Good morning, everyone. Welcome to Marcopolo's conference call to discuss the results for the third quarter 2026. Today's presentation and remarks will be delivered by André Armaganijan, CEO, Pablo Motta, CFO and IR Officer, and Eduardo Willrich, Legal and IR Manager. Please note that simultaneous interpretation is available on this call. Simply click the interpretation button at the bottom of the screen and select English. This conference is being recorded and will be made available on the company's investor relations website, ri.marcopolo.com.br, along with the presentation materials shared today. All participants will be in listen-only mode during the presentation. After that, we will begin the Q and A session when further instructions will be provided. Before we proceed, we would like to remind you that any forward-looking statements made during this call are based on Marcopolo's management's current beliefs and assumptions, and on information currently available to the company.
These statements may involve risks and uncertainties as they relate to future events, and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should be aware that a number of factors related to the macroeconomic environment, the industry, and other relevant conditions could cause actual results to differ materially from those in the forward-looking statements. We'll now begin the presentation by turning the floor over to Pablo Motta. Please, sir, you may go on.
Good morning, everyone. Thank you for joining us for our third quarter 2026 earnings conference call. Let's move on to slide four, where we'll begin with the highlights. In this quarter, Marcopolo reported consolidated net revenue of BRL 2,293.5 million, with 52.9% coming from the domestic market, 30.7% from international operations, and 16.4% from exports from Brazil, which reached BRL 377 million this quarter, up 3% compared to 3Q 2025.
The industrial segment net debt to EBITDA ratio remained at the same level as in 2Q 2026, 0.3x , even after the payout of BRL 161 million in dividends and the repurchase of more than 3.3 million preferred shares under the share buyback program approved in August. Let's move on to the next slide. In the first nine months of 2026, Brazilian bus production grew 0.8%, driven by the minibus segment, which is up 48.4% year-to-date, while the city bus and coach segments declined 15% and 16%, respectively. In 3Q 2026, Brazilian production fell 7.1%, with a 16% decline in the city bus segment and no significant deliveries under the Caminho da Escola and Caminho da Saúde programs. Next slide. In the quarter, Marcopolo's production for the Brazilian market was down by 20.4%, while production for exports from Brazil increased 5%. Production at international operations fell 59.3%.
Compared to the same quarter of 2025, the decline was associated with the absence of significant minibus production for the Caminho da Escola program, as well as the contraction in the Brazil city bus market. International operations, particularly in Mexico, Argentina, and South Africa, continue to report significant volume declines compared to 2025, while Australia remains the main positive highlight of the year. Next slide, number six. Looking at the net revenue breakdown, coach segment declined due to lower volumes in Argentina and Mexico, while the city bus segment increased its share of revenue, driven by higher deliveries of high value-added products in Australia, which accounted for 64% of revenue from international operations in the quarter. Let's go to the next slide. Consolidated gross profit reached BRL 464 million, with gross margin of 20.3%.
The decline in gross profit and gross margin mainly reflected operating deleveraging resulting from lower volumes in Mexico, Argentina, and South Africa, as well as reduced manufacturing efficiency associated with fewer deliveries in minibuses and city buses in Brazil. Profitability was also affected quarter-on-quarter by the appreciation of the Brazilian real against the US dollar, which impacted exports, and by raw material cost increases that exceeded the levels anticipated when sales were made. EBITDA totaled BRL 274 million in 3Q 2026, margin of 12%, affected by the same factors that impacted gross margin.
In addition, during the quarter, Marcopolo recognized restructuring costs related to operations in Brazil and Mexico, with a non-recurring impact of BRL 19.9 million in 3Q 2026. Consolidated net income was BRL 186 million, with net margin of 8.1%. Now, I'll turn the floor over to André, that will discuss market conditions and the outlook for the remainder of the year.
Good morning, everyone. We are going to start with the coach segment. In Brazil, volume growth during the quarter can be given to the effects of the Move II program, which temporarily made more affordable interest rates available. This reinforced our view that there is pent-up demand awaiting for lower interest rates before committing to investments. Order book visibility is limited due to purchases potentially having been brought forward to 3Q 2026. In the city bus market, the decline in volumes continues to be associated with diesel prices and operators' difficulty in passing on costs. In the short term, recovery depends on restoring the economic and financial balance of municipal fare structures, although the pace of this adjustment remains uncertain.
The segment continues to offer significant fleet renewal potential due to the fleet's aging. In the minibus segment, we began progression under Phase 13 of the Caminho da Escola program, following the approval of models representing potential sales of 5,210 units. An additional 2,000 units are still awaiting a decision by the Brazilian Federal Court of Accounts. Next slide. In international operations, Marcopolo Australia has established as the year's main highlight, with growth in volumes, revenue, and earnings in yet another record quarter. The operation maintains a substantial order backlog, favorable product mix, including electric models. Projected volumes for 2027 are lower than 2026, following the completion of recent bidding processes. Marcopolo Argentina, after the restructuring of the second quarter 2026, is monitoring signs of a potential recovery in the local market starting in 2027.
The company continues to believe that pent-up demands for fleet renewal could drive demand in the coming years as macroeconomic conditions become more favorable. Like Metalsur, Marcopolo Mexico is also undergoing restructuring and adjusting its workforce to the current level of activity given the challenging market environment and no prospect of a recovery in the short term. Marcopolo South Africa, in turn, recorded volumes below those recorded in the same period 2025 and continues to adjust its structure to current market conditions. In exports, traditional markets such as Peru and Chile remains among the main destinations of our buses. In the third quarter, as Pablo mentioned, the appreciation of the Brazilian real against the US dollar continued to put pressure on export profitability, as we also saw in 2Q 2026. Next slide. Market conditions remain challenging, with high interest rates affect customers' willingness to renew their fleet.
Limited demand visibility combined with idle manufacturing capacity is leading to structural adjustments across Marcopolo's Brazilian and international operations, particularly in Mexico, Argentina, and South Africa. These adjustments also take into account the cost impacts of changes in work schedules and the potential effects of the tax reform, which will require a period of adaptation to new rules. Marcopolo remains focused on preserving and strengthening its competitiveness, both in the short term and through its long-term strategic initiatives, while prepared to capitalize on fleet renewal opportunities as market conditions become more favorable. We can now move on to the Q and A session.
We will now start the Q and A session. If you have a question, please click the raise hand icon at the bottom of your screen. Our first question comes from Lucas Laghi from XP Investimentos. You may go on.
Hello. Good morning, everyone. I have two questions on my side. The first is how you see the exchange rate effect depreciation after the elections as a mitigating factor of a weaker domestic market. Should we see a positive effect in the fourth quarter considering the exchange rate, especially thinking of margins in exports? I think this is the first point. My second point is about the structural adjustments, restructuring costs, adjustments and capacity. Do you have a perception that the bus body industry today is more rational than it was in the past?
When we had the market boom, there was a lot more capacity, but now it seems that the industry as a whole is more rational. How do you see a possible adjustment in structure for competitors? Do you think there is more capacity to be limited in the market? What have you been doing? Does that help mitigate higher interest rates and a lower domestic demand? So, two points: implications of exchange rates and possible adjustments in structure by competitors because of a weaker domestic market. Thank you very much.
Thanks for your question. Are you going to start talking about the exchange rate, Pablo?
Yes. Hi, Lucas. Thanks for your question. Let's talk about exchange rates. I think Marcopolo, historically, has always benefited in scenarios where FX was a bit more resilient. Indeed, if you take a look into the context, we have international markets with pent-up demand. This is a main focus of ours internally, that is, to effectively capitalize in this context since, at least in the policies that we have on site, we do not see in the short term a more appreciated FX. So, that enables us to work with better margins in exports.
I think this is a positive context within the environment of the past two weeks and the macroeconomic movements that we observed. Talking a bit about adjustments in structure and capacity, I will talk a bit about the movements we are making, and then I will turn to André to talk about the competition environment and those lenses on the market. But talking about what we have been doing, I think that we have to have discipline in capital allocation. When we see a scenario that is a bit more challenging in the short term, we have to work to have our operation running at the best possible manufacturing efficiency with structure and costs that are suitable to the level of activity. This, I think, is a point that we have been working on very hard in recent years.
Right now, this is again put forward and put to test in our initiatives. Also, whenever we talk about structure, we also talk about how to make the most optimized structure. So, it is not only adjusting to a reduction in demand in the short term, but also thinking of how to make adjustments more and more long-term, thinking of our results in the long term as well. André, can you add, talking about the competition environment?
Sure. Thank you, Pablo. The market scenario, Lucas, and thank you for your question, indeed, the market has been growing quarter after quarter, and now we see a reduced market, especially in the second half of this year. Clearly, all players with some idle capacity, and this is a movement that is the opposite of what we saw in recent years. So, Marcopolo is taking the lead and making the necessary adjustments.
This shows our concern with capital discipline, profitability, and shows that we are thinking in the long term because the scenario is still uncertain. So, it is the best time for the company to anticipate a move that I believe is going to be for the whole of the market, seeking to optimize our assets and indeed improving profitability and having more capacity to recover market share and revenue growth. So, our competitors, we still have not seen a reduction in terms of structures. We do see some companies starting to make announcements, some shutdowns for some periods, some went on a collective vacation.
But we are doing our homework, we are looking into the market, and we believe this is the time to seize the opportunity and adjust the company, become more competitive. This has been what the company has been doing historically. The company has the resilience to do that, so to speak, and certainly with more competitiveness, we can recover our numbers, which is what we seek as an organization.
Very clear. Thank you very much, André and Pablo.
Our next question comes from Lucas Marquiori from BTG Pactual. Mr. Marquiori?
Good morning, and I also have two questions. First, thinking of your portfolio, and what you showed in your presentation about coaches and city buses, I would like to know what is production like for the coming quarters, fourth quarter, first quarter 2027, with the results of the auction of Caminho da Escola, you are going to have some differences. To talk a bit about the mix of your production lineup for the coming months. The second question, I think, is to try and understand from you what you see as a margin run rate of the company today.
For some years, we talked about the high teens, 18%, 20% in the 12-month window, and now we are seeing this going back to the pre-2022 levels. I see that you are adjusting capacity. You have shown some of these adjustments also in the beginning of this decade, cutting capacity. Just for the market to have some reference, what do you aim at internally? What should we interpret as a sustainable run rate in terms of company margin for the coming years, internal rates and targets, just for us to have as a reference?
Thank you very much. Hi, Lucas. Thank you for the question. I am going to answer part of it, and then I am going to turn on to the team. The portfolio, Lucas, we are talking about two months in terms of backlog. So we are starting to bid the backlogs for the beginning of next year. What do we see in the fourth quarter, which is usually a quarter with stronger seasonality? We do not see it as strong. We did mention that in the release, Move II anticipated part of the purchases.
Yes, in the two months backlog, thinking of mix, coaches already driven by purchases in the third quarter, and minibuses is a driver of growth. We talked about Caminho da Escola, the units we were awarded. Thinking about the beginning of the year, where you generally have lighter vehicles being produced, and our trend now mostly triggered by minibuses, I think this is what we see for the beginning of the year in the company. I am going to turn to my team to answer the other questions.
Hi, Lucas. You know the backlog was something that I was going to mention, but André already mentioned that. Talking a bit about margins, when we take a look at the quarter as a whole, we delivered EBITDA margin of about 12%. In a very challenging scenario within the quarter, we had a volume of buses because of the delay of Caminho da Escola brought significant costs compared to previous quarters. There is also the inflation impact. The war in Iran, the increase in diesel prices, and therefore, in the whole of the chain, especially in oil byproducts, we did have an impact in this process. We also have FX and the appreciation that caused exports to be affected. We had not seen that in previous quarters. It was quite a challenging quarter, and we still, we were able to deliver margins in the realm of 12%.
When you think of plants in practice, international operations, as we saw this quarter, Argentina, Mexico, were quite affected. This is a context that everything that was bad happened simultaneously this quarter, and that led to a profitability level way below what we have in terms of our targets. Again, we do not release guidance for the market to tell you what our EBITDA margin is going to be, but within this context I mentioned, the potential of deliveries is much more in line with what we delivered in previous quarter than what we reported in this quarter. Thank you.
Thank you very much. Have a good day.
Our next question comes from Gabriel Tinem from Santander.
Good morning. My first question is going back to your restructuring. If you could give us a bit more color at what stage you are in each geography, Brazil, Marcopolo South Africa, Marcopolo Argentina, and Marcopolo Mexico, and when do you expect to have addressed it all? The second point is more about the Caminho da Escola program. You talked about 500 units. Could you go back if those were effective deliveries for the fourth quarter, or was it tending to 2027? Also talking about the Caminho da Escola cycle, what kind of volumes do you expect from 2026 to 2028? Thank you very much.
Hi, Gabriel. I will start answering here. I am going to answer it quickly, and then I will turn to you, Pablo. We, in Brazil, we started this movement in the third quarter this year. There are still things to be done, thinking of our view of suiting the company, as we mentioned, to be able to optimize our structure more and more. To have a more efficient structure, starting with a lighter mix. We are looking into all that. We believe we still have an opportunity to continue the restructuring process. That is short-term. We do not want to take too long. In international operations, those adjustments were being made as needed.
Marcopolo Argentina had two different times, in Mexico as well, South Africa. All operations, as Pablo mentioned in the beginning, show that the company is very much focused on profitability, optimizing assets, and have discipline in capital allocation. We are making adjustments. I think most of it has already happened in external operations, perhaps it all. In Brazil, we still have some fine-tuning, but that is what we have today. Thank you.
Hi, Gabriel. Good morning. Just to add to what André mentioned, when we talk about impact on results, we are going to still see a representative balance in the fourth quarter, especially because part of the moves have not been captured in the third quarter and will in the fourth quarter, especially thinking of the Brazilian and Mexico operations. The movements are being made, as André mentioned, but in terms of results, we are going to see that the third quarter just captured part of it, especially when you are talking about a larger movement. Brazil and Mexico will have a greater impact in the fourth quarter. As for the Caminho da Escola program, the 500 units should be invoiced in the fourth quarter. We have to actually wait for production and the pace of deliveries.
We cannot confirm that, but this is an expectation to deliver the 500 units, which help us a lot to fill the backlog in available lines. We are expecting to have more intensive deliveries in line with what we said on Marcopolo Day. Remember, 2,000 units are still pending of the audit court, and the units that are confirmed are already being produced. Thinking of Phase 12 of Caminho da Escola, the volume basically took two years. Historically, the program will have 85%-90% of the volume, but we are expecting two years of deliveries. There is no guarantee, of course, but we could accelerate deliveries for the first year and leave the remainder for the second year. That will depend on cities, states, and the federal government. Nothing that we are saying is a given. These are just potentials of the units.
It depends on how the different cities, states, and the federal government behave.
Very clear. Thank you very much.
Our next question comes from Gabriel Rezende from Itaú BBA. Mr. Rezende?
Hi, André , Pablo , Eduardo. Good morning. I would like to talk a bit further about margins. Two points more specifically. If it makes sense, then you can open to us what you see in same models dynamic. So margins of the models this quarter compared to last quarter, compared to last year. There are many things that affected the company on a consolidated base. You had the operational deleveraging, you have a different mix, but I would like to understand a comparison model by model. Also the price dynamics, that is, how much price has been a negative driver, a neutral driver, or a positive driver. To understand the dynamics and what to expect in terms of pricing dynamics in Brazil and in the foreign market for the coming quarters?
Thank you, Gabriel, for the question. Let's talk about the pricing and cost dynamics. I think that when we compare quarter-over-quarter, what we see is the following. First is that the current context shows a reduced demand, which is always an additional challenge for all body makers, especially when you are talking about the Caminho da Escola program, because Marcopolo, together with Volkswagen, wins most of the units that we have in the auction. You have a scenario of lower demand with competitors with idle capacity. Then, just naturally, there is a bit more of a price war. This is something that we see in minibuses and city buses.
In this context, the current reference is still not a price war, but a scenario when we have a further challenge that competitors are doing their homework to have some kind of sustainability. This point of balance is what we are trying to see within this market and somehow we are seeking to organize ourselves for us not to have the need to go into a price war. What we see in terms of businesses, thinking of our backlog, is that we are going to see this year Caminho da Escola with margins slightly below what we saw in the previous auction. This has much to do with a more competitive environment. We saw that in the auction, and we talked about that, the margins in the standard bids were slightly below the previous auction.
When we talk about coaches, we see that the level of profitability for the company is maintained. We are being able to sustain product differentiation and indeed make sure that customers are happy with our products to even think of new purchases. In the external market, perhaps, the main factor here is FX. We see an FX that enables us to have prices in dollar in line with what was expected, as we have a real that is a bit more depreciated. The level of profitability is similar to what we had before. We do not see much pressure in terms of external markets in the segments we export.
I think the main challenge now in the short term, in terms of profitability, is to indeed see how the domestic market is going to behave because of a lower demand that we see at least in the past weeks. This is not something that is going to be sustainable in the long term, because again, we have pent-up demand and we have a huge potential in this segment. But it's a matter of what is going to happen in the macroeconomic environment, the level of interest rates, and customers' appetite .
Gabriel, thank you for your question. We also have to take into consideration that 1/3 approximately of the company's revenue came in 3Q 2025 from international operations. When we compare results, we see that Mexico and Argentina were very relevant at that time, and that explains a bit about the pressured margins this quarter, a substantial drop that we had at least in this quarter of more than 50% volume. This is natural for the operational deleveraging. We have the issue of prices and costs that is more clear in the internal market, but we cannot forget how relevant Mexico and Argentina were last year, and that affects the comparison year-on-year.
Very clear. Thank you very much.
Our next question comes from Andressa Varotto from UBS.
Good morning. Thanks for taking my question. I have two. First, talking about international operations, I think some lines in some countries we did see an additional deterioration for the third quarter. I would like to know your outlook for each market, and perhaps with a focus on Marcopolo Argentina, which is a very important operation for the company, and next year we have elections in the country. What are your initial expectations with regards to a potential recovery of the market or not?
Also a quick follow-up on margins. The second, third quarters, we did have a variation of volumes, mix, operational deleveraging. From now on, despite still weaker volumes with Caminho da Escola coming back, I think we are going to have more of a normalization in terms of mix. In this scenario, talking about the very short term, does it make sense to work with these levels of margins, especially gross margins for the third quarter? Thank you very much.
Thanks, Andressa. Thanks for your question. I am going to start talking about Argentina. When we take a look at the market scenario in Argentina, we see that at least for now, in the short term, the exchange rate in the scenario of the Brazilian real devaluation has generated good expectations of operators in terms of an increase to routes from Argentina to Brazil in the end of the year.
That already starts to show signs of recovery, at least a higher demand than what we saw. Renewals, remember that the fleet in Argentina is very much aged. What we want to know is how much that will translate into results for the very short term. In terms of vehicles being produced and already produced, we would like to know how much additional demand we should have at least for the coming year. Brazilian elections also affected Argentina. It was an environment that showed that there are some challenges for administrations to be kept. You have the structural reforms of Argentina since 2023, so that is a context that is just an assumption.
But we hear more and more from our clients that that may bring an even more challenging credit scenario for next year, when you are putting into check the continuity or not of the current administration. In the short term, a weakened real in Brazil has increased tourism levels, and that can generate additional demand, at least for the end of the year. For the longer term, we have to await these coming weeks. We know that the consequence of elections in Brazil put into risk continuity of the Argentinian administration. In terms of other international operations, we indeed see a challenge in Mexico.
Mexico is still a scenario that demands a level of attention. It is a market that is being very much affected. The bus market in Mexico has demand way below expected, and this is a context of the customers delaying investments in fixed assets. Basically, within each renewals, just to assess the geopolitical environment, the relationships with the U.S., how this is going to go in terms of negotiations. Mexico, we do not see a very clear scenario. It is a challenge, and that is why we are making restructuring initiatives. Again, in the context where dialogues are resumed between U.S., Canada, and Mexico, we will see an appetite for renewal. We just have to wait and see what happens.
In terms of margins, talking about the Caminho da Escola program, as we see a higher volume of Caminho da Escola buses being produced next year, we will see a higher operational leverage. This is a product that, within the volumes that we have in terms of potential deliveries, enables us to have better operational efficiency because there is a higher replicability between one product and the other, which is our greatest challenge. After the pandemic, the amount of orders that are repeated are very low, and so we are almost producing one product different from the other. Now, with this volume of Caminho da Escola buses, we are probably going to have an improvement in competitiveness due to operational efficiency.
The answer I gave before, when you take a look into margins, we still cannot tell you how much margins are going to be better, and we do not disclose margins guidance. We do have a very positive outlook as we have this product being produced in these expected volumes. These are effects that will help us improve our margins, and these are all effects that we did not see in the third quarter.
Very clear. Thank you.
Our next question comes from Gabriel Frazão from Bank of America.
Good morning, everyone. Thanks for taking my question. I have just a follow-up about more price competition. If you could share with us why this is very much concentrated in the sector of minibuses, and you do not have that much in seat buses and coaches that also have weak demand. If the competitive environment is more and more focused on prices, how do you consider the trade-offs between defending market share and keeping the company's profitability?
Hi, Gabriel. Thanks for your question. [Non-English content] Price competition in minibuses has to do with the volume that has been produced for the Caminho da Escola program. You see that a substantial part of minibus production, more than 50%, is directed to the Caminho da Escola program. Since the end of 2023 onwards, there was a certain uniformity in the industry. That is, in Phase 12 auction, part of the volume was manufactured in terms of the bodies by one manufacturer and the other half by two manufacturers. That became constant from the end of 2023 onwards, almost all quarters.
The dynamics changed in the first quarter of 2026 with a huge reduction of Caminho da Escola and the new auction of Phase 13. The volume of minibuses in 2026 are no longer connected to Caminho da Escola only, but rather Caminho da Saúde. It is a high volume, and in the Caminho da Escola, Marcopolo concentrated 100% of the volume. At least for this quarter of 2026, the industry had a very low volume of minibuses in the first quarter. In the second quarter, Marcopolo concentrated most of its deliveries in Caminho da Saúde, and the competitors had to be more and more aggressive to capture whatever market still existed. They have installed capacity that from 2023 onwards was used to produce a relevant portion of Caminho da Escola, and as of 2026, that no longer existed.
That is why we saw more competition, because competitors had to capture the retail market, smaller auctions, private customers, significant volumes, but very small compared to Caminho da Escola. With the results of Phase 13 of Caminho da Escola, that becomes even more evident. When Marcopolo directly or indirectly is awarded 100% of the volume, competitors will have to go to market and capture some of it. Because again, they are having idle capacities because of the buses they used to produce for the Caminho da Escola program. Competitors will have to adjust in terms of volumes and capacity with the absence of the Caminho da Escola, with a projected time period of two years.
We are going to have a natural accommodation of capacity, but part of this movement will also be more aggressive prices in whatever demand there is outside Caminho da Escola program, retail, the private market, and smaller auctions. That generated prices more aggressive. That is also concentrated in the third quarter because not even Marcopolo had the volumes of Caminho da Escola. We were still awaiting. It is not only the competitors, but even Marcopolo, Volare, we did not still have the numbers because of the transitions of makes and models. But we did have the capacity to be filled.
We saw a substantial drop in volumes in minibuses in the third quarter. We had a drop in city buses and coaches, but not as substantial. Coaches and city buses are products with higher differentiation. Marcopolo really stands out in the segment, and therefore can have a bit more stability in terms of market share and value than the market as a whole. [Non-English content] ]
Thank you, Eduardo.
Our next question comes from Andre Mazini from Citi.
[Non-English content ] Hello, good morning, André, Pablo, Edu. My first question is about the BRL 20 million in terms of restructuring expenses the company had in the quarter. Are there still relevant measures to adjust costs to be implemented? What would these additional adjustments be? That is my first question. The second is a follow-up. EBITDA margin was 12% in the quarter, the lowest level in a while now. How much of this pressure on margins the company believes is temporary because of mix, volumes, et cetera? How much could be a new level of profitability if volumes do not resume soon? Thank you very much.
Thanks for your question, André. Good morning. I will talk about adjustments in line with what we mentioned before. We have a scenario that in the third quarter, we had approximately BRL 20 million recognized. Along the fourth quarter, you are going to see also a substantial amount. This data is still being worked on because adjustments are still being implemented. We are going to concentrate these movements in these two quarters, third quarter and fourth quarter. We will see an impact in company results also in the fourth quarter. In terms of margins, this is a bit of also we commented before.
We have a quarter in which we have some negative factors, higher operational leveraging, inflation environment, especially because of the war against Iran that affected our supplies and components, especially oil byproducts with the injected line effects, and the effects of Argentina and Mexico that really makes demands to be a lot lower than they were in the past. All these factors together this quarter led us to this margin of 12%. When we analyze the scenario in a broader way, we see the potential to generate better results does exist.
We never had a quarter with all these negative factors together. We effectively believe that there is a potential to improve margins, at least at this level. Again, respecting the fact that we do not disclose any guidance, so we cannot tell you what the target is going to be, but we understand that we are going to be closer to what it was than what we had this quarter. Other quarters, we had lots of factors that helped us improve this result.
Very clear. Thank you.
Our next question comes from Daniel Federle from Bradesco BBI.
Good morning, everyone. Thanks for taking my questions. I have two follow-ups. First, the international market. If you could explain what is Marcopolo's strength in Argentina, Mexico, and South Africa? Because I understand the macroeconomic scenario is challenging in this market, but a drop of 80%, are you giving away market share? The second follow-up in terms of the seasonality of coaches in 4Q. You did say that you had some anticipated sales. Do you think seasonality is going to be weak? Is the fourth quarter going to be weaker than the third quarter?
Daniel will start answering, and then I am going to turn to the team. Talking about the market you asked, Mexico is a market in which we traditionally have lower market share. Among all operations, it is the one that we have the least share. Along with an industry that did have a huge drop. Operators were very much uncertain with U.S.-Mexico relations and did not make investments. Significant drop, especially with city buses, in which we have good strengths given the partnerships that we have. This is a market in which the brand is consolidating. We are developing and investing in local products, especially G8. When we take it to the market, we start to strengthen our position.
We are strengthening our commercial position, but there is a lot of work to be done. We did mention that during the call, we have to seize opportunities to restructure the company and grow in a market that was relevant for the company in terms of results before. South Africa, the industry also had huge drop. We are keeping a good market share. We are market leaders where we operate. Indeed, the drop was for the whole of the industry. We saw the drop happen, and we were very fast in adapting our structure to the market drop. The operation is healthy, generating cash, but we are monitoring the operation. It is not a substantial market share drop. In Argentina, it is the same thing. The market was very strong last year, especially the year before last.
Lots of renewals, clients, because of our presence in the market, because we have had a plant in the country for many years, because of our after-sales services, vehicle remodulations. These are all advantages. We can work with our production in Brazil and Argentina. This is always something that the market sees with good eyes. Of course, when there is a drop in the market, some clients can buy from the competition. If you think overall, we are not losing market share substantially in these markets. It is a drop in the industry as a whole, in the bus industry, and we are adapting. Nothing more than that.
I think it is a lot more in terms of opportunities that we see ahead, in terms of upside, market recovery, and we are going to be with a leaner structure, a good relationship with customers, new products developed in the time the market was not growing. All that should help us when the market picks up.
Hi, Daniel. This is Eduardo speaking. In terms of the coach market in the end of the year, we always have the benefit of seasonality in the fourth quarter. It is traditionally a very good quarter. As we highlighted, we had also the Move II program that anticipated part of the sales that could happen in the fourth quarter to the third quarter. The reflex of the Move II program is still there. We still have deliveries of the program in 4Q, but we should have constant production in the coming months, and eventually, the effect of this anticipation, but perhaps this should be more evident by mid-November, December. We do not have full visibility. We are working week after week, but observing October and November, we see constant movement. As of mid-November onwards, perhaps a reduction.
Very clear. Thank you.
Our next question comes from Marcelo Motta from JP Morgan.
Good morning. I have two topics on my side. If you could talk about how you see capital allocation, especially the breakdown between share buyback program and dividends. You have been keeping the payout of 50%. I do not know if a tougher market, you may change payout. Also CapEx in the third quarter, a lot weaker year-over-year, but you also had a higher basis for 3Q 2025. Just to understand that if you were going through a movement of reducing CapEx, you talked about BRL 300 million this year. It seems that you are going to be slightly below that. Just these two points.
Hi, Marcelo. Thanks for your question. Capital allocation, with regards to payouts, our policies are maintained. We want to have the 50% payout. This is what we have been executing, as well as the share buyback program. In this context, we are executing what we try to always align with you. Overall, nothing is going to change with regards to payout and buyback. As for CapEx, until now, we are estimating for this year something close to BRL 220 million.
A partial reduction compared to what we have been doing. That has to be with delays of investments, and much of this capital is allocated in new products, tools, et cetera.
We see that with time, this can be a bit more spaced out into next year. So, the idea is to have this rationale of pricing discipline and to do what has to be done at the right time. So at least in CapEx, this is very much in tune with what we expect, and it is going to be lower than last year.
Thank you.
Marcopolo's Q and A session is now closed. We are going to turn the call to Mr. Motta for his final remarks.
Well, thank you very much for attending the call, for giving us the opportunity to share a bit more about the operation, and we are always open for your questions and requests of presentations through our IR channels. Thank you very much, and have a good day.
Marcopolo's call is now closed. We thank you for attending and wish you a good day.