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- Revenue: Dropped by 7% to BRL 2.8 billion.
- Gross Margin: Dropped by 0.3 percentage points.
- Adjusted EBITDA: Reached BRL 338 million with a margin of 12.2%.
- Net Income: BRL 50 million for the quarter.
- Operating Cash Flow: Total (EPA:TTEF) of BRL 762 million for the first nine months of 2024, a growth of 97% compared to the same period in 2023.
- Indebtedness: BRL 2.3 billion, corresponding to 1.81 times adjusted EBITDA for the last 12 months.
- Cash Position: BRL 2.6 billion.
- Revenue by Region: 43% Latin America, 41% North America, 12% Europe, 3% Asia, Africa, and Oceania.
- Revenue by Segment: 87% from structural components and manufacturing contracts, 5% from energy and decarbonization, 8% from distribution segment.
- Energy and Decarbonization Segment: 2% increase in the domestic market, 54% reduction in the foreign market.
- Distribution Unit Sales in Brazil: Represented 14% of revenues, an increase of 7%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tupy SA (BSP:TUPY3) improved its gross margin through favorable exchange rates and efficiency gains, saving BRL140 million this quarter.
- The company is capturing synergies from acquired assets, aiming for structural margin increases by 2026.
- Revenues in the replacement and aftermarket segments reached their highest historical level in Q3 2024.
- Tupy SA is expanding into new markets and launching new products, with a 120% increase in product launch rate.
- The company is investing in new business initiatives such as battery recycling and biofuel engines, which are expected to contribute to future growth.
- Tupy SA experienced a 7% drop in revenues compared to the previous period, impacted by reduced volumes in foreign markets.
- The company faced significant reductions in some industries, with up to 30% decreases in certain sectors.
- High interest rates and a young fleet have reduced demand for vehicle renewals, impacting Tupy SA's clients.
- The foreign market saw a 54% reduction in the energy and decarbonization segment, particularly in engine sales for agriculture.
- Logistical challenges and increased financial expenses negatively impacted the company's margins and net income.
A: The BRL40 million efficiency gains are from reallocating products to lower-cost plants, reducing duplicate activities, and creating service centers. This excludes foreign exchange effects. The battery recycling program aims to recover valuable minerals like lithium, cobalt, and nickel efficiently. We have filed for three patents and are starting a pilot plant. Long-term, regulations will require recycled materials in new batteries, and our recovery rates are high, making the process economically viable.
Q: What is the timeline for recovery in the heavy-duty vehicle market in North America and Europe, and which new initiatives have the most long-term potential?
A: The North American market is expected to recover gradually, with significant improvements likely in the second half of 2025. In Europe, the outlook is challenging, but we are monitoring developments. Long-term, the hydrogen project, battery recycling, and ultralight iron initiatives are promising, with results expected in three to four years. The bioplan project and ethanol/biomethane engines also have significant potential.
Q: Are you seeing any impact from Chinese products on your volumes, particularly in the US and Latin America?
A: Yes, Chinese products are affecting our clients' businesses in construction equipment, agricultural machinery, and small trucks, impacting our volumes. This is true for both the US and domestic markets. We expect our clients to gain market share, and protection measures in Brazil could benefit us.
Q: How are margins being impacted by your focus on cash generation, and what are your expectations for agribusiness in 2025?
A: Our focus on cash generation affects margins due to reduced volumes and restructuring costs. We spent BRL11 million on restructuring and BRL20 million on developing new businesses. Logistics challenges also added BRL10 million in expenses. Without these, margins would be closer to 14%. For agribusiness, we expect an 8-10% growth in harvests next year, with significant demand for new products like biomethane and ethanol engines.
Q: What are your expectations for the heavy-duty vehicle market in the US, considering the younger fleet and lower shipping prices?
A: We anticipate the pre-buy cycle to start in the second half of 2025 and continue through 2026. The American economy is growing, and trucks are being used extensively, leading to wear. OEMs indicate that replacements will begin as vehicles become more expensive, and the cycle will align with economic growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.