Welcome to MAHLE Metal Leve's earnings call for the second quarter of 2026. This presentation is being recorded and may be accessed on the company's Investor Relations website. The presentation is also available for download there. We would like to inform you that all participants will be in listen- only mode during the company's presentation. After that, we will begin the questions- and- answers session when further instructions will be given. Before proceeding, we would like to underscore that any statements made about the company's futures are simply the management's expectations, beliefs, and assumptions based on the information currently available to the company. They may involve risks and uncertainties as they relate to future events, which therefore depend on circumstances that may or may not occur.
Investors, analysts, and the general audience should consider that general economic conditions, industry factors, and other operational aspects may impact the company's future results and make them differ materially from these projections. We have with us Mr. Cláudio Braga, Financial Director, and Mr. Daniel Brasil Alves, Marketing and Communications Director. We will now begin with Mr. Cláudio Braga. Go ahead, sir.
Good morning. Thank you. Good morning, everyone. Thank you for your time and your interest in being here. Here we start with our agenda. Just as last quarter, we are going to follow basically the same process. Throughout the slides, Daniel and I will make a few comments, and at the end, we will be available to answer any questions you may have. As in previous quarters, I will run this presentation starting with the financial part, and Daniel Brasil will support us with the market and the commercial areas.
In general, this is probably not new to you. We had some of the highlights in the news from June. Actually the scenario has changed since then. Overall, as pointed out by the Selic rate in the Brazilian Central Bank, and also looking at the inflation levels, which are still high. Although they are still partially offset by the Brazilian government making BRL 21 billion available for trucks, BRL 14 billion for agricultural machinery, and BRL 30 million for passenger vehicles, it is still a very challenging scenario. We have to mention that this availability of funds for passenger vehicles prioritizes taxis and ride-hailing vehicles. The utilization has been very low to BRL 2.5 billion only. This is mostly due to the risk analysis process and the credit analysis process for the people who requested it.
The program is available, but it was not accessed by most of the population. We can also see that the penetration of Chinese vehicles continues to grow strongly and inventories are very high. Daniel will go into this. Although we are starting to do some localization in the Brazilian market, this is still very small. We have all seen a drop in the Brazilian stock exchange. There seems to be some aversion to risk, so it is a challenging macroeconomic scenario. Global conflicts have been ongoing for at least two years for some of them, and there are some tariff discussions that appeared again after seemingly being resolved.
Actually, we thought that this would be even more difficult to return since it was considered unconstitutional by the American Supreme Court, but now it has levied new tariffs, due to the so-called unfair advantage or competition, in Brazil from the Pix payment scheme. They also applied 2.5% tariffs due to slave or forced labor. In more recent news, we saw that the Brazilian government was also making some space for retaliations and negotiations. Things are still uncertain and difficult to predict. To recap what we discussed when tariffs were discussed in the second quarter of 2025, our reliance on sales to the North American market is still at 8% of our revenue, and this 8% is now subject to tariffs.
Looking at the past and the first six months, and including the impacts that we saw last year, nearly 80% was reimbursed for by customers, and after it was declared unconstitutional, we received reimbursements from the American government. Obviously, this revenue doesn't belong to us. We provisioned and separated this amount because if it needs to be reimbursed to customers, it will be returned to them. Next slide, please. In general, our footprint remains the same as in previous quarters. We have a strong concentration of our manufacturing plants here in Brazil. All of them are close to the city of São Paulo. We also have a manufacturing plant in Rafaela. Some after-sales offices in Brazil and Argentina, and we have an office in Panama City. Our revenue is still in line with what you saw in the previous quarter.
A gross margin and an EBITDA margin that are still very impressive, especially considering the challenging scenario that we've discussed. How much we can ensure that these levels will be maintained is uncertain, is unpredictable. We can't make any promises. I think we need to look at the past and appreciate the company's operational performance. As administrators, we're doing our best to be ready for any potential macroeconomic factors. So it's an election year in Brazil. I believe that you're seeing the same level of caution and instability in most of the companies that you cover. I will now hand it over to Daniel. Go ahead, Daniel.
Thank you, Cláudio. Good morning, everyone. It's a pleasure to have you with us in our conference call.
Starting with our Q2 highlights, we had Agrishow, a strategic participation in Latin American's leading agribusiness trade show, which happened in April and May. This strengthens our presence in agricultural and construction applications. This is a part of our revenue diversification strategy. This is a resilient market, which is currently a bit more depressed due to the Selic scenario and the profitability of agribusiness. But this is a business that is very strong in Brazil. So it's a part of the company's strategy to increase our revenue in this segment. We also did the pre-launch of the Bio Ultra fuel filter for the new diesel characteristics. It's currently at B15, and we will reach B20 by 2030. So there's a demand from the market to support biodiesel. This is a new demand.
The second highlight is the ESG award we have received from the Brazilian Automotive Engineering Association. MAHLE was recognized for its dual-fuel engine solution, and this reinforces the company's leadership and innovation and commitment to mobility decarbonization in Brazil. We are very proud of this award. The company is very happy to have received this from AEA, which is related to ESG and mobility decarbonization. The next point is the GHG Protocol Gold Seal. This was the highest level of recognition in GHG gas emission reporting. Again, it underscores the company's commitment to climate transparency and ESG reporting, as well as our governance best practices. Three considerable highlights from our understanding about the company's work. This all serves the company's future. Next slide, please. On this slide, we see vehicles production and sales in Brazil and Argentina.
We also see the production levels in Europe and North America, which are our two main destinations. Starting with light vehicle sales in the Brazilian market, we saw an impressive 20% growth. We have to refer back to Cláudio's comment. Despite the amount that was given to ride-sharing vehicles, not much was used, and even despite that, we reached 20% sales increases in Brazil. There is an increased confidence by consumers. There is a sustainable car program with lower taxes, so this is also responsible for this growth, and also the electrification and deals from car manufacturers. There are new launches arriving in the market, which is making sales happen. Vehicle prices have also been reduced by these promotions, which has led to this 20% growth.
Cláudio's projection for 2026 has been reviewed. Our forecast is now to finish the year with 13% growth, and the company is aligned with this. In Argentina, things are different. There was a 23% drop. It is a contracting market, which reflects the structural and competitive challenges that they have there. After a good year of 2025 was very good in Argentina. In the second half of 2026, we expect that this demand will remain flat, so the year will finish with a reduction of 10%. An improvement, but still an expected 10% drop for the year. When we add Brazil and Argentina together in light vehicles, we are expecting 11% growth, and the projection is to finish between 8% and 9%, which is an excellent level of growth if we look at the macroeconomic scenario that Cláudio mentioned.
Now talking about production, still in the Brazil and Argentina market. The Brazilian production of light vehicles increased by 10%. It is a difference that is very striking between sales and production. Production grew significantly, but it does not capture 100% of the sales. The main impact was an increase from imported vehicles, especially from China. We are seeing that the market is changing. There has been an increased market share by Chinese manufacturers. Most of this is still imported. We are expecting import rates to go up to 35%. This is still being subsidized, meaning that they are still importing with lower import taxes. They created large inventories, so Chinese manufacturers still have larger inventories than Brazilian manufacturers. This effect will still continue in the second half of the year. That is why we still see a difference between sales and production until the end of the year.
The expected growth by ANFAVEA until the end of the year is 6.5%. 13% in sales and 6.5% in production for 2026. In Argentina, I've mentioned the unfavorable scenario, and their projection for the end of the year will be a reduction between 5% and 10%. Currently, it's at 18% for the quarter. Adding Brazil and Argentina together, there is currently a 5.2% growth for the first half of the year and an expectation to finish the year at 4% or 5%. The percentage of sales and production will remain close to this level of 5%-6%. Now continuing with heavy-duty vehicles, buses and trucks. Things are different here. Here we saw a reduction in sales, a reduction of 10.7% in Brazil, despite the incentives given by the government. We had MOVER 1 and MOVER 2.
With these two programs, BRL 2 billion has been made available for the acquisition of trucks and buses with subsidized interest rates, meaning they are lower. Even despite that, we haven't had any positive numbers. In the beginning of the year, it was much more negative, though. There was an improvement. In the second half of last year, we started to see a contraction in the market. The second half of 2025 was weaker than the first. As a consequence, for the second half of this year, we will have a lower comparison base. ANFAVEA's projection for 2026 is to finish the year with a 6% reduction in sales. In Argentina, we see the same for heavy-duty vehicles, a reduction of 31%, which reflects the challenging scenario that they are facing.
Adding both together, we see a reduction of 9.6% and an expectation of finishing the year with a reduction of 5%-6% in heavy-duty vehicles. Now, speaking about production. Levels are similar. In Brazil, it was a reduction of 11.3%. The projected figure is 6% lower for the rest of the year. In Argentina, it was 18.3% lower. Adding both of them together, it's 11.7% and a projection of -6% to -7%. Despite the recent reductions to the Selic rate, it is still high. MOVER 1 and MOVER 2 have been fully used, these values with lower interest rates. We believe that this demand for heavy-duty vehicles will remain flat. For 2027, we expect to see some recovery in this market of around 5%-10%. But this year, we are expecting a reduction. Now, let's talk about Europe.
Their light vehicle production had a reduction of 1.3%, a very slight reduction. Sales in Europe grew. In the European market, imported vehicles also grew, especially from China. This is also affecting their market, but it's very similar to what we saw in 2025, and the projection for the rest of the year is 2% for the production of passenger vehicles. In North America, we saw a reduction of 1.3% as well. Despite the challenges, the market is showing some resilience. In 2025, we had pre-buy in the American market due to the tariffs imposed by the government. The comparison is also high here. This 1.3% reduction is expected to be -2% at the end of the year. Adding both of them together, we expect a reduction of 2%. It's currently at 1.3%.
Heavy duty vehicles in Europe, we saw a reduction of 1.5% for the quarter. In 2025, it was a significant drop in this market, both in Europe as well as in North America. This 1.5% drop means that the market is stable. It has stopped dropping. We expect it to be at 0% by the end of the year. In North America, we saw a 6.6% reduction in the first half of the year, and we are expecting to finish the year with a growth of 7%. We will see an acceleration during the second half of the year according to these projections. The comparison was also lower in 2025. In the second half of 2025, the demand was lower. As a consequence, we are expecting to see an inversion from -6% to a growth of 7%.
Adding both of them together, it is currently at a 4% drop, and we are expecting it to be at 3.5% growth. Next slide, please. Now we are going to talk about our net revenue performance in sales, starting with the first half of 2026. We will start with the consolidated line. Adding up all of the markets, the company reached BRL 2.59 billion, down 1.8% versus the first half of 2025. If we deduct the foreign exchange effect, which was -3.8% , if we deduct that, it would have been a growth of 2% in revenue. As mentioned by Cláudio, all of the macroeconomic challenges are present here. Exports were also negative in the first half of the year. The heavy duty market in Brazil and Argentina has also been negative. Passenger vehicles, in Brazil and Argentina were the biggest contributor to this market.
The consolidated revenue that we saw of -1.8%, considering the macroeconomic scenario, is also seen as a positive revenue level for the company. Again, it shows how resilient we have been. Now looking at the original equipment also in the first half of 2026. We reached a total revenue in the domestic and export markets of BRL 1.66 billion. Up 0.9% versus the first half of 2025, with a negative foreign exchange effect. If not for that, our growth would have been 3%. In the domestic market, we saw BRL 1 billion in revenue, up 3.2%. Here we do not have the foreign exchange effect. So we grew above the market levels, especially with passenger vehicles due to market share gains and also a favorable sales mix. In the heavy duty market, we also saw a reduction, so the same appeared in our revenue.
But this is in line with the market. Exports represented BRL 583 million, down 3.2% versus the first half of 2025. The foreign exchange effect had a reduction of 5.4%, so it would have grown 2.2%. The European and North American market had been dropping. So our revenues have also been positive above the overall market levels with market share gains, especially distance. Now looking at the aftermarket segment, the consolidated figure was a revenue of BRL 929 million, which is a drop of 6.2% with the foreign exchange effect of -6.8%. If we deduct that, our revenue would have been 0.6% growth. Looking at the domestic market. Here when I talk about the domestic market, we include sales from our Garin unit in Argentina. The sales performed there is described here in reais.
Although it is domestic, there is a foreign exchange effect. Here we are referring to Brazil and Argentina as domestic. There was a reduction of 4.9% in revenue with a -2.5% foreign exchange effect. Separating the two markets, the Argentinian market is still very challenging. Our purchasing power there is smaller. We also see new players there. We have discussed how the market is more open now. There are new competitors, new players, and also some competition. We also have to make adjustments to our inventory. The Argentinian market has been impacted in this quarter due to all of the factors that I mentioned. In the Brazilian aftermarket segment, things have been flat, although we have suffered a greater competition pressure. At the current level, this favors imported products. We also have newcomers launching engine component lines, inventory adjustments for our customers, our distributors.
Despite these factors in the Brazilian market, we have been able to sustain a level of stability. This obviously is being done with innovation initiatives, electromobility, our portfolio. The goal is to increase revenue in this environment. There is a highlight here. Due to the tax reforms, which will begin early next year, we are expecting this to affect our distributors' inventories. The second half will also be challenging, not only due to the market, but also due to the tax reforms, which impacts our distributors' inventories. Each one will have their own strategies to deal with that. We saw a 13% drop, which was very similar to the foreign exchange effect. This refers to all the macroeconomic challenges that we mentioned before. For the second quarter of 2026, one highlight was that we grew versus Q1.
Revenue went up by 6% or BRL 1.33 billion . In the first quarter of 2026, revenues were BRL 1.26 billion . I will hand it over to Cláudio again, and I will be available for questions and answers at the end.
Thank you, Daniel. I think Daniel has explored the first line, so I will be a bit brief on this. We are going to start on the right and move towards the left on this slide. I think most of what I am going to tell you about the first half will be aligned with the second quarter, except for the bottom line where there were some more specific factors in the second quarter. In any case, our net operating revenue for the first six months had a reduction of 1.8% versus the previous year. This excludes the negative FX impact.
Like Daniel said, this would actually have been an increase of 2 percentage points to our revenue. This increase and the effects variation also had repercussions to the cost of goods sold. In the first half and the second quarter, our gross profit was 28%-29%, which is very high in comparison to other players. We had some factors that affected this, especially in the second quarter, which is basically what explains this difference from 28% to 29%. We saw better margins in some production lines and a favorable production mix in some units. That explains this percentage point increase. Looking at overhead costs, they have been about 12%, which is very similar to or basically the same as we saw in the second quarter, with no increases versus previous year. This is actually a reduction in absolute values.
As a result of all of this, we see our EBIT, which is at 17.9%. In the second quarter, when we see our increase in net profit, it was raised to 18.4%. This is basically the company's operational side, and it is aligned with some macroeconomics comments that we made, about the unpredictability of the future. It has been improving the company's operational side, showing how the administration. It shows how much the company is committed to mitigating or softening any negative impacts from the tax reform and so on. The big difference when we look at this quarter versus. Excuse me. The first half versus the second quarter is the impact to net profits. For the first half, it was 14.4%. You might remember from the previous call, the positive impact that we had was basically from the foreign exchange fluctuation.
We did not see the same trend during the second quarter. Net profit there was 12%. Whenever we talk about FX exchange, a major part of that comes from the financial side or the indebtedness of the company. The company is in debt, especially in 2020, when reserves were distributed, was in a strong currency, in euros. Yes, we do see a positive or negative impact of the euro affecting us, our profits and losses. This impact will not be seen at the same proportion, and it does not mean that in the future we will see any risk because this is based on exports. Exports that I receive in the fourth quarter in euros can be used for the amortization in euros during the same time as well. The exchange rate is being hedged at that moment. Next slide, please.
With this slide, you might remember that last year we saw it very frequently. This was when we saw the impact of hyperinflation in Argentina in comparison to the 2025 values. We decided to use this format again. Although this is in our release every quarter, I think this gives a little bit more transparency to IAS in Argentina. These are infinitely lower than we saw in 2023 and 2024, but the impact is either positive or negative in some lines. I will talk about this in some detail. We also included in this, in both periods, 2025 and 2026, a second column with acquisitions. In 2024, we made three acquisitions. One was the compressor line, but we also had an acquisition of the thermal industrial lines. In 2024, we acquired a participation in a company also related to the thermal segment in the south of Brazil.
This was based on a valuation that was carried out by a third party. What I want to show you is the delta versus the valuation for the same quarter. Further below, you will see the valuation reference, which is available on our investor relations website. I do not want to go too deep into this, but simply highlight that there was a deviation and clarify that we made a great acquisition that has been adding value. So, we can look at the figures on both ends, the official numbers that were reported and audited, and then exclude the effects from hyperinflation and acquisitions. I will discuss this soon. In the middle of the table, we see the first half of 2026 and 2025 adjusted. This is not accounting in nature. This information is based on numbers and accounting, but it is not an official number that you will see reported.
This is merely to give you some transparency. Starting with the middle, with the first half of 2025 adjusted versus the first half of 2026 adjusted as well. You can see in the last lines that gross margins, excluding hyperinflation and acquisition from MAHLE Metal Leve, you can see that this half is still very robust. Without this, it would have been 28.6% last year. This year, the gross margin has been 29.2%. Looking at the EBITDA, actually, there was an increase of 1.3 percentage points, up to 20.1%. Our way of reading these numbers, hyperinflation and acquisitions, is that they are deducted from the numbers we reported. The number that were reported in accounting are full figures. For example, in the revenue line, starting with the second half of 2026, we can exclude an impact of BRL 16 million from hyperinflation to the revenue.
The impact of acquisitions in the first quarter was basically zero. I will explain in a minute. In 2025, we went from a hyperinflation to BRL 53 million. One question that may arise from this transparency that we are providing is if acquisitions have performed worse. The answer is no, and you can see in the valuation reports that were carried out by third parties. The valuation scenario presented in thermal compressors acquisitions posted a growth of 5% from 2025 versus 2024. This was expected. The increase in the following year went from 5% to 25%. The valuation of these companies had already foreseen a 25% increase. That provides zero sales impact. We are showing an increase of 25% versus evaluation.
For transparency and confidentiality, as you know, this is sensitive information, and we do not have such a wide range of products, so we cannot go into details here. This is already mirrored by the valuation, but we cannot do it on a quarterly basis. I am not showing what is happening to my COGS or overhead in other lines. Besides that, our intention is to go straight to net income. The net income of these acquisitions has contributed BRL 21 million to our margins. Last year, it was BRL 12 million. The revenue from the acquisitions improved 25% this year versus the same time last year, which had already had a 5% growth versus the previous period. Margins improved by BRL 21 million versus our valuation. I think we can continue with the next slide. Now to speak about our cash flow.
I would split this into a few blocks. The first three columns show that despite our leverage being at a very healthy level, and although it is very small or conservative in comparison to companies in the same segment that have public figures, this is a concerning number, because the company is historically very conservative. We acquired BRL 429 million in new loans, and this was basically a debt rollout. From the principal debt, we paid BRL 309 million and BRL 50 million in interest. Another figure that is very striking and very relevant for investors, especially those who have not been with the company for a long time, is that we have paid dividends with high payouts, and during the same time, we distributed about BRL 300 million. The next figure that is striking here is that basically our cash generation is proportional and aligned to our dividends policy.
That's basically what I can say in sum. Whatever is being generated in cash is being paid out in dividends, which doesn't allow us to provide amortization for our debt. Whenever we have new debt, we need to go to banks to pay for that. Another number that's not very representative here, you might remember the last call, we discussed our CapEx, which was very strong at around BRL 119 million. In the first six months, we only did BRL 47 million. It's not an atypical number. If you look at the results release, you can see that the investments to our segment tend to accelerate in the third and especially the fourth quarters. It's normal for this to be higher and especially the first two quarters of the year. This all makes our cash reduce to BRL 499 million. Next slide.
As a result of all this and this debt rollout movement, what we see in the middle columns, or at least the last two, and the third block, is that our net debt remains basically the same. It dropped by only 4 percentage points, despite having a very positive result and despite a very positive cash generation as well. We saw that the gross debt went up, and it's basically mirrored in our cash. This cash is higher in the third quarter of the year. This is due to the payments that took place now in July. Although our gross debt is at BRL 1.6 billion, the average cost is 6% a year.
In comparison to the Selic rate, we can see that our strategy of being financed by FINAME, BNDES and FINEP, and most of it is in export contracts, and that reduces our financial impact to cash. Below that 6% we see our leverage. It was 1.17 x, and this is still the third installment of the 2024 acquisitions of thermal compressors. This was agreed with MAHLE Metal Leve's independent committee and the controller to pay this in three installments. This took us to a higher level. But now we're back at 1.05 x. Our net financial result is as we saw before, described here. When we look at the first three columns referring to interest rates, there was a change from BRL -50 million to BRL 35 million. Most of this has been the 2024 acquisitions.
In the information disclosed in 2024, we also made it clear that despite the controller negotiating with an independent committee that this would be paid in three installments, the interest rates that were charged then were below the interest rates that we would have if we needed to go to a bank. For MAHLE Metal Leve, it was very healthy to do it this way. For an exchange variation. Here you can see the biggest difference between 2025 and 2026, going up to BRL 84 million, most of which happened in the first quarter, not the second quarter. When you look at the financial results, take a look at the lines above these results, because they represent the operational side and the side that is more manageable by our sales team, administrators, and our production teams. We are delivering very positive and favorable results.
There are some smaller impacts, about BRL 6 million, positive or negative, which are labor rates, interest rates. There was a change from Selic to IPCA, and at the end, we see the net results. The next slide shows our working capital needs. This information was already in our results release, but it was not so transparent. Here we are detailing it. Starting with receivables, the first two columns. We saw a reduction of 4.5% half- on- half. If you look at the DSO, there was actually an improvement of one day from 55 to 54 days. The next column shows inventories. We also saw a significant reduction in these levels. There was an improvement to inventory management in this quarter. However, most of the reduction came from an excess number of orders in the first half of 2025. This is widely disclosed to all of you.
It has been mitigated and resumed to normal levels. It was 12%, and the number of days you see the impact of 87 days. There was also a proportional reduction in the payment terms looking at our absolute volume. The number of days, it was also aligned, and there was a reduction of one day. Adding all of this together, we see a positive result from 83 days to 75 days. Next slide, please. As a summary of everything that Daniel and I explained, even in a macroeconomically challenging scenario, as you know, we are in an uncertain market. But the important thing here is how the company is dealing with all of this. MAHLE Metal Leve was able to continue to generate solid and consistent results and generate cash.
We, this quarter, expanded our gross profits, and this was partially impacted by new production lines in some plants. You saw a lot of this in our SG&A and in our gross profits. You saw our operational discipline, in which we improved our percentage of sales versus margin. The balance between original equipment, aftermarket, and export markets. Usually one of them is underperforming, another one is compensating for it. We have a very solid financial position. Although I expressed my concerns about our level of debt. Actually, for our level, it is extremely healthy, and we are also supported by our operational discipline. This gives some space to explore new businesses and even new segments, like off-road vehicles and the participation in Agrishow. This is also in our earnings release. Talking about technology, Daniel also mentioned the recognition of our ESG program by AEA.
It is very gratifying to see our efforts getting recognized by the market. This is what we wanted to share with you. We are still persisting and believing in our medium and long-term strategies, and I think that concludes our presentation. We will hand it back over to the operator, and Daniel and I will be available for any questions you may have.
Thank you. We will now begin the questions and answers session for investors and analysts. If you would like to ask a question, please click on the raise hand button. If your question has been answered, you may remove yourself from the queue by clicking on lower hand. The first question will be asked by Mr. Gabriel Rezende from Itaú BBA. Go ahead.
Hi, Cláudio and Daniel. Good morning. I just wanted to ask a follow-up question about your dynamics for the next quarters.
You mentioned that it's hard to know if the company will sustain these levels, but it was the second quarter in which we saw a recovery year-on-year. Our impression is that these factors were more internal, under the company's control, than exogenous factors that sustained this. Maybe for the next quarters, you would do this better. It was interesting to hear that you said that you don't know if this is possible. I'd just like to understand a bit more about why you said that. It's a very volatile moment in demand and volume, but again, our impression is that there were internal factors that sustained this. Thank you.
Thank you. [Non-English content]. I think in general, although we mentioned this to a certain extent, yes, there are macroeconomic scenarios. Looking at the past, the first 6 months, there were things that affected us positively and negatively.
But for revenue, the biggest factor there was exchange variation, but also production cost, that's SG&A. A part of the BRL 190 million CapEx that was approved in the assembly, most of it will be to improve our production capacity. So renewing equipment, improving efficiency, product lines. This shows the company's effort in improving its productivity and sustaining our gross profit at acceptable levels. Plant managers have been committed to maintaining our personnel expenses in line with this. We're being very careful about how we run the operation and controlling costs and expenses. I don't think that we are unable to maintain the same efforts in the second quarter. Excuse me, the second half. My concern is that the future scenario is not something that we can relax with to count on these examples. Like Daniel mentioned, we have the tax reforms incoming.
Although it will start next year, not the definitive factors, but some percentages, there might be some reduction in orders in some segments, in some areas. There's also foreign exchange volatility. If we look at our exports and imports, they're basically favoring exports. If the foreign exchange helps us, this means that is what we're going to do. We're also importing materials, and we have aluminum, which is also indexed to a strong currency. This is all very predictable. We have some good and bad things. There are uncertainties about our clients' behaviors as well. Our clients are at a very good inventory level. They're all concerned about the next six months, not just us. But we can't promise the same margin levels because we're also depending on things that are out of our control.
The commercial team is very active, but we prefer to be conservative about our promises. I don't know if that answers your questions. Please let me know.
Yes, that was very clear. Thank you.
Thank you, Gabriel.
The next question will be asked by Mr. Jonathan Koutras from JPMorgan. Go ahead.
Thank you. Good morning. Congratulations, Cláudio and Daniel, for this quarter. I have a couple of questions. First, about the product mix. My question is if you expect a similar mix from now on until the end of the year, or if you'll go back to the previous levels in motor complements. What about the expected payout for the year? You mentioned that the company often pays dividends, but the macroeconomic scenario is still very challenging.
Considering this track record that you have done and what you expect to do, if you can tell us a little bit about payouts for this year. Thank you.
Thank you, Jonathan. Thank you for your questions. Speaking about mix and filters, we do not expect a significant change. This variation happens due to new projects coming in. But when we look at the long term, looking at previous quarters, we will be at the same level without any major variations. We do not expect significant changes about this.
Thank you.
Adding to that, there is a mix of my perception as the company's CFO and our inorganic growth strategy. About the first one, as a CFO, I feel that I have a responsibility of managing the company's financial resources in the best way possible. Yes, cash generation has been very positive.
We have made consistent CapEx investments, which can improve our gross profit and new product lines. On the other hand, our payout has been very strong, as well as our shareholder remuneration strategy. This is concerning to me for the long term, because if all the cash that is being generated is being used, BRL 190 million in CapEx, and you saw that the working capital need was higher, that leaves little space to finance our future. You have indebtedness 2023. We are doing basically what you saw the first half of the year with debt rollouts, with new debt. I think we have a very consolidated position in the combustion engine segment. In the acquisitions we made in 2024 of compressors and so on, we opened the doors for MAHLE Metal Leve in the thermal area. Thinking about our expansion in this segment, we need more resources.
We do not have installed capacity. My last comment is that we need to get ready for the future, and that requires either cash or a good credit line available. You know this better than I. The lower my debt, the better my results and the better our bargaining power for financing with banks. This is a concern for me. I do not have the autonomy to change it by myself. This is not something that has been discussed with the board, but it is a concern for me as a CFO. I have mentioned this very frequently and maybe in the future, we can talk about this. They responded yes. Thank you. I do not know if that answers your question.
Yes, it does. Thank you.
As a reminder, if you would like to ask a question, please click on the raise hand button.
We received a question in writing, which I will read. They congratulate us for our results. Thank you. With the EBITDA levels being so healthy and the CapEx discipline maintained, how does the company see the sustainability of this 65% payout?
Gabriel, I think we referred to this in the last few questions. But if I have not, please let us know. If there is any space for extraordinary payouts, I cannot make any promises. What the company did in some previous years was to pay out interest on its own capital. This is not something that the administrators can choose. I cannot make any promise on that, and I will let Daniel answer the second part.
Thank you, Cláudio and Daniel. The next question is about the aftermarket. If there was a contraction and if we are starting to see new orders for the second half of the year.
Well, when it comes to new vehicle sales, normally we see stronger figures, and then aftermarket suffers a bit. But this year, new vehicle sales have been very strong in Brazil, 20%, as I showed. The used market is also very hot. So this is driving this inventory reduction. At some point, inventories will need to be recomposed. So it depends on our distributors' sellout. But as we mentioned, there's also the tax reform. So it's hard to make a good projection. Obviously, we're looking at the new orders, but we can't say that either will be stronger.
You also mentioned ethanol and gasoline. Recently, we saw that there was an increase from 30% to 32% ethanol content in gasoline. So if that can benefit us.
Well, this is not such a significant increase, 2 percentage points. Vehicles that are older can be negatively affected. So honestly, we don't expect significant growth due to this change.
To continue, we also received a question from Donald. Let me read it. He congratulates us on our sales as well. Our results, excuse me. Considering the advance of Chinese companies in Brazil, what is your prediction for the next years in the original OEM segment? Is MAHLE Metal Leve adapting its portfolio for hybrid electrical vehicles to be competitive in supplying these new players in the country? How do you see this opportunity window to capture market share considering this new market configuration?
That's a good question, and I think there are many people who are wondering that as well. So we can break this technology down into a couple of parts. When it comes to electrified vehicles, we have purely electrical vehicles or battery life vehicles and hybrid vehicles.
They have two engines, electrical and combustion. So anything that's hybrid that has a combustion vehicle with MAHLE's portfolio. I mean, electrification, we have to mention that last month in the Brazilian market, it reached 23%. So we are seeing a change to the market. There's been more electrification and these 23% market share had a 7% share of purely electrical vehicles. So it still hasn't reached 10%. You mentioned Chinese manufacturers. So CKD is a big share of that. So in imported vehicles, we don't have that. There's our plans to localize this. In the first half of the year, there were 54,000 vehicles made locally, so it's still low. Sales are accelerating faster than the localization, so this advantage will conclude at the beginning of next year and will be at 35%. Considering the company's products, hybrids compose the company's portfolio.
When it comes to purely electrical vehicles, we have the technology and the product. MAHLE Metal Leve is a part of the MAHLE group. So it's a matter of volume. That is, reaching a volume that makes sense to localize. So Chinese companies are already assessing the first localization waves. MAHLE Metal Leve is in contact with them. We've received requests for quotations, and we have to highlight that these Chinese manufacturers are MAHLE clients in China. So MAHLE is already supplying them in the Chinese market. And obviously, this is being considered for motor components, engine components, and electrical components. We have to highlight our share of several markets, the aftermarket, like Cláudio said, the heavy-duty market, and the domestic market, as well as exports. So if we look at the market now, the Chinese manufacturers last year reached 23% market share in Brazilian sales.
This is already taking place. We saw the difference between sales and production, and the company has sustained its resilience and its revenue. The main effect was for exchange variation. Yes, we are looking at this territory. We are prepared for this new market dynamic and also to capture this market share increase as soon as these manufacturers really increase their local production and go through the component localization waves.
The next question is similar to Renan's previous question. What they say is, with pure electrification becoming faster, does MAHLE Metal Leve intend to change its strategic long-term plan to reduce its reliance on engine components?
It is important to highlight that we have a strategy that is MAHLE 2030+. This strategy has three pillars. Having more efficient internal combustion engines, the thermal area, which is thermal management, and electrification.
We have a strategy that takes electrification into consideration. In other markets, like the European one, this is more accelerated. MAHLE and MAHLE Metal Leve are in this strategy, in this pillar of being more efficient in combustion engines. It is also important to highlight the circulating fleet. If we look at the circulating fleet in Brazil, according to Sindipeças, this is 50 million vehicles, of which 3 million are heavy-duty vehicles. The new vehicles that are starting to circulate have a much smaller share of the fleet. Of course, they will require engine components. We are not going to reduce it. We are starting to see a mathematical reduction of the share. But we will be prepared, and we continue to develop product components for more energy efficiency.
Our tech center in Jundiaí, our dynamometers for engine tests are full, and they continue to develop new products. Brazil has ethanol, so we also see that this purely electrical vehicle has a limit. It is mostly being used in major centers, where it is easier to charge your vehicles at home. But when it comes to Brazil, logistics are not so simple for electric vehicles. There is a limiting factor to this penetration. Hybrids will probably be the predominant vehicles in the long term. They have some redundancies because there is a combustion engine as well. Our strategy is taking electrification into consideration.
Our last question was asked by [Jorge de Jesus Longato]. Good morning. What is the share of the Argentinian market to your revenue and your net results?"
Speaking about revenue, I do not have the exact figures. I can check and pass this information on to you.
[Non-English content] In revenue, our share is 11% and in profits, 0% currently. [Non-English content] And here, we're talking about original equipment and after marketing. So in previous years, we had a substantial participation of the Argentinian market. But after this reduction in original equipment volumes, we're starting to see a lower contribution and revenue is 11%. [Non-English content]. So that's it. If you have any questions, please send it to our Investor Relations team so that we can answer.
[Non-English content] We would like to give the floor back to the... This concludes the question-and-answer session. We will now hand it over to Mr. Cláudio Braga for his closing remarks
[Non-English content] It was a very interesting second quarter. When we [Non-English content] saw a reduction of 2 percentage points in revenue and an increase in other lines.
We were curious about this. We analyzed this in depth. We're very happy and positively impressed when we saw that most of the improvements, if not all of them happened on the operational side, whether it was in sales price or the production cost or administrative areas. So -- thank you very much for your interest, for your pertinent questions. Like Daniel said, we will remain available for anything that you may have. I'm sorry that we went a little bit over time, but I think we used this time very well.