Good morning. Welcome. This is the Q3 2024 earnings call for Fras-le Mobility. So before we begin, we'd like to give you some important notices. This earnings call is being recorded, and after conclusion, we'll make it available on our website, ri.fras-le-mobility.com. We have simultaneous translation into English. For you to access that, you have to click the interpretation button represented by a globe icon at the bottom of your screen. At the end of the presentation, we're going to have a Q&A session. So the questions might be asked in two ways: via audio, by clicking the raise hand icon, or in written form for the Q&A via the Q&A button. So we'd like to tell you that any statement here presented during this video conference is not a guarantee because it refers to future events that are based on situations that may or may not occur.
We thank you for joining us. We have here the COO, Anderson Pontalti; the M&A and IR, Hemerson de Souza; and as our guest, the IR Financial Director, Esteban Angeletti. Now I give the floor to Anderson to start the presentation.
Good morning, everyone. Welcome. Jessica, give me the feedback. Can you hear me well?
Yes, we are, Anderson.
Oh, excellent. Some very important highlights here that we're very proud of in our journey for creating value and our environment commitment. I'd like to highlight first our focus on the circular economy. We have a project called Safe Disposal that collects to our factory, the Fremax in Joinville. We have a new brand. It's called RecycleMax. This program is made together with our clients.
In this project in 2023, for you to understand, we didn't look for raw materials, extracting that from the environment, almost 3,000 tons because of this project. So we have a partnership with some repair shops that use our parts, both in Santa Catarina, Rio Grande do Sul, Paraná, part of São Paulo. And we can, with that, avoid the extraction and reduce our carbon footprint, have more efficiency in that. Because when you have your product, your part in an oven, it has that chemical composition that's perfect. You don't have to be in the oven for so long. The cycle is reduced. We're more power efficient, so we can calibrate what has been done there. So we are proud of this project. And now there's a new brand because of its representative for our business in Joinville.
We were also awarded by Sindirepa. So they awarded us for the eighth consecutive year. Fremax was awarded as the best of the year for the best brake disc brand. And we, Jurid & Fras-le, were awarded Silver category as the best brake pad brand. And I'd like to remind you that in São Paulo, we have many major players that are local. And Fras-le is a national leader, but we have competition in São Paulo, but we have two brands there. And with that, we have a market share and a penetration in that market. And because of that, the acknowledgment came. In September, that is busy and full of things happening, mostly in Europe. We have a fair, an Automechanika Frankfurt.
For the first time, we presented ourselves as Fras-le Mobility in its portfolio company that offers solutions, not only a single product or a few products company. We strengthened our brands, Fras-le, Fremax, Juratek, and Nakata, for the first time, starting with the wheels and suspensions and steering. The market we're trying to enter is the U.K. market, and we have some sales channels there. Fremax is now expanding its portfolio of products with calipers and friction and brake discs. Fras-le is very strong as it usually was, has been. We are expanding in the U.K. with Juratek's sales workforce. We disembarked in Europe as a solution company with a portfolio company, not only a parts provider in that geography. Next slide, please. I'd like to invite everyone next month on December 4th.
We're going to have the Fras-le Mobility Universe 2024 alongside the Marcopolo that has an event in the same week, in the same week. So it would be amazing to have you there, to receive you there, and show you a little the evolution of that site and Fras-le Mobility as a whole. That's there is the beginning, the HQ, and all the plan and ideas we developed there. And from there, we started executing from a single part company to a portfolio company. So it will be a pleasure to receive you there. So here you have the QR code for you to sign up on your screen. So it would be amazing to receive you guys there. Next slide. Now I will give the floor to Hemerson. Hemerson, it's up to you.
Thank you, Anderson. Good morning, everyone.
It's a pleasure to be here with you about the performance of Fras-le in this third quarter and the accumulated for the nine months of 2024, so I'd like to give you the status of the acquisitions that we announced in July of Kuo Refacciones in Mexico. It's a relevant acquisition for Fras-le Mobility. It puts us in the Mexican market, and I like to use the expression with the red carpet in that market as a leading company with supports that are relevant, access to relevant brands, and a very professional team that is leading the process wonderfully in Mexico, so we're still awaiting approval of the regulatory agencies for the antitrust market, and in Mexico, we filed the documents. We're talking to COFECE, that is the equivalent to CADE in Brazil, so since July 29th, we've been following this up.
There's a chance, a minor chance, but we could have the approval in the following days or months, still this year. We trust that's going to happen at the beginning of next year because it's an independent agency. We don't have access to their work dynamics. Considering other transactions, observing other transactions, and we are sure that there is a possibility for this year, but we are expecting that in reality for January and February next year. We also filed just in Colombia, and we received, we obtained the approval, and no further jurisdiction requirements necessary. When we talk about economic defense agencies, just Mexico is pending. When we talk about funding, we have BRL 750 million debenture issuances that's waiting precedent conditions. That's the approval of COFECE. That's the main. We have a loan agreement in Mexican currency equivalent to BRL 1 billion.
This disbursement will occur at closing within the acquired company, the Dacomsa. That is the Kuo Refacciones distribution brand in Mexico. We also had, as you could see, you will see in the financial forms, we have a financial application as a hedge for exchange rate protection. We know that the U.S. elections create instability and the global interest rates. The Mexican currency receives impact, but obviously, we've been following closely. We are not playing a game here. We are trying to keep our commitment. We have a hedge, and we blocked part of those funds in this investment hedge. If you'd like further information, we have a video call specific about this acquisition. This is the QR code that will lead to this call for you to have further information. For the next one, we're going to talk about the performance of the company.
As we've been always making it explicit to the market, we are a company that has very room for organic growth because of our market positions. We are leaders in many markets, but because we have in our revenue grid, we have markets that we have support for growth, different geography, new products entering in different geographies, so we have the Nakata lines in the U.K., so it gives us room for growth in good levels organically, and we have been doing that lately, so if you were here since the beginning of the video call, you could see the summary of our video celebrating the 50th anniversary of our research and development center that was named CTEC, so it shows how we are pioneers as a business, so I'd like to use an expression as a person that called me this morning about that.
We don't harvest apples if we don't plant apples. So the good results that we can show here for Fras-le is it was built along the time. So growing at 16% depends on the construction for capturing new markets, new geographies that allow this growth. We talk about the nine months accumulated, we have 8% growth. So it's amazing because we are facing a second half in Rio Grande do Sul. We had the floods and all the problems that we have here and all the logistical problem. We had over 200 containers that were stuck for exportations. We didn't receive almost the same amount for importation. So we were struggling to sell, especially in our Nakata unit. We import a lot. And even though we growth like that, we grew like that. So we're proud of talking about that, not only in Brazil, but for the external market.
It's 40% of our revenue, and with the acquisition of Kuo Refacciones, it's going to surpass the 50%. We're going to come back to it later, but we have been growing in comparison to the quarter of last year, 2.3%. We had a difference because of the logistical problems, but when you see the nine months accumulated, we have 2.5% growth. So we are exposed to the replacement parts market, so we are selling the goods in the vehicle, in the automobile market, different from our competitors that are connected to new manufacturing. So we sell for the replacement market connected to the vehicles that are still operating and need maintenance because it's a characteristic of the product that we sell. It's not a static product, and they don't choose. It's a mandatory product, like brake system, suspensions.
And that's why we have a recurring sale, and it supports our growth. For the next slide, we talk a little about the segments. So we have for the light vehicles, SUVs, and we sell for commercial vehicles as well, like buses and trucks. Overall, we are almost 70% light vehicles line. But when we go back to our main line, that's a friction. For that segment, the commercial vehicles, they are very relevant, over 63%. But we have had the level of support and sales really good. The replacement market is still growing. We have growing demand. But especially for brake pads for light vehicles, we are growing our market share. And you can access our releases later. But we have over 40% of market share in those lines, many brands. And we have been building that over the last few years, and we can serve the market.
We have a lead in almost 100% when we're talking about those products. When we're talking about heavy equipment, heavy parts for trucks, we are leaders as well. For the braking systems, we have a great quarter, especially for brake discs. Now we have a hydraulic cylinder portfolio for the second half by Controil that was affected by the floodings in Rio Grande do Sul. Here, mainly, we sell for light vehicles, 90%. We've been growing in a relevant way for suspensions and other parts. We have been evolving a lot. All the other lines connected to suspension. I was talking about shock absorbers. We have been struggling with some logistic problems because of the problems I mentioned before. In this other segment, we have some other products that we cannot fit in the other lines.
But we sell them for the light vehicles line. So we have some composite lines here. And after that, Anderson is going to talk about that. This week, we've been participating in Fenatran, and we are exposing those products there with a beautiful stand and stall. We received many stakeholders and investors there. But the fair ends tomorrow. So it's nice. It's interesting to go there and visit the fair because it shows the solid market we have for heavy vehicles and that favorable moment for the market. And now we're going to talk a little about our margins. And it's very important to emphasize. We had problems for importing. But the logistics costs are growing. And we have some limited capacity problems. So it's like a bottleneck. We've been suffering with costs and impacts the margins.
But in general, we can balance that quickly with our internal productivity and the reduction of raw material costs, like changing the suppliers or optimizing our products, improving the factory processes. But we evaluate in our perspective that out of the BRL 120 million - sorry, we're facing some technical problems here. And also closing up our Uruguay factory M&A expenses. So when we put that together, we have superior performance. So we are very healthy. So we're going back to the baseline. And it's a great year for Fras-le. So I'd like to emphasize also that we sold an asset in Argentina that brought a deflator. It was a unit that hosted Farloc. We sold everything. So we had to register a loss of BRL 5.7 million because of the exchange rate in Argentina, the effective price.
And talking about restructuring of Fanacif, we had - moving on to the next slide.
We had some investments in this quarter in the figures of BRL 85 million. A relevant part of those investments was in creating value, productivity, and sustainability. We are about to commission. Due to the dynamic of our business and because of Argentina's impact, it is important to say that in this quarter, in the accumulated of the year, we had due to the closing of Fanacif so our business is they're coming back to regular dynamics. I am sorry, we are facing some technical issues here. We lost Anderson. He crashed. But I could return. Oh, sorry, my internet connection. Talking about there's a fine line between good performance and availability of products. We are not happy with that because during a long time, we had shortages here. If we did not replace that, we missed the opportunity of selling.
Nobody lets the car waiting because we don't have the parts to replace. So we know we are aware of that. And although we are trying to recover and advance, we'd like to be clear because it shows the service levels. And it's very relevant when it comes to access to replacement parts. So now we show the divisions of CapEx between Controil and the controlled brands. Let me show you that for you to be aware. So on the next slide, we talk a little about net profit, net income. And we have BRL 89 million, what's like 8.6%. It's lower than last year, but especially Argentina. But when you look at the accumulated in the year, we had a decrease of 18%. But it's growing when you compare quarter by quarter because of the recomposition and the brake margins.
We are a company that we don't have any debt. We have cash of BRL 140 million in cash. We've paid lots of dividends for the following quarters. That's for you to see that we are generating cash very well. We have some captations, almost a lot of money, almost BRL 700 million. For the next slide, just for you to see our position, our guidance. We have the guidance is BRL 3.7 billion-BRL 4 billion. We have BRL 2.9 billion. We are waiting to repeat the revenue and the results from the third to the fourth quarter. The bias is very, very positive. We've been growing 8% in relation to the last year. For the external market, our guidance is at BRL 250 million. We are at BRL 214 million. It's likely that we reach the top of the guidance.
So, as a business perspective for investments, we have a very important support of hired staff, and we get closer to the guidance, so get back to Anderson. He's going to talk about some perspectives, and I'll be back at the Q&A.
Thank you, Hemerson. So, just reminding you of our latest quarter, and we talked about some accounting adjustments that we mentioned that we had a good future. So, it happened. So, we have a very solid quarter within the guidance, within the expectations affected by Argentina and the inflation. We're reflecting December last year. So, we are reaching a limit, and we are flying high now and stable in a stable way. So, we have the international logistics was affected in a relevant way, volumes, and costs. But our business model is solid because it's geopolitically affected. We are in different geographies, in different segments and businesses.
So sometimes part of that is suffering due to some external impact, but the other is growing. So we are solid. We are robust. So the ways ahead are favorable. I'll repeat the sentence I used. The market remains warm. Our portfolio is robust. The external market is very solid. So in dollars, we are reaching the top of the guidance. If we look at the average, we have favorable orders coming from Latin America, the United States, Asia, even Europe. We have businesses that we closed that we will harvest next year. And Argentina, with this economic opening and with suppliers building trust with a commercial scale, a little favorable. So the country is, at minimum, starting to fix its economy.
It's far from the optimum scenario, but it represents a big opportunity for us to expand our portfolio, increase our offers, being more aggressive in volumes, even if the margins are not detected because the risk of the country is being reduced, but still big. So in the future, we're going to have compatible margins that are comparable to the benchmark of the international market. So the worldwide logistics is still a relevant and worrisome point. And the worst problem in Brazil today and the imbalance that we have here is not ships or containers, alternative routes. Fras-le had made very clear decisions like changing ports and shippers to put more products to grant the shipping. But the problem is the state of our ports in Brazil. They are not being fixed and maintained. So big ships cannot, more high-capacity ships cannot approach. So we have an infrastructure national problem.
And we try to mitigate by having some different actions like changing ports and diversifying our shipments. So we approved the Shift 6x2 in our brake pads line in Caxias do Sul. So we're going to improve 20% of capacity in the plant. So with the closing of Fanacif, we have some brands that can be allocated in Brazil. So we're importing them. So we're going to start commissioning them in Caxias do Sul and in Sorocaba. So we could gain market share in this light commercial line, light line and friction. And we're going to gain even more. That's what we're doing. And we are getting prepared for that. And our substation in March next year. So we're going to increase the positioning 20% more for brake discs. And we are very happy with the expansion of Compass, embarking technology of VW. And we're putting that into hybrid vehicles.
That's the flagship of them now, and we have some airbags too for pneumatic suspensions. And we are bringing different solutions with new technology of intelligent composite, of basalt fiber, laminated parts with springs for buses and trucks. If you had the opportunity to see at the fair, but you can go to the fair and see that in person, so the outlooks are extremely promising, as I said three months ago. We are not going to have the closing of a factory, but the legacy of the commissioning is still here, so we can harvest good fruits ahead. So we are optimistic with our moments, and we expect a bright future ahead for the company. Thank you so much. Jessica, I have to go.
Thank you, Anderson, so we're going to start the Q&A session.
At the beginning of the video call, I said that Esteban would be with us, the director of Randon Corp. But unfortunately, he couldn't be here. But Davi, the financial manager of Randon Corp, is with us here at the Q&A. So let's start with the first question. It's for Gabriel Cini. He's a sell-side Santander analyst. Gabriel, we're going to open your audio. You can ask your question.
Good morning, everyone. Thanks for having me here. I have only two questions here. First is connected to the logistics impacts that create shortages and struggles for exporting. But you mentioned that some of the measures to fix the situation. But if you could put some color on how it's been impacting or if the situation was normalized, how much would you grow revenue, the cost? Did you have any problem with raw material?
If you could comment on that, it would be amazing. And the second question is connected to new businesses. You mentioned this new line for commercial vehicles. I'd like to understand inside the scope in medium and long term. You were focused on light vehicles, but talk a little more about the brake linings for the commercial lines. Thank you.
Thank you very much. I think Hemerson can start answering. He can mention logistics and all the financial impacts. And then Anderson can complement talking about costs of materials. And Anderson, if you could talk about the long-term perspective in relation to the light lines and the heavy lines for the company.
Thank you for your questions. Yeah. In fact, we have been living since the end of the latest quarter a very complicated moment regarding international logistics. It impacts in struggling for exporting. We have some logistics operators.
They're avoiding Egypt and the Suez Canal because of the conflicts in the Middle East. It's rerouting its fleet to different places. A very important part through Panama Canal. But it takes time. We have a limited capacity when it comes to availability of ships. Brazil has limitations, infrastructure limitations. We cannot receive the new biggest ships. It's a factor that creates some problems. Here in Brazil, Santos reached its maximum capacity. The port was out of concession for many months. The floods in the south of the country. It created an enormous problem for receiving ships and infrastructure for receiving the ships that were directed to Brazil. All those problems internationally, like the drought in Panama. Everything brought problems to us. Getting straight to the points, we had almost 300 containers stopped waiting.
So last month, we sent for our major client in the United States. We sent 130 containers in a single ship. It happened only in October. No, but it could have impacted the other months, August, September. So the figures are millions. When we talk about availability of products and our manufacturing process via Nakata and manufacturing with Controil of Fras-le and Fremax, if we put everything together, we left almost BRL 40 million in revenue. And of course, it would have impacted significantly the performance of the quarter. It was the first time in history that we got over BRL 1 billion revenue in a single quarter. So it would perform even better. And when we're talking about exporting, it's going to happen. So that's the reason we have good predictions for the fourth quarter. In the domestic market, we have a great portfolio.
But the problems didn't affect only Fras-le Mobility, but the competitors as well. Everybody's facing some shortages. So we think we can get around that. We are replenishing our stocks and purchasing more. What we bought in May, June, July faced problems. But what we bought in September is arriving. So we are replenishing the shelves to be able to serve the clients. So stocks is not necessarily good. We make more money with EBITDA, with new businesses, in comparison to saving the operating capital. So we have to balance that well. We've been trying to tune the guitar, as we say. So we faced many, many problems because of stocking or shortages. Let me comment regarding the cost of raw material.
Thanks for the question, Gabriel. We have to take into consideration two or three factors. Additional costs. We had to bring flights to provide some suspension factories.
It reflects on the cost. But we have a mix. Since Nakata and Argentina because of the inflationary effects that reduce the profitability when you consolidate that. And Nakata, because it has big margins and is the company that struggled more within those potential 40 million that we didn't make. So Fras-le would have a big exposure to materials. The other factories have a mix that creates losses in the whole. So we have a raw material cost that's a little higher in the latest quarter. And those are the main factors that I mentioned. But regarding the second question regarding the heavy lines. So we're living our best moment in the history of our company because we got all the markets in the United States for drums and discs. We have a great relation with our main client that increased its market share.
We have a recurring revenue that's relevant. It's expanded in the last three, four years. Looking at the drums and brakes optics, we are dominating. We have to hedge. We have to protect. I mean, we have competition. We're delivering more than the market expects. We are standing out in relation to the competitors. Now we have to replace new technology. The disc brakes are replacing the drum brakes. It's almost 50% in the American market. For the OEMs, they are putting 50% drums, 50% discs. But all the circulating fleet will reflect that in the future. The trailer share is another reality. The drums are a reality. They're going to keep at 80%. But we can sell discs and pads with a better added value. We've been investing.
We're gaining market share that were dominated by European competitors mainly. We were the first company to launch the copper-free products, first company to launch in the United States market. So we have the winning material in relation to this technology that is well accepted. We have many projects to be validated. So the heavy line friction, we have a very clear strategy. We started to plan. And we've been preparing ourselves to have more offer for the steering systems, powertrain. And for us to see the channels, to get the channels that Fras-le built, we have a more expressive presence on Nakata in the heavy line. We understand that we have room for growth, especially because of our new acquisition in Mexico. They have the channels, but they have a low offering of products in that market. So this line is gaining room, is expanding inside Fras-le Mobility.
But the light vehicles line is very strong. It's not going to allow the share to change so much. So we have many strategies for the light line. So we want to keep the mix at 60-40 in a healthy way from now on.
Thank you, guys. It's very, very clear. Have a great day.
Thank you, Gabriel.
Thank you, Gabriel. Our next question is from Lucas Marquiori, sell-side analyst of BTG Pactual. Lucas, you can ask your question, please.
Hello, guys. Good morning. Thanks for the call. Let me explore two topics here. First, Hemerson , if you could give some color on the results of the elections in the United States. I'd like to foresee some risks regarding importation tariffs with China and your bases in Mexico. Maybe it's going to increase costs for selling in the United States, compensated by the exchange rate.
I'd like to understand what do you think about that in this geopolitical world. Second, I'd like to see the overall perspective because if I put this extension of capacity in Caxias and I lose what we close in front of C, what's the overall capacity of yours in different lines? You're just transferring capacity from a region to another, or you are increasing the production capacity? Just for us to track the expansion of revenue with the expansion of productivity the last 12 months. Just for us to see the average capacity growth in the factory lines.
Thank you, Lucas. I think you shared the answers. Can you start, Anderson? And Hemerson, comment.
Very relevant questions. Thank you for your question.
We've been calibrating our perception at Fenatran, but we've been talking about it for a long time because of the possibility of the Republican Party to win the elections. In our perspective, the effect is slow because M&A is 95% in the market in Mexico. So 5% of the business is going to the U.S. So I think it's a lot of campaign speech. Cannot increase the tariffs in China and other countries like Brazil and Mexico, without having a very expensive and painful penalty because they have been losing purchasing power at figures of 20%, and the inflation is big there. So the purchasing power of the American is pushing the government. So if the government implements what they said in the campaign, the people will suffer a lot. It's a weak speech, very hard to be implemented.
So many things Trump said he would do, but just a few actually happened. But we are not waiting for that to happen. So we protect ourselves the best way we can. So we know that the American market cannot in the short term without massive infrastructure investments in industry for them to provide everything that this industry demands, especially the replacement parts and trucks. So Fras-le will not suffer from the election. And if this increase of tariffs are laid on China and other geographies, I think it's an unanimous opinion. And I've been talking to some American companies that are in Fenatran as well. So what's your second question? I remember it was capacity. We transferred the capacity because Caxias could absorb that. And we haven't invested in capacity because the factory had a shift to expand. But now we are running on the weekend as well.
We have a maintenance team with technology and safety prediction prevention that allows us to operate 24/7 without deteriorating the assets and have some ruptures in production. So we are very strong on that. And we understand that we have room at the figures of 20% to expand. And 2025, 2026, we're going to open our pockets and expand our production capacity if we cannot keep a favorable source. So we're always looking at possibilities of make or buy. But we understand that for the next fiscal years, we're going to increase the production capacity of friction for both light vehicles and heavy vehicles. Brake discs is well solved with the substitution. Shock absorbers, we have a second shift and a third shift to initiate. And we have a common factoring that's almost infinite with China that's going to be consolidated.
The risks of not growing organically, we cannot see in the short term. We have room for gaining market share. And I'd like to remind you that in friction, we dominate. We have 40%-50%. So a little more than that, we would hurt the margins. It's not healthy. So we have a different portfolio: steering, shock absorbers, brake discs. So I'm talking about 25%-30%. And we think we can go up to 45%-50%. So this question was asked through the visit of the analyst. And I repeat my answer to you. I think we addressed that really well when we're not limited at the moment.
If you allow me, Anderson, just to add a little bit of your sense on the United States issue. We have an advantage in the U.S. We have a factory in Alabama, U.S.A. So we will profit from that because we are close to the production base, so even as Anderson said, Mexico is a prominent player when we see the automobile manufacturing system. Many factories supply the U.S., like new vehicles and systems, so we are neutral to optimistic with what is happening in the U.S.
Thank you, guys. Thank you, Pontalti, Anderson. And good, good Fenatran for you guys. Thank you very much.
Thank you, Lucas.
Our next question comes from André Ferreira, sell-side analyst of Bradesco. André Ferreira, your microphone is open. Please go ahead.
Good morning, everyone. Thanks for taking my question. Congratulations on the results. I have two questions. First is about having the margin. It's coming back to the high levels, 19% in the adjusted. And I'd like to confirm two topics with you guys.
First is, what is the improvement point, comparing quarter to quarter, a few percentage points? Was it rate, exchange rate impact? And what's the dynamic of margin from now on? And the second macro topic is, I believe that in Fenatran, it was clear and the potential of Compass for a weight reduction in some parts. In the release, you talk about a contract of Compass beginning in August. If you could comment a little more about this contract and some other contracts that are being signed up, which parts, which client, if you could comment on that, and the size of the contract. Thank you.
So I'm going to start answering. First to, well, thank you, André, for your question and for participating in our video conference for the earnings call. So I'd like Anderson to talk more about Compass.
The contract we signed was the phase two of Iveco, and it's a big client for us to use the lines here. But there are many good things happening, and Anderson can explore that better. Talking about EBITDA, we talked about the struggling, the problems at logistics, so we could not seize and enjoy the exchange rate because we had problems for exporting. We had 260 containers stopped, so we had this material to be shipped. It was like they were waiting in the ports, so we could not enjoy that so much. But we have a level of importation that balances our commercial scale, and when we talk about cost of products and support of our margins, of course, it increases. It's a little neutral. Our EBITDA margin for the quarter has little effect on the exchange factor.
What answers this situation is the recovering of the levels we had. We don't have many non-recurring effects this quarter. Argentina was not that big as it was in the latest quarters. We are starting to go back to regular levels of operation. Let me get your question. One thing is the accounting treatment of what happened, and it's reflected in our results. The other part is the guidance of business of the company. The guidance of this year was never unfavorable. If we evaluate with Argentina influence, we understand that Argentina is part of our business. We cannot purge it, say, okay. All the effects, de-dollarization, inflation that is falling. Now the economy is stabilizing. Fras-le is still in the prime of its life in terms of profitability, ROE, ROI.
Of course, all the effects, non-recurring effects, they're going to bring us to a different level. But I think if you evaluate closely, deeply, you understand that very easily for them to understand the company for investing in our quality. So we are very optimistic. I think our business guidance is optimistic. Our clients are still buying. The replacement sales are very favorable. And now with the acquisition of BRL 1.5 billion of additional revenue, just for you to see the size of the growth that we are presenting. So our perspective is really good for business. Of course, we are optimistic. You have to discount a little because we are passionate here in the company. But the moment was never that favorable. We've been planting apple trees to harvest apples. So all the actions are converging for us to deliver better results in the future.
And of course, when everything's favorable in the logistics, maybe we will get favorable results from exchange rate because 40% of our business are out of the country. So building products to be exported and building strong currency in different geographies. But thank you for your question. Now, Anderson, I'll give you the floor to talk about Compass.
Thank you, Hemerson. So I don't have to compliment. First, each year that goes by, every time we have this earnings call, you start to see different opportunities. So Compass, this new business, the extension inside Iveco has different variations. Going to expand 50%-60% of the revenue. And Iveco, as I said, I'm talking about BRL 20 million of recurring businesses per year. But Iveco is a small player compared to Mercedes and Volkswagen.
So for the VW, we had the first launch that we are exposing at the fair here, exhibiting at the fair here. We intend to expand the dialogue. And we've been talking to Volvo, Mercedes, Scania. All the conversations are still here. We're looking at new geographies. But we're also looking at new technologies for supplying different components. So we have basalt fibers that we've been assessing. We are also looking at high-pressure molding materials that are going to replace maybe as a second generation of composites and reducing the costs, bringing more financial benefits for Fras-le and for the client. So the pipeline has 40-50 projects only for Compass. When I look at Nione, because Fras-le has 46% around 54%. So we have the royalties, 5% of the revenue because we hold the patent. It was born inside Fras-le.
Nione is very advanced, establishing, stabilizing the metallic alloys. The wheel hub, it was an expressive reduction, almost with a weight of aluminum with the cost. We have the approval of the clients in the markets. They have an important time for running the tests. But the technology is really promising. It is worth mentioning that Fras-le, through Fremax, in Joinville, Santa Catarina, is exporting in a regular way, 10,000 discs with the protection paint that helps avoid corrosion for countries that have snow and salt, highways that are very aggressive for many parts of the cars. We have been having an acceptance of the market in a premium position. The technology brings better performance, the protection inhibitor, the corrosion inhibitors that are available on the market. Those are practical examples. But we have many projects here. We do not have the capacity for dialogue.
We are entering into cosmetics, electronics, paintings, paint. But our main focus is to look at how we boost the products that we are still, that we are learning now. So Fras-le has a research and development center looking at the regulatory framework of the Euro, the Euro 7 that is entering force in 2027. We are very happy with the preliminary results. And we know that those technologies, they mature slow because it's hard to convince that a breakthrough innovation will replace established technology. But it's an exponential curve. You start to expand slowly, and then there's a boom, and you capture many different booms because of the size of the acceptance that we can see for Nione and Compass.
Very clear. Thank you.
Thank you, André. And our final question is for Gabriel Rezende, sell-side analyst, Itaú BBA. Yeah, you can go ahead.
Good morning, Jessica, Pontalti, Hemerson, Davi . Just one question from our side. If you could give some more detail on the dynamics, mix/price that we could see, friction, brake systems, suspension steering, powertrain. Obviously, it oscillates every quarter. But if you could comment eventually what we have to keep on the radar, what are the most challenging or positive dynamics in terms of specification?
Thank you, Gabriel. Can you start, Anderson?
The mix is coming back to the regular scenario in the first quarter because we had the countermeasures for bringing Nakata at the same level of revenue. It was planned or even surpassed that because of a higher back order. We have some effects of Controil and flooding. They're getting behind. So we had a month without production. We empty our stocks, and we have a big demand.
We are expanding the revenues in the fourth quarter and at the beginning of next year. So we are coming very strong at the beginning of next year. In Argentina, although we have reduced margins due to the market's dynamics, we're going to have a higher offer in product. And we've been preparing that, amplifying the purchasing, the orders, expanding the portfolio. So we will bring to the natural balance that we had Nakata performing as 100 million, Fras-le 110, 120, 130. That's what we've been doing, $6 million in Argentina. Back to what's regular. So the mix will come back to the standard, to the benchmark we are prepared because of our market share. So in medium-long term, we're going to expand the sales at Nakata, Fremax, and Controil. Fremax and Nakata because of the expanding of the market share they offer. And we have more market shares.
And we're going to have distributors, DPK recently. That's a very important client in shock absorbers segment. We have some other projects. But at Controil, we have a very significant backlog. And there are a few players that have this complete offer. So in Controil, we have this potential of growth for us to expand the offers. And Fras-le will keep the mix and lead the market with our current share because we could gain many market share, much market share for the last years. So those are the beliefs for your modeling.
Thank you, Pontalti.
Thank you. We close the Q&A session, and I invite Anderson for his closing remarks.
Thank you so much for the time you dedicated. It was a very positive quarter for us. Some headwinds counter us, but we have a historic revenue, and we want that to be a benchmark for our next quarters. Our internal motto is over a billion, and Nakata is performing better in the following quarter because it's a healthy company. And there's no other company that contracted revenue of like 30-40 for the next year, percent of growth for the next year. And we have plenty of synergy to be captured. The market is favorable. The business model is solid. We're strong and trusting that we're going to deliver results for Fras-le strategy. Thank you so much, all the participants. Have a great week and weekend. Thank you so much.