Good morning. Thank you for standing by. Welcome to the earnings call to discuss the results of the first quarter of 2023 of Tupy. All participants are connected in listen-only mode, and later on, a question and answer session will be open when instructions for you to participate will be provided. If you need help from an operator during the conference call, just dial star zero. This conference call is being recorded. We would like to remind you that this event is also being broadcast simultaneously over the internet via webcast and can be accessed at www.tupy.com.br/ri, where the respective presentation is available. The selection of slides will be controlled by you. Tupy clarifies that any forward-looking statements made during this conference call about the company's business prospects, projections, or operating and financial estimates are mere forecasts based on the management expectations regarding the company's future.
These expectations are highly dependent on domestic and international market conditions, the overall economic performance of the country, and of the sector, and therefore are subject to changes. With us here today are Mr. Fernando Cestari de Rizzo, CEO, Thiago Struminski, CFO, and Rodrigo Cesar Périco, Director of Treasury, Finance, and Management. Mr. Fernando Rizzo, you may proceed.
Thank you, and good morning. Thank you for attending our conference call. This quarter includes, for the first time, the full results of MWM. In this period, net revenue reached BRL 2.8 billion, which is the highest quarterly amount in the company's history. Although it reached the record, it was relatively low because the production of heavy vehicles in Brazil has been affected by the higher cost of vehicles in the PROCONVE P-8 and Euro 6 standards.
Together with that, there were restrictions on credit and high interest rates that impact the market for used and new vehicles. This scenario impacted our physical sales volume of structural components, which dropped by 7% year-on-year, largely driven by the domestic market, which dropped 16% and also adversely affected MWM. On the other hand, the resilience of our business model and the continued implementation of our strategies brought benefits that offset, although partially, these effects. We continue to capture synergies obtained from the acquisitions, which, together with the several cost reduction initiatives, contributed to the 23% growth in gross profit, reaching BRL 505 million and margin of 18%, an increase of 70 basis points in the comparison with the previous year. Adjusted EBITDA reached BRL 315 million, margin of 11.2%, impacted by the inclusion of MWM's result, which has a lower margin than Tupy's.
We see important efficiency gains in the composition of this result. However, it was impacted by the following: the worse dilution of fixed costs since we were prepared for higher volumes, the appreciation of the Mexican currency, and the significant increase of freight-related expenses as from the second quarter of 2022, which has already been passed through to prices. Our acquisition strategy assumes a central focus on efficiency gains in all lines of our income statement. In the first quarter, among the various actions carried out, we made changes in the structure of our operations in Brazil with a one-time impact of BRL 40 million in the quarter. The sum of the positive operating and financial results made the net profit reach BRL 145 million, a growth of 96% in the annual comparison.
Now to present the main indicators for the quarter, I will give the floor to Thiago, our CFO, and Rodrigo, the company's Treasury and Finance Director.
Thank you, Fernando. Good morning, everyone. Revenues grew by 19% over the first quarter of 2022 compared to the same period of the previous year, reaching BRL 2.8 billion. Regarding the distribution of those revenues by geography, 46% originated from U.S. and CA, 33% in South and Central America, mainly Brazil, 19% in Europe, and the remaining 2% from Asia, Africa, and Oceania. 36% of revenues come from the structural components and contract manufacturing business, supplier and product and value-added services such as machining and component assembly. 7% from energy and decarbonization, including generation sets, engines made in-company, marine applications, lighting towers, and product services related to decarbonization.
7% from the distribution business, which includes revenue from spare parts aftermarket from MWM and hydraulic products. Revenues from structure components and manufacturing contributions on the slides were impacted by the drop in commercial vehicle production in the Brazilian market, reflecting the replacement of engine emission technology, PROCONVE P-8/ Euro 6, and the ensuing increased price of trucks sold in the first quarter of 2023, as well as macroeconomic factors such as high interest rates, credit crunch, and a drop in consumer confidence. Revenues accounted for 68% of the domestic market and 94% of the export market for this unit, while the share of products with the added value in revenues accounted for 37% of the total of this business unit.
On the next slide, we present the performance of the energy and decarbonization segments, including generator sets, engine manufacturing company, marine applications, lighting towers, and product and services related to decarbonization. Several product launches were carried out during the quarter, and several products related to decarbonization that are in testing and prospecting phase. Revenues from the segment accounted for 16% of sales in the domestic market and 4% of the total export market. On slide eight, we present the distribution unit, which covers revenue from spare parts, the aftermarket from MWM, and hydraulic products. Sales in the distribution segment grew by 185% in the domestic market, representing 16% of Tupy's total domestic market revenues. The export market, on the other hand, showed an increase of 57%, with 3% of Tupy's total sales in the export market.
The main impact is the inclusion of revenue from the aftermarket business, with emphasis on the launch of new product line of options and multi-brands. Moving on to the next slide. The cost of goods sold increased 18% year-on-year, impacted by the start of operations of MWM Brazil. Despite the lower dilution of cost and expenses, reflecting the drop in volumes, the gross margin of 18% represented an increase of 70 basis points when compared to the first quarter of 2022, reflecting efficiency gains and synergies between operations. Reflected in the cost of this quarter, we see the following: 22% increase in the raw material cost as a result of the addition of MWM in the Brazil, and on the other hand, the utilization of materials. An increase of 29% in the account of maintenance materials and third parties, mainly driven by inflation and depreciation of Mexican peso.
Operating expenses posted an increase of 55% when compared to the first quarter of 2022. In addition to the impact of adding expenses to the new operation, the results represent a significant increase in freight prices observed since the second quarter of 2022, in addition to the base date salary negotiation. Moving on with the presentation, adjusted EBITDA reached BRL 315 million in Q1 2023, while margins in relation to the revenue reached 11.2%. The period recorded some important effects, such as the incorporation of report of MWM, which has lower structural margins given its business model. Change in the engine technology to Euro 6 standard with an impact on volumes and lower dilution of fixed costs. Net income reached BRL 145 million with a net margin of 5% due to better operating and financial results, in addition to foreign exchange effects from most of the CDIs.
I turn the floor over to Rodrigo, who as of June will take the function of the financial and controllership areas.
Thank you, Thiago. Good morning, everyone. On the next slide, I will comment on the financial results for the period. The increase of financial expenses is mainly due to the increase in gross debt arising from the issue of debentures in the amount of BRL 1 billion, intended to pay for the acquisition of MWM, and decrease in the CDI rate, which directly impacts interest on loans in reais. Financial income reached BRL 29 million due to the increase in cash balance in real and the interest rate that compensates our financial investments. The result with exchange variations was an expense of BRL 12 million, mainly due to the effect on the balance sheet line in foreign currency.
On slide 12, we have the variations of the main accounts of the working capital using the fourth quarter of 2022 as basis of comparisons. Accounts receivable had an increase equivalent to four days, mainly due to the higher volumes of sales from MWM, three months versus one month in the fourth quarter of 2022. Also, accounts receivable in foreign currency, which corresponds to 71% of its total, was also impacted by the exchange rate depreciation. This is due to the lower volumes posted in the previous quarter. In accounts payable, we had a reduction of BRL 174 million when compared to the previous quarter. In addition to the exchange effects on accounts payable in foreign currency, which represents 49% of the total, a drop in production and actions to reduce inventories also contributed to the lower level of purchases in the period. Going to the next slide.
Net debt on March 31st was BRL 2.2 billion, corresponding to 1.8 x adjusted EBITDA for the last 12 months. Recalling that we are only considering the four months of EBITDA of MWM. Obligations in foreign currency accounted for 56% of the total. Regarding cash, 67% was denominated in local currency. We ended the quarter with a very comfortable cash position of around BRL 1.2 billion. I now turn the floor over to Fernando, who will make his final remarks.
Thank you, Rodrigo. Moving on to slide 15. In the domestic market, we can see a sum of unfavorable factors that led to the drop in the truck market, such as credit crunch combined with interest rates and the higher price of PROCONVE P-8 standard vehicles.
In the export market, we have robust demand for heavy trucks and non-residential construction, which have not yet been so impacted by increase in interest rate, which even shows prospects of growth. In the segment of light commercial vehicles and pickups, we see accommodation or stability in relation to the previous years. Despite that, I would like to point out that our great opportunity in 2023 is within Tupy, which I will discuss on the next slide. I want to highlight the opportunities that we envision in Tupy's current businesses and how we are prepared to capture them in the list on the right of slide 16. On the commercial front, we recently announced contracts for the production of structural components and machining in Mexico. We are in negotiations with several potential customers who are looking for greater local content in compliance with the new rules of USMCA.
In our operation, we are obsessed with safety and efficiency. Two weeks ago, we announced adjustments to our organizational structure, strengthening objective actions in factory efficiency, project reallocation, process improvements, and increased attention to the cost of purchasing materials and services. Throughout the year, we also adopt initiatives aimed at reducing working capital, especially inventories, which will contribute to higher cash generation. On slide 17, I want to talk about the new Tupy that we are building. Over the past two years, we have made important acquisitions. We consolidated our position in the West and advanced our customer supply chain by offering value-added services. This allowed us to win new contracts for machines and preassembled components, as well as decarbonization projects, which will be much more relevant in Tupy's future. This growth was accompanied by financial performance with cash generation and low leverage.
We carried out two issues in the debt market that recorded great demand. In addition, our ratings were raised by the agencies that monitor our credit. The combination of our competencies and initiatives with research and development, with MWM knowledge in biofuels, engines, generator sets, and biotechnology, has allowed the progress of new businesses related to decarbonization. On this slide, several initiatives are in the prospecting phase, and some have already been announced, such as the partnership with the agricultural cooperative Primato, which has more than 9,000 members. This is the first phase of a project with high potential for scalability, covering just 15 properties, which will transform pig manure into biofertilizer and electricity and fuel for our trucks.
This way, we build the basis for a new Tupy, which advances in the current business value chain and which is well-positioned to enter segments that may represent a significant part of the company's revenue in the coming years. On slide 18, we further discuss this front, as well as the opportunities for new businesses. These are business areas that depend on in-depth and qualified research and development work, mastery of knowledge, and advances in sectors with high growth potential and that present higher multiples. The biogas and biomethane chains will play an increasingly important role in decarbonization, especially in agribusiness, through complete solutions covering waste management, energy generation, vehicle conversion, and commercialization of byproducts such as biofertilizers and CO2. These same opportunities are present in the management of urban organic waste, and we will soon announce partnerships in this line of business.
The replacement of gas with biomethane in the manufacturing processes will also be an important topic in the coming years, given the industry decarbonization agenda. Tupy will be present in this market, where we will play an important role in the development of solutions for clean fuels such as ethanol and hydrogen. We recently announced a contract for the production of cylinder heads for internal combustion engine powered by hydrogen, a solution considered zero emission according to the European Union regulations. We have also made headway in researching the appropriate method for recycling lithium-ion batteries with low energy consumption. We intend to launch a demonstration plant in early 2024, which will allow us to advance in the negotiation of commercial opportunities with the players in Brazil and abroad. With the acquisition of MWM, we also enter the engine component distribution segment.
This is a sector of whose potential we were already aware, but which we have not yet entered due to the network needed to make this business viable, which has counter-cyclical characteristics and growth. The combination with Tupy will make it possible to incorporate blocks, heads, and structural components into this product portfolio. These are all items with very high added value. Finally, I want to talk about our 2022 sustainability report, which was published on April 27th. This is our third report in compliance with the new GRI standards, covering important results and indicators in a more interactive version. We reduced the intensity of greenhouse gas emissions by 17%, and 92% of the products delivered to customers are of recycled origin. In the social aspect, we added more than BRL 9.8 billion in the communities where we operate, and we impacted more than 19,000 people through our social activities.
We also launched the sustainability committee linked to the board of directors and improved our code of ethics and anti-corruption practices. These results, together with our innovation initiatives, contributed to upgrade our ESG ratings in MSCI, S&P, and Sustainalytics. In addition to the cash generation, sustainability in all its pillars will be central to our agenda in 2023. We will make progress on important topics such as inclusion and diversity. I would now like to invite you to access our report and learn more about our practices and new Tupy, New Tupy. I would like to thank everyone for participating, and we are now going to open the Q&A session. Thank you all.
Ladies and gentlemen, we are now going to start the Q&A session. To ask a question, please enter star one. To remove your question from the list, please star two.
Please note this call is exclusively for investors and investment professionals. Our first question comes from Lucas Marquiori with BTG Pactual.
Hello, everyone. Good morning. Thank you very much for the call. There are two topics I would like you to address. You explained very well when you talked about energy and decarbonization, and when we look at the revenue, what would be fair to assume in terms of relevance considering the overall business of Tupy, so that we can understand what could be the expected growth. So could you give some drivers, some projections, what are the topics that we could follow so we could understand how the revenue is going to grow down the road for modeling purposes. So how can we model energy within the context? You also talked about the transition of Euro 6.
In your perception, we understand the worst has already gone in terms of volume and price impact, and we are to expect a slight recovery, and we would like to understand the margin trend. These are the two questions I had.
Hi, Lucas. Good morning. Thank you very much for the question. First, in relation to energy and decarbonization sector, we are opening this new way of reporting, obviously, because we see growth in the three pillars we mentioned. I think the design of the new Tupy created conditions for growth in all business areas. We are going to grow in structural components, contract manufacturing. As we execute new agreements, we add services and machining services. We have some major projects, like BRL 650 million of revenue in the future from the new contract, and part Mexico and part in Brazil.
This business continue to make headway. As for energy and decarbonization specifically, we have some very important fronts generating growth in addition to vehicle transformation, because we see a growing trend in Brazil for those areas. We see the interest in the use of natural gas and biomethane in an increasing manner. Biomethane is the identical molecule of natural gas, so the systems that we are selling for vehicle transformation, engines that will replace trucks for transportation of waste, urban buses, operations with a limited perimeter where we have access to natural gas. As well as our relationship with Comgás, which is providing support with our model and new models that we can use, reducing the operating cost of those companies.
We have a growth potential, which is very significant in this segment because it makes sense. We are talking about engines that would reduce noise of the vehicle. These are engines that emit less carbon and also less particulated residues. This is a very important topic, and we see an enormous growth in the segment in Brazil because it makes sense considering the availability of biomethane in Brazil. We are discovering new opportunities at all times. The project that we announced that we have with Primato using pig manure has a production of biofertilizer, which is quite relevant. Forget the mineral, it has a reduction of biomethane, clean electricity, and this biomethane can be sold to engines, and we can use them for the fleet of the farm. This is something which is produced on the farm.
We can also sell the biomethane to companies which are interested in replacing natural gas with biomethane. There's a whole universe of new system. There's an ecosystem that is being created considering all those opportunities, and this is why we invest in biotechnology. We have partnerships with Embrapa, partnerships with the University of São Paulo and other state universities. Why? Because we are developing a coherent manner of processing all types of biomass that we are about to talk about, the use of organic waste produced at the urban level. Solid waste for fertilizer and biomethane and help in the decarbonization of the city. We are talking about different business fronts which are being developed. I usually say that there's new Tupy is under construction. We are adding knowledge. We are also including competencies that make sense in the ecosystem.
And in the next quarters, we are going to be announcing new opportunities and new businesses. This is the reason we have very strong technical team working on those fronts, engineers, other technologists, making adjustments to the engines, making adjustment to generators, working with biodigesters. We are solving a problem, which is structural. Manure of animals is a problem to those farmers, considering that this kind of waste cannot go to the rainfall network. It cannot contaminate the water table. This is a problem that needs to be disposed of properly, but it is clean energy to the society. We see that those projects have a high level of scalability in Brazil, and we are developing all the technologies that make up this chain value of those systems. In relation to the market, you asked how we see it. You saw that April was a bad month.
Truck production dropped by 28% in relation to the previous year. But we believe that the worst part of the trend is gone by, and we are going to recover this movement. But this is not going to be done at a quick pace. This is going to be recovered at a slower pace because we also have to consider that we have to have availability of credit because we need the fluidity of the use of vehicles for the new vehicle market to thrive. We expect a gradual improvement, down the road, but we are not going to go back to higher volumes immediately.
Okay, Fernando, thank you.
Our next question comes from Gabriel Rezende with Itaú.
Hello, good morning, Fernando, Thiago, Rodrigo. Thank you very much for the space to ask questions. I have two questions on my side.
If you could make comment on the announce for the supply of, for the hydrogen combustion engine. If you could provide us with a prospect that were designed in the partnership in relation to the volumes and how we can think in terms of timeline. Is there any exclusivity clause? Is this project going to demand a relevant CapEx from Tupy? I would like to understand what would be the marketing behavior for the quarters to come. We were a bit frustrated, especially with the volumes due to the transition to Euro 6. This is something that was already negative since last year, but maybe it materialized worse than we had imagined. But now that we have a better view for the next months, what were the factors that adversely affected Tupy?
Okay. What can we see in terms of positive results in the future, and how do you see the prospect for the next months, please? Thank you.
Hello, Gabriel. Good morning. Thank you for the question. Beginning with hydrogen, this is what I have to say. The development of a product like this, we use 3D for the geometrical part. We make prototypes using 3D printers. The development is based on the material. What would be the chemical composition of the material? We start with advantage because we announced more than two years ago, we announced a project in Austria saying that we are testing this model. We are perfecting the material so that we can use hydrogen for combustion engines. The point is that hydrogen combustion engine is the way out that we see for the industry for zero-emission vehicles. There is a rule in Europe saying that there is a percentage that is growing until zero emission, and hydrogen combustion engine was considered a zero-emission vehicle.
It is much more economical than the other ones. What are the other solutions? Battery and hydrogen combustion cell, which is not ready yet. They are not fully developed yet. All those other solutions are much more expensive than hydrogen combustion engine. The difference is that those engines are likely to have a conversion rate. I know it is a bit technical, but 80% of the hydrogen used in the engine can be converted in force. We estimate that the engine is likely to stand at 50% or 52%, and fuel cell would remain at 55% or 60% in the future. However, it is much more expensive. The big challenge we have had of us is the price of the net hydrogen. So price and availability.
The product itself is likely to grow, and this is going to be our growth avenue because it is going to give autonomy to the vehicle so you can charge larger amounts of hydrogen in the vehicle so that you can maintain the autonomy of the diesel, or you can get up to the diesel autonomy. It has a great advantage. It does not need to have the pure hydrogen, because the fuel cell needs hydrogen absolutely pure because it cannot have any impurities. Why are we saying this? Because we believe that in certain markets, wherever there is hydrogen available, today it is very expensive. We will need subsidies. It is going to be the best way to reach this zero emission target. The potential is very high. This is just a focus project with one of our clients. We are working with other clients in parallel.
Of course, this is an industry trend. All car makers have already announced the engines using hydrogen. We are talking about road truck use and for all the other applications, the bus applications off road, for example, and other alternatives will also be hydrogen-based engines. We believe that. However, it will depend on the green hydrogen price. That will affect all the other solutions, regardless if it is cell, battery, or engine, because all the options are expensive. We believe that this is a business that is going to get mature in 2030 or 2035. It is a long-term solution. We are likely to see those vehicles on the roads for decades to come.
In relation to the margin, we had two extraordinary effects in this period, which was a drop of more than 30% of production of trucks in Brazil.
And of course, this will impact not only the physical volume of sales of Tupy, but also of MWM, which stood below the historical average. Also the non-incorporation of MWM, whose margin was lower than traditionally we deliver. So those two effects would partially explain this drop. We are going through a very similar moment to what we saw at the end of 2021. When we acquired Teksid, we had a non-incorporation, that we had lower margins at the beginning, and then we rebuilt those margins quarter on quarter after the acquisition. So it is a bit different what we see now because we have a new project being announced and the part of the revenue, but we are promoting a higher return to the shareholders.
Okay. Thank you, Fernando. Thank you, Thiago. Have a good day.
Thank you.
Our next question comes from Marcelo Motta with JP Morgan.
Hello. Good morning, everyone. I have a question on my side. Fernando mentioned the new Tupy and all the initiatives that the company has been adopting in terms of energy and decarbonization. I would like to understand how you see the CapEx for the future. We saw some contracts received awards in terms of assembly and the machining, and this involves CapEx. When we see new sources of revenues, the question is: do you see how the contracts are going to play and favor those revenues? All the changes you are making. We would like to understand how you are going to use the CapEx related to the project. If the CapEx is going to be higher than historical CapEx. Thank you.
Marcelo. We have opportunities in the three business pillars.
When we look at distribution, this is a case that involves launches of products, and which is related to manufacturing contracts and decarbonization. We have already announced some, and they are going to get into the normal cycle of CapEx and with the consumption close to the depreciation. We have this obligation of keeping the ROIC. When we see energy and decarbonization, we look at the cogeneration to finance this and the appetite of our shareholders to approve those projects. Of course, we are going to make alignments with our level of leverage, the expectation of return of the project, so that we can move on with those new initiatives.
Okay, Thiago. Thank you.
Thank you. Our next question comes from Victor Mizusaki with Bradesco BBI.
Hello. Good morning. Congratulations on the results. I have two questions. The first is a follow-up on Marcelo's question related to CapEx.
When we look at the results of the first quarter, we see an increase of nearly 70% year-on-year. There is a part where you mention as strategic investment, which is quite in line with what you discussed. There is another point. What is the Sustainalytics organization in a line? What do we expect from this line, and what can we expect for the next quarters? Is it something more related to Brazil or Mexico? The second question is an update in relation to the non-incorporation of MWM. Could you talk about synergy and also everything that can be insourced or internalized in terms of purchases and third parties and what has already been verticalized to Tupy. Thank you.
Victor, in relation to the line that you mentioned, sustainability and modernization of operational capacity.
To a greater degree, it has to do with the adjustments that we are making with flexibility. We are making actions for the transition of products between plants. When I mention synergy, what I mean is that we have realized some sales contracts, some purchasing contracts. However, industry-related movements need realization between plants. This is where this amount is being used. It has to do with the adjustment of the plants. The actions will start as of the second half of this year. We are going to make movements with products. We are going to launch new products in Betim. In the last conference call, I said that we are transferring many machine equipment that we had in Mauá to Betim, and this is what we are going to continue to do. We are making adjustments to the equipment. In relation to MWM and synergies.
It is focused on the announcement of new projects. We made a lot of effort to develop business. We took part in three trade fairs, launching new products on those trade fairs. This shows the ambition that we had to do new businesses with MWM. We are moving at a very good pace. The question was: how is this going to represent in the future? We see a lot of potential of growth, and we are developing all those areas. We have lots of new initiatives that have been implemented in the last few months, and we are going to continue for the next quarters.
Thank you.
Thank you. Our next question comes from Fernanda Urbano with XP.
Good morning, everyone. Thank you very much for answering some questions. My question is about prices in export market and considering heavy-duty vehicles.
I would like to understand the demand and the negotiations with clients. If it can pass through the prices of really an actual pass-through of prices to the market.
Hi, Fernanda. Thank you for the question. Yes. It is a market that is still very robust. It is very heated. We have a growing share in this market, and we are going to continue growing the share as we take products to the operations in Mexico. Products that are in the phase of development. Some of the products that we announced, such as a revenue of BRL 650 million, and it accounts for a higher participation of share in this. These were products that were provided by the car makers and some European car makers that send their products from their plants in Europe. They need to make adjustments.
The origin of this growth of have foundry and machining in the operations in Mexico in the next two to three years. This is a segment that continues very strong. The age of the fleet has been used. The age of the fleet is not at the ideal point, such as non-residential items. All those machines have had a very strong demand, and we see a growing demand in this sector. We are organizing ourselves so that we can better meet the needs of those clients. In terms of cost pass-through, yes, we have been able to pass through to the prices as we saw the variation quarter-on-quarter. We have improved the quality of our contracts.
We have been considering the inflation in Europe and in the United States, and the contract that we executed in the past did not cover for those changes, but would cover only the commodities such as energy and other items. Yes, I can say that the contracts are ever better, including all the cost structure that we have now. Thank you for the question.
Thank you. Our next question comes from Andressa Varotto with UBS.
Hello. Good morning, everyone. Thank you very much for taking my question. I would like to make a follow-up in relation to margin. How do you see the dynamics of raw material prices? How are you going to have this cost pass through?
What we have observed since 2022, when we do this exercise of comparison, we see that all those materials enter the deflation curve. There was a stabilization in March and a deflation in January and February, and maybe we saw a little increase. We see that the situation is favorable considering most items, including freight. We see a relevant deflation since the second quarter of last year. Our expectation under the contract to have this cost pass through on a quarterly basis. This is going to be seen in the revenue. It can move up or down. We need to balance the relationship to observe this long-term relationship with the client.
Okay, perfect. Thank you.
Thank you. Our next question comes from the webcast platform. It was asked by Giovanni Ardito, with Citibank: "In relation to the cash generation, could you give more information about the expectations of optimization of the operating generation? In addition to that, we expect to reverse the decrease of cash throughout the year. Thank you."
Okay, Giovanni. Thank you for the question. In 2023, we have an expectation of higher volumes. We did not expect the drop to be so deep in Brazil, 7% in the total volume. This is quite a relevant drop. In domestic market, above 16%. It is a lot considering the number of employees, the assets, the size of Tupy. You have to understand that this is distributed in different equipment, and we generate inefficiencies in all the process. Of course, we accumulated working capital in the period.
We had higher working capital in the period. Yes, we are going to improve the cash generation along the year so that we can make adjustments to the production. We had some stoppages in March and other stoppages in the beginning of April. Throughout the year, we are going to make the necessary adjustment to convert this working capital into cash for the next two quarters.
I would like to say that in general, the first quarter consumes cash, and we are going to recover this along the next quarters, as we did last year. This is what we expect. When we see the cash position as a whole, we see different effects. In the MWM contract, we have to return part of the amount that we used for the acquisition. This has to do with price adjustment, and that would make changes to the cash position.
This is not going to be a cash burn, but as for that, the work is going to be focused on the variations of the working capital so that we can recover the basis for the next quarters.
Excuse me. If you have any question, please press star one. Thank you. Excuse me. We now close Tupy's question and answer session. I would now like to turn the call back to Mr. Fernando Rizzo for his final remarks.
Thank you. Thank you all. We made two transformational acquisitions in the past 18 months, and in this quarter they accounted for 35% of the revenue for the company. Both companies came based on attractive multiples and lower margins of the Tupy acquisition, something between 4% and 7% of the EBITDA.
The results we presented today reflect the initial gains that will be gained with integration of the plants we acquired from Teksid. Since we assumed the control, we are making headway capturing synergies in the commercial front and the industrial fronts, also purchasing fronts, in line with our business plan that we announced. With the result posted, we increased margins, but even so, I would like to make it clear that we are not happy with the performance. We have improved our organizational structure, strengthening different actions of productivity at the plants, relocation of product, process improvements, and a closer attention to costs of purchase, materials and services. Speaking of the future, we are building this new Tupy that we announced on Tupy Day last year, comprising two major fronts.
The first is focused on the traditional businesses, capturing synergies, enhancing value addition, using the services of assembly and machining that have been accelerated with the acquisition of MWM. The second front is the development of a company that is ever more dedicated to low carbon economy, operating in segments with high potential of profitability that would comprehend in a single project, several business opportunities by using organic waste or agribusiness waste. Some examples of the benefits is the generation of clean energy, biofertilizer, and biomethane that can be used in trucks, buses, machines, and several industrial processes as a replacement of natural gas. We are also working to increase the relevance of the aftermarket, which is an area that we did not take part in the past.
We understand that considering the distribution network of MWM, we understand we can add new products, expand our channels and all the portfolio of offers we are presenting the market with. I would also like to congratulate the 70 years of existence of MWM, which is an important pillar of our strategy that has contributed with a lot of technology and especially with major talent in the construction of this new Tupy. Lastly, this is the last earnings conference call of Thiago Struminski, and I would like to thank for your hard work on behalf of everyone and after all the dedication you have given to Tupy. He became a CFO in 2016 when we had revenues of BRL 3 billion, and he was fundamental in the process of our company.
He made lots of operations in the capital market, and he has always operated, focused on the results, and he has this team spirit. All of us, your colleagues, we wish you the best of success and happiness. Have a good day, everyone, and thank you.