Weg Sa S/Adr

Good morning and welcome to the conference call to discuss the earnings of WEG in the first quarter of 2023. This call is being webcast with the accompanying slides at our investor relations website, ri.weg.net. And after it's finished, the audio file will be available at our investor relations website. Should you need assistance during the call, please request the help of an operator by typing star zero. Any forecasts included in this document or in forward-looking statements that may be made during the conference call about future events, business prospects, operating and financial forecasts and goals, as well as to WEG's potential future growth, are simply beliefs and expectations of WEG's management based on information currently available. Such statements involve risks and uncertainties and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operating factors may influence the future performance of VAG and lead to results that differ materially from those included in such forward-looking statements. We kindly remind you that this conference call is being held in Portuguese with simultaneous translation into English. Today, we have with us at Jaraguá do Sul, André Luiz Rodrigues, Financial and Administrative General Manager, André Meneghetes Salgueiro, CFO and Investor Relations Officer, Wilson Vasco, Controller, Felipe Coppel-Hoffmann, Investor Relations Manager. Mr. André Rodrigues, you may start. Good morning, everyone. It's a pleasure to be with you once again for the VEG Earnings Conference call. We start with the highlights of the quarter in which the net operating revenue grew 12.7% compared to the first quarter of 22. We delivered one more quarter with positive results in most of our businesses, reinforcing our strategy of product diversification and global presence. which allows us to take advantage of opportunities in our markets. In Brazil, the positive result comes from the good performance both in short-circle businesses, such as low-voltage electric motors and automation components, as well as in long-cycle businesses, such as high-voltage motors, automation panels and transformers. However, the distributed solar generation business, as expected, had a reduction in revenue in this quarter, mainly influenced by the change in the regulation of the sector that came into force in January of this year. In the foreign market, we posted good revenue growth, mainly influenced by good demand in the industrial electronic equipment area, in addition to the good performance of the energy generation, transmission and distribution area, especially in the transmission and distribution business in North America. The EBITDA was R$ 1.7 billion, a growth of 37% compared to the first quarter of 2022. The EBITDA margin ended the quarter at 21.3%, an increase of 3.8 percentage points compared to the same period of last year. During the presentation, Andrés Sanguero will give more details about this performance. Finally, the ROIC, as we will see in the next slide, reached 31.4%, an increase of 1.7 percentage points compared to the first quarter of 2022. the improvement in operating performance supported by revenue growth and improved margins more than offset the greater need for working capital and the increase in investments in fixed assets in the period i now give the floor to andres Thank you, André. Good morning, everyone. On slide 5, I present the development of our business areas in the markets where we operate, starting at Brazil with positive activity in the industrial electronic equipment area as a result of good demand for short-circle products such as low-voltage electric motors and serial automation equipment, with emphasis on the mining and oil gas segment. Long-cycle equipment, such as medium-voltage electric motors and automation panels, also had a good performance, especially in the mining, pulp and paper, and oil and gas segments. In the GTD area, despite the good performance of the T&D business, we saw a reduction in demand for distributed solar generation, which impacted this quarter's revenue. The anticipation of orders in 2022 and the entering to force of the new GD legal framework on January 7 of this year contribute to the lower revenue of this business. Despite the additional challenges, we believe in the potential for continued development in this sector, especially when also considering centralized solar generation. In commercial and appliance motors, we observed a resumption of activity, with positive demand in sectors such as washing machines, despite volatility in demand, and inventory adjustments in some important segments, such as motors for air conditioning. In paints and varnishes, demand continued to be strong, with emphasis on the segments of mining and oil and gas. At the external market, we saw good economic and industrial activity in the various regions where we operate, with demand for short-cycle equipment spread across the different industrial segments where we operate, with emphasis on North America. There was also good performance in long-cycle equipment, especially in the oil and gas, mining and water and sanitation segments. In the GTD business, we continue to take advantage of the opportunities present in the T&D market in North America. In the generation business, we highlight the good performance of our operation in India, in addition to the building of a robust backlog for the coming quarters. In commercial and appliance motors, we saw growth in demand for our products, with emphasis on the good performance of operations in North America. In paints and varnishes, exports from Brazil to Latin America, countries and sales from our operations abroad contributed to this quarter's growth. Slide 6 shows the evolution of EBITDA, which grew 37% in relation to the first quarter of 2022. The EBITDA margin ended the quarter at 21.9%, 3.8 percentage points higher when compared to the same period of last year. This result is mainly a reflection of the accommodation of costs observed in recent quarters, together with the change in the mix of products sold, mainly impacted by the difference in the margin of the industrial segment, which showed greater growth in relation to GTD. Finally, on slide 7, we show the evolution of our investments. We invested R$ 343.4 million in the quarter in modernization of an expansion of our production capacity, machinery and equipment, and new products. 49% were allocated to production units in Brazil and 51% to industrial parks and other facilities abroad. In Brazil, we highlight our investments in the expansion of factories for industrial motors and electric traction motors. And abroad, we continued with the expansion of the motor and transformer factories in Mexico, in addition to the expansion of the factory in India for the production of wind turbines. With that, I finish my part and give the floor back to André. Before we move on to the Q&A session, I would like to talk about some of our latest accomplishments and comment on our outlook for the remainder of the year. Regarding the achievements, I would like to highlight that we announced investments to expand battery pack production capacity in Brazil, totally 100 million reais over the next years. The investments will be made in Jaraguá do Sul, industrial park and involve the expansion of the current manufacturing building and the construction of a new factory, scheduled for the first half of 2024. Finally, on the outlook for the rest of the year, we continue with a robust order backlog in the long cycle projects, both industrial and area and DTD, especially in T&D projects, which will contribute to growth in Brazil and abroad. The accommodation of raw material costs, combined with the normalization of supply chains and a more favorable product mix, should continue to favor operational dynamics. but it's always important to keep an eye on the global microeconomic scenario and the possible risks and volatilities, both in the local and international scenarios. Even so, we maintain our growth expectations with positive demand in most of our businesses. This concludes my presentation. Operator, we can proceed to the Q&A session. Ladies and gentlemen, we'll now start the Q&A session. In order to ask a question, please press star 1. To remove your question from the queue, press star 2. Our first question comes from Lucas Marchiori from BTG Pactual. Hello, everyone. Good morning. Thank you for the call. There's one topic I would like to discuss regarding margins. I think this has been the major surprise in the quarter. I would like to understand from the two address that there is a bit of a cost accommodation as well as improved mix of products. I understand that the lower pressure on costs And maybe at the end of the day, the margin changes, and that would fit the discussion of the beginning of the year, saying that margins should be going down slowly or in line with last year's margin. given the dynamics of the favorable dynamics of the industries as a whole, do you somehow think that margin can be flat until the end of the year instead of decreasing? And if so, how much do you expect? How much will it come from the improved pressure on costs and how much it comes from mix of products. I would like to hear from you on that. Thank you. Hello, Lucas. This is Rodrigues speaking. Well, Let's talk about the margin. In our release, we said that there were some factors that had a positive impact on the margin, a very positive margin for the company. First was cost accommodation of most of our raw materials. The normalization of the global supply chain also impacted that. And it's good to remember, it's worth remembering that the change in the mix of products, depending on what we're talking about, has a different margin profile. For example, the industrial segment had a larger growth when compared to T&D or GTD, especially in terms of renewable energy, solar and wind, because, as we always say, The margin for that is lower than the average margin of the company. Also, the impact on the margin was the prices. The prices were improved of long cycle with the accommodation of the cost of raw materials in the last quarters. And when we are in the movement of increasing costs, the margins are under pressure. And when the costs are stabilized, margins tend to increase. So that was positive. Also, a better occupation of plants, of factories, that improves operations and has an impact on margins as well. So this is an overview of the positive effects on margins. In terms of prices, this movement can lead to a future reduction. Well, adjustments can be made according to market conditions, but it's worth remembering that in addition to the cost of materials and other costs, there are other costs such as personnel, also cause increases. And the inflation of latest years is included in that. We also had the normalization of international freight costs, which contributed to that. And as these factors go back to normal and according to market conditions, of course, we'll assess future price adjustments on a case-by-case basis. But it's always important to remember that we always try to preserve the company's profitability. In terms of what we can see about future margins, we are still in the first quarter. So we're cautious in the beginning of the year. There are macroeconomic issues that need to be better analyzed in the future. But if everything continues, According to the current performance, it's possible that we may deliver better margins or similar to margins that we had in previous years. Okay, perfect, Andrea. Thank you very much for the call. Good day. The next question comes from Joshi Milberg from Morgan Stanley. Good morning everyone and thank you for the call. My questions refer to the electro-electronic area. First, could you comment on the market share evolution, given the granularity about individual products, especially about automation and reducers, because I believe you mentioned that there's a major room for improvement when compared to your positioning in the past. That's the first question. Hi, Josh. Good morning. Thank you for the question. This is Andres Algueiro speaking. When we look at electro, electronic, and industrial equipment, as you pointed out well, we have three main blocks of products. industrial motors, automation, and reducers. So the company has an important market share in brazil we are among the leaders in most of these products and when we look at the foreign market or external market we see that low voltage industrial engines or motors had an important evolution we said that during vac day vec became the second largest market share with 10% in the global market. But when we look at the other markets, especially drives and automation and reducers, our global market share is relatively small, lower than 1% or 1%. So that brings, talks about the opportunity we have when we look at the industrial engines as a whole. we will use the market share we have in industrial markets motors to leverage on drivers and reducers as well as our brand knowledge so as we evolve and gain market share in the motors engine our motors business due to the pandemic uh we had a an interval in that development, but it's a very developing sector. And so we'll continue with drivers and reducers. But it's a gradual process, year on year, and we'll have to work in order to attain such an evolution. Okay, thank you for your detailed answer, André. My second question refers to the domestic market. You said that long cycle has helped, but sanitation is not one of them. So could you give us an update on the law of 21 and how would be the share of the company for the next quarters? Thank you. Hi, Josh. This is Rodrigues speaking. Undoubtedly, water and sanitation sector has always been important for VAG, and the framework will bring additional opportunities for the company. This legal framework is important for Brazil as a whole. The changes in the format that are being discussed should improve demand for improvements, although it could impact on the project's schedule. We have an updated portfolio of products for this market. We have energy efficient solutions, solutions to control water losses and to regularize the supply of water. And these things got a bit delayed. We feel that because orders are a bit below our initial expectation. But as I said at the beginning, this legal framework is important for Brazil. And although there was a delay, it will be important soon. Okay, perfect. Thank you very much. The next question comes from Lucas Laje from XP Investments. Good morning. Congratulations on your results. I would like to know about the dynamics of revenue. We saw Some investors were a bit afraid of these sequential drop in revenues since the fourth quarter. In the history, there is a seasonal effect. The revenue in the first quarter is usually lower than in the fourth quarter, and then it continues to grow on the second half of the year. I would like to understand whether that makes sense for this year and what's the reason for this seasonality that we see that usually the revenues in the first quarter is usually lower. And we see that the men seem strong. That's the first point. And the second point is More specifically, regarding the domestic market, that's pretty much stable in the quarterly comparison. I would like to understand why the drop in the solar distributed generation. And take me, what was the breakdown of that? Thank you. Lucas, this is Andrea Rodrigues speaking. I think you provided the dynamic correctly. If we look at the variations or the changes between quarters, it's important to highlight that that happens. It depends a lot on the long cycle. portfolio, the industrial projects that are delivered, the GTD variations. So if we look at the historical average from 2011 until last year, from 2011 to 2020, always the last quarter of the year has a better performance than the first quarter of the following year. This is because usually in the last quarter, we concentrate deliveries of projects that creates the seasonality. There is an increase in revenue in the last quarters of the year. And due to the pandemic and all this dismantling of our supply chains and the dynamics in the years of 2021 and 2022, there was a change in that dynamic. So the normal trend based in the past is for the first quarter of the year to have lower revenue than the previous quarter, which is the fourth quarter of the previous year. So the right way to analyze that is quarter on quarter comparison. So What we had is an issue in GTD and Andres Algueiro could give you more information about this impact on the revenue from solar generation. Well, we don't break down the specific revenue by business within GTD, but this is a fact that was included in the release. We can say that The solar had a drop in revenue in this quarter, both compared to the first quarter of last year, as well as to the fourth quarter. Even the drop compared to the fourth quarter was even higher than when compared to the same period of last year, the first quarter of 2022. Wind also showed a slight accommodation due to the delivery of projects, but it was very similar to the first quarter of last year. But all the other businesses in there had a good performance of growth. It's hydro, electrical, especially TND. So if we exclude solar effect, this business would have growth to low digits when compared to the first quarter of last year. So that can give you an idea of the size of the impact of the solar performance in or the solar in the performance of this quarter. Oh, that was very helpful. Thank you for your answer. Have a good day. The next question is from Andressa Varoto from UBSPB. Hello. Good morning. Thank you for the question. I have two questions. One is a follow-up about the solar GD. We said that some projects could... have less incentives in GD and migrate to centralized generation. How do you see this opportunity to capture this volume of GD in the centralized generation? Another question is, you highlighted in the release the Indian generation business. So my question is, is there any contribution from Winterbonds Could you give us an overview about opportunities in that market? Thank you. Hello, Andressa. Thank you for the questions. With regard to solar energy, indeed, the dynamics for this year will be slightly different. And we had distributed generation with a much greater performance than centralized distribution. And in the beginning of the year, there was a change in legislation. And so the incentives decrease. In addition to the change in the law, there was an increase in interest rate, which also impacted credit facilities for the segment, which is important. And there was a credit crisis in Brazil in the end of last year, beginning of this year, that restricted access to credit in general. And that impacted the distributed generation crisis. business. But looking at a portfolio for the future, we see a performance of centralized distribution much better this year than last year. So a part of this accommodation that we'll see in distributed generation will be offset by centralized distribution, especially in the second half of this year, where we have a more concentrated delivery of centralized distribution projects happening. As for your second question about the impact of India, wind turbines. We are still in the certification process of our machine in India. It's going very well, but we need a few more months in order to finish this process. What happened in India was a result of the good demand for equipment related to the generators and wind turbines that we also produce in India. Thank you very much. The next question comes from Pedro Fontana from Bradesco BBI. Hello, Andres Algueiras. Congratulations on the results. Thank you for taking my question. You've mentioned some of the avenue growths, growths of avenue. for the company generators in India. VEG is also working on electric mobility projects. So I would like to see your long-term view for opportunities for growth in coming years. Thank you. Hello Pedro, this is Salgueiro speaking. Thank you for the question. Actually, There is a slide in the presentation in which we talk about the growth avenues. There are three. I'll focus on two that fit your question. First one is about internationalization. And that is closely related to the fact of gaining market share and space in products that we already have in our portfolios. but improving our market share in the global market. So when I talk about the strategy of motion drive, that's a practical example of that. We do have an important share in industrial motors, and now we like to increase sales of reducers and automation. But this is only an example. There are other products that are in our portfolio, hydro and thermal generation, TND, wind, solar. For all the products, there is some internationalization strategy. We don't want to go global on everything, but in areas that... have a better outlook. So this is a major opportunity for growth in coming years. The second one are new businesses. Why new businesses? Because throughout the history of the company, WEG has been able to develop and open new businesses, launch new products, and that has, from time to time, and that has helped in our long-term growth. Today, we are working on the electric mobility business, as you mentioned very well, as well as powertrain for trucks and buses, recharge station, and more recently, battery packs. We also have the digital business package. as well as developments regarding energy storage. This is just to give you an example of concrete cases of businesses that are under development or developed. And we have the mission and we're willing to continue to develop new business. So in the future, we'll enter with new products or new segments that make sense for us. Okay, thank you very much. The next question comes from Daniel Gasparetti from Itaú BBA. Good morning, everyone. Thank you for the call. I have two questions as well. First, regarding the external market. In the opening, you mentioned that you were quite excited about this market. I would like to know more from you about How was the volume of strong fourth quarter, strong first quarter? Is there any bottleneck for delivery of projects? Is this something that will grow? And the second question is building on André's comment about increased margin and long cycle. we're looking at your construction agreements margins. There's a significant increment in that margin, close to 15%. Now moving to 21, I would like to understand in terms of mix or some projects of long cycle with longer, higher margins, or maybe wind with higher margins, just to understand whether there was any other effect in addition to the mix of products. This is Andrea Rodrigues speaking, Daniel. First, let's talk about how we see the external market. First, we have to separate the long cycle from the short cycle dynamics. In long cycle products, nothing has changed from what we said in the the other quarters the demand is very strong in electro electronic industrial equipment the demand is very positive in t and d we've been talking for some time now that the demand in the united states central america and mexico is very positive of this business so no major change in long cycle business and the outlook for the future is very positive we start one more year with the order backlog that's very well built, and now we just have to execute on it and deliver throughout this year. When we move to the short cycle, we have to analyze by region, starting with North America, where we have a very positive performance, both in industrial and low voltage motors, as well as in commercial motors. So far, the dynamic has been positive. It is natural that at some point in time, there will be an accommodation, but it will happen at a higher level than happened next year. So remembering that the difficulty of a short cycle is three months forward, so it's a positive outlook. When we move to Asia, there was an increase in the closing of China that had some consequences for VEG and for everyone that operates in that country. So first half of last year was very positive. Then in the second half of the year, there has been a reduction and the prospect of opening of the country. And now with that opening, if it takes place, there is a recovery. So if we compare the first half of this year to the first half of last year, obviously there will be a reduction because last year was very positive. But that is expected to continue growing. And with this opening, the second half of this year, will be able to recover the lower trend in the first half of this year. When we move to Europe, we should analyze that there's always been a concern in Europe with the energy And Europe was able to reorganize itself in the energy sector, but the war continues. So we do expect some volatility, and that should continue in coming months. That applies to the dynamic of short cycle. So in North America, it's positive dynamics. Asia, we can also say that we opened the low voltage motor factory in India, which will bring future growth. So Asia is in a recovery process. But we should be a bit more cautious regarding Europe in about the future outlook. regarding the construction contracts that you mentioned in 22 in practical terms that is directly related to the long cycle business. We have reported a good dynamics in that and when that happens, the margin tends to expand because the demand is positive and you have full capacity and it's more important for the customer to have the product available so pricing improves. I'd say that this will happen in a period for more than one year, and it's now reflected in a more structural way in the earnings. At first, it was reflected in the building of the backlog, and now it comes to results. So in terms of mix, There has been no significant change, but not everything is a long cycle, but for most of long cycle, especially in the solar, wind and new energy, wind turbines, and other large-scale machinery. So there is an improvement in pricing with time and also there is a movement of cost accommodation. So as we evolve and new contracts are signed, the profitability increases. So this explains the change in the margin of 22 when we look at the figures of the first quarter of 23 when compared to last year. Excellent. Thank you very much. Have a good day. The next question comes from Bruno Amorim from Goldman Sachs. Good morning, everyone. Thank you for the question. I would like to make a follow-up on solar. There are several dynamics impacting that line of business. And you emphasize the free buy, many of the purchases that were supposed to be made this year were made last year. We discussed that already. And also in this segment, There has been changes in the regulation. You've explained that despite that, the segment continues to be attractive. So now I would like to learn more how much of this change was from pre-buy when compared to the decrease in the demand. Was it majorly pre-buy? Those that would be buying this first quarter bought last year. Because if so, we can make a case that for next year, those that are supposed to buy in 2024 will buy in 2024. So that we'll have a growth for next year. So just to understand how much from what we see now is temporary and temporary. Maybe there will be a structural downward trend in the demand for this sector. Thank you for your question, Bruno. Well, it's difficult to break down that exactly. What we can say, though, is that we do foresee an impact, a reduction in revenue, and we also noticed a strong increase in revenue during last year, which means that In a way, there was a pre-buy effect. So a part of the revenue that was expected for this year happened last year. But there's also an important portion, not so significant, but that are the new plants from 1 to 5 megawatts. that were more affected by the change in the regulation. This type of project will continue throughout this year because there are this period for people or projects that entered until January 7th. something will happen this year, although in this lower volume, but then in the future, this project tends to disappear and a part of them apply to Andresa's answer that will migrate to centralized distribution because they were doing smaller projects to benefit from that incentive. And now they will migrate to centralized energy distribution. In solar, in general, there will be an accommodation this year due to decisions made last year. But when we look at the business in the medium and long run, structurally speaking, we believe that it has all conditions are favorable. And Another important aspect is interest rate and credit facilities. That also had an impact. And let's see how that evolves. And the fact that the energy price, I mean, the reservoirs are very high. We're operating with green flags, green tariffs. So if you calculate that impact, calculations that you made a down payment and financed paying small amounts with what you saved in the energy bill, that no longer happens. So when the market for credit and interest rate decreases and there's more credit available in the market, then that could make sense again. So all of that has to be analyzed, but let's see how this will evolve towards the future. Just a quick follow-up, thinking about the path for this year. This segment of small projects tends to be reduced more significantly throughout the year, maybe for next year. So first quarter starts to the bottom, so it will drop a bit more still before it starts to go up. Is this the trend or not necessarily? I'd say that the second quarter will have to wait. There may be a movement of some accommodation, but for the second half of the year, when we start having a larger deliveries of a centralized distribution, there should be a growth when compared to previous quarters. Okay, thank you. The next question comes from Regis Cardoso from Credit Suisse. Thank you. If you allow me, I have more follow-ups, if you allow me. One of them is about ramp up of wind plant in India. What should we expect in terms of ramp up? This is a plant that would be fully operational in the second half of this year. It's still under the certification process, but I would like to have an idea about terms of ramp-up periods. Is it a gradual ramp-up or will it be fully operational quickly? The other topic is there is a competitor of yours that left the engines, NEMA motors, Do you have anything about that you could share? And do you see an opportunity on this same type of market in Europe where maybe they were stronger? This is another follow-up topic. And the third topic is about the backlog of projects. You were commenting on the seasonality of the fourth quarter. Now thinking about T&D and the long cycle projects, do you expect any growing or seasonal distribution throughout the year? We should keep an eye on. Thank you. Hi, Regis. This is Andrea Rodrigues. Let's talk about the wind farms in India. As Andressa, as I told Andressa, we are now in the certification process. We are starting our investments to expand the medium and high voltage factory in India to start to produce these wind turbines in the future. So for this year, we don't have any revenue expectation for wind. Our plans were always to certify the machines until the end of this year, to start the commercial development, to have deliveries throughout 2024. But there's no expectation of revenue, even for the future. This is a new business we're starting in the country, so we don't doubt the wind potential of India. But VEGA is always very cautious when it starts a new business. We have to develop suppliers for a tower assembly. So it's natural that the first levels of contracts will be low. So we'll start to restructure our business. So we don't have an expectation of revenue from wind business in 2023. As for the movement in the competition, yes, undoubtedly one important competitor left in the United States, Santanema. And we became the second in market share last year. This was a reflection, not only of this movement, but of all the work that WEG has done to develop new markets, to have a stronger international presence and being at the same level of quality and technical assistance. as international companies. There's no doubt that this is happening at bag. We look at the dynamics of certain markets. We know what's going on and we know about our performance. So yes, it is a result of the increased market share. As for the backlog, we you'll see the backlog of long cycle projects that is significant for this year. This dynamic has not changed. It's robust and positive. backlog and we're adding new projects especially in tnd we have a very healthy portfolio or backlog both in brazil and abroad and that's also reflected in the investments we're making we're investing in brazil to increase the production capacity of transformers and in mexico and united states to increase the production capacity given the positive tnd demand scenario not just for this year, but in the long term. We have industrial projects, the important projects, mining, oil and gas, open paper projects. In addition to T&D, we do have a built backlog portfolio or backlog for wind. And we do have an important backlog for thermal generation projects to happen during this year. And the centralized distribution for solar is also positive for this year. So in terms of backlog, we have a good outlook for the next quarters. Thank you. So about this last point, is there any seasonality concentration in the last quarter? Any different dynamics? I'd say that from the order backlog, there's not so much seasonality. Seasonality depends on the investment decision made by customers that could happen any time during the year. But it's natural that you commit to deliver projects until the end of the year. So there's always some concentration of project delivery at the end of the year. This is why in one of the previous answers, André explained that this dynamic in the drop of revenue in the first quarter of the year when compared to the last quarter of the previous year happens. So we that explain the movement and then the deliveries continue to grow as the year evolves. Okay, thank you very much for your answers. The next question comes from Andrea Mazini from Citibank. Hello, Rodrigues and Salgueiro, thank you for the call. My question is about the batteries. back chain. How is VAC positioned in this? There's the manufacturing of the cell, the module, and the VAC. I'm going to understand you're concentrating on the VAC, only on the final part. What are the partners that you use to buy the cell, the module? LGK from South Korea, Peresonic. and you're positioned only in the end of this change. And the other is about powertrain. The powertrain, the car companies are still defining whether they'll have a powertrain built in house, especially the lead market. Do you believe they're more prone to outsourcing and the light vehicles are still making up their minds. How is that decision process in terms of electric mobility happening? Thank you for your questions, Mazini. As for the battery packs, We do have some exposure in that business for some time, and we've announced for this quarter an additional investment of 100 million reals to increase our production capacity of battery packs in Jaragua do Sul. Like you said, we don't intend to produce the battery cells. We'll buy them as we continue to buy them from the market. Unfortunately, I cannot... give you the number, the names of our partners due to contract issues, but they come from Asia. And we assemble the packs here in Brazil. We place the cells in the pack and all the cabling and the electronic and ventilation systems. We add all that and provide a complete solution to our customers. The main focus is the electric mobility market, especially electric buses in Brazil in coming years. But we can also use that to develop the batteries that we'll need or that are being connected to the energy storage projects. These are the new fronts. This is a relatively new business. will develop in coming years. As for powertrain, we are focused on heavy vehicles. E-delivery, it's a partnership we've had for some time and recently we have made some partnerships to develop electric buses in Brazil. So our focus is on heavy vehicles. with some specific applications in lower volume, but the major focus is on heavy vehicles. And given your comment that heavy vehicles tend to outsource the production of components more, as we see happening here in Brazil. So we end up making the most of this opportunity to develop by developing powertrain for these vehicles. When we moved to light vehicles, the car companies Some of them are developing their own power trains. Others are outsourcing that, but this is not our focus. So probably what will happen is the mix, but I don't know how much will be made by the car companies themselves or car manufacturers and how much will be outsourced. It's hard to say. Okay, thank you very much for your answers. The next question comes from Gabriel Frazão from Bank of America. I would like to give some color on MP 1152 in Congress, as well as if you have any calculation of the impact of this that you could share with us. Thank you. Hello, Gabriel. This is Andrea Rodrigues. Well, we're keeping a close eye on this bill of law that changes the rule for transit right in Brazil. Well, first, it's a provisional measure. It's expected to become a bill of law by the beginning of June, and that will be mandatory starting in January of 2024. There is a movement to make it mandatory in January of 25, but from we've heard, it will be 24. There's a change in the current transfer price and cost plus margin with arm's length basis. The arm's length concept allows for five ways for harmonization and there could have an impact on the effective rate if it passes and is implemented as it is now. The portion of our operations that will be impacted is shown on the difference on rates in our financial statements. it's very early to disclose how an estimate of how much that will because there are many uncertainties in terms of passing that bill and what are the five types of methodologies which one will be implemented but anyhow we do believe that part of the existing benefit will be reduced, but it will continue to make sense even after this bill of law passes. And we have to wait to see whether it passes. And throughout June, if there is a decision made until the end of June, we'll be able to give you more information in the next call. Okay, thank you very much. Next question comes from Jonathan from JP Morgan. Good morning, Rodrigues, Salgueiro. I have a simple question. The expectation of 1.6 million for 2023 is maintained. The second one, in Brazil, we've seen in the past the wind turbine segment. Would that happen in the margins with this segment? Thank you. Hi, Jonathan. With guarding COPEX, VEG's plan is always a long-term plan. So 1.6 that we foresee for this year, I don't know if we'll be able to execute all this volume of Copics, but there is no change in the projects where we estimate to invest in. This year, we... expect to change the profile of investments lately has been concentrated in the external market. This year, the original plan is for 55% to be in Brazil and 45% abroad. When we say Brazil, the focus is on increasing capacity. in expanding the industrial factory related to electric mobility, as Salgueiro said. This is a business that's gaining strength in the company, as well as an investment of R$100 billion in battery packs. Also, in this investment, given the good demand for distribution business, we expect to increase the production capacity of our factory in Beijing. We do have an area for that. And in the transformers that... There's also a good demand for that equipment. Abroad, the focus is on Mexico, especially to increase the capacity of T&D components to supply our plants in the United States with an increase in capacity of WTU in the US that's in course. Last year, we opened a new plant. In parallel, we also will increase the capacity of our Portugal plant. These are the most important investments. Also, India will increase the plant for medium voltage plant to start producing the wind turbines. So today there has been no change in our original plants in terms of CapEx for this year. Jonathan, regarding recent announcements, about some competitors in the wind generation business. These are recently, relatively recent news. I think it's too early to say that this is affecting the demand for the next quarters. But if you look at the medium and long term, you have a competitive environment with fewer players, that is positive. But we cannot say we see an effect of that on our portfolio or on the demand for the next quarters so far. Okay, thank you very much and congratulations on your results. This ends the Q&A session. We would like to turn the floor over to Mr. André Rodrigues for his final remarks. I would like to thank you all for attending this call again, and we'll see each other in the next conference call in July. Thank you very much. The conference call from VAG has now ended. We thank you all for attending and have a good day.