Iochpe Maxion S A : 05/08/2023Earnings Release 1Q23

MANAGEMENT REPORT - 1Q23	ADR: IOCJY

1) MESSAGE FROM THE CEO

The first quarter of 2023 was still characterized by a scenario of global economic and geopolitical uncertainties. High interest rates and inflation levels already signal a declining trend in several countries. From a sectoral point of view, bottlenecks in the supply chain occurred less frequently, indicating a gradual improvement. In Brazil, the production volume of trucks was negatively impacted by the change in regulations on the emission of pollutants for diesel engines (Euro 6). On the other hand, regions such as Europe and North America have been positively surprising with production levels above initial projections for the period.

The global production of light vehicles, excluding China, according to the IHS consulting, increased by 11.8% in 1Q23 compared to 1Q22. The commercial vehicle segment showed growth in global production, excluding China, of 2.1% in 1Q23 compared to 1Q22, according to LMC consulting.

Net operating revenue decreased by 6.5% in 1Q23 compared to 1Q22, reaching R$

4.0 billion. The reduction is due to the negative impact of the exchange rate variation of R$ 118.6 million (43% of the total variance), reduction of raw materials costs reflected in prices and the lower production volume of commercial vehicles in Brazil. The commercial vehicle segment had its share of the Company's net operating revenue reduced from 48.2% in 1Q22 to 44.4% in 1Q23, mainly due to the drop in Brazilian production in this segment.

The Company's operating margins were negatively impacted in 1Q23 by several temporal factors: (i) the lag between the inventory cost of raw material compared to selling prices, as we observe more stability in raw material prices, this impact has a declining trend; (ii) drop in volume of commercial vehicles in Brazil impacting operational efficiency; (iii) lingering impacts of inflation in all regions. We continue to work to reduce the impact of cost changes and expect margins to recover and return to normal level over the course of the year.

EBITDA was R$ 286.8 million in 1Q23, a decrease of 47.7% compared to 1Q22. Excluding non-recurring events in both periods, we had an EBITDA reduction of 50.3% in 1Q23, with a drop in recurring margin from 13.3% in 1Q22 to 7.1% in 1Q23 and an increase compared to 4Q22 when that margin was 6.3%.

Our financial leverage, measured by the ratio of net debt to EBITDA in the last 12 months, was 2.77x in 1Q23, compared to 2.26x in 4Q22 and 2.06x in 1Q22. The main impact of this increase compared to 4Q22 was the reduction in EBITDA accumulated in twelve months (EBITDA difference between 1Q22 and 1Q23) as mentioned above. Net debt increased in 1Q23 compared to 4Q22 by R$ 168.1 million, impacted by the payment of the settlement with the Mexican tax authorities, as disclosed in 4Q22, of R$ 147.0 million (cash effect), and by the distribution of interest on equity of R$ 65.6 million. Cash flow from operations in 1Q23 was positive despite the higher need of working capital in the first quarter compared to the fourth quarter, which historically has lower operating activity due to the seasonality of the sector.

The cash position at the end of 1Q23 was R$ 2,604.7 million compared to R$ 1,385.9 million at the end of 1Q22. Additionally, we have an undrawn committed credit line

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MANAGEMENT REPORT - 1Q23	ADR: IOCJY

(Revolver Credit Facility) of R$ 500.0 million. The liquidity ratio, measured by total liquidity divided by short-term debt, ended the quarter at 1.54x, compared to 2.67x in 4Q22 and 0.69x in 1Q22.

In April, we announced a partnership with Forsee Power, a French company specialized in intelligent battery systems, to offer the integration of battery systems for electric vehicles through our Structural Components division. Additionally, we participated in the capital increase process of Forsee Power on the French stock exchange, with an injection of EUR 5.0 million, aiming to contribute to the company's growth and the efforts of developing solutions for electric vehicles.

This movement reaffirms our commitment to innovation, integration, and partnership with leading companies in new technologies, and offering solutions for the current and future automotive industry.

We remain attentive to market changes, inflationary pressures, changes in our customers' production volumes and geopolitical events, always seeking to adapt in a timely manner to the possible impacts of these factors. We remain focused on gains in productivity and operational efficiency, launching new products, developing our advanced engineering, digitalization and innovation and strengthening our balance sheet, so that we can continue to generate value in a sustainable way over time.

2) HIGHLIGHTS OF THE 1Q23

• Net operating revenue: R$ 3,998.2 million in 1Q23, a decrease of 6.5%1
• Gross margin of 8.5% in 1Q23, a reduction in relation to the margin of 14.3% in 1Q22 and an increase compared to 7.8% of 4Q22
• Net leverage2 of 2.77x in 1Q23, compared to 2.06x in 1Q22 and 2.26x in 4Q22
• Reduction of R$ 74.1 million (1.8%) in net debt in 1Q23 compared to 1Q22
• Total liquidity of R$ 3,104.7 million3 in 1Q23 compared to R$ 1,386.0 million in 1Q22. Liquidity ratio (total liquidity divided by short-term debt) of 1.54x, compared to 0.69x in 1Q22
• Partnership with the French company Forsee Power to develop products and solutions for electric propulsion vehicles

3) MARKET

Production of vehicles in regions where the Company's highest percentage of consolidated revenues are concentrated, presented the following behavior in the periods indicated (thousand):

1. Compared to the same period of the previous year
2. Net debt/ EBITDA of the last 12 months
3. Cash + revolving credit facilities

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	MANAGEMENT REPORT - 1Q23		ADR: IOCJY
	Light Vehicles¹		Commercial Vehicles²
Region	1Q22	1Q23	Var.	1Q22	1Q23	Var.
Brazil	456	508	11.3%	40	29	-28.9%
India	1,259	1,377	9.4%	114	102	-11.2%
North America	3,550	3,898	9.8%	132	150	13.8%
Europe³	3,546	4,387	23.7%	119	134	12.6%
Global	19,924	21,063	5.7%	816	795	-2.5%
Global Ex-China	13,755	15,382	11.8%	526	537	2.1%

1. Source: ANFAVEA (Brazil) and IHS (other regions)
2. Source: LMC Automotive (Commercial Vehicles)
3. Consider EU27 + UK + Turkey

The most recent forecasts from the consultants indicate a global production of light vehicles and a drop of 1.5% commercial vehicles in 2023, both excluding China.

growth of 5.6% in the in the production of

4) OPERATING AND FINANCIAL PERFORMANCE

Consolidated I.S - R$ thousand	1Q22	1Q23	Var.
Net Operating Revenue	4,277,191	3,998,153	-6.5%
Cost of Goods Sold	(3,666,191)	(3,657,067)	-0.2%
Gross Profit	611,000	341,086	-44.2%
	14.3%	8.5%
Operating Expenses	(168,855)	(184,859)	9.5%
Other Operating Expenses/Revenues	(26,918)	3,676	-113.7%
Equity Income	4,674	5,857	25.3%
Operating Income (EBIT)	419,901	165,760	-60.5%
	9.8%	4.1%
Financial Results	(122,252)	(131,889)	7.9%
Income Taxes	(108,937)	(33,469)	-69.3%
Minority Shareholders	(28,506)	(16,743)	-41.3%
Net Income (Loss)	160,206	(16,341)	-110.2%
	3.7%	-0.4%
EBITDA	548,152	286,760	-47.7%
	12.8%	7.2%

4.1) Net Operating Revenue

Consolidated net operating revenue reached R$ 3,998.2 million in 1Q23, a decrease of 6.5% compared to 1Q22.

Net operating revenue in 1Q23 was negatively impacted by the drop in production of commercial vehicles in Brazil due to the change in diesel engines from Euro 5 to Euro 6, by components price reduction, driven by lower costs of raw material, and the exchange rate (R$ 118.6 million) due to the appreciation of the real. The recovery of production volumes in Europe, mainly in aluminum wheels for light

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MANAGEMENT REPORT - 1Q23	ADR: IOCJY

vehicles, supported to mitigate these effects.

The table below shows the behavior of consolidated net operating revenue by region and by product, for the periods indicated.

Net Operating Revenue- R$ thousand	1Q22	1Q23	Var.
Region
South America	1,194,894	1,025,608	-14.2%
North America	1,331,715	1,146,441	-13.9%
Europe	1,317,037	1,451,663	10.2%
Asia + Others	433,545	374,441	-13.6%
Product
Steel wheel (light vehicles)	1,019,781	873,372	-14.4%
Aluminum wheel (light vehicles)	1,092,847	1,233,399	12.9%
Steel wheel (com. vehicles)	1,057,598	916,596	-13.3%
Structural comp. (light vehicles)	101,867	114,474	12.4%
Structural comp. (com. vehicles)	1,005,099	860,311	-14.4%
Division
Maxion Wheels	3,170,225	3,023,368	-4.6%
Maxion Structural Components	1,106,966	974,785	-11.9%
Iochpe-Maxion Consolidated	4,277,191	3,998,153	-6.5%

4.2) Cost of Goods Sold

Cost of goods sold reached R$ 3,657.1 million in 1Q23, a decrease of 0.2% compared to 1Q22.

This lower percentage reduction in cost of goods sold compared to the reduction in sales is mainly due to temporal factors: (i) the lag between the inventory cost of raw material compared to selling prices; (ii) drop in the volume of commercial vehicles in Brazil; and (iii) lingering impacts of inflation across all regions.

4.3) Gross Profit

Gross profit of R$ 341.1 million in 1Q23, a reduction of 44.2% compared to 1Q22.

4.4) Operational Expenses

Operating expenses (selling, general and administrative expenses and management fees) reached R$ 184.9 million in 1Q23, an increase of 9.5% compared to 1Q22.

4.5) Other Operating Expenses/Operating Income

Positive result of R$ 3.7 million in 1Q23, an improvement over the negative amount presented in 1Q22 of R$ 26.9 million.

The main components of this line in 1Q23 were the recognition of the gain from the exclusion of ICMS from the PIS/Cofins calculation base in the amount of R$ 11.5 million, and an expense of R$ 6.7 million with restructuring processes in Brazil, driven by the reduction in commercial vehicle production in the region.

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MANAGEMENT REPORT - 1Q23	ADR: IOCJY

4.6) Equity Income

Positive result of R$ 5.8 million in 1Q23, an increase of 25.3% compared to 1Q22.

The increase in equity income is related to Maxion Montich's result, due to the increase in vehicle production in Argentina (+26.7% in 1Q23).

The following table sets forth the amounts corresponding to Iochpe-Maxion's ownership, which reflect the results of the equity income in the Company.

		1Q22			1Q23
R$ thousand	Amsted	Maxion	Dongfeng	Total	Amsted	Maxion	Dongfeng	Total	Var.
Maxion¹	Montich²	Maxion³	Maxion¹	Montich²	Maxion³
Net Income (Loss)	2,712	5,686	(3,723)	4,674	2,039	8,474	(4,656)	5,857	25.3%
¹Amsted- Maxion Fundição e Equipamentos Ferroviários S.A.: Related company in the railway segment (19.5% share)

• Maxion Montich S.A.: Joint business with factories of structural components in Argentina and Uruguay (50% stake) ³ Dongfeng Maxion Wheels Ltd.: Related company that produces aluminum wheels in China (50% stake)

4.7) Earnings Before Interest and Tax (EBIT)

Operating profit of R$ 165.8 million in 1Q23, a decrease of 60.5% compared to 1Q22.

4.8) Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

EBITDA of R$ 286.8 million with 7.2% margin in 1Q23, a reduction of 47.7% compared to 1Q22.

Excluding the non-recurring effects in both periods (negative amount of R$ 19.5 million in 1Q22 and a positive amount of R$ 4.8 million in 1Q23), EBITDA in 1Q23 would have decreased by 50.3% with a margin of 7.1%.

The table below shows the evolution of EBITDA.

EBITDA Reconciliation - R$ Thousand		1Q22	1Q23	Var.
Net Income (Loss)	160,206	(16,341)	-110.2%
Minority Shareholders	28,506	16,743	-41.3%
Income Taxes and Social Contribution	108,937	33,469	-69.3%
Financial Results	122,252	131,889	7.9%
Depreciation / Amortization		128,251	121,000	-5.7%
EBITDA		548,152	286,760	-47.7%

4.9) Financial Result

The financial result was negative by R$ 131.9 million in 1Q23, an increase of 7.9% compared to 1Q22.

The increase in the financial result is mainly related to the high interest rates still in effect in Brazil.

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