IOCHPE-MAXION S.A. Individual and Consolidated Interim Financial Information
Iochpe-Maxion S.A. and Subsidiaries
Three-month period ended March 31, 2022
with Independent auditor's review report on interim financial information
MANAGEMENT REPORT - 1Q22
1) MESSAGE FROM THE CEO
The 1Q22 presented a similar dynamic to that observed throughout 2021. We are still living with the uncertainties and impacts generated by the pandemic, such as the irregular supply of certain inputs, mainly semiconductors and now also with the impacts of the conflict between Russia and Ukraine. Nonetheless, we had a robust and resilient performance despite the challenges and uncertainties.
The global production of light vehicles, excluding China, according to IHS consulting, showed a reduction of 8.6% in 1Q22 compared to the same period of the previous year. The commercial vehicle segment was again the highlight in the period with a growth in global production, excluding China, of 1.2%, according to LMC consulting.
Our net operating revenue increased 36.5% in 1Q22 to R$ 4.3 billion, a new quarterly revenue record for the Company, mainly driven by strong demand and production of commercial vehicles and the launch of new products. The commercial vehicle segment continued to have an increasing share of the Company's revenue, with 48.2% in 1Q22 and helped to mitigate the effects of the drop in production in the light vehicles segment.
The performance and resilience of the results are driven by our diversified business model and the discipline of operational execution. Participation in the light and commercial vehicles segments, as well as the diversification of geographies and products, and the proximity of our production to customers were the determining factors for the result in 1Q22. Even with a still volatile scenario, operational flexibility and agility were also important for achieving solid operating results.
EBITDA in 1Q22 was R$ 548.2 million with a margin of 12.8%, an increase of 49.0% compared to 1Q21. Our net income in 1Q22 was R$160.3 million, an increase of 211.1% compared to 1Q21.
We ended 1Q22 with another reduction in financial leverage, reaching the lowest leverage level since 2012, measured by the ratio of net debt to EBITDA in the last twelve months. We had a reduction from 7.58x in 1Q21 to 2.06x in 1Q22. This improvement was due to the Company's operating performance, including operating cash generation of R$ 323.5 million in 1Q22 and also driven by our capital allocation discipline.
Regarding the debt profile, at the beginning of 2Q22, we successfully concluded the 11th issuance of debentures in the amount of R$ 750.0 million with an average term of 3.8 years. This new issuance is another step in the evolution of the Company's liability management, with the primary use of resources for the amortization of short- term debt. It is worth mentioning that we maintain a credit line approved with BNDES in the amount of R$ 620.0 million and a term of 7 years. Finally, we ended the quarter with a solid cash position of R$ 1,386.0 million.
Regarding our commitment to ESG themes, we recently announced the "ROADMAP ZERO" target, which is our strategy to support the decarbonization of mobility, with the aim of becoming a carbon neutral company by 2040. We are removing CO2 emissions from our production processes, improving efficiency in the
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MANAGEMENT REPORT - 1Q22
use of energy resources and developing lighter and more efficient products. We intend to become signatories to the United Nations Global Pact on social responsibility initiative.
We were winners of the 1st prize of BNDES "All for Sustainability" in the category of support to education, for the social impact generated by the Formare program, from Iochpe Foundation. Formare is a program focused on vocational education for young people in situations of economic and social vulnerability, responsible for training over 25,000 young people, with a 93% insertion rate in the formal job market. We are very proud to have supported this program for over 30 years and to have many alumni of the program as our employees.
At the same time, we remain focused on the market changes, inflationary pressures and geopolitical events, always seeking to adapt in a timely manner to its possible impacts. We remain engaged on productivity gains and operational efficiency, on the launch of new products, on the development of our advanced engineering, on digitalization and innovation and on strengthening our balance sheet, in order to continue adding value to our products.
2) HIGHLIGHTS OF THE 1Q22
- Net operating revenue: R$ 4,277.2 million in 1Q22, an increase of 36.5%1
- Gross profit: R$ 611.0 million in 1Q22 with 14.3% margin
- EBITDA of R$ 548.2 million in 1Q22, with 12.8% margin, an increase of 49.0%¹
- Reduction in financial leverage2 of 7.58x in 1Q21 to 2.06x in 1Q22
- Net income: R$ 160.2 million in 1Q22
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):
Brazil¹ | North America² | Europe² | ||||||||||
Segment | 1Q21 | 1Q22 | Var. | 1Q21 | 1Q22 | Var. | 1Q21 | 1Q22 | Var. | |||
Light Vehicles | 560 | 456 | -18.5% | 3,615 | 3,551 | -1.8% | 4,278 | 3,514 | -17.9% | |||
Commercial Vehicles | 38 | 40 | 4.8% | 133 | 139 | 4.4% | 118 | 107 | -9.2% | |||
Total Vehicles | 598 | 496 | -17.0% | 3,748 | 3,690 | -1.5% | 4,396 | 3,621 | -17.6% |
- Source: ANFAVEA
- Source: IHS Automotive (Light Vehicles) and LMC Automotive (Commercial Vehicles)
- Consider EU27 + UK + Turkey
Due to the difficulties in the supply chain, mainly related to the supply of semiconductors and the conflict between Russia and Ukraine, production expectations for 2022 were reduced by automotive consultancies. Despite the challenging scenario, the latest forecasts indicate a growth of 6.9% in global production of light vehicles and 5.1% in production of commercial vehicles, both excluding China.
- Compared to the same period of the previous year.
- Net debt/ EBITDA of the last 12 months.
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MANAGEMENT REPORT - 1Q22
4) OPERATING AND FINANCIAL PERFORMANCE
Consolidated I.S - R$ thousand | 1Q21 | 1Q22 | Var. | |
Net Operating Revenue | 3,133,096 | 4,277,191 | 36.5% | |
Cost of Goods Sold | (2,723,380) | (3,666,191) | 34.6% | |
Gross Profit | 409,716 | 611,000 | 49.1% | |
13.1% | 14.3% | -7.2% | ||
Operating Expenses | (181,874) | (168,855) | ||
Other Operating Expenses/Revenues | (5,692) | (26,918) | n.m. | |
Equity Income | 931 | 4,674 | n.m. | |
Operating Income (EBIT) | 223,081 | 419,901 | 88.2% | |
7.1% | 9.8% | 107.1% | ||
Financial Results | (59,042) | (122,252) | ||
Income Taxes | (86,037) | (108,937) | 26.6% | |
Minority Shareholders | (26,500) | (28,506) | 7.6% | |
Net Income | 51,502 | 160,206 | 211.1% | |
1.6% | 3.7% | |||
EBITDA | 367,938 | 548,152 | 49.0% |
11.7% 12.8%
4.1) Net Operating Revenue
Consolidated net operating revenue reached R$ 4,277.2 million in 1Q22, an increase of 36.5% compared to 1Q21.
Net operating revenue in 1Q22 was positively impacted by the launch of new programs and products and by the higher sales mix in the commercial vehicle segment.
The exchange rate variation negatively impacted the Company's operating revenue by R$ 274.0 million in 1Q22.
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 | 1Q21 | 1Q22 | Var. | ||
Aluminum Wheels (Light vehicles) | 113,754 | 127,476 | 12.1% | ||
Steel Wheels (Light vehicles) | 94,939 | 127,454 | 34.2% | ||
Steel Wheels (Commercial vehicles) | 242,798 | 394,995 | 62.7% | ||
Structural Components (Light vehicles) | 64,792 | 101,867 | 57.2% | ||
Structural Components (Commercial vehic | 268,303 | 443,103 | 65.2% | ||
South America | 784,586 | 1,194,894 | 52.3% | ||
25.0% | 27.9% | ||||
Aluminum Wheels (Light vehicles) | 129,984 | 148,343 | 14.1% | ||
Steel Wheels (Light vehicles) | 369,419 | 503,923 | 36.4% | ||
Steel Wheels (Commercial vehicles) | 91,488 | 117,453 | 28.4% | ||
Structural Components (Commercial vehic | 278,553 | 561,996 | 101.8% | ||
North America | 869,443 | 1,331,715 | 53.2% | ||
27.8% | 31.1% | ||||
Aluminum Wheels (Light vehicles) | 533,487 | 562,153 | 5.4% | ||
Steel Wheels (Light vehicles) | 288,002 | 329,746 | 14.5% | ||
Steel Wheels (Commercial vehicles) | 300,299 | 425,137 | 41.6% | ||
Europe | 1,121,788 | 1,317,037 | 17.4% | ||
35.8% | 30.8% | ||||
Aluminum Wheels (Light vehicles) | 206,261 | 254,874 | 23.6% | ||
Steel Wheels (Light vehicles) | 50,823 | 58,658 | 15.4% | ||
Steel Wheels (Commercial vehicles) | 100,194 | 120,013 | 19.8% | ||
Asia + Others | 357,278 | 433,545 | 21.3% | ||
11.4% | 10.1% | ||||
Iochpe-Maxion Consolidated | 3,133,096 | 4,277,191 | 36.5% | ||
100.0% | 100.0% | ||||
Maxion Wheels | 2,521,448 | 3,170,225 | 25.7% | ||
80.5% | 74.1% | ||||
Maxion Structural Components | 611,648 | 1,106,966 | 81.0% | ||
19.5% | 25.9% |
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MANAGEMENT REPORT - 1Q22
4.2) Cost of Goods Sold
Cost of goods sold reached R$ 3,666.2 million in 1Q22, an increase of 34.6% compared to 1Q21.
The increase in cost of goods sold in 1Q22 is related to the increase in the price of raw materials and other inputs used in the production process.
4.3) Gross Profit
Gross profit of R$ 611.0 million in 1Q22, an increase of 49.1% compared to 1Q21.
The increase in gross profit observed in 1Q22 is mainly due to revenue growth and greater operating efficiency.
4.4) Operational Expenses
Operating expenses (selling, general and administrative expenses and management fees) reached R$ 168.9 million in 1Q22, a reduction of 7.2% compared to 1Q21.
4.5) Other Operating Expenses/Operating Income
Negative amount of R$ 26.9 million in 1Q22, a worsening compared to the negative amount of R$ 5.7 million in 1Q21.
This line was negatively impacted by R$ 30.7 million due to the appreciation of the obligation to purchase equity interest in a subsidiary, and positively by R$ 11.1 million due to the recognition of the remaining balance of the net gain from the exclusion of ICMS from the PIS/Cofins calculation basis.
4.6) Equity Income
Positive result of R$ 4.7 million in 1Q22, an improvement compared to the positive result of R$ 0.9 million in 1Q21.
The results of Amsted Maxion and Maxion Montich were the highlights due to the good performance of the Brazilian rail market and the increase in vehicle production in Argentina.
The following table sets forth the amounts corresponding to Iochpe-Maxion's ownership, which reflect the results of the equity income in the Company.
1Q21 | 1Q22 | |||||||||||
R$ thousand | Amsted | Maxion | Dongfeng | Total | Amsted | Maxion | Dongfeng | Total | Var. | |||
Maxion¹ | Montich² | Maxion³ | Maxion¹ | Montich² | Maxion³ | |||||||
Net Income (Loss) | 327 | 1,786 | (1,183) | 931 | 2,712 | 5,686 | (3,723) | 4,674 | n.m. |
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)
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Iochpe-Maxion SA published this content on 24 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 24 May 2022 21:41:01 UTC.
