Release Date: March 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tupy SA (BSP:TUPY3, Financial) achieved the highest EBITDA in the company's history despite a sharp drop in physical sales volumes.
- The company implemented cost and expense reduction initiatives, contributing to improved operating margins.
- Significant acquisitions, such as MWM, accounted for 40% of revenue and contributed to a more diversified product mix with greater added value.
- Operational efficiency initiatives are expected to generate significant annual savings in fixed and variable costs.
- Tupy SA (BSP:TUPY3) continues to invest in R&D and innovation, focusing on new technologies like biofuel-powered engines, which are expected to drive future value creation.
Negative Points
- Revenues fell by 5% compared to the same period of the previous year, impacted by lower demand in foreign markets.
- The company faced a 6% reduction in the cost of goods sold, but this was accompanied by inflationary pressures on labor and services.
- Operating expenses increased by 7% due to higher freight costs and logistical bottlenecks.
- The net profit was impacted by an impairment of 250 million, resulting in a loss of 98 million in the quarter.
- Financial expenses increased due to new borrowings and the depreciation of the Brazilian real against the dollar.
Q & A Highlights
Q: Can you discuss the impact of US tariffs on Tupy's operations and the expected volume for 2025, considering the US Environmental Protection Agency's potential postponement of new emission standards?
A: All contracts in the US are protected by clauses that include the transfer of tariffs, so there is no direct impact on the company. Regarding the potential postponement of new emission standards, nothing is confirmed yet. Customers believe it would be worse if postponed, but we will monitor the situation closely. As for strategic plans under new management, there will be no changes in strategy.
Q: What are the profitability drivers for MWM, and how do you see the mix dynamics impacting margins in 2025?
A: MWM's margins are expected to improve due to operational efficiency initiatives. The current margin is 13%, and without pre-operational expenses, it would be close to 11%. The mix dynamics positively impact traditional business margins, with ongoing machining projects and high demand in engine assembly contributing to growth.
Q: Could you elaborate on the reduction in production capacity and its impact on cash costs and product improvement?
A: The reduction in production capacity involves discontinuing higher cash cost production lines, not entire plants. This process will continue until mid-2026, with a focus on reallocating products and maintaining available capacity to capture future growth. The industry is mature, and the need for machines and engines will persist, driven by infrastructure and population growth.
Q: How do you see the potential for securing new contracts, considering production capacity and investments?
A: We have significant available capacity due to strategic acquisitions, allowing us to secure new contracts. The launch of new engine generations to meet emission standards and regionalization efforts are key drivers. We aim to add more value through services like machining, enhancing product offerings.
Q: What is the rationale behind expecting a better second half of the year in terms of sales volume?
A: The expectation for a better second half is based on anticipated clarity in US economic policies and potential pre-buy activities. Europe shows signs of recovery in the heavy vehicles segment, with customers revising projections upward. Contracts are protected by clauses, and there are no local competitors, which is favorable for us.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
