Vibra Energia SA
BOVESPA:VBBR3
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Vibra Energia SA
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Good afternoon, ladies and gentlemen. Welcome to Vibra's earnings call to discuss the results regarding the third quarter of 2021. This video conference is being recorded, and its replay can be accessed at www.ri.br.com.br. This presentation will also be available for download. [Operator Instructions]
Before we proceed, I would like to take this opportunity to reinforce the prospective statements are based on beliefs and assumptions of Vibra's management team and the information currently available to the company. Those statements may involve risks and uncertainties given the fact that they regard future events and therefore, depend on circumstances that may or may not happen.
Investors, analysts and journalists need to take into account that events related to macroeconomic environment to the industry or other factors may lead to materially different results than those expressed in the prospectus statements.
Today, we have with us Mr. Wilson Ferreira Jr., CEO of Vibra; and Mr. Andre Natal, CFO and IRO.
Now I would like to turn over to the CEO of the company, who will start this presentation. Mr. Wilson Ferreira Jr., you may proceed.
Thank you. Good afternoon, everyone. Thank you for being here with us at our earnings call for the third quarter of 2021. We only have 10 slides just for an introduction and a summary of our results and our prospectus.
Starting with the results of the third quarter. We will get more into more details of that, but you see that vis–à –vis the same quarter of the last year, our volume is 9.2% higher. Our market share percentage points higher and also additional 270 stations vis–à –vis the same period of last year. And we have reached one of the lowest levels of adjusted operating expenses, BRL 42 per cubic meter.
Our EBITDA margin is compatible with the return on investments. So those are the 5 items that are very important in this quarter. But it is important to remind you that we are still going through a crisis.
We understand that in our environment, there has been some changes in perspectives. But still, even in an environment of crisis, we're still reducing on our expenses, and we have reached the lowest expenses in a quarter vis–à –vis the same quarter of last year. We had a 29% drop, which is the result of several improvements that the company has implemented. We will talk about that as well.
Our EBITDA has been maintained at the level of BRL 115 per cubic meter, so very stable levels lately. And we are constantly pursuing an optimal capital structure. You see that our leverage has improved. We are able to have more of our own capital.
And what is more relevant here is that by doing so, we are reducing the cost of debt. You see that vis-a-vis 2019, we have seen cost reductions of about 18% and with a significant improvement in the debt maturity. So it's the perfect combo, EBITDA comparable with the costs we have, lower expenses and with a good capital structure aligned with the best practices.
On this slide, you see how this market -- how the market has improved and how our sales have improved, the fuels market has recovered comparing with the last 2 quarters -- 2 halves of the year. So you see the difference, we have reached 34.4 million of cubic meters. And Vibra has practically grew by 20%, twice the growth of the market.
In terms of market share, we have good perspectives. The total sales of the company grew by 12%. And at the same time, we are also increasing our market share by 2.6 percentage points. We have reached 29.1%. If you see a comparison with previous years, you see that the company is doing better than in 2018. We are diversifying our market, focus on our customers. That's a very important year for this company. We would like to highlight our evolution in the aviation market, a growth of almost 34%.
And in the diesel market, you see the Otto cycle. We grew by 13% and even more highlight because of fuel oil. We are the largest supplier of fuel oil to thermal power plants. And since there is a higher dispatch on thermal plants, we have also sold more fuel oil. So the company has performed well in this business. We've also shared with you initiatives that we summarized in -- on this slide, this maybe gives us some perspective.
To be a competitive company, we need to have a competitive network of resellers. And of course, our costs need to be low. I'd just like to highlight what we have in our zero-based budgeting, more than 80% of our action plans have been completed. And we are completing all these actions that will add BRL 233 million to our EBITDA next year. We are also investing in retirement of assets, especially real estate assets. There was a package of 250 assets that we have established with a partner, with a real estate partner. This is under development. This is ongoing, and we are moving well in this area. We expect to see results next year, but the actions have already been implemented and shared with the market.
We are also trying to sell assets that have no use for the company. In this quarter, we have achieved significant amount with the sales of the former head office that we had in the city of Salvador and also land, plots and also stations that are being negotiated directly with operators. All these actions are listed in our release report.
As to the 25 logistics assets with potential for retirement, one of these assets have already been negotiated, and we are in advanced negotiations for another 2. We are looking for an adviser to help us develop this work in 2022 as we had announced because this has a potential of BRL 1 billion potential in -- in inducing our own capital in assets that do not add a lot of value to the company. ES Gas, our gas distributor was also included in the privatization program that was formalized with the governor of that state with the divestment earmarked by the first half of next year.
As to lubricants, this also has the potential of adding BRL 100 million to the EBITDA because of our increase in production capacity and gains in efficiency, 85% of our modernization program has been completed. We expect to complete the whole plan between March -- February and March of next year. We are also working strongly on reformulating our sales channels, establishing authorized dealers. This is a program we are going to develop along this year and next year. 30% of our schedule has now been performed.
In our transportation management model, we expect it to save BRL 90 million this year. Actually to improve actions this year is to produce BRL 90 million for next year. We have the control tower system 100% implemented and now covers the entire logistic rail network. It's now undergoing consolidation, fine-tuning. And there are further reductions in fuel transportation costs and more than 50% of these actions have been advanced in recontracting plan for transportation of dark products. We are moving very well in this area so that we can produce additional BRL 90 million in savings next year.
The pension plan has already been structured, communicated to the workforce, now being analyzed by PREVIC. We expect that the first members will start joining by January next year. And we also have this potential reduction in actuarial liability because of the migration of the pension plan related to benefits or variable contribution to the pension plan. We will have an exclusive pension plan defined for all employees of our workforce.
Next slide, please. I saw in some of the analyst reports that this was highlighted, the company has a robust cash generation. As I mentioned before, we're trying to reach a leverage level that is interesting this year, have already paid BRL 2.7 billion to shareholders in the form of dividends and interest on equity to all shareholders. And if we look at the current price of our share, the yield is almost of 12%. Along this year, we have BRL 160 million to be paid until December. Then we will total almost BRL 2 billion.
It's important to recap also about the share buyback program. It is approved to up to BRL 1.5 billion over 18 months. It was approved by the Board of Directors. And right now, over 50% of the program has already been completed, accruing around BRL 810 million by October this year. So we remain committed to providing excellent shareholder results, whether it's because of the valuation of the shares and/or because of dividends and buybacks and interest on equity so that the value can be preserved.
In this slide, we just show you something basic right after COP26. This is just a recap. I've already shown these numbers to you in September in our strategic planning. But it's important to show that Brazil keeps growing. The world will start reducing the volumes of fuel, especially, as you can see fossil fuels and even natural gas. And there will be an increase of the share of biofuels and especially electricity. But in Brazil, it's different because we are a developing country. We'll keep growing in the consumption of fuels and energy in Brazil, but with an important highlight not only to the growth in electricity but also in biofuels.
These are the 2 important volumes that we are getting ready to be able to provide our customers in a set of initiatives we are developing. We will have a reduction in the consumption of fossil fuel, but we're not going to zero at those levels. By 2040, we would move from a level of 46%, 48% to something close to 30% or 36%. That's what we call the energy transition, and this is the scope of our operations.
Our focus is in the fuels, lubricants, aviation. We are also advancing in terms of convenience, trading of ethanol and derivatives and derived products, by-products. We are working in cooperation with Copersucar. And also we will complete the work with by-products from ethanol, electricity, marketing and trading. Vibra is also a trader now. And of course, there are new vectors of growth. We are looking into off-grade and on-grid supply of natural gas and biomethane in a partnership that we have established with ZEG, reinforcing our position in electrical energy solutions for electric vehicle charging, a relationship program and also enhanced conveniency, they're also related with our partnership with LAS.
Let me remind you that our choice of strategy focuses on the customers. The customer that is going to determine the pace of this energy transition. We're going to follow up the preferences and challenges of our customers to be by their side. We also want to provide a solution in the -- energy solution in the most competitive sources regardless of the investments in assets, and that provides us more freedom. And we can be more independent as a neutral channel of commercialization. And progressive bets on these new energy sources as this transition takes place, we will generate and distribute these fuels to our customers.
This is just to show you the partnerships that we've established, as I've just mentioned. So partnership with ZEG for biomethane; and Copersucar, related to ethanol; Comerc and Targus related to electrical energy, electrical power; Americanas through LASA, LASA. We will announce soon for the next quarter a partnership related to trading. So I just like to bring you a summary slide that shows the importance of our participation, our potential participation in the relationship with Comerc, not just because the way the business was done, but also because of the amount of options that we will be able to provide our customers.
We are diversifying the results with this trading, not only in terms to trade electric power, there is also a wide range of services that we can provide to our services -- to our clients such as generation of energy from renewable sources. We also have -- there's expertise in the retail market of Vibra Energy that leverages the growth of Comerc. Also, opportunities of cross-selling in services provided by Comerc and the portfolio of Vibra with thousands of B2B customers. And the merger of this company is established Energy-as-a-Service platform that will help customers reach their targets of energy transition and also energy efficiency in line with the best practices of ESG.
The financial capacity of Vibra Energy and its penetration in the B2B market is crucial, aligned with the expertise of Comerc that brings synergies to both companies. And the participation of Vibra and Trader and Comerc, when you combine both shares, both participation it become one of the largest operations of energy trading in the country in terms of the number of customers served and the volume of energy sold. So we have a power of creation of value, not just because of the merger, but also because of future synergies with our market, with our financial ability. So this is an -- a transaction that is really remarkable. And we reassure you that this is focused on an ESG agenda that is crucial to the company.
We are convinced about the importance of energy transition and sustainability. We maintain our commitment with the neighboring communities and social development in Brazil and focus on diversity and inclusion with Targus for each one of these topics. Vibra is a company that is widely recognized in the market for its practices for 2 consecutive years, it was acknowledged by ISE and also B3, Refinitiv. There was also a highlight among distributors of fuels in the country. Listed for 2 consecutive years in the FTSE4Good of FTSE from the exchange market of London and also top 15% in the S&P sustainability annually. It's going to advance even more. This is a company that will keep differentiating itself.
So this was the end of my presentation. I would like to thank you for your attention. Now I'm going to open for questions.
Thank you very much, Wilson. We will now start our Q&A session for investors and analysts. [Operator Instructions]
Our first question is from Christian Audi with Santander.
So first, I would like to congratulate you for your results, not only because of the size of the figures, but also because of its quality. Congratulations for that. I would like to ask a few questions. You've been very consistent in your performance vis-a-vis your peers in the industry. So now especially because of the results in the third quarter, it seems that this has been a silver bullet.
I'm sorry to interrupt. I'm sorry, Christian. We can hear the feedback of the simultaneous translation from your computer. Can you please turn off that sound. Well, maybe this is it, right?
Yes, this is a good tip for everyone who opens their microphone, otherwise, we keep hearing the feedback. Yes, just during your question.
Let me try to ask my question in a very brief way. My first question is you have been very consistent in the generation of results for the company. In the third quarter, you seem to have reached that in all segments, retail, B2B aviation. Is that the case? Is there any silver bullet? And what is the first prospect for the next quarter? In terms of competition, do you think that this is also a positive prospect for the first quarter?
And my second question is on B2B. You highlight in the sale of fuel oil to thermal companies. I would like to understand the prospects for the fourth quarter and also for 2022. Do you expect this trend to be maintained? And finally, the last question. You have taken a very positive step in terms of energy transition. You had a JV with Copersucar, you have a partnership with ZEG. Can you give us some idea of how these important movements are moving forward? And I'm sorry about the feedback problem.
Okay. Let me start with the B2B topic. Obviously, we're going through a water shortage crisis because of -- we haven't had a lot of rainfall in October and November. This levels of 18% is just too low for us to be minimally comfortable, we should be 50% higher than the current levels. And of course, we are going to keep this higher dispatch on thermal power plants until the levels of the water reservoirs are recovered. So we don't expect those volumes to be reduced in the fourth quarter in that particular area, they're probably going to be similar, maybe stop for maintenance purposes.
And in 2022, of course, we need to keep track of the rainfall levels. I expect us to keep higher levels still on dispatch for thermal power plants because we've had a year where you have the La Nina effect. So we have stronger rainfall in the North and in the South, and we are witnessing that already, but lower rainfall levels in the Southeast. And most of our water tanks, so to speak, is in the Southeast. So if we don't have regular rainfall levels, it's only reasonable to expect for us to have more dispatch to thermal power plants.
In the beginning of the year, it was lower, but it increased along the second half of the year. So in -- if it is maybe a similar average to what we've had, we're probably going to achieve the same levels of next year. That will be a good bet in average than being the same as this year, next year.
Regarding your questions about -- your question about this operations, I would like Natal to give you more details about that.
We are working. We want the Comerc operation to be completed until February. As to LASA, we are waiting right now for [indiscernible] to complete his work. We expect these results to be communicated in the upcoming days. And also, we follow with the Copersucar joint venture. That takes a little bit longer, but we also expect to be able to operate these trader in that year's harvest. And as to ZEG, we are working with some clients to be able to make this partnership possible.
And finally, regarding your point of the first question about the fact that we are consistent and what we should expect for the fourth quarter. Objectively, I'd like to say that we are operating a company that we want to be competitive, and to be competitive, it has to have 2 things. Cost is relevant, of course, to competitiveness. And this is why we have made a lot of efforts to reduce costs. It is not surprising that we're actually trying to beat our own targets and beat our own benchmarks. This is crucial so that the group can be very competitive.
Of course, when there is lower demand, competition is fiercer. I think that now we expect demand levels to increase, and this competition is expected to be leveled to more reasonable prices. And we need to have efficient cost to be competitive. So yes, we expect to remain consistent and to keep this practice of lower costs so that we can be more competitive. Mr. Natal?
Well, you've practically answered everything. So Christian, just remember that in the second quarter, we had been impacted by the second wave of the pandemic. So we had contracted volumes and that naturally leads to scale the economies and did -- harms margin. But together with a marketing contraction, the competition becomes more challenging, competition becomes fiercer, and we see price aggressiveness in some areas. This is a lose-lose game, not a win-win, and you see that the migration of players did not produce the effects that were expected in the industry. And it just led to a margin retraction that we could see in most of the results in the industry.
Well, according to our expectations, well, we assume that this is due to the fact that we had contracted demand. We had a 24% drop in aviation vis-a-vis the first quarter because of people flying less. And the third quarter was a quarter of recovery. We recovered in volumes in all segments. So the demand expanded in B2C, B2B and in aviation and that expanded significantly in all segments. We have gained more share, we grew more than the increase in demand in the period. So we had a 40% increase in our sales volume, 27% more in B2B, almost 9% in B2C.
For us, this was very good because it actually has led to the consistency you've mentioned. We see expansion of margin in 3 segments with increased market share and economy of scale because of a higher absolute value. This has helped us in our margin. So after the adjustments of the previous quarter, there were some one-offs. But after these adjustments, we see results that are much better from the previous quarter, which was not so bad considering the context of the pandemic and our industry.
Now after the end of the quarter, we are witnessing a better perspective. October was a little bit better in terms of margin but it's not relevant for replenishment, but it's a slight recovery as it was the third quarter. October has a significant event in terms of gains in stock, gains in inventory. There was an increase of prices in the beginning of September. And since it just were applicable to the last days of September, did not have an effects on the inventories in the quarter, but in October, they did.
When we look into November, we see margins and volumes that are much better. Volumes as a whole, we see something like 5% above what we had expected in the beginning of the year before the second wave of the pandemic. So this is a volume that is being under recovery. And this competition seems much healthier from the margin perspective. We have a more significant expansion in recovery margins, especially in resales that had felt the effect since April, May until recently, until the half of the third quarter.
So we had this cooling down and the competition was very aggressive. And at the same time, there was a positive trend because of the high vaccination rates in the country. So these tends to be positive aspects that will have a positive impact on our results. Regarding the M&A, the reorganization was a prerequisite, it was a condition for us to be able to pay the debentures, and this is expected to be completed in the middle of this month. So we will have this disbursement of BRL 1 billion and another BRL 1 billion, just separated by 15 days. And we'll keep on doing what we will, precede the conversion of these debentures into shares and also the exercise that we have expected until February.
So as Wilson said, we are waiting for [indiscernible] position. We don't expect this to lead to any significant concentration. But we need this regulatory approval. We are still going through this period of comments and information. So we're still in this process. But we expect that until the beginning of next year, all the other deals can take off. And we are looking into other opportunities as well that go beyond the ones you listed. There are a lot of things going on in the energy. And the gas industry, we're participating in several negotiations, and we will let you know in a timely manner.
Our next question is from Regis Cardoso from Credit Suisse.
Wilson and Natal, I bet you can hear me. So let me touch upon 2 points. The first one relates to the recent M&As, especially the 1 related to Comerc. I would like to understand 2 perspectives. So first, how do you see the integration of Comerc and Vibra Trader? Because each of these companies has a different shareholder structure. Can you integrate operations? Can you make the best of synergies? If so, what are the synergies that you are foreseeing by having those 2 assets under the same umbrella? Or maybe the opposite of that.
Maybe one will focus on one thing, will focus on trade of energy. The other one will focus on the trade of gas, I don't know, I'd like to hear that from you. And related to Comerc and Vibra Trader, I would like to understand the verticals of trading you expect based on this merger. Is it consulting services, services, something related to energy efficiency? Is it related to generation, generation of renewable sources of energy, distributor energy or more centralized energy.
So I would like you to please elaborate on your strategic planning for verticalization. I would also like to hear about something you mentioned earlier. You mentioned that you were looking into EV charging solutions. I assume that you might not have something final to announce at this point, but I would like to understand what you expect from the development of this market. And if you allow me a provocation, suppose that you allocate relevant capital tomorrow, and tomorrow, there is the largest network of EV charging in Brazil, probably there wouldn't be enough demand. But on the other side, there is the egg and chicken dilemma. Sometimes you make an allocation too big and maybe 2 or 3 years down the road, this business could be more relevant or maybe today's chargers or not be the chargers we'll use in 5 or 10 years' time. So it's about electric vehicles that I'd like you to elaborate on to.
I like your question in our last slide, we showed that we defined our strategy because we didn't want to do what you just said, maybe to develop the largest network just waiting for the man to come.
So what we've been doing is we have assessed where we believe that demand might come from? So maybe people were going to charge their cars at home or at the office, that seems more likely right now. People also need to charge their cars when they are on the road.
So I think this is what we are looking for. We're looking for places we expect to have demand. And based on demand, we plan to offer services because through Comerc or Vibra Trader, we can provide packages.
Those will be packages of energy that would allow fast charging of electric vehicles in your route. But we are going to be very selective about that. What you can expect is that when this market exists, Vibra will be there, but we're going to be cautious in this process.
That we made an in-depth analysis for our strategic planning. We are looking for alternatives to be in this market at this point. But we want to be cautious, and we want to be available to follow-up the demand as it comes. And also, let me remind you that Brazil difference from other countries because of biofuels.
We've seen some hybrid cars that use ethanol as a fuel source. This can also happen when you look into the demand and you look at the volume, for example, of greenhouse effect, gas emissions, including the manufacturing of the car, the most efficient solution is a hybrid vehicle with ethanol rather than a pure electric vehicle, especially considering where these vehicles are going to be produced. Where you have electric energy produced based on coal than producing electric vehicles could lead to a much higher level of energy.
So that answers your third question. Your second question has to do with the verticals of operations. There is no doubt that the pipeline we have related to Comerc, wind power and solar power sources, you have a market for retail. The retail market is there. We see that as positive.
And we also have this perspective of some consumers who choose to have renewable energy, and we could be an investor to maybe making this transition so that this transition is possible for some customers. But for these transitions to be there, you need to have the ability of providing services, monitoring, energy efficiency, and Comerc can provide that.
We had some of these services at Vibra Trader, but Comerc is better equipped to do so. The main verticals are serving consumers. And if they need an investment, they make sense for us, okay, we can do it for the retail market. But we also want to have a good relationship.
We already have a very strong traditional relationship with our customers who have been in the market for 50 years. This is a relationship-based on trust, on credit, on long-term relationship. So we expect that consumers when they plan for their transition, they will require this support, and we believe that we can provide the support through our companies. As to integration, this is what something we are discussing right now.
As Andre said, we are waiting for a major landmark for the restructuring of Comerc that will trigger our process. And this is when we will start to assess this possibility. Comerc already has more than 1 trader. They have this expertise. So I believe it is possible to do that, but of course, we need to discuss with our partners from now on. Andre, would you like to add something?
No, that's it. This is in discussion. And as part of our agreement, we expect to use the money brought by our participation into Comerc's transactions. And if we do so, that will be deducted from the secondary part of the debt that we would pay. It's already included in the transaction plan.
But there is an assumption of a previous negotiation, negotiation that should be made prior to that. There are several models to be used. We are studying the pros and cons of each, and we are discussing that with our partners. Of course, and it's to work, and it's to be good for everyone. There are ways so that it can be good for everyone, and this is the path we would like to take. We believe that there is value in these transactions, but we do not know at this point what is going to be the outcome of that.
On the other hand, we also have an alternative path to if we decided to go in a different path, we could move on separately. We are studying those options. But right now, we don't have an answer for that, anything is possible at this point. Plan A is integration. That's what we expect in our deal with Comerc.
Andre, if you allow me one last question. To talk about the results. I think the results speak for themselves. It was very good, much higher than expected. But I would like you to elaborate on 2 points. One has to do with the thermal power plant. I think that it contributed to the results, but it would not explain this difference on its own.
And there's also an evolution that we should expect for the fourth quarter, but maybe moving from this absolute figure, BRL 115 per cubic meter of EBITDA, something we would already expect for next year and with all the benefits of efficiency captured there. So does that make sense? Should we expect sequential improvements from now on?
Well, Regis about thermal power plants. Indeed, there was a contribution related to that. But as we mentioned, even in other questions, indeed, there was no silver bullet that explain these results. There was indeed a contribution related to it. We saw the estimates that you published on the fact or estimates, very good, very similar to ours.
We don't think that -- it doesn't quite explain BRL 10. It's less than BRL 10 in our margin. In fact, the comparative performance in the industry would have been equally strong even without this effect. And indeed, this effect will last for more quarters, even with an improvement in rainfall levels, we still expect a long-term with increased dispatch for thermal power plants, maybe even in the second half of next year.
And looking into the fourth quarter, has to do with the first question. Indeed, we see October a little bit better, maybe with the nonrecurring effect because of the levels of stock, but November is much healthier in terms of replenishment margins because this is what we are more interested in.
The underlying business, the vital signs of the economy that will indicate how healthy our margins are and how much we'll be able to place ourselves well in the market. It was a good combination, including in terms of expansion of our network because this is how we are building our market share to come. So not only we have developed good margins, but also at high levels, this company used to reach BRL 60 of margin, and we have reached BRL 115 right now.
And yes, we can go better. We know that the fourth quarter has more stock. I don't want to inflate our expectations, but if the quarter ended today, we could expect something better.
Thank you, Wilson. Thank you, Natal, and congratulations on your results.
Our next question is from Luiz Carvalho with UBS.
I have 2 questions. Wilson, could you please talk about the company's interest after the Investor Day, especially regarding the stake you have? Yes, guy, you mentioned that in the beginning. So if there is a privatization, would you be interested in the buying part of the company as gas?
And another question has to do with the change that is very relevant of the change in Petrobras' behavior regarding product supply. The company has always been the major supplier, maybe will keep on being, but in the past 2 months, we witnessed a change that's really remarkable. It, of course, may be forcing a diversification of the supply in our supply chain. I would like to understand your perspective because I think that this is a concern in the market, people are wondering if companies need to import products. So maybe this is going to lead to a loss. We don't believe this is going to happen, just make this clear. I think the companies are probably going to deal with that.
But I would like to understand how Vibra is preparing for that. Maybe preparing for the scenario that might be different from the scenario we've had in the past years. Have you seen a significant reduction for the upcoming months? I would like to hear your take on that.
Your first question. Well, our interest in the ES Gas is an interest of sales. This is clearly in our position in the Investor Day. We are not investors theoretically in regulated businesses. We understand that the most appropriate player for gas would be off-grid so this is where we're trying to get our position, pursuing that.
And the new gas model follows the electric industry model and the relationship in the B2B changes so that we can serve our customers using the legal framework. So we are interested in selling our shares at ES Gas. Regarding the behavior of Petrobras. Maybe it is clearer to the market right now, these difficulties in the past 2 months.
Because of a lot of pressures because of exchange rate, because of other increases that have made Petrobras to take -- to make an assessment whether -- what should it do that has led to lower prices.
And it's a commodity, if there is somebody selling for a cheaper price, of course, the demand for that particular sales company is going to increase. Petrobras is not the supplier of all fuels in Brazil. Vibra is the largest importer of fuels in Brazil today.
I would like Andre, who knows more about that, and I did to say to give you a stake on it. But I think the diversification the Vibra is looking into to have our trader for ethanol, to have international business, to position itself in other fuels, it moves into this direction.
There's no way of subsidizing the price of fuels we are importing in what we usually do. We do our best to have a very competitive fuel prices offered to our network, but we are going to buy a part from Petrobras a part is going to be imported. And the price is going to be a blend of those prices.
We are trying to get this blend price to be as competitive as possible. All strategic movements involving Copersucar or involving ethanol derived products, for example, probably is going to be more important because the Brazilian market is expanding.
And the Petrobras refinery business is not expanding. Hence, the share of imported fuels increases. This is how we're positioned in this market. Andre?
Luiz, I'd just like to add by saying that it is part of our value proposition to our customers when we are talking about having a contract with a B2B customer, maybe having the flag loyalty with a customer. This has to do with supply and customers realize the value of being associated with the company that is well-structured and whose operations are reliable that will not leave them out of stock. So it's only natural that people are trying to get as much as we can from domestic refineries.
But having said that, given this context, we will go to the import market. This has been true since the privatization. All -- we've always had a significant levels of imported volumes. This has added to our gross margin, move from BRL 4 -- BRL 5 to BRL 15 in some quarters. So our trading, considering sourcing of what we sell to our customers has been a permanent strategy.
But individually, if you isolatedly, you're trying to reduce imported volumes and increase domestic volumes. But this is related to the scenario. We don't believe that in the long term, we're going to have parity prices that is well balanced. We don't believe that we're going to move away from that.
And regardless of the combination of sources, this market should have an equilibrium price based on the set of sources. This equilibrium prices, balance price with quoters and different cutoff prices should be a mix, maybe a weight average of those 2 prices.
And this is what we've been doing. We are looking for imported products. We are pricing it accordingly, but we don't see any restrictions in the market in absorbing the prices imposed on the product, the product cost, what it costs. And the market absorbs this cost because demand is resuming, mobility is resuming, flights are resuming.
And of course, the national product is going to be priced as a mix of the imported products and the domestic products. This is already reflected in the margins of November that I've mentioned before. We don't see any restrictions in the short term, and we don't believe this is a structural movement. We believe that over time, the gap of prices is going to be closed, is going to close, and there is a natural adjustment to that market will reestablish to an equilibrium later.
Just adding to what Wilson said regarding trading. Our trading today focuses on supply. It has to do with creating competitiveness in our access to the molecule. So if we have a trading desk to be a trading desk to have a trading business, that's something that we are thinking of and probably going to begin operating like that in the beginning of next year.
With that, we're going to be -- have more flexibility to have positions outside Brazil, maybe changing routes of ships, something we cannot do today. And we just purchase hedges and delivers in Brazil that today, it's the only operation as possible. But if we have a different type of trading center, we can have different solutions that will provide us more flexibility to try to mitigate the effect of changes in price.
And you were right, there is no harm in this imported volumes. We'll keep importing products, and we are able to price those products correctly in the field. Our network is supplied, and we're very confident that this will not lead to more damage.
Our next question is from Bruno Montanari.
Two quick questions. First, you mentioned the increase of your network, which is good news. What is the margin profile of those new stations when compared to the ones that are already part of your network?
My second question is considering a repurchase of shares, is dividends, redistribution, for how long can we have those payout levels until those energy projects are more relevant. When do this CapEx competes with what is paid to shareholders?
Yes. This is a question to Andre, that's for sure. I'm sure he has an answer for that, oh I wish. Well, in terms of the network, I just missed your first words, but I think I understood your question. You were talking about those new stations that we have added. So how do they compare to the existing network? We don't analyze it like that. But whenever a new station is going to be flagged, the sales executive will set parameters to that transaction that he's doing with the seller, with the distributor.
And he cannot make a lot of difference in that short zone of sales. So when we set the parameters for that transaction, of course, there is negotiation around the figure, but still, ultimately, the margin is not a contract parameter. We just negotiate volumes.
But to be able to assess that capital allocation, we see a margin of that sales zone. We use a parameter very similar to what had already been happening in that particular station for the past month. So we assume that there will not be a significant difference.
Sometimes it depends on the economic ability because you're negotiating volume, for example, and the upfront payment that you made to flag our station. And maybe in the negotiation that could be some changes and maybe the economic ability is not so good. But when we calculate that, I can tell you that the quality of the feedbacks we've had is very good.
I guess I have mentioned that before. We have raised the levels of return that we demand, and we have not seen difficulties in meeting those targets in terms of those new stations. We have not been able to -- we've been able to achieve the return rate, and that's scalable for transactions above a certain rate.
Maybe can be approved by the sales manager and the decision escalates. Depending on the type of negotiation that we are doing, a given negotiation can go all the way up to the Board of Directors. All I can tell you is that we have not escalated many of those decisions. This means that most of those new flag stations that we are getting quarter-after-quarter, they are being made with good returns when compared to our capital costs.
So the margin is very similar to the margin we have today and the economic ability is above the levels we have established. Regarding the buyback program, we have executed that, have executed more than half of it. I guess your question has to do with how much we're going to have a phase out, maybe become allocating this money in organic growth or an M&A will be more relevant. But this is already taking place in this M&A operations. We haven't sure and with other transactions.
So we look into this program as an opportunity, of course, given what is going on with equities in Brazil and ours in particular. So yes, we see this as an opportunity. But we will, of course, take different business opportunities in energy transition.
And this is why there is a natural comparison of potential returns. The pipeline for the upcoming months indicates that it's going to be more relevant to put money on these acquisitions rather than what is left to do in the buyback program. I'm not giving you -- any new information to you.
The BRL 2 billion of debenture is much more than the BRL 700 million that is yet to be done in buyback. And there are a lot of other points that we are analyzing in our pipeline. So the allocation is going to be more relevant from the organic and inorganic perspective rather than just putting money in the buyback program. This is always going to be on our radar and it's going to be executed when it makes sense.
That was very clear.
Our next question is from Thiago Duarte.
Let me go back to the discussion raised by Andre related to Petrobras commercial policies. You've brought some relevant information regarding this replenishment margin. Apparently, you're not finding it difficult to do that in resales regardless of the source. But doesn't that give you an opportunity in share?
Because of this differentiation that you are getting in your ability to work on the trading, I believe that with this tighter window of imports, tighter in terms of margin, I think that this differentiation in terms of the source should be a competitive advantage in your prices to the end consumers.
And my second question, we've already said what is the cruise ship speed of the business, but I would like to say, talk about the opportunities in gas. You've already mentioned what are the pillars of this transformation and the company position in energy transition. We've seen significant movements in renewable energy and biofuel. So maybe we need to understand what is the expectations of positioning of the company in the gas market?
I would like you to elaborate on that because we've seen significant openings in terms of distribution in the gas market. Do you believe that those opportunities of cars now, we've already seen the sales of Gaspetro, for example. Would it make sense for us to see the company positioned in other links of this chain, maybe on ports, BTNs?
Okay, Thiago. Related to your first question, I think it's true every time there is an opportunity to expand margins that the flip side of the coin is a higher chair. You can choose to do so. We believe that we should be cautious related to the straight off between market share and margin. The margin of distributors accounts for a very small amount of the end price.
So margin hardly ever will lead to a similar -- counterpart of similar volume because we represent BRL 0.10 of the final price of gasoline, for example, of gas that costs like BRL 6 or BRL 7.
So -- and this competition does the same as you do, and everybody will lose their margin and share will not increase. We should be careful when we do that, it should be, pay attention and be technology based and surgical in our decisions, trying to balance all elements.
What I can tell you is that what you've seen in the last quarters, and I think maybe in the -- for 6 quarters in a row is that we've gained share consistently even with the margin expansion. We've been trying to find some balance and recover our historical market share, but we are careful because if you look into the trajectory of this market share, it is consistent to go slowly and steadily, always.
We gain always. We don't see those hiccups that we saw in the past of the company, where you had a great market share, low margin, then historically high margin with low market share. So this see-saw effect is something we avoid. In the long term, you'll probably see that the variation year-over-year has been of 1.5% -- or 1.5 points with a healthy margin.
And it's also true that our supply is more competitive because of scale because of our ability of execution. And naturally, in a market like this, maybe it's more challenging for an independent player or a white flag station to do that. And this is why the reliability of supply is more divergent among different types of players. And this is exactly where we can bring our products to be more competitive in game space, as you mentioned. But that's difficult to equate and we've been very careful. Should I continue?
Yes, go ahead.
Related to gas, there are a lot of things going on. That's true. But my answer goes in the same, along the same lines of others. We should be asset-light. We should have this additional energy source to be added to our energy platform, what we provide to our customers. There are only a few cases that are not like that. But oftentimes, we sell to a B2B customer, and we sell them diesel and lubricants, and we're also their supplier of fuel oil. So we sell everything to a customer.
Of course, there is synergy of having a long history of relationship, of credit. That's difficult to replicate overnight. It's difficult to think of another company that all of a sudden would build a customer base of 15,000 customers with all the trust and long-term relationship we have.
So we leverage on that, and we believe that this is going to be a value to leverage all the business that are connected to our platform. We are not going to -- and those are energy business that one energy is going to replace the other.
So there are customers that are no longer you will fuel oils, but they are moving to gas or to electricity. So we're not moving to a business that is absolutely different from what we've been using or can leverage on. We are building a platform of energy sources that will be available.
And along these lines, it makes more sense for us to first position ourselves in a, for example, natural gas, our ability to supply to the whole country, to supply where natural gas does not go, does not get there. And then we can have maybe replace GLP or other fuel, maybe even diesel.
So that's the type of movement we are pursuing. And that makes more sense to us than just making a massive allocation of capital in the gas distributor in a regulated business, that will be focused more on the regulation framework, for example.
This does not make so much sense for us. And we decided that's the path we are not going to pursue. We are not going to participate in the privatization process of distributors, but we will be involved in all assets and opportunities of partnerships that can bring those elements I've mentioned to provide a wider network so that we can reach our current customer with maybe the gas does not have access to today. And these are the transactions or associations we're looking into today.
I just like to add Andre, that 90% of consumers that are part of our customer portfolio are not connected to a gas distributor. So if customers will use gas for their energy transition, as the example, Andre gave, it should use G&L. So this is a priority for us. We are moving in this direction.
And of course, as Andre said, this can lead to the reception of gas, maybe transportation, but we want 90% of these customers be served with gas. It could be LNG, liquefied natural gas. And I hope that soon they can share with you that -- those plans.
Our next question is from Gabriel Barra.
I have two follow-ups, because most of the questions have already been answered. Related to margin, I would like to divide it into two topics. Not exactly margin actually as thinking about the business as it is. When you consider the retail market, the owners of gas stations were faced this problem of lack of supply that was -- and now that the infrastructure is different, maybe the relationships they had with supply, lack of supply may change.
So I would like to understand how you see -- even the flagging issue from now on, can this be an opportunity? It has to do with the market share point you've already mentioned. Maybe people, maybe the owners of gas stations will no longer want to
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it is very strong in the south and the southeast, you are strong. But in the north
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business there. And in the medium and long term, considering your robust infrastructure, how do you balance your choices in market share, volume and margin? How do you balance those elements? I understand you have had interesting cost reductions.
But what should we expect for the future of the company? Will you focus more on volume rather than in margins? Or we'll keep focusing on profitability and improvements in cost structure? What will be the focus of the company?
Gabriel, thank you for your question. What you said is true. The value of being associated with a distributor involved several aspects. This segment can provide returns above capital cost in the long term because there are several features to it, considering the companies that are well positioned in the market. And they relate to infrastructure, they're related to brand.
They related to a perception of reliability or the attributes perceived by consumers. So consumers are more likely to go to your gas station and maybe pay a premium price because they expect to have a better service, maybe convenience store, better quality, affordable prices.
So there is a set of attributes that involve all that, involves our infrastructure, our scale business. That's true. Players that grow a lot, become more competitive, and of course, consumers benefit from that. And as they do and recognize the value, they will go to that particular gas station. And the retailer there sees advantages in being flagged.
You can even calculate that based on public data by ANP, the regulatory agency. If you follow the history of some gas stations margins, the difference between sell-out and sell-in comparing where they were white flags and when they became flagged.
Usually, they sell more when they are flagged, and they also receive an amount in reals per liter over time to become associated with the distributor. And this is what makes -- gives sense to this business.
So in times when you see more difference between players, those features become more pronounced, more prominent, and this is why sometimes there is increased perception of value. In 2017, in the part of 2018 until the strike, the domestic prices had a much higher premium. There's a lot of discounts. White flag stations believe it was best for them to remain white flagged because they had access to that field with discounts, you are familiar with that story.
So this balance of forces moves common place operations. But in average, large competitor -- distributors are very competitive, and offer something that provides value to consumers and to customers. So times like this can make this even bigger. But this is something you do every day in the long term. You will not have a list of -- a queue of retailers right in front of our door wanted to be flagged. We have added 70 gas stations to our flag. It's, it provides value to retailers, but you need to prove the value to them. So it's not so easy.
And it -- not all companies are expanding their networks similarly. Some even experienced some contraction. So it's not necessarily obvious to retailers that they should have a flagged gas station.
So you should give them an interesting proposition. So yes, we do believe that we could gain traction in that, but we don't believe it's going to become easy overnight. We're still going to have to put a lot of work to build that network.
And in your second question, you mentioned, can you please remind me where a question was? You said focus, I can't remember what it was.
Yes, related to margin. This is compounding. This is building value over time. It is tempting to build margin overnight, if we want to increase your margin overnight, you can, it's not going to be a disaster in terms of your market share, but it can destroy our value in the long term because you harm your retailers, you destroy your relationship, you lose value over time.
We've been resisting for quite some years for the past 3 years, we've been very consistent understanding that compounding over time is the name of the game. So getting an ROI above capital costs. It's not about increasing margins or getting more margins or getting more market share, all of a sudden. Market share takes the long term -- time to be achieved, you need to improve your value proposition. It is our image of the gas stations. It is the payment forms, convenience to service a combination of items you can add value to.
We need to be competitive so that our retailers can also be more competitive. They need to see that not only we are reliable, but we have good prices so that they can be competitive. We don't believe that we're going to shift our focus all of a sudden.
We are not going to just expand margins crazily or expand our volumes. We're continuing this game of balance. We want to have good margins, but we always be concerned because this game of building and allocating capital over time is the game we want to succeed in.
I know given a very vague answer, but that's what we've seen in the past years, and this is how we've achieved our results.
I'd like to add something. Yes, you said that the owners of the gas stations are not used to a shortage in supply. This is a side effect of this process that took place in Petrobras in the past 2 months. But we do not need to work on the assumption, whether this is going to continue or not. Maybe you should work on the assumption that this will not happen as often, because it's crucial for us to, of course, to sell to more refineries, so that is more competitive. It's a side effect in the short term. We don't expect it to continue.
But it's important to reinforce that we are creating a company whose perspective, I don't know if you saw that, but it has to do with sustained results. We are getting more sophisticated in terms of cost and pricing. We shouldn't have any volatility unless there is exogenous volatility because it depends on the company, we want to be consistent and robust and to have flagging with a good capital cost for the company. And the competitive of our business should also be reflected in the competitiveness of our retailers. Thank you.
Our next question is from Vicente Falanga.
I would like to go back to Comerc. We got a lot of questions related to the fact whether it will be interesting for Vibra to have just 30% of Comerc depending on the terms negotiated on the M&A. And assuming that you will end up having 50-50 share, how easy is going to be for Vibra to take range in terms of decisions cutting of costs.
I would like to hear your opinion about the portfolio of renewable energies of Comerc. We have some oil analysts that are not so familiar with that.
And I have a second question. ANP, the regulatory agency determined that the biodiesel auctions will no longer exist and distributors who buy biodiesel directly from producers. How do you see the risks and opportunities in this decision?
Okay. Let me talk about Comerc first. I don't know if I understood your question, the first part of your question. We drew our intention in Comerc. I'm very familiar with the company. It was a competitor back at the CPFL times of Eletrobras was a significant player with a strategy that is customer-centric. It Comerc is much more like a manager of customer positioning.
And they could generate conditions to be a player in generation. But that's not how they started. They focus on customers, and that's what was attractive to us because we are focused on customer centricity, and we wanted to offer a package of offerings to meet the needs of customers. That's the first part.
But in a more recent movement, there was, when there was this merger with Perfin and Comerc already had something. But Perfin is a machine, they're really good at making those initiatives. I worked a lot at CPFL, but what people are doing here is different. They're working on certification. They have a funding ability. They have good contracts.
So each of those things we see at Perfin that they are really excellent at doing that. We're talking about a pipeline of almost 2 giga and with good contracts. So considering their technical skills, connection, it's really state-of-the-art. So we were sure of what we could achieve in this business.
That's part of the work we've done here at Vibra. This market of consumers of electric power and being supplied by other suppliers. Now you need to have some background. We need to have guarantee. That's something that came to stay, people. Other markets are also moving to different sources of energy.
But I think that what stands out in terms of Comerc's operations is that they have this pipeline of 2 giga that is very well connected. It is in execution, it is been hired and funded. Differently from what we hear in this market-related to risks and failure to deliver, I am convinced about the deliveries of Comerc because of everything we've done.
You've asked about biodiesel. For quite some time, we didn't have this possibility or flexibility to import it. I believe that this decision is very positive in terms of the perspective of competition among suppliers.
That was the right thing to do and it's going to lower the prices of fuel is going to become more competitive. And with a better purchasing ability, we can benefit from it. Andre, can you talk about his first -- part of his first question?
Just want to make it clear that we cannot have 30%. The transaction is structured in such a way that either we have 0 or 50%. So exercising this option should be made together with convertibility of debentures into shares. Either they take place at the same time, and there are some adjustments to be made because secondary participation takes longer to be paid, provided some flexibility there, but this does not rule out what I said. So this option should be implemented concomitantly. If we choose not to convert, we cannot have this option.
And you've mentioned of taking reins in your question, right? We didn't want to take reins of anything. We believe in the management team that is there. We believe also in our counterparts, our partners. We want to work with them together. We don't have a person from electric energy to put there. That was never the plan. We don't want to have a lower participation. We don't want to be in the back seat of that operation.
So yes, we are good to have a good representation in the Board of Directors and with all governance mechanisms. There are other ways of making it work, not only because of our balance, reputation and brand, our sales force and access to customers.
So other things associated with this participation in terms of governance. So our presence with 50% of the capital, and these other elements I've just mentioned will allow us to increase the chances of everything going very well. That's not the spirit.
We want to be in this business we want to be there and stay there. We might build additional participations. But you never be less than 50%, but it could, and this is already in the draft of the agreement of shareholders. It's already there in the documents. There are mechanisms that are partner in the long term.
If they want to exit the partnership will have preference in this additional participation, even the full participation taken over. So in the longer term, this could be done.
But in the short and medium term, we just want that team that is there to develop their work. Their business plan is very interesting. We trust their ability to deliver, and we take part of this ability.
The combination of business and what it can bring to the business and compared to what they can bring to the business make a very powerful combination. We are relying on it. And we also have already answered your question related to biodiesel.
We are making the first hirings of that. It seems that we will be able to use our presence and our scale to achieve more competitive prices. It is closer to and hydride market today. We'll be able to make our own bets. We believe that this can happen. We are favorable to it.
If we realize, what we did at Comerc, Copersucar and LASA, they are very similar. We are going to have 50%. We are hiring a professional management team and hiring a professional Board of Directors to appreciate the strategic plan.
Obviously, we need to make available a set of synergies that haven't been accounted for. Relating to 30 million customers every month or 18,000 in B2B every month, of course, the financial ability is different. But these will bring more value to these operations.
As Andre mentioned, we've studied that. It's no coincidence that we are working with all 3 lines similarly. We believe that there are operations like the ones we co-created where you have a highly qualified management team. The results are due to this good management team. And together, we can do more led by them.
It has a lot to do with innovation. This is very clear with Comerc. We don't want to be a weight to the company. We want to be something that are going to provide oil to have well-oiled relationships. We want to preserve the way they are. This is an operator like LASA or Comerc, those operations are very light. Governance is strong based on the Board of Directors' presence we'll have,
This concludes the question-and-answer session. I'd like to turn over to the CEO, Wilson Ferreira Jr., for his final remarks. Mr. Ferreira?
I would like to thank once again 1 hour and 40 minutes of meeting. I'd like to thank you for attending. The third quarter shows the process of our recovering volumes, we believe, in a more appropriate competition in the fuels market.
As a company, we are focused on the operations we have announced, but also in the strategic perspective, that we shared in September. The team is focused on that. We need to close the gaps regarding these perspectives.
We need to keep our identity and be a company that has a good and close relationship with customers, but more especially a company with competitive costs. This has been our focus so that we can be a more effective player.
And we believe that our results are a consequence of having not only good products that go beyond energy and fuels, but to serve customers where they are at the lowest price to ensure the sustainability of our business. So we are very optimistic.
I would like to thank the analysts for their comments on their results. This is good incentive. I'm going to share that with the team. Everyone is focused on that. We're very optimistic about the future. And we hope that in the next quarters, we can also share in value our optimism -- and financial values and optimism as well. See you next time.
Vibra's video conference is now completed. We'd like to thank you for your participation. Have a great afternoon.