Good afternoon, Brazil, everyone, and thank you for waiting. Welcome to MAHLE Metal Leve for the fourth quarter of 2018 results conference call. With us here today, we have Dr. Christian Binkert, CFO, Chief Financial Officer, and Mr. Daniel Alves, Marketing and Corporate Communication Manager. This event is being recorded, and all participants will be in a listen-only mode during the company presentation. After MAHLE Metal Leve remarks, there will be a question and answer session. At that time, further instructions will be given. Should any participants need assistance during the call, please press star zero to reach the operator. This event is also being transmitted simultaneously through the internet via 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 webcast may post 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 turn the conference over to Dr. Christian Binkert, CFO, who will begin the presentation. Please, Dr. Binkert, you may begin your presentation.
Thank you very much for the introduction, and welcome. Good morning, ladies and gentlemen, to MAHLE Metal Leve 2018 and Q4 2018 Conference Call. Looking at the agenda, we first of all will discuss the Q4 2018 results, including the full year 2018, then the market overview, net revenues by market, the summary for PNL, EBITDA, and the last two bulletin points, the financial management and topics in negotiation. Let's get started with the highlights. The net sales revenue increased to BRL 2.59 billion for 2018. That's an increase of 14% compared to 2017, and we achieved a margin of 18%, I think EBITDA margin of 18%, compared of 17.7% in 2017.
If you look at the fourth quarter 2018, the net sales was 10% higher compared to 2017, and the EBITDA margin was a similar level, 13.6%, compared to the previous year quarter, 2017, where we had a margin of 14.3%. In 2018, the domestic market for MAHLE Metal Leve, meaning the OE market and after market, accounted around 52% of our net sales, meaning nearly no change compared to the year 2017. The net profits increased by 22.9%, while in the fourth quarter 2018, the profits for the year or for the quarter increased by 56%.
At the moment, the board of directors approved a distribution of interest of capital of BRL 80.6 million, and at the ordinary general meeting in April 2019, there will be a proposal to distribute dividends and interest on capital like in the past fully. But as mentioned, this is depending on the approval of the ordinary general meeting in April. I would like to give over the floor to Daniel regarding the market overview.
Good morning and good afternoon to everybody. First of all, thank you very much for attending our conference call today. I will start on Slide four with the information about the Brazil and Argentina vehicle registration production, full year 2018 and 2017. Starting with the light vehicle sections, we have the Brazilian figures. We can see an increase of sales of 13.8% and a production of 5.8% higher than last year. In Argentina, we have almost 23% decrease in sales and in production, -1.4%. The combination of the two countries, we have a 3.2% increase on vehicle sales and +4.7% increase on production. These numbers are very in line with the projection we did on the third quarter last year about the full year expectation.
If you look at the deviation between sales and production in Argentina, we have a decline of 23% in sales and -1.4% in production. It is because of the relation between the vehicles produced in Argentina and sold in Brazil. When you look at the combined countries, Brazil and Argentina, we can see very close numbers, the absolute numbers for production sales. Talking about this year, the projections for 2019. Looking at the Brazilian projections, we see the obvious figures. We have a good perspective, two digits increase for vehicle sales, 11.3% for light vehicle and 9% in production. Talking about Argentina, our projection is -30% in vehicle sales and -30% on vehicle production. So again, another bad year. If you look for the 2018 figures, we had a decline in Argentina starting June. This is the reason that we have again, the reduction for this year.
Looking at the year-to-date figures, we see that a bad situation in Argentina at the moment, closing to -50%. However, with the lower days comparison for the second half of the last year, we have this projection of -30%. Combining Brazil and Argentina, the projection for 2019, we expect in sales 2% increase and 3% increase in production. So even with a very bad situation in Argentina, we still expect in the combination of the countries an increase. Now talking about the medium heavy vehicles, we can see much better numbers. In Brazil, we have almost 31% increase on vehicle sales and 27.4% increase on vehicle production. In Argentina, the same situation, so we have a bad -15.5% on vehicle sales and -16.4% on production. The combination of Brazil and Argentina, we are having almost 18% increase on vehicle sales and 23.4% increase on production.
The forecast for this year, the combination of Brazil and Argentina, we have again, positive numbers for Brazil and negative numbers for Argentina, close to 30% decline. But in the combination, the projection we have is 4% increase on vehicle sales and 6.6% on the vehicle production. Now moving to Slide five. We have the vehicle production in the main export countries of the MAHLE Metal Leve revenue. We can see on the North America, a decline of -0.4% on the light vehicle, and an increase of 16.1% on the medium heavy vehicle. The total of North America vehicle production, it's 0.1% increase. In Europe, we have a -1% on the vehicle production for the light vehicle and -0.2% for the medium heavy vehicle. The total of Europe, it's -1%, and total vehicle production combining Europe and North America, it's -0.5%.
For this year, we have the expectation very close to the number that we had last year. For the North America light vehicle, we have -0.5% for light vehicle and an increase of 3% for the medium heavy. In Europe, we have a 0% for the light vehicle and 2.5% increase for the medium heavy. So no big numbers or no big increase in the global market. It's a really stable situation even for light and the medium heavy. Now moving to Slide six. We have the net revenues performance by market. We have on the first column, 2018 figures, full year. We have a volume price effect, the FX variation in 2017 figures. Going directly to the last column, where we have the variation, the full year variation. In the original equipment domestic sales, we had an increase of 21.4%.
We had a minor impact of FX because of the Argentina, and the volume price impact, we have 22.6%. The main reasons for this better performance than the vehicle production, we just see a few minutes ago. We are having a high increase of the medium heavy market, so we have a better mix when we are talking about the MAHLE Metal Leve sales. Another effect is the OES parts. We have an increase of the service parts. And the last main reason, it's the new products ramp up. We start the new products or the new vehicles engines, and this new engine vehicles, we had a ramp up during the year of 2018. So these three main reasons of our better performance on the MAHLE Metal Leve sales on the domestic market. On the original equipment export, we have an increase of 15.5% with an FX impact on 16.
Basically, we are increasing the FX increase that we have. No major comments on this part. The total of the original equipment increase is 17.9% with an FX of 9.1%. Now the aftermarket domestic. We have an increase of 3.2% with a negative effect impact of -10.3%, mainly driven by the Argentina, so the pesos devaluation. If you look on the volume price impact, we have an increase of 13.5%, mainly driven by the transport segment recovery and our product portfolio expansion. The aftermarket export, we have an increase of 25.6% with a FX impact of 11.7%. Therefore, the volume price impact we have is 13.9%, mainly driven by the increase for Chile, Colombia, Paraguay, and also some intercompany increases we have. The combination of the aftermarket, domestic and export is 7.8% increase, with -5.7% FX impact. Volume price increased 13.5%.
The combination of original equipment and aftermarket gives us 14.4% net revenues increase with 4% impact of FX, a volume price impact of 10.4%. Now moving to Slide seven. In this slide, we have the net revenues performance in the quarter 2018 and 2017. In this case, I will go directly to the total. We have an increase of 10% of these net revenues with FX impact of 3.2% and volume price impact of 6.8% increase. Now moving to Slide eight. We have the export by region.
We have the participation 2017 and 2018. We have an increase of the South America portion, mainly driven by the aftermarket I mentioned about Chile, Colombia, and Paraguay. These are the main reasons of this change and this increase of the revenue in 2018. In the LATAM region, we have an increase for liners in our heavy-duty customers. This is the main reason for this 1% increase of the participation. Now I will give back the word to Dr. Christian Binkert, and I will be available at the end of the conference for the questions.
Thank you, Daniel. Coming to page number nine, the summary profit and loss. The gross margin 2018 was 26.6% compared to a gross margin of 27.8%. The major differences are really coming from higher material costs, labor cost increases, and Brazilian real. The gross margin in Q4 2018 was 19.2% compared to 26.9% in the fourth quarter of 2017. Moving to page number 10. Regardless of the selling expenses, the increase in the selling expenses in principle affects the revenue increase, so the selling expenses are stable at 6.9% in both periods. If you look at the general admin costs, we had an increase from 3.9% to 3.6%, and this is mainly coming of the mix of that cost compared of both periods. The R&D expenses moving from 3.7% to 3.1%.
Here we had some restructurings, which did help to bring our R&D cost down by the next 0.6%. The other operating income, we had a positive impact in the year 2018 compared to a negative impact in 2017. The major movements are really provisions for labor claims, civil and tax accrued, and the program. Also we have some gains in regard of the sales of MAHLE Eberspächer in the previous year. Moving to page number 11. The bridge, where the differences are coming from. The EBITDA in 2017 was BRL 401.8 million. As mentioned previously, EBITDA margin of 17.7%. We have reached in 2018, BRL 466.9 million in EBITDA with a margin of 18%. The major increases are coming from gross income, BRL 61 million, which means higher volume, higher sales. Other operating income, I mentioned already one of the major reasons is the reversal of labor claim accruals.
The impacts IAS 29 for Argentina, hyperinflation BRL 25 million, and we had a negative impact in selling expenses of BRL 21.9 million. Here, really mainly higher freight costs and there are the smaller effects in 2017 respectively 2018. Looking at the quarter comparison, Q4 2017, BRL 80.7 million with a margin of 14.3%. In the last quarter 2018, BRL 86.6 million with a margin of 13.6%. Really the major movements and the major explanations like Other operating income, IAS 29, very similar compared to the total year 2018. We have the gross income in the last quarter did go down, and here really the major negative impacts, comparisons to a quarter than in higher material costs, severance payments, which we reduced quite a lot of people in the last quarter, and a negative impact in regards of Brasil Maior.
Coming to the page number 12, the net financial results. If we look at the finance income, we can see we had a negative impact of BRL 20.6 million, an improvement compared to previous year of BRL 6.8 million. Last year, we had net financial income of BRL -28.4 million. Where are the changes coming from? The financing costs, you can see a difference of BRL 3.4 million, and within the finance cost, interest alone, you can see a combination that the cost of debts went down compared to previous year, but also the average debt decreased.
So it is a combination of financing cost and the average debt is going down. The other major improvement is the monetary valuation with BRL 4.4 million as a net impact compared to previous year. If we then go already to the next page, the page number 14, we can see the net position is BRL 153 million. Last year, it was BRL -14 million, meaning we had a financial leverage in 2018 of 0.33. We have liabilities to the end of 2018 of BRL 291 million. You can see the distribution, the short-term distribution till end of December, and well-balanced distribution till year 2023, where we have roughly around BRL 30 million of loans in debt assets each year.
Coming to the next page, the page number 14. In debt assets, you see the breakdown, how are we financed. 50% we are financed with syndicated financing, and 45% with ACC loan. So it is also the major change compared to previous year. ACC means advance exchange contracts. This year, in 2018, we still have a small portion with [inaudible] of around 5%. Coming to the net income and the benefits to the shareholders. I mentioned already the sales, BRL 2.591 billion, increase of 14%.
Daniel explained where the major changes are coming from. Profit for the year, BRL 291.7 million, 11.3%. I also can proudly announce that the 11.3%, the net income profit for the year, is the highest amount in percentage we ever had. So a really a good year for MAHLE Metal Leve in the year 2018 compared with 10.5% in the year 2017. Dividends and interest on capital on equity. We distributed BRL 231.6 million in the year of 2017. At the moment, for 2018, BRL 86.2 million has been agreed, has been earned.
Interest on capital, and as mentioned, there is a proposed annual general assembly end of April to distribute interest on capital and dividends as usual, everything meaning 100% distribution, but it is necessary the approval of the general assembly. Coming already to the last page of the presentation, looking at the CapEx and the depreciation. We spent a little bit more in 2018, really slightly more than in 2017, BRL 90.5 million. The total depreciation went down to a level of BRL 90 million. The total, the CapEx percent to sales, to the revenue, is 3.5%, and in percent of depreciation, it increased to 101%. Thank you very much for your attention. Daniel and myself are available for 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, press star two. Our first question comes from Marcelo Motta, Banco JP Morgan.
Hi. Good afternoon, everyone. Thank you very much for the call. I have two questions. The first, if you could comment a little bit about the breakdown of all the impacts on gross margins. On the release and the presentation, you comment about the increase on raw material prices, the impact of the taxes that were charged in Brazil. If you could break down those impacts so we could have a better idea of what could be your recurring gross margin, that would be very helpful for us. The second question is regarding the details about the commercialization of the MB2 technology. We read that it was approved by the board, the commercialization of this technology. If you could provide any type of information on how much it could generate in revenues, what you expect in terms of margins, that would be helpful for us as well. Thank you.
Thank you for your questions. Coming to the first question, if I heard correctly, you wanted to know a more detailed breakdown of the margins comparing the 2017 to 2018 numbers. I mentioned material costs, we had a negative impact of above BRL 20 million. We had Brasil Maior, which gave us a negative impact in 2018 compared to 2017 of around BRL 8 million. We had labor cost increases of around BRL 20 million. These are really already the major positions.
If you look at the margin, 27.8% in 2017 compared to the 26.6%. Some minor positions, but once again, material costs, labor cost increases, Brasil Maior, and then really smaller impacts like, for example, energy cost or freight cost. Coming to your second question, the MB2, you are fully correct. The board of directors signed the commercialization of the MB2 product. We signed already some contracts, that is very positive.
We did not create any sales, any turnover at the moment. We are building up in, I think, in two facilities at the moment, this new equipment, and we are very excited. The first crop or the first results of the MB2 product for this mill, where we sold the equipment, will be valid or will come out in the months June or July. That is I think the update I can give you. We signed contracts. We are sampling our equipment at various mills, and we are looking really excited forward to the results of the mill in June and July. Did this answer your questions?
Yes. That was clear. Thank you.
Thank you very much. Any other questions?
Excuse me, ladies and gentlemen. As a reminder, if you would like to pose a question, please press star one. Again, if you have a question, press star one. 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, ladies and gentlemen, for participating in this call. I am looking forward to hearing, speaking, and meeting you in the near future. Have a nice day, and thank you very much once again. Goodbye.
That does conclude the MAHLE Metal Leve audio conference for today. Thank you very much for your participation. Have a good day, and thank you for using Chorus Call.