Good morning. Welcome to the video conference of Frasle Mobility to present the results for the second quarter of 2026. Before we begin, we would like to share a few important announcements. This video conference is being recorded and will be made available on our website, ri.fraslemobility.com. We have simultaneous interpretation to English. To access, simply click on the Interpretation button represented by a globe icon at the bottom of your screen. At the end, we have a Q&A session. Questions may be submitted in two ways, through audio, indicating your interest through Raise Your Hand icon, or in writing through the Q&A button. Additionally, please note that some information discussed in this video conference do not guarantee future performance, involve risk and uncertainty. It relates to future events depending on circumstances that may or may not occur.
Briefly reviewing today's agenda, Hemerson will cover the quarter's highlights and the integration of Dac omsa. After, Mariana will present the operational performance and financial management. Anderson will provide the guidance and outlook. Finally, we move to the Q&A session moderated by Jéssica with Esteban Angeletti, Corporate Director of Finance, IR Strategy, and FP&A of Randoncorp, along with executives Anderson and Hemerson. Now, I hand the floor to Hemerson to begin his presentation.
Good morning, everyone. Welcome to another video conference by Results of Frasle Mobility. It's a pleasure to be with you. I'm speaking from Mexico. We have good news in this presentation regarding the results of the second quarter. First of all, this is the best quarter in the history of Frasle Mobility. When we talk about margin conversion, it could be the best quarter in revenue if we considered an exchange rate that would be neutral in this period. I say this reinforcing this point because the fundamentals of the company, as we spoke for the past quarters, did not have any changes.
Obviously, as a business, we have to perform and seek paths in the macroeconomic scenarios that we do not control. One is exchange rate. In macro, we had a difficult beginning of the year. We did a system integration, a new design of the logistics operation, and logistic automation in Nakata that removed some traction in revenue and a bit of the result. Obviously, these are things that we acted fast on and are stable in this quarter. But still, a small impact, especially in April. We were not 100% operational, where we had space to improve.
Anyways, as we said, the synergies of Dac omsa as a whole are starting in a slow pace, I can say very small, start to flow and appear constantly in the 2026 operation and afterwards in the consolidation at Frasle Mobility. We still have some challenges, especially when we talk about heavy vehicles. But it's a scenario of improvement, especially in the North American market, where the volumes of production and the production forecasts are pointing to some advances. We closed the revenue at this one point. It represented $138 million in growth of 7.5% compared to the second quarter of 2025. As I mentioned, we closed here an EBITDA margin of 20.4%, which is BRL 282 million, as I mentioned, the best quarter in the history of the company. Investments are around BRL 22.5 million, below last year due to the schedule of investments of these amounts.
A relevant point that I like to reference, the fundamentals of Fras-le. I started talking about this. They continue to be very much solid. I believe this quarter, in fact, can express this in a consistent way. The next chart, I would like to update you a bit how we are mapping the synergies of Dacom sa updated till June [2026]. Remind you, we had an initial estimate in the year of 2029 having something around $50 million in synergies, recurring synergies, one-off. We have approximately BRL 24 million close. Currently, close to the business case, being that these BRL 24 million, approximately 100% of the business case, around BRL 15 million, BRL 14 million, and some are already implemented. They are not any longer in the mapping out phase or discussion. When I say implemented, it means they are adding in the DRE of Dacomsa .
Obviously, I am not saying we have $15 million more now there. It depends on each project. You have a fraction of this till the ramp is complete. We use all of this as things happen. We implement it, for example, we have a synergy, which is a change of supplier. Till I approve, it takes two, three, five months. Then you put in the orders, it takes two, three months, and then it arrives, and then you have the average cost in stock. It should show up in our DRE between 12 and 13 months, being positive and showing up there. In the Universo Frasle Mobility, we will start to show with method how much this is part of this operation inside the results accounts.
But I can bring to you, this is not public data yet, the margin in June, it is not part of what we have in this quarter, is 20% above the level that we had when we acquired, showing clearly the impact and the potential synergies that we have with this operation. A bit more spaced than an acquisition done in Brazil due to the several complexities that it brings, but very robust, above what we had forecast. Going to the next chart, I would like to continue. Speaking of Dacomsa, one of the important lines we have is the addition of new revenues. The initial business case is these were the biggest synergies. During the process, they became smaller due to the fact that we had a large amount in synergies of sourcing and reductions of expenses more than adding new products.
That takes a bit more time. Highlighting that we had success in the launch of blocks. We are close to 30% market share with the two that we had last year, heavy blocks. This brings a revenue of around $5 million. The impact in the synergies in aggregated margins, we launched now in the beginning of July, the line of hydraulics with Fritec brand. An important part of this will be done in Brazil by Controil in São Leopoldo. Part of it, we were searching for suppliers and co-manufacturers according to our strategy. I can say that our business case had a low sales forecast because it is a new line. But the results that we have received in terms of initial orders from the customers that we are receiving only in November, is a lot higher than what we designed for the full year of 2027.
Also, it will be a successful line in the Mexican market due to the characteristics and what we can push as Frasle Mobility. For the next years, we have designed a series of other products, launch in the Mexican market. This will leverage the synergies even more that we have mapped out already. Obviously, in its time, we can speak more of this. In the next chart, I invite you. Today is the last day to sign up for Universo Frasle Mobility, the Investor Day, that this year will be in person in Extrema, Minas Gerais, and will be broadcast live through YouTube in our networks. It will be in two weeks, and you can sign up. You have a transportation from Faria Lima, those that are in São Paulo. All the details when you sign up, you have the schedule in detail.
It's a great opportunity to go to Extrema, Minas Gerais and see the advances we have in logistics with mobility, the advances in the plant, shock absorber plant also. We can talk more about the strategy that we have designed for Fras-le in the next cycles. Looking at the next chart, we are detailing the revenue this year, this quarter. As I mentioned, a growth of 2.2% compared to last year. What impacted the most, internal market. The repair and the workshops are stable. There was an increase in the availability of products. We're working in competitiveness. We have an impact in volumes. We continue to maintain in some lines, even gaining market share. The only exception here, we didn't lose a position, but the beginning of the year is a bit harder with Nakata. That had an impact this quarter.
We had an advance compared to last year in the commercial line in the United States, as I said, showing recovery, clear recovery for the next quarter. A meaningful reduction when we talk about exchange rate that impacts almost all of our currencies that are used in the different geographies in conversion where we bring our exchange through Brazilian real. Argentina had some impact due to the effects of IAS 29, removing a bit. If we eliminated FX, we would have a revenue growing 6.5%, as I said. It would be the best quarter in the history of Fras-le also. Next chart, I'm talking about the effects of the heavies line. A heavy line compared to last year, we have here in the internal market growth, as I mentioned, but a decrease when we talk about external market, a decrease of approximately 18%, specifically for this market.
If we look at production of vehicles overall, we see there's a variation that's still a bit more complex. When we look the first quarter compared to past quarters, but in the case of Brazil, we produced trucks 20% higher production when we talk about the second quarter of 2025. Sorry, 10% lower when we look at quarter-after-quarter. But better when we compare to the first quarter of this year, we see a bias of improvement.
When we look at the North American market, there's a decrease when we compare quarters, but a reaction when we compare to the first quarter of 2026. As I mentioned, the signs are more promising for the second semester when we talk about the commercial line. I will pass the floor to Mariana, that is going to talk about the operational results, and I come back for the Q&A at the end of the session.
Thank you, Hemerson. Good morning, everyone. It is a pleasure to have you with us in the call for results at Frasle. On slide 10, we provide an update on the tariff scenario applied by the United States to Brazil. First, it is important to emphasize that only 5% of Frasle Mobility's total sales are exported to the United States, specifically in the following product categories, heavy-duty brake linings and brake discs and pads for both light and heavy lines. The most recent update, July this year, changed the tariffs applicable to the heavy-duty brake lines.
As you can see in the bottom left section of the slide, the rate in effect from February to July 2026 of 10% under Section 122 was raised to 37.5% under Section 301 since late July. It is important to note that only 3.5% of sales correspond to exports to U.S. in this product category. The brake lines for heavies and lights did not change. Tariff remains at 27.5%. We remind that exports from Brazil to U.S. are on FOB basis, meaning the importer is responsible for paying the tariff. With the increase in tariff for brake lining for heavies, the company continues to monitor and continues competitive to the North American market. We continue to monitor this and the impact in competitiveness and the commercial flow. Currently, we reinforce there is no impact in the business.
Going to slide 11, we see the performance of net revenue by product family. The key highlights here are in braking line. Domestic market growth was driven primarily by the workshop activity and the consistent demand from Fras-le, Fremax brands with the distributors. The external market was affected by the exchange rate fluctuation that impacted the revenues for this product line. In the ride and comfort line, growth in domestic market reflects stabilization of the distribution center automation and the consolidation of the ERP system that was mentioned, factors that had impacted the first quarter. The decline in international market was driven by Argentina due to challenges regarding pricing and shelf space.
The powertrain line, the domestic market decline was driven by operation Extrema, although the volumes in this line is small, and growth in foreign market is linked to Dacomsa's operations that ended the quarter with gains driven by the gradual resumption of repairs on existing vehicle fleet. Going to slide 12, we see the EBITDA performance. Hemerson said that the quarter closed with the biggest margin in the history, 20.4%, showing an increase compared year-over-year. This was driven by the combination of favorable exchange rate for some lines, sales mix, Dacomsa synergies captured, and operational efficiency initiatives implemented in recent quarters. We had an important impact in the exchange rate in the period that reduced the cost in co-manufactured and imported inputs.
We highlight the impact of BRL 6 million due to credits, tax credits that were not recognized in their correct period and are recurring in the business, and the total recognized this year is more than normal. The expenses with sales and administrative are stable compared to the net. In the line of other revenues and expenses, there is a variation due to the reduction of line of expenses in innovation program. Going to slide 13, we see the generation of cash. Generation. Through this plot, we have an important increase with positive cash flow of BRL 308 million and free cash flow positive of BRL 170.3 million. Investments were focused on layout changes and acquisition of machinery and equipment, maintenance of manufacturing facilities, and initiatives aimed at increasing productivity and automating processes.
The final results show the reduction in financial expenses, driven especially by lower foreign exchange exposure and optimization of receivables-based financing operations. Besides this, working capital requirements decreased significantly by 33 days compared to 2025, reflecting inventory optimization, efficient receivables management, and the strengthening of operational financing sources. Moving to slide 14, we talk about the fiscal management of the company. The company continues with a balanced capital structure. The first quarter leverage of 1.3x net-to-EBITDA cash position of BRL 1.4 billion. Furthermore, the optimization profile remains comfortable with maturities concentrated in the long term, reinforcing the company financial flexibility to sustain operations and advance its growth strategy with responsibility. I will now hand over to Anderson, that will discuss the guidance and outlooks moving forward. Anderson.
Thank you Mariana, Hemerson, Mônica. Thank you, everyone that are with us. It is a privilege once again to talk a bit about our quarter. It is obvious we have an additional challenge regarding the guidance of net revenue. We do not have challenges in EBITDA margin, exposure to foreign market. The first quarter recovers in the second. Looking at guidance, we understand the activity. Actions through political stability can bring the dollar to a higher level, getting closer to the quarter guidance. We have acceleration in the [Non-English content] due to the first quarter. We have achievements in new product lines in Mexico. Synergies in Mexico generate local competitiveness that can bring new revenues. The proper moment, we believe there is the possibility to be according to guidance in our revenue. The other indicators are very comfortable.
We have a spectacular margin this quarter due to the thesis, as Hemerson said, we had a first quarter with intentional adjustments, preparing the structure and the company for a promising future. We have to follow the market trends. That is why we have the need to modernize our part distribution in Extrema. The invitation has been made to you. You can visit us at the end of the month. It will be a privilege to have you. And the update, the ERP system where we can capture more integrations of our operations. But what I can tell you is we are very firm with both synergies occupying spaces in different markets and all lines and geographies. Obviously, I have to highlight and mention Dacom sa. Dacom sa, still in a shy manner, starting to capturing the results and showing results captured as a project.
For this to become reality takes some time, but the trust in what we told you many quarters ago, that in 2026 we would start to see, we are very optimistic with the operational results, synergies, and return on investment in this project, which is a transformation for the company. Very happy with our capacity, once again, to deliver results with these growth projects. How do we see 2026 and a bit of 2027? Macro environment, we do not need to repeat ourselves on the tariff policies, tariff wars, China, U.S., Russia conflict, Ukraine, all of this has complex impacts for a global company like ours. We need to change with speed, facing the difficulties of governance that we see. The model of the company and diversity, the size it has, allows us to navigate with some tranquility. This has its unfoldings, which is natural in an election process.
The intentions of the governments for next years, this can bring some impact in the long term. Hemerson has said, well, there is a lot to come with Dacom sa. What I can say is the fronts, the purchasing fronts are well-established, but the issue of new revenues is only starting. This journey did take some time due to portfolio, go-to-market strategy, brand positioning, price. This, little by little, will start to bring great perspectives of growth. Brazil was mentioned by Mariana, very resilient. I would say there is a time challenge that has to do with pricing due to the natural dynamics of the market, but especially a tax reform will generate an opportunity of better performance of our distributors, better use of the cash, working capital after 2027.
In 2026, the majority of them will be able to work with a lower level of stock leverage to have better performance in 2027. It is beneficial to our customers. As a consequence, they will maintain the level of service in the lowest level possible, as long as it does not impact their business. A reduced stock size, this is natural to happen, but also there is a risk. If they have a higher stock in December, it can be a benefit in January. Many of them might have a hard time with supply. Overall, we see that on the long term, we understand it is a big factor in terms of possibilities when we have more availability of working capital for our customers. And the premium lines usually have the best space in the shelf.
They will reduce stock in the lower margin and lower representation lines that we are not a part of. Our portfolio is paramount for the Brazilian production, and we end up becoming stronger in this moment. Commercial line we explored, there is a recovery, gradual, not structural yet. I cannot say, the market cannot say that the environment in 2027 has to do with the motor legislation next year. We have record levels. We will supply the market. There is an improvement also regarding movement of cargo in the American market. This can benefit us. The volumes are pointing up. It is hard to say that 2027 will maintain. It is early to say we will enjoy the moment, and the second semester is probably favorable in this direction.
Regarding growth, we have a combination of organic expansion that we mentioned a lot in this presentation, and we will explore even more in the Investor Day at the end of the month. We have an active management with M&A agenda. We did exceptional work in terms of company leverage in the last 14- 15 months. It allows us to have more appetite in this direction. Respecting the controller's appetite, we will be more active looking at growth for the next fiscal cycles. We remind you, when we acquired Dacomsa, we said we needed two years to digest. We are just doing what we promised, but we are quite active again. With this, very happy with the quarter. Exceptional work in terms of cost austerity. We adjusted what was needed in terms of operations. We still are in an operational improvement cycle in the next quarters.
The company is delivering in a sustainable way results. Reinforcing that, we can have a quarter that's one a bit lower, a bit higher, but in the long term, the vision continues solid, strong, and we want to increase it organically and inorganically in the next quarters. Now I return the floor to Jéssica that will do the Q&A session with us. Thank you.
Thank you, Anderson. We will start the Q&A session now. The first question from sellside analyst Gabriel Rezende, Itaú BBA. Gabriel, we will open your mic and you can ask.
Thank you, Jéssica. Good morning, Hemerson, Pontalti, Mariana, Mônica also. I would like to make a follow-up to Pontalti's comment when we look at the horizon for the next quarters, understanding the time challenge with Pontalti, the market dynamics, unless the tariff tax reform. Understanding how do you see the pricing drivers we see in the results, Dacomsa has taken off, but understanding ex Dacomsa, how the pricing challenge should impact together with this, exploring the dynamics of competitiveness, what has changed? If it's a continuity of factors that we saw in the last quarters, how is this evolving? Thank you.
Thank you, Gabriel. The questions are already directed to Anderson. If you can talk about the pricing horizon, main drivers, and competitiveness overall. Hemerson can talk about the North American market and the dynamics of competition at that geography. Perfect.
Thank you, Gabriel. Great to hear from you. Thank you for your question. I can say that pricing is a challenge because when we have a retraction, which is natural, and we need to look at the tariff reform. Everybody wants space on the shelf, some can have more.
We see some players with not orthodox measures, and we need to fight this, where demand retracted. We have some people that wants more space. It's not different in our market, but I think that the U.S. dollar, when it's below or low, it will make us look for a repricing in different geographies, especially in exports from Brazil. We have long-term contracts. We need it in 2027. Thinking about repricing of some contracts, we have metrics and rules. This should impact more in 2027 than 2026. It's a bit of a challenge also. If we cannot pass the decreasing U.S. dollar issue that retracts some margins and some products, we cannot pass on. The competition doesn't have new factors in the market. Everybody's looking for competitiveness through investments or invest in other geographies. It's more of the same. We don't see a big difference from what we already have.
We have how to compete in this market because we have multi-exposure of plants. We produce worldwide India, China, Brazil, Argentina, Mexico. This gives us a geopolitical protection that is considerable, besides what we already mentioned, the capacity to procure, to purchase is like no other, which allows us in this line of product to have. With this purchasing power, the demand, the workshops is high. The workshop guys prefer the premium products, the premium brands. There is a survey that we follow closely. The market is gaining space with OEM, gaining space over the lower reputation brands. Given that the labor and the difficulty to repair due to higher frequency to repair, lower availability of labor, nobody wants to make a mistake, so the premium is being captured in our product lines. I hope that I answered your question, and Anderson can talk about the U.S. Perfect.
Gabriel, thank you for your question. Thank you for participating. Speaking of Mexico, Mexico is a very competitive market, a lot more open than Brazil in several fronts. The import tax are a lot lower than we have in Brazil. It is a geography where it is more simple to add. It does not mean that it is simple to manage. You have a fleet complexity that is very diverse. You have used vehicles coming in from the United States. You have vehicles, [Non-English content] that come with no record from the United States, with no continuity. We do not know if it was purchased, stolen. A lot of complexity in the fleet. This brings complexity to manage. Also, when we purchased Dacom sa, we knew about this, and the competition here is harder.
We had modest growth, I would say, this semester. Impacted due to the customer dynamics, not due to our capacity to advance and search for space. Big customers had changes in their ERPs. Also, one was acquired two years ago, has integration issues. This creates some difficulty when you want to maintain the volumes, but we are growing. The introduction of new lines has shown very assertive due to the market adhesion as a whole. When you have a premium brand that shows the capacity to service, that gives support that the market needs, the chance of advancing is huge. The hydraulics shows this very well. We advanced a lot more. We do not have the product in the shelf to offer yet. It is a pre-launch. We will deliver only October, November, but the market is acquiring in an expressive way. It is very good.
Looking at price dynamics in Mexico, it is quite stable. Aftermarket sales, aftermarket market. With the gains we have, we have tried to bring competitiveness to search shelf space. Some things are only starting. We have good news to share in Universo Frasle Mobility about the Dacomsa's advances we will have that will be paramount for future growth, but we have to do some investments to increase productivity and focus on the North American market, expanding to the U.S. also. We have very advanced in motors in the [audio distortion] project from Dacomsa. For our traditional customers also, we are able to maintain a good level of space. There is not high competitiveness with the items that we are selling for many years already. Very competitive in Mexico, in motors. There is work to be done expanding the team. We are installing structure to search for a relevant motor market in the United States.
When I say relevant, it is not market share. It is a huge market. 1%, 3%, 5% is a huge volume. We want to look at these volumes, making twice as much or 3x as much sales.
Thank you, Hemerson, Anderson.
I hope we answered your question here, Rezende.
Very clear. Thank you, guys. Thank you. Have a great day.
Our next question from Gabriel Tinem, sellside analyst of Santander. Gabriel, your microphone is open. You can ask.
Good morning. Thank you for the space. First question, geared towards external market. Something that drew my attention, the [audio distortion] dollar increase year-after-year. If you can mention how this improvement has been in heavy vehicles here in aftermarket and OEM, the pre-buy effect. Anderson talked about 2027. If you can talk about the second semester of 2026, it would be great. A second point here, looking at cost.
If you can share with us a bit more the approach regarding the revenue. You had a plan to expand in co-manufacturing in some units, Controil, Dacomsa. I want to hear more of how is this adoption and understand more about the recurring profitability looking at the future, this quarter. Or had the impact of exchange rate. These are the two questions I had. Thank you.
Thank you, Gabriel, for your questions. Hemerson, I believe you can talk about external market growth in dollars, talking about the heavy segment, the first question from Gabriel. Anderson, regarding profitability, the recurring profitability, you can mention and together with this co-manufacturing strategy, the evolution of the process. Thank you.
Very well. Starting here, thank you for your question, for your participation, always participating in the calls.
We have many good things happening when we talk about new revenues, and Dacomsa is relevant due to the fact that they can occupy an important space in blocks in Mexico. We have other blocks customers in Mexico, like Meritor, had also used a bit of the space left by First Brands leaving the North American market and the Mexican market. We left approximately 2% share Dacomsa in blocks, and we went to 27%, 30% market share in the six first months. We cannot say that this is a normal position yet because we are still understanding, researching, searching for this information. We know also that our Meritor, our dear customer, had 16% share, advanced a lot also. So in fact, today, we can say that we are a leader in brake linings in Mexico.
If I am thinking about the revenue of Dacomsa, estimate for this year is $5 million realized. Half of this has been realized already. We are in half of the year. I can think about the same dynamics in our customer that also grew, is doing excellent work with our products. We are very happy to advance there. The introduction of new lines, like the brake discs of Fremax that were sold in a different manner before, are still in an increase or growing ramp. There is still work to be done, but the competitiveness that we imposed, combining Dacom sa with Frasle Mobility, gave us a sprint, a possibility to grow in volumes in a few lines. We have seen this as very reasonable regarding what we have in regarding sales market. American market and motors were growing year-after-year, a little bit more shy, around $13 million, $14 million a year.
We're growing around 20-something percent in the first quarter due to the strategy change, as we mentioned, the Eagle project that we have mentioned. We have seen South American countries increasing volumes. North American market is buying at levels that are similar, a bit more than last year. Pontalti mentioned we have a bias of being better as the volume of trucks is realized. In Europe, we have new customers, OE, that buy more. We have the introduction of new product lines, [GeoTech], suspension, steering, that are impacting. When we add everything up, sometimes the growth strategy is not robust in one project. Several small seeds that were planted during decades that start to show up as the horizon of sales increase.
This summarized a bit, and we cannot say for sure, but we are moderate optimistic that we can continue in this bias of growth when we think about North American heavies. Brazil has difficulty regarding credit trust this moment of instability due to the elections. It's not so clear to us if it will consolidate in a robust way. We have Esteban here, if he wants to add. You're a lot more connected to the domestic market here, of how the trailer production is and trucks. You can add if you'd like, please.
Thank you, Hemerson. Congratulations for the results. The truck market and trailer market is still compromised due to the current interest rate. We don't see any meaningful change. While the interest rate levels are at this level, we don't see improvements.
Thank you, Esteban.
Looking at the second part of your question, it's great to hear from you. Regarding profitability, resilience in the next quarters, I would say that we depend on factors, obviously. Macro factors, like we had micro factors in the first quarter. We understand that the guidance, we are comfortable, and with the guidance margin, the first quarter was a little bit below second quarter at the top of the guidance. On average, in the guidance, we have the recover of additional volumes, Nakata second semester. If there isn't a big exchange rate unbalance and [instability] will be maintained like today, we're always paying attention, anticipating the volumes mentioned, especially looking at the tax reform. This can bring some issues in the short term, in terms of revenue regarding costs can be impacted. I don't see anything that's compromising, that doesn't allow us to navigate in the margins in the semester.
Still very cautious due to the macro environment that we're undergoing. Some moments of instability that are strong, we continue firm and optimistic regarding the second semester in terms of conversion, despite the revenue is the big challenge.
Thank you, Anderson. Connected to this question, Gabriel had requested information about co-manufacturing. How was our planning, if you can mention this?
Thank you for reminding us. Hemerson mentioned a specific project where we will have a mix of co-manufacturing hydraulics to Mexico. What I can say, some small production lines in Mexico make more sense currently in co-manufacturing. Others in Mexico make us want to ask more locally, and we like this mix, 40/60, for many reasons. First, to own what you're specifically manufacturing. Two, avoid the pure white labels.
We need to have the technical know-how regarding the product that we bring to the market to develop competitive sources beyond the traditional. 60% of auto parts is being made in China currently. We want to have this differential. We also want efficiency and cost in our operations that are not in the country of origin. We are paying attention. We look into this daily, challenge ourselves to have the lowest cost possible where we operate. We do not have any guidance that is purely co-manufacturing or purely our own manufacturing. We are very flexible regarding this. In the first moment, when we want to occupy space in a market, sometimes it is easier to do the investment as the volumes consolidate. High volumes also make the investment for Capex safer. This is the day-to-day dynamics. We do not have a preference for an agreement. We want the best results.
Thank you. Have a great day.
Thank you, Gabriel. Next question from sellside [audio distortion] analyst, [audio distortion]. We have opened your mic, and you may ask your question.
Thank you, Jéssica. Good morning. Congratulations on the results. I have a follow-up with the margin question. I do not want to exhaust this, but trying to understand the timing of things, talking about the exchange rate, if you have the favorable impact in the stock and raw material that you end up putting in COGS, but the natural effect that we would expect in a pricing challenge scenario that you mentioned during the call, we imagine this domestic revenue would reflect appreciated exchange rate and the margin would normalize due to the accounting issue, the marriage between unitary cost. Just understand the timing. Do you see at the end a normalization in the shelf product, in the shorter cycle of production where you have a quick marriage of price and market dynamics?
It is not so clear. Pontalti mentioned the renegotiation of contracts more for 2027. I do not know when we would see the marriage between unitary cost and revenue impacting the results, especially in the short cycle products, looking at the exchange rate dynamics. And another, more to clarify this profitability issue and the exchange rate issue with the domestic market. Second point. We see the leverage continuing to happen. It should not be very far from one time by the end of the year. Yet at the same time, you have an important year, 2027, capturing synergies and conclusion or continuity in the integration of Dacom sa process.
But thinking about what we can see in terms of allocation of capital, when we have the Dacomsa integration scenario, M&A, [inaudible] should be left for later and you have an out, or should expect the company is comfortable running unleveraged levels. Thinking about how you can look at leverage, buyout, M&A, and capital allocation. These two points. The exchange rate accounting issue that you will see at the end, and capital allocation leverage.
Thank you, Lucas, for your questions. Anderson, since you were already answering, you can clarify profitability, especially connected to the domestic market. Hemerson can comment regarding the unleveraged payout.
Thank you, Lucas, for your question. When we do not have exchange rate oscillation, this will stabilize margin. Inflation is under control currently. We should have stable margins. In Brazil, specifically, more stable. What happens in the first quarter, we have an important decrease in the exchange rate.
First thing that you have, you have a mild reduction because the cost are looking at the previous cost. In the second quarter, we have a normalization. It is important to mention a few words. We are serving with a price that is leveled the second semester, especially in the Brazilian market, navigating margin, that is very important. Notorious at Dacomsa due to the synergy. This is very important. In the Brazilian market, when you open the gap a lot, you have the competition working, you have space to gain market share. You need to defend with price. It is not the moment, it is not a fact. We are not doing this. We saw in previous cycle, when you have higher profitability above all, with a dollar base, you have to make some movement. It is not just imports. A lot of our commodities have a marked dollar.
Oil, rubber, packaging, all of this is associated to the dollar and oil that goes against this. We have inflation pressure in the second semester also. We need to pass on this inflation pressure with oil and look at the exchange rate oscillations. Second quarter brings a normalization of margins and prices. Let us see the inflation dynamics and competition movement that will demand movements on our side. I would like to stay with quarters like this one. The world is not like this. We have a lot of companies in the market, macro and micro, that can affect. We are very comfortable that we will be with a consolidated margin in the year inside the guidance, far from the lower levels or threshold. Thank you for the participation. Thank you for your questions.
Just to add regarding Anderson's comment, we have talked about the synergies a lot. There are things that are in a result composition context that we can have opportunistic concepts and others are legacy. The fact that we are performing in a better competitiveness in Mexico with products that we sell, the fact that we are introducing new lines, these are cycles that create synergy not only in Mexico, but in the Frasle Mobility ecosystem. When you import more from Mexico to Brazil, brake pads, you leave margin in Brazil and Mexico. You buy master cylinders from Controil and you improve Mexico and Brazil. When you combine the purchasing volume, Dacom sa, Fras-le, Controil, you have a price that permeates all units. This is legacy. We do not lose this due to exchange rate and others. We are very happy that this is happening. We had the security of this, but the market looks at the short term.
It wants to see every day, but it takes some time. You start negotiating, do item validations, thousands of items. It takes time. You put in an order, it takes time. You have stock, you have to consume the stock, and you look at the average price. It takes time to see this, but it is happening on the positive side, and it does not have to do with exchange rate and opportunity. Fundamentally, we are working the same way we work. This will become legacy. We had good quarters that stayed and changed the level of the company. We are living this moment again. I am saying this since the Dacom sa acquisition. It is structuring acquisition that will help us to grow and keep profitability levels. Going back to your leverage question, we maintain an active agenda, Pontalti mentioned this, regarding M&A.
We are not 100% very much connected to Dacom sa performance, but we do have space. We are working on projects that will bring to us possibilities to maintain our growth rate. Reinforcing, we have the choice to be a company that grows. We are compounding company many aspects. This was a challenging year, many ways. Operational issues like Nakata, exchange rate is something that we did not forecast, have low levels like we had in the first semester as a whole. But we are a company that seeks to have a growth level.
We do not hear you. Are you back? Is it back?
Oh, sorry. It is an issue with the connection. We are a company that wants to maintain a good growth level, and this goes through having an active acquisition agenda.
We have a lot of space to occupy in product lines that currently we do not know how to occupy. I can tell you we are working on things. I do not know if in 2026 or in 2027. No closing will happen this year because you do not have the time to make the normal cycle. But I can guarantee that we will bring a growth base, better revenues, more synergies, and this will impact the circuit, more possibility to improve the net profit and appeal of the company. The fact that we leverage has to do with the growth rate maintenance. There is still a lot of opportunity. This is the flow that we want to guide the company and the impacts that it has in the margin.
Great. Very clear answers. Have a great day.
Thank you, Lucas. Thank you for your participation. Our last question comes from Gabriel Frazão from Bank of America. Gabriel, your mic is open. You can ask your question.
Good morning.
Thank you for the opportunity. One last question about Dacomsa, specifically the increase in synergy going to BRL 15 million - BRL 24 million that you mentioned at the beginning of the call. If you can hear from you, what surprised you in a positive way since you acquired the company? The main leverage synergy was higher savings in cost, or you identify more opportunities to launch more products in Mexico with a competitive market with the leaving of First Brands. This one is for you, Hemerson.
When we talk about Dacomsa, I am excited. I am in Mexico. I get some tequila and tacos. We are very surprised in many aspects. Thank you for your question, your participation. One thing, especially, Dacomsa, we knew it was a jewel. It had a very high reputation in Mexico, space to grow, to advance. We had this very clear since the beginning.
[inaudible] did the best they could with the company. It was not their core, talking about auto parts, selling auto parts, making this grow. It was a side business for them. For Fras-le, Dacomsa is 25%-30% of our revenue. It changes completely the focus that we give, the focus to the operation. What surprised us? To find several opportunities in terms of process, plant, quick improvements where we can implement quickly the change. Leaving an importing company to a company, a co-manufacturing company like we did, brought a lot of synergy. It shows, obviously, if we look at the results that we already have. It talks about our business case in the sense that the cost area, cost adjust and expenses, is a lot better than we expected due to the opportunity we explored together with Frasle Mobility.
The focus on new revenues in the North American market, we forecast to have twice as much the motor parts by 2030. Why? Because we focused in the structure, we are investing in this. The other areas, yes, we had benefits, especially in brakes, in heavies, due to First Brands leaving. But First Brands didn't act in motors and other segments. There are several good things that we are doing that are leveraging. From the point of view of what we found, we have an executive team that's very senior, very committed. With this change, they were energized, and they saw how good it is to be a part of the group, Frasle Mobility, Randoncorp. Their analysis changed regarding growth. We just promoted a director from Dacomsa that will be a Global Director of Supply Chain for Frasle Mobility.
We have a structure in China with Dacomsa people in China. Very positive things for the team there to grow. That's it. I invite Gabriel and everybody here. We are going to bring new things, Dacomsa synergies in our Universo Frasle Mobility. We are preparing this material so you can understand how we integrate a company. Thank you so much.
Thank you, Hemerson. Super clear. Congratulations on the results once again.
Thank you. Answer one last question. Jonathan will have the space. He is from JP Morgan. One last question, Jonathan, your mic is open.
Thank you, Jéssica. Good morning. Hemerson, looking at the P&L, the tax alíquota is a bit higher than expected, around 33%. Can you say that there is something specific that impacts? How do you see this line by the end of the year?
Thank you, Jonathan, for your question. We had one non-recurring one-off event in the alíquota for the tax. There was a change in Dacom sa unit. There was an office change that was doing the tax calculation. There was a deferred that generated a higher alíquota in this quarter. Our expectation during that year, it should be around 22%, at most 25%, the alíquota that the company has been working with the last few years. There was one-off, but nothing that would change the structure going forward. This one-off should be deleted previous month. The change in the office, there was issues that were corrected. Service center that is shared at Dacom sa. Since March, we are doing this from a dedicated center. We found some adjustments that were done. This will be part of the synergies in Dacom sa. We have better structured processes going forward.
It is very clear. Congratulations for the quarter.
Thank you, Jonathan. Now we finish the Q&A session. I will pass the floor to Anderson for the closing of the video conference.
I will be brief as it is almost lunchtime. First, I would like to thank you. We just received. We were, me, the Board, and the team, we received the [inaudible] . Thank you to the analysts that recognize our work. We try to do our best to make you informed, as transparent as possible for your analysis. It is great to see you close to us, this recognition. Be sure we are very happy to receive this recognition. We have closed the quarter very positive way. Our commitment is with the long term. The thesis is solid. The unleveraging happened constant way. Generation of working capital, operating cash flow, dynamics of business continues stable. The company is very stable. The thesis is stable.
Now with financial muscle, that is more important, allows us to dream once again, thinking about new flights that are very important going forward. Dacom sa didn't close the synergy. Nakata didn't finish the synergy. But we have resource structure to bring and incorporate new businesses to the thesis. We have a bigger dynamics, more comfortable for new investments without overlooking the macro. We do have business challenges going forward, looking at competitiveness. So what is ours is well defended by the team. Thank you for one more conference. I hope to see you in Extrema. A warm hug to you all.