Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vamos Locacao De Caminhoes Maquinas E Equipamentos SA (BSP:VAMO3, Financial) reported a 33% increase in consolidated revenue for Q3 2024 compared to the same quarter last year.
- The rental segment saw a significant growth of 35%, with record sales of used assets increasing by 46%.
- Net income grew by 51% in Q3 2024, reaching 175 million reals compared to 116 million in Q3 2023.
- The company has a healthy return on invested capital (ROIC) spread, maintaining a level above 4-5% points.
- Vamos Locacao De Caminhoes Maquinas E Equipamentos SA (BSP:VAMO3) is focusing on deleveraging, with a target to reduce leverage to below three times by the end of next year.
Negative Points
- Consolidated ROIC decreased to 13.9%, primarily due to weak performance in the agribusiness dealerships.
- The rental segment's operating profit was slightly impacted by asset repossessions and related costs.
- Higher effective income tax in the quarter negatively affected financial results.
- The agribusiness dealerships continue to perform poorly, impacting the overall profitability of the dealership segment.
- The company faces challenges with repossessed assets, which have affected revenue and required additional costs for legal fees and asset preparation.
Q & A Highlights
Q: How do you see the balance between leverage and growth in the mid and long term? What is the level of leverage that would be good for you to operate in a more structural scenario?
A: Cesaro, Chief Financial and Investor Relations Officer, explained that the guidance for investments next year includes a certain level of deleveraging, aiming for leverage below three times by the end of next year. This level is considered reasonable for continued growth. The current capital structure, without considering the spinoff transaction, supports this target. The spinoff will slightly increase leverage for the new entity, but the overall direction remains the same.
Q: What are your expectations for the agribusiness sector, given recent improvements in weather conditions?
A: Gustavo, Co-Chief Executive Officer, noted that while recent rains have encouraged farmers to resume planting, this has not yet translated into increased sales of agricultural machinery. Farmers typically purchase machinery when they have higher productivity and profitability, which is not currently the case due to low profitability levels. However, with a projected record harvest next year, machinery sales may improve in 2025. For the rental segment, increased production could lead to higher demand for trucks in agribusiness.
Q: Could you provide more details on the guidance for 2025, especially regarding the Seminovo product and repossessions?
A: Cesaro explained that the Seminovo product has a projected volume of 1 billion, with assets available for rental. The company expects some repossessions next year, estimating up to 5% of gross assets. The strategy includes reducing total inventory levels and increasing fleet occupancy to improve returns and margins. Regarding pricing, the company monitors interest rate fluctuations and adjusts pricing accordingly, maintaining an average IRR above 20%.
Q: What is the expected impact on book value if the spinoff of Verus Concession is approved?
A: Cesaro stated that the spinoff will involve separating dealership assets into a new entity, which will take a positive cash position instead of negative debt. The impact on book value will be managed through the cancellation of intercompany payables and credit notes, resulting in a balanced financial position for the new entity.
Q: How do you decide between renting or selling a truck in a new cycle, and what is the typical lifetime of these trucks?
A: Gustavo explained that the decision is based on comparing the IRR of renting versus selling. The typical asset cycle is around five years, but extensions are possible for less severe applications. The decision to rent or sell is influenced by the financial result of each option, with current market conditions favoring rental due to cost-effectiveness for customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
