Weg Sa S/Adr

Good morning and welcome to VAG's fourth quarter 2024 earnings conference call. I would like to highlight that simultaneous translation is available on the platform on the interpretation button at the bottom of your screen. Again, this conference call is being streamed live, and after its conclusion, the audio will be available on our Investor Relations website. During the company's presentation, all participants will be on listen-only mode. Following the presentation, we'll begin the Q&A session. To ask a question, please click on Raise Hand to join the queue. When announced, a request to unmute your mic will appear on the screen and then you should turn on your microphone to ask questions. If you have more than one question, please ask them all at once. If we do not have time to answer all questions live, please feel free to send your questions to our email at ri.veg.not, and we'll answer after the end of our conference call. We would like to emphasize that any forward-looking statements containing this document or any statements that may be made during the conference call Regarding future events, business outlooks, operational and financial projections and goals, and VEGS potential future growth are merely the beliefs and expectations of VEGS management, based on currently available information. Forward-looking 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 could affect VEG's future performance and lead to results that will be materially different from those in the statement. Today with us in Jaraguá do Sul are André Luiz Rodrigues, Chief Administrative and Financial Officer André Meneghet Salgueiro, Finance and Investor Relations Officer, and Felipe Escopel Hoffman, Investor Relations Manager. Please, Mr. André Rodrigues, you may go on. Good morning, everyone. It's a pleasure to be with you once again for VAG's Earnings Conference Call. I will start with the highlights of the quarter on slide three, where net operating revenue grew by 26.4% compared to 4Q23. In Brazil, we had another quarter of growth, with strong performance in long-cycle equipment, especially in transmission and distribution projects, along with the resumption of centralized solar generation projects. For short-cycle equipment, we continue to see healthy demand in industrial electric and electronic equipment and commercial motors and appliances. In the international market, we had yet another quarter with good living volume in the power generation, transmission, and distribution businesses, particularly in North America, as well as the execution of generation projects in Europe. In the industrial segment, activity remained strong in several important sectors, with highlights in oil and gas and water and sanitation. Additionally, we would like to tell you that recent acquisitions also contributed to revenue growth in the quarter. EBITDA reached 2.4 billion reais, a 30.5% increase compared to 4Q23. EBITDA margin closed the quarter at 22.1%, an increase of 0.7 percentage points compared to the same period last year. Throughout the presentation, Andrés Salgueiro will give you more color on these points. Meanwhile, return on invested capital, one of our main financial indicators, remained at a high 34.2%, as we can see in more details on the next slide. Here, we observe a reduction of 5 percentage points compared to 4Q23. This is mainly explained by the non-recurring effect in 4Q23 related to the establishment of a new subsidiary in Switzerland and by the growth of invested capital, primarily due to investments in fixed assets and recent acquisitions, despite revenue growth and the maintenance of healthy operating margins during the period. Now I'll turn over to Andres Alguero. Thanks, Andrea. Good morning, everyone. On slide five, we bring the revenue evolution of our business areas. In Brazil, industrial activity remained healthy. with strong demand for short-cycle equipment, such as low-voltage electric motors and serial automation products, in addition to solid performance in long-cycle equipment, like high-voltage motors. DTD continued to show revenue growth, with another quarter of growth in T&D, especially because of the delivery of large transformers and substations linked to transmission and distribution network projects, We also highlight the positive performance in solar generation, with the resumption of centralized projects, along with the continued strong demand in the distributed generation business, which helped offset the lower delivery of wind turbines. In commercial matters and appliances, we continue to perform well, with sales growth in key segments such as air conditioners, washing machines, and compressors. In paints and varnishes, sales volume remains strong, with diversified demand across different market segments. In the international market, we saw positive demand for short-cycle equipment, such as low-voltage electric motors. Also good results for long-cycle equipment, including high-voltage motors, automation panels, especially in key segments such as oil and gas and water and sanitation. Remember that the integration of Marathon, Schengen Rotor and Volt electric motor businesses contributed to revenue growth in the quarter. In GTD, We continue to capitalize on opportunities in the T&D market in North America, as well as solid performance in our power generation operation in Europe. Remember, they acquired a maritime brand generator and business also contributed to the revenue performance. In commercial matters and appliances, a slowdown in sales in key markets such as North America and Argentina impacted revenue growth compared to the previous year. despite the positive contribution from our operations in China. In paints and varnishes, we continue to see revenue growth, driven mainly by strong results from our operation in Mexico. Slide 6 shows a beta evolution, with growth of 30.5%, while a beta margin ended the quarter at 22.1%, showing yet another quarter of improvement compared to the same period last year. This reflects primarily the margin improvement in long cycle equipment and the continued positive momentum of short cycle businesses. Important to note, this quarter we had a change in the mix of products sold, particularly the increased relevance of the solar generation business in addition to the non-recurring adjustments related to the valuation report of the Marathon business. Finally, on slide seven, we showed the evolution of our investments with a total of 672 million, 65% in Brazil, 35% abroad. In Brazil, we continue to modernize and expand the production capacity of transformers at Betim and Blumenau units, in addition to increasing the production capacity of industrial motors in Jaraguá do Sul and expanding the automation units operations in Itajaí. Abroad, we continue to invest in Mexico. advancing the construction of the new transformer plant, enhancing the production capacity of the electric motor factory, and expanding the automation unit. In China, we are expanding low-voltage motor production capacity. With that, I conclude my part and hand it back to André. On slide eight and before we move to the Q&A session, I would like to talk about some of our recent accomplishments and share our outlook for the year. Accomplishments I would like to highlight that in November, we announced an investment of $62 million to expand production capacity at the Rugal Industrial Complex in China. The investment involves increasing component manufacturing capacity and constructing a 30,000 square meters building for high voltage motor production. We also announced the acquisition of Ravex, a Brazilian company in the power generation control system sector. a well-established company with presence in both domestic and international markets. In December, we completed the acquisition of Volt Electric Motors, a Turkish manufacturer of industrial and commercial electric motors. The acquisition diversifies WEG's industrial footprint to serve not only Turkey, but also other strategic nearby markets. Also in December, we announced the construction of a new gearbox factory in Turkey, aiming to increase our component manufacturing capacity outside brazil the new factory will be established in a twelve thousand square meters building in the ismir region with an investment of approximately twenty eight million euros and completion expected by twenty twenty seven Finally, I'd like to share a bit about our outlook for the year. We maintain a healthy operational dynamic, constantly seeking operational efficiency and productivity gains, which should continue to support strong operating margins and return on invested capital. Continue with a solid order book for long cycle projects, particularly in the T&D area. along with the reception of centralized solar generation projects, which should contribute to revenue growth. However, it's always important to remain vigilant about global microeconomic scenario and potential risks and volatility, both locally and internationally. Even so, we maintain our growth expectations with positive demand in most of our businesses and pursuing opportunities in new businesses and international diversification. That concludes our presentation. Please, operator, let's start our Q&A session. We'll now start the Q&A session. Remember, if you have a question, just raise your hand at the bottom of the screen icon. To be announced, a request for you to turn your microphone on will show, and then please turn on your mic to ask questions. Please ask all your questions at once. We are going to start. Our first question comes from Lucas Marchiori from BTG Pactual. Thank you. Hello, everyone. Good morning. Thanks for the call. I would like your help to try and understand the recurrence, let's put it this way, of some demand factors and revenue that we saw in your results release. I saw that you had a large delivery generation in Europe. I think it's turbines. If you could say if your backlog is long, if it should phase out in the next month and year. And also solar. This is a topic that I suppose many people talked about the phase out. You talked about the redemption of some centralized contracts. Is it a long backlog? More contracts coming? What's the average profitability of these orders? So a bit more color on these two topics. Thank you very much. Hi, Lucas. Good morning. This is Andres Alguero speaking. Okay, the two questions that you asked, recurrent demand, the first part, generation in Europe, is connected to our joint venture with Gigi Cummings. And what happened is that we had a concentration of deliveries in the fourth quarter, and that made revenue to be slightly above average. than what we were delivering in previous quarters. And because of the nature of the products there, this happens sometimes. I don't know if you remember, but some years ago, I think in the third quarter, we had a relatively similar impact. So I would say it was a concentration. It will not necessarily be recurrent for the future, but every now and then for the future, we might have some other concentration because of the nature and the type of product that we produce and deliver. As for solar, indeed, we had a very positive quarter, the fourth quarter of 24, for two reasons. G&T, especially retail, the kits are showing again growth in revenues, they were growing volume and now they're growing revenues, but I think the novelty was centralized generation so large solar farms. that we started deliveries in the fourth quarter. There is this project that we announced to the market, but we have others in our backlog. So I could say that centralized generation has a good backlog for the first half of this year. Of course, we can have something for the second half, but for now it is until the end of the half of this year, beginning of the second half. Very clear. Thank you very much, André. Our next question comes from Rogero Araújo from Bank of America. Rogero, Mr. Araújo, you may go on. Hello. Good morning, André, Salgueiro. Thanks for taking my questions. I have two. The first is try and explore a bit T&D outside of Brazil. We saw DTD growing well abroad, 26% in dollars and already leaving the M&A out. However, When we see the results of VEG Transformers US, it was with a share of 14, 15% of the profit. And this quarter, it came to 12. Is it anything recurrent below or above the EBITDA line? This is my first question. And then I'll ask the second question. Hi, Rogério. This is Andrea Rodrigues. Thanks for your first question. I think there is nothing much new when we talk about the performance of T&D in North America. It continues quite positive. And a variation when we talk about margins results is common, depending on the type of product you sold, the type of transformer. So fluctuations between quarters is business as usual. I think the message is, demand continues heated, orders are more and more robust and vague, is more and more ready to meet customer needs. Very good. Thank you. My second question is about two lines that helped to profit. One is the income tax bracket of 18% this quarter, and then you have others in financial expenses. It was 30, 40 million, and now it is six. Any particular effect that is non-recurrent, the result of the rising SELIC rate in Brazil. What could you talk about this tax bracket? And just for us to understand if this will contribute to profit in the coming quarters. Thank you very much. Hi, Rosario. This is Salgueiro speaking. As for tax bracket, there were some fluctuations. Some fluctuations may happen in between quarters, depending on incentives, subsidies that we may have along the quarters. So it's natural to have this kind of fluctuation. Of course, you have the much you export, the much you bring from outside. So this can... provoke some variation on the effective tax bracket. I think the most important point here is that we did have a concern in the end of 23 because of changes in trans pricing and taxation in Europe. We had the expectation of being between 20-21% and we closed the year more or less so. As for financial results, we did the main impacts in the quarters are related to exchange rate fluctuations that we had because of the dollar fluctuations and the hedging that we have. And it's important also to remember that in the fourth quarter of 23, we did have a negative impact. So the comparison base was very low. There was a strong exchange variation in Argentina at the time, and that provoked the change in the financial results. So when you see the differences quarter on quarter, Fluctuations are normal, but compared to the fourth quarter 23, we have these two factors that help explain the variation. Very good. Thank you very much, Andres Alguerum. Our next question comes from Joan Frizo from Goldman Sachs. You may go on. Good morning, everyone. Thanks for taking my questions. I have some questions with regards to margin. First, I would like to hear from you. What is the expected margin for 2025? I think that things change quarter on quarter depending on your mix of deliveries. But it did say in your release that the cost of raw material had an impact on margins in the fourth quarter. And even if you adjust to the purchase price allocation, the margin did go down. So for 2025, is that going to be the new margin? Way above pre-pandemic, but with not much room for expansion or contraction. That is both ways. This is the first question. And the second question about mix. When you take a look at VEG's revenues, the international segment gained relevance in recent years. I know that you don't break down margins by segment or region, but I would like to hear if this margin that deteriorated quarter on quarter... can be because of a mix of more exports where you naturally have a lower margin because you're not so verticalized as you are in Brazil and you're not as relevant as you are in Brazil. And the third question is about capex for 25, 26. What should we expect in terms of percentage of revenues? So three questions. Thank you very much. Hi, João. This is Andrea Rodriguez. Let's talk about margins. I think that it's nice to have some time to talk about that. So when we talk about future, you have to analyze the quarter. The first thing in our view is that we showed another quarter with excellent margins. We closed the year with margins above what we had in 23 and gross compared to the fourth quarter of 23. And to justify that, when I say that nothing has changed in terms of T&D in North America, that has to do with the behavior of the margin, which is positive and with the demand that we have for this type of equipment. We also had a project keeping the good dynamics of short cycle equipment that do have an impact on margin. And the reduction can be explained by three factors. I would like to give you a bit more color for us to understand it well. The first thing is that we have in the explanatory note the non-recurrent adjustments because of the purchase price of allocation of marathon. This is a non-cash and non-recurrent event that impacted the margin by 0.3 percentage points. Another thing that Salguero mentioned is the recovery of the solar business. Solar has a margin behavior. that is lower compared to the group's average margin. When you're talking about centralized generation, you have margins that are below distributed generation. The concentration of sales of solar on the last quarter 24 compared to the whole of the year was 35 percent of the total volume that was sold in solar revenues in the quarter, which also has an impact on margin. and the concentration of deliveries that Salgueiro also mentioned of generation projects in Europe. If you do not take this effect into account, the margin would be even higher than the third quarter 24. So it's always good to remember that we are exposed to different markets, different segments, And we do have these fluctuations. They are the nature of the business. And therefore, you'll have an impact of our margins quarter after quarter. And we always like to point out that in the case of VEG, we like to follow the margin for a longer period, at least one year. And if you see the margin of 24 compared to 23, we had growth of 0.6 percentage points. So what is the expectation for this year? It's a positive expectation, especially because the good performance of long cycle business T&D So VAC's objective is always to try and deliver margins above the market. In the last two years, we had very healthy margins. And we do not expect for 25 margins to be very different than we had in the two last years. But it's always good to follow what's going on in the market. There are things that may impact the margin. Exchange fluctuations. We are in a period of volatility, and that can impact margins in the short term. Changes in commodity flows for longer periods, which also may show higher volatility. And we cannot forget that volatility, deceleration of the global macroeconomic scenario may affect margins. So once again, we always like to highlight that our analysis of margins has to be over a longer period of time. And finally, you talked about the mix of products that could impact margins. That is for sure. That can always happen. I'll give you an example. The recently acquired businesses of Marathon. These are businesses that today have margins that are lower than legs. And that's why we are going to work with a verticalization process to implement our processes and then do reintegration and start improving margins. You talked about the external market. We have to remember that even in the domestic market, we can have variations compared to product mix. Solar, for instance, Alguero said we have a very good backlog for centralized generation in those first quarters. So the takeaway message is that variations in between quarters is normal in the behavior of VEX margins because we are exposed to several different products, segments, and fluctuations are common and happen usually. And as for CapEx, your question for 2526, we did announce yesterday a proposal for a capital budget that was approved by the board. And we are planning to invest in 25, 2.6 billion Brazilian reais. So investments significantly higher than previous years. Most are projects that were already announced to the market. So the expansion of the wire plant, increasing production capacity and verticalization and automation in Tajairi, expansion of powder in Guaramirim, new investments in T&D, both in Betim and Gravataí in Brazil. And abroad, we have a lot happening in Mexico, expansion of T&G plant, the new paints plant, some investment in verticalization, in addition to how the voltage matters in China that we announced last year, and the new gearbox plant at Turkey. So because of all these investments, CAPEX is going to be higher than average, a bit of a peak compared to what we do perhaps for this year. 26, we still do not have a number, but probably all these projects, some are going to continue to 26, but then in the mid-long term, we should go back to our average historical average. Very clear. Thank you very much. Our next question comes from Jan Spies from Morgan Stanley. Jens, you may go on.

Sorry, I was on mute. I'll do the question in English. So I want to ask on FX, on the point you just mentioned, I guess, given the BRL depreciation you had in the fourth quarter, it was probably a positive impact for that quarter. So assuming, for example, that the BRL remains relatively stable from here on, How do you expect the FX to have an impact in the first quarter and the second quarter? Will it be a tailwind or headwind, considering that also probably some of those raw materials are purchased in US dollars? Any color in that would be much appreciated. And also, I want to ask on any other financial considerations we have to consider maybe for the market, like post-marathon acquisition, for example, earnouts, anything you could highlight that's relevant would be appreciated. Thank you.

Hi, Jens. Thanks for your question. Just to follow the call dynamics, we are going to answer in Portuguese and you follow the simultaneous translation. I think it's always important to say that FX fluctuations and the impact on VAC along the time is not that much. Why? Because we have a chain of products that are also sold in dollars and that somehow the impact is corrected. In the short term, generally, the higher devaluation movements can have an impact. FX was above six for a period of time. then it was a bit down. So we thought that it would have a higher impact. But with the reduction, the expectation was adjusted. And whenever we have an impact on raw materials, we try to pass it on to prices. So with a stable rate, we really don't think that FX is really going to be something that can impact margins for the following quarters. I think what we have to pay attention to our product mix, I think that in the long run, mid and long run, I think FX is not really something that has a huge impact on our margins. We never expected a BRL devaluation to have better margins. So when we talk about FX, when we talk about margin, The only thing that concerns us is volatility in the short term. I think this is our greatest concern. But if you think of something for the mid-long term, I don't think that happens, especially when you're talking about a higher devaluation impacting our margins. Jens, I don't know if I got the second question about Marathon. If you're asking if there is a change in the profile of our results in the dividend payout. I don't know if that's what you asked, but for now, we don't have anything.

Sorry, go ahead. I was asking... Do you have any earn out structure for the marathon acquisition or not?

No, no earn out with regards to marathon whatsoever.

Perfect. And if I may, just one last question. On your raw materials, would you say that most of them are sourced locally? Or do you have a significant portion that's sourced from abroad? So for example, the copper you use for your copper wires, is that sourced from mines in Brazil? Sorry, from smelters in Brazil, or is it sourced from somewhere else? Just curious. Thank you.

Hi, Jens. This is Salgueiro speaking. What we try and do is to have a mix of suppliers. We generally have an option of local suppliers in Brazil, but we also have the option of buying abroad. I just think what's important to say is that regardless of buying in Brazil or abroad, you might have fluctuations, but they are global commodities. So prices tend to behave similarly, even we buy them in Brazil or elsewhere.

Perfect. That's clear. Thank you.

Our next question comes from Lucas Lagy from XP. Good morning. Thanks for taking my questions. I have two that I would like to explore with you. The first is a follow up to your profitability demand. When we see the contraction quarter on quarter, we see that's mostly because the impact of raw material. which is very much in line with what you mentioned about the mixed effect and the increase in the price of inputs. The mixed effect is clear after what Andre mentioned and the three points. But thinking of the price of inputs, prices going up, aluminum, copper, So try and understand how you see the possibility of passing on to your end prices. And so try to understand the dynamics of raw materials and prices. And the second question is about revenues. The U.S., had relatively worse performance than other regions, especially quarter on quarter. So was there any specific effect in the fourth quarter about the US specifically? Any pre-election uncertainty that had an impact on your results? And if you could comment a bit on your backlog for the U.S. and what you have today compared to the fourth quarter, I think that would really help us understand the dynamics of the region. Thank you very much. Hi, Lucas. Good morning. This is Salgueiro speaking. Okay. Margins. I think André did, I think, answer very well the reasons and movements for the margin of the fourth quarter being lower than the third quarter. So you have the effects that we mentioned, the PPA and the mix effect that is very much connected to the reception of solar projects. And when you see different products in the sales mix, you have an impact on the cost structure and the company's gross margin. So I think this is the main effect. Now, when you think of price variations of the main inputs, we did have important fluctuation in copper, but more year on year, quarter on quarter, the movement was less relevant. What was relevant in the quarter was the exchange rate. As for passing on prices, I think that we weren't to try and passing on costs regularly to the market, especially with short cycle products. We have price lists and we try to adjust them at least once a year. And remember that we did say that in the third quarter for some equipment, some products like motors and paints, we had already had an adjustment in the end of the third quarter, beginning of first quarter 24th. and other product lines, we adjusted prices in the beginning of the year, especially automation. So I would say that we did adjust prices recently, and obviously we are following fluctuations to see if we need to make further adjustments. As for the U.S., T&D continues, as Andrea mentioned in the previous answer, quite positive. We might eventually have, because of the nature of the business, some fluctuation, especially because of the concentration of project deliveries, depending on the project, when the project is being delivered. And in short cycle, I would say that we are with low growth compared to historic levels. I think here we do see some uncertainties about economic activity, the election itself, but I think the expectation for 25 is to pick up this and grow in the US, especially in short cycle products, motors, automation, gearboxes, everything that we have in our portfolio in the American market. Very clear. Thank you very much, André. Have a good day. Our next question comes from Daniel Gasparetti from Itaú BBA. Daniel? Good morning. Thanks for the call. I have two questions as well. The first is to try to understand the ripple effect we saw drop in demand. about 20%. So I would like to understand the dynamics behind price volumes, and if that changes your margin expectation for that. So to try and understand the behavior for the short term, if it's now down, but it will pick up. And second question, I understand the behavior of centralized solar projects. Sal Palguero mentioned that you have visibility until the end. of the half year. But how do you see the demand for this segment specifically? Are there orders being placed? We thought that was going to weaken as a segment. But as you mentioned on WAC day, it is growing. So just for us to know where it's going to when we consider 25 and 26. I'm going to answer the first part, Daniel, and then Salguero is going to talk about centralized generation. When we talk about REBO and the variation that we have from quarter to quarter in terms of revenues, I think Salguero answered part of that in the previous questions when he talked about the dynamics of the U.S. We did feel a less heated demand, especially in the last quarter, reflecting the numbers of VEGs and the industry peers. And also when we have a change in control, you somehow expect some kind of movement because of the change. And in this case, I'm talking about the acquisition. So we are adjusting our sales strategy, reinforcing our positioning, especially with new clients. Together with the acquisition, we got a team of Marathon sales reps that are very experienced, that have very good relationship with local customers and that are going to be very important for the recovery project. So I think it is within this context. It's an accommodation of the quarter, but it's also part of the context of integration where we revisiting brand positioning, product positioning. So it's natural in the short time to feel some of that. On the other hand, we cannot forget that Remember on VEG Day when Jean-Paulo talked about demand and generators, VEG is making investments to increase our capacity of generators to meet the strong American demand. And as for GC, we indeed were able to build a very important order book when I mentioned in the previous presentation answer one of the projects we did announce to the market last year, and we are delivering it today, but we have some next. So we have very good visibility for this business along the first half, perhaps the beginning of the second half of this year, and the sales team is working So eventually we can have new orders for our backlog for the second half of the year. Remember, when I talk about this area, we are talking about long cycle, but they are not that long cycle. we work with them between six to eight months from the moment the order is placed and we deliver the project. So if we have some orders in the coming months, we will have time to deliver in the year of 25. Very good. Thank you very much. Have a good day. Our next question comes from Andre Mazzini from Citi. You may go on. Hi, Rodrigues, Salgueiro, thanks for your call. I have two questions. One about storage. If you could give us an update on energy storage auctions for 25. And if in the future, this storage area can be as important as generation, transmission, and distribution. So it would be GTDS as storage. So as important as the other three. And in terms of generators, the spot price now seems high. So my question is, when this high spot price is going to hit margins? And does it make sense to focus on transformers that have shorter deliveries to benefit from these high prices? Hi, Mazini. Good morning. Thanks for your questions. This is a storage is something that we have been investing. We have had important R&D projects in Brazil and in the U.S., As the potential of this market, we do believe in its development in the mid and long term. So yes, we do see a possibility for it to be an important market in the future within some years. But we do have to see a more structured demand, a more recurrent demand. And a way for this to happen is through energy reserve auctions, where the government itself has been already discussing, saying that we are going to have something for the auction this year. But we do not have anything yet. that is clear in terms of rules, size, volumes, data. So I think that that would be very positive for the development of the segment, but we have been working in all other fronts as well. So we are developing the technology and preparing ourselves to address the market when opportunities come. And André, talking about transformers, I think it's very important to say that, along last years, VAC has been investing heavily to more and more offer a complete portfolio of products to our customers. As we can see now, This is a very good time for the demand of transformers that leads to better prices and margins, but it's not our strategy to focus on one product with better margins, but rather gain market share and more and more offer a broader portfolio of products to our customers. Some years ago, we had the acquisition of Rodor, that is a very specific transformer. that is completely different from the regular transformers that we see installed. But this is a market that has lots of opportunities to VAC. This company worked providing to the domestic market, but it had no capacity. And Vega just announced that it's going to double its capacity for us to also start operating in the international market. So our strategy is to develop a broader and broader portfolio to work with operating issues to deliver healthy margins. Thank you very much. Our next question comes from Victor Mizuzaki. from Bradesco BBI. Hello, good morning. Congratulations on your results. We have a question. with regard to the beginning of 25. You did already talk about that, but thinking in the short term, if you could talk about commercial mortars and appliances orders for the market and also in the United States, if you could give us some color in terms of orders for transformers end of January and February and how we can interpret your backlog for the American market. So how long is your backlog there? Thank you. Hi, Victor. Good morning. Well, new orders as a whole, no major changes. Short cycle because of its nature. And because it's shorter time, we might see more fluctuations. Commercial matters and appliances, as you mentioned, the fourth quarter had good growth, but it was smaller than what we were delivering in previous quarters. So, again, it is a natural fluctuation. But as a whole, short cycle products and long cycle products are not really different from what we had in the fourth quarter. By geography, you can have some changes. We have been talking about Europe for some time, and it's showing some signs of deceleration. But other than Europe, I would say that the remainder of the business continues more or less similar. to what we saw last year. Specifically talking about T&D and the US, which was the second part of your question, this is a very heated market, as André mentioned in a previous answer. The backlog is relatively long. I would even say longer than usual. So I would say that we have basically the backlog completed for this year and already part of next year already guaranteed. And, you know, demand continues heated given the restrictions of capacity of the markets to meet demand. This is a movement that continues to show, and that's why we announced all the investments that we announced along last year with the objective of increasing production capacity. And then you'll have investments in TAD happening practically all geographies, the most important of which in Mexico for us to meet the demand of North America. Very good. Thank you. Our next question comes from Marcelo Mota from JP Morgan. Thanks for taking my questions. First, if you could give a bit more color on industrial equipment in the domestic market. It was the largest percentage growth that we saw in the last six, seven quarters. So if it was seasonal or if we should expect this higher level, vis-a-vis the situation of the country not being at its best performance. And then Mexico, this is the largest plants that you have other than Brazil, lots of expansion, but tariffs are being discussed. We never know when they're going to be implemented. Does that create a pressure? Should Mexico be your second largest production plant? How are you thinking of investments for the future? So these two questions. Hi, Martha. Good morning. As for your first question. Indeed, the performance in Brazil for the fourth quarter in electric electronic industrial equipment was very positive, growth of 14.3%. And what we see is good demand for short cycle industrial motors, gearboxes, automation, everything performing relatively well. What's important to say, And I did mention that in an answer before crisis. We did have an adjustment for the matter business in the end of the third quarter last year. So we do have those components that helps us with results, but also we have long cycle projects that are performing very well. Medium, high voltage motors, automations, mainly connected to the commodities industry, oil and gas, mining. and even water and sanitation. And just to close, I would say that part of the new businesses are here. So electric mobility, recharge stations, powertrain, developments that we are having in terms of batteries are here. And these businesses are showing good growth and they make up the better performance that we saw in the fourth quarter. As for Mexico model, We are at a time that we still lack a lot of information. It's very hard to have a position with so much uncertainty going on. But clearly, VEG in Mexico is important. That is, Mexico is important for VEG, not only for exports and also the local market. No change in position with regards to Mexico. The investments announced will go on. I think we've already seen times that you can have, you know, higher taxation, then there are adjustments to be made. So now we do not have enough information that would justify a change in our positioning. So investments in Mexico, the new transformer plant, liquid paints, gearboxes, verticalization. This is all extremely positive when you think of the assets we have in Monterey and even in the U.S. So for now, nothing changes in terms of our positioning towards Mexico. Okay, thank you very much. Our next question comes from Alberto Valeria from UBS. Yes. Rodrigo Salgueiro, thanks for taking my question. It's a follow up on Martha's questions. We have two thirds of the first quarter. Any deceleration you are noticing in the Brazilian market? We hear that GDP may holding things back. And also the US, you had an annual result that was very good. But quarter on quarter, our expectations were a bit frustrated compared to industrial matters and automation in the domestic market. Anything in the fourth quarter that can tell us that we are going to have a better result for the future? Hi, Alberto. Good morning. As for the dynamics for the beginning of the year, as I mentioned before, no changes so far. Orders are being placed for the short cycle, for the long cycle. following more or less the same trends we saw in the past. As for the US, we already talked about some factors for the results this quarter, but what happened again specifically for the fourth quarter? was that the demand for short cycle products did show a deceleration. I don't even call it an impact, but probably a result or a consequence of the elections and a bit more uncertainty. And T&D continues very positive, continues very good. And eventually we can have fluctuations quarter on quarter, depending on deliveries and, um, especially the type of project that is being delivered in that quarter. So basically these two factors, no major concern for the U.S. I think it's a very important market, the company's largest market outside of Brazil, and expectations for 2025 are very positive. So T&G should continue growing at a positive pace And do we expect a pickup of short cycle products for this year? Okay. Thank you very much. We are now closing our Q&A session. I'd like to turn the call back to Andrea Rodriguez for his final considerations. Well, once again, I'd like to thank you all for attending and I wish you an excellent day. Thank you very much. VEG's conference call is now closed. We thank you very much for joining us and wish you a good day.