Good morning, and thank you for standing by. Welcome to Intelbras conference call to discuss the fourth quarter of 2020 results. Today with us, we have Mr. Altair Silvestri, CEO, Mr. Rafael Boeing, CFO and IRO, and Mr. Bruno Teixeira, Head of IR. We would like to inform you that during the company's presentation, all participants will be on a listen- only mode. We will then begin the Q&A session when further instructions will be given. Should you need assistance during the conference, please request the operator's help by pressing star zero. We would also like to inform you that the company's management will be presenting in Portuguese with simultaneous translation into English. This event is also being broadcast simultaneously over the internet via webcast.
Before proceeding, we would like to mention that forward-looking statements are based on the beliefs and assumptions of Intelbras' management and on information currently available to the company. They involve risks and uncertainties because they are related to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that general conditions related to macroeconomic and industry conditions and other factors could also cause results to differ materially from those expressed in such forward-looking statements. I will now turn the conference over to Mr. Bruno Teixeira, who will start the presentation. Please, Mr. Teixeira, you may proceed.
Thank you very much. It is a great pleasure for me to be with all of you here today. Today, March 22nd, Intelbras celebrated its 45th anniversary, and it is a great pleasure for us to be here for the first time disclosing our results in a conference call. The fourth quarter finished the year 2020 on a high note. The year was very important in terms of results for the company. It was a very challenging year with all the situation created by the pandemic and all the healthcare measures that we have to implement in terms of our business. As was said earlier, today with us, we have Mr. Altair Silvestri, the CEO, and Mr. Rafael Boeing, CFO and IRO. They will actually be available to take any questions you may have about the 4Q 2020 results. I am going to start the presentation.
The presentation is available on the website. I am going to move over the slide so that you can see the details about the results and all the topics that we want to present to you in our conference today. Starting on slide four, I would like to talk about the highlights of 4Q 2020. There are two points that are important here and that should be highlighted. Two events that were considered and recognized in the fourth quarter that we would like to clarify, and then we are going to talk about the other financial and operating indicators. In February 2021, the Institute for Independent Accountants advised that the financial credit should be credited as other operating income or expenses net and not a reduction on the taxes on manufactured products. They should become other operating income.
Here you can see the table showing how it was considered before, amounting to BRL 2.2 billion in net income in 2020. Now with the new way to account for this credit, it would be BRL 2.1 billion. You can see that there was a drop in 3.8% in our net income. Because it was recognized only in the fourth quarter, it was recognized as such, it has an impact on the fourth quarter, and that is why we wanted to highlight this point. In the presentation, you are going to see that we made other analysis related to this income and the financial credit. Also in October 2020, we won the lawsuit related to the removal of the ICMS tax in the tax base for PIS and COFINS, and that generated financial and operating results, and I am going to talk about those effects over the presentation as well.
In general, our fourth quarter 2020 was excellent. Our net income was BRL 671 million, with 39% more than the fourth quarter 2019. Here I am including the new way to account for those adjustments. Our EBITDA was BRL 158 million, 156% more year-on-year, and the net profit was BRL 206 million, 190% more year-on-year. That led us to a pre-tax ROIC of 53.3%. As I said earlier, all of those numbers were affected by those two events that I mentioned before. Now, these are the adjusted figures. Our net income would be BRL 755 million, 57% more year-on-year. The EBITDA is BRL 106 million, 70% or almost 71% larger year-on-year, and the net profit was 50% higher year-on-year with BRL 170 million. The adjusted ROIC is 46%, which is in line with the historical numbers for the company.
I would just like to mention that those numbers were calculated based on the adjusted net income. Our EBITDA annual evolution was very significant. We started with 11% in 2019 to 16% in 2020, and that is the adjusted number. I would like to highlight that part of the BRL 409 million EBITDA has a non-recurring effect from the win in that lawsuit that I mentioned. I would also like to highlight the fact that the margins throughout the year grew because of the pass-through of costs that happened throughout the second, third, and fourth quarter 2020. The costs absorbed the high FX exchange and our operating margin was large over the year, and the expenses were under control, lower than the income growth. Towards the end of the period in the fourth quarter, we saw an EBITDA margin that is more in line with our historical numbers.
Now I would like to talk about each segment. This is a summary of 2020. Since this is the first conference call that we hold, I would like to highlight the fact that we have three segments. The first one is security with CCTV, hardware, and software for image monitoring. We also have security alarms, fire alarms, and access control in the security segment. On the communication segment, we have optical fiber with switches and routers, radios, unified communications as well. Here we also include smart boxes that allow us to work with TV communication. We also have the energy segment with on-grid and off-grid solar generators with UPS units, power supplies, and residential automation as well. Looking at the annual results, the net income for security grew by 14%, 13.9%. This number considers the new accounting method, it amounted to BRL 1.1 billion in net income.
The gross margin was BRL 418 million with 36.5%. In the communication segment, the growth was 34% in 2020 with BRL 772 million in net income and a gross margin of BRL 230 million, accounting for about 30% of the net income. The energy segment had BRL 214 million in net income with an 86% growth and a gross margin of BRL 52 million, accounting for 24.3%. Now I am going to present the detailed results for the fourth quarter per segment. Starting with security, which accounted for 55% of our earnings in the fourth quarter 2020. You can see the growth in all categories here with a very strong sell-out in the fourth quarter. We are leading a technology transformation for residential access control, especially when it comes to Wi-Fi gate keeping and also digital locks. The recurring revenue is now starting to grow significantly.
Over the year, the Seventh company, which is our controlled company, has been delivered great results in the fourth quarter and in the entire year 2020. In the table at the bottom, you can see the comparison with the third quarter 2020 and the fourth quarter 2019. Here you can see the different comparisons. We can see here that there was a 48% growth in net income in comparison with the fourth quarter 2019, and 21.8% quarter-on-quarter. There was a slight drop in gross margins, which we already expected. We already knew it would happen because of the stabilization of costs. Even though we pass on costs, we reached a level for margins that is closer to our historical levels. I would like to highlight the significant increase in quantities. Our security segment delivered more products, it also grew in earnings, it also grew in terms of gross margin.
Going to the next slide, I would like to talk about the communication segment, which accounted for 34% of our results. I would like to highlight the strong growth in the optical fiber business, which is a business line that is very close to the regional ISPs. That line is very important for us. The ISPs were very agile during the pandemic. Since many people started working from home, they had to deliver faster internet connections to those consumers, that happened also through optical fiber. That growth was sustained in the fourth quarter. I would also like to highlight that this is the first business line that we had at Intelbras. This was how Intelbras started, it is still adding new income. The demand for this segment and all its categories is still very high.
At the bottom, you can see the table comparing the gross profit and also our revenues, comparing the fourth quarter 2020 to the third quarter and the fourth quarter of 2019. Here we have the adjusted numbers, including those financial credits. You can see that there was a 66% growth year-on-year, with BRL 257 million in revenue and a gross margin of 30.7%. We also delivered significant growth in terms of quantities with 29.2% increase year-on-year and 11% more quarter-on-quarter. Now moving on to the energy segment. Here we have our two most recent business line, accounting for 11% of our net revenue in the fourth quarter 2020. I would like to highlight the local production of UPSs. We have a very competitive line here as it is produced nationally.
We started the production in the State of Santa Catarina, and as the Tubarão factory is finished, we are going to migrate that production to that unit. Solar energy showed a very significant growth throughout the entire year and also in the fourth quarter. I would also like to highlight the high demand for smaller and medium energy consumers, which is our focus. Solar energy has been delivering a great growth in this segment, in this business line. Now at the bottom, you can see the same table comparing the fourth quarter with the new accounting method and the adjustments so that we can compare our figures annually and quarterly. We had BRL 81 million in revenue, and the gross margin was BRL 21 million, 72% higher year-on-year. The margins are in line with what energy has been delivering with 26.6%.
Now I would like to talk about our cash position. Having a strong cash position is an assumption of ours. We are always concerned about having a very robust cash. We started with BRL 401 million in cash in 2019 to BRL 753 million in December 31st, 2020. Operationally speaking, we would already add significantly to our cash. However, in the beginning of the pandemic in April and May, we made a decision to strengthen our cash so that we were able to better weather this crisis caused by the pandemic, and so that we would be able to take preventive measures to help our sales channel financially. We didn't want that channel to deteriorate. So we strengthened our cash, and we had to add the financing that you can see on the chart. We didn't have to use the resources from that financing.
It is still in our cash by the end of 2020. The second point I would like to highlight here was a decision that we made in the second half of 2020, reducing forfaiting operations. I believe that we have already talked to many of you about that decision, and that decision will start having impacts in the first quarter of 2021 and in the first months of the second quarter of 2021. So the cash that you see now, which is very robust and strong, is going to be reduced, and it is going to reach the more appropriate levels for the company's operations. Lastly, about CapEx. I would like to highlight the comparison with the year 2019. In 2019, we invested in acquisitions and we invested in industrial expansion. But in 2020, we didn't invest so much in those two points.
But we started in the fourth quarter investing again for expansion with the new Tubarão factory and the expansion of our factories in Minas Gerais and Manaus. The CapEx for 2020 is in line with our historical numbers, with a CapEx that is geared towards expansion and maintenance. To wrap up the presentation, because I would like to give you time for questions, we have five highlights here for our perspectives in 2021. The first one is that we want to finish 2021 at the same level of growth as we have been delivering. We are optimistic about our actions, about our strategies. We believe that they are going to reap great results in 2021. However, we can see some uncertainties about the pandemic and also some lockdown decisions made by the state governments that may affect momentarily our business in the different regions.
We have been paying attention to that. Now, since the pandemic is still going here in Brazil, we are making the appropriate decisions to keep our business going and supporting our distribution channels. Also, we are going to use BRL 460 million for organic and inorganic expansions over the coming 18 months. We are going to see more details about that in our projections and our next conference calls. You are going to see that number being used over the year. Now, I would like to talk also about supply chain and the impact of the pandemic on the supply chain. I would like to highlight the struggles that we have had in terms of the supply of chipsets, which is challenging to our logistics, but we have been delivering the planned quantities to our factories. We already had that problem in 2020.
It still continues in the first quarter of 2021. This is one factor that we would like to highlight and share with you. Also, we would like to mention that we are working very efficiently on this, and we are delivering the planned quantities, and we are also delivering the produce to the final products and the orders that we have. We are able to, and we have been able to meet our plans. We also have new product releases that will strengthen our current business segments. For example, in access control, we have new products for gate automation. We also have new launches coming in the IoT and home automation business line. In the first quarter of 2021, we are going to see those new products coming out and being made available to our consumers.
We are very optimistic about the power that these products will have in terms of increasing our presence in the different segments we work with currently. These were the points that I would like to mention in this presentation. Over the next 30 minutes, you can feel free to ask questions through the webcast and through dial-in as well. Now I would like to turn the floor over to Greg. He will explain to us how to ask questions. Thank you very much.
Thank you very much. Now we are going to begin the Q&A session. If you have a question, please press star one on your phone. If at any point your question is answered, you may remove yourself from the queue by pressing star two. The questions will be taken in the order they are received. We do ask you to pick up your handset to provide optimum sound quality when you ask your question. We are going to start with the webcast. The first question comes from Mr. Caio. Good morning. Thank you very much for the presentation. The energy sector grew by 86%. Could you specify the growth for the on-grid and off-grid solar energy business lines?
Mr. Altair, would you like me to take that one?
Yes, absolutely. Go ahead.
We are putting the two business lines together. We are merging them to make things simpler in the presentation of our results. The growth for the year in the energy segment was 3 x as large as 2019. I do not know if I correctly answered your question, but the results for 2020 were 3 x as great as 2019.
The next question, also from webcast, comes from Mr. Leonardo Lema. We would like to know about your M&A perspectives. Do you think you are going to start operating in the cloud storage segment?
Hello. Good morning. Yes, we do have a plan for that. We have a very strong M&A pipeline as we presented in our roadshow. The first announcement will probably come over the next days. Indeed, the investments in cloud storage and also in the sales of cloud storage of images for recurring revenue, it is a plan that we have. We are investing in that. We are already in a process of discussing the acquisition of a company precisely for that purpose, and it is a very important plan that we have for 2021.
The next question comes from Mr. Rodrigo. I would like to understand the impact of the PIS/COFINS tax and the informatics law on the results for 2021. Should we expect to see those results and those impacts in the 2021 results as well?
There was a significant impact in 2020 because of a lawsuit. In the lawsuit, we were challenging the PIS/COFINS tax, including that tax in the calculation base, and we won that lawsuit, which brought the PIS/COFINS tax amount down. That decision is final and unappealable. The Brazilian Supreme Court actually analyzed that matter in 2017, and since 2018, we started applying that new calculation. From now onwards, we are not going to see any effect about that anymore. That effect is just related to the impacts that we had since the beginning of that lawsuit in 2017, and that effect will no longer impact our results.
On the informatics law, in terms of how we recognize the financial credit, as we report our numbers over the quarters, we are going to adjust the previous quarters and the previous years so that we do not have to present the two results as the base quarter and the official quarter. We are always going to adjust the numbers so that we have only one way to account for and recognize the financial credit, and that is going to help us make our presentation more simple. The impact of the financial credit has no impact on our earnings. It is just a different way to recognize that revenue.
The next question comes from Gustavo Fabricio with RSP Capital. Can you explain the effects of foreign exchange on your results? You had an inventory that was purchased at a lower foreign exchange, and what is the impact of that in the margins? Can we expect margins to go down over the year?
In 2021, especially in the first half of 2020, when we had a very strong FX depreciation, that drove our prices up. We adjusted our prices, and naturally, the cost of the inventory is not the same as we have. It does not directly reflect the current FX. The margins of 2020 were larger in comparison with our historical numbers. Our perspective is that we are going to go back to the historical levels of our margins. The costs are now, at this moment, in line with the prices, with the updated prices.
Ladies and gentlemen, please stand by as we collect the next questions. The next question comes from Mr. Mauricio Fernandes . I would like to know if the 10% reduction in the import tariff for electronics creates any impact for Intelbras?
Almost no impact, really. Most of our competitors are affected the same way that we are. Most competitors manufacture the products here in Brazil, and they import the raw materials. The impact from that in terms of competitiveness is very little. It is just 10%, and that really causes a drop of 1% in our taxes. The FX variations are the factors that most impact prices. That 10% reduction simply goes away when we adjust prices because of FX. The influence of that is nearly zero on our prices and on competitiveness.
As a complement, Mr. Altair, if we look at those who were affected by that reduction by the products, you can see that the effect is very little. There are very few products that we sell and that are impacted by that reduction. We should also remember that, as Mr. Altair said, the impact is marginal.
Yes, that is good you remembered that. There is just a limited list of products that are impacted by that reduction.
The next question comes from Mr. Marco Antonio. With the new factory in Tubarão, do you think that the margins for the solar energy business could exceed 30%?
The factory of Tubarão is not going to produce energy products. It is going to manufacture UPSs and chargers and other products, but it is not going to work with solar energy. Solar energy products are made here at our headquarters. As for the margin, I do not know, maybe Rafael could clarify that point.
It should be a little bit south of 30%. We expect to grow and keep the historical margins, but it is a little bit less than 30%.
As a complement, Rafael, solar energy is now gaining scale, and with that come two benefits. First, we can negotiate more when we purchase the materials. As we sell more, we can get better deals and better costs, and we can improve our prices to improve our competitiveness. Even though the gross margin is tighter, the EBITDA margin for the solar energy business is in line with the other businesses, since the expenses will not grow in the same proportion because of the gains of scale. Solar energy has been contributing a great deal to our earnings.
Bruno, since the beginning, as many of you know, because we talked about that in our roadshow, we are very confident in the solar energy business because we are going to work with small and medium-sized projects. The competition is not so tough as it is in larger projects, and it is not our strategy to work with larger projects. We want to work in smaller projects using our existing sales channel. The margin may be lower, but the volume will grow. Also the expenses will not grow in the same proportion, which will bring the margins to the same level of the other segments.
The next question comes from Mr. João Tobias. Good morning. I would like to know more about the dividends policy.
Our dividend distribution policy works like this. We distribute a little bit more than 25% because we are working with a 30% rate on net income, and we distribute dividends every six months. We distribute 30% in the middle of the year and the rest at the end of the year. Now, for 2020, we have already anticipated the distribution because of the one-off results that we had in terms of recovering that substantial amount related to the PIS/COFINS lawsuit. We filed that lawsuit in 2007, and the results impacted backwards until the end of 2002. In January, the company already anticipated these dividends. Now starting in 2021, we are going to continue our traditional distribution method. As we close the first half of the year, we are going to distribute dividends related to 2021.
The next question comes from Thiago Albuquerque. The FX is still depreciating in the beginning of 2021, and the company has already adjusted prices to restore the gross margin. If that is the case, was there any adverse impact on demand?
Yes, we have adjusted our prices. Since 4Q 2020, we changed our financial policy. We now hedge all of our imports. Because of that, we can minimize the impact related to FX, and therefore we do not have to adjust our prices so much. So during this period, with the FX depreciation, that was very important. Hedging the imports was very important because it decreases the need to readjust our prices because the average cost of our inventory is protected. So our liabilities are in line with the average cost of our inventory. Our liabilities is no longer unprotected, and if that were the case, we would have to adjust prices.
As the average cost goes up, we also adjust our prices upwards. We should also talk about the impact. We adjust the prices every month according to the FX, and we do not see any impact on the market because of that. Our sectors are based on dollar prices. Everything is imported. The different components, they are imported, so the sector is really accustomed to that situation. So we do not see any impact on the demand side when we adjust prices. Just one more thing. If we depended on prices, on the retail, of course, on the major retailers, that would be tougher for us in terms of prices. But since we do not really depend on the major retailers, we depend more on smaller retails and corporate channels, things are easier for us in terms of adjusting prices.
Now, the next question comes from Mr. Jose Roberto. What is your expectation in terms of launching new products?
We are already working on it. We are investing in new products, and we are already finishing some of the projects. We are working to add revenue with the new products. We do not want the new products to cannibalize the existing ones. We want to work with projects that will meet the demand from the customers who really have that need, and we are working very fast to meet those demands.
The next question comes from Fabio Rosenfeld. I have a few questions. The first one is related to the inventory per segment. Is there any shortage of components and inputs for the factories? What about the logistics pressures? What can we expect in terms of your perspectives for the future in terms of supply?
We are struggling with shortage in terms of supply and higher costs of freight, and we have already absorbed that additional freight cost that comes from the higher price of containers. Those costs went up significantly, but we have already absorbed those increases. We also have problems in terms of the supply of chipsets. It is a global challenge, as Bruno said, and we have been working very hard since last year. We were able to supply our plants because we adopted a strategy to mitigate those effects, and we adopted that strategy in September or October 2020, and we are purchasing more components than expected, than we had planned. We have a plan, and we are purchasing in excess of that plan so that we are able to supply our plants, and we are able to do that. Of course, we are struggling.
The situation is challenging, but since we are working to purchase components in excess of what we had planned, at least we are able to supply our factories, our plants with the materials they need.
The next question comes from Gustavo Fabricio. Energy is a segment that is growing the most. Can we expect revenue in 2020 to double in comparison with 2020?
I do not know if we can give you that information. We have very aggressive growth plans for this segment, but I do not think we can give you any numbers. As I said earlier, we are aiming higher than what we expected during the roadshow. The expectations are very good in terms of solar energy. The first quarter is going well. I believe that our expectations are very positive. We are very happy about the strategy that we chose to follow. We are very happy about the performance of our resale channels in the medium-sized and small-sized projects. We are very happy about the investments that we made in this segment.
The next question comes from Mr. Caio. Are you going to open new plants in the Northeast region since it is such a good region for solar energy?
Not new plants, but we are now working on having a distribution center in the Northeast so that we are able to faster meet the demands there, especially in terms of solar energy. We are going to have a competitive edge in the region, so that is what we are working for now.
The next question comes from Mr. Frederico. Do you expect to have larger domestic productions in the future, and what would be the impact on margins? If you do expect to produce more nationally, in what business lines would that be?
We want to nationalize 80% of our productions. We still cannot produce nationally some specific products that complement our portfolio, and for which we do not have so much scale, and we do not intend to produce those products nationally. in 2020, we brought many of those products home to be produced here in Brazil. In some cases, there are products that are much cheaper when they are imported, so it would not be worthwhile for us producing them here, and they are the solar panels and the inverters. It is not worth bringing those productions to Brazil because of the incentives, because of the fact that we sell kits, and we do not have any taxes. We do not have to pay any taxes on the import of those products.
The next question is, good morning. The financial credit in 2021 would be similar to 2020, and it is going to be accounted for over the year or only in the last quarter of the year?
It is going to be in line with the same year proportionally, and we are going to account for it every single month. We calculate the result and the impact each month. We account for it each month. The offset will be accounted for at the end of each quarter. We are calculating that impact every month. Since we are going to now have a full year with this new calculation, as the results are compared with 2020, we are going to do the same calculation for the 2020 results so that the comparison is more straightforward without any impact in the comparison caused by that new method, the new calculation.
The next question comes from Maria Tereza with Santander. Good morning. Congratulations on the great results. Seventh's performance was exceptional. Can you give us some more color about their operations, and can we expect the same recurring revenues from the remote monitoring business line?
The revenues coming from Seventh will continue at the same levels, and the investments in recurring revenue is one of our strategies, and we are going to make acquisitions soon, and they will bring a very significant volume for that business line. We also have other projects that are geared towards recurring revenue, for example, hardware and software. We believe in that strategy, and we are investing in that strategy.
The next question comes from Mr. Pedro Vaz. In the long run, you have been consolidating your presence in Brazil. In the future, do you intend to expand to other Latin America countries?
Yes. Of course, we are consolidating our presence here in Brazil. There are many challenges ahead of us in the coming four to five years. We already adopted a strategy for other countries, and we have been working on exports for many years, and sometimes we do great, sometimes we take some steps back. Now strategically, we decided to focus in other countries the same way that we focused on Brazil, with the same way to work with the channels, providing training to our resellers. We want to do in those countries exactly the same thing that we did here in Brazil. The first country was Uruguay. We started a few years ago there, and it is going great.
Now we are discussing the possibility to go to other countries, for example, Argentina, Ecuador, or Colombia. We are going to take steps. We are going to work step by step to establish ourselves in foreign markets.
The next question comes from Julia Rizzo. We would like to know more about the bill that can reduce incentives for solar energy. What would be the impact of that on your business?
We always consider that possibility, but it is not so concerning to us. Today, for the projects we work with, which are small and medium-sized, if we were working with very large generation plants, that would be a problem for us, but that's not the case. For those major power plants, everything they produce will be taxed. Since we work with small projects, with rooftop solar panels, the consumers already consume the energy produced, therefore, there won't be any surplus to go to the grid. If that happens, if there's a surplus, it may be taxed, but the payback will come in about two or three years. If there are taxes on that surplus, it may increase a little bit, but still, the payback will come in just a matter of few years, that is a great investment. That represents a great investment for consumers.
The next question comes from Mr. Rodrigo. Why are you decreasing the forfaiting operations?
We started doing that many years ago, over 10 years ago, when the company started to grow because we wanted to have stronger working capital. Over the years, that also exposed us to FX variations because our dollar payables were exposed for six months. Also, over the years, we didn't hedge our imports because it was always very easy for us to pass on costs to our distribution channels. Since last year, with the FX volatility being so great as it was, we decided to change our policy. We reduced the term in half for our dollar payables to decrease our exposure. We started hedging our imports to protect our FX liabilities in line with what we have in our inventory. That was the reason. Also, we decided to do that because we wanted to strengthen our working capital.
As the company started growing, we started generating more cash, we were able to decrease the forfaiting operation that we have put together in the past with now a smaller period of dollar exposure. We also did that to manage prices more easily in all of our segments. We have 60 categories. We have 60 groups of people focused on each segment, by doing that, it is easier for us to manage the prices. We don't have any surprises related to FX variation, so things will be much more stable now.
The next question comes from Mr. Antonio Prado. How much of your sales team or channels have already been trained to sell solar energy?
There are resellers that buy energy solar products every month, I believe that there are 80,000 resellers that buy those products every month. About 3,000 of them have already been trained to sell solar energy. We believe that we are going to reach 30,000 trained resellers. Of course, the pandemic came in the way of the acceleration of the training, but still, even so, we started ramping up the acceleration again. It is our target to reach at least 30,000 resellers, I believe in 2021. I believe that in 2021, we are going to see a significant growth, and we expect to reach that number over the next three years, 30,000 resellers.
Now we are going to move to the dial-in questions. The first question comes from Welliam Wang from AZ Quest.
Hello, good morning, and congratulations on the results. I would like to know more about the business profitability. For the past two quarters, you have been delivering over BRL 100 million. Since you have positive perspectives for this year, including solar energy, can we expect to see a profitability level that is in line with what you have already delivered so far?
Rafael, would you like to take that one?
Well, I can start, and then you can complement my answer, Rafael. The profitability in our strategy for the past years, and maybe that was the reason why we grew so much, we always want to increase profitability. That is related to passing on costs so that we can keep the same profitability levels. So we increase productivity, we sell more, and we pass on costs to keep the same level of profitability. So I expect that we are going to see the same level of profitability that we have had over the past years.
There were some distortions in terms of EBITDA for 4Q 2020 because of FX variations, and the cost did not increase at the same pace as prices. But we want to keep always the same profitability level that we have had over the past years. Now, Rafael, would you like to complement my answer?
No, that's perfect. We expect to keep our historical numbers. Some people say that solar energy has lower margins, but as Bruno said, the expenses are also lower in that segment in solar energy. Because of that, we expect to maintain the same profitability levels that we have had so far.
Okay, thank you very much.
The next question comes from Maria Tereza Azevedo with Santander.
Hello, good morning. Congratulations on the great results. My question was about Seventh, actually, and you have already answered that, but I have a second question. I would like to know, what is your opinion about the competition, especially now in the first quarter? Do you think the competitors are struggling more because of the disruptions in the supply chain? Do you expect to see a higher competition pressure in some segments?
Well, when it comes to the competition and the pressure from the competition, we don't really compete. We believe that the competition is on the same level that we are. We have been able to fulfill our plans. Of course, we could be doing more if it weren't for the supply chain problems, the chipsets supply chain problems. But as I said, we are aiming higher. We are purchasing more so that we are able to fulfill our plans. So our concern is not really about the competition. Our concern is related to lockdowns. We're not so concerned about the economy because the economy suffered last year, and despite that, we continued growing, but lockdowns are negative. Of course, that affects only a part of our business because our resellers continue working during lockdowns.
Okay, thank you very much. I have a follow-up question. In the fourth quarter, you have a very strong demand, and part of that demand may not being met. Do you think that you are going to have a stronger first quarter 2021 because of that demand that was not met?
Well, maybe if it weren't for the shortage of components. The demand tends to remain on the same levels. Of course, things will depend a lot on what is going to happen over the next months with the lockdowns. There's a lot of uncertainty about the level of restriction of the lockdowns in the coming months, and that may pose challenges for us. But we have been able, as I said, to fulfill our plans.
Okay, thank you very much, and congratulations on the results.
With that, we conclude the Q&A session. The unanswered questions can be forwarded to the RI team at ri.intelbras.com.br. I would like to turn the floor over to Mr. Altair Silvestri for his closing remarks.
Well, thank you very much for attending our conference call. I would like to thank everybody that helped us in our very first earnings conference call after the IPO. I apologize if our performance was not so good in this first call, but we are going to improve for sure. I would like to highlight the point once again that despite the pandemic, despite the challenges related to shortage, we are very confident. We have great projects in our hands, and we are working to achieve even more than we have promised analysts before the IPO. Despite everything, we are very confident. Of course, challenges will come, and we are going to work hard to overcome them. But we are very excited about the new projects, the new segments that have a great market for us to expand.
I would like to thank you once again and see you in our next conference call.
That concludes Intelbras' conference call. Thank you very much for your participation. You may disconnect now. Have a good day.