Welcome to WEG's audio conference on the earnings of the fourth quarter 2018. We are broadcasting this conference call together with slides on our investor relations website, ri.weg.net, and after conclusion, the audio is going to be available on the IR website. If you need assistance during the conference call, please reach the operator by pressing star zero. Any statements made in this document or made during the conference call with regard to future events, business outlooks, projections, and operating and financial goals, and the future growth potential of WEG, are based on the beliefs and expectations of WEG's management that rely on information currently available. Forward-looking statements involve risks and uncertainties and therefore depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, industry conditions, and other operating factors may affect the future performance of WEG and lead to results that will be materially different from those in the forward-looking statements. I would like to remind you that the conference call is being made in Portuguese with simultaneous translation into English. Today with us in Jaraguá do Sul are André Luís Rodrigues, Superintendent Director of Administrative Financial, Paulo Polezi, CFO and IR Officer, Wilson Watzko, Controller, and André Salgueiro, Investor Relations Manager. Please, André Rodrigues, you may go on.
Good morning, everyone. It's a pleasure to be here once again to release our earnings of the fourth quarter 2018.
Before starting with the highlights of the quarter on slide three, I would like to remind you that in the beginning of 2018, we said the growth of revenue and continuous focus on ROIC would be the main drivers for the year. With the numbers presented, we feel we have accomplished our objective. Talking about the highlights of the quarter, net operating revenue grew by 16.9% in 4Q, closing the year with growth of 25.7%. Paulo is going to provide more details on the performance around the presentation. ROIC reached 17.6%, going to levels observed only before the global crisis of 2009. Other two highlights in the quarter were the growth of 30% of OIBDA, that reached BRL 490 million, with margin growing 1.6 percentage points, reaching 15.7%.
Increase in the pace of investments, totally BRL 170 million in the quarter, including 60% of investments that were made in industrial complexes and other facilities overseas. Going to slide number four, we have more details on ROIC, who had growth of one percentage point compared to the 4Q 2017, reaching 17.6%. The best performance of operating profit after taxes is explained by the growth in revenue and improvements in operating performance. This growth more than offsets the more capital invested necessary to support business growth, both because of recent acquisitions and for investments in working capital, fixed intangible assets performance along the year. The consistency of this indicator proves our strategy to develop new businesses like wind and solar, that although have margin structurally lower, present a very attractive return on capital invested. Now, I'm going to turn the call to Paulo Polezi. Good morning, everyone.
Going to slide five, we show the evolution of our business areas in the different markets. I will start with industrial electro-electronic equipment in Brazil, where sales of short-cycle equipment continue with a trend of growth. Additionally, in this quarter, we observed growth of revenue of long-cycle equipment, especially automation panels. We also observed an increase in the search for equipment to capacity extension projects like brownfield and new investments, greenfield. Most of them already being quoted, but already signing for the beginning of a resumption of this project in Brazil. GTD had a drop in revenue in this quarter in Brazil. The last project of wind generation in portfolio are already being concluded and already recorded a lower revenue along the fourth quarter 2018. Additionally, transmission and distribution always contributed to a lower revenue in the quarter, showing the oscillation in delivery of projects in the quarter.
On the other hand, solar generation continues to stand out, and the prospects for the business continue positive, especially in distributed solar generation that has been showing continuous growth with our backlog in recent months. In domestic use motors, there was a small reduction in revenues, a reflex of the consumption dynamics in Brazil for the segment that did not present consistent recovery compared to last year. The performance of the paint business reflected the performance of industrial markets in Brazil that started to recover in recent quarters. Overseas, electro-electronic equipment continued to grow. Mainly driven by short-cycle products. As mentioned in previous quarters, we have already observed projects to increase capacity and build new plants that also demand long-cycle products, especially in industries connected to oil and gas, pulp and paper, and mining.
GTD, the greatest contribution comes from the transformer business that had growth in all operations abroad, particularly for the consolidation of the new transformer company in the U.S. In domestic use motors, revenue had dropped, especially because a lower backlog in the local market in China, allied to a poor performance of the operation in Argentina that is suffering from the recent problems that are being faced by the local economy. In paint, the drop of revenue in the external market also reflects difficulties in the Argentinian economic scenario, one of the main markets for this business unit outside Brazil. On slide six, we have evolution of EBITDA in the fourth quarter 2018. The major highlight quarter-over-quarter was growth in revenues. EBITDA grew 30.2% compared to the fourth quarter 2017. As André mentioned, EBITDA margin closed the quarter in 15.7%, an increase of 1.6 percentage points compared to the fourth quarter 2017.
This is a reflex of better profitability in overseas operations, gains of margins in some operations in Brazil, in addition to a lower revenue of wind generation that has traditionally lower operating margins. Finally, the lower exchange volatility in the period contributed for stability of costs of materials in long-cycle projects in Brazil. Finally, on slide seven, we show investments in recent quarters. In the fourth quarter 2018, investments reached BRL 170 million, 40% allocated to Brazil and 60% to production units overseas, showing significant growth compared to previous quarters, especially because of an advance in investment in the first foundry outside Brazil of WEG that is built in Mexico, and that in this quarter concentrated higher volumes of investments. Additionally, a normalization of market behaviors demands gradually an increase in disbursements to expand our plant capacity and also to modernize our production processes in Brazil and in overseas.
With that, I will close and will turn the call back to André. Thank you, Paulo. Before we open for Q&A, I would like to reinforce some recent accomplishments and the prospects for the year of 2019. The first thing is that we announced last week the acquisition of two new businesses. The first was the purchase of the storage system of energy in batteries of NPS in the U.S. that can bring good prospects in the future for the growth of WEG, and even more synergy to our renewable energy solutions like wind, solar, and also electric traction. The second, the purchase of Geremia Redutores, that will complete our portfolio in the reducer business, following on our strategy to offer complete solutions in a large range of products. Finally, profitability measured by EBITDA margin and our continuous focus on ROIC will be the main drivers for 2019.
Even with an expectation of growth, the pace of growth in revenues will decelerate in 2019, especially because of a lower project portfolio in renewable generation as wind. As you all know, these businesses have operating margins that are lower, and therefore, we expect an improvement in the mix of products sold, that together with best outlooks for other businesses, will positively contribute to our EBITDA margin and maintenance of ROIC for the remainder of the year. We are going now to start with the Q&A session. Operator? Ladies and gentlemen, we'll now start the Q&A session. To ask a question, please press star one. To withdraw your question from the list, press star two. Our first question comes from Ricardo Alves from Morgan Stanley. Good morning, André and Paulo. Thanks for your time. I have two questions, both in GTD. The first is more objective.
This level of BRL 500 million, BRL 502 million, if I'm not mistaken, that you delivered in the quarter as part of already the deceleration. Now the drop in wind that everybody's expecting, and a bit more volatility in T&D. Do you think that we can work with this level along the year? Or from what I understood in your release, do you still have something of wind that is going through the results, so perhaps we should work with something like BRL 400 million, BRL 450 million, if it would make a bit more sense? So a bit focused more on GTD for this first quarter. Then about solar energy more specifically. Could you please give us a breakdown in solar for what is distributed? I believe it's going to keep constant, but I just wanted to check on that, and a bit more color in terms of solar farms.
If I'm not mistaken, you would deliver them by June. What would be their contribution today? If you have in your pipeline other projects like this, too, as of June, make up your portfolio once again. Thank you very much. Hi, Ricardo. Good morning. I'm going to start with wind GTD, and then André is going to complement. Wind alone. We have to talk about GTD as a whole in Brazil. As you very well mentioned, we had about BRL 520 million. Wind had a considerable share in this amount. It will reduce along the year. This is information that we have been providing, and will continue until next year. We prefer you to look at WEG's GTD for the year of 2019 in consolidated numbers. Mature businesses and other sources of energy, biomass, hydro plants, they will continue to grow along 2019.
This is a positive trend. When you look at GTD in Brazil, you have to consider at distribution and transmission that recovered sales along the year of 2018. This recovery will continue along 2019. Finally, solar, that we can answer in separate, but it is important for you to see the whole thing. We tend to see GTD along the year as growing. Of course, there is going to be a step along the year because of wind coming out, but we expect a recovery. It is hard to give you a hard number if it is going to be below 520. We started the first quarter this year with BRL 470 million. We are going to have some volatility. We wished you looked at WEG's GTD as a whole, not only wind alone. The trend is of growth along the quarters. This is André Rodrigues.
One thing before answering the question on solar, is that in recent years, we have given great visibility in terms of quantities for new businesses in renewable energy, wind and solar. They were new businesses that contributed for the growth of revenues significantly. Now we are going to disclose information as we do with all WEG's businesses. Let us talk about solar plants and distributed plants. We signed 4 large projects, 6 solar farms, 4 delivered in 2018, and 2 are to be delivered in the first half of 2019. We are almost completing the negotiation of a third project still for this year. Because it is the beginning of the year, prospects are positive, we can say, because there are still projects from auctions of 2017 and 2018 in the market that may bring positive prospects for the future.
When we go to a distributed generation, you will remember, WEG has been in the market since 2011, and we are expanding our network of certified stylers. We have more than 300 now. The demand for this project has excelled our expectations, we have been saying. We have very good prospects for the coming years. Differently from solar plants, is that margins here are very good and comparable to other WEG's businesses. This is what we have today for the portfolio and what we can say about solar. Okay. It is very clear. Thank you, André. Thank you, Paulo, as well. Our next question comes from Lucas Marquiori from Banco Safra. Hello, everyone. Good morning. Thanks for the call. I have 2 questions. First, André, in your presentation, you talked about the 2 acquisitions of last week.
I would like to know a bit of your strategic views. First, in the U.S., for the storage of energy and batteries, is this an application more for urban mobility, electric cars? Is it more for hybrid energy, solar farms together with wind energy? Is it something more directed to Brazil or more of a global product? Geremia Redutores, well, you have a very large portfolio of reducers today. Is it something to get to a group of clients that you did not have before? I would like to understand a bit more about the 2 acquisitions. The second, if you could give me the percentage of domestic production that is exported. How much of Brazil's total production is being exported? Thank you very much. These are my 2 questions. Hi, Lucas. Thanks for your question. Okay.
Let me talk a bit about strategic views. I'm going to start with the battery storage energy system, NPS. This is a strategic value and the opportunity that this business brings for us to be a relevant player in a business that is just starting to develop worldwide. What is important is that right now numbers are not really significant. This is a project that is still under development. It's a new reality that's starting first abroad to be implemented later on in Brazil. For now, I already answered part of your question. Our view is that this is not going to be a local business, but rather a WEG's global business. Today, the market that is most evolved is the U.S. Last year, we announced a supply in the city of Vermont.
Vermont is a city that is conducting a project on the storage based on batteries, and we have then a small portfolio to develop new projects so far in the U.S. The applications of the storage business are quite complementary to what we have been developing in terms of renewable energy. For example, solar. You have solar generation, but the sun is not shining all the time. The wind is not blowing all the time. You can store this energy and use it at peak times or peak consumption. You already mentioned electric cars, and as I said, you can work with intermittent sources like solar and wind, and you also have a safety system for the distribution and transmission system. The project that we are developing in the U.S. is that. Electric traction is very important because the use of a fast charge station.
In the beginning, we know that the networks are not going to be in place, and the solution can help. Another thing that is very important is that this type of application finds a solution of what to do with electric car batteries. You know that they have a useful life of five to seven years. They can be reused for another 10 to 15 years in battery energy storage. It is a business that is complementary to what WEG offers, but it's more long-term, and it will start outside Brazil. Geremia Redutores is a company that was founded in 1973. It is a reference in its market in terms of portfolio and quality product, and it really comes to expand the offers of WEG-CESTARI. You know, WEG-CESTARI has small reducers, motor reducers, but its focus is more mid and large industrial reducers.
With Geremia, we include the mega reducers. Geremia works with smaller reducers as well. It's complementary. It comes to strengthen our presence in the reducer market. As I mentioned, again, complementary to our portfolio, and it will increase our competitiveness compared to global players that are already in Brazil. I think they were acquisitions that were very important for the company's strategy as a whole. Okay. Very clear. The second part of your question, the percentage that at the end of the year was produced in Brazil and exported. Just as a reminder, the number was 28% compared to net revenue. In 2018, of course, there was a major impact of the exchange variation. The number gives an increase that is proportional to what we saw in the external market.
We had a balance of what is produced and sold in Brazil, especially in GTD, and produced and sold overseas because an increase in capacity. Altogether considered, we went up to 30%, so slightly better, but almost flat compared to the previous year. Okay. Thank you, Paulo and Andre. Our next question comes from Bruno Amorim from Goldman Sachs. Good morning, everyone. I have two questions that are follow-ups really in terms of the split of energy. I would like to understand what would be the impact of a deep reduction in revenue coming from wind projects. I understand that the segment has lower margins, lower invested capital. ROIC is good, even with lower margins because you have low invested capital. Can you mobilize the capital that is invested in the business because you're going to have a drop in revenues that is significant.
Second, what can you say with regard to the ROIC of the wind division? Is it similar to the average of the company or is it not? I understand you have lower margins and lower capital investments, but in the end of the day, is the ROIC the same, higher or lower than the average of the company? Okay, Bruno. Well, wind energy. We have always mentioned that the return on capital invested is above company average, because WEG didn't have to make strong investments to work with the business. If the share of wind will have a negative impact to the company, well, we always work for the other businesses to offset any drops. Along the time, this is something that we have been proving.
There were times that other segments were more relevant in the past, because of a specific drop of one segment, the other segment kind of stepped up for us, not to affect our numbers. Even with the reduction of wind for 2019, we don't see anything that is really going to change our trend of showing appealing numbers in terms of return on capital invested. Thank you. Just a follow-up, thinking of the company as a whole. We saw since the slides of 2015, 2016, we have been seeing growth in the company's top line for the last two years. I suppose that operating leverage has contribute for our ROIC go from 13%-17.5% that you delivered in 2018. Do you still have room for expanding your ROIC and margins as a whole by means of operating leverage?
Are you already using your full capacity given the strong growth of recent years? What can you say about that? We want to continue to have an appealing ROIC as it was this year, in line or even above the objectives that we had within the company. You ask if there is room to develop. We always work very hard to work with working capital. Sometimes we have to invest. We are growing abroad. We have to invest a bit higher to support our growth. There are always opportunities to improve margins, we are going to continue working on that. Our objective is to maintain interesting levels as we delivered this year. I think it's going to continue to be attractive to everyone. Okay. Thank you very much. Our next question comes from Felipe Vinagre from Credit Suisse. Good morning, everyone. I have two questions.
Changing topics about revenue. First, revenue overseas. You grew 14% in local currency, and you also talked about a gain of share. I would like to know what you expect from now on. You are with a good backlog. Are you going to continue at the levels of the fourth quarter? In transmission, the last news after the auctions that we had recently is that you already had a backlog of BRL 500 million. If you can say if this has increased and what kind of ramp-up we are going to have in terms of revenue for 2020. Hi, Felipe. We have the prospect of, in 2019, to continue grow at the pace of 2018 overseas. Why are we saying that?
Well, first, there are two segments that we always talk about as being relevant for WEG outside of Brazil, oil and gas and mining, that are in the process of recovery. We see signs that there is a reception in steel, pulp and paper, and energy generation abroad. We never stop. We are opening other operating fronts and commercialization in other countries, in Asia, Africa, Middle East. For instance, PGM has a leading position in South and Latin America, but we still have opportunities in the rest of the world. For a development of PGM out of the market in which we are leaders, we might have opportunities to grow. Another example is that we are doing very well in low-voltage motors in China.
We have a new plant we started to produce in Rugao in 2016, and now we are making new investments to increase the capacity of Rugao's plant. China is growing more than 20% in USD. That shows our successful strategy outside of Brazil. That's why we believe that 2019 may bring good prospects for growth in the external market. Felipe, good morning. This is Polezi. As for backlog, we have to look at what our profile was like in this area and what is going to be from now on. In last years, we had always had a balance between revenue from generation of energy, another part for the industry, and another part for renewable energy. Last year, the share of distributors has gone down significantly. The main player in the market is less active, especially state-owned companies are a lot less active.
On the other hand, it was renewable energy that took this vacant space. WEG has solutions of substations and transformers in many of those projects. For 2019, we see the same process to go on. Growth and the addition of new orders because of the auctions. This is already starting to appear along the year, more specifically in the second half. With all that, we are going to have a bit more robust growth in the level of 2 digits in the area of T&D. What is really different is the auctions that we already had, and orders are going to start more to the second half of this year. If you allow me, just two very quick questions. Interest rates and income tax. I see that with prefixed rates, interest rates are going down. Do you think this line is going to get better or worse?
In terms of income tax, if you think you are going to keep the levels of 2018 or even better because you are increasing your mix overseas compared to the domestic mix. Thank you. Hi, Felipe. Let's talk a bit about the financials. I always like to start by saying the following. WEG is quite different from other companies. That helps our business units, which is our financial flexibility. What is that? We have a solid balance sheet with cash liquidity, and this is a must to us. The opportunities that we have to raise credit below market costs are no longer available. Especially in Brazil, we are having the best time in terms of low interest rates in history.
We still have access to the main structures for financial leverage, and we are going to probably continue that cash ratios that are suitable or positive and will support the company's growth. That is on the one hand. The downside is leverage and debts overseas. We also saw an increase in interest rates in emerging markets and in mature markets. LIBOR, for instance, went up, and we have some leverages in Mexico, South Africa, and Colombia. That gives us a bit more financial expenses. Along the year, we are going to work to reduce this leverage in the external market. We are working today with the best case scenario of having a neutral financial result along the year.
We do not know when we are going to be able to zero the debts abroad or change them for cheaper debt, but we are working to have a break-even point in 2019 or a neutral point in 2019. Just to add, in terms of income tax, we do not have expectations in changing any of the benefits that we have. Interest on capital or others. There is always this mix between Brazil and overseas. You might have minor changes, but in the basic scenario, we are not going to show anything much different in terms of effective rates for 2019. Okay. Thank you very much. Our next question comes from Augusto Tanski from HSBC. Thanks for taking my question. I have a quick question about non-recurrent numbers of BRL 26 million. In the material fact, you had mentioned BRL 46 million.
Has the amount changed, or you are going to have an extra BRL 20 million for the next quarter? Hello, good morning. This question has to do with our announcement of November. The total agreement was BRL 46 million divided in two installments, two parts. One part is what is non-operating expenses, about BRL 20 million. It was already entered, booked in the results of the fourth quarter, and BRL 26 million is the monetary correction. Since it started to be calculated back in the 1990s, that was booked into financial results. That is why we had unfavorable financial results. BRL 46 altogether, BRL 26 in financial results, and BRL 20 in the line I mentioned. Okay. Thank you very much. As a reminder, if you want to ask a question, just press star one. We are now closing the Q&A session.
We are going to turn back the call to André Rodrigues for his final considerations. Please, Mr. André, you may go on. Well, once again, thanks very much for joining us in this conference call. Even starting the year with the drop in the wind portfolio, we have the expectations of growing our business in Brazil and overseas. With that, we are going to improve our operating margins, and we are going to keep return on capital invested as WEG has been presenting with an attractive number for 2019 as well. Good morning, everyone, and see you in our next audio conference. WEG's audio conference is now closed. We thank you very much for joining us and wish you a good day.