Good morning. Welcome to Romi's third quarter 2026 earnings conference call. Before we begin, I would like to clarify that this conference call is intended exclusively for investors and investment professionals. Any statements made during this conference call regarding the company's business outlook, operating and financial projections and targets constitute forward-looking statement based on management's current expectations regarding the company's future performance. These expectations are highly dependent on market conditions, the overall economic performance of Brazil, industry developments, and international markets, and are therefore subject to change. Please note that this conference call is being recorded and conducted in Portuguese with simultaneous interpretation into English. The presentation slides are available in the Earnings Center section of our investors relations website at www.Romi.com/investidores. During the presentation, all participants will be in listen-only mode. A question-and-answer session will follow.
To submit a question, please type your question along with your name and the name of the company you represent using the Q&A feature in Zoom. Further instructions will be provided later for participants wishing to ask questions verbally. Joining us today, Mr. Luiz Cassiano Rosolen, Chief Executive Officer, Mr. Fabio Taiar, Chief Financial and Investor Relations Officer. Our executives will first present the company's third quarter 2026 results and will then be available to answer your questions. I will now turn the floor over to Mr. Luiz Cassiano.
Thank you, Julia. Good morning, everyone. Thank you for your presence here for this third quarter 2026 earnings call. I want to start by acknowledging that we had a very difficult quarter, with results far below what we consider adequate. Excluding the extraordinary effects of tax credits, we recorded a negative adjusted EBIT of BRL 9.1 million.
We're not satisfied with this performance, and we understand our responsibility to reverse the situation. It is true that the business environment remains very challenging, especially in Brazil, with great caution investment decisions. This has affected the Romi Machines unit and, even more significantly, the casting and machining unit too. But regardless of the scenario, we need to act. We are intensifying actions to adapt structures, improve productivity, and review operational processes. And we are doing this with a sense of urgency because we need to recover the profitability of our operations. On the other hand, we had very positive news at B+W, our German unit. There were BRL 252 million in new orders, including an important contract of approximately BRL 200 million. As a result, the portfolio reached BRL 725 million, giving important visibility for the coming years. That is two years.
Looking ahead, we remain cautious about the economic outlook, but determined to move forward. We have important opportunities, and our focus is on executing with discipline, speed, and turning those opportunities into consistent results. I thank our shareholders, employees, customers, and business partners for their trust. I now give the floor to Fabio, who will detail the quarter's results. Thank you very much.
Thank you, Cassiano. First of all, good morning, everyone. Thank you for taking part of this earnings call, starting with the highlights for this third quarter, where we have an order backlog that has been quite significant of BRL 421.5 million. That represented an increase of 8.5% compared to the third quarter 2025, very much propelled by B+W orders that in this period reached BRL 250 million. That is a growth at B+W of nearly 64% compared to the same period of 2025.
This volume of order backlog allowed us to reach the end of the third quarter of 2026, BRL 993 million of order backlog. This represents nearly 11% over September 2025, where also B+W subsidiary represents out of this total, BRL 725 million. That is analyzing B+W specifically and the order backlog we are talking about over what we had of September 2025. That means we have a very positive outlook of B+W for the next quarter. EBITDA for this quarter, that is the adjusted one, not considering the tax credit, it reached BRL 10.2 million with a margin of 4%. This is a drop concerning the third quarter of 2025 because our net operating revenue reached BRL 257 million. That means a drop of 26.5% compared to the last year, where the main drop was machines and machine cast iron, specifically for the domestic market and B+W.
In any case, as it has large size projects, it had been expected with lower volume of specific net sales. Looking into the portfolio, we see that the fourth quarter will be much superior. Also, we should highlight a recognition of tax credits of BRL 47 million, that is before tax, and the net profit effect is BRL 36 million. These are tax credits that come from the non-levying of social security contribution on certain payroll amounts where it was sentenced at our claims. That means we have now the recognition of this asset, and it will be compensated with federal tax future ones. It was also an object of a material fact that we did say in September, where the big importance is to have this credit fully compensated at most likely in 18 months.
We also talk about our participation in the two main international exhibitions that we have. One called IMTS in Chicago, and the other is AMB in Stuttgart, Germany. Both were very well visited. We had a booth for Romi and B+W, and it was quite favorable to us. We must mention here that we celebrated the 70th anniversary of the Romi-isetta. It was quite interesting event where we had, in partnership with the Romi Foundation, to celebrate the 70th anniversary of the Romi-isetta produced in Brazil. Also, in September 24, we stated interest on our own capital on BRL 26 million, which is BRL 0.28 per share to be paid in 2027.
In terms of conjunctural indicators, analyzing both the industrial or the GDP and the gross fixed capital formation, where there was a slight growth for the second quarter of 2026 compared to the same of the previous year of 1.4%. However, when we analyze in a more stratified manner, the evolution, we can realize that it was fully represented by softwares and hardwares that were imported that showed an increase of 8.5% in the same period. When we look into the apparent consumption of machines, there was a reduction of 2.4%. When we analyze the industrial GDP, which is the sector that impacts us the most, which is the transformation industry, presenting the same period when we talk about comparison, a reduction of 0.9% for the second semester of 2026. If we look into other economic indicators, one is the average installed capacity utilization.
It ended August in 69%. If we analyze under the previous years, the average for this year is a bit under in 2026. However, we are still able to see an industrial activity that is reasonable, but we still do not see a trend of reduction that would be more significant. Although we do see that compared to the previous years, it does not show as much force. Finally, the Industrial Entrepreneur Confidence Index. This already shows very low from October 2022. We see that since 2024, it remains at a level under 50 points, which is the one that splits optimism from pessimism.
What we see on a day to day when it comes down to it, is a market that is very challenging with the index of confidence, the Industrial Entrepreneur Confidence Index, that is low, that actually does impact in a negative manner, mainly when it comes to investments, that it impacts directly the impact of Romi machines. When it comes to the different sectors that demand our product in Romi machines, there was not much of a difference when we talk about having machinery equipment, job shops, we have here as 50% of our client base. We are talking about both the machinery and job shops. It is quite a diversity, which is a characteristic of our equipment and of our database of clients, and that is still true for 2026 when compared to the previous years.
B+W is a niche sector with major projects to be delivered in less sectors.
In 2026, we still see a highlight the performance of engines and systems, which was over half of the revenue for 2026, and here we see here engines and systems related to energy generation. Machinery and equipment had a certain growth, but mostly because there was, in this period, a reduction of delivery for construction and mining. In any case, the market, both for the other segments that B+W works with, is still very positive. Finally here, Rough and Machined Cast Iron Parts. We have a stability for commercial automotive, although, as we know, there was a reduction of the net revenue. We know the absolute number will drop and does drop. On the other hand, we also have construction that is here, the yellow line. That means there was a reduction here, much more because of postponing some projects.
In terms of outlook, this segment is still positive. Agricultural machinery, we already have been seeing the last few years, a performance that is much specifically dropping, and it has been recovering, but still very gradually. For energy, wind energy, that in last year we pretty much did not have any delivery, and this year it reached 14%. We still have some parts to be delivered by the end of the year, but in terms of outlook, it is still very uncertain, the demand of this segment. In terms of net sales for a business unit for consolidated revenue, Romi machines increased a bit its participation, but mainly because there was a reduction of the other segments of the other business units that made Romi machines get more share.
But overall, the three business units remain one that represents very similar percentage in 2026 compared to the nine months of 2025. In terms of revenue by geographic region, Brazil is still the one that represents, in 2026, the same percentage that it had in 2025, that is 66%. Here we highlight a new growth for the United States, and mainly B+W growing the American market. The other segments or the other regions are still constant, as we can see from 2025 to 2026. In terms of order entry, we can see here an increase of 8.5% compared to the third quarter of 2026. So we have BRL 421 million, the total mostly represented by B+W, that had quite a growth.
On the other hand, we see a reduction of Romi Machines, especially in the domestic market, as we have been talking about an environment with many challenges, with a high level of uncertainty that have a negative impact both for Romi Machines and also we can see that environment for Rough and Machined Cast Iron Parts. For the year, we have a 15.6% reduction for Romi Machines here because of this drop because of the level of uncertainty in the market. B+W, on the other hand, brought a higher volume of order and a drop also of machine cast iron. So in terms of, here, portfolio, we have here, the total amount, mostly, the BRL 992.7 million because of B+W machines. For Romi Machines, we see a reduction and there is an impact in our portfolio.
Compared to the same period of last year, we are talking about a reduction of 28%. The same is true with greater intensity for Rough and Machined Cast Iron Parts. Also, although the absolute number is smaller, we have a 44% reduction. That means that when we talk about the incremental B+W, this portfolio by the end of September this year, compared to the September of last year, it grew 10.9%. In terms of profitability, the gross margin is pretty constant compared to the third quarter of 2025. There was not much change. However, since we are talking about a 26% drop in revenue, the volume of gross profit had a reduction. Since we have a characteristic of operating expenses that are more fixed than variables, this reduction of the gross profit impacted both EBIT, where we see an adjusted that is negative of BRL 9.1 million or 3.5% -.
The same impact we can also see right here on EBITDA, where we see that it goes from BRL 38 million to BRL 10.2 million, a margin of 11% to 4%, represented mainly because of the drop in revenue. Here, the net income, we see BRL 7 million, as we say, excluding the tax credit, so we here have 4.7%. In terms of performance by business units, we had a 10% reduction of Romi Machines because of the lower volume of order entry in the last quarters. That way, we also see a reduction on the gross margin. Here there are two main points. The first is an additional commercial effort to have a volume of business that is still significant. The second one here, the foreign market represented more than these revenues in 2026.
If we look into the comparison, there was an appreciation of the real currency, and there is an impact then on reducing the margins for exports. With lower volume and the reduction of the gross margin, it has impact in all the other numbers, as we can see here for the adjusted EBITDA, going from 22.5% to nearly 16%. For B+W, although there was a reduction in the operating revenue, as we already mentioned, there is a concentration that is high at B+W for the last quarter of this year. In any case, even with a revenue that is a bit less, it shows a margin recovery here, which is products and the deliveries that are more diversified in terms of geography, and that also can bring us better margin. That way, we are able to have a slightly positive EBITDA margin in terms of 2026.
Finally, Rough and Machined Cast Iron Parts has a reduction of revenue that is more significant. We had a very low volume for the previous year, and this reduced a bit more this year. Obviously, this brings a greater challenge to dilute fixed costs, and it ends up impacting the margin, both the gross and EBITDA margin, where we are seeing very negative numbers here for the nine months of 2026. In terms of financial position, this quarter was one of great cash generation, especially here coming from the advance payments that B+W received from the recent orders. That way, it impacted in a positive way the company's debt that went from BRL 469 million to BRL 101.5 million at the end of September this year. We have BRL 370 million for cash debt, where we have here a reduction of the debt for this third quarter.
Finally, the share performance, much under Bovespa for the results, mainly because of the macroeconomic environment and the level of uncertainty we have been going through. All of this has been impacting in a negative way the performance of the shares in this two-year period. With that, we complete the presentation of our earnings information. We thank everyone for your participation. Now we are available for questions that you might have. Thank you very much.
Ladies and gentlemen, we will now begin the question -and -answer session. As a reminder, this conference call is intended exclusively for investors and investment professionals. To submit a question, please type your question along with your name and the name of the company you represent using the Q&A feature in Zoom. If you would like to ask a question verbally, please use the raise hand feature.
We will then enable your microphone and ask you to identify yourself. Good morning, everyone. The first question comes from Cedric Miranda.
Good morning. I would like to know the impact of the elimination of the six-day work week that would have in the company.
Cedric, we are going through all the analysis to understand the impact. The greatest impact for us is the reduction of 44 hours to 40 hours weekly. If we calculate, we are talking about BRL 10 million in the results, but our goal is to minimize or to nullify the impact with gaining productivity and keep investing in automation greatly. Also there is some impact in terms of flexibility and also our database that we need to analyze and all the impacts and then take the decision accordingly. That is the information we have now.
Thank you.
Excuse me.
As there are no further questions, I would now like to turn the floor back over to Mr. Luiz Cassiano for his closing remarks. Remember that Romi's Investors Relations Department remains available to address any additional questions or inquiries. Please, Mr. Luiz Cassiano, the floor is yours.
Thank you, Julia. Thank you everyone for taking part in our earnings conference call for the third quarter, 2026. We are available for you to answer any other question that might rise. Thank you very much and see you next time. Have a great day.
Romi's teleconference has come to an end. Thank you very much for participating.