FRAS-LE S.A. EARNINGS RELEASE
4Q23 |2023
Caxias do Sul, March 11, 2024. Frasle Mobility (Fras-le S.A. - B3: FRAS3) discloses its results for the fourth quarter of 2023 (4Q23) and twelve months of 2023 (2023). The Company`s Financial Information is consolidated in accordance with international standards IFRS - International Financial Reporting Standards and monetary vales are expressed in Reais, unless otherwise indicated. Comparisons are made with the fourth quarter of 2022 (4Q22) and twelve months of 2022 (2022).
HIGHLIGHTS
Consolidated Net Revenue was R$ 741.3 million in 4Q23, 0.7% down from 4Q22, and reached R$ 3.4 billion in 2023, 10.8% up from 2022.
Revenues from the International Market¹ amounted to US$ 37.0 million in 4Q23, 22.3% down from 4Q22. In 2023 full year, it amounted to US$ 246.1 million, which is 8.1% up from 2022.
Gross Margin was 27.3% in 4Q23, 2.0 percentage points down from 4Q22. In full year 2023, gross margin was 33.6%, 4.1 percentage points up from 2022.
EBITDA amounted to R$ 113.1 million in 4Q23, 34.5% up from 4Q22 and reached R$ 667.2 million in 2023, accounting for 47.3% of growth when compared to 2022. EBITDA margin was 15.3% in 4Q23, which is 4.0 percentage points up from that of 4Q22. ADJUSTED EBITDA was R$ 664.7 million in 2023, accounting for a margin of 19.6%.
Net margin was 12.7% in 4Q23, 7.9 percentage points up from 4Q22. In full year 2023, net margin was 11.5%, which is 4,8 percentage points up from the previous year.
Investments2 were R$ 59.6 million in 4Q23 and amounted to R$ 133.7 million in 2023, 25.6% up from 2022.
Return on Invested Capital (ROIC)
MARKET CAP (12/28/2023) R$ 4.6 bi FRAS3 - R$ 17.00
FREE FLOAT - 33.2%
reached 19.3% in 2023, 5.5 percentage points up from 2022.
Investor Relations ri.fraslemobility.com ri@fras-le.com
Hemerson Fernando de Souza - IRO
Jéssica Cristina Cantele
Marcelo Scopel Caberlon
Mônica Rech
Renata Schwaizer
Earnings Conference Call 4Q23 | 2023 March 12, 2024, (Tuesday)
11:00 am Brasília | 9 a.m New York | 2 p.m London WEBCAST (Portuguese/English): Click here
Forward-LookingStatements. The statements contained in this reportregarding the Company's future. These expectations are highly regarding FRASLE MOBILITY's (FRAS-LE S.A.) business prospects,dependent on changes in the market, the general economic projections and results and the company's growth potential performanceare of the country, the sector, and international markets, merely forecasts and were based on management's expectationsand may undergo changes.
- Value referring to the sum of exports out of Brazil and revenues from operations abroad, net of intercompany operations. ² Value referring to organic investments.
FRASLE MOBILITY UNIVERSE
INVESTOR DAY
Frasle Mobility Universe 2023 took place in a hybrid format on December 7th, an event that brought together investors and capital market analysts in Joinville/SC, where the manufacturing plant of Fremax is located. The fourth edition of the event aimed to bring investors closer to the Company's
business strategies, innovation, sustainability and long-term planning. The
recording of the event is available on the official Frasle Mobility YouTubechannel.
SURVEY "BRANDS AT THE WORKSHOP 2023"
The survey, which is in its seventh edition, is carried out by CINAU - Automotive Intelligence Center, with automotive repair professionals. Fras-le, Controil, Fremax and Nakata brands were distinguished for their customer service, reliability and delivery availability.
BRITISH AFTERMARKET FEDERATION AWARD
In December, Juratek was distinguished in the "Car Supplier of the Year" category, receiving a highly recommended rating at the IAAF Annual Awards, an event promoted by The Independent Automotive Aftermarket Federation, in the United Kingdom. To find out more about the event, click here.
GREAT PLACE TO WORK
Fras-le Panamericana was certified as one of the best companies to work for in Colombia. The Unit was the first to win the title among Frasle Mobility companies abroad.
EARNINGS RELEASE 4Q23 / 2023
3
WORD FROM MANAGEMENT
The end of 2023 financial year marks a new milestone in the history of Frasle Mobility. It was a historic year, full of opportunities, guidelines, and a new look at the future. The results reflect the disciplined execution of the strategic plan that combines growth, profitability, cost discipline and adaptation to market volatility.
In 4Q23, the Company showed stability in net revenue when compared to 4Q22. A natural slowdown due to the seasonal effects of the period is characteristic of the end of the year, but in 2023 this effect was aggravated by the complex scenario faced in some of our operating markets, especially in Argentina, and by the scheduled shutdown of our operations to update our system ERP.
In 2023, the Company presented its new corporate brand to the world, which conveys its mission of keeping life in motion through an ecosystem of smart and sustainable mobility solutions: We are Frasle Mobility! The acquisition of AML Juratek in the United Kingdom marked the beginning of the second expansion cycle, in 1Q23. The acquisition has already contributed to positive returns in less than a year into the integration process.
Other achievements were recorded: important advances in the replacement powerhouse in Colombia, new appointments for projects with automakers in Brazil and abroad, reinterpretation and repositioning of brands and production records.
The reasons to celebrate 2023 are many and 2024 begins with this same feeling of celebration. The pioneering brand FRAS-LE completed 70 years of history on February 22nd. The brand carries the legacy of courageous, entrepreneurial and innovative people and deserves respect and admiration for its victorious trajectory, towards the next 70 years.
Frasle Mobility continues focused on optimizing the strategy of replicating the already consolidated and robust business model in other geographies. The advances achieved energize and motivate the future of mobility, which is increasingly sustainable, with non-negotiable care for people and the environment.
"The results reflect
the disciplined execution of the strategic plan that combines growth, profitability, cost
discipline and
adaptation to market volatility".
EARNINGS RELEASE 4Q23 / 2023
4
MAIN FIGURES
Net Revenue
Domestic Market
Foreign Market
Foreign Market US$
Exports - Brazil US$
Gross Profit
Gross Margin
Operating Profit
Operating Margin
EBITDA
EBITDA Margin
Net Profit
Net Margin
*
741.3 | 746.8 | -0.7%889.1 | -16.6% | 3,388.7 | 3,058.2 | 10.8% | |
555.5 | 496.9 | 11.8% | 554.5 | 0.2% | 2,156.5 | 1,882.1 | 14.6% |
185.8 | 249.9 | -25.7% | 334.5 | -44.5% | 1,232.2 | 1,176.0 | 4.8% |
37.0 | 47.5 | -22.3% | 68.5 | -46.1% | 246.1 | 227.7 | 8.1% |
26.7 | 27.0 | -1.4% | 25.3 | 5.5% | 108.5 | 105.7 | 2.7% |
202.6 | 219.1 | -7.5% | 319.3 | -36.5% | 1138.6 | 903.5 | 26.0% |
27.3% | 29.3% | -2.0 pp | 35.9% | -8.6 pp | 33.6% | 29.5% | 4.1 pp |
81.4 | 49.8 | 63.4% | 157.9 | -48.4% | 542.6 | 333.0 | 62.9% |
11.0% | 6.7% | 4.3 pp | 17.8% | -6.8 pp | 16.0% | 10.9% | 5.1 pp |
113.1 | 84.1 | 34.5% | 190.2 | -40.5% | 667.2 | 453.1 | 47.3% |
15.3% | 11.3% | 4.0 pp | 21.4% | -6.1 pp | 19.7% | 14.8% | 4.9 pp |
93.9 | 35.3 | 166.0% | 106.1 | -11.5% | 388.7 | 203.3 | 91.2% |
12.7% | 4.7% | 7.9 pp | 11.9% | 0.7 pp | 11.5% | 6.6% | 4.8 pp |
Adjusted EBITDA | 98.0 | 106.6 | -8.1% | 190.2 | -48.5% | 664.7 | 475.6 | 39.8% |
Adjusted EBITDA Margin | 13.2% | 14.3% | -1.1 pp | 21.4% | -8.2 pp | 19.6% | 15.6% | 4.1 pp |
Investments | 59.6 | 59.5 | 0.1% | 17.5 | 240.8% | 133.7 | 106.4 | 25.6% |
ROIC | 19.3% | 13.8% | 5.5 pp | 17.1% | 2.2 pp | 19.3% | 13.8% | 5.5 pp |
Values in R$ million (except for exports, | profit per share and percentage) | |||||||
(*) Includes intercompany sales | ||||||||
Average price of the US dollar | 4.95 | 5.26 | -5.8% | 4.88 | 1.5% | 4.99 | 5.16 | -3.3% |
SUBSEQUENT EVENTS
SUSTAINABILITY-LINKED LOAN
According to the Material Factdisclosed on February 28, 2024, Frasle Mobility ("Company") signed a contract with the International Finance Corporation ("IFC"), a member of the World Bank Group. The fundraising amounts to R$250 million, which will be invested in a variety of projects aimed at sustainability. Among these projects is the Caldeira Verde project, an initiative that seeks to reduce greenhouse gas emissions by 60% of the Company, thus significantly contributing to the mitigation of climate change and demonstrating our commitment to concrete solutions to environmental challenges.
EARNINGS RELEASE 4Q23 / 2023
5
BUSINESS OVERVIEW IN THE QUARTER
In the fourth quarter, the Brazilian aftermarket continued to bring results. The flow of vehicles in repair shops, the reduction in fuel prices and the decrease in the Selic rate are market factors that stimulated this growth. Furthermore, the Company actively worked on strengthening brands and sales campaigns, increasing production capacity, assuring greater product availability and expanding the powerhouse.
In the international market, the Company was impacted by geopolitical effects, especially in Argentina, where the new political-economic guidelines established by the new government that took office in December brought accounting effects to the result. However, it should be noted that, operationally, the business in Argentina is healthy, the local team has a lot of experience and discipline in business management, adjusting Frasle Mobility's presence to the market and supporting results with great caution. Furthermore, geographic exposure is one of the great strengths of the Company's business model.
Sales Performance
Volume and Net Revenue by Family
2023 | |||||||||||||
Friction Material | 27.0 | 25.2 | 7.2% | 25.8 | 4.5% | 103.8 | 98.5 | 5.4% | |||||
Components for the Brake System | 2.5 | 2.2 | 13.0% | 2.3 | 8.6% | 9.5 | 8.7 | 10.1% | |||||
Components for the | 4.7 | 4.0 | 15.4% | 5.2 | -11.3% | 19.4 | 16.6 | 17.1% | |||||
Suspension, Steering and Powertrain | |||||||||||||
Δ % | |||||||||||||
Friction Material | 361.9 | 48.8% | 357.9 | 47.9% | 1.1% | 425.6 | 47.9% | -15.0% | 1,635.4 | 48.3% | 1,502.7 | 49.1% | 8.8% |
Components for the Brake System | 153.4 | 20.7% | 158.2 | 21.2% | -3.0% | 176.1 | 19.8% | -12.9% | 676.0 | 19.9% | 591.6 | 19.3% | 14.3% |
Components for the | 213.0 | 28.7% | 201.2 | 26.9% | 5.8% | 258.4 | 29.1% | -17.6% | 948.6 | 28.0% | 821.0 | 26.8% | 15.5% |
Suspension, Steering and Powertrain | |||||||||||||
Other products * | 13.0 | 1.8% | 29.5 | 4.0% | -56.0% | 28.9 | 3.3% | -55.1% | 128.7 | 3.8% | 142.8 | 4.7% | -9.9% |
Net Revenue | 741.3 | 100.0% | 746.8 | 100.0% | -0.7% | 889.1 | 100.0% | -16.6% | 3,388.7 | 100.0% | 3,058.2 | 100.0% | 10.8% |
The components are detailed at the end of this report. |
The fourth quarter recorded progress in revenue and volume, reflecting the building and capturing of synergies between our brands and operations. Furthermore, it is necessary to highlight the update, from ERP SAP ECC to ERP SAP HANA, carried out by the Company in December and in part of January 2024. This update caused systemic stops in several operations, producing the effect of general holidays and purchase orders being placed in advance, impacting revenue recognition. Please see below more details about each family:
6
EARNINGS RELEASE 4Q23 / 2023
Friction Material
- Brake pads for light vehicles showed, at the end of the year, he best results in history in terms of volumes. The quarter was very positive, with growth in revenue and volume. The reasons of this advancement are the growing flow of maintenance in workshops, availability of products and product launches.
- In the commercial line, where the largest volume is brake lining for trucks and trailers, the strengthening of relationships with customers throughout the year led to an increase in volumes. Furthermore, sales campaigns stimulated growth in the quarter.
Components for the Brake System
- The positive highlight of the fourth quarter comes from Fremax - with the Maxcoating paint line, which has been adding value to products through the protective coating for brake discs, using niobium nanoparticle technology developed together with Nione. In December, the Unit opened a second work shift to meet demand.
Suspension, Steering and Powertrain Components
- The one-off variation in 3Q23x4Q23 refers to the seasonality of the domestic shock absorber market in December, caused by actions took earlier than the usual time, in previous months, in preparation for the maintenance period before the holidays. The subsidiary Nakata ended the year with outstanding operational performance and record production and sales of shock absorbers. Also in December, important improvements were made to the painting of shock absorbers, generating more capacity and advances in production processes.
Other Products
- The slowdown is linked to the shutdown of an important Composs customer, due to the restructuring of production lines, which generated impacts on revenue and volume in the third and fourth quarters of 2023. Supply was regularized at the beginning of 2024.
NOTE: It is necessary to highlight that the performance of sales revenue by material family does not necessarily reflect the same behaviour in volumes because of the effects of variations in exchange rates, product mix and prices charged. In particular, in 4Q23, the Argentine peso suffered a strong devaluation (365 USD/ARS vs. 800 USD/ARS), negatively impacting revenues in the amount of R$114.3 million.
For more details about the families, see Appendix IV.
Below is a graph in causal format showing the effects that changed the performance of consolidated net revenue in 4Q23 compared to 4Q22:
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EARNINGS RELEASE 4Q23 / 2023
Revenues by Market
2022
DM Aftermarket | 501.7 | 67.7% | 445.6 | 59.7% | 12.6% | 502.1 | 56.5% | -0.1% | 1,946.5 | 57.4% | 1,660.1 | 54.3% | 17.3% | ||
DM OEM | 53.8 | 7.3% | 51.3 | 6.9% | 4.9% | 52.4 | 5.9% | 2.6% | 210.0 | 6.2% | 222.0 | 7.3% | -5.4% | ||
Domestic Market | 555.5 | 74.9% | 496 | .9 66.5% | 1 1 .8% | 554.5 | 62.4% | 0.2% | 2,156.5 63.6% | 1,882.1 | 61.5% | 14.6% | |||
FM Aftermarket | 143.0 | 19.3% | 208.9 | 28.0% | -31.6% | 284.1 | 32.0% | -49.7% | 1,037.7 | 30.6% | 1,000.6 | 32.7% | 3.7% | ||
FM OEM | 42.8 | 5.8% | 41.0 | 5.5% | 4.3% | 50.4 | 5.7% | -15.0% | 194.4 | 5.7% | 175.5 | 5.7% | 10.8% | ||
Foreign Market | 185.8 | 25.1% | 249 | .9 33.5% | -25.7% | 334.5 | 37.6% | -44.5% | 1,232.2 | 36.4% | 1,176.0 | 38.5% | 4.8% | ||
Total Aftermarket Net | 644.6 | 87.0% | 654.5 | 87.6% | -1.5% | 786.2 | 88.4% | -18.0% | 2,984.2 | 88.1% | 2,660.7 | 87.0% | 12.2% | ||
Total OEM Net Revenue | 96.6 | 13.0% | 92.4 | 12.4% | 4.6% | 102.8 | 11.6% | -6.0% | 404.4 | 11.9% | 397.5 | 13.0% | 1.8% | ||
Total Net Revenue | 741.3 | 100% | 746 | .8 | 100% | -0.7% | 889.1 | 100% | -16.6% | 3,388.7 | 100% | 3,058.2 | 100% | 10.8% |
Values in R$ million
Domestic Market (DM)
- Replacement: the growing number of visits to workshops, combined with brand positioning, product launches and sales campaigns provided market share advances in 2023.
- Trailer Division: gradual recovery in gains from new business and mainly the lower Selic rate, which stimulates the return of financing for new vehicles.
International Market (IM)
In the international market, which corresponds to the sum of exports out of Brazil and revenues from operations abroad, the devaluation of the Argentine currency (in December) was largely responsible for the drop of more than 20% in this indicator. Isolating the exchange rate effects, highlights include Fras-le Panamericana, which worked on expanding its portfolio to better serve the fleet in
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EARNINGS RELEASE 4Q23 / 2023
the region, and AML Juratek, which contributed more than R$40 million in 4Q23.
In exports out of Brazil, the most relevant region continues to be North America, where, in the fourth quarter, purchase orders were placed in advance due to the update of the SAP system, which stimulated growth in revenue.
Net Revenue Breakdown in the Globe
- North America: increase in products in the portfolio and growth in the Aftermarket sales were prominent factors in this quarter. Even with high inflation remaining, Operations foresee stable growth for next year, as a result of new businesses.
- South America: we grew in customers and expanded our profitability with operational efficiency and effective management of the supply and pricing strategy. The negative result for the quarter reflects the exchange rate devaluation (in December) in Argentina, where the effects of hyperinflation in the country, as stipulated by accounting standards (IAS 29 - CPC 42), require the updating of information
9
EARNINGS RELEASE 4Q23 / 2023
due to the effects of the inflation index in that country. This information must be, subsequently, presented in the monetary unit of measurement at the end of the year, thus updating the past.
- Europe and Eurasia: AML Juratek Limited contributes to the growth of the region. Operations on the Continent ended the quarter working on synergies with the sales teams. Conflicts in the region remain a source of attention.
- Asia: the quarter ends in India with growth in the Aftermarket in the domestic market due to high vehicle maintenance stimulated by holidays in the country. The operation in China was impacted by the effects of seasonality caused by the Chinese New Year.
Operational Performance
Cost of Products Sold and Gross Profit
In 4Q23, the Cost of Products Sold totaled R$ 538.6 million, accounting for 72.7% of net revenues, and resulted in a gross profit of R$ 202.6 million and a gross margin of 27.3%, 2.0 percentage points lower than in the same period of the previous year.
The graph below shows the composition of Cost of Products Sold:
a
bra
ção
ável
ção
15% | 14% | Raw Materials | |||
6% | 6% | Labor | |||
4% | |||||
4Q22 | |||||
3% | 4Q23 | Depreciation | |||
15% | Other fixed Costs | ||||
16% | 61% | ||||
60% |
Other Variable Costs
*General Manufacturing Expenses
Gross profit in the fourth quarter was affected by the devaluation of the Argentine peso, in addition to the fiscal change in the PAIS1 tax, which is levied on imported goods, going from 7.5% to 17.5%, on the total debt of the subsidiaries located in Argentina, increasing the cost of products sold by R$ 16.7 million.
1 PAIS Tax, acronym "For an Inclusive and Solidarity Argentina".
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EARNINGS RELEASE 4Q23 / 2023
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Disclaimer
Fras-le SA published this content on 11 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 March 2024 22:51:09 UTC.
