Good afternoon. Thank you for standing by. Welcome to the teleconference of Tegma Gestão Logística S.A., the discussion of the results with reference to the third quarter of 2023. We have with us today, Nivaldo Tuba, CEO of Tegma, and Ramón Pérez , Administrative Director and Financial Director, and of Relations with Investors. We mention that this event is being recorded and all participants will be only hearing the teleconference during the presentation of the company. Following that, we will start the question-and-answer session, when instructions will be given about how to make your questions. If any of you, please solicit the help of an operator if you need help during the conference, dialing asterisk zero. The recording of the event will be available after the event for seven days.
We would now like to start, passing the word to Senhor Nivaldo, the Director President of Tegma, who will begin the presentation. Senhor Nivaldo, please go ahead.
Good afternoon to everyone. I am Nivaldo Tuba, CEO of Tegma. In name of the entire company, I would like to thank you once again for your participation in our teleconference and our earnings call. I have with me Ramón Pérez , our Financial Director and our Investor Relations Director, along with Ian Nunes and Felipe Fogarolli of the IR area. As is usual, we will start our presentation with slide two, where the participants can find our disclaimer with respect to our prospective declarations. Going to slide three, we'd like to talk about the highlights of the third quarter. In the first point, we mentioned about the approval of the payment of dividends and interest on equity intermittently.
With reference to the third quarter of 2023, we will distribute BRL 35.6 million, or BRL 0.54 per share, which corresponds to 72% of the net profit, adjusted net profit, adjusted by the reserve for fiscal incentives. These payments will be made on 23rd of November , benefiting those stockholders who have a stockholder position as of Thursday, November 9th. For the second highlight, we'd like to talk about the important project which was initiated in the month of October this year. Tegma started the process of the implementation of a new ERP from Oracle Cloud, which will substitute the ERP of Datasul. This new ERP is a solution which will best attend the needs of the company in innovation, modernness, and ease of use, cost and ease of use.
Beyond having the highest large portfolio of logistics solution, it is one of the first steps of the digital transformation of our company, focusing on the administrative and financial areas, and which will serve as a basis of foundation for the second step, expanding to other fronts of the company. We have a provision that the implementation of this project will take from 12 to 14 months. The third highlight is an important award that Tegma won, the 100 Open Corps, f or the fifth year in a row, is most involved in innovation in the country. This award always seeks to find opportunities to add new logistic solutions, adding benefits to our solutions and for our clients. Finally, for the fourth year in a row, the inventory of the greenhouse gases by Tegma.
We received the Gold Seal from the GHG Protocol, which has as one of its demands, the external auditing of the information, testing in this way, the quality of the information supplied. This conquest is a recognition of the efforts that the company has made in this area of sustainability and we say with respect to transparency with our emissions, reinforcing our strong intention to always seek the best ways to evaluate and reduce our impact in terms of climate change. Going to slide four, we talk about the principal data in the vehicle market in Brazil. As we can observe in the first chart, the domestic sales in the third quarter of 2023 were 10% above those, with the annual comparison. This reflects the growth of retail sales in that quarter, with the availability of components, especially semiconductors.
We should point out that the sales in July were positively impacted by the program of discounts on new cars of BRL 120,000 of the federal government. However, we cannot quantify if these sales were anticipations or actually new sales. The production for its turn, presented a reduction of 3% in the third quarter of 2023 on the annual comparison, as we can see in the graph below on the left. This fall is explained by the resizing of the rhythm of production to current levels and the stocks of industries, and the fall off in exports, which fell 20% in the quarter, as well as the growth of 31% in the sale of imported vehicles in the country. Looking at slide five, we present the principal operational indicators in the division of automotive logistics.
The quantity of vehicles transported in the third quarter of 2023 was 170,000 units, 2% above the annual comparison, reflecting the growth of domestic sales, as is explained in the previous slide. On the other hand, our market share was reduced in the third quarter compared to the annual basis to a level below 25%. This retraction of market share was due to the loss of participation in the market of relevant clients for the company in the month of July, when there was the government's program of discounts for new cars, the federal government. However, it's important to mention that in the following months after July, we can observe a normalization of our market share among these clients.
Finally, the average distance of our trips of 1.4% higher than on an annual basis due to the growth of export trips and highway transport to other countries in the MERCOSUR, and also the increase of domestic trip travel overall. It's important. After these highlights, I'm going to pass the word to Ramón Pérez, our financial director, who will talk about our results, cash flow, and other indicators. After that, we will open for any questions you might have. Thank you.
Thank you, Nivaldo Tuba. Good afternoon to everyone. Looking at slide six, we can talk about the results in the automotive logistics division. We can see on the graph above that there was growth of 3% in net revenue of the division in the third quarter of 2023, which is explained principally due to the increase of 2% in the number of vehicles transported in the quarter, and 1.4% in the distance traveled. It is worth mentioning also that the great oscillation in the price of diesel fuel in the last 12 months has caused readjustments in the tariffs, both positive as well as negatives during this period. Finally, we have to point out the good results of Fastline, our unit of logistics for used vehicles, which has had continued evolution of revenue, which has been quite positive.
Below, we have the evolution both of the EBIT as well as the EBITDA in the third quarter of 2023 on an annual comparison, as well as of their respective margins. We should also keep in mind that the margins in the third quarter of 2022 are adjusted by the event, a non-recurring event, which increased in BRL 6.6 million, the expenses of that division in that period. The reduction of the EBITDA margin in the third quarter of 2023 reflects the normalization of the profitability of logistics services, as well as the administration of these auto services and the patios, as well as the realignment of the tariffs of the division to the current levels of fuel prices.
Additionally, there was growth in the costs with personnel above the growth of revenue due to the increase in the operational headcount in the division, which does not always accompany linearly the growth in the number of vehicles transported. Nonetheless, the proportion of expenses with personnel relative to net revenue in the third quarter of 2023 is below the average of the last five quarters. Also, we see the reduction of the—there is a reduction in the EBITDA margin, an increase of SG&A expenses, especially expenses with personnel due to the wage increase of the year of 2023 and new hiring, as well as the increase of expenses with consultancies and legal fees. Slide seven, we show the results of the division of integrated logistics. We can observe that the net revenue of the division in the third quarter of 2023 reduced by 3% on the annual comparison.
This reduction is due to the operation with chemicals due to the instability in the operational flows caused by the renewal of the fleet of silo trucks, of tank trucks, as well as in the second quarter of 2023, which caused a reduction in the amount of chemical products transported. This renewal of the fleet has already been practically finalized, and by the end of November it will be, and we expect a gradual normalization to the volumes in the fourth quarter of 2023. In this quarter, the operation of chemicals of Tegma conquered an important contract for the transport of barrilha, in which we will be responsible for attending the flow between the states of Santa Catarina and São Paulo. This contract has a 12-month period and the potential to add 10% to the revenue of the operation, considering the level of 2022, and maintain our margins in line.
The operation of electrical appliances recovered its revenue, especially due to the recomposition of tariffs. On the graph below, we can see that both the EBIT margin as well as the EBITDA margin presented retraction in the third quarter of 2023 on an annual basis. Both were impacted negatively by the operational event mentioned, which compromised the dilution of fixed costs in the quarter. Looking at slide eight, we would like to present our consolidated results. Net revenue was BRL 427 million in the third quarter of 2023, which represents a growth of 3% on the annual comparison, reflecting the growth in the division of automotive logistics during the period. Below, we can see that both the EBIT as well as the EBITDA, presented retraction on the annual comparison, as well as their margins reflected in a fall off of margins in both divisions due to the factors previously mentioned.
Finally, net profit for the third quarter was BRL 56.3 million, 5% higher on an annual basis. An expansion of 0.3 percentage points in the net margin and the evolution of net margin, which occurred in spite of the retraction of the EBIT margin, is fruit of the financial results which are still more positive, consequence of the generation of cash and the structure of a deleveraged capital structure and of the positive results of our joint venture with GDL. The recent GDL performance reflects the growth in the storage of imported vehicles, accompanying the increase in the sales of these vehicles in Brazil. Beyond that, the performance of the activity of storage in general of consumer goods also benefited these results.
Looking at slide number nine, we present on this graph on the left, the cash flow cycle in September of 2023, which was 36 days, five days shorter than the cash cycle in the previous quarter due to an improved dynamic in receivables. With respect to CapEx of the company, the total investments in the third quarter of 2023 was BRL 11.9 million or 2.8% of total net revenue, pointing out that the investment of BRL 4.8 million in the renewal of the fleet of company-owned vehicles, of tank vehicles for the operation with the chemical sector. Finally, on the left, we look at the free cash flow of the company, which was of BRL 50 million positive in the third quarter of 2023.
This cash generation is the fruit of the operational performance allied with the reduction in the cash cycle, as well as the utilization of BRL 4.8 million of tax credits, which contributed positively to our operational cash flow. On slide 10, we present the details of our capital structure. In the first graph, we can see that the current cash on hand of BRL 259 million, which is above the payments on the net debt for the coming years. Over the third quarter of 2023, we liquidated loans in the amount of BRL 45 million in principal, as well as the capture of loans and financing that total BRL 51.3 million.
As a result of these payments and new fundraisings, we can see on the graph on the side that the cost of our debt has been reduced, compared to the previous quarters, reaching CDI + 1.55% in September 2023. On the table below, we can see that our net cash position in September 2023 was BRL 163 million in cash, higher than the position of June and due to the positive operational results and the reduction in our cash cycle. Finally, on the right is our rating, which was reaffirmed by Fitch in April of this year and maintained at A Local with a perspective of stability. Looking at slide 11, we can see the indicators of profitability of the company.
A return on invested capital in the third quarter of 2023 in gray was 28.7%, slightly below that of the second quarter, as well as the ROE on the orange line. These variations were due to principally the reduction of the operating margins of Tegma in this quarter. On the graph below, we can see that the EVA in the third quarter of 2023 has also been reduced due to the level of the previous quarter. Basically due to the same factors that impacted negatively the ROIC in the quarter. On the right, we see the history of dividends and interest paid on equity paid by Tegma. On the gray line, we indicate the payout of these distributions. The payment of dividends interspersed during the year 2023 was BRL 73.2 million, 65% of the net profit without considering the constitution of the reserve for fiscal incentives.
On this slide, we see that the dividend yield on distributed profit corresponded to 8.2%. Finally, on the last slide, we see a performance of our stock compared to the Ibovespa Index. Tegma stock shown in the first graph showed a performance above that of the market overall till the middle of July. This performance is a reflection of the operational resilience of the company and the tendency of the recovery of the automotive market. As is shown in the graph below, stock in Tegma, as well as happens with a lot of the companies listed in Brazil, are sold at multiples below their average, influencing by the macroeconomic scenario, which is still in recovery. With that, I thank you all for your attention, and we open for the session of questions and answers.
Ladies and gentlemen, we will now start the session of questions and answers. To make a question, please type asterisk one. To remove your question from the list, please type asterisk two. Sir Nivaldo will read the questions sent in during the webcast. Our first question is from Luiz Capistrano of Itaú BBA.
Good afternoon. Thank you for the space and also for the results. I wanted to hear from you two things, and I think which is the first thing is an update of how you see the market for next year. In the last month, we've had a downturn in the part of interest rates. Perhaps things won't come back as quickly as was hoped for. I'd like to understand what's the humor, the attitude of clients in the association of vehicle manufacturers and your relationship, any information that might help be useful for us.
And the second question is regarding Fastline. If you have continued to point out about the good performance of the subsidiary, perhaps the idea is that I wanted to look at you, what could help to have more growth in this segment, and if these possibilities could have an M&A to accelerate this area, if that makes sense, and if you have structure for this type of inorganic growth. Those are my two questions. Thank you very much.
Luiz, thank you for your questions. Good afternoon. It is a pleasure to have you here with us in our conference. Let's go. In 2024, there are still very few indications of growth out in the market. However, we will give you an overview, the input that we are using in our budgeting. First of all, is the question of logistics. We estimate a small growth in new vehicles in the domestic production and a bigger growth in imported vehicles because the base of imported vehicles in 2023 will be smaller. We have BYD looking at good quantities and with a good market acceptance and a marketing program which is quite aggressive. Other big brands that I can mention which are public also, such as Volvo and Porsche, with positions which are quite optimistic for growth this year.
The question of used vehicles as well as other areas we understand is the growth which will be disconnected from what we can call the vegetative growth. We are looking at it. It is still a new business which is in expansion, and we are looking at 2024 with growth in that area. Strongly interesting growth. The question of chemical transportation, we are going to have a recovery compared to 2022, since at the end of this year and in the beginning of 2024, a normalization of our fleet. Also, we made an announcement of a big contract which we signed recently and which will come to effect in 2024, the operation of barrilha with a new player who was not in our portfolio.
On the side of electronic appliances transportation, we see the stability of the market in 2024 or perhaps a slight retraction of the market due to the re-adequation of two suppliers and our principal clients, making it possible that the average distance run by our fleet will be slightly lower. I also talk about GDL, our subsidiary in Espírito Santo, which hit the year of 2023. It did very well with results positive disconnected from our budget. There is a sign in 2024 of this scenario. We have inputs when vehicle projections with our patios full and due to a general cargo, which is also moving very well.
Talking about Fastline, has been transforming itself into a very interesting business with good growth, relevant annual growth, and we are working on investing in that company, and principally to bring it up to speed technologically. We know that right now is the time for the technological advances in the company, which will facilitate a lot the work and consequently, the performance will improve, and we will be able to mark a growth that the market might support. Thank you, Luiz.
Very well. Thank you, Nivaldo. One last point in relation to M&A in the market of Fastline. Would it make any sense, an acquisition in that segment?
This is Ramón speaking now. Yes. I believe that we've even mentioned this at some point in time, and within the targets that we have been analyzing, there are possibilities connected with the market of vehicles, where we see some growth in that area. It's part of our strategy.
Very well, Nivaldo, Ramón. Thank you for your answers. Good afternoon.
The next question is from Marcelo Arazi of BTG Pactual.
Afternoon, everybody. Thank you for the opportunity. One point about the impact that you had on the margin in 2023, especially in the dynamic of fuel costs and the pass-through of these costs. How do you negotiate with the clients this pass-through, and how has this affected both in 2023 as well as 2024 with this greater volatility in fuel prices?
Good afternoon. We have contracts with the car companies are case by case. Even though they're independent, there's practically a rule that permits the control of these costs. We define percentages of triggers. When these triggers are reached above or below, they are set off, and this has happened with a great deal of relevance in 2022. In 2023, it has been happening in 2023, and we understand we've been having success in the negotiations, being able to pass through all of the increases in fuel costs. For 2024, a lot of our contracts are renewed or in the process of renewal.
We don't see many surprises there, and the same concept will be in effect, a trigger which will increase by as a percentage, whether upwards or downwards on prices, either raising or lowering rates due to that. This, we looked at our operational area in the vehicle sector.
It's something that you consider a one-off, not recurring. It's something that should maintain itself going forward? In relation to the expenses that you've had with personnel in this quarter, with the higher number of hiring, and also the increase in wage contracts, do you think that this will continue going forward, or is this more of a one-off affecting the third quarter numbers?
This is Ramón speaking. I would call it a one-off. We tried to explain this, I am not sure if it was very clear, that these readjustments, the size of our operating team, they do not happen linearly. So this could have a higher or lower effect in a certain quarter, and this is adjusted over time. So it has a lot to do with the size of our team. In the third quarter, we had a ramp-up, increasing costs due to the contractual wage readjustments. But this was a nonlinear adjustment in our costs, which will not be repeated in the next quarter.
Okay. That's very clear. Thank you very much.
Our next question is from Victor Demier of Vinci Partners.
Thank you. Congratulations on the results, Nivaldo and team, and thank you for taking my question. I would like you to comment a little bit more on this new contact in the chemical sector. Also, that you would comment on what to expect in the next quarters in this ramp-up, both in revenue as well as margin for this chemical part of the operations. If you expect a recovery of lost volume due to the renewals of these trucks, the purchase of new trucks. If you could pass any information about this ramp-up in revenue, that would be very interesting for us. Thank you very much.
Hi, Victor. Very good question. Based on a contract that could bring an increase of up to 10% in our revenues in 2024 with the chemical sector, is a very interesting characteristic. The operation of Tegma in a geographical area in which we were not working, not operating. It's a new question. One that's very relevant. A large client who's starting their operations with us, operates with other players. There's also the possibility of growth within the same client. A one-year contract, and we're putting a new fleet at the service of this client, and we're going to see the results. As you said, starting more specifically in this last quarter and last days, in the end of November, we can see almost a fleet operating at full speed, highly renewed with a number of new vehicles. This will be continuing during 2024.
We expect independent of the chemical market, Brazilian chemical market as a whole, does not see relevant growth, but Tegma, due to the actions which we're taking, adding to our fleet, placing new trucks in our fleet and having relevant growth, the results will be better than 2023.
Thank you very much.
Ladies and gentlemen, remembering that to make a question, just type asterisk one. We will now pass the word. Now look at the webcast questions.
Hi, people. This is Ian from IR. I would like to mediate the questions which came in during the webcast, some of which we've already answered. We're going to try to answer the others. The first is from Eduardo. The better cash cycle was important for the company in the generation of cash in this quarter. Why there was such a reduction, such a considerable reduction this quarter, and can we expect that this will continue in coming quarters? I'd like to pass this question to Ramón.
With relation to this reduction, this improvement in our cash cycle, it's very much connected to the reduction of receivables and a mix of sales which had an improvement in participation with shorter payment terms. It's also worth mentioning that the reduction of administrative losses, questions that internally operational questions which we work with constantly to reduce eventual lateness in payments, sometimes due to systemic questions or lack of proof of payment. They're not credit questions. On the contrary, one of the strengths of Tegma is that we have a portfolio, the quality of our clients, and that in all of our divisions. Specifically in this quarter, we had this situation.
In the following quarters, there's nothing that we can really indicate as being a constant, diminution of, to verify personally, the same rhythm of diminishing costs, which ratifies our effort here. That which is under our control. The so-called administrative payments is part of the dynamic of our businesses.
A question from Caio from Vinci Partners. When we talk about GDL, I'm going to pass this question to Nivaldo and ask him to answer about GDL.
Thank you. Really, GDL in this third quarter of 2023 has a very important component of investment due to the imported vehicles in the Port of Vitória. Great Wall Motor and BYD have had exponential growth in sales here. Other clients also have contributed, such as Volvo and Porsche. It's very important when I look at BYD, not simply a client in the automotive area. Almost all of the imports that they make through the Port of Vitória, and Vitória concentrates a lot of BYD's imports, are removed and operationalized through GDL. GDL has also had a relevant growth of revenue through general storage, merchandise which come into our warehouses and are quickly passed through and then are dispensed through our system. Other merchandise, which is produced in Brazil, which are brought to our patios, or from our patios, are then distributed as well.
It is also worth mentioning that in a world that is not only flowers, we have had results that we considered a little bit below that which was expected when we look at storage, the import tax warehousing of the GDL's logistics of new cars, and the logistics of general storage, which has reached, compensated clearly the small negative results which it generated.
Some questions from Caio, which were partially answered already. Do you think about increasing the payout for next year, or to make any extraordinary distribution considering the possibility of the extinction of the JCP in the following year? Asking Ramón.
Caio, due to the possibility of the extinction of the interest on equity in 2025, there is no definition of extraordinary distribution specifically related to that. We are going to be accompanying this subject, and finally, the decisions which we will distribute to the market if necessary. But there is nothing decided in that sense. What we do have, and is happening in this third quarter, is that we brought our payout, which normally has been about 70%, roughly 70% tax incentive reserves, to something above 70% in this quarter. This is more connected to a question of management of our available cash in relation to our strategy of growth, inorganic growth.
We always like to remember that our cash on hand, which is due to the capacity of the company to generate operating cash, also due to our low level of CapEx and investment, this cash on hand will be administered due to the velocity with which we evolve in our strategy of inorganic growth through M&A, which we continue to work hard on so that we can put into practice in the near future. Thank you.
Next question comes from Guilherme, for Ramón. Congratulations on the results. Can you tell us your expectations of market share for 2024, especially in relation to the automotive operation? What is the dynamic that this will have for the domestic shares, will have an effect on domestic shares for domestic vehicles and export vehicles? I would like to ask Nivaldo.
Thank you, Guilherme. The perspective for 2024, what we have, we have results and our attempts with the car companies, though it is premature, it is a scenario for the chemical sector as well. In the beginning of 2023, when we talk about 2022, we are talking about growth of 4% or 5%. Today, we are looking at 7% growth, and that is actually a conservative number. We are looking at numbers of growth. We consider those numbers to be very conservative. As far as the question of exports, we look at the volatility and we look at an average historic reactions in countries such as Peru, Bolivia, Colombia, where the level of exports and cargo has been growing. Thank you.