Iochpe-Maxion Sa S/Adr

Good morning, everyone, and welcome to Your Ship, Maxion, third quarter 2025 earnings release video conference. I'm Rodrigo Carazza, Senior Investor Relations Manager, and I'll be conducting today's video conference. Present in the video conference today and available for the Q&A session are Mr. Peter Klinkers, CEO, and Mr. Renato Salon, CFO. We inform you that this video conference is being recorded and will be made available and the company's investors' relations site, along with the respective presentation. We highlight that Mr. Peter will conduct the presentation in English. For your convenience, we have available simultaneous translation into Portuguese and English, and you can access them using the icon in the form of a globe that says Interpretation, located in the bottom center of your Zoom screen. you will have three options, original audio, Portuguese and English, and you should select the one that better fits your needs. For the Q&A, we ask that you use the Q&A icon on the bottom of your Zoom screen, and the dynamic standard, we will announce your name for you to ask your question live. At that time, a request for you to open your mic will pop up on your screen. and we suggest you use the translation tool if you need. Before moving on, we would like to clarify that statements made during this video conference related to the business perspectives for the company, projections and operating goals and financial goals constitute beliefs and assumptions. from Yorkship Maxim's management based on information currently available to the company. Future considerations are not performance guarantees because they involve risks, uncertainties, and assumptions regarding events in the future that may or may not occur. I will now give the floor to Mr. Peter Klinker's CEO. Please proceed, sir.

Hello, everybody. Thank you for listening in to our third quarter 2025 earnings call. Before we start to share some slides and talk about some numbers as we do usually, I want to come back to something I said earlier this year during our investor day in Sao Paulo when I referred to a quote from Ayrton Senna. I think all of us know him. who said, you may remember I said this, who said, when it's sunny weather, you cannot overtake 15 cars, but when it rains, you can. And so why am I referring to that quote again? It's because I think when you look at the third quarter results, it is reflecting. some rainy weather in some regions, particularly North America. And so we cannot change the weather, of course, but we can try to adapt as fast as possible, maybe faster than others. And we can try to mitigate that rainy weather in one particular area with some more sunny weather and some more performance in other regions. And I think that's what you will see back when you look at our numbers and when we talk through the slides. So let's keep that in mind. that we can go have a look at some of those numbers if you look at the next slide and you see we used to look at global production x China so you see a little bit of contraction in lv light vehicle 0.3 this year or next year some more light contraction maybe stability but it's not it's not great that's not great growth at this moment if we look on the truck side On the right side, I think here it doesn't look too bad. It's plus 2% including China, minus 5% excluding China. But if you look, and we will talk about it more during this call, if we look particularly at North America, which is a very important market for us, especially when we talk about components, not so much when we talk about wheels, but for components it's very important. that segment and especially the heavy truck segment is very important. You've got class 4, 5, 6, 7, 8 and most of our business when we talk components in North America is actually in class 7 and by far the most is in class 8. The higher up the classes, the more contraction we've been seeing already in quarter two, but quarter three was particularly down in that area, in that segment. And we will talk about it a little bit more during the call. If we look on what it does to our net revenue, this market situation, you can see our revenue in the third quarter mounted up to 3.8 billion reais, which is slightly down, 4.5% down to the same period in 2020. last year in 2024 and so there is another slide where I will talk a little bit more in detail about it but I can guarantee you that you know if we would have had only half the drop of what we've seen in North America truck that number would have been up instead of down and so this has been impacting our overall net revenue meaningfully. Our gross profit, I would say, you know, given that situation in North America, track very healthy, remained at about 12%, 12.1% in the third quarter of 25. And, you know, we're actually pretty happy with that number. Our EBITDA amounted to 390 million reais in the third quarter, and that represents a margin of 10.3%, excluding restructuring costs, which amount to approximately 32 million reais on net income. was 35 million and with all of that our leverage ended up at 2.55 times. A little bit higher than we wanted but still a little bit lower than in the same period one year ago. We will also talk a little bit more about growth, particularly in South America. There is a dedicated slide about that in the remainder of the presentation. If we look in more detail on our revenue, you can see that in the third quarter of 2025, we were pretty much equal to the last year, same period. And if you look at the nine months 2025, we actually show some growth. But if you exclude FX, these numbers are a little bit down compared to last year, same period. And so, as I said before, you know, this North American truck market situation has impacted both markets. the nine months, but more so the third quarter of 2025. I can also tell you that when our impact was the highest in the third quarter 2025, also our mitigation was the highest in the third quarter 2025. That's one of the reasons why the numbers are pretty equal between the two quarters last year and this year. And so that means the more impact we have been having, the more we have been able to offset that in other segments, other products, other regions in the world, which is, I think, a good thing to have happening in the company. If we look on our revenue by product, as we already saw happening in the second quarter, you can see, of course, with that North America truck situation impacting components or components business very meaningfully, you can see that the percentage of wheels in the company has been growing. And so, again, that's because of components going down, but it's also because wheels going up overall in the world. And so right now, It's about an 80-20% split between wheels and components. If you go to the next slide, you see that also in our revenue by customer. Clearly, you see Tretton. Tretton is a global customer for us for wheels and for components, but we have a big business in components with Tretton. That's their international brand in the U.S., uh and they see that that revenue uh going down uh year over year uh same quarter uh same for daimler of course again this is a global business and we do a lot of wheels for them around the world we do business with them for components in south america but just the impact of northern america truck makes that bar go down in 2025 meaningfully versus 2024. you know The good thing is, again, that some of the other bars are going up. And so if you look at customers like Ford or you look at Toyota or you look at Volkswagen, we are actually gaining quarter over quarter. And so that means in total the impact of the North American truck market is there, but it's not as big as it would be if we would not have been winning in other segments with other customers in other regions. If we look more in detail in other regions, I think South America, clearly I would say we are continuing. You've been seeing that already in the first and the second quarter. We're doing it again in the third quarter. We are outperforming the market. quarter over quarter, was pretty flat from a light vehicle point of view, and it was pretty down, even though it's only 4,000 trucks, but pretty much down on the commercial vehicle side, quarter over quarter, year over year. And contrary to that, I think Maxion, clearly up in light vehicles, in a flat market, and not as much down at all, In the commercial vehicle cycle. So overall, you know, our revenue is up in the first nine months of the year, meaningfully six, seven percent. And even in that third quarter, it's still up by two point six percent versus the same quarter last year. On the other hand, if we look at North America, we see this is where the big problem is, and not so much in light vehicles, but specifically in commercial vehicles. And you look at some of the market numbers, and they say it's minus 5%, or maybe when you look at North America, it's minus 25%. But in the segment where we operate, Class 7, mostly Class 8. We've recently seen some public announcements from big customers. I talked about Tratton. They were announcing their sales were down in the third quarter at about 64%. Daimler truck said their sales were down. close to 40%. We think their production may be a little bit more down than what their sales were down because already in the second quarter they were down, so they've been slowing down production even more than their sales have been slowing down in order to build down some inventory. So, you know, overall our numbers reflect very much what is happening in the market of heavy trucks in North America. And so here's where we see the big drop. in our revenue quarter over quarter and with that third quarter also for the nine months in 2025. If we look, if we go to EMEA, this used to be Europe and now we call it EMEA. The only difference is the South African plant, which is uh i believe our smallest light vehicle aluminum uh plan that of course the comparison uh between the two quarters and the and the nine months compared to last year that's apples to apples it's the same perimeter uh but i would say i'm happy to say that you know we have a a strong performance uh stronger than the market performance uh and that's true for both light vehicles uh and commercial vehicles and it's true not only for revenue but i can tell it's also true when you look at units and so that does support our overall global results. Now, the units is clear. We're gaining share because the market in light vehicles is pretty flat. Our numbers are up. Our units are up in light vehicles. And in commercial vehicles, okay, again, it's only 10,000 trucks more, but the market has been coming back a little bit in the third quarter of 2025. Let's hope that continues into the fourth quarter and into next year. But at the same time that the market came back, also our market share keeps on growing. And so besides the units being up, we can also say that, you know, the recovery of higher raw material costs and other inflationary costs and a positive mix. And with that, I mean, we're supplying, for instance, on the light vehicle aluminum segment, we are supplying more and more the premium segment. That all contributes to a positive story, I would say, in Europe, EMEA. We go to the next slide. Asia, our revenue a little bit down in the third quarter of 2025, but I can assure you that we will be growing in the Asian market, which, as you know, for us is mainly, not only, but it's mainly the Indian market. We're very focused on India with our operations and with our sales. And so I wholeheartedly believe that we will be growing in this growing market, and you'll see that back in 2026. With that, what does that all do to our profit and our profit margin? As I said before, you know, a 12.1% gross profit, actually we think it's a very appropriate number given the circumstances that we talked about when we talked about the market. And so, you know, $460 million in the third quarter or $1.44 billion in the nine months from a gross profit point of view, we think those are actually very strong numbers. We go to the next slide. we see our EBITDA and our EBITDA margin and here's where we see a little bit of the contraction where we cannot fully mitigate all of that heavy rain when we talk about Ayrton Senna and his rain the heavy rain in North America from a truck market point of view and so our margin uh excluding uh non-recurring effects primarily uh restructuring costs in north america uh ended up at 10.3 percent uh in the third quarter and now uh amounts to 10.2 percent uh year to date we go to the next The net income, 35 million in the third quarter. I would say, you know, this, again, North America truck production situation impacted our results meaningfully also from a net income point of view. On top of that, we had the restructuring costs. And on top of that, of course, as we all know, financial expenses are higher simply because of the CDI, the SELIC costs. So that's what we see back here on this slide as well. When we look at investments, We always talk about disciplined capex management, and I think you see that back on this slide. Our investments are actually down year over year, and of course we do that because of some of the market slump that we see primarily in North America. So we try to manage our investments down there where appropriate, there where possible, and we think at the end of the year we will come in with the number that we have been talking about in in the prior uh pulse uh maybe a little bit lower because of the adaptive adaptations that we're doing because of the market situation you go to the next one Our leverage is a little bit higher than we were targeting. But given the market situation, we're still happy to say, even with that, we are slightly below where we were one year ago, even though we are slightly up from the prior quarter's presentation. So 2.55 was the number for our leverage at the end of quarter three. Go to the next slide. Not so much change on this slide. We think it's a healthy composition of currencies when it comes to our debt. When you look at the term, 93% is long-term debt. So that's very healthy. And if you look on the top right, also our liquidity, our cash situation seems to be very healthy with 1.6 billion cash in hand. And on top of that, 760 million of undrawn credit lines. If you look at the cost on the bottom, I don't think these costs are uncompetitive. It's actually, you know, these are pretty good numbers. I think the plus 1.2% is competitive, the 3.5% in euro is competitive, and the 5.4% in dollar is competitive. It's the CDI that is not competitive, but we all know about that situation. We go to the next one. Going away a little bit from the financials, talking about the business, we present here our third quarter 2025 SOPs, but I think it's more important. to uh mention to you guys that you know when we talk about market share gains and outperforming in some important regions for us in the world you know when we look at wheels uh you know i can tell you that our new business wins so the the amount of of of new orders of new of wins we have you know is significantly higher year-to-date 2025. And then I don't talk 5%, 7%. I talk tens of percentages significantly higher than the same period last year. And already last year was better than the prior year. And so it's another proof for me when I look at the numbers that we are having some very good traction with the company globally on winning new business at appropriate markets. We go to the next slide. You know, if you win share, especially when you win share in a growing market, and a good example of that is the South American light vehicle aluminum wheel market, you know, our wheels are wanted and cars are wanted. And so you want to service your customers correctly, you need to do something. And I think you could have seen in the press release that we have been working hard on being able to service our customers like we want and to profit, of course, from this market growth. And so besides supporting our customers temporarily from global operations, which is very important to be doing, and we can do that as a global company, Also, we are redeploying assets from entities around the world, Europe, Asia, back to Brazil, to our plants in Limera and in Santo André. And on top of that, I believe you may have all read about our recent acquisition of a majority share in Polymetal, which is an aluminum wheel factory in Argentina. And of course, the Argentinian market is growing. is doing well, and we believe it will be doing well going forward also. But, you know, the main strategic target here is to expand this factory, and it will be much more efficient for us to expand the factory here. In fact, we have equipment standing ready to be installed on adjacent land in San Luis. And so doing that in Argentina creates for us a situation where we will be able to produce wheels that we produce today in Brazil for Argentina, to produce those wheels in Argentina, which again frees up capacity in Brazil for Brazil. And so this is just an example of how we try to service a growing market where we gain share. in a very efficient way, meaning without spending a huge amount of money by building a new plant. We try to figure out a way to serve the market correctly and to profit from that market growth that we are having in that market. With that, let's go to the next slide. We talk a lot about steel components and steel wheels and aluminum wheels, but we don't talk so much about uh the two materials being merged and and you know i cannot tell you yet that uh it is happening uh but i can tell you that we have been trying for some time and i can tell you that we're making a lot of progress and we're now at a stage where we are uh involved with two oems one in asia and india one in europe for making a wheel that is made out of steel and out of aluminum and as you guys know wheel is a very important styling element but the styling you only need there where you look at it not there where you put the tire on and so we would make the rim out of steel and we make the disc out of aluminum and with that you know we save costs on the steel part and we guarantee the styling uh on the on the uh aluminum part not easy But I think if anybody will be able in the world to make it happen, to pull it off, it will be Maxim, because we are kind of the only one that is producing both steel wheels and aluminum wheels. And in many instances, by the way, we produce it at the same location or in the same region. And so, you know, this would be a true strategic advantage for our company. if we will be able to make that happen. Again, I can't guarantee it yet. We're working at it with our customers, but I hope we will be able to talk about it a little bit more in one of the following earnings calls. With that, I think let's go to the last slide, wrap it up. I think, you know, it's not what we wanted, the market that we see in North America, and it's impacting us. But we believe that is a temporary situation, and we believe we will be very strong when that market comes back. I'm not saying if that market comes back, I say when it comes back. And I think in the meantime, We're doing a good job on managing through that situation locally and mitigating that situation with our results in the rest of the world. And so that makes us, I believe, a resilient company. We continue to deliver appropriate productivity. We continue to be disciplined in our costs, and we continue to be disciplined in our pricing management. I can guarantee you that. From a growth point of view, I have given some examples on how we try to grow and what we're doing with new business wins. It's really a good story. And I think overall, very important as well, our customers remain to see us as a very reliable, stable, and high-performing partner. And I come back to Ayrton Senna. Maybe we go a little bit slower because of some heavy rain locally, but I believe we will be able to overtake. And with that, I pass it on for Q&A.

Now we are going to start our question and answer session. We would kindly ask you to ask all your questions at once and wait for the answers from the company. Reminding you that to ask your questions, we ask you to use the Q&A and your names will be announced so you can ask your questions live. At that time, a request for you to open your mic will pop up, and our first question is from Gabriel Tinen from Santander. Gabriel, you can go ahead. Thank you. I'd like to know if the capacity has been adjusted already, if there's anything else to help, and in terms of capital allocation, if you could explain the rationale for the participation of Palo Alto and the opportunities you see in these markets. And also, still in that topic, if you could talk about the North American market and talk a little bit about how you saw cash management and how you see the leverage for 2025 and 2026 a little.