Earnings Call: Q2 2021

Aug 12, 2021

morning, ladies and gentlemen, and thank you for waiting. We would like to welcome everyone to JAKKS Primaxian Second Quarter 2021 Earnings Conference Call. Present at the conference today and available for the Q and A session are Mr. Marcos Oliveira, Chief Executive Officer and Mr. Elsio Ito, Chief Financial and Investor Relations Officer as well as Luis Abreu, Strategy, M and A and Investors Relations Director. We would like to inform you that this conference call is being broadcasted in the Internet at the company's website, www.yashpi.com.pr, and the presentation is available to download at the Investor Information section. We also inform that all participants will be in listen mode only during the company's presentation and then we will start the Q and A session. Before proceeding, we would like to mention that forward looking statements are based on the beliefs and assumptions of Yashpi Matsyen's management as well as information currently available to the company. Forward looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances which may or may not occur. Now I would like to turn the conference to Marcos Oliveira, Jaspers Primaxiom's CEO. Mr. Oliveira, you may begin the conference. Good morning, everyone, and welcome to the Yachtri Maxion result conference regarding the Q2 of 2021. Even though there were uncertainties regarding the pandemics, the result of the global automotive industry during the second half of twenty twenty one have presented a meaningful recovery in sales and production of vehicles when compared to the same period in the previous year. The demand from the main markets has been consistent, but the supply of certain inputs, particularly semiconductors, is still irregular, thus limiting the production of light vehicles and with a lower impact in commercial vehicle production. Global automotive production, excluding China, has presented an increase of 67% in the second quarter. With regards to the first half of twenty twenty, which was the hardest hit vehicle sector impacted. The growth in commercial vehicles has been noticed in all the regions where the company operates. Our net operational revenue has achieved BRL 3,200,000,000, a new quarterly record for the company, moved forward by the huge demand in the production of commercial vehicles. We have reached an adjusted EBITDA of BRL602,000,000 in the Q2 of 2021, a meaningful growth compared to the negative result documented in the previous years. Even though there is no gain in the judicial rulings about the peace coffins that was acknowledged in 20 21 and other recurring events, we would have an EBITDA of BRL404,900,000 with a margin of 12% 12.7%, in fact, which is a quarterly record for the company. Our operational results in the Q2 of 2021 still reflect a recovery scenario of the global production of vehicles regardless of the shortage of semiconductors. It also shows our operational recoveries, the restructuring conducted in 2020 and the positive effect in the diversified model of the company in its geographical locations, customer base, product portfolio and the commercial and light vehicle segments. I'm going to follow the slides containing the presentation, which has been made available in the company's website. And one can as one can see in Slide number 2, the trends for production in light vehicles all over the world show the recovery of the global market. And the projection for light vehicles in 2021 is a global production of 82,000,000 vehicles, a growth of 10% when compared to 2020 and a growth of 12% when we exclude China from the global production. The 82,000,000 units industry projected by IHF for 2021 was about €84,000,000 at the beginning of this year. One can see here that even though there is a consistent demand in the main automotive markets around the world, the limitation in availability of inputs, particularly raw materials such as semiconductors, has brought about limitations when it comes to the capacity of production. Commercial vehicles, which has been less impacted by semiconductors also shows an important growth, reaching approximately 3,700,000 vehicles in the production projection for 2021 with a growth of 25% in automotive production, excluding China. And we're getting back to the same levels of 2019 in 2021. On Slide 3, some of the main highlights of the Q2 of 2021 are listed. Our net revenue of BRL 3,200,000,000 has represented an increase of, in fact, 171.7 percent in the Q2 of 2021 versus the Q2 of 2020. Our adjusted EBITDA of BRL602 1,000,000 shows a margin of 18.9 percent in EBITDA. That also excludes gains in the exclusion of ICMS in the PISCOFINS calculation, so we reached BRL404,900,000 with a margin of 12.7%. Our gross profit was BRL 420,700,000 with a margin of 13.2%, gross margin of 13.2%. Our net debt divided by the adjusted EBITDA was 2.74 times, a reduction when compared to the first quarter of 2021 when we achieved 5.74 times. Our net income in the Q2 of 2021 was BRL 214.8 million. On Slide 4, we can see the net operating revenue and these are the consolidated results for the company and this is BRL 3,184,000,000, a growth of 1.6% versus the Q1 of 2021 and a growth of 19.4% when compared to the Q2 of 2019, which was more of a normal quarter when it comes to production and sales of vehicles around the world. Our revenue by region can be seen on the right hand side chart, where South America represented 29.4% North America, 26.5 percent Europe, 33.7 percent and Asia, once again above 10% at 10.4% of the operational revenue. On Slide 5, when we see the net operating revenue by product, we can see the positive impact of the growth of the truck segment, particularly in the Americas and the participation of structural components for commercial vehicles in this revenue, which represented 16% in the Q2 of 2020 and it now stands at 21% of the company's revenues. Aluminum wheels for light vehicles have maintained themselves quite stable at 30%. Steel wheels have faced a small decrease, particularly in function of the limitation of the production of light vehicles around the world. On Slide 6, we can see how the revenue has evolved for each segment of the company. And we can see that the commercial vehicle segment, which represented about 35% in 2015 up to 2017 on the Q2 of 2021 has reached 44% and light vehicles come in at 56% for the company. On Slide 7, revenue per customer shows particularly the business dynamics of different car manufacturers around the world. But this is to be highlighted particularly because of the growth in the segment of spare parts by the company, which represented 4.1% and now represents 6% in the second half of twenty twenty one. On Slide 8, when we look into the main regions where the company operates. In South America, we've had a growth in net operating revenue of 426.8%, thus achieving a revenue of BRL 936,000,000 in the second half of twenty twenty in the second quarter, in fact, of 2021. In 2020, the second quarter was the most impacted in the Brazilian market as well as all over the world. We can see that the Brazilian market performance when it comes to vehicle production at is listed at the bottom left hand side and the growth of light vehicles in the Q2 of 2021, a growth of 2 96% and a growth in commercial vehicles of 259%. We can see participation in the consolidated net operating revenue for the company all over the world, which stood at 15 percent approximately in the Q2 of 2020 with the high impact of the pandemics back in the day. And in the Q2 of 2021, it now represents 29.4%. Once again, this benefits the increase in sales for light vehicles, but particularly for the sale of commercial vehicles and new businesses in wheels and structural components. On Slide 9, looking into North America, we have reached a net operating revenue of BRL 844,000,000, a growth of 145 percent in comparison to the Q2 of 2020. When it comes to the number of vehicles produced in North America, the light vehicle segment has presented a growth of 132% and for Commercial Vehicles, a growth of 94%. Once again, the growth of Commercial Vehicles has been really important along the Q2 of 2021, and we can see the irregular supply of raw materials, particularly for light vehicles in North America in a more highlighted way. We can also see the ramp up in our factory in Mexico that now continues to consistently in 2021 to grow. North America represented 29.4% of our revenue in 2020, now represents 26.5 percent in the Q2 of 'twenty one. On Slide 10, looking at the European market. We can see a net operating revenue of BRL1.72 billion, a growth of 86% in relation to the Q2 of 2020. The growth in the production of vehicles in Europe in light vehicles is 88.5% and in commercial vehicles is 75.7%. Europe has been less affected in the Q2 of the previous year in relation to the other markets, represented 49.2% of the consolidated revenue in the Q2 of 2020 and in 2021 returned to the normalized level around 33.7% of our global revenue. On Slide number 11, looking now at the Asian market and other, especially India and Thailand and China that represent most of our revenue in Asia, we've had a growth of 348.5 percent in the operating revenue net operating revenue in the Q2 of 2021. We can see the recovery in India being more stronger. In light vehicles, it grew 408.2 percent. In commercial vehicles, it grew 341.3 percent in the Q2 of 2021. Thailand had a growth of around 162% in the Q2 of 2021. The growth in the region has been limited due to the surge of cases of COVID-nineteen in India. In Thailand, it decelerated the production. The growth in production in China was one of the highlights of the quarter, and the ramp up of our factory of aluminum wheels in India is ongoing. There was a growth of 239% of the volume of production in the first half of twenty twenty one when compared to the 1st semester of 2020. On Slide number 12, we reached a gross profit of BRL421 1,000,000 in the Q2 of 2021 and a gross margin of 13.2%. The increase of gross profit in the second quarter is due to the revenue growth and greater operating leverage. The first quarter the first half of twenty twenty one reached a gross profit of BRL830 1,000,000 and a gross margin of 30.1 percent 13.1 percent when compared to 1 point 4% of the first half of twenty twenty. On Slide number 13, looking at the adjusted EBITDA and the margin of the company, we reached an EBITDA of BRL602 million in the Q2 of 2021 when compared to the negative EBITDA of BRL144 million in the first in the Q2 of 2020. The EBITDA in the Q2 of 2021 was benefited by the devaluation of the option to purchase of subsidiary's shareholding of around BRL6.7 million and the net gain from the final court ruling from the exclusion of ICMS of the PISCOFINS calculation basis, which represented around BRL190.2 million. Excluding nonrecurring effects, the EBITDA of Q2 of 2021 was BRL404.9 million with a margin of 12.7%. 1st months of 2021, we reached adjusted EBITDA of BRL977 million and a margin of 15.5%. On Slide number 14, we can see the net income of BRL215 1,000,000 in the Q2 of 2021 in relation to the loss of BRL352 1,000,000 in the Q2 of 2020. Along the 6 months 1st 6 months of the year, we reached a BRL266 million profit in relation to the net loss of BRL 343 million in the first half of twenty twenty. On Slide number 15, we can see the main investments related to safety, maintenance, new product launches and productivity, which was around BRL80 1,000,000 in the Q2 of 2021 compared to the BRL85 1,000,000 on the Q2 of 2020. Along the 1st semester of this year, we've had a total investment of BRL140 1,000,000 with a reduction of 28.6% related to the first half of twenty twenty. On Slide 16, we can see the financial leverage and the liquidity ratio of the company. We've had a net debt of BRL3.982 billion in the Q2 of 2021, a reduction of from the BRL4 1,000,000,000 of the Q1 of 2021. Our financial leverage that peaked in the Q1 of 2020 was reduced for the Q2 of 2021 and we reached around 2. The liquidity ratio of the company was around 0.75x. And when we look at the short term debt of BRL1.79 billion and the cash in the final of the second quarter was around BRL1.355 billion. On Slide number 17, we can see the indebtedness of the company and the composition of this debt that in the end of the Q2 of 2021 was around 47% in reais, 37% in euros, 11% in dollars and 5% in other currencies. At the end of the Q2 of 2021, 67% of the debt is long term and 33% short term. We had average cost of 2.5 years to 4.6 years as the average term. On Slide number 18, we can see some of the highlights of ESG for the company in the Q2 of 2021. About the environment, there are a lot of initiatives. We got the responsibility environmental responsibility award from Mercedes Benz of Brazil due to the AutoSet PID machine learning in our crusader plants at Fluentes Station with a direct impact of reducing environmental risks. We're focused on machine learning and automation in the decisions of the process. We also had recognition in the Q2 of 2021. Our different customers as Supplier Excellence Award from Cienaga Industrial in South America Logistic and Quality, the Excellence Performance Award from Honda in Brazil Honda Service Award from Honda in Mexico Certificate of Achievement, Quality and Delivery from Isuzu in Thailand Supplier Quality Excellence Award from GM in U. S, Mexico and Brazil and Masters of Quality Buses Mexico from Dalmer Buses. In social aspects, we continue to improve the implementation of our initiatives related to diversity and inclusion, which is our unique and united project with the launch of our global policy of inclusion in the company. We also had a food donation campaign at plants in Brazil and where we donated 15 tons of food for needy families in cities where Yashpi Maxium operates. The positive effect of our model being diversified geography and base of clients and products and light and commercial segments, the improvement of the operational and the implementation of the projects of digitalization permits us to continue to advance and attend even better the structures of the automotive industry in conversion, in the utilization of internal combustion motors or electrification of the fleet of the global fleet. We can observe different awards and recognitions coming from our clients all over the world. Our search for global growth in the different products and segments where we operate made possible in the 1st semester of 2021 the growth of 2 37% of the produced volume in new aluminum wheels plant in India with the growth of 4 37% of production in the Stamps factory in Mexico, always related to the 1st semester of 2020. About the production of aluminum wheels in China, we continue with the construction of our factory and installation of equipment with the forecast of starting operations in the beginning of 2022. We are always attentive to the market movements and prepared to act. We will keep the focus of the strategic agenda in the long term with innovation products and digitalization as well. Consistently advancing in our productive capacity, launching new programs and aligned with environmental, social and governance systems. We would like to open for questions now. Good morning. Congratulations for the results. The first one is about indebtedness. If you have a forecast of the improvement of the debt and what's the strategy? The second question is, do you see the influence for the 2nd semester of the stock recomposition of the automotive industry? Thank you. Good morning, Catherine. Elsir here. Thank you for the question. About the indebtedness, it's important to highlight that the steps that we have been taking and how we will look from now on is the first step in the pandemic, was to improve our cash flow for around BRL 1,500,000,000. In short term debt, in some instances. We also access some long term lines with European governments. This cash is initially built due to the uncertainties of the duration of the pandemic. The second step was to refinance longer term. The first important move was the approval of the line from BNDES of BNDES140 million dollars and in sequence around BNDES $420,000,000 for 7 years. We then got the preventive approval going to the leverages that we are still very under these levels. And the 4th step here, just for us to build the timeline and the next steps, we are continuously analyzing the best opportunity in the cost benefit to improve the profile of the debt. We are much better than we were in the past with the performance of the company and leverage. And it's important to mention that in the International Capital Market, and what we pay to BNDES serve to liquidate bank operations that opened up capacity of flexibility in the bank market. And we also debut in the capital market, which can make other opportunities from now on. With this, the strategy of continuing to reduce the application of this overflow of cash and the structure of capital, we had the BMDS line of BRL 940,000,000. We paid BRL 320,000,000. So we still have BRL 6.20 to pay. Contractually, we have until February 2023 to pay this value. So we are evaluating different alternatives and options to continue to search for that. So answering to your question, we clearly have opportunities and options to continue to advance in this system, and we will always be analyzing the opportunities that are more feasible and looking for the best moment to execute. With regards to your second question, thank you for your question and your comment. We have worked along the course of the first half of the year in a strategic manner with a level of inventory that was a bit higher, particularly because of the hardships that we faced in the supply of raw materials at the turn of the year from the last quarter of 2020 Q1 of 2021, when the supply of raw materials, particularly steel as well as aluminum, was pretty irregular and we didn't have the same pace for delivery in the deadlines that we expected. Given the product mix and the raw material mix, we decided to operate at a higher level, so we were able to have the capacity to meet the demands of our client in an efficient manner. In the last quarter of 2020, we had a lot of hardships. That's why we had a large amount of over time with a high number of shifts in tools in our production lines because of the raw material supply issues. So we decided to work at higher And at the same time, we And at the same time, we have, on the other hand, a large number of changes in production programs by our customers now, given the hardships they have had in the supply of semiconductors And these changes in productions by the customers bring about certain level of instability in the type of product and the mix of raw materials that we use. Therefore, we have been maintaining these levels of inventory a bit higher along the course of the second quarter and the first half of the third quarter. Our goal between the third and fourth quarter of the year is to reduce our inventory in a more normalized manner with a consistent supply of raw materials with which we normally operate, and we operate with them at every year. The meaningful growth in automotive production this year has been a reason for the increasing inventory in raw materials to meet these high levels of production. But with the stabilization in the supply of raw materials and a better visibility with a higher consistency in the supply of semiconductors for our customers, We expect that these production programs become more consistent over the course of the second half of this year, particularly the Q4 of this year and the Q1 of next year with a more normalized level of inventory in comparison to what we normally have. Could you please be able to comment to the price dynamics in the second half and what you have seen along the Q3 of this year and what you see for the second half of this year? Well, Carinol have been very consistent since the beginning of the year to pass over costs and increases of prices in raw material as we have been doing historically and as we have been able to do historically speaking, just passing over 100% of these costs to our customers. They happen differently in each region and for each client, depending on the type of a contract and the procurement agreement we have in place with these customers. We have predefined formulas, which have a certain time lag for the adjustments of indicators like CRU or LME in the international markets or these updated prices to be reflected in our products as well as in other products in markets and regions, which negotiate these items customer by customer, product by product. Along the first half of the year, we have been applying these increases consistently within our expectations when it comes to figures and deadlines, and we believe that this is going to maintain itself throughout the second half of the year as variations in raw material prices appear. I would say that the estimates have been quite consistent and within the expectations of the company. Very good. Thank you for the answers and I wish you all of you have a good day. The next question comes from Victor Mizusaki with Bradesco BBI. Good morning. Congratulations for the results. I have two questions to ask. When we look into leverage, we see that it happens below the level of 3.5%, which shows a trend for decrease or reduction getting to 3x by the end of this year. Considering that this trend is going to continue in 20222023, What could IAS should do when it comes to new projects? Then what can be discussed about that? And when it comes to the one offs, I wanted to know about the gains in the valorization of the price option or purchase option, in fact, and the cost of reconfiguration for the Q2 and if we can expect anything else for this quarter? Well, Victor, thank you very much. I'm going to answer the first question and then Elsio is going to answer the second one. When it comes to leveraging, this was our plan and it was and still is to maintain the focus and the strengthening of our balance sheet. This is the work we have been doing in the second half of the Q2 of 2020 when this industry started recovering from the pandemics. And this repeats itself in 2021. So the focus in our balance sheet is important for the continuous reduction of the financial leveraging, and we hope that this will continue happening over the course of the next quarters. Even with the focus on the sturdiness of our balance sheet, we have been investing in the increase of our operational efficiency in the several plants we have all over the world as well as in the deployment of those plants that were in our strategic planning, such as the aluminum wheel plant in India, which is still in the ramp up period because we started in the end of 2019. We moved along through 2020, and we are still doing the ramp up in 2021, and that is still going to take place over the next quarters. We have the plant in Mexico, which is in ramp up mode as well and the main investment has been done back in the day, but we have incremental investments, which have been happening quarter by quarter. And as we increase production, we install new equipment for the increase in production and the building of the aluminum wheel in plant in China. We have moved along with the deployment of the plant with new equipment being installed, so ramp up is going to start next year. Our main focus has been in our balance sheet, the improvement of our operational efficiency, the launch of new programs and products. We've gained many of them all over the world throughout the course of last year And such programs and products are being launched throughout the course of 2021 2022. So we have investment to meet the requirements of these new programs and products. And that goes hand in hand with the organic growth in such markets and in products where we perceive an interesting opportunity, not just for a better penetration or meeting the demands of our market in a growth phase. We have invested in innovation, in advanced engineering to increase the added value of our products in the future of productivities. For internal combustion engine, this is going to remain relevant and this is going to be applicable to electric motors as well. And we have been working for these products to bring more added value to customers. And this is the focus on 2021 2022. Of course, in the future, one may be able to perceive market opportunities for us to be ready for opportunities that will arise. But this is not our focus for 2021, 2022. Our focus goes along the lines of what I said earlier. Organic growth, strengthening of our balance sheet and the problems for productivity improvement. Well, I wanted to add that when you mentioned leverage, you excluded PISCOFINS, but we are at 2.74 times. Of course, PISCOFINS has an impact. It's not an immediate cash, but it's going to be monetized over the next fiscal years. And it is linked to the interest rate at its foundation. So we're going to monetize on that over the course of the next years. When it comes to the EUR 6,900,000 in gains for the options of this kind of initiative, we have a formula, which given the results that we've had in the previous years And considering the impact of the pandemics, we have had this devaluation in the purchase option. So we have seen the same impact last year. So this happens on a yearly basis. It moves up or down depending on the results and this happens on a yearly basis. When it comes to the internal restructuring data, we have mentioned that most of our restructuring process was conducted last year. So this year, we are conducting the Arco plant and the closure of that plant is moving along quite well. So we expect less and less impacts as a result of that topic. We're just monitoring the large number of activities that we started last year. Excellent. Thank you very much. Ladies and gentlemen, to ask your questions, please type. The next question comes from Guilherme Nunez by CondorInsider. Hi, everyone. Congratulations for your results. I wanted to ask a few questions. The first one has to do with your idle capacity. Do you see many of your customers with raw material issues or maybe some kind of downtime, particularly in Brazil. Some car manufacturing companies have announced that, and we wanted to know how you perceive that. And another thing has to do with the Mexico scenario that you announced recently, where you wanted to have an agreement of around EUR 150,000,000, if I'm not mistaken. Have you updated any of that? Good morning. In relation to the utilization of the capacity, it's very diversified depending on the region and product, So it varies a lot quarterly actually in function of the demand and eventual parallelization that our customers have. In average, we have around 75% to 80% of our capacity. In some plants, it's over that and others under, but we have a good use of the capacity. We obviously react swiftly to these variations, but normally in most of the cases, our productive processes are not aligned to a determined product from a certain client. They are flexible. So we use the same line to produce different products for different customers without we have to change some tools seldomly, but it's flexible and it allows us to adjust our production with the demand on the market at that time. When the client A produces more or client B produces less, we have adjustments to make and tool changes in line speeds and other instruments that we can use without need to stop the factories, different to other manufacturers or producers that have no alternative when the term in the raw material lacks. Obviously, when it's needed, we use holidays or our banks or other instruments for certain parts of the factories, so we can avoid the total parallelization of the factory. But some processes or some parts of the factory can be stopped. So the flexibility of our factories and our processes allows us to adjust in an efficient way without the need of complete stoppage of our industrial complexes. Good morning, Eelsio here. Thank you for the question. I'd like to recap this Mexico issue. This is a relevant topic that we publicized on July 14. About 2012, the Mexican authorities are questioning the interests with acquisition of Imaguse and the intercompany action involving so this the value is around BRL 606,000,000 in December 2020. The law advisers see that the chance of exit of success is probable even though we have no forecast, but we have the disclosure and the form related to 2020. And now we are looking for other ways in the administrative sphere. Avoiding expenditure with lawyers and guarantees that need to be set here in our defense, we see that the best way would be an agreement so we can finalize this issue. It's important to highlight that there was no alteration in the position of our lawyers. We stand at probable. It's more likely than not. So we made a proposition. We advanced in the process with a potential agreement in the 2nd semester. We had a proposition equivalent to BRL 150 1,000,000. It was not controllableized as forecast with this potential deal. We are still waiting for the response of the Mexican authorities and we believe that the conclusion is possible to happen within this year. So there was no actual evolution in effect so far. If the authorization doesn't come, the company will go to the law sphere to search for our interest as we understand with our lawyers that this is what we should do. Thank you. Next question is by Jonathan Coltrus by JPMorgan. Good morning, Marcos, Elsio. Thank you for the questions and congratulations for the result. The decrease in the margin by segment, there is a significant difference and we want to understand that larger price mix in the commercial. And the second question is the semiconductors with the new capacity in Brazil. So I'd like to hear from you, what do you hear from your customers outside Brazil if there is an estimate that is reasonable? Thank you. Good morning. Thank you for your questions. Normally, the commercial vehicle segment has average margins slightly superior to light vehicles in our case. So about the mix, a greater participation in growth in the commercial vehicles is positive for us and we thanks for that. But the margin varies a lot from product to product even inside the segments and by region. In a general way, the mix is positive for us. We've seen growth in the participations, in commercial vehicles that back there was less than 40% and now it's more than 40%. So this is positive and we expect for it to continue to be positive. About semiconductors, the visibility issue in the supply of semiconductors for the manufacturers improved in relation to the end of the Q1, but there is a lot of uncertainties from our customers. So we are in constant contact with different manufacturers in Europe and Americas, Asia, all over the world. We see that even in the short and medium term planning, there are still adjustments to be made. We seek to keep the flexibility in our factories to see for that and the situation we believe that will gradually improve within the next months. All the industry indicates that this is a situation that will not be completely solved until 2022 due to the new capacity of chips and semiconductor manufacturing all over the world. So this is a gradual improve due to the better visibility and the planning of the customers. But at the same time, we know that this is still possible to affect the industry, maybe in lesser dimensions along the industry maybe in lesser dimensions along the 4th quarter of this year and gradually improving in 2022. Our only alternative is to keep the flexibility and react swiftly and be prepared to eventual changes in mix from 1 product to another or 1 customer to another and try to optimize the operational leverage of our factories. Perfect. Thank you. Good morning. Next question is by Eric Delaney. Good morning, guys. Congratulations on the results. I would like to know to which factors you see the improved EBITDA margin to 12.7% and if we can expect margins in this level for the next quarter? Good morning. Thank you for your questions. So I'll start and Marcus can complement here. We had a positive margin with all the challenges that we are facing. But it's not a simple explanation of one item, it's a combination of several factors. First, we just talked about the mix. This is a positive theme for the margin. The average ticket for commercial vehicles is much larger. So the margin in light vehicles helps us in this process. It's important for us to start the process of adjustments and the restoration that we did last year so we can gradually have a positive weight on the results on the profit margin. And we have several impacts occurring at the same time. So the business model is very diversified in our company. And we saw that last year, North America recovered very swiftly. And in Brazil, we are taking step by step. When you see the scenario today is inverted, South America is much faster in the Q2 and North America is focusing on the semiconductors. So we are very eating due to the geographic regions and commercial segments. So the flexibility, we are well, but it depends on the market. It can go to commercial or to light, but according to our capacity and our management, we are very timely acting. So there's a group of factors and there was also a question of execution and the price setup. In a consistent way, we have been seeking the best results in the recomposition of the cost that is increasing and we can see clearly this on the commodity market. So this is a result of several aspects. So saying how it will behave, it depends on the development of the industry and of the mix that we see and the maintenance of these issues that we trust here and the timing issues maybe a little more, a little less and the cost setup continue to rise along the Q2 and we have this effect on the 2nd semester. I want to reinforce in here what we said about volumes and how this has an effect. We have a large operational leverage as a company. As volumes pick up, we improve our operational execution efficiency. In the first slide that was shown in the presentation, a little bit of the effect of semiconductors with an impact in offers right now. The demand that we hear from several places, the demand remains present because of all other macroeconomic effects with impact in global economy. So demand is still there. Looking into the scenario like we have today with light vehicles, commercial vehicles and so on, the expected growth for 2022, considering the semiconductor situation, we expect a growth of 12% in light vehicles and 14% in commercial vehicles. That excluding China, because China starts having a higher relevance next year, but it's still small in the whole. But this is meaningful in the growth of volumes and the operational leveraging of the company. Yes. I think that one more thing. Elsio has summarized the situation quite well as a whole. The effort in improvement in gain for productivity and compatibility for our plants is constant. This is something that we never stopped. We do that consistently. And the goal is for us to be able to launch new capacities with better margins and better results and maintain this capacity, agility and flexibility to absorb any any oscillation and variations in demand without a large loss in operational efficiency. And the team has been doing a great work throughout the course of this year in managing the surprises and ups and downs we have seen. And we have a positive view on 2021. Even though there are uncertainties and questions, our general take on the year is positive because initiatives deployed along the course last year, restructuring and actions that are still being implemented this year have been effective and they have worked the way we expected them to. And that's why we maintain a positive spin on this year. And particularly looking into the industry volumes, as Ashi mentioned, with the growth of 2020 more in comparison to 2020 and the forecasted growth for 2022. We know that global automotive demand is consistent, and it remains high in South America, North America and Europe. And that demand is not being met by the limitation in the capacity of manufacturers given the semiconductor scenario. But this demand will have to be met along this year and next year. So this gives us this positive and constructive take on the industry and the company itself. We now conclude the Q and A session. We would like to invite Mr. Marcus for the final remarks. Well, thank you all very much for being here today with us. I believe that this ratifies what we said in the beginning of the presentation. The positive effect of our business model, which is diversified in different geographies and customer database, product portfolio, light and commercial segments, the improvement of operational efficiency, the deployment of innovation and digitization processes enables us to move forward in meeting the current and future demands in a better scenario for the industry of mobility and the automotive industry. We'll keep paying attention to the market movements and the dynamics of these market segments, and we will act in a timely manner. We will keep focusing on our long term strategic agenda with innovation and digitization processes moving forward in the efficient use of our productive capacity, the launch of new products, new programs and always in line with environmental, social and governance items. Thank you very much, and we wish you all a very fruitful day. The Ashby Maxim conference call is concluded. Thank you very much for your participation and have a great day. 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