Good afternoon, ladies and gentlemen. Welcome to MAHLE Metal Leve's conference call to discuss the earnings for the fourth quarter 2023. This conference call is being recorded, and the replay will be available on the company's investor relations website. The presentation is also available for download. Please note that all participants will be in listen-only mode during the presentation. We will then begin the Q&A session when further instructions will be provided. Before moving on, I would like to emphasize that the forward-looking statements are based on the beliefs and assumptions of MAHLE Metal Leve's management and rely on current information available to the company. Forward-looking statements may involve risk and uncertainties since they relate to future events and therefore depend on circumstances that may or may not occur.
Investors, analysts, and the general public should take into account that events related to the macroeconomic environment, the sector, and other factors could lead to results that will materially differ from those in the forward-looking statements. Today in this conference call, we have Cláudio César Braga, Chief Financial Officer, Daniel Brasil Alves, Marketing and Corporate Communications Manager, and Fábio Lopes Peres, Executive Finance Manager. I will now turn the floor to Mr. Braga that will start the presentation. Please, Mr. Braga, you may go ahead.
Thanks, Rodrigo. Good afternoon, everyone. Welcome to the conference call of MAHLE for the fourth quarter and end year of 2023. We hope everyone is okay, and beforehand, we would like to thank you for your time and attention. As Rodrigo mentioned, just as a reminder, in the end of the presentation, we are going to be available for your questions. Should we move on to the next page with our agenda? I am going to start with an overview of our results, then I am going to turn to Daniel Brasil to address points 2 and 3 of the agenda, market overview and net revenues. Then I go to item 4 to give you a bit more color on our P&L. Then Fábio Peres is going to talk about financial performance and indebtedness. Then we will close the presentation and open for your questions.
Before we start, I would like to introduce myself. I have been a bit more than 10 weeks at MAHLE Metal Leve. I am Cláudio. The last 23, 24 years, I devoted to the auto parts industry, focused on the financial area. Since January 2, I have been part of MAHLE Metal Leve. I have to admit that they were extremely intense and interesting 10 weeks, and I am looking forward to the coming years. Thank you very much. Let us move on to the next slide. In 2023, we had net sales revenue of BRL 4.3 million. A timid increase when you compare to the full numbers of 2022, an increase of 2.7%. Daniel is going to give you a bit more color on that, but we had the pre-purchase of Euro 6 in 2022 that really leveraged sales in the last quarter of 2022.
Looking at 2023 compared to 2022, only the fourth quarter, we see a reduction of 8.9%. But if you eliminate the pre-buy of 2022, I also compare to 2021, the last quarter showed an increase of about 8%. Then we take a look at our adjusted EBIT. Some years ago, we had an average of 17%, 18% for adjusted EBIT. In the past three years, we went up to 20 percentage points. The year of 2023 was extremely good. We closed at 21.2%. Later on, I am going to give you a bit more color and talk about some factors that contributed to that. Looking at our results, again, net margin, adjusted net margin in the year hit 17.2% against 13% of the previous year, just for the fourth quarter. We continue very healthy with 15.2% compared to 12.8%. Compared to 2021, our number was around 14%.
Still on this page, talking about payout of dividends to shareholders. In 2023, we paid BRL 1.3 million. Basically profit reserves that were accrued during the pandemic because of the uncertainties of the market, how it would develop for the coming years. Profit reserves accounted to approximately BRL 500 million, and dividends and interest on equity of BRL 850 million, BRL 350 million referring to the year of 2022, and almost BRL 500 million referring to the results of 2023. I am going to turn to Daniel.
Thanks, Cláudio. Good morning, everyone. It is a pleasure to have us in our conference call for the fourth quarter 2023 and the whole year of 2023. We are on slide 5, where we have our sales and production of vehicles for the Brazilian and Argentinian market, as well as North America and Europe, the two main destinations for company exports. We start with light vehicles in Brazil. In sales, we had growth of 11.2%. We closed the year very well, above our expectations. The month of December was very good.
In Argentina, we had growth of 8.2% in the sales of light vehicles, despite oil prices and the exchange devaluation of last year. We did have an increase of 8.2% in the sale of vehicles. Consolidated numbers for Brazil and Argentina, 10.7%. Heavy vehicles. In sales, we had a drop of 10.8%, in line with our expectations. The drop is a result of the new technology. Last year, we had the introduction of Euro 6 that increased vehicle prices and consequently decreased sales. In Argentina, a drop of 3.4%. Brazil and Argentina together, a drop of 10.1%. Talking about production, a reflex of the sale of vehicles in production, light vehicles growth of 1.3%. In Argentina, growth of 13.7%. The Brazilian and Argentinian market combined, vehicles that are produced in Argentina and sold to Brazil and vice versa. Consolidated in production, growth of 3.7%.
Compared to sales, where we had growth of 10.7%, we see a lower growth in production. This is because of lower amount in exports. Some markets like Colombia, Chile, and Peru showed a decrease, and that contributed to the results in exports. Also the introduction of imported vehicles that did have a share in the market share, which also took some of the production of Brazil and Argentina together. Heavy vehicles, drop of 37.5%. We had a projection of 34%, so slightly worse than projected in Q3 for the close of 2023. The drop above the drop in sales because we had an inventory in the end of 2022. We had the production of Euro 5 trucks for inventory that could be sold mainly in the first quarter of 2023. In Argentina, a drop of 8.4%, and both together, a drop of 36.4%.
Now, thinking a bit of the prospects for 2024, both in Argentina and Brazil, for light and heavy vehicles. Talking about ANFAVEA projections for light vehicles 2024 vis-à-vis 2023, a projection of 5.7% in light vehicles, and in heavy, 13.6%. As a counterpoint, in Argentina, we have a deterioration of the crisis, so the expectations is a two-digit drop in the sales of light vehicles. However, consolidating Brazil and Argentina, we have expectation of growth of 2%-4% in light vehicles. Heavy vehicles, 13.6%, that is the estimate, and Brazil and Argentina together expected growth for heavy vehicles. A reflex in production, the projection for 2024, ANFAVEA in Brazil of light vehicles growth of 4.8%, and heavy vehicles growth of 32.1%.
The growth is well above the growth in sales due to the fact that for this year we are going to produce, that is what is going to be sold. Differently from in 2023, we sold vehicles that were produced in 2022 because of this inventory of Euro 5 that we had. So a positive outlook for light vehicles and quite positive in the production of heavy vehicles when we consolidate Brazil and Argentina. Now going on to the European and North American markets. Last year, 2023, we had growth in European light vehicles of 12.3%, heavy vehicles 13.8%, in North America 9% growth in light vehicles. And 8% growth in heavy vehicles. Consolidated numbers for Europe and North America, the top two destinations of company exports. We have 10.7% growth in light vehicles and 10.9% in heavy vehicles.
For this year, the prospects are more in line, so not significant growth. In light vehicles, a slight drop in Europe, perhaps a 1%-2% drop, and in North America, growth of 1%-2%. So in light vehicles, it is almost going to be a break even in production if we put together Europe and North America, comparing 2024 to 2023. That is an external projection that we use as reference. In heavy vehicles also a decrease, both in Europe and North America, of around 5%-6%. Again, consolidated numbers, Europe and North America, an approximate drop of 5%-6%. Europe very much affected by the war in Ukraine and also because 2022 was a very positive year. So we see a slowdown in demand. Moving on to the next slide 6, we have the net revenues performance of the company.
First we have the full year of 2023 compared to 2022, and the last two columns show the fourth quarter 2023 against the fourth quarter 2022. Talking about the full year 2023 against 2022. In original equipment, domestic market, a drop in revenues of 6.2%. This is a drop, but again, if you think of the market reference, we had better performance than the market due to the share in revenues of the auto parts for the heavy vehicle market. We saw a drop of almost 40%. So when you have this weighted number, minus 0.6% is a positive number due to gains in market share in exports to customers. We supply to the local market, but our customers in exports are also asking for parts. Original equipment export market growth of 2.5% in Brazilian reais.
If you take a look at this revenue in dollars would be growth of 7.3%. Here we also have an effect of the exchange rate, but growth of original equipment for export. Subtotal for original equipment, drop of 1.7% with almost BRL 2.5 million in revenues. Aftermarket, domestic market growth in 2023 of 16.7%. Market share. This is gain of market share in Argentina as well. In aftermarket for exports, we had a drop of 22.6%. The main explanation for the drop in the aftermarket for exports has to do with the market dynamics. Purchases and sales do not happen on a monthly basis, even because of the cost of imports. These orders may take two, three months to be repeated. Customers started 2023 with higher inventory levels, and that did impact the market a little.
Also the political economics scenario of some countries, especially Peru and Colombia. We saw a slowdown in the two countries and eventual inventory adjustments that did impact this line. The total first for aftermarket, 9.3% growth and total revenue growth of 2.7%, as mentioned by Cláudio. Despite the challenges and the drop in original equipment, the company was able to reach 2.7% growth in revenues. For the fourth quarter, it is important to highlight original equipment, a drop of 15.9%. The year of 2022 had a very strong fourth quarter, a non-recurrence. Heavy vehicles manufacturers were producing as many trucks as possible under Euro 5 technology, and that had an impact on the quarter. It was the quarter with the most impact, 15.9%. Aftermarket exports, we had some adjusted inventory levels from our customers and also a market adjustment, therefore a drop of 15.5%.
For original equipment export market, the same reason. In the fourth quarter, a consolidated decrease of 8.9%. Now I turn the call back to Cláudio, and I will be here for your questions at the end of the call.
Thanks, Daniel Brasil. Well, this is point 4 of our agenda. I am here giving you a bit more color on our results. We do see the cost of sales at 70%, and last year was 73%. That has to do with our gross profit. Basically this line, when you take a look at our more traditional products, like pistons and rings, we are more or less with the same share. What we see is that there was an increase of 1 percentage point in the sales of filters, which was a very interesting movement that was observed. We have a very strong exchange rate fluctuation that did affect our sales in a negative way. But we had a balance of 100% in the cost of imported materials. Think of overhead.
We see a very stable movement, but what draws a bit attention was the increase in research and development. I think those that are following the media have been noticing a very interesting movement around the tech center in Jundiaí, showing that the company continues to invest heavily in research and development, in close contact with the OEMs. What was not very positive, and it is still not fully covered by sales prices, and we are going to see that in 2024, is the adjustment in labor. It is not so substantial increase, but it is an increase. 2023 against 2022, we spent a bit more with maintenance. We continue with the steady investments, and maintenance is happening on a regular manner.
Because of the follow-on that we had in the second half of last year, we had an increase on expenses with professional services. I think that is it. Now we are going to the final item of our agenda with Fábio Peres, talking a bit about our net financial result.
Good afternoon, everyone. I am going to start with the fourth quarter 2022 compared to 2023. Here you see that on interests, revenues, and investments, we have a negative amount of BRL 10.5 million in the line of revenues. That was a reclassification made in December. We identified that all the interests and exchange rate fluctuation related to Argentina was being allocated in the line of interest rates. We had a reclassification in a total amount of BRL 33.2 million, and therefore, in the last quarter, we had this line negative. But it was a readjustment. Loans, compared to 2022, in 2023, we had an addition of BRL 6.1 million compared to the volume of the loans that we had in 2022. It was lower than in 2023.
In a total, we get to net interest of BRL 20.2 million in the quarter against BRL 24.4 million last year. Again, this is a reflex of the readjustment made. If it were not for that, we would have BRL 13.2 million positive. Talking about exchange rate fluctuation, this year we had BRL 26.2 million positive against BRL 32.7 million negative last year, BRL 58 million. Remember that the adjustment made of interest and investments on the first line does affect this line 1.1. Here we have the amount of BRL 32.3 million positive. That fluctuation of financial investments and others, most of this amount comes from our operation in Argentina, where Rafaela is an exporter.
We exported at a lower rate, and when we got the amounts that were actually paid by our customers, which was after the exchange devaluation, we had a very positive effect along the year, especially in the fourth quarter of BRL 15.8 million. Total of net exchange rate effect plus hedges was BRL 40.3 million in the fourth quarter 2023 and BRL -35 million last year. An increase of BRL 75 million. We have net effects from inflation adjustments, BRL 10.3 million positive in the fourth quarter against BRL 4.9 million negative in 2022. Here, it is important to mention that we have the impact of CPC 42 in the amount of BRL 33 million. That also had an impact on this line.
Thinking about the full years of 2022 and 2023, I am going straight to the totals. Net interest income, BRL 75 million against BRL 58.7 million last year, 2022. Again, most of the volume comes from Argentina. Of this total of BRL 75 million, BRL 54.9 million comes from Argentina. Net exchange rate effects and gain and loss on derivatives, BRL 46.3 million positive against BRL 40 million negative 2022. Again here, the impact was quite significant. Just as a reminder, we had the readjustment of the first line of interest to exchange rate fluctuations, an improvement of BRL 86 million compared to last year. Net financial income, we had almost its breakeven, and last year, BRL 27.8 million. Remember that net financial income comes from our labor and tax provisions and their corrections. We did have an impact there.
If we are to exclude the BRL 33 million, we would be in line with last year. Total for the year of 2023, we had a final result of BRL 121.8 million against the -BRL 9.1 million last year. So an improvement of almost BRL 131 million. The next slide, please. Here we talk a bit about our indebtedness. We had growth of our indebtedness of BRL 559 million, 63%, almost two-thirds of our indebtedness in long term and 37% in short term. And obviously, we had a reduction in cash that was used to pay capital on equity and dividends in the last quarter. So we went from BRL 505 million to BRL 383 million. So here we had growth in our indebtedness of BRL 437 million, and the total net cash growth in net indebtedness of BRL 559 million. Okay?
Now we are going to open for your questions. Myself, Cláudio, and Daniel are here to answer any questions you might have. Thank you very much.
We will now begin the Q&A session for investors and analysts. If you would like to ask a question, please click on Raise Your Hand. If your question is answered, you can leave the queue by clicking on Lower Your Hand. Our first question comes from Felipe Lenza from Citibank. Mr. Lenza, you may go on.
Good afternoon, Cláudio, Daniel, Fábio. I just have one question regarding the effect of Argentina on the P&L of the fourth quarter. You still have exchange fluctuations that impacted the BRL 380 million, the P&L company. Could you give us a bit more color about this impact and what to expect from Argentina in 2024? Thank you.
Well, thank you for your question. I think we have all been following the developments of Argentina in prior years, more specifically the last quarter of 2023 and the beginning of 2024. As for the future, I think it is still a very uncertain situation to everyone. What I can tell you is that MAHLE Metal Leve is doing everything at its reach to protect itself. As Fábio Peres mentioned, we are protecting with the resources that are within Argentina in the local financial market or through New York, which gives us a very interesting offset. When I compared the third quarter 2023 and the close of the year of 2023, and I see the monetary fluctuation in Argentina isolatedly, we see an increase of BRL 60 million- BRL 65 million of impact.
But when you recompose that within MAHLE Metal Leve, we do have an offset within MAHLE Metal Leve. When we compare the third to the fourth quarter, it went from BRL 65 million- BRL 70 million. Still, when you think more broadly, when you think of Argentina altogether in compared to MAHLE Metal Leve, Argentina is a very substantial volume of sales for us. But in terms of result, it accounts for about 5%. So way below of what we had in MAHLE Metal Leve in Brazil, and we consolidate both results at the end of the day. So it continues to be a positive operation for 2023. As for this year, as the whole market, we are monitoring to see how the country behaves. I do not know if my colleagues would like to add to that.
I think that in sales of vehicles, we are expecting a drop, and that will certainly impact on revenues. But we expect an offset from the Brazilian market. So again, when we consolidate Brazil and Argentina, we have a positive outlook, as we mentioned in the market section. That's it.
Felipe, I don't know if we answered your question.
You did. Thank you very much.
Our next question comes from André Ferreira from Bradesco BBI. Please, Mr. Ferreira, you may go on.
Good morning, everyone. Thanks for taking my question. I have two questions. The first, I'd like to understand a bit better your EBITDA margin for 2024 after a year of strong margins, but with a weaker fourth quarter. If you see a pressure on prices with an increased competition. Second, I'd like to understand MAHLE's strategy more for the long term. Think of the electrification trend in the world. It is affecting Europe, in the U.S., and it is becoming a reality in Brazil. Are you considering adjusting your portfolio, based on electrification? Thank you.
Good morning, André, and thanks for your question. I'm going to start with your second question, going electric and our plans. Last year, we had the announcement of BYD and other OEMs starting sales, so there was a share in the Brazilian market. The trend abroad, as you mentioned, that is in Europe, a bit stronger, the U.S. not as much. Here in Brazil, we do have a projection of penetration for electric vehicles, and not only electric, but also hybrid vehicles. So, purely battery or battery with combustion engines. We understand that there is not a unique solution for the future. It's a diversity of solutions for the future of mobility. As we mentioned before, MAHLE Metal Leve is part of the MAHLE Group. So MAHLE, outside in Europe, we have products for electric vehicles as well, and this is a matter of volumes.
So we are monitoring the market, and we need gains of scale. That is volume for it to make sense for us to have local production, both for OEMs and for auto parts. So we are monitoring and following the market, and the company adapts as future developments happen. We do have technology for our solutions to be applied for the future of mobility. But local production depends on volumes.
Just to add to the answer, when you take a look at 2024, I think it's still a bit premature. We are just starting the year. So far, we had two healthy months. Let's see how March develops. Then, by April, May, we have a more fact-based answer. As for Q3, when you talked about a bit of Q3 2023. I think it was a bit atypical in 2022. So I do not see Q4 alone as a reference. I don't know, André, if there was any specific point that you would like to address.
No, it was just for me to understand the whole, because the margin was very strong, and I just would like to know projections for 2024. But you did answer my question.
Thank you. Rodrigo, back to you.
Our next question comes from Giovanni Vescovi from JP Morgan. Mr. Vescovi, you may go on.
Good afternoon, Fábio, Cláudio, Daniel. I have a question about MAHLE customers in Brazil. If they are growing in line with the guidance from ANFAVEA, or if there is any discrepancy, and where most growth lies.
Hi, Giovanni. Thanks for your question. I did not mention that. I did talk about the outlook of ANFAVEA for 2024. However, we already have the close of the first two months of the market, the year to date, February. Very much in line. The month of February, even with Carnival, was a very good month for sales. Argentina already reflects that. When you consolidate Brazil and Argentina in the sale of light vehicles, we had growth of 17.9%. The amount is a higher percentage, so to speak, because of the beginning of the year of 2023. 2023 started a bit weak, and it gained momentum along the months. You remember that we had that project of discounts for new vehicles, which changed things a bit. The first two months show alignment with the projections for 2024.
In heavy vehicles, we had a drop in sales of 15.7%. However, it is a base of comparison that is very high. That is Euro 5 vehicles that were being sold at a lower price than Euro 6. The beginning of the year, the first two months, very much in line in terms of outlook for 2024. I do not know if I answered your question.
Yes, perfectly clear. Thank you very much.
As a reminder, if you have a question, just raise your hand. Please wait while we collect new questions. Once again, if you have a question, click on Raise Your Hand. Please wait while we collect your questions. Since there are no further questions, we are closing the Q&A session. I would like to turn the call to Mr. Cláudio Braga for his final comments.
Well, very well then. Thanks for your time. Once again, I believe it is also an opportunity for us to exchange experiences. It is very good for all of us and for you as well. I hope very soon we have the opportunity to meet. I hope that in 2024, these opportunities will come. I thank you once again for your time, and see you next time, and have a good day.
MAHLE Metal Leve's conference call is now closed. We thank you very much for attending and wish you an excellent afternoon.