[Foreign language]
Welcome to all that are following us in this conference call of Randoncorp: today's event, we will have the highlights and results of Q1 2024. Before beginning, I remind you that this conference call has simultaneous translation into English and also sign language. To hear in English, please click on "Interpretation," which is at the bottom of the screen. To hear only English, select "Mute original audio." This event is being recorded, and the recording will be available in our investor relations website, rirandoncorp.com. We also invite you to participate in the satisfaction survey through the link at the platform. Based on the comments that you send us, we made some changes in the format of the conference call today to optimize and adjust it to your needs. That's why we ask you to participate.
Going on to the agenda, we will begin with a message from our CEO, Sérgio Carvalho, then the CFO and investor relations, Paulo Prignolato will talk about the highlights of the quarter, and the Director of Finance, IR, Esteban Angeletti will give you more details about the results of the period. After the presentations, we will have the Q&A session, when we will have also the Director of IR, Hemerson de Souza, from Fras-le, and our manager, Davi Cohen. To participate in the Q&A session, please click on the button "Q&A" or [Foreign language] [crosstalk] You can also participate at any time following the instructions on the screen. If we don't have time to answer all the questions live, we will get in touch with you after the end of the presentation.
Before passing the floor to our executives, I remind you that the information here is not a guarantee of performance. They involve risks and uncertainties, they refer to future events, and therefore depend on circumstances that may or may not occur. I invite now our CEO, Sérgio Carvalho, to begin the presentation.
[Foreign language]
Good morning, thank you very much for being with us in this conference call for earnings of Randoncorp. We began 2024 with a positive business environment, with a recovery in one of the most important markets in Brazil, trucks and semi-trailers, and replacement continued with good demand. The point of attention is the foreign market, where we have a drop in volumes, especially in the segment of semi-trailers in Latin America and in the USA.
But we know that working abroad is a journey, that's why we continue with our internationalization plan of our verticals, since many opportunities await for us in other geographies. In this beginning of the year, we made some important projects for the future of Randoncorp. We upgraded our ERP system, our SAP system, and upgrades in some plants, for example, OEMs. These movements, together with vacation and the calendar of the year, had an impact on our operations, with six workdays less in comparison with Q1 2023. As a result, this will affect our numbers, and this will be explained by Paulo and Esteban. I'd like to highlight also the important actions for our robust financial position, like the loans we're taking out, especially to lengthen the terms of our debt and reduce the average cost of debt.
Our markets continue with good perspectives, and macroeconomic factors in Brazil are favorable. It is a year when we will have the Fenatran Trade Show; we will inaugurate our plant of Castertech in Mogi Guaçu this year, this will add to us revenue this year, it is being structured to be state-of-the-art with automation. We are reorganizing processes, investing in operational efficiency to be even more productive in our plants. Innovative products launched recently, which have gained momentum, like e-Sys's electric systems, will continue in the next quarters. We have many projects in progress; I can't give you many details, but they will materialize in this cycle. We trust that we will end this year with many new things and conquests. In Q1, we have two important dates for Randoncorp. Randon, our OEM, is now celebrating 75 years of existence, and Fras-le is with its 70th anniversary.
In Randon, we have a story of leadership, and we have a conglomerate, which is Randoncorp, as we know it today. Through Randon and the strength of its brand, the company grew, conquered clients all over the world, and this unit opened many doors, not only for its products, but for the other companies of the group, especially auto parts and financial services. Talking about Fras-le, a pioneer brand, where it is celebrating its 70th anniversary with strong replacement, it is a leader in the markets where it is, with pioneer brands, with dynamism, safety, and sustainability. Fras-le has reaped many victories with its expansion, with consistent results and resilient results. We continue believing and investing in Fras-le, which is a success case.
Before closing, I'd like to express my solidarity to all the people affected by the floods in the state of Rio Grande do Sul. The state is in a calamity state. More than material losses, we're concerned in preserving the life and the safety of our employees and their relatives. We took many measures, apart from offering services and support channels to all those affected by the floods. We are also working to rebuild the state through Instituto Elisabetha Randon, and we have on the screen the data. If you want to contribute, the data is here. We want to keep our stakeholders informed about these floods in the state of Rio Grande do Sul. We are sure that the state will recover and will leave the situation stronger and more united. Now I'd like to pass the floor to Paulo, who will continue the presentation.
[Foreign language]
Good morning to all who are here in our conference call. I echo the words of Sérgio: we have solidarity, we're doing our best to minimize the impact of the floods in the lives and safety of the people and the communities where we are present. We will continue this way, knowing our role and our responsibility in terms of society. Now, talking about what we see in the business environment in Q1 2024, I highlight some important factors concerning demand. The interest rate SELIC had a drop, reaching 10.75% a year, the interest rate stimulating the domestic economy with lower costs for financing. The inflation and the price of raw materials did not have significant changes. Concerning exchange rate, the U.S. dollar is worth BRL 5 at the end of the quarter, and this is a healthy level for our business.
Finally, concerning the harvest for 2024, we highlight that it should be the second largest harvest in history in Brazil, despite the drought in the Midwest at the beginning of the year. We see no negative impacts from agribusiness in Q1, but we are alert to possible changes of scenarios and their effects. Now, talking about the numbers of commercial vehicles, you can observe this data that we had an important recovery in the production of trucks in Brazil in this quarter. OEMs reactivated some shifts, and they have a good portfolio of orders. In sales, we also see a drop in comparison with Q1 of the previous year, but this happened especially to the high level of inventory of vehicles with Euro 5 engines at the beginning of last year.
The semi-trailers remained with good demand in the Brazilian market, a little higher than in the same period 2023, and this has helped this segment, sales to Agro Business, especially the product grain with fourth axle and the continuity of renewal of tank fleets. The negative point is in exports, the drop in the US market and some countries in Latin America, this is the main factor for the drop in volumes for exports from Brazil. Now, concerning the replacement market, the market is on a good level, with the sale of new vehicles still on a low level due to high cost of acquisition and difficulty in financing. There is a strong demand in used trucks. We see now the main indicators of Q1 2024. What impacted was the lower, smaller number of workdays in Q1, we had to update our ERP, our SAP, reorganization in plants, and holidays.
So, without this, our, without these facts, we had 5% more than last year. Our margins also had an impact due to a shorter quarter, which really affected EBITDA. Without this impact, our EBIT consolidated EBITDA margin in relation to Q4 2023 would have been 3.7 percentage points. Concerning net profit, the drop is explained by the factors we already mentioned, together with greater distribution to minority and also losses due to lower estimates of recovery of tax losses. Now, going to finance, we have important movements to share with you. Concerning our debt, we work to decrease the average cost of our debt and to lengthen the payment terms.
Apart from diversifying financing sources, we took out two loans in Q1 2024 that enabled us to really make progress: a loan with BNDES for exports, incentives for exports, and IFC that you heard through a material fact explained in the last conference call. More recently, in April, we announced a new issuing of debentures, mentioned by Sérgio. This will enable us to improve even more the profile of our debt and amortization schedule. Here on the screen, we see the history of the net debt without Randon Bank. You can see that in the last 12 months, we went from BRL 2.5 billion in debt to BRL 1.9 billion in debt. Leverage remained controlled on a low level during the whole period, showing our commitment with a solid financial position.
Now, talking about our shareholder base, I highlight that we reached an expressive number of investors, close to 53,000 shareholders, so 10% more than last year. The profile is very similar to the end of last year, with a growing participation of foreigners as shareholders. Our market cap was BRL 4 billion at the end of the quarter, advancing 72% in relation to the closing of Q1 2023. Another point I'd like to highlight is our history of the payment of dividends. Apart from being a company that grows its revenue and margin, we're also a value company. Concerning 2023, we distributed 46% of net profit, more than the minimum established by our statute, which is 30%. I would also like to thank the analysts and investors who voted for our public meeting in 2023 Randoncorp Day, which was one of the 10 best evaluated by APIMEC, our long-term partner.
The date of our next event is defined and will happen on June 19 in São Paulo. Soon, our IR team will give you the save-the-date, official save-the-date. We want you to participate. It's a very rich moment when we will share information, fundamental information about our company and our strategy. Now, I'd like to pass the floor to Esteban, who will continue with the presentations.
[Foreign language]
Good morning, it's very good to be with you in our conference call for Randoncorp. As of this quarter, we will show the consolidated numbers detailing the main highlights in each one. As Carol said in the beginning of the conference call, we accepted your suggestions, and this change is part of your suggestions. Beginning with net revenue, Paulo already brought us some data about the performance.
Our revenue reached BRL 2.5 billion in Q1 2024, which represents a drop of 4.5% in comparison with the same period previous year. In general, the main factor of impact was the drop in workdays, number of workdays. The update of the SAP, ERP, apart from requiring a stop in the beginning, also had an impact on the following week concerning the use of the systems linked to production, especially in OEMs, which affected the production rhythm in the period. We show on the screen some graphs that show the distribution of net revenue by vertical and by sector. As you can observe, it was a quarter that was very balanced in terms of the revenue, with 30% for each vertical and 10% for services and technology. The sectors responsible for most of our revenue were replacement, agro, industry, and foreign market.
When you look at the causal graph at the bottom of the screen, we see the variations in revenue from Q1 2023 to Q1 2024 by sector, and I highlight: the industrial segment had a growth of sales, especially due to good demand for tanks with renewal of fleets, services that grew with pool sales due to the expansion of credit, and also sales in DB, urban mobility in auto parts and also buses, agribusiness, which was affected especially by the lower availability of products by OEMs due to the factors we already mentioned. So, replacement due to the drop in workdays, which had an impact on the billing, and the foreign market, which had the largest drop due to a drop in sales of semi-trailers in the U.S. and a drop in exports of many of our products to Latin American countries.
We're working on alternatives to mitigate these impacts, looking for other sources of revenue, since right now there is no sign of recovery of better sales in the U.S. Looking at international sales, you can see here on this graph the drop in the regions I mentioned. So, I would like to highlight an increase in EMEA, especially due to the acquisition of Juratek in England in March 2023, adding important revenue to the company. With all this scenario in the foreign market, the percentage of international sales on consolidated net revenue went from 23% in Q1 2023 to 18% in Q1 2024.
Now, EBITDA and EBITDA margin, the main highlights were: less dilution of fixed cost due to a drop in workdays in the quarter, and negative effects of the drop in revenue from the export market, which have better margins than in the domestic market, and non-usual expenses linked to provisions, accruals already mentioned by Paolo, which affected OEM and movement control. You can observe on the graph the distribution of consolidated EBITDA. Concerning organic investments made in the quarter, we had a growth, especially in auto parts. The most of it referred to new plants in the city of Mogi Guaçu, Castertech and Suspensys. In movement control, we made investments in the Green Boiler and substation of Fremax, both based on sustainability, which will allow us to reduce our emissions of CO2.
The great highlights were the investments in semi-trailers, a modular system in Araraquara; it is being expanded, and new resources are foreseen for this project. Thus, we'd like to close our presentations, and now I pass the word to Carol to begin our Q&A session.
[Foreign language]
Thank you, Esteban, Paulo, Sérgio, for the presentations. Once again, we thank you all for participating in our conference call, and especially for the messages you have sent us, the solidarity with everything we are seeing here due to the floods in our state. Now, we'd like to begin the Q&A session. You have the information on the screen; we have some questions, but you can participate by audio or ZAP. So, our first question comes from the analyst of BTG, Lucas Marquiori. Lucas, thank you for participating.
[Foreign language]
Thank you. Good morning. I would like to express our solidarity to two topics. First, I'd like to hear from you an update about the truck market. What is your projection? Have you vehicles, road implements? And second, looking at ROIC, please tell us the main levers for improvement in ROIC during the year. What are the verticals, candidates for improvement? What are the main initiatives to accelerate ROIC during the year? Thank you.
[Foreign language]
Lucas, thank you for the question. Beginning with the issue of markets, I will ask Sérgio to comment on how we see the evolution during the first months, and then I will ask Esteban to comment on ROIC together with Paulo.
[Foreign language]
Thank you.
[Foreign language]
Sérgio, if you can begin with markets.
[Foreign language]
Yes, my camera is on, but someone has to enable it. Thank you, Lucas, for the question. Our vision concerning domestic markets, especially trucks, your question is about trucks. Our vision is very positive for the year in Brazil. We showed an increase in production, a substantial increase in production. I'm trying to turn on my camera. Our vision is very positive. OEMs are adding production capacity. We believe we will have a good year in trucks, a very positive year. The beginning of the year this quarter, they are well aligned with this vision. Semi-trailers in Brazil, Paulo already touched upon this, very positive to semi-trailers.
We have an expectation. We have the most critical months. There is a pause between April and May, but after May, we expect better volumes for semi-trailers from agribusiness. We're very comfortable in relation to semi-trailers in the beginning of the year. Very positive. Replacement, looking at maintenance in the garages, we see a healthy situation for replacement parts. This is important for us, very positive. Our concern, as mentioned by Paulo and Esteban, is due to international sales.
Our exports and production outside Brazil are centered in the Americas, South America, North America. South America, the performance of the economies, there are restrictions and difficulties in the economies in Central America and in the U.S., semi-trailers, this segment, we were expecting a downturn already in the economy, and semi-trailers had a strong drop. Some segments had significant drops, and heavy trucks in the first semester continued with the drop, but we know that the second semester will be different. The domestic markets, in the domestic market, we are very positive. Our concern is with export sales. Having said this, foreign sales, talking about continuing, we continue to increase our internationalization effort. We know that there will be peaks and valleys. We have a long-term plan and vision, and we will continue with our long-term plan and vision in terms of internationalization.
[Foreign language]
Thank you, Sérgio.
[Foreign language]
Lucas, the second part of your question, thank you for the question. Concerning ROIC, first, I have to say we want to have a return above the cost of capital invested. We have this goal. All the projects we analyze, this is one of the assumptions that are important. Now, looking at ROIC, looking at denominator, I believe we have two highlights, Lucas. First, working capital, you saw that we had an increase in Q1 versus Q4 last year, but much less than in previous periods, and this is due to all the initiatives we have made to reduce working capital. I mentioned, some of you in the market, in our meetings, Randoncorp is like a cruise ship. When you make changes, you have to wait for two, three quarters to see the effects. We're seeing this effect in the first quarter.
The trend is to have less capital invested, helping the denominator. Now, concerning CapEx, we always want projects that will add value to the company with a return above the cost of invested capital. You saw that in Q1 we restricted CapEx to be sure of what we would do, but the plan continues. Now, talking about verticals, Sérgio also mentioned in his previous speech, in Q1, especially in OEMs, we had a combination of factors that were bad for the result of this vertical, but we believe that this will be beneficial in the future. Investments made in the new ERP system, new SAP system, and upgrades in plants, a new paint system, which will give us more efficiency and lower cost.
In terms of terms, you heard the call yesterday, just repeating, we have a good, we see garages working well, repair shops working well, and we see growth in auto parts. When we compare net revenue, there was a growth of 5%, but when we compare by workday, this growth was higher, closer to 14% by workday in auto parts. It is linked to the production of trucks, and we saw the new numbers for truck production in April with a robust growth, 60% growth, so this shows that we're on the right track. The market is helping us to sustain this ROIC or to have a ROIC above the cost of capital. Thank you.
[Foreign language]
Now our second question, Gabriel Tinem, analyst, Santander. Thank you, Gabriel.
[Foreign language]
Good morning, thank you for the opportunity. Two questions. The first is focused on products in the U.S. Give us some details about this operation in the U.S. and volumes, export and also Hercules. How about the improvements in the plant? What do you expect? A second point focused on the domestic market, on semi-trailers. We see a great drop in market share due to the change in the SAP system in the beginning of the year. During Q2, what will you do to recover? Will anything new be necessary to recover?
[Foreign language]
Thank you, Gabriel. I will pass these two questions to Sérgio. The first on Hercules and the U.S. market, semi-trailers in the U.S., and our actions in Hercules, improvements in Hercules, and also the second point, market share was below usual, but as you said, we mentioned the impacts, one of the reasons why this happened, if you can give us more detail, and also in the future what we expect. Thank you.
[Foreign language]
Perfect. Gabriel, thank you for participating. The market, as I mentioned, for semi-trailers in the U.S. is the first to reflect the problems in the economy. Two years ago, a recession was expected. Thank God it did not happen, but there was a slowdown in the U.S. economy, and semi-trailers is the first to show this. The segment in Hercules had a very large stop in the department of containers, so we're developing other product lines, other platforms to participate in other segments, and this project is in progress. We are seeing the first signs of the first orders for container holders at Hercules, but semi-trailer as a whole, as I mentioned, is the first to be affected and the first to recover. So we already have some signs that semi-trailers as a whole, the net order intake level is improving.
We invested a lot to improve the work conditions and safety conditions of our employees in Hercules to use better manufacturing processes so that our operation is better prepared today. It is no longer similar to the operation we acquired. It is much better organized, better processes, better health, and better safety for our employees. We are ready for the recovery in the U.S. market, as I said, expanding the number of products we produce in Hercules, and the exports we had last year to the U.S. market. We haven't had progress due to the situation in the U.S. market. The second part of your question has to do with the Brazilian market in this quarter. If we look at the last 12 months, we have a leadership position. We lost volumes, yes, in the beginning of the year due to the reasons we explained.
We launched a more efficient and modern version of our SAP, our ERP, and this provoked a stop since the end of last year. We lost production days at the end of 2023, sorry, and also in the beginning of the year. So we began the year with a lower inventory. We had less days of production. Many peripheral softwares that talk to our traditional ERP, we had problems too, and this also had an impact on our production capacity. So we began the year with less inventory, and the market was better than we imagined and with additional difficulties. That's why we had a smaller production. Having said this, all of this has already been solved.
We have everything realigned, and we continue with production levels that are higher now, much higher, and I am sure that our volumes will recover and our market share will go back to previous levels. So we trust that this is only during this period, these problems.
[Foreign language]
Thank you, Sérgio.
[Foreign language]
Thank you, Sérgio.
[Foreign language]
We received a similar question from André, so it was answered concerning the US market for semi-trailers. So now we have the third question by audio, André Ferreira, analyst sell-side , Bradesco.
[Foreign language]
Good morning. Thank you. I have two questions. First, can you explain better the reorganization of the plants? Will you have a positive impact in margin in Q2 with the upgrades in plants? And also, if we adjust the margin of implements, the EBITDA margin becomes stable even with a relevant drop in revenue and volumes? Looking at road implements, in April we see a 27% increase. So I'd like to know, road implements without these impacts, is it prepared for higher EBITDA margin in Q2?
[Foreign language]
Perfect, André. Thank you for the question. The first, I'd like Sérgio to answer concerning the upgrades in plants, reorganization of plants to improve efficiency, and the second question for Esteban, concerning Q1, our margins. We have the 11th emission of debentures, so we have some restrictions in terms of talking about projections for the next quarters. We will try our best to explain the benefits we may have in margins with investments we have made. So first, Sérgio, then Esteban.
[Foreign language]
Thank you, André, for participating, for the question. André, we had many actions linked to increased capacity, optimizing our plants for OEMs. One of them is a new paint line, which is bringing gains not only in productivity but also benefits in relation to the environment. We also had a realignment in terms of what we produce in which plant. With this realignment, we were able to have more production capacity. For example, products in Caxias do Sul went to Erechim plants. Traditionally, we had all the bases in Caxias do Sul. So now we began in the southwest production in, for example, products for Semi-trailers close to the markets, closer to the markets.
So these transfers of production lines to other plants, optimizing mix and productivity, investments in new technologies, and production of structures in other locations, this is what we mean by the upgrades and changes we made in our plants.
[Foreign language]
Thank you, Sérgio. André, the next part. My answer is linked to what Sérgio just said about these projects to gain efficiency. Apart from this, automation, new equipment, reorganization in plants, I would include new products in modular lines with lighter products, so modular systems that are much lighter, so better efficiency for our clients. So this motivates clients to renew their fleets with lighter products, and with this, we can see a recovery of market share. But you are correct, André. If we adjust OEM margin with non-recurring effects, without non-recurring effects, it would be stable. We believe that from now on, when we add these efficiency gains and additional automation, this should help us to improve even more margins. And finally, the last point, we showed today our breakdown of revenue, how we are balanced among verticals, each one representing 30%.
So 60% of industrial revenue is coming strong apart from the revenue of services, automation, technology, which has helped Randoncorp. So apart from better margins from OEMs, we have the rest of our portfolio business with a positive contribution.
[Foreign language]
Very clear. Thank you.
[Foreign language]
Now the next question, Fernanda Urbano, sell-side analyst from XPI . Thank you, Fernanda.
[Foreign language]
Good morning. Thank you. We wish a lot of safety for the employees who are in risk areas in the south of the country. I believe you explained well the points we had. In terms of OEMs, I have a follow-up question in terms of competition and market share. Do you see the possibility of higher prices? So according to your product mix. The second question, thinking of the new plant in Mogi Guaçu for Suspensys, can you tell us about the investments, and will you inaugurate in Q1 2025? Thank you.
[Foreign language]
The first is for Esteban, market share, market competition, and then Sérgio, if you can talk about the progress in the new plants, both Castertech and Suspensys, the two plants in the city. Thank you, Esteban.
[Foreign language]
Thank you, Davi. Fernanda, thank you. Well, I believe we explored well the market for semi-trailers. The volumes are in Brazil, the market exists, the demand exists. We will have the second largest harvest in Brazil, so there will be a great need for transportation. Also, with the winter crop for corn, we have had reviews showing higher volumes, and this to say that competition is there, yes, but it is not a predatory competition. There is no price war in an aggressive way that could hurt the industry as a whole. So there is more and more consolidation among the main players. We haven't seen any predatory competition. Market share, Sérgio mentioned.
Well, the market share in Q1 suffered with a combination of negative factors. I don't want to repeat them, but we believe in a recovery with gains in production that we will have in Q2 and also greater availability of inventory too. Sérgio, please comment on our operations in Mogi Guaçu.
[Foreign language]
Fernanda, thank you for participating. Everything is going well in Mogi Guaçu. As Davi said, we have two new activities there: Castertech, foundry, machining, this operation. We had a small delay due to strikes, difficulties in receiving some new equipment due to a strike. Also the importing, but we overcame this. We are already beginning production at Castertech, products that are very necessary. Today we buy from suppliers many products that we will produce at Castertech. So we're foreseeing improvements in productivity with local production, Castertech in Mogi Guaçu.
And there we also have the construction of the new plant for Suspensys, which is on track to begin production in Q1 2025. And we are having a good performance in the schedule with industrialization of this new activity. So we're doing very well.
[Foreign language]
Thank you, Fernanda. Next question, Luiz Otávio Capistrano, analyst sell-side , Itaú BBA. Good morning, Luiz. Thank you for participating.
[Foreign language]
Good morning. I'd like to begin thanking you for your time during these difficult times with the floods in your region. Let's hope this situation will end. Concerning trailers in the U.S., well, you already answered. I'd like to hear concerning the next few years. Some players are talking about new regulations in emissions in 2027, but with a limited capacity of industry in the U.S., you could have an improvement in 2025. We may see a valley in demand this year and two good years, 2025-2026. I know it's a little early to talk about this, so let's talk about 2025-2026. Do you see this?
[Foreign language]
Thank you, Luiz. Well, Sérgio, please talk about the US market in the next few years, although we know it's long term. Okay, Sérgio.
[Foreign language]
Perfect. Luiz, thank you for the question. Luiz, I'm part of an entity. It's like Anfavea and Sindipeças in the US. I just came back a week ago. We discussed exactly this point, and what you said is very aligned with what we discussed there. Yes, there's the EPA. There's the EPA in the U.S. with different demands to reduce pollution. The criteria is different. The macro objectives are the same, but the way they will do this is different.
Yes, 2027 will bring a new regulation for emissions, and the U.S. fleets, based on previous experience, they know they will not be able to wait until 2026 to begin the prebuy. So the expectation is that in 2025, volumes will begin to grow in the U.S. due to the changes in 2027. When you look at the long term and you normalize the peaks and valleys, the market is always growing. So you asked, what happens after the prebuy? So in 2027, will we have a reduction? It may happen, but if you look at the horizon, there is growth. One of the great players in the U.S. market just announced the launching of a new truck plant to be prepared for this new situation. So for us, Randoncorp, it is favorable.
So greater participation in the U.S. market, not only semi-trailers but auto parts, at a time when the market is saying, "We will grow, and we will grow a lot."
[Foreign language]
Thank you, Sérgio .
[Foreign language]
Thank you, Luiz. So now our next question, Andressa Varotto. Good morning, Andressa. Thank you.
[Foreign language]
Good morning. First, I'd like to express our solidarity to all the population in the Rio Grande do Sul. Let's hope you will recover well from the floods. There's an issue within auto parts. We're seeing the truck market production reacting, recovering year after year, and we had the problem of the new SAP, as you mentioned, and also cast products for agro. We know there is a drop in this sector and also a reduction in volumes to OEMs. How can we foresee the revenue from this vertical? Like you said, in April, we saw a 60% increase in the production of trucks. How do you see revenue of auto parts reacting to higher production of trucks? Thank you.
[Foreign language]
Thank you, Andressa. I will pass this point to Esteban, reminding you that we had in Q1, in spite of the new SAP program, not only OEMs, auto parts were able to grow in revenue in comparison with Q1 last year. So we have six workdays less. Esteban, please give us more details about the market and what can affect auto parts.
[Foreign language]
Thank you, Andressa. Thank you for the question. We see that we're aligned with Fenabrave. There's an expectation of growth in production down to 30% depending on the family of vehicles, and auto parts is directly linked with the growth of production of trucks.
Auto parts has four main sources of revenue: contracts with OEMs for the main truck OEMs in Brazil. We have a second source: supply to semi-trailer producers, like our auto parts supplies to Randon. We also supply to other semi-trailer producers. The third front, agro, yes, is seeing a drop in demand, and a fourth source: replacement parts, with a smaller market where we want to grow. And the fifth point would be the export market, production in foreign plants. Going back to trucks, what we see in Q1, the main effect, yes, we adjusted our ERP system. If we exclude these effects, if we look at the revenue by workday, we grew 15% in auto parts if you look at the revenue by workday.
Reminding you that in the distribution of the year, Q1 is the weakest because of vacation and carnival, especially January and February are very slow months. Q2, Q3 are stronger in terms of workdays and production. And finally, this year, in November, we have the Fenatran trade show, which should require additional production in Q4 or Q3.
[Foreign language]
Thank you.
[Foreign language]
Filippe Lezza, Citi analyst. Good morning, Filippe.
[Foreign language]
Thank you. Good morning. First of all, we'd like to express our solidarity. My question: Randon is working with outsourcing? Are you working on total? Outsourcing? Are you working on total outsourcing?
[Foreign language]
and the business to answer this question.
[Foreign language]
Good morning, Filippe. Thank you for your question and also the solidarity. Concerning Addiante, we're doing very well, continuous growth. We want an edge in Addiante with a service package. Addiante offers a service package. This is our objective: to have maintenance or offering telemetry services. So the objective of the partners for Addiante is this: complete packages, not only assets but also services.
[Foreign language]
Thank you.
[Foreign language]
So our next question, Marcelo Motta, analyst, JP Good morning, Marcelo.
[Foreign language]
Thank you. Good morning. Also, our solidarity for we hope the floods will end. Two points. First, railway cars. So quarter after quarter, we're expecting a recovery in railway cars. Do you have anything to say? And also, tax levels. They are higher. The government is increasing taxes. Can we expect lower income taxes in the future? Thank you.
[Foreign language]
Thank you, Motta. First, I will pass to Esteban about railway cars and our expectations. And second, Paulo, if you can answer. Mr. Antônio Rizzo is also asking the same thing, so we can answer these two questions about taxes. [Foreign language]
[Foreign language]
Thank you, Motta. Thank you for the question. In OEMs, apart from semi-trailers and parts, we also, in the last five years, have had small volumes in railway cars. This year, we're hoping to have a better year than last year. We have already sold 180 railway cars for Vale, a mining company, to be delivered in the second semester. New orders. We have some companies requesting quotas. The market is smaller than what we expected, but there are signs of recovery. And this recovery comes from two factors: the main operators of railways renewing their concessions and investing, and the second, they have studied to increase the efficiency in terms of the number of railway cars pushed by locomotives.
This will bring new needs in terms of railway cars. So we have these orders. We are negotiating two other orders, and in the future, we hope more investments on the part of railway companies. Paulo, please comment on taxes.
[Foreign language]
Motta, thank you for your question. Also, your message concerning solidarity. Concerning income tax, we follow the guidelines of CPC 32. We have a policy of we consider always the next 10 years. What changed in this quarter? The non-recording of taxes on tax losses in some of our companies. Always reminding you that it is not lost, it's off balance, it continues there, and when we reevaluate these projections, we can go back to our results. So we consider this as being something temporary. We can't say it's going to change in Q2, Q3, but we can say that it's temporary. That was the main factor in income tax.
[Foreign language]
Perfect. Thank you, Paulo. I will go on to the next question. Same question as we received from four analysts: Pedro Soares, Mateus Varela, Deborah Borges, Larissa, requesting to know about the situation in the state of floods, the impact on our business. So, Sergio, I will ask you to answer about the floods. Last week, we stopped production for two days, so please talk about our plants in the south of the country.
[Foreign language]
Thank you, all of you, for the solidarity. It is the greatest catastrophe in our state. The state has already had 100 deaths due to the floods. People without houses. A very delicate situation. On the positive side, our culture is the following: let's face the problem, let's work together. So solidarity is unique, very strong. We have had support from the rest of Brazil, so many good things happening with the support coming from the rest of the country. For us, in Randoncorp, we are working, but thousands of employees lost their houses due to avalanches. Those who lived close to hills, especially near the mountains, we quickly organized our crisis committee in Fras-le Mobility on Tuesday night. We began our actions. On Thursday, we had to paralyze some operations, some plants, and this continued until Sunday.
On Sunday night, we recovered almost all the operations with one exception: our Controil company, which is part of the Fras-le Group. The plant was flooded, and this single plant continued paralyzed. So our operations are back since Sunday night, almost normal. Auto parts, friction materials, all our local plants began working on Sunday night or Monday morning. We began to use other alternative roads. We have routes.
They are a little longer than the original routes, but we're being able to ship products and receive raw materials. Our greatest concern right now is with Controil in the city of São Leopoldo. The plant was flooded, and so in the lowest part, we have some water still, but we don't have a clear vision of when we will begin producing in this plant. Our people from DBServer in Porto Alegre, it's not a plant. It manages software, this company. It is in the capital and was affected by the flood. DBServer. Homeless in the region of São Leopoldo and Porto Alegre is very high, homeless. 450 employees of Controil are homeless. One-third is homeless, and also in DB, 36 families are homeless. We supplied food yesterday. We continued with our efforts to help them. We're very concerned with illnesses due to the floods.
So we have preventive measures, vaccination too. We're concerned. Today, it rained but not very strongly. So in the next few days also, we will have rains. So if things don't get worse, we hope to know more clearly when the plants will produce again. Our company as a whole has had a great effort in engagement, giving support not only to our employees but also the communities where we are present. We're working long hours, and we will continue making efforts in this direction. As I said, it's the greatest catastrophe we already had in the state, and we're working in the right direction, taking care of people first of all, and now rethinking the support we will continue to give to all these families affected. So it's a very difficult situation. Some families lost everything. So our support will always be fundamental.
[Foreign language]
Thank you, Sergio. Another question in writing from Mr. Antônio Rizzo. Second question, Paulo, for you. He wants to know monetary correction. What we have seen in Argentina and the impact we saw in the quarter. So please comment on Argentina.
[Foreign language]
Mr. Antônio, thank you. You should remember that in Q4 last year, we had a negative accounting effect concerning our results in Argentina due to a devaluation, a great devaluation of the exchange rate of Argentina, the peso. What we saw in Q1 was a stable exchange rate in Argentina. The country is being able to reduce its inflation rate. There's a lot to be done still, but bearing in mind that the inflation is dropping and we had a roughly stable exchange rate in this quarter, the effects in Argentina were positive because we have in that country assets, our industrial plants, plots of land, our inventories.
So these assets have their value in strong currency. Based on the stability of the local exchange rate, there were good financial effects. This is the main situation in terms of our operations in Argentina.
[Foreign language]
Thank you, Paulo. Now the last question for today from the analyst at Bank of America, Gabriel Frazão. Gabriel?
[Foreign language]
Thank you. I have a question on auto parts. The greater production of trucks we will see this year is positive, but you will have to outsource some processes that you internalized last year. What will be the net impact on margin with the growth of margin in 2024? Thank you.
[Foreign language]
Thank you, Gabriel, for the question. I will pass this to Esteban, reminding you that outsourcing is for Castertech due to their capacity. Before Esteban answers.
[Foreign language]
Thank you, Gabriel. In fact, you are correct. There is this expectation of higher volumes. More trucks this year, a stronger production of trucks. Last year we had the change from Euro 5 to Euro 6 engines, but most of the contracts of auto parts we have are negotiated with the OEMs with a certain spread. We don't have great drops due to dilution of fixed costs. There is the impact of outsourcing of part of the production of Castertech. On the other hand, as it is true that we're working on efficiency and productivity, also this is true in the other verticals too. We always challenge our team with monthly follow-ups concerning the initiatives and the effects. So there is a balance. For example, greater outsourcing at Castertech is compensated by greater efficiency in other plants.
[Foreign language]
Very clear. Thank you.
[Foreign language]
So we'd like to conclude the Q&A session. We thank you all for participating. More than 10 questions are a record in our conference calls. Now I pass the floor to Sérgio for his final comments.
[Foreign language]
Thank you, Caroline. Once again, I'd like to thank you all for participating. Thank you for the solidarity. As I say, we are all available for further clarification you may need. If you have more questions, please call us. We wish you a good afternoon, and we will meet again in the next meeting, the next call. Thank you. Thank you.