Good afternoon Brazil, everyone, and thank you for waiting. Welcome to MAHLE Metal Leve for the fourth quarter of 2019 results conference call. With us here today we have Dr. Christian Binkert, CFO, Mr. Daniel Alves, Marketing and Corporate Communication Manager, Mr. Daniel de Oliveira Camargo, Executive Account Manager, and Mr. Fábio Lopes Peres, Executive Finance Manager. This event is being recorded and all participants will be in a listen-only mode during the company's presentation. After MAHLE Metal Leve remarks, there will be a question -and -answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. This event is also being transmitted simultaneously through the internet via the webcast and can be accessed through the investor relations website of the company, where the presentation is also available.
Participants may view the slides in any order they wish. The replay will be available shortly after the event is concluded. Those following the presentation via the webcast may pose their questions on our website. They will be answered by the IR team after the conference is finished. Before proceeding, let me mention that forward statements are based on the beliefs and assumptions of MAHLE Metal Leve management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Now I will turn the conference over to Dr. Christian Binkert, CFO, who will begin the presentation. Please, Dr. Binkert, you may begin your presentation.
Good afternoon, ladies and gentlemen. Welcome to MAHLE Metal Leve conference call. First of all, I hope everybody is safe and healthy. That's very important during the Corona crisis. I also would like to start with this topic. That's not only the safety of our people, but also the health of our people, as well as the health of the company at this situation, the most important for MAHLE Metal Leve. You might have heard already that for the admin area, we put our people already mid of March 2020 in the home office, so people are safe. Also, our plants are closed, starting last week, mid of last week, ended end of last week. Most probably the closure of the plants, depending on the customer needs, will be till April 13th.
But we will have to see if we will have to extend the home office as well as the closure of the parts, plants longer than April 13th. Now let's go to the fourth quarter data. I'm moving to Slide number two. The agenda, like usual, first of all, the highlights for 2019 and for the fourth quarter 2019 will be presented by myself and Daniel [inaudible]. The market overview, the second topic, net revenues performance the market, also by Daniel [Brasil]. Then a summary P&L and EBITDA from my side. Some input regards of financial management, net financial results and indebtedness, and the last bulletin point is CapEx depreciation. Then of course, we are open for any questions you might have.
Moving to Slide number three, we could see that we achieved in 2019 a sales of BRL 2.526 billion, a reduction of 2.5% compared to previous year. If you look at the fourth quarter, we received sales of BRL 595.7 million, which is a drop of 6.1% compared to previous year. The domestic original markets for the company recorded an increase of 5.3%, while the concentrate production of vehicles dropped for the market by 3% in Brazil. In Argentina, we did see a fall of 32.6%, sorry. Interest in capital will be decided in the AGO, in the ordinary shareholders meeting end of April for discussion. At the moment for decision and approval is amount of BRL 18.2 million. Looking at the key indicators, I will give some more explanations later on. EBITDA, we achieved BRL 440 million for the total year. That means the EBITDA margin is for 17.4%.
A slight drop compared to previous year of 18%. If you look the last quarter 2019, the fourth quarter, we achieved the EBITDA margin of 12.9% compared to 2018 last quarter, 13.6%. The last quarter is following the trend of the total year in percentage deviation. In regards of the net margin, the net margin slightly dropped from last year 11.3%- 10.3%. On the other hand, for the last quarter of 2019, we achieved a net margin of 11.1% compared to 2018 last quarter of 10.7%. Now I would like to hand over to Daniel [inaudible] for the market overview.
Okay, Christian, thank you. Good afternoon, everybody. I am on Slide four, and now I go to the market overview, Brazil and Argentina registration production 2019 against 2018. In Brazil, we finished the year with 7.7% increase. Was a good number, this amount. In Argentina, a decline of -45.4%, and a combination of Brazil and Argentina on the light vehicle sales, -3.8%. In production, we have a 2.1% increase in Brazil and -32.5% in Argentina. A combination of these markets, 2.9%. So you see a very good performance in Brazil and a very bad performance in Argentina, and the total amount is negative in the production and sales. Going to the medium and heavy vehicles. In sales for Brazil, we had an increase of 19.6%. In Argentina, -46%, the same situation for the light vehicle and medium and heavy.
A total combined at 6.5% increase for the medium and heavy vehicle sales. Our production in Brazil, -2.7%. In Argentina, -34.5%, and the combination of Brazil and Argentina, it is -4.7%. Again, it is a very good number. In Brazil, we had a decline on production, mainly in the non-road mobile machinery , the agricultural numbers. The combination of the two markets on production was -4.7%. I will not talk about the plans for 2020. We had the Corona situation. It is creating this very bad situation for everybody. What we can say right now, it is the customer shut down. We have, at the moment, almost 100% of the automakers without producing vehicles. We are receiving daily updates with the postponement of the return on production. On average, the scenario we see, combining March and April, it is around five weeks shut down for the customer.
Of course, this will impact on the vehicle production. The expectation is at least -10% decline on the vehicle production based on the figures we have right now. We are working with scenarios, and with these scenarios, we must be as flexible as possible to react or to act between these scenarios. We are in a very stable market situation, and we need to be daily evaluation for these scenarios and the business going on. Moving to Slide five, where we have the vehicle production in the main export markets. It is North America and Europe. There is a mistake on the title. It is showing 2020 and 2019. The right one, it is 2019 against 2018. Sorry for that. As you can see, we had a decline on the North America vehicle production, 3.6%, light vehicle and medium and heavy combined.
In Europe, we have a decline of -4.1%. In total, we had -3.9% for Europe and North America combining the markets light vehicle and medium and heavy. Moving to Slide six, where we have the net revenues performance by market. We have the 2019 values, volume and price, column, the effects variation. 2018, values and volume and price percentage, and the effects/impact percentage, and the total variation. I will direct to the last column, the total variations. In the original equipment domestic market, we had an increase of 5.3%, a negative effects impact of -1.7%, and the volume and price impact, 7% increase. We had a better performance than the market, and just show the vehicle production with a decline of -3%. The main reasons for this better performance, it was a share increase. We got some new business ramp-up.
We also get benefits from the export engines. We supply some parts from the customer that are exporting engines, and also on the OES parts, the service parts. On the export market original equipment, we had a decline of -14% and a positive effects impact of 5.2%. Therefore, a total decline of volume impact of -19.2%. In this case, the main reasons for this performance was the market reduction I just present, and also inventory adjustment from the customers. We had also a last year spot buy, so we had a sales on 2018 and not again on 2019, a specific project. Also a ramp down for some projects. These are the main reasons for this lower sales on the export business for the original equipment. On the subtotal for the original equipment, it is -6%.
For the aftermarket domestic, we had an increase of 6.9%, with a tax impact -10.3% . This negative effect impact is mainly because of the Argentina. We have the sales in pesos, and we bring it to Brazilian reais to make the consolidation, and this is the main reason for this tax impact. In total, we had a 17.2% increase for the aftermarket domestic. In this case, the main effect was the mix of products of sales. This is the reason for this increase.
In the aftermarket export, we declined 1.5% with a positive effect of 5.4%, and the total volume price impact was -6.9%. In this case, we had some low turnover in Turkey, Chile, and also Paraguay. These are the main reasons for this decline on the aftermarket export. The total for the aftermarket was + 4.9%, and the combination of the original equipment and the aftermarket, we had -2.5%, with effect impact of -0.5%, and total volume price impact -2%. Now moving to slide seven.
On this slide, we have the last quarter of 2019 and the last quarter of 2018. In this case, the total turnover was a decline of -6.1%, and the main reasons for the deviation of the sales turnover was explained on the full year. We have a very similar effect for this last quarter for the turnover. Now moving to Slide eight, where we have the participation for the export markets by region. As you can see, we had an increase for the South America, 16% against last year, 2.3%. As I mentioned, we got some new business on the market, and this is the reason for this increase. Now I am moving back to Dr. Christian Binkert, and I will be available for questions at the end of the presentation.
Thank you, Daniel. Just one additional comment from my side. Slide number five, the segment it says January to December 2020 and January to December 2019. So it is a typo mistake. It should be January and December 2019 compared to January and December 2018. The numbers are correct. There is just an error in the years. So once again, it should be not 2020, it should be 2019, but and 2019 should be 2018. Thank you. Coming to page number nine, MAHLE Metal Leve achieved a gross margin of 25.3%, a slight drop compared to previous year with 26.6%. The major reasons are the same, like explained the last time already.
The social cost benefits which we received from the government in 2018, which we did not receive in 2019 anymore, and higher energy costs, a major part is coming out of Argentina, but also in Brazil, are the major reasons of the decline of the gross margin. On the other hand, for the last quarter, we could see an increase of the gross margin to 21.5% compared to previous year, 19.2%. Moving to page number ten. We can see if we look at total 2019, the selling expenses have been stable. We achieved a ratio of 6.6% compared to 6.7% in 2018. In the admin cost, we did see a reduction from 3.6% to 3.4% due to restructuring efforts mainly.
We did see a small increase in R&D expenses from 3.1% to 3.3% mainly of innovations and development with partnerships with our customers, some patent legislations, and also some release of new products at the market. We also have a change in the other operating income. Last year, + 0.3%. This year, -0.3%. What are the major changes? They integrate the export incentives which we still achieved or received in 2018, but we did not receive in 2019 anymore. In addition, the Argentinian government introduced an export duty expense in Argentina, which is also burdening the other operating income and expenses. Moving to page number 11, the EBITDA comparison 2018 for the total year, the margin 18%, that's an absolute amount of BRL 466.9 million, and in 2019, we achieved BRL 440.8 with a margin of 17.4%. What are the major changes?
The first one is the hyperinflation account in Argentina, the so-called IAS 29, which gave us a positive impact of around BRL 24 million. General admin, I already explained, mainly due to restructuring, BRL 8+ million . The other large impacts are really other operating income, and here once again, Reintegra, the export incentives within the BRL -15.6 million are the major portions. Then the cost income is BRL -50 million. Here again, the social incentives, which we did not receive any more.
Higher energy costs for sales, but also, of course, not to forget, higher personal costs. These are really the main highlights for the total year 2019, and if we look at the fourth quarter 2018, we achieved a margin of 13.6%. That's an absolute amount of BRL 87 million EBITDA compared to BRL 17.7 million in 2019, the last quarter, with a margin of 13%. Really, if you look at the gaps and the reasons, are very similar, 2018 compared to 2019, the total year. Moving to page number 12, the net financial results. We could see that the net financial result got worse by around BRL 20 million to a level of BRL -41.4 million. Where are the major changes coming from?
The first one is the finance costs. There we have a deterioration of BRL -7 million compared to previous year. These are really, you can see on the lower table on the bottom of the page, the cost of debt has been quite stable with 4.2%, but our average debt did increase from BRL 270 million to BRL 383 million. So that's the first reason. Second reason is the investment yields, which go down from 6.3% to 5.5%. Also the average investment amount, this increase from BRL 124 million to BRL 112 million.
Really, the largest deviation is coming from exchange rate variation, compared to previous year, BRL -19.7 million. This is really the majority of this impact is coming due to exchange rate impacts out of Argentina. The last one, we have a positive impact, monetary valuation, BRL 7 million. That's the labor claim interested portions, where we had a positive impact in 2019 compared to 2018. Once again, overall, the results, the net financial result got worse by BRL 19.8 million. Moving to page number 13, the indebtedness did increase from BRL 153 million by BRL 35 million to BRL 188 million. You can see that the distribution and liabilities between short-term and long-term are very stable compared to previous year, with 54% short-term, long-term, 46%.
We had an overall increase of BRL 102 million in liabilities, and we also had an increase in the cash deposits in the bank of around BRL 68 million, once again, giving a net indebtedness of BRL 188 million. If you look at the lower table of the page, you can see the distribution between short and long term. Short term, once again, the BRL 214 million are quite equally distributed between the different months in 2020. For long term, also have a major portion in 2021 till 2023.
But also you can see in the outer years, even till the year 2028, some long-term liabilities. Coming to page number 14. Here, the more details in regards of the indebtedness of the year, you can see that the company strategy did not change a lot. The loans we are having are around 49% with FINAME compared to 50% last year, and 47% with ACC and NCE, and last year it was 45%. All this year, no major change compared to previous year. Coming to page number 15, which is already the last page before answering any questions.
We had a slightly higher CapEx at page number 15, a level of BRL 99.8 million, meaning an increase of around BRL 9 to BRL 10 million. Accordingly, all the depreciation increased to BRL 97 million from a level of BRL 90 million in the previous year. If you look at some ratios, last year in percent to sales, CapEx was 3.5%, so it increased to 4%. Compared to depreciation, you also have a slight increase to 102% compared to 101% previous year. This was already the last slide from our side. I am now open for any questions, and looking forward if you have any questions.
Ladies and gentlemen, we will now begin the question -and -answer session. If you have a question, please press the star key followed by the one key on your touch-tone phone now. If at any time you would like to remove yourself from the questioning queue, please press star two. Our first question comes from Gabriel Rezende, Bradesco BBI.
Hi. Good afternoon. I have two questions, if I may. First, I would appreciate if you could share with us how you're seeing EBITDA margins evolving compared with your historic levels, considering this very challenging environment in the auto industry. Second, just to clarify, you mentioned a drop of 10%. Would you please repeat what is this decrease related to? Is it Brazil's vehicle projection falling 10% in 2020? Thanks.
Perhaps, Daniel, you could mention on the expectation of the market drop what you mentioned before.
Okay. I can say about the market first. The - 10% mentioned, it's not our forecast in this case. What I mentioned is we had, on average, the customer shutdowns around five weeks. If you took this on consideration the whole year, we got around 10%. This is the minimal level that we think the market will decline. We are working on the scenarios, as I mentioned, and this was just a reference, based on the customer shutdowns. For sure, we will have the economy situation. We have a negative forecast for the GDP and also maybe an unemployment rate on the country. So the confidence level. The scenarios that we are evaluating, it's different from this 10% decline. This was my mention. It's clear for you, Gabriel?
Yeah. It is clear. Thank you.
It's a very complex.
In regards of the margin, as Daniel mentioned, we are working on different scenarios. It's very difficult to predict at the moment because our customers are also changing permanently the schedules, not only here in South America, but as you know, we also have a major portion of export to North America and Europe. For example, Volkswagen and Scania announced they will not reopen as scheduled. They will postpone already. At the moment it's very difficult.
You all know that the government announced some measures which we can use. We are studying these measures very carefully at the moment. Highest priority, let me express once again, is the health and safety of our people at the moment, really, and also the health of the company. We are trying to flexibilize our production as much as possible, but really to give an estimate at the moment on forecasts, I cannot do. It's because the environment is just changing too much at the moment.
Okay. That's fine. Thank you.
Thank you.
Our next question comes from Marcelo Motta, Banco JP Morgan.
Hi. Good afternoon. Two questions as well. The first one is actually a clarification. During the call, you mentioned that the main negative impact on gross margin was energy cost. I just wanted to check if I got it correctly, and if you think that you could recover this increase in energy prices, you can pass through this to customers over time so gross margin would return to normalized level. The second question is regarding the MB2 technology. There was a material fact yesterday night saying that the efficiency level was a little bit lower than expected.
Just wondering if the company could provide us with a little bit more color regarding what exactly was below expectation, if you could say the amount, and if you have other tests going on which could offset this one, if the company will continue to invest on the initiative, if it might take longer than expected for the commercial ramp up. Just an update on the MB2. Thank you.
Thank you, Marcelo. Let me take over these two questions. Yes, you did understand correct. A negative impact on the margin was energy cost, mainly driven by Argentina, really huge inflation in energy, but also partially in Brazil, really depending on the customer. Yes, you are right. Partially, we can rationalize it , but partially not. It is really depending on the customer contract, if we can forward these charges to our customers or not. In regards of MB2, yes, you are correct. There was yesterday a release, a little bit more background is that what you ask, we made trial mass production in 2019. The productivity was lower than expected. There was a delayed start. We had to finish earlier than expected. Many different reasons. We could study during this time, really the behavior of the MB2 quite well. You asked, are we further investing?
Yes, we are doing further mass production at the same customer we agreed to. We are not giving up into productivity. We will have to see the next couple of weeks and months how the productivity at this mill will develop. The good news is that our mill customers did not indicate any shutdown at the moment, so they are continuing to work. This is really good news for us. There are difference in many areas in the automotive. I hope, Marcelo, this does answer your two questions.
Yeah, that was very clear. Thank you very much.
Thank you.
Our next question comes from Victor Mizusaki, Bradesco BBI.
Hi. Just a follow-up on this question about the MB2. Is there any risk that, given that you do not achieve the expected results, that maybe you need to do a kind of impairment in these investments?
We did do an impairment testing in 2019. We did not see any impairments. As mentioned, we will have to wait for the results of 2020 of the productivity, really, at this stage as we just started the first crushing. The mills have started, so it is really too early to say if there is a risk of impairment or not. You really have to wait next couple of weeks and months.
Okay. Thank you.
Ladies and gentlemen, as a reminder, if you would like to pose a question, please press the star key followed by the one key on your touch-tone phone now. This concludes today's question -and -answer session. I would like to invite Dr. Christian Binkert to proceed with his closing statements. Please go ahead, sir.
Thank you very much for participating at the call. I really wish you all the best, safety, health, not only for you and your family. I hope we hear us once again after the first quarter and the crisis is more stable, and we can predict once again how it is going forward. But really the most important now, stay in health and basically take care and hear us once again. Thank you very much for participating the conference call. Nice day.
That does conclude the MAHLE Metal Leve audio conference call for today. Thank you very much for your participation. Have a good day, and thank you for using Chorus Call.