BRL 150. And in the second half of the year is typically better, every year, that's what we see in this industry.
And again, this is what we expect this year, that the second half of the year is going to be better. To start on a lower level and ended on a higher level. So we start Q3 at a higher level. We don't see much of that in July. There's an improvement in margin, but volume is something that we will start seeing as of August. So typically, the second half of the year is better for the industry, as I mentioned. So expectations are good.
And you asked about Comerc. So we are running at BRL 1 billion. And when we acquired the business, the plans in terms of order of magnitude, they don't change much, in terms of the order of magnitude, I don't know if it's going to be exactly EUR 1.5 billion. I can't give you a precise number, but it's going to go up. We are at BRL 1 billion and EBITDA is going to grow even further.
[indiscernible] and I, are Board members at Comerc, and we're always looking at new opportunities. There's many opportunities that Comerc can seize to unlock value, such as the partnership we have with Itau, which is still crawling, we are just fine-tuning some things. But there's great opportunities with the deregulation of the market, we can generate much more value. And there's a number of other initiatives in energy efficiency, for instance, that will help us unlock great value. I'm confident.
And the EBITDA will certainly be over EUR 1 billion. And there are some projects that will mature in 2024, and that will have an impact on 2025. So there's still some projects that are maturing.
Bruno Montanari, Morgan Stanley.
First question is about your cash cap. You said that there was a reduction of payment terms with suppliers, especially with your most important [indiscernible] Petrobras was not offering a very long payment term. Did you review the contract with Petrobras? Can we expect the shorter payment terms to be kept in the short term?
And in terms of market share and volume, I understand that there's a gradual improvement and that you expect to achieve your market share go in 12 to 15 months. But looking at 2024 so far and what you expect this year, do you think that the market share is going to be higher than 2023? So these are my questions.
I'll start with your second question. Volumes will depend a lot on market and the crop season and crop year, there are many effects which -- it's difficult for me to establish volumes. But what we will see maybe Q3 or Q4, I don't know, but volumes will be higher than last year without a shadow of a doubt. I can't give you a precise figure because the market is dynamic, and there's a number of variables. So I don't know exactly what demand is going to be like. Apparently demand is going to be strong in the second half of the year, but we still need to wait a bit longer.
As to working capital, and thank you for your question. Good that you asked it. That was the point of inventory. And working capital is something that changes every quarter. We have to look at the company's profitability. There's no change in contracts, no changes in strategy. There'll be 2 or 3 important events in the quarter that led to some fluctuation. But there was a holiday on a Friday that there was a mismatching between the quarters and also supply management, the same in accounts receivable and payable.
And the second important point is there was one customer that took a loan within a credit limit, but more than what they had taken in previous quarters. It was important customer and that affected our working capital figures. There hasn't been changes in our strategy with Petrobras. When you look at Q3, for instance, I have figures for July, for instance, and you see that everything is stable.
Bruno Amorim, Goldman Sachs will ask the next question.
I have a follow-up question regarding ROIC. I know that you have no guidance, but the thing is that your ROIC is much above your capital cost, which is positive. And again, I know you cannot quantify your ROIC. But qualitatively, if you could help us understand, in your minds, what is the set of competitive advantages that you have that could sustain the ROIC much about the cost of capital in the future? That could be helpful.
SKU, I think, is the most obvious advantage you have, but if you could tell us more about what do you think are the levers for your competitive advantage? And therefore, what will enable you to sustain your ROIC much above your cost of capital in the future?
Thank you, Bruno, for your question. Indeed, we don't have ROIC guidance in Q3 last year, the result was much above the expected not only because of our initiatives, but also market circumstances at that time. And so well LPM and -- that happens. and naturally, that is going to bring ROIC down, which doesn't mean it's going to be bad. It is just something we must bear in mind, 15% ROIC, 16% is a good figure. It's not a guidance again, but comparatively, when we look at cost of capital, I think this is a good level.
What's different in the company? And what do we think is going to be sustainable for the business? Well, first, our capillarity, the legacy, the logistics chain that's already implemented. Most of it, well advanced in terms of depreciation. Even taking into account maintenance investments, there's a competitive advantage there that we can be profitable, which is also what sustains our recovery of market share.
So the competitive advantage in cost, which enables us to improve profitability and be competitive as we recover market share. This has a big impact on ROIC. Also, we already have a good idea for the CapEx and investments and need even with some occasional expansion in some businesses, we can take them without hurting ROIC. And I think this is the main point.
On one point profitability and the size of the company, its capillarity, the brand trend, and there are many challenges in terms of added value and branding. So there's room for growth. But today, we are already the #1 player in the market, which helps in profitability and the basis of employed capital is stable, which enables us to keep our ROIC on a healthy level.
Next Gabriel Barra from Citi will ask his question.
One question that I can break down into 3 elements. When we look at market share, there are some important points. There's fierce competition in our industry today driven by price mostly. And that's where we see that, may be, you decided to let go of market share in markets where you didn't have your expected returns because of that. So how do you recover market share, but sustaining our profitability?
So there are 3 things I'd like to you to tell us more about First, your entry in TRR. If you could tell us more about why going to TRR and how that can help you increase market share?
Second, your brand, which is also very important in this business, especially in your branded state and in a process of discussing with the Petrobras. So I'd like to hear from you how you're dealing with that if you have new branding strategies or not?
And sourcing. There's been a spectral in the industry in the past few years. The imports have become an important pillar in this business. And as you mentioned, this difference that that was before because of Russian diesel, for instance, oil and your lessons learned at the company. I'd like to hear from you, how are you dealing with that internally? And how important that pillar is for you to become more competitive? And if Russian products are marginal or not or if we could consider that will still be an important pillar in your competitiveness in the future?
I mentioned before that we've restructured our sourcing strategy recently. Now our trading organization is very active, and there's a director working reporting to Marcelo Braganca, who is someone who's always worked with trading and now is working for us. We've made progress and we will go on making progress in our logistics infrastructure. This is a strategic point for us in the future. We want to enhance our logistics positioning ourself different, but we understand we have the lowest cost in the distribution industry, and we want to keep that or even improve that gap.
And imports or even the trading organization as a whole will be important. And this is a very important organization for our performance this year. They are helping us be competitive in the market, helping us make progress in market there without letting go of margins. And obviously, this new trading and sourcing organization is helping us be more competitive, as you see reflected in our figures. So increase the market share. But being very competitive, especially because of what's working and trading have been done.
And you asked about the brand as well. Our brand, but there's no controversies we have a contract with Petrobras that will expire in 2029. And then we have 6 years to de-brand. So there's no discussion. There's no discussion about that today. Petrobras and us are in agreement regarding brands. So there's a consensus. And so again 2029 is the deadline. So there's no there's no pressure today for us to do regarding our brand. So rest assured, we have a contract, which is very clear, and we will -- the brand is ours until 2029. So there's no risk today regarding brand.
And then you also asked about market share and you ask about TRR, but I think it's a question about market share at the end of the day. With our competitiveness, we are repositioning ourselves. You will see market share increases in B2B, this is going to come from more direct customers. We are using different channels. We have a new structure in our sales team that -- and we are reaching customers that we didn't use to, smaller customers that offer better margins. In the past 3 months, there's 500 new customers with lower volume and indeed but better margins, we are now using also different channels to reach these customers. We have [indiscernible] sales, which is a new organization. We are using different panels today to access market. We didn't have access in the -- so growing market share with additional margin.
TRR, we are and we'll go on being TRR partners, but being more selective. We wanted customers who want a long-term relationship with Vibra and who can value what we can offer. So TRR provide service is an important channel for us, very important channel for us. And we want a long-term relationship and incredible as it may sound, we'll be successful. You see an improvement in our market share. Of course, this is a more volatile market. The TRR market is more volatile, it couldn't be different. However, we are positioning ourselves differently in TRR, end market share is going to be driven by growth in volumes in our own services at the 8,000 stations today, or additional stations with new branded service stations. So that helped us increase market share sustainably with larger volumes.
Next question is going to be asked by Leonardo Marcondes, Bank of America.
I have 2 questions. One about branding strategy. We saw that there was a slight decrease in number of service stations in the past. So if you could tell us more about your branded service stations strategy going forward?
And the second question is about margin. There was the first quarter end that have more than 150 per cubic meter margin in spite of the challenges that the industry faced in the first half of the year. In the past call, Ernesto has mentioned that the adjusted margin was 140-plus. So can we be more confident that the margin is 150 plus or even more than that?
I was going to let Augusto answer about the margin, but you mentioned my name, so I think I need to answer it. But yes, we've been above 150 in the past 4 quarters. I'm not going to speak about plus anymore. What I see is that we are going to go on growing this margin consistently, consistently. This I mentioned that there's a number of projects, a number of opportunities of projects that are still being designed and have not been fully implemented and that will enable us to grow margins consistently. I'm very confident.
One year ago, I were saying that we needed to reduce the volatility of our business and that we needed to become more consistent. And this is exactly what we are doing. We are delivering consistent results and our margins are going north. I'm really confident.
And on a branding strategy for service stations, we are gradually screening our service stations. In spite of that, there's been an increase in market share, even if ultimately, there were some service stations that already had a very weak relationship with us. So we are just doing that screening process. Early on, what we can expect in the first 1, 1.5 years, is that still the number of services is going to be equivalent, but we are switching service stations that are leaving us, but we are branding new service stations. So this is one of the ways we will be growing volume. We are leading the relations that had a weak relationship with us with more volume, switching for a new service station that will add more value and bring us more volume. So there's going to be stability in figures and gradually going forward, there's going to be an increase in number of services. So believe me that the slight reduction here is like an increase there every quarter, but gradually, you will see growth in a number of branded service stations.
Just a follow-up question regarding branded stations. Do you see a long way ahead of you regarding the screening process? Or do you think that much has been done already?
Well, nothing very significant in terms of service stations. There are some service stations that are not performing and re-discussed some contract conditions. So this is what we will be doing. It doesn't mean necessarily that we are severing the relationship with all of these service stations. Sometimes, we are renegotiating with them. And the ones that we are stopping to work with are the ones with very low volume. So there's no concern that there's -- if there's a decrease in number of service stations, it's a still -- it's a small number, and there is no direct correlation with volume because these were service stations for which the volume was low already. So even there might be an increase in volume, actually.
Next question by Regis Cardoso XP Investments.
There's a number of topics that I'd have to address with some quick questions. First of all, lease reduction. When we look at our net debt, it's down, but down because of leases. Maybe the -- there's the acquisition of your headquarters and your net debt that is down. Also, there's the out of court, BRL 200 million agreement, if you could tell us more about what is that cash out?
And another topic, as there is a screening process with service stations, but from a different point of view, your branding CapEx is very low for the second quarter in a row. And I don't know if that is on purpose, but if that's the case, provocation in your theory of growing EBITDA -- that you have unit EBITDA margin that is lower when you have new branded. Also expected a growing result for Comerc, and that's not what happened when compared to the first quarter. I don't know if that because of seasonality or why, so if you could tell us more about that?
You spoke about net debt and lease, I think we can meet later on to talk about that, but we had a debuting payment of BRL 127 million of the building in the first quarter and the second quarter that is shown as CapEx variation that I told you in the slide. So the year projections don't range, but that's something that happened in Q2. As the EUR 200 million contingency. This is something that we announced last year. It was our highest contingent risk and we may be in a deal and the BRL 200 million were paid in the second quarter. And we announced that to the market.
Branding CapEx, I don't think -- you don't know what is anticipated or brought on early or forward because when you have that paid, afterwards, there's a counterpart in volume. There's the advantage of monitoring results much more closely, but there's a direct impact on expenses and EBITDA. So you see a reduction in CapEx, that doesn't mean to say that we're reducing branding, but I'm changing the mix to the post payment. So there's no change in the cost of branding.
And as to Cormerc and Q2, the curves are driven by project maturation. So there's nothing unexpected in Q2. The production is 1 billion. There is seasonality end of the year and contract adjustments. Last year we saw the same. But the project is -- just adding to that, the projects -- major projects are on. So gradually, the EBITDA curve that was like this is going to be more like this. So we expect growth in the coming months and quarters. But the most important projects are on, there are some smaller projects that are coming in. And because we've made no new investments in centralized generation, we are not specifically what we expect is a gradual stabilization, still growth, but at a different pace.
And a follow-up on your branding question. And in our management model, we migrated from paying forward to paying later, and that does not show in Capex. And the branding cost is being managed, and there's been a reduction actually when compared to previous years. As I mentioned before, we monitor all of these figures and all of our -- and this is part of the goals of our executive.
And I have a follow-up question. I don't know if it's too specific, maybe we can schedule a meeting later on. But lease, there was a reduction of BRL 272 million in leases comparing quarter-over-quarter. Maybe it's the present value of your lease contract.
Because this is part of the IFRS 16 debt. That's my comment on the net debt. It's likely that's the case. But yes, we can have a follow-up meeting with you. But in theory, that's the case.
And the unit margin, anticipated cost. Did you do an analysis of how much that post-payment strategy can have an impact of your unit EBITDA margin so that we have comparable margins going forward?
I think we can have a meeting with you later on and go into more details about that.
Next question, Rodrigo Almeida, Santander. You can ask your questions.
I have some follow-up questions. And a question about another topic that you haven't talked about. It's a question about CapEx and capital basis and 1.5 to 1.55 that you mentioned earlier, the recurring at -- and then the acquisition of the building. And then CapEx, I'd like to ask about capital allocation. And if you see the need for strategic reasons to invest in your subsidiaries because of working capital or to new business?
And second, I don't know if you're going to be able to answer, but a follow-up question on your screening process with the service stations. If you could give us some rough figures and average volumes of the stations that came out?
And the question about lubricant. The lubricant business is one that maybe could grow considerably. So speaking about your planned expansion what you expect in the second half of the year in terms of volumes and market strategy, new volumes and ramp-up expectation?
Rodrigo, I'll have the 2 last questions, and then [indiscernible] answer the other one. So the gallons of the volumes that the stations that we are no longer working with they were not relevant. So were stations that we're not buying from us anymore, almost. So it's less than 50 cubic meters of gallon. So this is an important figure, of course. We're going to go on announcing that, but this was the volume VMM, sales to our service stations market share because there's number of service stations does not necessarily correlated directly with our volumes in terms of gallons.
The other question is about what?
Lubricants.
Well, the lubricant plant is going to start operating by the end of the year. It's pretty operational, actually. We are really confident -- well, it's a plant that will give us an important competitive advantage in the lubricant market. It is going to -- it's one -- it's the largest plant in Latin America. It's one of the top largest plants in the world, it's really state of the art. There are foreign experts in automation who are here with us, and they are all impressed when they come and see our plant in terms of automation.
So the quality of the product that we will be making there's going to be higher, and the cost is certainly going to be lower than the cost of any other plant in Latin America. So we will become even more competitive. And the plant is preoperational and by the end of the year, it's going to be fully operational. And our mission is to go on growing the lubricant market, our volumes are up, and we expect them to go on growing. We will expand the lubricant business, which is very important for us, a very significant business for us, and we understand that this is one of the most important growth platforms in the future.
You mentioned CapEx and the building in our, there's a CapEx carryover effect exercise and quote, the execution. So the investment for 1.5%, it's not a guidance that be more or less, but it's roughly debt amount, including the building, BRL 1.4 billion last year. This year, we said that investments would focus on agri business, expecting BRL 100 million above -- BRL 150 million above last year. So that's why we keep that figure and that's the paid for this year. There's no relevant expected investments in the subsidiaries, so nothing new there.
A follow-up question, Ernesto, about lubricants and the additional volumes you expect what in B2B, in retail? So what should we be monitoring going forward in this ramp-up this year or next year, so that's in 1:14:19.4 [indiscernible]
The number of fronts for the lubricant business today, we've restructured our distribution network. So there's authorized distributors in every state in Brazil today. So with that, we have greater footprint, and we reach end customers more easily. And also, distributors supply our own service station. So they have more capillarity. They offer training, they train the service stations and so we expect growth in retail. At the same time, we're also working on B2B cross-sell.
Many of our customers use diesel oil and lubricants, but very few customers buy diesel oil and lubricant from Vibra. They usually buy diesel oil from us, and they don't buy lubricants from us. We showed you a 5.6% growth in the presentation that B2B cross-sell is going to be an important driver. We are making progress there. Our B2B team has been trained. They have new tools to work on that. So these are the 2 fronts: better distribution network to work in retail, including our own service stations. And in B2B, the strength of die oil sale is going to be the driver for greater lubricant sales. So these are the 2 pillars there.
That brings us to the end of the Q&A session. So I would like to turn it over to Mr. Ernesto Pousada for his final remarks.
To conclude, I'd like to emphasize what I've mentioned before, we really trust that these results are not thereby trends. There's been 4 quarters and each one of them have been very different. Some quarters were more favorable, some quarters were not as favorable for us, but we've been able to navigate everything, managing the company, delivering results in every respect.
ROIC, again, is one of our most important long-term metrics. And in this, we always managing short and long term, trying to strike a balance. And as you've seen, this is a [ trend ] going forward, gradual recovery of market share, growing volumes and maintaining or even increasing our profitability and unit margins. So we're really confident our management model has been successful. It includes pacing intensity, and it will certainly deliver growing results in the coming years. Thank you, everyone, and have a great day.
Great day.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]