WEG S.A. (WEGE3.SA), a global player in the electric engineering, power, and automation technology sectors, announced its first-quarter results for 2024, showcasing a 4.4% increase in net revenue compared to the same period last year. The company's EBITDA rose by 4.8%, reaching R$1.8 billion, with an EBITDA margin expansion to 22%.
Return on Invested Capital (ROIC) notably increased to 38.9%. WEG's investments totaled R$351 million, focusing on both Brazilian and international markets. The company remains optimistic about its operational dynamics and the electric infrastructure sector, despite the cautious stance on the global macroeconomic landscape and certain short-cycle equipment demand challenges.
Key Takeaways
- WEG's net revenue grew by 4.4% year-over-year in Q1 2024.
- EBITDA increased by 4.8% to R$1.8 billion, with a slight margin expansion.
- ROIC saw a significant rise to 38.9%.
- Total investments reached R$351 million, with a new plant announced in Mexico.
- The company expects stable raw material costs and favorable conditions in the electric infrastructure sector but is cautious about the global economic scenario.
- WEG is integrating the acquisition of Rexnord (NYSE:ZWS)'s industrial electric motors and generators business.
- Management discussed the positive impact of including power storage systems in auctions and the company's participation in the Movair program.
- The T&D backlog in Brazil, the US, and other markets is expected to support continued growth.
- Copper price fluctuations are managed through hedging strategies.
- The acquisition of Regal is anticipated to increase margins through supply chain integration.
- WEG is expanding its EV charging station business, with significant growth noted in Brazil.
Company Outlook
- WEG plans to invest BRL 1.2 billion to expand transmission and distribution capacity in Brazil.
- New plants are underway in Mexico and Colombia to bolster international presence.
- The company is monitoring copper prices and may adjust strategies accordingly.
- WEG is optimistic about the EV market's future, with plans to expand its charging station business to North America and other regions.
Bearish Highlights
- Management expressed caution regarding the short-term challenges in demand for short-cycle equipment.
- A slight decrease in revenue was attributed to volume rather than price effects.
- The global macroeconomic environment remains a concern for the company.
Bullish Highlights
- WEG reported a strong order portfolio, particularly in North America, and a healthy operational dynamic.
- The company's consolidated margin has proven resilient, expected to continue performing well.
- Investments in foreign markets have been increasingly relevant, with a focus on capacity demands and new business ventures.
Misses
- There was no significant mention of misses in the provided context.
Q&A Highlights
- Executives discussed the potential benefits of the Movair program and the company's role as a provider of power storage systems.
- The T&D backlog in various markets was highlighted as a positive aspect for sustained growth.
- The impact of recent copper price increases was deemed manageable with current hedging strategies.
- The integration process of Regal's acquisition is expected to yield increased margins and synergies, with idle capacity projected to decrease from 50%.
In conclusion, WEG's first-quarter earnings call painted a picture of a company experiencing steady growth, making strategic investments, and positioning itself for future opportunities, particularly in the electric vehicle and power storage markets. The company's cautious yet optimistic approach, amid a complex global economic landscape, underscores its commitment to long-term sustainable growth.
InvestingPro Insights
WEG S.A. (WEGZY), a leader in the electrical engineering and automation sectors, has demonstrated resilience in its first-quarter performance for 2024. To further understand the company's financial health and market position, we can look at some key metrics and InvestingPro Tips.
InvestingPro Data shows WEGZY's market capitalization stands at a robust 31.99 billion USD, reflecting the company's significant presence in the industry. The P/E ratio, a measure of a company's current share price relative to its per-share earnings, is 28.18, which is relatively moderate, suggesting that the stock may be reasonably valued when considering its near-term earnings growth. Moreover, the company's revenue growth over the last twelve months is reported at 6.72%, indicating a steady increase in sales, which aligns with the revenue growth mentioned in the article.
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Full transcript - WEG ADR (WEGZY) Q1 2024:
Operator: Good morning, and welcome to WEG's Conference Call to Announce the Results of the First Quarter of 2024. We are streaming this conference call and after that, after it's finished the audio will be available. During the company's presentation, all participants will be in listen-only mode. And then we are going to start the question-and-answer session [Operator Instructions] If you have more than one question, please ask all of them at once. If we do not have enough time to answer all questions during the live streaming. Please feel free to send your questions to our e-mail, ri@weg.net. And we are going to answers the questions, after the conference call. And any statements made during this conference call about future events, business prospects, operational and financial projections and goals and the future potential of growth of WEG, they are mere beliefs and assumptions of WEG's management, and they are based 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 the general economic conditions, industry conditions and other operational factors may affect the future performance of WEG, and may lead to results that will be materially different from those expressed in such forward-looking statements. Today with us in Jaragua do Sul are Andre Luis Rodrigues, Superintendent and Financial Administrative Director; and then Menegueti Salgueiro, IRO; Wilson Watzko, Controller; and Felipe Scopel Hoffmann, Investor Relations Manager. Please, Mr. Andre Rodrigues, the floor is yours.
Andre Luis Rodrigues: Good morning, everyone. It's a pleasure to be with you once again for the conference call to announce the results of - I start with the highlights of the quarter on Slide 3, where the net revenue grew 4.4%, as compared to the first quarter of 2023. In Brazil, we had a good performance with a highlight of long cycle equipment in the areas of transmission, distribution of wind energy. In the international market, we have good demand in the areas of generation, transmission and distribution and with good opportunities in North America and generation businesses with a robust order portfolio that we built along the last portfolio. EBITDA has reached R$1.8 billion, with a 4.8% growth as compared to the first quarter of 2023. The EBITDA margin ended the quarter at 22%, a growth of 0.1 percentage points, as compared to the same period last year. Along the presentation, Andre Salgueiro is going to give you more details about these points. ROIC continue to evolve, with 38.9%, an increase of 7.5 percentage points, as compared to the first quarter of 2023. And you can see more details on the next slide, where the improvement in our operating performance with revenues and margins more than offset our higher need of working capital and more investments in fixed assets. One important point to be emphasized is the ROIC had the positive impact of tax incentives that, were booked in the fourth quarter of 2022. So taking out this nonrecurring effect, ROIC would have been 35.8%. Now I give the floor to Andre Salgueiro to continue.
Andre Menegueti Salgueiro: Thank you, Andre. Good morning, everyone. On Slide 5, you can see the evolution of our business revenues. In Brazil, industrial performance had a good performance, with demand for short-cycle products. We continue with good performance in long cycle products, especially medium voltage electric engines, with a highlight oil and gas and mining industries. In GTD, we had another quarter of good results, driven by deliveries of large-sized transformers and substations, two projects related to transmission auctions and distribution networks and a highlight to the wind generation and distributed solar energy despite the good growth in the volume of sold. We had the same performance as last year, influenced especially by the reduction in solar panels prices, which impact the prices of products sold. In terms of Commercial and Appliance Motors, we had a good demand in many segments with a strong growth, with a highlight to air conditioning and pumps for residential use. In coatings and varnishes, we had stable demand, pulverized in different segments of operation with a highlight of oil and gas and maintenance. In the external market, internationally, we had a drop in short-cycle products especially low-voltage industrial engines. In addition to the FX rate, lower demand in China and in some countries in Europe, a reduction of inventory and important customers have contributed for the results of the quarter. For long cycle products, we had good results in high-voltage engines and automation systems, especially in the segments of Oil and Gas, or Water and Sanitation. In GTD, we continue with a very warmed market, especially with transformers for renewable energy complexes and reinforcing the electric grid in the United States. In Commercial and Appliance Motors, demand dropped in the same markets where we operate, especially as compared to the lower inventory replacement of our customers in the United States. In Paints and Varnishes, we saw a growth in revenue with good results of our operations in Mexico. On Slide 6, you can see the evolution of the EBITDA with a growth of 4.8%. EBITDA margin ended the quarter, 22% practically stable as compared to the excellent level that, we had in the same period in the previous year. This is a consequence of cost of raw materials, combined with a mix of products sold. Finally, on Slide number 7, you can see the evolution of our investments. We had invested R$351 million this quarter, 64% in Brazil and 36% internationally. In Brazil, we advanced with the expansion of industrial engine plants and electrical engines and internationally, we increase our production capacity with our plants in Mexico and the expansion of our low-voltage engines in China. And now I end my part, and I give the floor back to Andre.
Andre Luis Rodrigues: Thank you very much, Andre Salgueiro. On Slide 8, before we move to the Q&A session, I would like to talk about some of our most recent accomplishments and the outlook for the rest of the year. As to our recent achievements, I would like to highlight that in March, we announced an investment of BRL100 million in a new plant in Mexico for industrial coatings, to increase our manufacturing capacity and meet the demand in the market in Central America. We finalized the acquisition of industrial electric motors and generators business from Rexnord. On May 1, we started the transition and consolidation of our new businesses. Finally, I would like to talk a little bit about the outlook for the rest of the year. We continue with a healthy operational dynamics, with a good mix of products sold and stability in the cost of the main raw materials. This should continue supporting good operational margins and a positive return on capital for the rest of the year. We should continue to benefit from structurally favorable conditions, especially those related to electric infrastructure such as T&D businesses. On the other hand, we are still paying attention to the global macroeconomic scenario, and the possible risks and volatility of our operations, especially with regards to the demand of equipment of short cycle, despite the consolidation of industrial electric motors and generators of Regal Rexnord in May that contributed for higher revenue. This also means that we have some short-term challenges, especially operationally. Our action plan was very well structured, and the transition team is already working, for the gradual improvement of the profitability of our operations in the future periods. Now I end my presentation. Operator, we may move to the Q&A session, please.
Operator: [Operator Instructions] So let's go to our first question from Lucas Marquiori from BTG. Lucas, we are going to open your audio for you to ask your question. Please Lucas, you may ask your question.
Lucas Marquiori: Thank you. Good morning, everyone. I have two questions. On the integration of Regal, for us to understand the process here, if you could update the information of the closing, what is the revenue of all the assets that you're buying, margin and utilization level? So that we can gauge the integration for us to update how much is going to come in, in terms of Q2? And my second question, I think that it is the second question, why CapEx is different in Brazil and internationally? I think that this is related to the use of utilization capacity domestically, which is much higher than internationally. I could ask what about this mix that used to be on the same basis both in Brazil and overseas? But I think here, there is capital allocation exercise. But could you explain this trend that we have seen in the last two quarters?
Andre Luis Rodrigues: Lucas, thank you for your question. This is Andre Rodrigues. First, let's talk about the merger. Well, we do not yet have all the numbers of Regal Rexnord - and the manufacture industrial system, and this is the entire scope of our acquisition. But what we have are the numbers for 2023, where this division had an operating revenue of R$500 million, EBITDA R$39 million and adjusted margin of 7.5%. So where are we in the process? So this is very recent, on Tuesday, we announced it. So we took over the company two days ago on May 1. And between the closing and our objective was to have a good preparation of the entire preparation process of the company. Obviously, the teams are not yet too involved, but we could structure our integration teams. So, we created a formal committee for the transition with many of the executive officers of our company and the meetings are overseen by the Executive Committee, and also by the Board of Directors. I think that at first WEG's concern was focusing on new employees. So after May 1, we received 2,800 new employees. So to have a good communication process, reassure employees. We acquired the company to promote continued and sustainable growth and also, obviously, to have very precise and clear information with our customers. So this was the focus from now on. The teams will go to the field to start the integration process that will take a few years as we indicated until we reap all the benefits that we are expecting for the future. When we talk about CapEx, undoubtedly, in the first quarter, we had a concentration, especially in Brazil with 64% in Brazil, and this was relative to investments, increasing capacity, process improvements, productivity improvements. As we announced, we have a new industrial engine factory that is almost ready in Jaragua do Sul, investments and a new battery factory. But you should remember that there may be an oscillation between quarters, so there be more concentrated on the first quarter. Just as a reminder, for the full year, our CapEx is expected to be BRL1.9 billion and 55% in Brazil and the rest in the international market. So this may vary a little bit. But as a reminder, recent years investments in foreign markets became much more relevant but sometimes we need to concentrate depending on capacity demands, new businesses and to allocate the CapEx. So, this is the main design of everything that happened in the first quarter.
Lucas Marquiori: Thank you very much. Thank you, Andre.
Andre Luis Rodrigues: Thank you, Lucas, for your question.
Operator: Our next question comes from Lucas Laghi, sell-side analyst of XP (NASDAQ:XP). Lucas, we're going to open your microphone for you to ask your question, please.
Lucas Laghi: Good morning, everyone. Good morning. Andre, Salgueiro, Felipe. There are two things that I would like to ask you. Number one, in the segment of external or foreign markets looking year-on-year and considering FX. With what you can see today in terms of backlog and new orders, is it possible to think of a reversal for the growth of this market, which is quite significant, thinking in terms of revenue? And then thinking in terms of the short cycle? So external markets are weaker in China and Europe and also in the United States, which must be one of the most important when we look at the integration of Regal. And now a more specific question about taxes. We saw a rate that is not too difference between the first and second quarter last year, and this is related to the transfer price. So we effectively see a benefit of transfer price in this quarter. But in terms of tax benefits, it compensated. So what can we think about the future, about the combination of these factors that reduce the rate? And these are the two main points? Thank you so much.
Andre Menegueti Salgueiro: Hi Lucas. Thank you so much. This is Salgueiro. So starting with the electro-electronic and industrial equipment in the international market. We saw a slightly weaker demand this quarter. So here, we have the short cycle and long cycle and outside Brazil. And on the whole equipment, there is a higher predominance of short cycle. And this is important, because here, this is where we see some demand oscillation. So, we tried to qualify the main geographies that are impacting, especially China, which is something that has been going on since last year and more recently, an oscillation on demand, especially in some countries in Europe. What I can say about the U.S. that you asked your question, we started seeing some oscillation that is not so significant, as we see in China in some countries in Europe. But on the whole, this is kind of a global movement. So part of this, this is an adjustment of the industry as a whole. And also the adjustment - in inventory of some significant customers, after the normalization of our global supply chain. There was very strong demand, after the first impact of the pandemic. And then, this lasted for quite some time, and now we are seeing the industry as a whole. And the chain as a whole, going back to normal, and this inventory effect coming. Looking into the future, it's a little bit more difficult considering that our portfolio is not too long, considering the product features, because it's a shorter cycle. But we have a visibility, and we expect this inventory adjustment to take place and to be normalized. And then we can see an improvement, when we look into the horizon for upcoming quarters. As to your second question, the rate, you said correctly that when we see the impact of foreign operations, they contribute to - they have a smaller share this quarter. And we are seeing an adjustment in a transfer price - in transfer prices rules, but other lines are flat. So we have some benefits in Brazil, especially if we look at the performance of commercial and appliances, and home appliances and most of the incentives are concentrated in Brazil, both in Linares and Manaus. So this contributed to this movement. And in the end, we had a rate that was more or less at similar - at levels that are similar to previous quarters for different reasons. So looking into the future, we expect this rate to go up a little bit especially, because of the changes in transfer prices.
Lucas Laghi: Great. Thank you.
Andre Menegueti Salgueiro: Thank you so much, Lucas, for your question.
Operator: Our next question comes from Gabriel Rezende from Itau BBA. Gabriel, we are going to open your microphone for you to ask your question, please. You may go on.
Gabriel Rezende: Good morning. Thank you, everybody, for the space. I would like to talk with you, the dynamics that we saw in the first quarter and maybe what we expected was a scenario of accommodations during the quarter, and we had a positive surprise in Q4 and another positive surprise in your performance. So you've talked about the mix and the dynamics with raw materials. And if possible, could you give us some more detail, on how you see the dynamics of margins, profitability and EBITDA for the rest of the year? So which are these factors that are non-recurring, and how much can it change along the future quarters? And what could hold your margins at levels that would be higher than we had imagined before? Thank you so much.
Andre Luis Rodrigues: Hi, Gabriel. So, I think that some point you have already mentioned. We have said that this time of stability of costs, and most of the raw materials have contributed the product mix, with different margins. It's always good to remember that, we are through a positive time for the demand for long cycles with better margins along the years. And the company has always invested in cost reduction programs, process improvements, both industrial and administrative. And this has also contributed for better margins overseas. So in analyzing what happened so far, when we look into the future, I think that we can comment that the consolidated margin has proven to be more resilient, especially, because of the good performance in the long cycle. And in this scenario, I think that we have no expectations of significant changes. And we should continue with a better performance along last year, the recent historical average. It's good to remember that the consolidation of businesses in Regal, starting in May will have a negative impact for short-term margins. But as we said before, and we have mentioned it. The impact is not so significant, but it goes down a little bit. So, we always say that oscillations in margins are common in our industry. But our objective is, to always deliver margins that are above the market. So, I think that a point here, and the good news is that the consolidated margin, has proven to be more resilient. And in the current scenario, we are not seeing too many relevant changes.
Gabriel Rezende: Great, Andre. Thank you so much. So as a follow-up, and I would like to hear from you how you've been seeing it for the different segments? I asked this especially, because we've heard from global competitors of WEG that the price dynamics is healthy. And companies have been working to improve the strategies, seeking to preserve margins, especially after the inflation that we've been seeing after - in these recent years in Europe. Could you give us more details about the price dynamics?
Andre Luis Rodrigues: Well, Gabriel, we are kind of confirming what we've been seeing in the market. So, we are not seeing any pressure so far.
Gabriel Rezende: Great. Thank you so much.
Andre Luis Rodrigues: Thank you, Gabriel, for your question.
Operator: Our next question comes from [Felipe Lonza] from Citibank. Felipe, we are going to open your microphone for you to ask your question. Please Felipe.
Unidentified Analyst: Good morning everyone. And I have two questions. The first question is about the possibility of including power storage system in batteries. The use has been going up and prices have been going down. So you could give us some more color how much including batteries in the auction. And how relevant this would be to WEG and the performance for the rest of the year? Is regarding the [Movair] program, WEG was allowed to take part in this program. So with investments in T&D, which can be very relevant for your company. So could you give us a little bit more color and the percentage of your reported caps that, would be able to create this financial credit. And how much credit you would be expecting for the whole year?
Andre Menegueti Salgueiro: Hi Felipe, good morning. Thank you for your question. This is Salgueiro. As to power storage in the auction we are debating is, we are monitoring it close up. And this can be positive for the development of the market, and also for demand for this type of equipment in Brazil. So WEG has already positioned as a provider of power storage systems. We've done that a while ago, also because we bought an American company a few years ago, we already have this company. In terms of power storage, we are producing batteries for electric buses. And so, we've been investing. But in practice, what happens is that especially in power storage. We are not seeing a structured demand in Brazil. So what we are seeing now are some T&D projects, very one-off, stand-alone opportunities. And once this goes into the auction, this could be the beginning of a more structural demand. And this can be positive for the development of the market as a whole.
Andre Luis Rodrigues: Hi Felipe, this is Andre Rodrigues. About the Movair program, we see this positively. Undoubtedly, this is a way to foster the growth of technologies related to mobility in Brazil. So this movement is likely to be beneficial for WEG as we continue to develop solutions that are related to powertrains, and battery packs and all of this is directed related to this program. And we also have a significant presence in recharge stations, and we have all the infrastructure necessary for the generation, distribution of energy. Based on information that we have so far, it's small. The most important for us are the financing and incentives.
Andre Luis Rodrigues: Thank you, Felipe.
Operator: Our next question comes from Victor Mizusaki from Bradesco BBI. Victor, we are going to open your microphone, you may ask your question, Victor.
Victor Mizusaki: Good morning. Congratulations on your results. I have two questions. The first, could you talk a little bit about the backlog - the T&D backlog in Brazil and U.S.? And the second one is about cost. In the last 30 days, we saw a spike in copper prices. How do you see this scenario in copper? Thank you.
Andre Menegueti Salgueiro: Hi, Victor. Good morning. This is Salgueiro. Thank you for your questions. As to T&D backlog, we've been reporting for a few years, and maybe this is the business segment where we have the longest backlog right now. So both here in Brazil and especially, because of all the projects that are taking place. In relation to transmission auctions, not just that, we have all the investments of distribution power distribution companies, and all investments in the generation of renewable energy. So, we have a quite positive portfolio for this year, and also for next year. Now when we look at the international markets, we talk a lot about Mexico and U.S. And those are the most significant operations for us, with a quite healthy portfolio. And this year in building our portfolio for next year, sometimes with even longer cycles, which can be positive. But I think that you should remember that it's not just U.S. and Mexico. In South Africa, we also have T&D operations. So, we see a favorable market demand, because of electrification, investments in renewable energy. And what makes it clear, is an investment that we announced at the end of last year, BRL1.2 billion to increase T&D capacity both here in Brazil, expanding our factory in Beijing, Minas Gerais and also in Itajuba. And also in Mexico with a new plant in our new plot of land in Mexico and also a new factory in Colombia. This is the visibility that we have and the prospects that it will continue to grow along next year. As to copper, if we look back, we did not see such a significant impact, but it's fair to say, especially in the last few weeks, we started to see an increase that slightly more significant. So we need to monitor this always in times of copper, we see a hedge, and we project the consumption for up to 12 months. And then we do the proportional hedge for three to four months and in trying to have a protection curve to make all these short-term oscillations more smooth. But we need to monitor this, and we need to see the strength and maybe looking into the future, we should think of something else. It might be just a market movement. So at first, without any major impacts, I think that hedge helps a little bit and along the next few weeks or months, we should try and define and see if we need to change anything in our strategy, but for the time being no major impacts for the company.
Victor Mizusaki: Thank you.
Andre Menegueti Salgueiro: Thank you, Victor, for your question.
Operator: Our next question comes from Marcelo Motta from JPMorgan. Marcelo, we are going to open your microphone for you to ask your question. Thank you. You may continue.
Marcelo Motta: Thank you. Good morning everyone. I have two questions. Just going back to Regal. Just to confirm if to you the idle capacity was still at 50%? As you said, at the time of acquisition. And to think of low-hanging fruits, what are they in terms of margin? So once you can plug it into your structure, in terms of supply chain and verticalization, there could be a significant increase in margin in the short-term. So these two points, if you could share some more information about Regal with us?
Andre Luis Rodrigues: Hi Marcelo, this is Andre Rodrigues. Well, the information that we have so far, yes, we have a 50% utilization capacity. So this is positive and we'll continue to grow outside Brazil without any major capacity constraints. As to all the gains and synergies that this is going to provide, we know the level of verticalization. We know if each unit is here. We know that we have many opportunities. The first will always be the acquisition of raw materials. How much we can buy more steel, copper and a wider scale. But after this, we need to take the process of WEG's verticalization. Maybe the first step, which might be the simplest. We have capacity available in Mexico is that we can manufacture engine carcasses in Regal. The other processes will invest and will depend on some investments of WEG in the tools to produce Regal parts. So WEG has one question, which is our manufacturing growth with the level of technology, which is along this integration process as it develops. Our objective is to bring the operational margins closer, to what we operate our factories in China, is very much likely to be to what we have in other places. Just as Monterey, close to the margins that we have in other nearby locations. So, we want to bring each unit's margins closer to the closest WEG plant.
Marcelo Motta: Thank you so much.
Andre Luis Rodrigues: Thank you, Marcelo, for your question.
Operator: Our next question comes from Gabriel Fraser from the Bank of America. Gabriel, we're going to open your microphone for you to ask your question. Please Gabriel, you may ask your question.
Gabriel Fraser: Good morning. Thank you for the opportunity I also have a question. So can you tell us the revenue shrinking this quarter? Is it due to a drop in volume, or is there a drop in prices, too?
Andre Luis Rodrigues: Hi, Gabriel. Good morning. Well, actually, the price effect was small. It's more an effect of volume, especially because of the dynamics that I have just explained. So there is a normalization of the supply chain and inventory adjustment. And also activity in industrial, investments similar to what happened in recent years in the main geographies?
Gabriel Fraser: Thank you. It's very clear. Thank you so much.
Andre Luis Rodrigues: Thank you for your question, Gabriel.
Operator: Our next question comes from Alejandro Demichelis from Jefferies. Alejandro, we are going to open your audio for you to ask your question. Please Alejandro, you may ask your question.
Alejandro Demichelis: Good morning. Thank you. I am going to ask the question in English. [indiscernible].
Andre Menegueti Salgueiro: Hello, Alejandro. Good morning, I'm going to answer in Portuguese so that we keep the program. As to copper hedge, so we have it structured for all operations in the world. But for the operations that we have now, they are not yet within this process. And now we are going to start the integration and we have started already that we are going to look into those operations, and we are going to bring this volume projection of those operations into our hedging methodology for each one of the locations. And so, it's in our pipeline to solve this. So we will look at this from now on.
Andre Luis Rodrigues: Alejandro, this is Andre Rodrigues. As to the working capital, along the recent quarters, we have improved our inventory turnover. So we had a normalization of the supply chain. And in the first quarter, if we take consolidated 4.5%, 4.4%, it's a substantial improvement as compared to what we had in previous quarters. The integration is going to reduce this turnover, which was not fully integrated or verticalized. It also suffered greatly with the pandemic, and we have work to improve the turnover. But I don't see this as a reduction. So, we are not expecting any major changes going - looking into the future. Also, because with a very positive long cycle dynamics. So all these operational working capital indicators have improved greatly recently. Thank you, Alejandro, for your question
Operator: Our next question comes from Lucas Esteves from Santander (BME:SAN). Lucas, we are going to open your audio for you to ask your question.
Unidentified Analyst: Good morning, Rodriguez. This is Felipe. Thank you very much for the opportunity to ask the question. Going back to what you said about electrification and all the opportunities on the segment. If you could update us on the evolution of market potential with the recharging of electric vehicles. Also in the U.S. but as you said, South Africa, Mexico, could you share more with us about that?
Andre Menegueti Salgueiro: Thank you for the question. This is Salgueiro. As to the rate charging of cars. And so, we have the third generation of charging stations. We've changed the product portfolio and this is growing at a fast pace. It's still small business as part as a share of our total revenues, but it's been growing a lot, especially here in Brazil. We have announced many partnerships, with many OEMs here in Brazil. We also announced partnerships with OEMs in other country. So it's not just here in the Brazilian market. In Brazil, we are more advanced, because of our presence, recall of brand. This evolved more, fast but we have the intention of having this in other geographies. This has started slightly more relevantly in other markets in South America, but we also want to develop this market in other geographies. Especially in North America, and maybe even other regions in the near future. Just to consolidate the knowledge, the product that you develop for charging stations, it is prepared and thought to have access to international markets, especially U.S. and EU right or not. Everything that is collected to the electric grid, depends on certifications that depends very much on local standards. So whenever we travel around the world, even the plugs - the plug outlet to charge a cell phone is different in each country. So, there are a few unique features depending on the geography, depending on the product, but they are related to the features of each market and the certifications, the equipment and its health and the constitution of the equipment doesn't change so much, from one geography to the other. Thank you, Lucas for your question.
Operator: And now our next question comes from Victor Antonio from Legacy Capital. Victor, we are going to open your audio for you to ask a question. Victor, please. Victor, Mr. Antonio, could you ask your question? Victor Antonio, you raised your hand, you may ask your question, please. So, I think Mr. Antonio does not want to ask the question. He's taken out his question. And we're going to wrap up our question-and-answer session. Now I would like to turn it over to Mr. Andre Rodrigues for his closing remarks. Please, Mr. Rodrigues.
Andre Luis Rodrigues: I would like to thank, once again, everyone, for your presence here today, to wish you an excellent weekend until we meet again next quarter.
Operator: WEG's conference call has now ended. Thank you so much for your participation. Have a good day. Thank you.
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