SIMPAR S.A. (SIMH3) Earnings Call Transcript

Good morning, and welcome to SIMPAR's conference call to discuss the earnings regarding the first quarter 2023. Today with us are Mr. Fernando Simoes, CEO; Denys Ferrez, the VP of Corporate Finance and Investor Relations Officer. [Operator Instructions] We would like to also inform you that this conference call is being recorded and simultaneously translated into English. Before moving on, we would like to let you know that any statements made during this conference relative to the company's business outlook, projections, operating and financial goals are based on SIMPAR's management's assumptions and beliefs and provided information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions because they refer to future events and therefore depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors may affect certain [indiscernible] lead to results that will be materially different from those in such forward-looking statements. We now turn the call to Mr. Simoes that will start the presentation. Mr. Simoes, you have the floor.

Good morning, everyone. We are starting the release of our results for the first quarter '23 at SIMPAR. On behalf of our team, I'd like to thank you all for joining us, also thanking our customers for the opportunity of working, our people that work hard with determination and competence for us to have results such as the ones we are presenting today. I'm going to start with Page 2 with the main highlights for the first quarter '23. We had a strong operational performance with record revenue and EBITDA. EBITDA of BRL 2 billion in the first quarter '23, which means 30% above the same period last year. We had gross revenue of BRL 8.2 billion, up 63% year-on-year. And if we annualize this number, we go past BRL 32 billion. EBITDA of BRL 2 billion growth of 30% year-on-year. And again, if annualized accounts for BRL 8 billion. Net income of BRL 77 million, down 77% year-on-year. And leverage net debt to EBITDA of 3.7x, with net CapEx of BRL 290 million in the first quarter. Return on invested capital of 22.5%. That is an increase 8.5 percentage points year-on-year. If we normalize, we would have 13.7%. I'm going to go to Page #3. I'd like to share with you a bit of the context of the first quarter '23 and the position of the holding as a whole. We had more stable interest rates at higher levels, 13.75%. And the banking system have got more selective in terms of rating credits as well as the capital markets, OEMs balancing supply and demand on cars and starting to offer cars that are at lower units, that is more economic and the trend of the stability in used vehicle prices, starts and choices and the end of production of EURO 5 and start of EURO 6. Within this context, I'd like to draw your attention to the positioning of our companies that are subsidiaries of SIMPAR. All of them, with no exception, today enjoy the benefits of scale. We are prepared to start enjoying scale, synergies of the acquisitions made and also of the strong investments of recent years. All companies, Movida, we have everything built in terms of reduced car scores, rent a car, retail, Vamos with the farm equipment and network. So we have the foundations with CapEx executed. Everything that had to be done was done to enjoy this new cycle of development. And the position with organic growth for the generation of new contracts, continuous prospecting of opportunities that build customer loyalty and generate contracts that are long term and have adequate returns because when credit is easy, interest rates are low, people get a bit more irresponsible. When you have fair pricing covenants, you generate more opportunities to create long-term relationships with customers. Inorganic growth, which also brings more opportunities for M&A that will further contribute to the development and scale of our business, that specifically when we talk about the Logistics segment. We have the strategic inventory of trucks with early purchase at extremely competitive prices of EURO 5 that brings us more competitiveness and generates better results. We sold an exiting fleet in Movida rent-a-car in line with our strategic plan. Because of the early purchase of last year, we sold to the circles and are now resizing the fleet in the first quarter of '23. That will certainly contribute to better results for Movida. We are starting a process of extracting synergies of acquisitions and consolidating Automob in car dealers. We have several assets of high quality as the 2 ports in Bahia, CS Mobi in Cuiabá, which are preoperational and that has great potential of future results. That's it. When we take a look at the market in the context of the first quarter '23 and the business position of our companies, it is the first year that we start with all the foundations, infrastructure-ready to focus on operational efficiency and to enjoy everything that was built along the last years, improving margins, returning returns and, therefore, creating the foundation for continuous development. Going to Page 4. We talk about our main numbers in the context of JSL, operational efficiency, quality pricing and discipline in capital allocation generated strong growth. Such growth, I would invite you to give some thoughts on JSL. When we had JSL's IPO in 2020, it was a company with revenue of BRL 3.2 billion. Along the 3 years, that is from 2020 to the first quarter '23, the company showed annual growth of 12%. If you get the acquired companies, they grew more than 20% year-on-year. And we had an average CAGR of 23% from 2020 to the first quarter '23.That is practically doubling the size of the company when compared to 2020. And if we compare to JSL 2020, we had a threefold increase in revenues in 3 years. So on Page 4, where you see the transformation in numbers, you see what we had at the IPO in 2020 and the company's current numbers. EBITDA growth of 170%. Margin 4 percentage points above. Net income, plus 359%. These are some of our main numbers. But I also draw your intention still on Page 4 to your left is for the acquisition of IC Transportes, a company with operational efficiency, unique positioning in the transportation of gases, liquids and agri business. If you take into consideration the growth and synergies that we have extracted from acquired companies without creating expectations, but just showing that there has been recurrence, the transformation of the multiple page for the company. Sometimes we pay 5x EBITDA and with gross synergy and better results that converts into less than 4x the multiple of acquisition. And this is a segment and a company that poses huge opportunities of growth. And before going to the next page, I'd like to share with you that JSL and acquired companies have a unique position because of the diversification of businesses, the sectors it operates, capacity and scale to invest CapEx and recognition of delivering to the customers that hire its services. I'm going now to go to Page 5, talking about Movida's key numbers. Movida in the last quarters has been executing its strategic plans. Remember, we had early purchases along last year. That was part of our strategy. We met the needs of our customers. We bought whatever fleet was available. We operated the company. And according to strategic plans, we sold exiting fleet that is 13,000 cars. We are starting to resize the fleet, selling more expensive cars and buying cheaper cars. And with that, with less CapEx, we are going to keep growth in revenue, EBITDA and margins. As you can see, the first quarter '23, we had higher revenue compared to 4Q '22. And compared to the first quarter '22, we had an increase of 38%, even with a smaller fleet in the first quarter '23, again, in line with our strategic plans. In addition to reducing 13,000 cars, we started to adjust our mix bringing more return and efficiency to the company. And talking about efficiency, we increased total occupancy rate by 5.3 percentage points in our DNA of feeling customers' expectations and anticipating needs, we launched Moover, a company that is specialized in renting vehicles for professional drivers, that is cargo, urban distribution or [indiscernible] cars for passenger transportation. When we talk about Movida, in addition to the main indicators, this is a company that has very well positioned stores for used car sales and rent-a-car, its structure is ready. I think it's the first year that we have our mission. We have operational efficiency. We want to improve returns and margins without being concerned about operational execution, building stores, people and et cetera. That is a company ready to enjoy what was built in past years. Now going to Page 6, Vamos. Vamos has had sustainable growth with better profitability, ensuring margins and expansion. On Page 6, we show the transformation of the Vamos dealer business, a company going from BRL 700 million in 2020 to more than BRL 3.7 billion revenues in dealerships in the first Q '23. A transformation in the rental segment. You see in the first quarter '23 in the last 12 months with BRL 2.4 billion revenues in the rental alone of trucks, machinery and equipment. There is growth of 43% over 2020. So a transformation in numbers consolidated comparing the IPO of 2020 and the first quarter '23. This is a company that the whole market sees is still just starting with a unique position because of its ecosystem. Now we go to Page 7. As you know, we have purpose, but we have discipline in execution. We want to consolidate car dealers in the country, light vehicles. And by means of mergers and acquisitions, we are executing the plan. Remember that shareholders of the acquired companies will be partners with Automob in different regions. [ Marinel ] with huge potential of growth. We acquired company with premium brands, all of them with quality positioning that can bring us diversification of brands and also of regions. Today, we are already the holding with the most diversified brands, 26 altogether. We are in 17 cities, 84 stores. We went from BRL 1.1 billion to BRL 5.5 billion. That is growth of 400% built in the last 2 years. The great opportunities of synergy will be started to be enjoyed in the coming quarters, again, with responsibility, making adjustments, synergies in back office whenever possible, F&I, better used car sales. And with that, you're going to see the extraction of value. Now going to Page 8, when we talk about CSInfra. This is a company with a diversified concession portfolio, extremely resilient and long term. Ciclus, the largest center of waste treatment in Brazil and one of the largest centers for solid waste treatment with more than 290 tons of waste per month. We have generation of gas and energy in the treatment center coming from waste. We also have 2 ports. We were awarded the concession in the state of Bahia. Ports in Lagoa, Todos os Santos, still preoperational. They are being built, modernized. And when in full operation in the year of 2023 will contribute to our results. We had the opening of the first plaza toll in line with our plan of CS Rodovias [indiscernible]. We have the BRT Sorocaba and CS Mobi. As you can see, the main projects, are still being developed are still being built, but will generate long-term revenue extremely resilient and opportunities for the generation of complementary business for the existing companies as the case of the 2 ports that will certainly generate logistics opportunities for JSL. On Page 9, we have CS Brasil. This is a company that is also growing. And remember that here, we have basically the rental of cars and some trucks for state-owned and mixed ownership company with drivers, with operations and that had also some opportunity of growth. Going to Page 10, this is our bank. BBC is a multiple bank. More and more, we have products to offer. And this is a bank for the operations inside our ecosystem to fund part of our reduced asset sales to small and large companies, independent drivers, but this is a bank that grew in recent quarters and year after year. As you can see on Page 10, we already have a credit portfolio of BRL 510 million, more than 90% of trucks and cars within our ecosystem, with governance and management completely independent, such as all our other companies. And here, the huge opportunity to grow and generate value to shareholders of BBC, but also opportunities within our ecosystem. Now we go to our Page 11 with our main consolidated financial highlights. And for that, I'm going to turn the call to Denys, our VP of Finance for SIMPAR. Denys?

Thanks, Fernando. Good morning, everyone. Well, moving on, as Fernando mentioned, we are on consolidated financial highlights. Our indicated net revenue, EBITDA and EBIT had positive evolution. Net revenue reaching in the quarter, BRL 7.4 billion, growth of 64%. In the last 12 months, it goes to BRL 27 billion, an increase of 12% compared to the year of 2022. EBITDA in the quarter reached BRL 2 billion, with gross margin of 34%, 30% above the first quarter '22. And year-to-date in the last 12 months, EBITDA reached BRL 7.5 billion, an increase of 6% compared to the close of the year '22. EBIT reached BRL 1.3 billion, an increase of 16% compared to the first quarter '22, and year-to-date, BRL 5.3 billion, an increase of 4% as compared to the whole year of '22. Net income reached BRL 77 million down 77%, basically driven by increased financial expenses. The same effect occurs in the last 12 months with a reduction of 27%, reaching BRL 689 million compared to the whole net income for the year of 2022. On Slide 12, we have consolidated numbers for our financial position at the end of the quarter. We closed with a strong liquidity position, which has been recovered with BRL 15 billion. That gives us the comfort to continue our development with a very elongated debt profile, approximately an average of 5 years and coverage of more than 3x our short-term debt. Therefore, no pressure in the short term for rolling out the debt. This advantage shows the early settlement made in the first quarter. The Brazilian market, we decided to set about BRL 2 billion. And abroad, we repurchased bonds in the amount of BRL 800 million. Also in the first quarter, we had capital raising in the amount of BRL 1.5 billion. On the next slide, we talk about SIMPAR as a holding company individually. When you take a look at our liquidity position continuous with strong cash, BRL 2.8 billion, with a debt schedule that is very elongated, concentrated by the year of '31, which gives us an average debt time of 8 years. If you take a look at the holdings, net debt, BRL 3.8 billion compared to the value created so far using the market valuation of our listed companies and equity value of unlisted companies, you see that the total company's stake value is more than triple the holding's net debt. Moving to Slide 14. We show that our asset base covers 1.5x our liabilities at the subsidiary level. We have on the left BRL 42 billion in assets that are mostly cars and trucks that comprise 96% of the asset base, all of them very new cars, an average 1.5 years, trucks 3.3 years. Remember that in the Brazilian market, the average age is 20 years. So assets at BRL 42 billion compared to the net debt in our operating companies of BRL 25 billion and even adding suppliers to pay another BRL 2 billion and floor plan that OEMs offer, we get to a total liability of BRL 27 billion. So we're very comfortable position in coverage of net assets, liquid assets compared to our liabilities. That is the money is being allocated in liquid assets, long-term contracts that give us visibility for cash generation. On the next slide, 15, I talk about CapEx. In the first quarter '23, we invested BRL 295 million, much lower amount than previous quarter as we had in the fourth quarter with BRL 4 billion. That was only possible because we had the early purchases of equipment in the last quarter '22. Companies have different behaviors, different dynamics. In Vamos, for instance, decided to build a strategic inventory for deployment in the coming months. And Movida, in the third quarter, selling the surplus of vehicles because it had the early purchases last year. And whenever we talk about CapEx, it's important to mention, in the year of '22, we invested BRL 13.5 billion. And most of it not to yet showing in the year of '22, but will show in the year of '23 that is we expect evolution of revenues along the year with the full benefit of the investments already made. Now the next slide, Slide 16, we show a line with the period showed on the CapEx slide that is starting in the first quarter of '21. Then you see quarter-on-quarter until we get to the current quarter. We have consistent evolution of cash generation measured by EBITDA from services that almost tripled in a 2-year interval. That is the result of us enjoying investments made in previous periods. And then if we go to the next slide, 17, we talk about leverage. We closed the first quarter '23 with leverage of 3.7x. I think the main point to mention here is the following. When excluding the capital allocated that we mentioned for early purchases and that have already been paid up, this is very important to say, and adjust the number, the number from 3.7x goes down to 3.4x, which is lower what we closed the year of '22 and in line with the year of 2021. And on my last slide, before turning the call back to Fernando, we show to you our return on invested capital. Return on invested capital was 22.5%. But when we normalize the numbers due to income tax, we have a return on capital of 14%. That is we continue focus on improving returns and on the sustainability of our business. I'm going to turn the call back to Fernando. Fernando, please?

Thanks, Denys. We have prepared everyone to ensure our strategic plans that will enable us to enjoy a new cycle of development with value creation. What does it mean? Now we are going to capture the synergies that come from all early investments made in the second half of '22, but also all the infrastructure and CapEx that we've built in all our company in recent years. Strategic selective acquisitions made. We have huge opportunities to have even more synergies, capital allocation. Today, we have gains of scale, capillarities in all companies and segments in which we operate. That means that companies are ready to improve return revenue with a lot less investment because everything has been already executed. So you will see less investment along the year, better results and growth in revenue even with less CapEx. That is gaining of efficiency and more productivity and us enjoying everything we've built in recent years. We are going to ensure the execution of SIMPAR's strategic plan with all management model of independence for each subsidiary, for all of them to have agility and continue to develop regardless of the economic scenario. We are very much focused on developing our people, having people aligned with our culture and values. We do not will do away with that. We want to have customer focus with long-term relationships and even more important, anticipate to their expectations and execute deliveries because that generates new business, development of business in a sustainable manner and perpetuity of the company. We are going to preserve a solid capital structure continually evolve in social-environmental, governance and control practice as pillars for the group's sustainable development. Once again, on behalf of our team, I'd like to thank you very much for joining us today, and now we are going to open for your questions so that we can clarify any of your questions. Thank you very much once again.

[Operator Instructions] Our first question comes from Pedro from [indiscernible] Investments.

I have 2 questions. The first, the automotive sector, we saw data from April being published today with a weak retail. Perhaps, I would like to split the question into light and heavy vehicles. Light perhaps an impact that is positive for Movida because you resume a more normal negotiation dynamics with a new weaker retail. It reminds everyone how important rent-a-car companies are for OEMs and vice versa. So you go back to discount and mix. But on the other side, it brings a concern for retail, even for Movida in the rent-a-car and used car sales. And you have Automob that I suppose would eventually be more negatively affected in its sales, thinking of retail. So I would like to hear from you about that and also heavy assets. With Vamos we saw a strong drop in April, that was expected. You did mention that with the prebuy of the EURO 6, but I would like to know how that translates in purchasing opportunities now past the strategy reducing Vamos inventory and the impact on dealership sales, what we should expect as of April. So that's my first question.

Pedro, this is Fernando speaking. Okay, automotive industry. We do feel, of course, the beginning of a decrease of movement, both in light and heavy vehicles and also because of the interest rates are harder. People do their maths. Credit is more difficult. So you do see a drop in retail. What's important to say, Pedro. With the drop, you have a stabilization of new asset prices. And with that, you open for negotiation. This has been. Whenever you have a drop or a stabilization of new asset prices, you do have an appreciation or normalization of used asset prices and a higher demand. It's not that people are not buying, but they say, "Well, brand new assets are so expensive. I'm going to go for a used asset." So what I can say is that the possibility of having drops in sales in used assets is smaller than new cars. So you have opportunities of negotiation with OEMs, but you have other opportunities, which is extremely favorable to Movida because Movida has a new fleet, 10 months old. So it has the legs to manage whether if it's going to buy, renew, postpone, renewal. So it is an extremely favorable position. When you talk about heavy assets, trucks, we have the close of EURO 5, the transition ready for EURO 6. And with the high interest rates and everything that is going on, new trucks are not selling. There is a drop in sales. OEMs had -- saw all dealerships with a huge inventory of EURO 5, the inventory is being sold. OEMs themselves are also managing EURO 6 inventory with the tests to sell. So the market is normalizing with less demand. You have first to finish the inventory of EURO 6 and OEMs are revisiting EURO 6 prices and making adjustments to a new reality, although still a lot more expensive than EURO 5, the difference a lot less than 4, 5 months ago. So they are less expensive. So this is what we see from now on. I don't know if I answered your question. But once again, it's very important to have trucks that are 4, 5 years because there is high demand and appreciation because EURO 5 prices went up very much last year until we got to the price of EURO 6. So again, trucks that are 3, 4, 5 years old have a huge demand. I don't know if I could answer your questions.

Yes, Fernando. And I think your last point was perhaps the most interesting, the strengths of trucks that are 3, 4, 5 years old. And that was the question I was going to ask about the sale. In the beginning of April, you released a material fact of Vamos selling cars to JSL, Marvel and [ Inka ] if I'm not mistaken. I know that we heard of that, again, investors have challenged the transaction. And I think not necessarily because it is a transaction of related parties, but precisely because of what you said, that Vamos has an operation of used assets that is still small considering the size of the company. The company grew a lot. And consequently, at the time of the cycle, these used asset sales will follow the size. And this is exactly what we have been discussing. Trucks of 3, 4, 5 years of age are premium trucks because today, the average fleet is much older than that in Brazil. So what surprised us of the sale, more than being a related party sales, is a sale in wholesale 2 days out or other group companies are not. So if you could give us a bit more color on the rationale of the transaction because of these 2 things, because it is a related party transaction, but because you sold wholesale of Vamos truck at this point in time for Vamos history.

Okay, Pedro. Thanks for your question. And for the opportunity of us to really provide clarification on this transaction so that you and everybody that is following us can understand it well. First of all, I'd like to highlight the history of the holding when we talk about related parties. I'm not going to take long, but it's important to remember, related parties transactions, purchase, sales happened 4 times in 12 years, the company has been listed, considering when JSL was listed. And in the 4 times, we, as controlling shareholders submitted the matter to the Board of Directors with consulting banks, independent members recommended the transactions, and we as controlling shareholders said whatever the minority shareholders decide we are going to vote along and we said that 30 days before. That shows our model, governance and ethics when we talk about related parties transactions. So this is something that I would like to highlight. This event that you are mentioning in Vamos has no difference in terms of governance and ethics. So first of all, some times, analyzed by company officers when they decide to have a negotiation of the site, of course, you have the CFO and the CEO of each company involved. We always play around that. One always thinks that the price of sale is high and the purchase is low. But JSL could be an asset-light company. It is not. Why? Because we have a potential to buy and too, remember that JSL can also enjoy the same OEM prices that the group has. So JSL does not rent from Vamos to avoid related parties transactions. But when it happens, the CEOs negotiate and submit to the Board of Directors and to independent members even when it is a price of transaction that is compared to the size of the companies incipient. BRL 88 million is a lot of money, but not considering the size of the company. So everyone approved the transaction. Okay. All that said, what was the commercial rationale? In my perspective, although they negotiated that. Remember that at SIMPAR, companies are independent. They have executives and Board of Directors, but it is our responsibility to follow the transactions. So JSL could have bought from manufacturers directly. It did not have to buy from Vamos. This is one thing. Second thing, when JSL buys from OEMs, according to the law in Brazil, you will have to go through a dealer. And the commission of this dealer is going to be 5% at the most -- 3, 4 but 5% at the most. This is the terms that we have. JSL has had excellent results. It had the demand for x number of trucks that amount to 166 trucks, if I'm not mistaken, decided to shop for the trucks OEM, other dealers, talk to Vamos and Vamos decided to sell. What do I have to tell you that is very important in this transaction? Out of this 166 trunks, 30 trucks were trucks that were about 1 year old with very low mileage. The other 130 were brand new trucks that have been inventory for more than 6 months. They had already registration, but they were brand new trucks. But you know that, by law, these trucks are considered used trucks. Why? Because they have already been registered. They have license plates. And therefore, Vamos, and I think rightly so, mentioned used trucks. But they were new trucks, new trucks with registration and license plates for more than 6 months in inventory, in line with Vamos payment terms. So Vamos have no carrying cost with the truck. So they negotiated, made the sale as announced. The margin of sales for Vamos was about 12% of the trucks that have 1-year of use. What does it mean? Every now and then, less than 3% of its volume, Vamos will rent a truck for 6 months for a year, for a specific harvest, something. So that's it, the 30 something. The others were brand new cars, 0 kilometers. So Vamos decided on the sale based on the margin of 12%, and that represents less than 3% of its inventory, less than 3% of its inventory. Its inventories is so enough to cover 6 months of operations with the same trucks that were sold. And that is what was the rationale of our executives. And it may happen, it is rare, but it can happen even in the regions where we have dealership stores. So that was the rationale. That's what's happened. I think that Vamos saw that the price of EURO 6 is going to be much higher than EURO 5 but not 56% higher as expected, perhaps 40%. And it saw the opportunity of making 12% and not 5%. And JSL bought the trucks at market prices. This is what I can assure you, and this is what we do with governance and ethics. Now another comment. Vamos trucks that are 5 years old, 6 years old have margins of more than 30%. And that shows the capacity of Vamos selling used assets. And once again, no one will have the volume that Vamos will have with 5 years old. And we have in Brazil, one of the oldest fleets with an average age of 20 years. So used trucks of 5 years, it's like hot buns. But JSL is not going to buy those trucks. JSL does not buy used trucks. It bought under this commercial term. So thanks for your question. And again, companies are completely independent. And when they have to make a deal, they do it in a win-win negotiation. I think the misunderstanding is that it was released as used. They are not used, they are new. But anyway, that is the legal name that you have to call those trucks.

Our next question comes from Victor Mizusaki from Bradesco BBI.

Congratulations on your results. I have 2 questions. First, Fernando, a follow-up from Pedro's question. We look at the trucks sold. As you mentioned, less than 3% of Vamos inventory of EURO 5 trucks. A concern of the market is whether you changed the Vamos growth dynamics. So my question is, if you were to think for the second quarter, have you changed the pace of allocation or expectations of Vamos for the rental of its EURO 5 inventory? Do you see a change in the yield dynamics? And the second question goes to Denys in debt management. At the level of Movida. Movida has an interesting management of its debt repurchasing bonds prepaying debt. But you also have debt at SIMPAR level. My question is, how should we think the prepay of debt vis-a-vis the growth of nonlisted companies? Do you think that may mean a lower CapEx for listed companies?

Okay. I have 3 points to answer. First, opportunities for growth in Vamos are astounding. We are just starting. It's crazy, the amount of opportunities. What I said, average fleet in Brazil, 20 years old in first developed countries, 8 years old, you have 75 for logistics movement on road, the capacity of purchasing. So Vamos is in an extremely insipient segment with huge capacity to grow. So Vamos is focused on rental, but it also has its arm of dealerships that is the value. All that said, Vamos is within the fuel economy. Brazil as a whole is slowing down. If we're doing the math to buy to rent, you know that. People are more taking a look at their customer's credit. And this movement, of course, can lower the pace of growth of Vamos. But so extremely substantial and completely different from any other company in Brazil. So it may happen, but it is something that happens for a short period of time. EURO 5 inventory. Once again, the sale made to JSL accounts for 3%. If it has more opportunities, perhaps it could have, but the focus is rental. And this is me as a shareholder analyzing inventory is something that must not spoil in trucks. For you to have an idea, even the warranty period starts when you inform the OEM that you are starting to operating -- to operate the truck, not when you bought the truck. So it doesn't spoil. Vamos bought with very good payment terms, and that has a big tail related to yields. I do not see Vamos yield going down. Quite the opposite. I think it's going to go up. But based on the lower price of acquisition and the transformation of prices that we see, especially trucks that are 3, 4, 5 years old we can't work with the same yield even with the interest rates today and because of the quality of the sales and residual value. So I see Vamos yield going up, not going down. And again, trucks can be in a way locked for sales and for rental. But new contracts, we are always having new trucks, trucks that can really provide the service as needed. And this is what we have. We have the inventory, and we did it well even with the financial cost and terms. I'm now going to turn to Denys and if you have any other questions, I'm here for you. Okay?

Victor, this is Denys speaking. The management of our financial liability has been done by replacing more expensive credit line for a less expensive credit line. So this is not related to any CapEx plan for our companies. And it does not interfere in any company business plan. CapEx for this year will certainly be a lot more moderate than last year. But because we are enjoying more of what has been done in the past. But it does not relate to our debt strategy. The trend is for us to continue to look into funding lines and continue to carry on our work. Okay, Victor?

Yes, certainly.

The next question comes from Gabriel Rezende from Itau BBA.

I'd like to go back to the truck market. A very quick question. How you see the price dynamics for EURO 6 to understand if this is likely a more challenging environment than OEM expected can make a difference in the prices of EURO 6 different than what we expected. Vamos brought to the market the gains in ICMS, perhaps those could be passed on to prices and generate deflation. I'd like to know your insight. And a question more to the long term. I'd like to hear from you, Fernando, how you see the strategy of dealerships in Vamos. We did see some movements in recent weeks, in acquisitions. And I'd like to know your view for the long-term event. Today, we have a group structure that Movida's focus on the rental and sales of used assets and Vamos is separated from Movida. Does it make sense in the short and long term for Vamos as well?

The truck market as the whole market with the situation as is, everybody thinks twice before contracting funds, banks before granting credits. And this makes people rethinking the market. So people are really doing their best. As for deflation of EURO 6 prices, I'm just guessing. I'm not creating expectations. I just think of companies that buy few units or just 1. But EURO 6 -- EURO 5, if you get December '21 to today, EURO 5 increased by 50%. Of course, you had inflation, steel, parts, tires. I'm not discussing if it was a lot or less. But from December '21 to the December '22, the price of trucks increased by 50% and another 20% for EURO 6. So you have 70% difference from one price to the other. When it is a large company that is fine. It's not what happens. But for the market as a whole, it is what happened. So there is room for EURO 6 to go down 10%, 15%. But then the valuation of our inventory is 40%, 50%. And then again, when JSL's going to buy EURO 6, we are going to enjoy the margins because our margins are different than small fleet owners. So I think there will be an accommodation on prices, and it will take time for the volume of sales pick up. But that does not impact Vamos residual value or inventory value due to the inventory. But in '22, with prices agreed for '21, so no impact for us whatsoever. Dealerships in Vamos. We understand and we have executive directors per brand per dealership completely independent, even within Vamos. When the company buys inside Vamos even that we consider normal market margins. And thanks to the team, today, we have the largest dealership of trucks in Brazil with the large dealership of Volkswagen/MAN trucks and Valtra and transit trucks. So that is picking up. We are really becoming a huge company in dealerships. So when you go to Movida, you're talking about light vehicles. We've always spoke to you, investors and analysts, and you always thought that Movida had to have comparable numbers. We just brought the CS fleets to other Movida after some competitors made it clear that they were also part of the market of CS fleet. So that is what we do for comparable purposes. So we think that Movida should continue to be independent. Light vehicles should continue to be independent. But Vamos dealers. All services of Vamos, Movida, CS Infra were born as business units within JSL. As the market developed and as the opportunity posed to generate value to shareholders and improve our capital structure, we distracted ourselves. So if at some point in time, it makes sense approved by the Board of Directors or felt that it was the right thing to do with the market, we might just have it as a separate business. Again, we are transforming. For example, today, we have the largest fleet of forklifts of -- inside Vamos and the largest fleet of electric vehicles. And people are talking to us about this machinery and forklifts another business inside Vamos. So we are looking for possibilities with governance, with the consent of our board, that we want always to take a look at opportunities that can bring us sustainable development value for our shareholders and even stronger relationship to our customers.

The next question comes from JPMorgan [indiscernible].

We have 2 questions. First, leverage. 3.7x compared to your covenant. How do you think this leverage will evolve along the year? And the second question is that each company had tax benefits along the year. Are you going to keep this tax benefit for the year of 2023?