Good morning. Thank you for holding. Welcome to the earnings conference call for the fourth quarter and the year 2022 of Mills. I highlight that if you require simultaneous translation, this tool is available on the platform. To access it, simply click the interpretation button at the bottom of the screen to choose your preferred language, either Portuguese or English. For those who are listening to the conference call in English, the option to mute original audio in Portuguese is also available. We inform you that this conference is being recorded and will be available on the company's IR website, where the complete material of the earnings release is also available. During the presentation, all participants will be on mute, and afterwards, we will begin the questions and answer sessions.
We highlight that the information presented in this presentation and statements that may be made during the conference call pertaining to the perspectives and projections of the company are based on the assumptions of the company regarding Mills' future. Forward-looking statements are not a guarantee of performance as they involve macroeconomic conditions, market risks, and other factors. I will turn the floor to Sérgio Kariya , Mills' CEO.
Good morning. Mills thanks you all for your presence at another Live to share our earnings. We begin our presentation on slide three with the main highlights that marked the last quarter and the year 2022. We generated gross revenue of BRL 376 million in the quarter, reaching a record of BRL 1.3 billion in the year-to-date, both with an increase of 50% when compared to the same periods of the previous year. The ROIC reported for the last 12 months of 24% for the rental business unit, both light and heavy, and 23% for the consolidated of the company.
As of this quarter, we'll start reporting our results, including adjusted EBITDA, only with the exclusion of non-recurring impacts when indicated. The impact caused by the adoption of IFRS 16 in the accounting of rents are no longer excluded to facilitate the comparison with both accounting numbers and with other companies that operate in the market.
Thus, the company had an adjusted EBITDA of BRL 146 million in the fourth quarter of 2022, with a margin of 45%, and a record of BRL 512 million in 2022, with a margin of 47%. Net income, in turn, was BRL 48 million in the fourth quarter of 2022, at a margin of 15%. We understand that the decrease in margin in the fourth quarter was an one-off event. Income for the year amounted to BRL 216 million, with a margin of 20%. Our leverage remains low, with net debt equivalent to only 0.2 times Mills' EBITDA for the last 12 months. The BRL 430 million raised and the BRL 72 of debentures held in December will be invested in the growth and contribute to the reprofiling of the company's debt.
We invested BRL 246 million in Q4 2022, totaling BRL 600 million invested in the last 12 months, ended in December 2022. Such move reflects the confidence in the potential of the rental market and in Mills' performance capacity for the coming years. We've reached the mark of 55 rented, reinforce our national presence, and the company's vocation for leadership in the sector. In 2022, we distributed BRL 50.2 million via interest on equity and BRL 1.2 million of complementary dividends to be distributed in 2023 to achieve the statutory minimum payout of 25% over net income, with a yield of 2.5%. On the ESG front, our Programa Partilhar, through which the company makes donations to various organizations and social entities, reached its third edition in 2022.
We also posted a record in the amount donated. In addition, on January fourth of this year, we received news of our inclusion in the B3 GPTW index, which makes us very happy. We consider that this is yet another benefit of our commitment to the well-being of employees. Finally, we also celebrated the arrival of hybrid elevating platforms that we have added to our fleet as another alternative we offer to our customers. In addition to all of our efforts within the priority material theme of green operational efficiency and sustainable solutions.
As you can see, it was a year of a lot of hard work and great team effort, but it was also rewarded through records broken on virtually every front of our results. Our challenge now is to maintain growth without losing the balance of our expenses or affect the health of our balance sheet. I can say that I'm very pleased with the history we've lived last year, and we're very optimistic but very mindful of the year 2023. I now turn the floor to Carol, who will talk about our financial performance in the quarter.
Thank you, Kariya. Moving to the analysis of rentals earnings on slide five, we saw that our fleet received more than 400 pieces of equipment in the last three months of 2022. The replacement value is of BRL 3.8 billion currently. At Mills, we used responsible management of our fleet, investing in the ideal mix to better serve our customers. We count on organic growth and the constant assessment of M&A opportunities as a growth lever. Regarding the progress of our fleet overhaul project, the Phoenix, we inform you that 392 unavailable machines have been recovered in 2022, and the project is almost concluded.
This project enhanced our revenue generation through increased equipment availability. Going to slide six, I'd like to remind you that this quarter includes the results of Triengel and the beginning of our heavy rental operations also by organic growth. We see the contribution that this move has already brought to the diversification of the company's revenue. Agribusiness, for example, which is a significant and resilient factor of Brazilian economic activity, increased its share by 4.4 percentage point in Mills customer portfolio, totaling now 6% in the period. Rental top 20 customers accounted for 19% of the business unit's revenue in the fourth quarter of 2022.
As part of our strategy, we seek to diversify Mills revenue as a protection against cyclical macroeconomic effects. At the same time that we look at the ability to increase our top line through cross-selling opportunities and increasing share of wallet, we are also careful to reduce the concentration and exposure to a particular customer and/or sector, seeking to enhance the resilience of our business. With the increase in the fleet, the usage rate and the prices and the light equipment rentals, as well as the beginning of our activity in the heavy segment, our net revenue increased 15% in 2022 in the combined rental units. In the same comparison, the adjusted EBITDA increased 57% with a margin expansion of 3 percentage points. Net revenue in the quarter grew 49%, while adjusted EBITDA posted a 39% increase.
The margin reduction in the fourth quarter is a one-off effect, mainly related to adjustment in the provision for short-term incentive due to exceeding the target set for the year. In 2023, our expectation is that margins will be normalized. On slide 9, it is clear that the unit of formwork and shoring is going through a very good moment. We saw a 53% increase in revenue from BRL 29 million in the fourth quarter of 2021 to BRL 45 million in the fourth quarter of 2022, and an increase of 185% in adjusted EBITDA, with a growth of 18 points in margin in the period. In the year, net revenue was up 58% and adjusted EBITDA grew 200%, reaching BRL 61 million.
The highlight in the performance of this business unit was the 74% increase in rental revenue, mainly due to better prices and higher utilization rate of equipment, which indicates the good moment for the construction and infrastructure sector, an opportunity that is being tapped into by Mills as the absolute leader in formwork and shoring. Moving on to consolidated results on slide 11, we proudly present our record performance. Both net revenue and EBITDA are the largest in Mills history, exceeding the net revenue of BRL 738 million in 2021 to BRL 1.1 billion in 2022. Adjusted EBITDA, in turn, went from BRL 309 million to BRL 512 million in 2022, representing a 66% growth in the same period.
In the annual comparison between quarters, net revenue of Q4 2021 grew 49.2%, growing from BRL 219, 19 million to BRL 326 million, while adjusted EBITDA went from BRL 98 million to BRL 146 million in Q4 2022, an increase of 48.2%. These results indicate that the growth strategy for the rental sector, either through the rental business unit or formwork and shoring, is successful and promising. Demand is keeping up with Mills expansion. We are consistent in our growth. Moving to slide 12, we highlight net income of BRL 216 million in 2022, 105% above the 2021 result.
In the last quarter of 2022, income was impacted by the reversal of a deferred income tax credit in the amount of BRL 14 million, with no impact on the year. Excluding this effect, net margin would be closer to the company's historical margin, in line with the 2022 margin of 20%. Looking at the chart to the right of the slide, we see Mills' cash generation shows strong growth over the quarters. While operating cash flow has quadrupled, free cash flow for the firm has fluctuated over the past five quarters, considering the company's investment to acquire machinery as well as the disbursement related to M&A operations.
We share the company's cash and indebtedness positions on slide 13, where we demonstrate that our net debt reached BRL 88 million, starting from a gross debt of BRL 885 million, almost entirely offset by the cash of BRL 796 million. In December, we raised more funds. BRL 430 million were obtained in debentures at a cost of CDI plus 2.05% with a payment term until 2027. We also point that in January this year, Moody's published an upgrade of the company's rating, raised to A+ due to the improvement noticed in Mills' cash generation and payment capacity. S&P and Fitch ratings were held at A- and A, respectively.
We went from an average cost of CDI plus 2.34% in the 3rd quarter of 2022 to CDI plus 2.23% in the 4th quarter of 2022. The average maturity of our debt was extended and went from 2.4 years in September to 3.1 years in December of 2022. We ended another quarter with covenants fulfilled and low indebtedness, being 0.2 times the net debt over adjusted EBITDA in the last 12 months. It is worth remembering that our growth debt is composed almost entirely of debentures, and 90% of its maturity is in the long term. I conclude my comments with a thank you to our team that has done a great job to advance our growth journey. To you, our shareholders and investors, for your trust and your interest in Mills' history. I turn the floor over back to Sérgio for his final considerations.
Thank you, Carol. We close today's presentation with a message that we follow the fluctuations of Brazil's economy and markets very carefully. We have indications that 2023 may be a year of instability and a long period of high interest rates, we keep our feet on the ground, focused on the forces that will bring a good performance in any scenario. The customer is always in the center. Our products and services are differentiated, both in terms of the product mix we offer for rent in more than one line of equipment and the premium manufacturers that make up the fleet. Our job is to ensure the efficiency and productivity of our customer in their day-to-day. This is our value proposition. We're absolute leaders of MEWPs in Latin America.
We have the scale to stand out in negotiations and are very close to our customers, serving more than 1,400 cities. The beginning of our operation in the rental of heavy machinery and equipment also favors the diversification of our revenue and minimizes the negative effects of macroeconomic cycles as we seek long-term contracts. We invest in getting our business to work more and more efficiently and quickly scalable. Technology and innovation are powerful tools in our activities, and we move on watching closely our digital journey to continue to delight our customers. We have also reviewed our processes and replicated strategies that bring efficiency and cost reduction. Last but not least, we control our leverage and preserve a sound balance sheet with strong cash generation. Investments are carefully analyzed to optimize our capital structure and the returns generated.
Based on these pillars, Mills c ontinue forward on our growth journey, optimistic but cautious. We remain available to take your questions at this time. Thank you.
We will now begin the Q&A session. In order to ask a question, click on the Q&A icon at the bottom of your screen and write your name, company, and language. When we announce you will see a request to activate your microphone, and you should do so to ask your question, and your camera as well if you wish. If you prefer, you can type your question and indicate it so that the operator can read it. Our first question is from Alexandre Assaf. Alexandre, we will enable your microphone so you can ask your question. Alexandre, you may go ahead. Alexandre audio has been enabled. I believe he had some technical problem. We will come back to him later. Let's move on to the next question. One second, please.
Good morning. This is Gabriel Rezende from Itaú BBA. Can you hear me? Good morning, Maria, Carol. Congratulations on strong results again. Two questions from our side. I'd like to understand a little bit more about the revenue increase in the fourth quarter, especially in the comparison with the third quarter of 2022. It was almost 20% of growth. I'd appreciate it if you could break it down, considering the fleet increase from the third quarter, that I believe had a full effect on the fourth quarter, but also the trend in terms of usage in yield in the rental segment. Another point here, you already mentioned during the call, the presentation about the one-off decrease in the margin due to stock options, et cetera.
I understand that the strategy to expand branches on Mills' physical expansion also weighs down on the margin here, right? I'd like to confirm if I understood that correctly and understand how much of the 55 branches you have today are not completely ramped up yet. I mean, the room margin would have to improve. Of course, you have an expansion plan, but to understand the weight of this effect.
Thank you, Gabriel, for your question. I'd start with the increase in revenue. The increase in revenue in the fourth quarter had two or three effects, actually. The first is linked to price. We were able to evolve price from the 3rd to the 4th quarter, especially in the light rental, as well as in the volume of equipment, not only the equipment that arrived in the 3rd quarter, in part in the 4th quarter, but we had a concentrated effect of new equipment arriving in December specifically, that ended up not generating a positive impact as of yet in the company's earnings.
There was also the effect of the Yellow Line, right? Yellow Line in the 3rd quarter, we accounted on about 1 month, and now it comes for a full quarter. We had effects not only in terms of volume of rental, but also price improvement and the effect on the Yellow Line as well. As for your second question, the opening of branches. What we normally do is we have an advanced post a little bit earlier to make sure that our branch opening strategy is aligned with our expectations.
We usually start putting, commercial and technical people and equipment in the location first so that we can feel confident in opening the branch. That mitigates that J-curve, that initial curve of impact and margin. The effect on margin of these branches is balanced compared to the average margins of the older branches. The main effect in terms of margin impact was this provision. Most of it was the impact or the increase in the provision to be paid for the company.
Excellent, Padilla. Thank you.
Our next question, Mauricio Ramoni, buy-side analyst, Reach Capital. Mauricio, we'll enable your microphone for you to ask your question. I believe Mauricio has a problem in the microphone. I'm going to read his question. The question is: Sérgio Kariya, what's the expectation of the G&A evolution from now on? Thank you.
Thank you, Mauricio, for your question. We also had an impact on G&A this year also because we reinforced our team, not only in the technology department for all of the challenges and the strategic pillars that we have to develop in this area, but also G&A for the Yellow Line. We expect, and we're focusing for 2023 to see stability in G&A and a strong focus on costs and expenses. We want to seek margin improvement through less G&A impact in the revenue, to have it more offset with the revenue increase so that we get productivity gains.
Next question, Marcelo Arazi, sell-side analyst, BTG Pactual.
Congratulations on the results. Do you intend to maintain an accelerated fleet increase in 2023 despite macroeconomic challenges? Any priority between growing in platforms versus IL?
Thank you, Marcelo, for your question. I think the point here, we're a little bit more cautious for 2023. The longer interest rate curve makes us more cautious and choose projects with more profitability. Specifically for light equipment, we're focusing on the expansion of fleet rather than renewal of the fleet. That would be a focus. To equip the branches we opened, our estimation is to open again almost 10 branches for 2023. To stock these branches. For Yellow Line, we're focused on the choice of better or the best project.
We have here a value proposition to deliver service differentiation to our customers, choosing premium machinery, longer term contracts, we will choose contracts or bids that offer better return. Our investments will be more cautious in that sense. We do not intend to accelerate too much at this time, as it's more complicated in Brazil in terms of interest rates and macroeconomic scenario.
Our next question is from Breno Pires, buy-side analyst at four one .
Good morning. I would like to know the current size of the Yellow fleet. Triengel had 345 machines. The other question is, have you evolved in conversations with OEM? Will the cost due to inflation still impact acquisition value?
Well, we ended the year with approximately 350 machines. Almost 90 machines came in in December. Pretty much in the last two weeks of December, the Yellow Line equipment arrived. When you look... I don't know if I understood our question with OEMs, with the manufacturers, if that's your question. We are feeling some stabilization of prices from manufacturers for 2023 in Yellow Line equipment. We don't have an expectation of decrease at this time, but of stability.
An increase of prices compared to 2022. The dynamic of lifting platforms is a little bit different. It's more focused on the global macro scenario of importing the equipment. We made the purchases for 2023 last year. There's a small effect. Looking at 2023, there would have been a new increase. We will not have this impact since we made the purchase last year for this year.
Next question, Alexandre Assaf, investor.
There's two questions. First, congratulations on the results. What's the dynamics now for the utilization rates of equipment and rental rates? If you can, please talk about new possibility of new M&As in Yellow Line.
The usage rate, well, a lot of new equipment has arrived, and we're working on renting them. We have seasonality in December. In December, our short-term equipment, considering the holidays and so on, have a relatively high return. We're stabilizing usage now to the levels before the end of the year. We're generating about 66%-67% usage in light equipment. Our heavy line, if you look at, We signed a lot of contracts, and they're long-term contracts, so the volume today is close to 70% already closed. It has not been sent to the customer yet because it's a program shipment. We have the machines, we're preparing the equipment for our customers.
They will be shipped throughout the quarter. From the invested capital, we have about close to 70% of usage rate of those equipment.
Sorry, excuse me. There was a question about M&A. I remember it now. We continue focusing on M&A. Of course, we're equally cautious in terms of CapEx and M&A. In the end, we need to look at interest rates and the meaning of the M&A. We maintain our focus. We're very watchful. To remember our strategy, especially on Yellow Line, if we also look at acquisitions, it has to add knowledge in line with our strategy of premium brands, long-term contracts, and also obviously bring more know-how to the company. We allocated a lot of knowledge from Triengel, and we also hired highly experienced professionals from the market.
We want to have this view for acquisitions in the next stages. It must be in line with the strategy. Not only in the long-term contracts and premium machines, but it needs to add knowledge to the company as well.
Our next question is from Claudio Casoni, investor from the Portal Small Caps.
Congratulations on the results and the boldness of diversifying the business, incorporating the Yellow Line into your business. This acquisition increased the expectations of investors over the light equipment rental and Yellow Line performance. Does the company plan to provide separate data and information of these two business in 2023 for investors to understand and keep track of the performance of the new business? Could you give us an idea of the share of Yellow Line in net revenue and EBITDA posted in the fourth quarter of 2022? Thank you.
Hello, Claudio. Thank you for your question. As regards the separation of the business units between light and heavy, we intend to release this information together as we have been releasing in this first quarter. I believe some indicators are we share, for example, in the earnings, you can see the average age of the fleet divided between light and heavy. Financial, our goal is to show this closed, consolidated as we see other players releasing. The second question about the percentage of revenue between Yellow Line and light. When we look at 2022, heavy equipment revenue was BRL 20 million. Since we haven't yet incorporated Triengel, this is going to happen probably in May now, we have the breakdown, and you can look at the numbers from the 2022 Triengel figures separately.
As Caria said, we also had a lot of equipment arriving at the end of the year in December. The equipment of organic growth and these results do not appear in 2022 yet. The organic entry in Yellow Line will show up in the figures of 2023. 22 is still has a very small reflection.
Great. Our next question, Carlos Alberto, investor at TC.
I'd like more information about the Phoenix projects, please.
Carlos, we have released that in the earnings release. We concluded almost 95%. There's a little bit of equipment remaining for 23. It's pretty much concluded. In the Phoenix projects, there's just under 5% of assets estimated for us to overhaul all of the equipments. It will be concluded now in 23.
The next question, Pedro Gonzaga, Buy-side Analyst, Mantaro Capital.
I'd like to understand how much of the increase in SG&A in the fourth quarter of 2022 can be considered a recurring event, and what would the level of this line be in 2023?
As for the fourth quarter of 2022, we had BRL 11 million in extraordinary costs in SG&A in our earnings. We showed in the presentation that if we were to disconsider the extraordinary items, the margin would be of around 48%. These items, as Caria mentioned, are basically exceeding targets that we had in 2022. The adjustment of provision occurred in the fourth quarter. If we look in 2022, we also have the startup of the Yellow Line operation that had some additional effect on G&A. We see the G&A starting on the first quarter at more streamlined than what we saw on the fourth quarter.
We're going back to our margin, to our historical levels of around 48% in terms of our EBITDA margin.
Next question, Alexandre Assaf, individual investor.
Can you discuss the dynamics and opportunities in sectors of the economy, for example, the private agenda, concessions in the EMC sector, the Minha Casa, Minha Vida program for the real estate industry and so on?
Alexandre, I think we see it very optimistically, especially the bids already made in the last few years and the expectation of construction work for coming years. We're talking about infrastructure works. In the residential side, we have almost no positive effect. Minha Casa, Minha Vida program, we don't have a presence of or a share of the residential construction market for loading time.
We had it in the past, but now the company has been remodeled and we're focused on the industrial market and in more perennial industries. You see that we increased our presence and our share in agribusiness and the company's revenue. We're looking more at that. Obviously, we're going to surf the waves of the infrastructure works and the bids which have been done in the past.
Reminding you that in order to ask questions, simply click on the Q&A icon at the bottom of your the screen. Write down your name, company, and language. When announced, you will see a request to enable your microphone, and you will be able to ask your question. If you prefer, type your question and indicate that the operator should read it. We now close the questions and answer sessions. I will turn the floor to Mr. Sérgio Kariya for his final comments. Please, Mr. Kariya, you may go ahead.
We thank you all for participating on our earnings live, referring to the fourth quarter of 2022 and the year 2022. Our investor relations team will remain available for any questions or doubts that you may have. Thank you very much.
Thank you.