Good morning, ladies and gentlemen, and welcome everyone to Tupy S.A. audio conference to discuss results relative to Q4 and full year 2025. This conference is being recorded and a replay facility will be able to be accessed at the company's website at ri.tupy.com.br. The respective slide deck is also available for download at the company's RI website. All participants will be connected in listen-only mode during the company's remarks. After that, we'll start a Q&A session when further instructions will be provided. This presentation is also being recorded and simultaneously translated. Translation is available as you click on the interpretation button. For those listening in English, there's an option to mute original audio in Portuguese by clicking on the respective button.
Before moving on, I'd like to reinforce the fact that forward-looking statements are based on beliefs and assumptions of the company's management and also on information currently available for the company. Such forward-looking statements might involve risks and uncertainties as they refer to future events, and therefore depend on circumstances that may or may not materialize. Investors, analysts and journalists should have in mind that events relative to the macroeconomic scenario to the industry and other factors might lead the results to differ materially from those expressing these forward-looking statements. Joining us today for the conference, we have Mr. Rafael Lucchesi, CEO, Mr. Rodrigo Perico, CFO, Mr. Ricardo Sendim Fioramonte, VP for Structural Components, Mr. Gueitiro Matsuo Genso, VP for New Business Innovation in the RI, and Tupy's IR team. I'd like to turn the floor over now to Mr. Lucchesi who will start the presentation. Please, Mr.
Lucchesi, you may proceed. Good morning, everyone, and thank you for participating in our teleconference. 2025 was a year marked by an environment of uncertainty that caused impact on the global economy and as a consequence on the markets where we operate. External factors, both macroeconomic and industry related, have affected our sales and had repercussions on our revenues, which saw a drop of 9% vis-à-vis the previous year. The lower production volume also pressed and affected our operating results due to a lower cost dilution and also due to the impact on the efficiency and quality indicators. When you combine all those effects, we had a drop in EBITDA in over BRL 700, a significant amount, no doubt.
If we had preserved sales volumes and production volumes that we saw in 2024, we would have more than doubled Adjusted EBITDA in 2025. Even though we face a challenging scenario, 2025 was also a year where we continued to execute our strategic planning, having moved forward in building a company which is now leaner and more efficient. Whenever necessary, that strategy was revisited and improved. Geopolitical changes combined with an increase in the relevance of the region and a USMCA, which includes Mexico, the U.S. and Canada, led the company to promote significant adjustments in the scope of the projects related to capacity reduction, which started in 2024, and which were expected to be finalized by the end of 2024.
In this scenario, capital discipline takes on an increasingly more important role. Actions geared towards working capital management helped generate operating cash to the tune of BRL 915 million, the second-largest in the company's history. It is an important result, especially when we consider the current challenging scenario that we face. That advancement came accompanied by a rigorous cost and expense control program, which led to total reductions of about BRL 300 million throughout the year. From the commercial standpoint, we continue to expand our contract portfolio and raising our share in new businesses which combine growth and higher profitability. MWM's margins have reached 10%, accounting for a significant advancement vis-à-vis the year before the acquisition, when they sat at 6%, and then when compared to 2024, where the number registered was 8%.
Such performance reflects structural gains, process rationalization, cost reduction, and an improvement in our product mix. On the next slides, I'll go into more detail of the facts that have impacted our final numbers. The implementation of tariffs from the U.S. affected the level of trust of companies and consumers, generating inflationary pressures as well. Both in the U.S. and abroad, such environment, combined with a delay in defining the rules for emissions for commercial vehicles, the EPA 2027, led truck buyers to delay the renewal of their fleets. Moreover, freight prices dropped because of an excessive increase in supply during the pandemic, and also pressured the profitability of transportation companies in the past years, thus contributing to a drop in sales of commercial vehicles.
In Brazil, the combination of high interest rates and a weak performance of the agribusiness sector reduced sales of commercial vehicles, both heavy vehicles and ultra-heavy vehicles, thus directly impacting the performance of our business units around structural components and manufacturing contracts. In both cases, we saw sharp drops in excess of 20%. On the next slide, I'll talk about the impact of the changes in the process where we reviewed our industrial footprint and also the allocation of production that we conducted in 2025. Historically, we have adopted a strategy of acquiring assets that allows us to access new clients and new markets, demobilizing, in a timely manner, potential surplus capacity coming from those transactions. It's not about providing responses to cyclical demand movements, but of structural adjustments that will lead to financial gains, which tend to be more sustainable throughout time.
Since Q2 2024, we had been executing a project to reduce capacity with a focus on operations located in Mexico, including investments of BRL 145 million in assets and inventory. However, given the new administration in the U.S., the adoption of more protectionist measures, we chose to suspend such process and reassess our industrial strategy in response to demand from clients, both current and prospective clients. As of the second half of 2025, we implemented meaningful changes in this redesign, including a reallocation of the original project and the start of a new plan to adjust the capacity in Brazil. Those changes, which happened, as I mentioned, in a scenario of lower volumes, led to idleness costs and delays in capturing the expected benefits, in addition to involving one-off expenses linked to impairments and write-offs.
We're talking about significant amounts, but which create the necessary conditions for future structural gains to be reaped in the second half of 2026. I turn the floor now over to Rodrigo, our CFO, who'll be talking about the numbers for Q4 and also for the full year of 2025. Over to you, Rodrigo.
Thank you, Rafael. Good morning, everyone. In Q4, revenue came out at BRL 2.2 billion, a drop of 12% when compared to the same period of last year. This performance reflects mainly a lower sales volume, combined with the appreciation of the foreign exchange in the period.
From the geographical standpoint, we had a breakdown, 40% coming from Central and South America, 40% from North America, 17% from Europe, and the remaining 3% from markets in Asia, Africa, and Oceania. Looking at a breakdown by business, 80% of the revenue was generated from the segment of structural components and manufacturing contracts, which concentrates cast iron products and higher added-value services as tooling and components assembly. Distribution accounted for 10% of revenue. With a focus on the sales of spare parts and hydraulic piece parts. The remaining 10% came from energy and decarbonization, with a highlight for generator set, our own engine manufacturing, and in situ solutions towards decarbonization.
On the next slide, looking first at the internal market, the revenue from our business units for structural components and manufacturing contracts were impacted mainly by the weak performance of the commercial vehicles market, with a highlight for the segments of heavy and ultra-heavy, coming from a scenario that reflects higher interest rates, more default levels, and the agribusiness weak performance, which equally affected our off-road applications. In the foreign market, there was a slowdown in revenues because of a lower demand for mid-size and heavy commercial vehicles in the U.S., and also because of uncertainties brought about by tariffs and its impacts on inflation and interest rates. That effect was partially offset by a good performance in sales for commercial vehicles in Europe, driven by fleet renewal.
Lastly, it's worth mentioning that products of higher added value represented 41% of the revenue for that unit, reinforcing the strategic importance of solutions with higher technical complexity and higher contribution for the profitability line. Moving on, we have the unit of spare parts whose sales corresponded to 60% of the internal market revenue, with a growth of 15% in the Brazilian market, reflecting performance of new lines of products, Master Parts and Optionals, which together saw an expansion of approximately 40% in revenue. Moreover, the expansion of distribution channels and efficiency gains helped increase productivity and sustain that growth. Moving on to the next slide, we highlight the performance of the Energy and Decarbonization unit.
The segment saw a growth of 36% in Brazil, driven mainly by the strong advance in the sales of our own engines, in addition to an increase in indirect exports. Revenues was also marked by a ramp-up of new businesses with a highlight of biogas plants and vehicle transformation projects, which start to gain traction now. In terms of share, this unit accounted for 24% of revenue, internal market, and 2% of the foreign market in the period. Moving on, we have costs and expenses. The drop in production volumes at levels above those of sales, with a reflection in the dilution of fixed cost, impacted gross margin, which reached 8% in the period. We also saw inflationary effects on services and labor, in addition to the appreciation of the Mexican peso, which were partially mitigated by initiatives to reduce costs, restructure and productivity gains.
Operating expenses saw a drop of 17% in the quarter and 7% in the year 2025. It reflects mainly of lower sales volumes, foreign exchange appreciation and other efficiency gains initiatives. The unit comparison was affected by a higher level of expenses with freights due to logistics bottlenecks. We now talk about the EBITDA, Adjusted EBITDA totaling BRL 39 million in Q4 2025, with a margin of 2%. The traditional business margin was negative at 1% in the quarter, reflecting a drop in sales volumes and production. The impact on operating efficiency, a worsening of the dilution of fixed cost and indicators of quality. The impact combined of those factors came out at BRL 205 million in the quarter.
In addition to that, the real and the Mexican peso depreciation led to a negative impact of BRL 70 million in the period. At the same time, MWM's operations saw a margin of 10%, reflecting the implementation of optimization processes. In the lower part, we highlight the evolution of the net numbers in Q4 2025, which was impacted by the impairment of assets and write-offs of inventories and tax credits. We got with no cash effect linked to the production to reduce and optimize capacity, having as an offset cost reductions from the second half of the year.
After that, we saw the main effects that impacted Adjusted EBITDA throughout 2025, where the comparison basis, 2024, was affected by BRL 173 million in revenues coming from commercial negotiations, which are non-recurring, and insurance payments to the tune of BRL 26 million throughout 2025. Lower sales and production volumes led to a negative impact of about BRL 580 million. Also, quality indicators effects also linked to smaller volumes impacted the year at BRL 150 million. Those factors were partially offset by reductions in costs and expenses of about three hundred million and a favorable foreign exchange scenario, with gains of about BRL 150 million. Looking at the financial results of the period, financial expenses saw an increase of 23% when compared to the previous year.
This growth reflects mainly a raise in interest rates in Brazil, which have impacted interest provision over local currency debt. In addition to that, financial expenses were also affected by the whole recognition of costs related to the waiver, which was approved by the debentures special meeting in December 2025. Financial revenues reached BRL 45 million, affected by the better cash position in the period. Lastly, foreign exchange variation over the foreign exchange line, combined the results of hedge operations, led to a net revenue of BRL 7 million. The next slide, we see variation of the main working capital accounts having the third quarter of 2025 as comparison basis. Accounts receivables saw a drop of BRL 63 million in the period, which represent an impact of one day on the average, receivables term.
That movement was influenced by the seasonality, by a higher concentration of receivables in the fourth quarter, and by the reduction of the sales volumes. Those effects were partially offset by the depreciation of the BRL vis-à-vis the U.S. dollar on a quarterly basis. 71% of our receivables are pegged to the dollar. In inventory, we had a drop of BRL 257 million, accounting for 11 days, reflecting initiatives of better working capital management with a highlight for raw material and products being still manufactured. As for accounts payable, we saw a drop of four days, a consequence of the reduction in inventory and a lower purchase volume, partially offset by the depreciation of the real in the period. Moving on, the efforts to better manage working capital helped to generate operating cash in 2025.
We reached BRL 915 million, as said before, the second-largest in the company's history. With a lower demand, we made a conscious decision to produce less, even knowing that this will pressure margins. To consume inventory, prioritize cash generation, and preserve liquidity, even though this is occurring to the detriment of a drop in the EBITDA in the short run. This will continue in 2026. We still have room to monetize inventory and non-operating assets, and our priority will be to keep the company's financial solidity, robustness. Within this context, in 2025, we sold IPI credits to the tune of BRL 174 million, directly helping to reinforce our cash. Lastly, company's net debt at the end of 2025 was BRL 2.2 billion, a drop when compared to Q4 2024.
Leverage accounted for a 3.35 times EBITDA for the last 12 months, reflecting mainly a lower EBITDA year to date for the year. From the point of view of debt composition, 58% of the obligations were denominated in foreign currency. On the other hand, 48% of our cash position was also pegged to foreign currency, which helped us to have a natural protection of the balance sheet. We closed 2025 with a cash position of BRL 1.9 billion, reinforcing the company's liquidity level. In December, we approved at a debenture assembly the flexibilization of governance for debentures through a waiver. As a counterpart, we established some conditions, such as the fiduciary alienation of immobilized assets, temporary restriction to a share buyback and bonds, and limiting below the minimal level.
The waiver will extend from the Q4 2025 to Q3 2027, but they do not restrict the execution of the strategic plan of the company in this period. It's important to reinforce that leverage levels which were approved do not represent, by any chance, guidance or the company's budget, but a safety margin. Our view is quite clear. We expect a gradual return of volumes, a ramp-up of new contracts which have already been announced, and the effects of projects to optimize capacity and improve operating efficiency, which will lead to an increase in Adjusted EBITDA, and consequently, a reduction in our leverage level, especially as of the second half of this year. Now I'll turn the floor back over to Ricardo.
Thank you, Rodrigo. Well, Rafael Lucchesi has already mentioned the factors that have influenced the industries we service in 2025, and it's important to reinforce that our results reflect the performance of the market and of our clients, especially a combination of performances which are quite negative in both countries which are the more relevant for the company, the U.S. and Brazil. Looking ahead, our expectations are quite positive. Not only see a recovery of some segments, but also we hope to grow more than the market. Since our last teleconference in November, we have realized that we have clients in North America which are more optimistic, indicating an increase in production pace as of the second half, in line with an expected normalization of inventories in the first half of the year.
The reduction of uncertainties related to tariffs and the confirmation of the new regulation for emissions, EPA 2027, expected to happen in January 2027, have strengthened the confidence of truck buyers. Other relevant factors, the raise in the price of freights coming from a reduction in capacity and a higher balance between all supply and demand. Additionally, new contracts for blocks for engines bring perspectives of about BRL 1.4 billion in annual revenues, and we expect about BRL 600 million coming from those projects as early as 2026. In the light commercial vehicle segments, we also see positive signs. The expectation is to have strong growth of sales of the Hemi motor engine used for the Ram pickups, which will help increase our sales.
This engine, which uses two pin blocks, had been discontinued in 2024 and is now being revisited in the market with a very robust sales outlook expectation. In Europe, this scenario is also favorable, driven mainly by recomposition of fleets. The consistent volume of new orders and a low level of inventory indicate a healthy demand for the year. These trends can already be seen in our public forecasts for the clients, which have been upticking the guidances for 2026, both in the North American market as in the European market. The off-road equipment market continues to show robust activity. As an example, massive investments made in data centers have boosted sectors of non-residential construction and generating sets, leading to an increasing demand for higher power engines.
In Brazil, you know, being more prudent, a combination of high interest rates, record levels of defaults, and a low performance in the agribusiness sector have affected the segments of ultra-heavy and heavy commercial vehicles. Also, there's an important structural point. Have been observing an important change in car makers' strategy, especially in the U.S. Several makers are reducing or canceling projects of electric vehicles and revisiting investments to internal combustion engines. That move will favor our portfolio of services and products. On the next slides, I'd like to share some indicators that sustain our expectations for the North American market in 2026. Low level of idleness and the delay in the renewal of fleets in the past years increased the average age of vehicles, which has already reached a level above the historical levels.
That situation triggers a demand for fleet renewal as you see better profitability on the transportation segment. Within this context, it is key for us to look at the evolution of the pricing of rates. Combination of pressure on prices over the past years with policies that had restricted availability of labor led to the bankruptcy of several transportation companies, especially the smaller ones. Such factors have positive reflexes, with the capacity adjustment reflecting in higher rate prices. That increase is an important indicator to restore the confidence on transportation companies and stimulate return on investment. Dissipation of these uncertainties and increase in profitability already reflect an increase in orders, as you can see. An increase in orders and a reduction of inventory in the first half of the year will reflect in a growth in production in the second half.
We should highlight the order level in February, which was the highest in the last 26 months. The next slide, I'd like to talk about the execution of our capacity reduction project. It's important to say that capacity reduction is not a necessary response to overall factor. That had been predicted in our integration plan to capture synergies during acquisition processes. We're going through a moment where we have a low in the cycle, but we have not identified changes in the fundamentals of the sector we operate. The effects of such initiatives will start to be perceived as of the third quarter of 2026, with estimated gains of BRL 100 million in 2026 and BRL 180 million as of 2027, especially because of the reduction of fixed costs.
We are following rigorously our schedule, allocating efforts to flexibilize plants, developing new tools and processes which are necessary to transfer products, as well as to have the approval of the client. To cover those expenses, the company has made a provision of BRL 52 million, contemplating the result of 2025. I now turn the floor over to Gueitiro, our VP for Strategy and New Businesses. Over to you, Gueitiro.
Thank you, Ricardo, and good morning to everyone. Today, I'll be commenting on the performance of our subsidiary, MWM, which accounts for 27% of our total revenues. Despite the two-digit growth across several businesses, MWM's revenue saw a drop of 3%, a reflection of the performance of manufacturing contracts directly linked to the truck industry in Brazil.
Still, this is a business that generates cash with return on invested capital, which is significantly above those of other segments where GP operates, and which accounts or presents a major competitive edge and good value proposition for clients. EBITDA margin in 2025 reached 10%, an increase of two percentage points when compared to the previous year, reflecting a better product mix and especially internal initiatives around efficiency and productivity. On the next slide, I would like to highlight the performance of our business of spare parts. The segment reached revenue of about BRL 570 million, with margins significantly higher than that of the other operations. It's an anti-cyclical business by nature and which will gain relevance as we move forward with our portfolio.
The new product lines, Master Parts and Optionals, saw an expansion of over 40% and already account for 20% of the revenue for that segment. The year 2025 was also marked by the preparation of the unit for that new growth cycle. We have concluded the reorganization of our parts distribution center in Jundiaí, São Paulo, expanding its capacity by 28%, at the same time, increasing productivity by 35%. The business unit for Energy and Decarbonization saw a growth of 16%, reaching 27% when considering only the internal market, with a highlight for the performance of sales of generating sets, a segment that we lead in Brazil. 2025 was also marked by an important advancement and by the expansion of our portfolio.
We started operations of our first biogas plant in Paraná, and we are gaining scale little by little in the business of vehicle transformation. Those projects led to a BRL 32 million revenue generation, a number that tends to grow in the coming years. We also presented to our market our ethanol-running engine, already being used by tractors. I have a partnership with Yuchai, one of the largest makers of engines in the world, to be their exclusive representatives in South America. The technological and commercial partnership expands our engine offer to biofuels and gas-running vehicles. It's about an agenda totally in line with regulatory tendencies and market demand, which has been materializing in projects such as the one signed with BNB from the Vamuze Group, in addition to other initiatives which will be announced in 2026.
I thank you all for being here, and we're now ready for the Q&A session.
We'll now start our Q&A session. To ask a question, please click on Raise Your Hand. If your question has been answered, you may remove yourself from the line by clicking on the Lower Your Hand icon. The first question comes from Mr. Kipper Kennedy from Citibank. Please, you may carry on, sir.
Good morning, everyone. Thank you for taking my question. two questions. The first, well, it was quite clear during the presentation, expectations for 2026, I think you are more optimistic about the foreign market than domestic market. That is reflected in the company's guidance. On the slide where you have the number of orders for commercial vehicles, in particular, yes, February coming on strong.
Do you see that already reflected into P&L as well for the expectation of having a better second half? Any indication, more orders coming in, based on the data you have already made available and which seem to be more optimistic second half than. A second question about the impairment reported in the Q4. I'd like to have some more color on what plants, where exactly, more than one plant. Why do you see this additional need of having that impairment after what happened in 2024? At the end of the day, I'm trying to understand whether those adjustment levels already reflect what the company expects to see to be able to totally deliver the guidance expected for this year. In other words, can you expect some deterioration of the market or any additional movement going forward in terms of impairment?
Thank you. Okay. Good morning, Keeper. This is Ricardo. I'm going to address the first question and Rodrigo will address the second one. I think the short answer is yes. We already have seen a reflex on our portfolios of a more optimistic, more positive perspective. The commercial vehicles industry dropped by 40% in the U.S., and car makers demobilized or decommissioned capacity. They reduced work shifts, and now they are looking to recompose, regroup, and that takes time. What we expect is that the orders now coming in at a higher pace will reflect at a higher production and higher sales down the road in six months' time. We have information from clients that as of May, we'll have work shifts already back to normal.
We do expect to have a second half to be better than the first half, and the start of a new level of production and sales in the North American market, which should extend to 2027. We do not have total clarity. If we have a confirmation of the EPA 2027, we might expect some positive impact on that front as well. Lastly, it's worth mentioning that several of the new programs will be ramped up in 2026 which also help to expect a better or positive second half of the year.
Hi, Keeper. This is Rodrigo. Thank you for your question. As for the impairment, more than discuss whether the capacity reduction is completed or not, we are moving forward. We have changed our criteria. We no longer expect to maximize volume or optimize at any cost.
Our mantra here is capacity is now gauged to a demand level that will soon remunerate our capital. The decision has been made. It's not a new process by the way. We decided to reduce capacity as we made the acquisition. It was the company's plan. We saw the need for that in the past. We did it partially in Mexico because of geopolitical issues. We adapted that to our current needs. At the end of the day, the impairment is more of an accounting snapshot, if you will, which clearly shows that the company for the past two years has in fact been executing its strategic planning. Because of our operating leverage, high assets and fixed costs, our movement towards that takes time to unfold. We cannot do that overnight, so there's a whole planning process around it.
Just to give you an idea, we have already said that before in previous calls, but just to be sure. When we include different geographies, different products, and we're talking about over 50 products, only for labor demand, we're talking about over 150,000 hours for new labor demand. So that impairment happened in Brazil. Okay. Just to be sure.
Okay. Thank you.
Our next question comes from Fernanda Urbano from XP. You have the floor, ma'am.
Good morning, everyone. Thank you for taking my question. Two questions actually. Number one, I'd like to have a follow-up on that discussion about commercial vehicles for the year, especially focused on Brazil. We see some geopolitical events take place and impacting and increasing uncertainties about freight prices, transportation companies' profitability levels. Also some uncertainties in agribusiness.
Given all that uncertain, volatile context, does it make sense for us to think about a slower recovery for Brazil or not? If you could comment on that, how do you expect that to happen first half? Commercial vehicles, the first half of Brazil, what do you expect to see happening? An update on that. A second question about the leverage level of the company. Given all that context of a lower volume, lower sales in the first half, seasonality in Q1, I'd like to better understand how you see your leverage timeline in the coming quarters. Do you see any risk going down? Perhaps revisit the waiver, the recent waiver for covenants, and that would be it.
Thank you. Hello, Fernanda. This is Ricardo once again. Well, the domestic situation is a little bit more uncertain.
I can tell you that car makers have started the year expecting to recover as of Q2 or the end of Q2. They expect an impact from MOVER Brasil, the program. The geopolitical situation, without a doubt, the impact on diesel prices, of course, all of that may be a hindrance to that. Right now, we are being more cautious, as I mentioned before. We are not placing our bets on a full recovery as we do for the North American market. The key advantage in the domestic front is that we have different indirect exports businesses. We provide parts of engines to our clients in Brazil, which then in turn export them. On that front of the business, we expect to have a better performance this year than last year.
Several of those parts are shipped to Europe, which is doing well in commercial vehicles, and part of that export business, indirect exports, have military uses and because of the geopolitical situation. It's negative on the one hand, but it causes a positive impact on military applications, right. Fernanda, good morning.
This is Rodrigo speaking. Looking ahead, we do not see any need to renegotiate the waiver levels. No need for that. They were based on EBITDA and our liquidity has been preserved. The 5.5 times for 2026 and 3.5 in 2027 is what I call a safety margin for the company. Most of that recovery process for the company will happen inside.
What we expect? We expect to see a market growth in this year. We have new projects to the tune of BRL 1.4 billion, which in 2026 will total BRL 600 million. Those two projects that I mentioned, optimization of capacity and efficiency, the first one will generate BRL 180 million, as we have announced, and the second, about 2% of the EBITDA margin. Our belief is quite real that the company will deleverage as of the second half of this year, 2026.
Okay. Thank you. Have a nice day.
Our next question comes from Mr. Gabriel Rezende from Itaú BBA. You may carry on.
Hello. Good morning. Thank you for taking my question. I'd like to have a follow-up on what Fernanda asked. In this scenario of volatility in the recovery of the heavy vehicles, try to expand that to the other geographies where the company operates. I understand that highway freights will be under pressure around the world, including North America. I'd like to understand, you're having a better February, the higher order or higher orders. Would you expect this to be accompanied by some uncertainty levels on the side of the truck companies because of an increase in fuel prices, and how that will affect freight prices, so operators might be incurring higher costs?
That's the bottom line. A follow-up on the margin issue. It's clear that the company expects to see a higher increase in second half, both in revenue and also in terms of deleveraging. I'd like to understand how you expect to see things happening in Q1, the first half. Adjusted EBITDA in Q4 you just reported. How can you expect EBITDA margin to behave in the first half vis-à-vis the volume you expect to see this first half? Thank you.
Hi, Gabriel. Good morning. This is Ricardo once again. As for the domestic market and the potential volatility, it's important to have in mind that Q4 was quite bad for the industry as a whole. The rhythm, the pace now is better than we had in Q4, and it'll continue to be so even if we face some volatility. Also, there is a factor that mitigates volatility is the fact that once the chain starting at the vehicle maker's level, if they're ready to build, we won't see drops in the short run. We believe that our portfolio is protected in the short run.
The reflexes of that situation where you have more expensive diesel and an increase in cost for transportation companies, as we also mentioned before earlier today, of course, that does have an impact on profitability, but it also has an important effect, which is the removal from the market of some smaller transportation companies, and this will help adjust the available capacity and does have a positive effect on price, on freight prices. We are aware of the situation, of course. It's no easy sailing right now, but we believe we have a solid position in our portfolio.
This is Rodrigo now. Good morning, Gabriel. As for your question about margins, what we've seen is Q1 usually in terms of volume, very much in line with our budget. Yes, foreign exchange rates do affect us, but at the same time, we have managed to reduce costs and expenses to a larger extent. In a way we will offset the appreciation of the foreign exchange rate with internal measures to cut costs and expenses. We maintain our guidance, which is, in the second half, we start to see an EBITDA margin, a consolidated, EBITDA margin recovering quite well, resuming levels, resuming pre-acquisition levels.
Okay? Yes. Yes. If I may, a follow-up, Rodrigo. When you talk about margins in Q1, you're talking about they are in line with the company's expectations, but not in line with what we saw in Q4. Exactly, yes. In line with what we expect, with what the companies expect.
Better than Q4, of course. Better than Q4.
Okay. Thank you.
Our next question comes from Mr. Jonathan Komp from Baird . You may carry on, sir.
Good morning, everyone. Thank you. I have two questions. First, if you could share the share of the company in this industry today, and if you could talk about the CapEx in Q4 comparing to the current size of the company. Any one-off investments for new products in the second half? Thank you.
Good morning. This is Rodrigo. I'll be addressing the question on CapEx. Investments for Q4 very much in line with what we expected. 2025 was also within the company's expectations, so we had a few investments. Yes, we did, but linked to the demobilization or decommissioning, so our operating capacity remained in check.
Jonathan, this is Gueitiro, and I'll be talking about our strategy around capacity. Rodrigo and Ricardo talked about this, but just to reinforce a few points and connecting to the impairments also. That move is linked to the company's strategy. When we had the M&A, we saw an opportunity for a consolidation in the industry, and we executed the first step of that, which is to buy more capacity. Along with the capacity came along a client portfolio and a higher capacity to price, a higher bargaining power. Of course, we saw that back then already. Talking about now 2026 for new products that already come under new price basis, BRL 600 million in revenue are expected for 2026, and that's why we defined our thesis that we will grow in 2026 even with the American market going sideways. That's not in our budget, right? We are working on that.
We are executing that plan to remove capacity. The question is, are we going to stop that move? The answer is, we are adjusting, right? We have changed the company's mindset and now to adjust the capacity of our plants, to adjust them to the size of the market to what better remunerates our capital. We're paying close attention to that. If throughout the coming periods, something changes, we will always use that to calibrate our actions.
If I may, just a quick follow-up. In the mid of last year, you mentioned 65% and the objective was to reach 80%. If you consider the decommissioning is, so you are now what, above 65, 70 something? Does that rationale make sense? I know you cannot give me the number, but.
Yeah, Jonathan, those large numbers are the same, pretty much the same. Of course, there's slight variations up or down, but we are getting ready to adjust the company for the current demand with the look, of course, to the long run as well. You know, we believe that's enough to meet the upcoming demand in the short term.
Okay. Thank you. Have a nice day.
Once again, to ask a question, click on the Raise Hand button. The Q&A session is now over. I'd like to turn the floor over to Mr. Lucchesi for his final remarks.
Thank you again for your participation in today's conference. Thinking about 2026, it's important to highlight three movements that happened simultaneously at the company.
Number one, the execution of a fundamental phase of our footprint transformation, which includes capacity reduction, which brought relevant accounting impact in Q4 2025, but which is also part of a clear strategy, well-defined strategy that we took over after the acquisitions to make our production base even more efficient. That move has already started to generate value in 2026 with an increase in operating margins and better improve on invested capital. Number two, a commercial comment. We're starting to capture the benefits of this new phase with products that will be manufactured in more efficient lines, at lower maintenance costs, and within processes which tend to be more organized, which means less quality cost, more competitiveness, and a gain in share. The ramp-up of those new contracts reflect in an increase in our ability in important markets such as Class 8 in the U.S.
Number three, the start of a recovery cycle in the operational front with more efficiency, better cost dilution, and an asset base which has now been adjusted to the demand level. In addition to that, the foreign environment seems to be more positive, especially in North America. There are fewer uncertainties in the sectors we operate and important indicators start to improve, such as freight prices. Strong levels or new orders in the beginning of the year should drive production in the first half, a move that our clients already see, perceive and indicate. The most important point looking ahead is that the company is becoming structurally more resilient and as a consequence, more competitive. Resilient because today we have an industrial base which is more efficient and better adjusted to demand, or less idle mass in structural parts, and a higher capacity to adapt.
Also resilient because we are expanding our growth drivers. We have anti-cyclical, businesses such as the aftermarket area, which grow above market and with higher margins. We are advancing in the services area with higher added value services such as assembly and integrated solutions, and we are strengthening our pipeline with new fronts such as engines, biofuels, which start to gain scale with recent partnerships. In addition to improve the performance of our core business, we are also building an economy which is less dependent on market cycles. It'll be a year with execution challenges, but we already has clear drivers for better results.
Thank you very much. The PSA's teleconference is now over. Thank you all for participating and have a nice day, everyone.