Good morning, and welcome to the ROMI conference call, where we will discuss the results for the third quarter of 2024. This conference call is exclusively for investors and finance professionals. All the statements that may be made during this conference call regarding the company's business outlook, projections, and operational and financial goals are merely forecasts based on management's expectations regarding the future of the company. These expectations are highly dependent on market conditions, the general economic performance of the country, the industry, and international markets, and are therefore subject to change. It shall be noticed that this conference call is being recorded and held in Portuguese with simultaneous interpretation into English, accompanied by the slides available in the results center of our Investor Relations website at www.romi.com/investors. During the presentation, all participants will be connected as listeners only. We will then begin the Q&A session.
To ask a question, type it along with your name and the name of the company you represent in the Q&A tool in the Zoom app. For questions via audio, further instructions will be provided later. With us today are Mr. Luiz Cassiano Rosolen, CEO, and Mr. Fábio Taiar, CFO and Investor Relations Officer. Initially, the executives will present the results for the third quarter of 2024, and then will be available to answer your questions. Now, I yield the floor to Mr. Luiz Cassiano Rosolen. Sir, you have the floor now.
Good morning, ladies and gentlemen. Thank you all for attending ROMI's third quarter of 2024 earnings conference call. During this period, we have achieved a 15.3% increase in incoming orders compared to the last quarter last year.
As a result, our order backlog is now 36% higher than last year, reflecting the recovery of the domestic market and the consolidation of the machine rental business throughout 2024. At our Burkhardt+ Weber unit in Germany, we face the challenge of delivering several projects by the end of the fourth quarter. It is important to mention that our order backlog for 2025 is already almost completely full. Regarding the Rough and Machined Cast Parts Unit, we managed to improve our margin compared to 2023, although sales volume is still significantly impacted, especially by demand in the agricultural industry. We are optimistic that the reduction of inventories of our agricultural customers should result in a gradual increase in deliveries next year. Furthermore, we have started developing parts for a new client in the energy industry, which also brings us good prospects.
I will now yield the floor to Fábio, who will present the details of this quarter's results. Good morning, Fábio.
Good morning, Cassiano. Good morning, everyone. Welcome again. Now, starting with the highlights that we have had for this third quarter. An EBITDA of BRL 23.6 million, a margin of 8.9%, an order entry or incoming orders of BRL 332.8 million, a 15.3% increase with regard to the third quarter of 2023, with the spotlight on ROMI Machines, where not only have domestic customers gained representativeness, and also we have consolidated the machine rental business. We have experienced a significant growth in comparison to the third quarter of 2023. With regard to revenues, we've also had ROMI Machines exceeding our revenues. It's a 36.1% increase in comparison to the third quarter of 2023, which has been driven by the machine rental business mostly.
Rough and Machined Cast Iron Parts. In 2024, we've had an increase of 27.7% in comparison to 2023, mostly due to Yellow Line products. In B+W machines, we have finished the quarter with a sound order entry log, and we have completed the quarter with an order backlog that's also considering 2025 orders. With the general incoming orders that are 15% above the third quarter of 2023, we've managed to increase our order backlog. The consolidated orders reached over BRL 700 million, representing a growth of approximately 14.5% in comparison to the previous quarter, and 36% in comparison to the third quarter of 2023, which demonstrates we have a positive outlook ahead of us. I'd also like to emphasize the declaration on asset capitals, which have been declared in September this year.
We've also had the participation of ROMI at trade fairs and trade shows such as Fenasucro and Interplast in Brazil, as well as international fairs such as AMB, which takes place in Germany, and IMTS in the United States. Now, talking about the macro scenario in the past two quarters available, we observed that gross fixed capital formation has gone back to positive levels, coming stronger in the second quarter of 2024. There is a positive reaction here, although this growth is in civil construction and sanitation, which obviously, in an indirect way, has an impact on our industries positively. Either way, the industry is reacting positively to these movements, and what we can observe based on the previous slide is that the growth in incoming orders for machines in the third quarter of 2024 was almost 35% above the third quarter of last year.
Also looking at other indexes, such as average Installed Capacity Utilization. In September, we've reached 72%. If we look at the history from 2017, we are achieving the highest level, and this is something we've been communicating to you in the past conference calls, that at the end, with the client, we have a very powerful perception of this. Clients have been working at a very good volume of activities, so the current scenario is positive for the industry overall. What is still capped at a lower level is the confidence index. When entrepreneurs look at a more distant future, trust has still taking small steps. If we look at the history where there have been more robust investment cycles since last year.
We've been ranging between 50 and 53 now, and there have been a few months where confidence has dropped lower than that, but it's still at a reasonable level. That means that the industry is still working at a sound pace. However, entrepreneurs still lack a bit of confidence for medium and long-term planning. In terms of markets that consume our products, such as ROMI Machines and Rough and Machined Cast Iron Parts, we have large volumes, and the machines division is still very big, and we serve lots of different clients who produce their own machines, and our demand has been high in 2023 and is still high in 2024. In the service industry, there are also industries that are very representative in our customer portfolio, showing that there are several industries that have been doing well in their business.
Automotive has experienced a slight drop, but still quite representative of our orders. Packaging has grown, and blowers, which have gained more clients in the past times, but the other industries remain very similar to 2023 demands. For B+W, I'd just like you to bear in mind, it's a niche business that serves a smaller number of industries. There are large projects, large equipment. In the third quarter, the share of each industry remains similar to 2023, especially for engines and systems and energy. In Rough and Machined Cast Iron Parts, especially when it comes to Yellow Line products, we experienced a growth in 2024 in comparison to 2023. There is a positive bias here that explains this growth. In commercial automotive is still doing quite well in 2024 and the key reduction we've observed is in agricultural machinery.
Since the second semester of 2023, this industry has decreased its production volume, and consequently, they have reduced their orders. But on the other hand, as Cassiano pointed out, they've reduced production by a lot in order to reduce inventory, and this has been happening throughout the entire year. Now we are observing the first moves for resuming agricultural machinery volumes. In power, we have concluded deliveries of parts dedicated to the energy industry in the first semester of 2023, especially now in 2024. This is part of this new client for which we are developing parts. We've delivered the first samples or prototypes, if you will. This is still an industry for which we don't have that much visibility, but it shows a lot of potential, especially from 2025 and beyond. In terms of business units and net sales, we have ROMI Machines growing its participation.
Throughout nine months, we experienced similar numbers to 2023, but ROMI Machines is gaining representativeness, because when we look at the nine months, specifically for the third quarter of 2024, there's been a reduction. Especially if you observe that the first semester of 2023 Rough and Machined Cast Iron Parts, and we have the delivery for the energy client, and agricultural was still running at high volumes. In B+W, we see constant revenues, constant participation, and share in comparison to the same period of 2023. In terms of geographic distribution, Brazil is basically stable. There are two movements happening here. As I mentioned in the last slide, machined and cast iron parts have a reduction in revenues.
However, the growth in ROMI Machines revenues into the domestic market, not only with sales, but especially with the machine rental business, that all gave us stability for Brazil's share in consolidated revenues. Europe has lost some of its share. 2024 is still very hard for the foreign market, more specifically when it comes to ROMI Machines. So Europe has reduced its share by a little, but Latin America is still stable in comparison to last year. The U.S. have gained a share, especially due to the delivery of a solution of a machine by B+W for a client in the U.S. In terms of order entry and backlog, we can clearly see an increase of orders for ROMI Machines.
It's a substantial growth in comparison to the third quarter of 2023, especially driven by sales in the domestic market and also due to the growth of machine rental business. Accrued over the year, we see a significant growth of almost 14%. For B+W machines, we have significant incoming orders. B+W sells large projects, so it's a better analysis if we look at the accumulated figures. 2023 has been a very good year in terms of order, but we Rough and Machined Cast Iron Parts, we've experienced this growth, especially driven by civil construction and Yellow Line. In total, order entry over the quarter is 15.3% above the third quarter of 2023, and in the year to date, 14.7%. This is a sound portfolio of incoming orders, and this has allowed us to grow our backlog.
Now for ROMI Machines, we have a very sound backlog. A growth, not only in comparison to June this year, but also in comparison to September last year. These machines are due to be delivered in the next quarters. In ROMI Machines, we have a very sound portfolio. Now, B+W, with the new incoming orders that we have brought in in the third quarter, we have not had a delivery of machinery in the third quarter of 2024. As we've mentioned earlier, there is a high concentration of deliveries in the fourth quarter this year. So we've had an increase in order backlog ending the quarter with almost BRL 380 million, which is 46% above the same period of 2023. This comprises machines to be delivered in the fourth quarter, as well as the machines to be delivered throughout 2025.
Rough and Machined Cast Iron Parts, we've also experienced an increase in order backlog, showing this gradual recovery that this division has been experiencing throughout 2024. In the total, we have a significant growth in comparison to September 2023 by 36%. In terms of profitability, the third quarter of 2024 in comparison to 2023, when it comes to gross profit margin, we see a certain stability, especially in ROMI Machines. We are keeping these figures at a very sound level. For B+W, we've experienced a reduction, especially because revenues in the third quarter was lower, and this was expected. It was even lower than 2023 because we had a delivery in 2023. This has brought its margin down to some extent. However, in spite of the smaller revenues in this quarter of 2024 in comparison to 2023, we can still observe an evolution of operational margins.
This is something we've mentioned in the second semester of 2023. We have reorganized and readjusted the production for the demand, and this has been increasing profitability. If we see a larger number of orders in the next quarters, the tendency is that the operating margins will respond positively to the increase in volume. Now, with regard to EBITDA, our EBITDA is about half what we reached in 2023. The margin is going from 7.2% to 3.4%, mostly because the operating expenses with a volume of revenues is slightly below 2023, and this has not allowed us to dilute the operating expenses, and this has driven down EBITDA. EBITDA at BRL 23 million, almost BRL 24 million, and it's a reduction from 12.1% to 8.9%. There's also been a decrease in net income and net margin, where our margins came from 8.2% to 5.1% in this third quarter of 2024.
Now, in terms of business units results, ROMI Machines is basically stable, as we have covered earlier. The foreign market has experienced a reduction, which was compensated by the growth in domestic market, both in sales and machine rental. Margins are decreasing a bit, and we've been making additional efforts in sales to guarantee this volume. On the other hand, the growth of machine rental business is helping us compensating for this loss of margins and sales. But still, if we look at it, the margin is still quite sound. We just don't have an increase in volume, and therefore, it's harder to reduce operating expenses, and this has an impact on the margins and the EBIT margins, from 24% to 20%. For B+W, there's been a more significant reduction in revenues.
As we've mentioned earlier, the concentration of revenues in B+W is all in the fourth quarter of this year, and therefore, we have a drop in the gross margin. When we talk about Rough and Machined Cast Iron Parts, we see a reduction in revenues. But again, this is strongly connected with the fact that our third quarter of 2023 was very strong in Rough and Machined Cast Iron Parts. If we look at the comparison between 2024 and 2023, the volume variation was much smaller, and we had a better recovery back then for our operating margins. But when we look at the nine-month period, due to the significant reduction in volume, we experience a reduction in margins, both gross and EBITDA.
Now, in terms of cash flow, we've had a consumption of cash flow in this period, and this is due to the fact that B+W still needs cash flow to finish producing and deliver in the fourth quarter. Then obviously, as of the fourth quarter and the beginning of 2025, there is a significant volume of revenues related to these deliveries. But for the time being, B+W still needs capital to build the equipment and deliver. There's also been a certain increase in our inventory for ROMI operations due to the increase of backlog orders, both for ROMI Machines and Machined Cast Iron Parts. Now, thinking about our performance in the past couple of years, our performance was below the index overall. Also, because of the cycles that our work are based on.
Now, with this, I conclude my presentation for the results from the third quarter of 2024, and I'm at your disposal for answering your questions during the Q&A. Once again, thank you very much for attending.
The second question comes from Marco Casiraghi. "Good morning. Could you provide us with more details on this product that's being developed for the energy industry? Is it for a single client or for the industry as a whole?"
Well, this is a specific development for one particular client in wind power. ROMI has already manufactured the foundation for the turbines and the hub for the turbine for several clients in the past. This industry has been dormant, so to speak, for two years. Now this order came in through the domestic market when we've been developing these parts so we can deliver them in production as ordered.
At the moment, we don't have any requests or orders for serial production of these devices. We have been preparing to go back to working more in this industry. The part itself is designed entirely by the client.
The next question is from Tiago. "Good morning. I would like to better understand the impact of machine rental on the total results of the company and which industry has been demanding more for this new solution by ROMI. Is the possibility of rental deployed for all business units at the moment currently? What percentage of total revenues from the company comes from machine rental?" This question was from Tiago Pinter.
Well, machine rental started with ROMI in 2020, and 2024 is the year with the most growth. This business is focused on ROMI Machines. It serves several industries. We rent the machine.
The machine rental helps clients becoming more productive. After one or two years clients return the machines. They can rent a new machine, or they can even purchase another machine. The machines come back to ROMI. We retrofit the machine and put it back in the market again. It is very hard to separate the revenues from rental from the total of the company and the total for ROMI Machines Unit, because it is intrinsically connected to the chain value of the unit. Because of rentals, I have the sales of used machines. Because of rentals, we have the financing business at PRODZ, which finances the machines that come back from rentals. This is in a context where it's not just a new pathway for revenues, it's one more alternative offered to our clients. Our clients are allowed to have a choice with rental.
They can allocate their whole capital in a purchase, or they can allocate little capital to the rental of a machine like this. Either way, clients have more alternatives to be more productive with more modern machines that are newer and connected. Just to give you an idea, out of all the incoming orders for ROMI Machines that we are negotiating, I would say 70% of the business are still sales and 30% of our business are rentals. So internally at ROMI, the delivery date for rental machine or a sold machine, there's the incentive for our sales team. The incentive is the same, basically, between rental and sold machines. In theory, we don't even know if the machine will be sold or rented. It's 100% up to clients.
I would say out of 100% of what we do in our business, 70% sales, 30% rental, give or take, just an approximation.
Thank you, Tiago. The next question comes from Rodrigo Queiroz. Good morning. Congratulations on the results. Thank you, Rodrigo. The question is, "Do you believe it is feasible to recover the EBITDA margins of two digits in the fourth quarter based on the order backlog, or will we only observe this increase in 2025?"
Well, Rodrigo, we end up not anticipating this as a guidance for the fourth quarter in 2025. Of course, we have had a couple of quarters with significant incoming orders, which is the second and third quarters of 2024, and that increases the backlog significantly for the fourth quarter. In addition, B+W will basically deliver all of its projects in the fourth quarter of 2024.
Therefore, it is quite possible that our fourth quarter is our best quarter based on the public results available.
The next question comes from Mauricio Ramani. Good morning, Cassiano and Fábio. Do you anticipate anything with regard to recovering the machined parts, the cast iron parts for wind power generators?
Well, as I was answering in one of the questions, we have a new client in wind power to build the foundations, the bases for their generators. They are in Brazil. The orders are being commissioned at the moment, and we do not have an order for serial production of these parts, but we have been working on developing them. We are close to delivering them. In October, we are delivering some of the samples or prototypes for this client, and obviously, we have a positive outlook for next year to receive more orders and go back to supplying this industry as well.
The next question comes from Nelson Tobias. What is the perspective of return and investments in terms of profitability in face of the minus 25% comparison to ROMI 3 stocks in Bovespa at 18% positive? Do we have a perspective for payment of dividends in JSCP in 2024?
Well, the payment of dividends in 2024 is deliberated by the board and ultimately by the shareholders themselves. In the last five years, we have been regularly paying dividends in JSCP, and if we can maintain this performance, we will maintain our dividends policy. But this is deliberated by shareholders and the board. We make the quarterly payments for the JSCP, which allows us to save in taxes for shareholders. As to the stock value, our performance has been worse than Bovespa in the past couple of years.
Maybe if we look at a longer period of time, we are performing at the same level or even better. There is a lot of oscillation in demand in our market, especially the interest rates, which are inhibiting growth. We have lots of factors that generate a certain expectation on ROMI's stocks. But I cannot really comment on this specifically.
Oh, I am sorry. I forgot to turn on my camera. My apologies. Oh, I do not think I can do it now. Well, as they work on it, I am going to continue. For the third quarter of 2024, PRODZ had an increase of capital of BRL 14 million, and now it has gone to BRL 47 million. And capital increased throughout 2024. Can you tell us more about the reasons why this PRODZ capital has increased more than BRL 30 million in the quarter?
Well, Fábio, I believe you can address this one.
Well, this increase occurred especially because some operations flow into the FINAME accounts for the manufacturer, both in assets and liabilities. They flow through PRODZ as a vehicle. Now in the fourth quarter, they are going to be transferred to the manufacturer, FINAME. Because it worked as a vehicle, in this case, we needed to bring the capital. If we look at PRODZ, they have also had a proportional increase, but now that these operations are migrating to the FINAME for the manufacturer, this social capital is not necessarily reduced. But there is a returning of this capital from PRODZ back to ROMI itself. This is only temporary, because PRODZ served as a financial vehicle.
Thank you, Fábio. The next question comes from Daniel. Can ROMI disclose how much is the average yield on a monthly basis for rental?
I'm not sure I follow the question. For our clients, rental is basically about 2% of the machine cost. It's a very aggressive value. This has been happening because we are focusing a lot on rental to give our clients productivity. Even if they don't have the capital to invest in cast and machined parts, they can still get more productivity with a connected machine that offers them much more information and productivity without allocating the capital for the full purchase of the machine. ROMI is doing that for them. It's approximately 2% of the cost of a new machine. This is the monthly rent.
The next question comes from Rafael Ometa. Good morning. Although there's no separation in revenues between sales and rental, can you differentiate the net margins for both modalities? Which one has the best net margin?
Rental offers better net margin, but that's only natural because capital allocation is much larger. Return over invested capital is much higher in rental than it is in sales. As a consequence, we have good return on sales. We allocate less capital, and we have better return on rental because we allocate a lot more capital. I think what's most interesting is the value chain for our client. When we offer this option, we're offering them an opportunity. We're getting ourselves an opportunity to find clients who would not be investing in us otherwise because of the cost of capital in the country. They would look for alternatives to produce. Rental serves a need for these clients because they don't have to allocate capital at the beginning.
As a consequence, this offers a great possibility for Rough and Machined Cast Iron Parts through the rental of machines. This is very significant, and it has been stimulating clients, especially in the Machines rented year-over-year, quarter-over-quarter. We can see an improvement in these numbers, having more rented machines quarter after quarter.
Thank you, Rafael. If you have any questions, please type them along with your name and the name of the company you represent in the Q&A tool of the Zoom application, or for questions via audio, use the raise hand tool to release your microphone and then identify yourself, please. Excuse me. Since there are no more questions, I would like to turn the floor over to Mr. Luiz Cassiano Rosolen for his final remarks.
Bear in mind that ROMI's Investor Relations Department is available to answer any further questions and concerns. I would like to thank you all for participating in ROMI's conference call for this quarter. We are at your avail to answer any questions you may have. Thank you very much. Have a great day.
The ROMI conference call is now closed. We thank everyone for your participation. Have a great day.