On Thursday, Iochpe-Maxion (OTC:IOCJY) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Iochpe-Maxion reported net revenue of around 4 billion in Q2, slightly lower than last year due to currency effects, but showed a 5.6% growth excluding FX impacts.

The company highlighted strong performance in aluminum wheels in North America and growth in Asia, particularly India, as key drivers.

Net debt has been reduced, and refinancing extended debt maturity to 2030, enhancing financial stability.

Strategically, the company is investing in new facilities and expansions in Mexico and India to meet rising demand in North America and Asia.

Management remains optimistic about future growth, particularly in North America and India, while maintaining a focus on cost discipline and financial flexibility.

Full Transcript

Investor Relations (Operator)

In our call today for the Q&A, we have Mr. Peter Klinker, CEO, and Mr. Renato Saloun, CFO. We would like to inform you that this video conference is being recorded and will be made available on the company’s Investor Relations website along with the presentation. We would like to highlight that Mr. Peter is going to make this presentation in English, and we have simultaneous translation for Portuguese and English. You can access it by clicking the small globe at the bottom of your screen.

By clicking on that icon you will see three options: original audio, Portuguese, and English. Please select the one that best suits your needs. For the Q&A session, we ask you to use the Q&A button at the lower part of your screen to submit your questions. If you are invited to speak, you can then activate your microphone, and you will see that on screen. Remember that part of these questions will be answered in English, so we kindly ask you to use the translation tool if you need it.

We would like to make sure that, apart from declarations that can be made during the conference regarding the company’s business perspectives, projects, and operational goals, these are assumptions and premises, as well as information available to the company. Future considerations are not guarantees of performance; they involve risks and assumptions, and circumstances may occur or not. I would like to call Mr. Peter Klinker. Mr. Peter, if you will.

Go ahead, sir.

Peter Klinker, CEO

Hello. Good morning to everybody. Good afternoon to everybody here in Belgium, where we're meeting with the global team to talk about the future. But we're taking a break here to do this conference and talk a little bit about the recent past, the second quarter for Iochpe-Maxion. But also, at the end of the presentation, as you will see in a few moments, we will try to take you with us a little bit into the future, talk about what has been happening in the second quarter.

We go to the next slide. First of all, the executive overview. I think from what you could see, maybe already from our numbers, again, we believe that we have been able to show a pretty resilient performance. We were disciplined on some of the cost savings that we were targeting. We realized them and I think, you know, it will come back more often in this presentation and maybe in other presentations as well. But North America clearly is recovering; that is supporting our CV demand or CV performance there. And at the same time we are seeing some strong aluminum wheel performance in North America that has been helping our performance. That was, as we call, resilient financial discipline. Shareholder focus, you know, I think you will see from the numbers, we believe we have a solid liquidity and on top of that we are showing a lower net debt which should reinforce our financial flexibility and the outlook for the minimum long term for our shareholders.

And, last but not least, we do have not only resilience, we also see some growth drivers. And we will talk about it a little bit more at the end of this presentation. But for us, clearly Asia is outperforming. We've talked about that a little bit also in prior presentations, but we start to see it more and more now and within Asia, of course, for us, India is a growth engine in all the segments that we are present in there. And so I'm happy to talk about that a little bit more at the end of the presentation.

It's not only Asia or India; also Brazil LV is strong, and very strong for Maxion. And as I said, North American truck trending upwards is very helpful as well. We go to the next slide, look a little bit more in detail on the market. It's really different between LV and CV, not only right now, but also if we look at the immediate future—let's say the rest of this year or next year or even the year after that. It's very little growth on the LV side.

And on top of that, remember, the exports from China still continue to grow. And so everything that you don't produce in China and put on vehicles in China that are being produced in China and then exported, you will miss as it grows. And so for many, many, many suppliers, I think it will be a slow-growth, no-growth scenario in LV in the next 1, 2, 3 years. Same time, commercial vehicles is a positive market. We see North America coming back. We believe Europe will be stronger the next two years than what we've seen this year or the last two years.

India will be growing and we believe Brazil is not so favorable right now, but should be stabilizing second half of this year, next year. And so overall, the truck market for us, we believe, is showing a very positive outlook. We go to the next slide, coming back to the second quarter, talk a little bit about the highlights from a financial KPIs point of view. How are we doing in that market? And so our net revenue around 4 billion in the second quarter.

And that's a little bit lower than what we saw last year. But we all know FX—the real has been appreciating to many other currencies. And so, if we exclude that, actually we would have been showing 5.6% growth year over year, which is not bad in a market that is showing negative growth in the pass-car side and still recovering in North America on the truck side. So overall we are happy with the performance that we show on the net revenue side. Gross profit, not a bad number, 12.1%, but still having some impact from lower fixed-cost absorption in markets that are recovering like North America, also suffering a little bit still from the temporary raw material pass-through timing effects. And so we believe whatever is negative for us there in the first half of the year, which clearly is, that should be a positive in the second half of the year for our company. We look at EBITDA, you can see negative, it's not as good as it was last year, the second quarter. But keep in mind North America was a lot better at that time and it's coming back; you can see positive, it's a percent better than in the first quarter.

Overall we believe this is a very decent number and a good base for us to build on for the next coming quarters and years. You look at the leverage, we have been able to reduce net debt and that's a very positive one for our company in the second quarter of 2026. Our long-term multiple on the EBITDA side is still not there where we need it to be, where we think it will be. We will get there, that's our belief. But overall our leverage was pretty stable compared to the first quarter of 2026 and our target will remain to get that leverage further down from the 2.52 where we were at the end of June.

We go to the next slide. We look at our revenue by product. It's a little bit still the same number as what you guys saw in prior presentations, where still our Components unit is lagging behind the past performance that it had from a percentage revenue within the company. We believe this will come back to prior numbers pretty quickly now. But you can still see in the first half, even in the second quarter, lagging a little bit behind the normal 22–23%, maybe even getting up to 24–25% that Components has in the total of Iochpe-Maxion.

That lagging behind has then been made up by Wheels, especially aluminum wheels, which were strong again and have been offsetting the revenue drop that we saw year over year in Components. You go to the next slide, we look at that a little bit more detail by customer, and even though the numbers are getting closer than what we saw in prior presentations where we saw truck going down and pass-car going up, still some truck being down this quarter versus last year quarter, but I would say not so much anymore.

We still see pass-car revenues, some of the big customers that we have, they are still increasing revenue this year, Q2 versus last year Q2. You look at a company like Stellantis or you look at Toyota, it's clear that we're gaining some momentum there. And so if you combine that with the truck coming back, which is what we see happening and what we also foresee for the next coming two years, that would be a good—that could be a good story. If you go to the next slide, we look a little bit more in the regions in the next four slides.

We look at South America. I would say it's a very different picture between LV and CV. In CV, the market clearly is down and, and so our numbers—it's not huge numbers for us if we compare to the rest of the world, but still this is not helpful. And so when the Brazilian market comes back and stabilizes, which is what we hope, what we believe will happen, that would be helpful for us. But we really have some momentum on the light-vehicle market, where the market is strong and we see momentum with customers, both traditional customers as well as new customers that are coming into the market.

We go to North America on the next slide. Our revenue is still slightly down, but it's coming back. That's what we say. And so this is a combination of our aluminum wheels doing very well in North America. We have some new business wins. We're doing good with margin there as well. But also we see this truck market clearly coming back—more in June than we had in April—but during the quarter we saw improvements there. And that is also our expectation for the rest of this year.

We go to the next region, EMEA. We see a contraction of our revenue. And so Europe, I think, is a more complicated story, especially from an LV point of view. Now the good thing is for Maxion, we are strong in Europe. We are a very competitive company. We have had some market share gains in the past and we're still profiting from that, but we cannot have market shares every quarter. But we're okay in our plants. But Europe is a little bit tougher environment from an LV point of view.

Truck also was not great. But here we continue to profit from our more recent market share gains. And we also believe that will be the case during the rest of the year and then in the out years 2027, 2028; let's see how the market develops. But there is a more positive tone that we hear in the market than what we have been hearing during the last two years. And so if that happens, when that happens, Maxion will be ready to fully profit from that increasing trend in the market.

We go to Asia on the next slide. Really this is a growth area for Maxion, and of course, as you know, the major region where we are within Asia for us is India, where we are making passenger-car steel wheels, passenger-car aluminum wheels, and truck wheels. And so what we see is the market is doing well and Maxion is actually doing a little bit better than the market. And again, I've been talking about it, we've been talking about it in the prior calls, and I look forward to talk about this not only on the next slides but also on some of the next calls because we believe this can really be a very good story for our operations in India and for our company overall. Let's go to next slide: gross profit. Gross margin, we talked about, it's down. But if you look at the first half of the year here now, we're very close to where we were last year. Keep in mind last year we had that North American truck market that was very significantly better overall in the first half than what it was this year. So keeping this margin close to where we were last year in the first half for us is a good outcome and, again, good basis for the rest of the year.

You look at the next slide, Talk about EBITDA, it's pretty much the same story. As I said in the beginning, we are lower in the second quarter than where we were last year, but we believe the 10.4% is a good outcome for us in this quarter. If you look at the first half of the year, similar story to what I said on the gross profit. We're very close to last year, with the expectation and the hope that the second half of the year for us will be better. Go to the next slide. Net income, not a bad story at all.

I think the number is still too low, but we're happy with the outcome of 87 million in the second quarter and the 90 million as a base for the first half going into the second half of the year. And so this is a good base for us to have a decent year from a net income point of view. Go to the next slide. Looking at our investments now, these are meaningfully lower than what we were doing in the first half of last year, but this is mainly timing. We have been trying to manage timing for investments over the whole year since we believe our earnings will be a little bit better in the second half of the year than the first half of the year.

We've also been trying to move our capital expenditures in line with that timing. And so we believe overall we will be in line with our yearly targets from a capital expenditures point of view, but with a managed timing between the first half of the year and the second half of the year. Okay, next slide. Leverage pretty stable, I would say, quarter over quarter. And again, we are decreasing our net debt and we are looking for the long-term multiple on the EBITDA side to pick up in the coming months, in the coming years, of course.

And that combination should drive our leverage down to be meaningfully lower than what we're looking at right now, step by step. We go to the next slide. We look at gross debt there. There is new news here. And so on the top right side you see how our maturity looked before we refinanced some of our liabilities, or a good part of our liabilities. We had some maturities in 2028 and the team was able to refinance those and to extend the maturity mainly until 2030.

And therefore, our average debt maturity, instead of being three years, now is about four years. And so that's a good thing for a company. Never easy, sometimes more difficult because of external factors, but overall we're happy to be able to have realized these new maturities from a financing point of view. And so I would say if you combine that with our liquidity, I would say this company certainly is in a stable position from a financial point of view.

We go to the next slide. Talk a little bit more, as I said in the beginning, besides all the financials, about some of the projects that we are doing. And we've been talking quite a bit over time about our investments in Mexico for structural components, the rails and the frames that we supply to our North American truck customers. On the top right there you see our new facility we call Plant 3. It's a new facility. Bottom right, you see some pictures of that facility.

But the most important point is that, and the good news is that we are starting to produce product in this plant. And so, of course, that's still testing right now, but we're getting ready to serve that North American market that is coming back from the very low numbers that we saw at the end of last year and the beginning of this year. We are getting ready to serve our customers in the second half of 2026 with volume from this plant. And so I think that's a major good news for our operation, for our company.

And so also if you look at the 2027 projections there, you look at the 2028 projections there, it's a very good thing to have the plant. We will need it, as we thought when we made the investment, and we're looking forward to make the best use of it from a supporting-our-customers-volume point of view, but also from a productivity point of view. Because, of course, the equipment that we put in here is state of the art, is the latest of the latest.

And so we look forward to a good situation for this operation that we have established in Mexico, Castaños. You go to the next slide. Staying with components but moving to Brazil. This is our beautiful Crazero location that you see in the middle, and you see some of our products on the left and on the right. But I think the main news here that we wanted to share is that we did win meaningful new business, very significant new business. And we're co-developing a product with a very big pickup customer that we serve, have been serving, and will be serving from Pro Zero.

And so this, again, it's a combination of sustaining the very profitable operation that we have in Pro Zero and combining that with further automation. So all of this will be executed—we're actually starting that already at the end of 2026—and we will run this throughout 2027, 2028, and it will be a very good thing to secure the short- and mid-term future of Cordero. We go to the next slide. Looking at the other side of the world, I will have two slides on India truck.

I could have more slides on India, but we have one for truck and one for passenger car aluminum wheels. This is part of our truck wheel plant that you see in the middle. And we have decided to expand our capacity in this plant to be serving already-sold additional volume. And so we are doing that right now. We will complete this somewhere in the middle of 2027. It's part of the CapEx that we all have in our budgets, in our forecast. And so it's a very good thing.

The business, the volume, is already sold and we're preparing to get ready to do that. These are projects that I talked about in prior calls where I said, instead of doing one big one, let's do 10 small ones. We're not going to do all the 10 small ones in one quarter, or not even in one year, but we are opening up the drawer and picking out the best projects, the projects that have the highest priority, and we are starting to execute on those. And so this one in India truck is a very good example of that.

If we go to the next slide, we look again at India. We look at our light-vehicle aluminum wheel facility in Quet City, Pune, Maharashtra. We are expanding the new plant. I still call it a new plant, but the new plant in the meantime is 10 years old. But this is the first expansion after filling up the existing capacity in the new plant that is 10 years old. And so it's a modest expansion. Again, this is in the range of the three-, four-, five-million-dollar projects that I talked about before, not 50 million or 100 million.

And it's to serve our customers. It's to produce wheels that have already been sold and that we will launch in the next one, one and a half years. So we will execute this in the remainder of 2026 and in the first half of 2027. And it's a very good project at the existing location in Pune, India. We go to the last one in this row. In South Africa, we have a beautiful plant over there, but there are a couple of things happening over there. We have one meaningful new business, and so we're launching, I think it's a total number of about 27 new wheels.

Some have very low volume, some have a little bit higher volume, but 27 new wheels over the next 18 months in South Africa, which is fantastic. And at the same time we're putting in place some new equipment. The capacity, the base capacity, is in place, so we're just filling up what we already have, but we're working a little bit on energy and more efficient energy. And so a new heat trim facility is being put in place that is already almost completed—so no additional CapEx; that was in our 2026 numbers. And on top of that, we're putting solar energy in place everywhere we can, in and around the location. And so about 25% of our energy will then come from solar energy, which is not only cheaper, better for the environment, but also makes us less dependable on other sources that sometimes have been a problem for us in South Africa. And with the additional volumes, we didn't want to have that anymore. And so taking care of this plant, and even though it's a small facility, it's a very good story that I wanted to share with you guys as one of those projects where we say these are more sized, these are more digestible, and we're making use of our existing facilities instead of building new facilities. We go to the next slide, trying to wrap it up. If I look at the 2026 second quarter, I think we talked enough about the global resilience and discipline—that was the case; it is the case. I think we've delivered another quarter; we've shown another quarter where we can say we were resilient. At the same time, resilience is nice, but we do want to have some growth.

Even if the LV market is showing no growth overall, and truck is showing some growth but of course it's not exploding, we think we're looking at a more favorable scenario going forward than what we have been looking at in the last one or two years. And so keep in mind, North America is coming back and we are very well positioned. I showed you the pictures of our new facility in Castaños there. But also wheels is well positioned there. In South America, LV is strong.

Truck should be stabilizing, right? And so I think in LV and truck, we take what we get, but in LV, in that strong market, we are having momentum with customers—good momentum with customers. In Europe, the market is more challenging, but the good thing for us is we are a very competitive company in Europe, and so we will manage our way through that, even in LV, which is more challenging than CV. And then Asia—Asia is growing. India is growing more than average in Asia, and Iochpe-Maxion in Asia is growing more than average in India.

And so, in the most important regions where we operate, I would say the glass is more than half full overall. Of course, we do that in order to deliver value. And I think by keeping our strong liquidity, keeping the cost discipline—which is definitely our target—generating cash, and lowering our debt, I think we have a plan to make sure that our company can thrive. And with that, I would like to open it up for questions and answers through Rodrigo.

Investor Relations (Operator)

So we are going to start with Q&A right now. We kindly ask you to ask your questions at once and wait for the answers from the company. We would like to ask you to send your questions with the Q&A button. You will have your names called, and then we will send you a request to open your microphone. Our first question is from Louisa Munsey from Safra. Louisa, if you will, go ahead.

Peter Klinker, CEO

Okay, Louisa, I will answer the first question and then Renato Saloon will take the second question. So, on the revenue in Europe, this can vary quarter by quarter depending on the mix. I would not be too hung up on one quarter. This has nothing to do with Volkswagen closing plants. And so one quarter you can be a little bit more lucky than another quarter, with more demand on a certain vehicle or for a certain customer than otherwise. But overall, I think, as I said, we are in a strong position in Europe.

Of course we can't change the market, but I think our position in that market, whatever it will be, is pretty strong. So I would look at that over a longer period of time instead of just one quarter. And as I said, on the commercial vehicle side, we're actually outperforming the market, and my expectation is that we will be able to continue to do that for some more time. Is that okay for the first question? Thank you.

Renato, CFO

Hello Louisa, good morning. Thank you for your question. Well, starting with the working capital, one of your questions, it's important to mention that since 2023 the company has been working the working capital ratio below 3%. Once again, we closed this quarter with a ratio around 2.4% in March if compared to June. I apologize for these words. But if you think about the average in the second quarter, we have 12 0.7% in the cash flow that's been accumulated from the first quarter.

We also see easily in our financial reports, especially in the cash flow, indirect cash flow, that our CapEx has consumed around 90 million, which is a significant and relevant improvement when we compare to previous quarters that we had the consumption of 3,403,43 million, and our cash consumption we keep 45 days. So again, we are still focusing on managing inventory as well as maintaining sustainable positions for our suppliers to preserve the CapEx and the cash flow.

I think that when we talk about cash flow and when we look back over how much has been generated in the operational activities in the company, we can truly see in the first semester 454 million compared to a consumption of 3 million reais in the same period last year. And also this improvement was supported by the capital flow and the consumption at the end of the day. I mean, it's about the inventory, having the lower purchase of inventory and good quality of our suppliers.

So we consider that helped the company regarding and keeping our leverage. Our leverage closes 2.52%, just like Peter mentioned. But of course if we can add the polymetal that ends up being consolidated from this moment within our financial reports, and if it weren't for this event, we would have the same leverage that we've had in the previous quarter regarding liability and management. That's an important point. In July we've had a very important activity in the assets, in the liabilities of the company, actually.

And then we have a loan in two currencies, the first in euros, 123 million euros to the cost of Euribor and to 55%. So in other words, in this moment, if we had like a simple conversion, we would have around 5.04% every year. And we closed $180 million to so far more than 275%. That is equivalent to 6.51. And also we had a debenture. We used to have a debenture, the 17th debenture of the company, 400 million reais, its CDI we had 160. And at the end of the day we end up using part of our own cash, apart from these lines that we had to bring to reinforce our cash flow.

And we have the total rescuing of our bond on July 24th. So to help you out with the projection, at the end of the day we are going to have, I would say, 73 million impact on financial expenses, and 41 million reais would be additional interest because we're coming out from a bond of 3.5 and having these two instruments. If we had, if we went to the market in the moment that we've done research, we saw something about like high aid. So we understand that the process that we decided to follow brings benefits to the company.

And as we close these bonds in these last years, we can accelerate indexation of the debt, the cost for capturing that bond. And especially when we talk about like this, there was a prize, a claim that was 0.62% that was paid on the ED. So we have this whole liability management that has been finished. Regarding cash flow, we don't have a significant impact this year because even though we can allow for the 6 million reais in our interest payment, we have the online financial results that we have 40 million reais in a cash flow.

So we've had an impact of 6 million reais, but negative in our cash flow, and for 2027, apart from what we used to have in the bond, that the maturity would be 28, we have an adding of 71 million reais if we consider the rates that we have up to now on a year basis. So even though we have more costs of the previous debt, the structure was more efficient, different from like a new emissions that we had available at that moment. And at the same time we reduce refinancing risk from the company, we enhance predictability on the maturity, and we see that the financial flexibility of the company will be kept.

So thank you for your question.

Peter Klinker, CEO

Thank you very much for the question. I will take that one. So unfortunately, on Chinese cars being imported in Brazil, we believe there's a very stable round number of percentage of wheels being produced in Brazil. On those cars, it's close to zero. And so right now we believe all these cars are being assembled with wheels coming from China. That picture we believe, and to a certain extent we know, will change very significantly when localization comes in.

And that localization will come in, may not come in this month or next month, but we believe this will happen next year. And so we are actually working on producing wheels for Chinese OEMs. So that's why I say we know it's happening. Can't give you more details there. I wish I could give you names and brands and numbers, but I'm not allowed to do that, so I won't do that. But I can tell you that our belief is that there's a big opportunity there to supply these wheels for the vehicles being produced in Brazil from our facilities.

Is that okay? You're welcome.

Investor Relations (Operator)

Our next question from Andresa Baruto from UBS. Andresa, go ahead.

Peter Klinker, CEO

Yeah, no problem, Andrea. So I will take all three of those questions. So the North American truck rebound, we clearly see it happening now. To what extent this will continue, at what rate, that's difficult to say at this stage, but we clearly see a very positive trend now, which wasn't too difficult after the disaster at the end of 2024, the beginning of 2025. But it comes back as strong as we were targeting, as strong as we were hoping. And so for our profitability, I would say that's a very positive sign.

Now, of course, when you start a new plant, like the one that I've been showing 15 minutes ago in one of my slides, you cannot run that plant immediately super efficient because you're starting it up with one shift one day and then one shift one week. And so there is a gradual ramp up of that plant, and so you will not see immediately the full extent of that good news in your profitability. But for sure profitability will be supported by this. This is already being supported during the course of the second quarter, and we expect that to continue in the second half of this year as well, even though we need to keep in mind we have that new operation that we're starting up from 0 to 10 to 20 and not from 0 to 80 or 90 immediately. Now, starting up to come to your second question on 2027, we expect and we count on that continuing and not to be only a pre-buy in 2026 and early 2027. We think there's more underlying reasons like the need for freight picking up and also the replacement cost of trucks becoming less than maybe the increasing maintenance cost of all the trucks that were bought during COVID when people got a lot of incentives.

And so there's more reasons for the North American truck market coming back. And that's what we are counting on, that's what we are prepared for, and that's what we also expect to be able to see back not only in our revenue but also in our profitability. So I hope that answers those two questions. From an antitrust proceedings point of view, I have no update for you guys. There's no new news after what we talked about in the last earnings call. That okay, thank you.

Investor Relations (Operator)

Our next question is from Fernanda Urbano from XP. Fernanda, go ahead.

Peter Klinker, CEO

Thank you, Fernanda. So taking your first question on Brazil LV, yes, it's a very positive situation, especially if you compare it with some other regions or Europe where we are sitting now here. And of course subsidy plays a role there not only in the LV but also on the CV. And we hope in the CV it stabilizes the market. I think on LV it's supporting more growth than what you would have otherwise. I do believe still that there is more room to grow for the Brazilian LV market.

Many OEMs have been investing big time, and not only the Chinese will invest big time, but many OEMs have been investing money in Brazil because they believe there's more potential in Brazil than what we have seen the last couple of years. And so I think it's a mixed bag, a positive mixed bag, where on the one hand subsidies help, but also I think just generally the market in Brazil can do a little bit better. Of course, Brazil for us as part of our LV portfolio is relatively small.

Truck is bigger because we have both components and wheels being big in there. Components has a share in LV, but is much bigger in CV in Brazil. But still it's an important market for us, it's nice to have, and we believe that this momentum that we see right now will remain there for the near future. And so we're positive about it. And on top of that, we are positive that once the wheels are not being imported on cars, on CKDs from China, we can participate in that growth in the Brazilian market even better from Brazil.

So that's all good. I see that positive, even though I agree with you, part of that is related to subsidies. On the profitability, I think North America, we've been talking about it so much over the last three, four honest calls because there was a big drop, a big headache for our North American operations, mainly components. But I use the word was because we truly believe that we are out of the woods now. How far will this continue to go upwards?

Let's see. But we are clearly away from the very dramatic numbers that we saw at the end of last year, beginning of this year in that region. And so that's one growth factor in profitability. We talked about some of the other regions, so I don't want to repeat that, but for sure, Asia is something that will drive not only growth, but also profitability. And then I think, as you said, the metal story, yes, overall that should be a positive for us in the second half compared to the first half.

Part of that is already happening in the second quarter more than what you saw in the first quarter. But still, we believe there are some more good news for us in the third quarter, in the second half of the year compared to what we started seeing in the second quarter. But if you look at the overall second half of the year, yes, that should be a positive for us compared to what we have been going through in the first half of the year. Fair enough.

Thank you.

Investor Relations (Operator)

Our next question is from Gabrielle Jesenji from Itaú BBA. Gabriel, you can open your mic.

Gabriel Jesenji, Analyst at Itaú BBA

Thank you, Rodrigo.

Peter Klinker, CEO

Hi Gabriel, thank you for the, the questions. So on, on, on the second question. Let me start with this, with that, with that one. We continue to want to look in a very disciplined way on our capital expenditures. And so even though of course, we will have CAPEX to be spent both in our current operations as well as in tooling and projects, productivity projects, etc. We do not foresee right now a very big capital expenditure in a new operation. So nothing like the investment that we did in Castanas or that we did in CVA.

But of course we will look, especially when our leverage improves, you know, what are the best next priorities for the company. In the meanwhile, I think we have enough of those smaller projects still in the drawer, even after what I presented in this conference call, to make sure that we continue to grow steadily, that we can produce the wheels and the components that we try to win, and we are winning in the market, but in a disciplined way, I would say.

And so I think from a percentage of EBITDA, we have those kind of KPIs in place, you will not see something very, very different from us than what you've been seeing. We've been talking about the last two years. Can you repeat the first question, please? I wrote it down, but I can't read my own handwriting. Yeah, yeah, yeah. Right now I can read my own handwriting again. I remember what you said. So I talked about the market, right? If, if you only depend on the global market on LV, right there, there is no growth on the CV, there's gross.

So on the CV, we are gaining market share in a growing market. And so there, I think it's a matter of being prepared for the growth. And so I think on the, on the CV side, from a components point of view, this castaneous thing, and also some of the investment that we have in making, and we're making small and smaller investments in Brazilian components, it will take care of us being able to serve the market and to, you know, be acting at or better than the market is providing for us.

On the, on, on, on the wheel side, I would say we will try to continue to gain more than what the market is showing us. And so in 2026, we will grow our volumes over 2025. I don't know exactly what will happen over the next five months, but unless something very strange happens, we will have more volume in 2026 in LV and wheels than what we had in 2025. So if that is the case and the market is like 1.8%, 2% down, right, it means that, that you have been gaining share.

First of all, we don't want to lose that share. And second, you know, based on our portfolio, based on our global leverage, based on our innovations that we are bringing to the market. I think we have a fair chance to continue to outperform the market. I'm not saying when the market is zero, we will do plus 10%, but I think if the market does zero, we want to have two or three. And if the market does minus two, we want to have at least stability, right?

That, that is a little bit our target. And so for that, we don't need to do a huge investment. For that, we can do small investments or make sure that we produce more efficiently and therefore generate a little bit more capacity to continue to serve these additional volumes, additional tonnages that the market could require from us. Now, that being said, if there is a major opportunity in a region and we feel it's the right thing to do for the company, we will look at that.

I don't think we're talking about that in the very near future. 2026, 2027. Does that answer your question? You're welcome.

Investor Relations (Operator)

Our next question is from Marcelo Mota from Deep Morgan. Marcelo, you can open your mic and ask your question.

Peter Klinker, CEO

Hi, Marcelo, thank you for the, the questions. I will start with the, the. The second one. And so, yes, Europe is in a more difficult spot when it comes to, to industry, automotive industry, and there's a lot of debate, a lot of press about, about that. I don't think it's a disaster, by the way, now people restructuring and people trying to speed up with keeping their competitiveness or improving their competitiveness compared to new competitors.

I think, you know, it's not the first time we see that, but I think Europe is clearly in a bit different spot, more tougher spot than some of the other regions that we're looking at. Even though I believe even if you look in five years, it will not be a disaster. But I can also tell you that in the past, a little bit long ago, I'm not talking last quarter or last year, a little bit longer ago, our company already has been reacting to this future.

And so we have been restructuring plants, we have been closing plants and we have been moving equipment, right? And so I remember a time, starting with this company, we had three plants in Italy. Now, Italy is beautiful if it's not too hot like right now. But three plants may be too much, right? And so we closed two plants and we moved. We move one, we create, we build one new plant to, to Turkey based on the equipment of those two plants that we closed in in Italy, and then we build another one in Turkey in order to make sure that we are competitive in Europe.

So what I'm trying to say is that this company has done already a lot of homework to be ready for a future that we're seeing happening right now. Now, do we have to do more if things really go south? Yes, we can and yes we would. I believe right now we are in a competitive position. But of course, you know, depending on how things go, you ask about five years from now, that's nowadays in even a longer time than it was 10 years ago. But if you look over the next five years, I think we're okay.

But if we need to do more, we can and, and we will. And especially when you talk about aluminum wheel plant, which we have much more in Europe than. Than steel will. You know, equipment of those kind of plants is, is much easier to move around the world there, where you need it than it is for, for steel wheels. And in steel wheels you have Pascal and you have truck. I believe in truck, you know, which is a significant part of our wheel production in Europe.

We will, we will rather see good years coming at us. I'm not sure if everything that Standard and poor is projecting right now is really going to happen in 2027, 2028, 2029. But even I say to the team, even if half of that happens, we're in a good position and we're prepared for it. So aluminum and Pascal Steel. I think we've done our homework to cope with what's going on in Europe right now. If we need to do more, I think it would be on the aluminum side and we will and we can.

On the truck side, I feel we're okay. Is that answering your question on Europe? Thank you. Then I pass on to Renata Saloon for your first question on the. On the capex.

Renato, CFO

Hello, thank you for your question. So regarding the capex, if we had like a lower capex in the quarter, it's a matter of like calendar, putting everything in the, in the schedule. We are thinking about a capex going along with what invested last year. Just to remember that we invested 520 million. And from this I would say that 50 of these 520 is about maintenance. Of course, within maintenance we always have a meta level like sensory robotization that ends up at the end of the day improves productivity of each of our plants and the remaining of that capex.

I would say capex for investment. And they are more focused on the 33 plants that we have. If we allocate 5 to 7 million, we have this, the rest of this 550 million and what Peter and I have approved for Capex are those investments in which the return payable will be lower in two years. So that's the discipline that we follow. This is what we have as our expectations for the rest of the year. I hope I have answered your question. Yes. Yes it did.

Thank you.

Investor Relations (Operator)

Thank you. So we are going to finish our Q and A due to time constraint and I would like to call Mr. Peter Clinkers for the final remarks.

Peter Klinker, CEO

Okay. Thank you very much all of you for listening to us and for supporting us. Let me finish by saying this. I think if you look at the world, what you read is a lot more dynamics, let me call it positively dynamics in the world. And what we maybe would have thought, would have, would have hoped for. Some things are good, but many things, you know, are not so good. I think, you know, keeping that in mind, the way this company, this team is being able to manage through is what we need to do, what we target to do. And I'm happy to say that, you know, I believe that is, that is what we're doing. And so let's hope the world will become a little bit more stable. We can always hope for that. And if that happens, that would be fantastic in many ways.

But even if it doesn't, I think this company will be able to show solid numbers and shareholder value going forward. So thank you very much again and bye bye.

Investor Relations (Operator)

Our video conference for results 252026 is now closed. Our department is at your disposal to answer any other questions. Thank you all participants and have a great day. Thank you.

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