Good day, everyone. Thank you for waiting. Welcome to Tegma Gestão Logística S.A. conference call to review second quarter 2022 earnings results. Today we have Mr. Nivaldo Tuba, CEO, and Mr. Ramón Pérez, CFO and IRO. I would like to inform you that this event is being recorded, and that all participants will be in listen-only mode during the company's presentation. After Tegma's remarks are over, there will be a question-and-answer session when further instructions will be provided. Should you need assistance during this conference call, please dial star zero to reach the operator. The replay of this event will be available right after the end of the call for a period of seven days. Now, I'll turn the conference call over to Mr. Nivaldo Tuba, Tegma's CEO, to start the presentation. Mr. Tuba, you may begin.
Good afternoon, ladies and gentlemen. My name is Nivaldo Tuba, Tegma's newly appointed CEO. On behalf of the entire company, I would like to thank you once again for taking part in another earnings call. Here with me are Ramón Pérez, our CFO and IRO, as well as Ian Nunes and Nicole Brunetto from our IR team. On slide two, as usual, we have a disclaimer for forward-looking statements. Moving on to slide three, I'd like to take a moment to introduce myself to investors and analysts on the conference call today. I took over as CEO of Tegma on July 1st after Marcos Medeiros submitted his resignation. I'd like to take this opportunity to thank Marcos on behalf of the whole team for his contributions to Tegma. I have over 35 years experience in the logistics industry and served as a CEO of the Columbia Group.
Two years ago, I accepted the challenge of serving as CEO of Tegma's joint venture, GDL, t hat is responsible for managing both general warehouses as well as vehicle logistics yards. As CEO of Tegma, I intend to harness the strengths of the vehicle logistics division and reinforce Tegma's market position. As far as the integrated logistics division goes, I hope my experience in the sector will provide the vision needed to double down on our pursuit of growth plus profitability and diversification. Moving on to the second topic, the semiconductor crisis that continues to negatively impact vehicle production. According to ANFAVEA, in the first half of 2022, approximately 170,000 vehicles were not produced due to the shortage of components and parts corresponding to 17% of production in the period.
Despite being unable to foresee when the situation would return to normal, many automakers decided to produce unfinished vehicles during the quarter on account of better prospects for receiving the needed parts. The third topic is on the approval of dividend payouts and interest on capital for the first half of 2022. BRL 24.6 million in interim payments will be distributed, corresponding to 50% of the accounting net income and to 60% of adjusted net income for the first half of 2022. Dividends will be paid on August 18th to the shareholders listed as such on Monday, August 8th. Dividend yield comes to 2.8%. I'd like to turn now to some of this quarter's innovation and technology highlights and to quickly share three company initiatives during this period. The first.
The first consisted of setting up the "electronic call", as we call it, which continues to offer several benefits to the company and its transportation partners in the automotive logistics division. This initiative represents an important step for operational digitalization as it allows partners to remotely select cargo, thereby limiting error-prone manual processes and increasing information processing capacity and speed. The second initiative involved adopting semi-trailers or adapting semi-trailers in our chemical's operation with the installation of a fourth axle and lengthening the chassis and the cargo box. These changes resulted in higher productivity, fewer trips per month, lower CO2 emissions, and product customer synergy on all trips. This is yet another improvement in our pursuit not only of economic gains and higher productivity, but also of environmental and safety gains for the operation as a whole.
The third and final initiative consisted of the Startup Challenge program, which is run by tegUP Ventures, Tegma's open innovation and technology arm. This challenge has been running for six consecutive years and was first launched in 2017. This year, 36 startups registered and 12 were chosen to take part in Pitch Day. You can find more information in the innovation and technology section of our Q2 2022 earnings release. Slide four gives us a graphical overview of the vehicle market in Brazil. As you can see, domestic sales in Q2 2022 were 6% lower than sales in the same period of 2021. This lower performance continues to reflect the supply squeeze for parts and components, tighter credit conditions, and worsening domestic macroeconomic indicators in Brazil, like inflation and income.
Once again, one of the biggest bottlenecks occurred in GM's plant in Gravataí, State of Rio Grande do Sul, which faced production difficulties during the quarter and that led to its manufacturing unfinished vehicles at the quarter's end due to the lack of available semiconductors. Nevertheless, the plant resumed production in July and, in addition to completing those unfinished vehicles, began once again producing sales-ready vehicles and recovering market share. The lower part of the slide shows that vehicle production was up 9% over Q2 2022 year-on-year due to a weaker comparative base, since the semiconductor crisis became more intense in May of last year, and to exports that performed well with 33% growth in Q2 2022 in the yearly comparison. This performance was due to improved sales in South America. Almost 1/4 of Brazilian production went to exports.
Slide five shows the key operating indicators for the automotive logistics division. In the graph, the upper right, we see that the number of vehicles transported in Q2 2022 was 8% higher year-on-year, and market share held steady at around 22%. Our market share is still below Tegma's historical average on account of the heavier impact of the semiconductor crisis on GM. General Motors is one of our key customers. The average distance of domestic trips, which is still below historical averages, was also affected by the temporary reduction of trips from GM's plant in Gravataí. Average distance of exports, on the other hand, increased year-on-year due to the greater road transport of vehicles to MERCOSUR. Du e to the increased share of exported vehicles, which correspond to a shorter distance in the consolidated mix, average distance traveled decreased by 3% in Q2 2022 when compared to Q1 2021.
Now that I've shared these highlights, I'll turn the floor over to our CFO, Ramón Pérez, who will cover our operating indicators, results, cash flow, and other indicators. After that, we'll open the floor to Q&A.
Thank you, Nivaldo. Good afternoon, ladies and gentlemen. Moving on to slide six, we see the results from the automotive logistics division. The chart on the top of the slide shows 33% growth of the division's net revenue in Q2 2022 compared to Q2 2021. These results reflect the increase in the number of vehicles transported 8% higher and tariff adjustments throughout 2021 and 2022. Please note the increase in revenue coming from the logistic operation of used vehicles, which has seen significant growth in terms of the number of vehicles transported and that has generated interesting, good commercial opportunities for Tegma.
The bottom of the slide shows that Q2 2022 EBIT margin recovered 3.2 percentage points over Q2 2021. Consistent with volume and revenue growth trends in the automotive division, this performance reflects a return to normalized margin levels following Q1 2022, which was severely hampered by lower volumes. The same is true for EBITDA margins. The 14.2% EBITDA in Q2 2022 is a direct reflection of the division's ability to handle volume increases while keeping costs and expenses under control. Slide seven presents income from integrated logistics. We see slight year-on-year growth in the division's net revenue due to an increase in the volume of chemicals transported and stored. All that despite difficulties that the household appliance operation has faced in light of uncertainties in Brazilian retail, coupled with shortages of parts and components.
The graphs show a sharp drop in the EBIT margin, but the reason for this is a one-off phenomenon that happened in Q2 2021, n amely, a tax credit totaling BRL 5.7 million. If we were to exclude this effect, we would see a mere 2.2 percentage point drop in the EBIT margin. For adjusted EBITDA, which excludes the one-off tax credit already mentioned, we also see a drop, but in this case of about 2.9 percentage points. This merely reflects the ups and downs of the mix of more or less profitable services, warehousing and transportation, respectively.
Moving on to slide eight, consolidated results. We see that the net revenue in the second quarter was 29% higher compared to the year prior, and was positively affected by 8%, as mentioned before, growth in the number of vehicles transported, in addition to tariff adjustments and the growth of the chemicals operations in integrated logistics. EBIT, without disregarding the positive one-off effect of Q2 2021, shows 26% year-on-year growth and a consistently stable margin. This is a reflection of the automotive operations' better operating performance overall. If we exclude the Q2 2021 tax credit, the margin in Q2 2022 would have grown by 2 percentage points. The Q2 2022 adjusted EBITDA margin of 16.1% was 1.2 percentage points higher year-on-year, and this is mainly due to recovery in the number of vehicles transported, which leveraged the division's asset utilization and also brought margins back to levels closer to normal.
Finally, it bears noting that net income grew by 27%, while the margin held stable at 10%. This net margin in Q2 2022 and in the first half of the year is on par with earlier net margins posted during much better periods in the automotive industry. Even though the industry is currently facing so many challenges, these numbers reflect the resilience of the automotive logistics operations and the company's wise decision to diversify. In fact, integrated logistics and the joint venture, GDL, accounted for 30% of Tegma's net income over the last 12 months. In addition to the diversification, the company has a deleveraged capital structure, which has significantly reduced the company's net financial expenses at a time of sharply rising interests and interest rates here in Brazil. Moving on to slide nine.
We see here that the company's CapEx was BRL 12 million in Q2 2022, corresponding to 4% of net revenue. The most significant investments in the period included the BRL 4.9 million purchase of 10 tractor units for the vehicle logistics operation. These were acquired to upgrade the company's fleet, which has been used extensively for deliveries throughout South America. We also acquired packaging for handling parts and components for the household appliances operations, and this investment amounted to BRL 4.2 million. It was predominantly related to the launch of new products that have different packaging specifications. Our cash-to-cash cycle was 51 days. That is one day higher than the previous quarter. This indicator was negatively impacted by occasional customer delays at the turn of the quarter, totaling BRL 9.5 million, which is the same as or equivalent to two days in the cash- to- cash cycle.
These returned to normal in subsequent weeks. Note that the balance owed relative to commercial negotiations with another logistics operator that subcontracts us for some routes has gradually decreased, corresponding to just a two-day increase in the cash-to-cash cycle in June 2022. If you will recall, this impact was seven days back in December 2021. When we look at the company's free cash flow, it was BRL -17 million in the second quarter. You may recall that the decrease in pending receivables mentioned earlier impacted our cash flow positively by BRL 15.4 million. Cash consumption in the quarter is explained by strong, rapid revenue recovery from automotive logistics, which despite significant improvement in operating income, consumed cash through working capital. The one-off delay of BRL 9.5 million, as mentioned earlier, also hampered cash flow. Slide 10 details our capital structure.
The first graph clearly shows that the BRL 120 million in cash in June 2022 is higher than the current gross debt amortizations for the next three years. We also see that no debt amortization is scheduled for 2022 moving forward. Repayment of the more expensive debt contracted during the pandemic explains the sharp drop in the average cost of debt. You can see this in the right-hand graph, resulting in CDI + 2.2% in June 2022. The composition of our net cash position, which is shown in the table on the bottom of the slide. You see that in June 2022, it stood at BRL 51 million. Again, this reflects the company's deleveraged structure, as mentioned earlier.
Finally, on the lower right, even though this is a very challenging moment for the automotive industry, we're proud to say that in April 2022, Fitch reaffirmed our Local A stable rating. Finally, moving on to the very last slide. Let's take a look at the evolution of return on invested capital as well as return on equity. Note that the ROIC, which is shown in gray, was 16.6% in June 2022 and represents, practically speaking, stability when compared to the ROIC posted in Q1 2022. This comes after a year of successive drops, due mainly to production difficulties in the automotive industry. The current ROIC is the same as the one the company posted at the end of 2020, but with 8% fewer vehicles transported and an 11% lower average distance traveled.
For ROE, shown by the orange line, also grew and was positively affected by the joint venture GDL's excellent quarterly performance. The lower left of the slide shows dividends and interest on capital paid out over the last five years. The gray line shows solid distributions payout. The orange line graphs the corresponding dividend yield. As shown in the quarterly highlights, the company decided to distribute 50% of book income, which corresponds to 60% of adjusted net income for the first half of 2022, corresponding to a dividend yield of 2.9%. In the chart showing the TGMA3 multiples, you'll see that the price to earnings in gray is stable compared to the previous quarter, at 7.2 x. Same as EV / EBITDA ratio, which was 4.1x in the second quarter of 2022. We attribute this primarily to uncertainties in the automotive market.
Finally, the last chart presents share performance compared to the Ibovespa index. Again, due to significant uncertainties in the automotive market, Tegma's share prices have been quite volatile thus far this year. Nevertheless, Tegma's shares have been in line with the Ibovespa index in recent months, which apparently reflects market confidence in Tegma's solid grounding and readiness to successfully face adverse situations. I'd like to thank you all for your attention and now would like to open the floor to questions and answers. Thank you.
Ladies and gentlemen, we will now begin the questions and answers session. If you have a question, please dial star one. If you'd like to remove your question from the queue, please dial star two. Mr. Nivaldo will read the questions coming from the webcast. Luiza Mussi from Banco Safra (Safra Bank). First question.
I have two questions. When I see guidance on ANFAVEA, we see that for light vehicles it's quite low, so for the second half of the year needs to be a lot stronger. In terms of this, I'd like to know what your perspectives are in terms of production. Do you expect a stronger second semester? The second question is that last quarter you talked about labor. You said that it was high in terms of cost. I'd like you to know what you have to say about the companies and what you think about labor costs for your second half of the year and what your strategy will be. Thank you very much.
Thank you very much, Luiza. Despite the fact that the second quarter was better than the first, it was still challenging for automotive logistics. The lack of parts and semiconductors is still far from being fully resolved, and there were a lot of times where production stopped and unfinished vehicles were all that we had. For Tegma, the most difficult was the GM plant, as we mentioned earlier, because there were a lot of vehicles that were just unfinished. Nevertheless, we still were able to recover our margins. This gave us relatively good results at the end of second quarter. For the second half of the year, we are paying close attention to what ANFAVEA is predicting. ANFAVEA was very bold early in the year. Now we're talking about 0.9% growth.
We estimate or we expect a little bit of growth in the second half of the year compared to the first half of the year on account of recovery and production will start up again, which again, production was heavily jeopardized the first half of the year. Ramón.
T o answer your second question, you were talking about the impact of labor on our margins. Our expectations are as follows. Since volumes are expected to increase, as ANFAVEA said, about 1% over last year, give or take a little bit. With this, we expect it to be more effective in the second half of the year. It's important to keep the following in mind. Although we have very little operating leverage and little ability to adapt labor to the volume requirements, it's easier when you have reductions over a certain period of time.
So volatility, the stop and start, stop and start, makes it difficult to be effective. We have to keep the teams. In fact, one of our primary or key customers recently stopped producing for two weeks, and we couldn't make any effective changes to our labor and teams because we have to be ready in case volumes increase again or production starts up again.
Thank you very much.
Luiz Capistrano from Itaú BBA.
Thank you. Good afternoon and thank you very much and congratulations on your results. I'd still like to talk about semiconductors and perspectives for the second half of the year, and it's very clear what you had to say, but I'd like to specifically talk about something, which is the number of headlines that we keep seeing referring to semiconductor stock that t hey're being stocked up right at the beginning, at the point where they're produced. We see that this is very complicated because they're being stocked up. It's hard to understand that electronic chips are necessarily what's used in vehicles. What do you think about this?
We expect this not to come back to normal so soon. That was very clear from what you said. On the other hand, do you expect this to improve in 2023? Do these headlines not affect you? How can we better understand the semiconductor context? Is that going to lessen costs perhaps, or increase costs? We've seen that the costs are quite high, and this obviously jeopardizes demand. It affects demand, affects sales. Is there a point of inflection that we'll see, at least for semiconductors? I'm just kind of thinking out loud here, but I'd like to understand what your thinking is on the stocking of semiconductors abroad.
Luiz, good afternoon, and thank you for the question. We are in vehicle production—w e're not in a vehicle production line. We're not in the best position to make gains from this. But we still have insights. For example, semiconductor stocks in Asia or South Korea are high because there's been a drop in demand for electronic products and the plants are starting to operate once again. But we don't really understand exactly what's going to happen with this sector. We can't make any affirmations. We can't be super optimistic about this because we're not yet sure.
Well, thank you.
Webcast, and the speaker will read the question.
Good afternoon. This is Ian Nunes from RI. I have two questions here on the webcast. From IR, sorry. One is for Nivaldo from André Santana. Can you give us some more information on the sector and size? Are you looking at M&A targets i n terms of the sector and size.
We're looking at integrated logistics in terms of the industry. Activities that are aligned with what we already do, whether it's automotive or specifically integrated logistics. The idea or guidance from the board is the following, is that we're gradually looking for a balance of scale for integrated logistics and other divisions. We have our parent company, GDL in Espírito Santo, has been doing a great job looking at this balance for us.
Second question. Humberto Rocha. Congratulations on such strong results. With cash generation moving back to normal and net cash, do we expect payouts to increase? And exports have been very strong this year. What are the perspectives for the second half of the year? Is it for South America or some other service, something else with the manufacturers?
Hi, Humberto. In terms of payout and cash generation returning to normal, I believe we're going to maintain our policy of about 50%, roughly 50%. It's been 50%-60% in recent years. Nominal amounts may increase, but the payout percentage is expected to stay roughly the same because our strategy is connected to what Nivaldo already mentioned. We expect to grow inorganically, so M&A. Your second question was about exports. This is an overall trend in the market. If you see agents' outlooks for this year. You see that domestic sales were lower than projected. We have transport to all of MERCOSUR, including Colombia, Argentina, Bolivia, Chile. There's no reason for us to believe that this trend is going to turn around. We expect it to continue apace.
Ladies and gentlemen. This is a reminder that if you'd like to ask a question, please dial star one. We are ending today's question and answer session. I'd like to invite Mr. Nivaldo Tuba to proceed with his closing statements.
Thank you very much. Thank you for your participation. It's always so gratifying to see everyone participating, learning about our company, understanding how we operate. As Tegma's CEO, I am here whenever you need me. Once again, thank you, and thank you on behalf of my entire team.
This concludes Tegma's conference call for today. Thank you very much for your participation. Have a good day, and thank you for using Chorus Call.