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Edited Transcript of FERREYC1.LM earnings conference call or presentation 4-Nov-19 1:30pm GMT

Q3 2019 Ferreycorp SAA Earnings Call

na Nov 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Ferreycorp SAA earnings conference call or presentation Monday, November 4, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Mariela García Figari de Fabbri

Ferreycorp S.A.A. - General Manager

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Conference Call Participants

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* Babatunde Ojo

Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner

* Thiago Albuquerque

Onyx Equity Management Gestora de Investimentos Limitada - Partner & Equities Analyst

* Rafael Borja

i-advize Corporate Communications Inc. - SVP

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Presentation

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Operator [1]

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Good morning and welcome to FerreyCorp's Third Quarter 2019 Conference Call. (Operator Instructions).

It's now my pleasure to turn the call over to Rafael Borja of i-advize Corporate Communications. Please go ahead.

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Rafael Borja, i-advize Corporate Communications Inc. - SVP [2]

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Thank you, and welcome everyone, to Ferreycorp's Third Quarter 2019 Earnings Conference Call. Presenting on behalf of Ferreycorp, and joining us from Lima, Peru, is Mrs. Mariela García, Chief Executive Officer; and Mrs. Patricia Gastelumendi, Chief Financial Officer. They will be discussing Ferreycorp and subsidiaries' consolidated results per the press release distributed by the company on October 30. If you have not yet received a copy of the earnings report, please visit www.ferrycorp.com.pe to download a copy, where there is also a webcast presentation to accompany discussion during this call. Before we begin, I would like to remind you that today's call is for investors and analysts only; therefore questions from the media will not be taken. Please be advised that comments made today by Ferreycorp's management may contain forward-looking statements which are subject to various conditions that may differ materially. For a complete note on forward-looking results, please refer to the last page of the quarterly report.

It is now my pleasure to turn the call over to Mrs. Mariela García, Chief Executive Officer of Ferreycorp. Mariela, please go ahead.

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [3]

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Thank you, Rafael. Good morning, everyone. Welcome to FerryCorp conference Call. Thanks for joining us and for your interest in the company.

Today, we will review a brief presentation, which is available in our website, to discuss the main highlights and company results for the third quarter and the first 9 months of 2019 according to the financial statements published last Wednesday for Ferreycorp and subsidiaries.

Let's turn to Slide 4, where I will begin with a brief introduction of market conditions.

In the first 9 months of the year, the corporation was able to deliver positive financial and strong operating results in a challenging environment, where the economy was affected by external, factors, such as the commercial war between China and the U.S., and by domestic events, mainly political ones, that derived in a lower dynamism reflected in GDP growth of 2.2% instead of the 4.2% initially forecasted for the year. Actually, forecasted growth has been reviewed downward several times this year -- this year based on lower levels of both private consumption and public spending, important drivers of the economy.

However, it is important to mention that we have started to see some positive signals in private investment growth, especially in mining and in other sectors that posted a positive performance.

Recent announcement of the license for construction of Tia Maria also bring good news to our business, and we are confident that social issues and requests will be worked out in the following weeks.

In addition, [sub-construction], an important leading indicator in Peru, is currently growing near 5% year-to-year. We're confident that we will continue to see more of these positive events. At this point, we need to point out that last week, President Vizcarra and his new cabinet presented the working program for the following months. Extraordinary measures were announced to reactivate public works in the country to stimulate economic growth. There were more than 800 paralyzed projects that account for $5 billion and the measures announced are focused on 500 of them. Moreover, in the following weeks, measures to start and execute the competitive national plan and the National Infrastructure Plan will be announced.

Forecasts point towards a stronger dynamism of activity next year with a better performance of subnational public investments and primary sectors.

Today, after 4 weeks from the crisis that led to the dissolution of the Peruvian Congress, we can share with you that the social pressure in the country has decreased, presidential approval has grown, and the country is getting ready for election of Congress in January that will allow democratic institutions to move the country forward. As a result, the percentage of Peruvians who expect the country's economic situation to improve in the next 12 months increased from 27% in June to 52% in October.

In conclusion, Peru maintained its solid fundamentals and GDP growth will continue to be favorable during 2020 and years to come. Political issues are under control and democratic institutions will be aligned to boost growth.

With this optimism about the future of the Peruvian economy, we keep focused in market coverage in order to detect commercial opportunities that can leverage our sales growth based on our segmented value proposition approach to different industries and segments. This approach has allowed Ferreyros and other companies dealers of Caterpillar in Peru to keep our dealers -- a leadership position in the market over the years, evidenced by a market share of 60% in Caterpillar branded equipment.

Before finishing this introduction, we would like to point out some highlights and recent announcements. First, the Board meeting held on Wednesday 30th, October 30, approved the distribution of a complementary extraordinary dividend of PEN 50 million, which equals to $0.0512 per share. The record date for this dividend is November 21, and the payment date will be December 16. This dividend is complementary to the extraordinary one distributed earlier this year.

Also, in order to give value-added to our shareholders and due to low price of the share recorded in recent months, which even decreased below book value, the company announced last Wednesday a repurchase program for up to 50 million shares that will be executed depending on market conditions through next month.

Finally, FerryCorp has included for the third consecutive year -- Ferreycorp was included for third consecutive year in the Dow Jones Sustainability Index for the MILA Pacific Alliance region. This index is composed of those companies that demonstrate superior performance on the social, environmental and economic criteria.

Please turn to Slide 6 of our earnings presentation to discuss financial highlights as of September and then for the third quarter 2019.

During the first 9-months period of the year, consolidated sales amounted to PEN 4.3 billion and rose by 14% compared to the same period last year, led by the diversification of the corporation portfolio through the supply of new and used capital goods, the rental of equipment, spare parts and services and by its consistent leadership in the market in the main product lines.

Likewise, the corporation continued to maintain a high gross margin of 24.1%, benefited from the sales mix where spare parts and services amounted to 51% of total sales and margin improvement in almost all the subsidiaries. Moreover, operating profit surged by 23% and amounted to PEN 387 million. Operating margin recorded to 9% compared to 8.3% as of September 2018, as a result of higher sales and gross profit and a lower increase of SG&A expenses that increased only by 6% to PEN 660 million, following only partially the increase in total sales and mainly explained by higher expenses related to the product support for mining customers.

Financial expenses year-to-date boosted by 42%, amounting to PEN 73 million compared to similar period last year -- 42% compared to similar period last year, and that was a result of a higher average cost of debt of 3.85%, whereas last year it was 3.31% and the average rate -- excuse me, and also because the average debt rose by 20%, mainly driven by inventories increase.

As of September 2019, the corporation results were affected by PEN 17 million exchange loss, but still lower than the PEN 23 million FX loss last year, and therefore a lower impact in the bottom line. That resulted in PEN 206 million net income, 20% on top of last year's net income.

Year-to-date, EBITDA amounted to PEN 552 million and surged 29% compared to EBITDA reported in the same period last year, led by higher sales and higher growth and operating profit. The corporation reported a strong 12.8% EBITDA margin compared to 11.3% as of September last year.

In order to have a better comparison to 2018, if we adjust the amounts and exclude the impact of IFRS 16, the EBITDA would have reached to PEN 506 million, still on top of last year's figure of PEN 427 million, and an EBITDA margin of 11.7%, still higher than the EBITDA margin as of September last year.

Let me mention now comparison, third quarter 2019 versus third quarter 2018.

Consolidated sales for the third quarter surged 26% compared to those of third quarter 2018 and amounted to PEN 1.6 billion. It has been the highest sales figure in the last 7 quarters since last year average was PEN 1.3 billion and this year first quarter average is PEN 1.3 billion. This higher sales volume is a result of the delivery of Caterpillar equipment for mining customers, reflecting business that were closing -- reflecting the deals that were closed in prior months. And the delivery of Caterpillar equipment for mining customers this quarter was PEN 250 million compared to only PEN 27 million in the same quarter last year. But also because of the strong performance of the spare parts and services of used and allied equipment business lines.

Gross profit increased by 11% and amounted to PEN 353 million, led by major sales. Gross margin went down to 22.1% from 25.2% in third quarter 2018 as a result of the sales mix, where machinery increased its share in total sales from 37% in same quarter last year to 47% this year, while product support percentage dropped from 55% to 46% quarter-to-quarter.

In turn, operating profit rose 14% and reached to PEN 124 million, led by SG&A expenses that amounted to PEN 225 million, an increase by 4%, and a slower pace than sales increase, mainly impacted by variable expenses related to product support. Thus operating margin recorded 7.7%. Third quarter 2019 EBITDA amounted to PEN 175 million and leaped 20% compared to EBITDA of PEN 147 million reported in the same period last year, led by higher sales, higher gross profit and controlled increase in expenses, as I stated before.

The corporation reported 10.9% EBITDA margin.

If we exclude the impact of IFRS 16, the EBITDA would have reached to PEN 159 million, still higher of last year's figure.

Please now move on to Slide 7 to review the net income (inaudible) for 2019.

Net income during the third quarter reached to PEN 32 million and fell 38% compared to net income of PEN 52 million in the same quarter last year. This result compared to last year's third quarter is explained by, first, an EBITDA increase in 19% or PEN 28 million derived by what we have been explaining, higher sales and controlled expenses, but counteracted by financial expenses that rose by 28% or PEN 5 million; foreign exchange loss that increased by [295%] or PEN 38 million led by a 2.89% nuevo sol devaluation during the third quarter of 2019, compared to only 0.86% sol devaluation in third quarter 2018; also by the increase of 36% in depreciation and amortization or PEN 12 million, mainly driven by the incremental depreciation of assets that were recently added as a result of the adoption of IFRS 16 and an income tax that dropped in PEN 6 million led by lower earnings before tax.

We will now review the commercial performance. Please turn to Slide 9 to explain the share of main lines of business in the third quarter.

Sales of Caterpillar Mining Trucks and equipment for large mining customers amounted to PEN 250 million, which we already mentioned, and represented 817% increase compared to third quarter 2018, led by the delivery of mining trucks, reflecting deals closed in prior months.

Last year, there was only PEN 27 million sales in similar quarter. In this third quarter, deliveries to companies such as (inaudible), Marcobre, and Chinalco have been recorded.

It is important to mention that orders on hand still allow us to project sales for PEN 160 million this year. And for next 2 years, we are also expecting sales to large mining of similar amount.

In addition, allied equipment sales went up 46% compared to third quarter last year led by Trex and Motored sales that increased by 31% and 16%, respectively.

Rental and used equipment business line surged by 35% derived from an important sale of used equipment to one customer.

Likewise, parts and services achieved record sales of PEN 744 million, 7% above third quarter 2018 and 5% higher than the last 4 quarters' average.

Our forecast still considers this line of sales to continue to grow at rates between 5% and 10%.

Please let's go to Slide 10 to review our results by group of companies during the third quarter 2019. When we analyze sales by groups of subsidiaries, those from Ferreyros, Orvisa and Unimaq, the Caterpillar dealers in Peru, represent 79% of total sales and went up 31%, mainly driven by an increase in Caterpillar Mining equipment that we already explained rose in 817%, a significant growth of 59% in rental and used equipment lines, also already explained, due to an important sale of used equipment and allied equipment, and an increase in 35% and -- on the spare parts and services sales and enhanced by 6% and accounted to 53% of overall sales of this group of companies.

Gross margin for this group of companies reached to 22.1% compared to gross margin during third quarter 2018 of 26.1%, mainly driven by higher share of machinery and equipment, and total sales of this group of companies have rose from 37% to 47% this quarter, while spare parts and services were 1 percentage -- while spare parts and services declined from 63% to 53%.

The companies that carry Caterpillar business and other allied lines in Central America represent 6% of total sales and posted similar results compared to the third quarter 2018, mainly led by rental and used that increased by 15% and spare parts and services that went up 10%. These results were achieved even though this region is still going through a complicated political economic situation.

Political situation that has improved in the last month, and we expect positive impact in the economic situation.

Gross margin in the third quarter 2019 increased to 26%. The local subsidiaries and businesses abroad that complement the Caterpillar business represents 15% -- represented 15% of total revenue and rose 15% as a result of Trex, Motored and Soltrak's higher sales that increased by 31%, 17% and 5%, respectively.

Gross margin for this group of companies reached 20% in this quarter, similar figure compared to third quarter 2018.

Now let's move to Slide 12 to review the state of financial position main accounts.

As of September 2019, total assets amounted to PEN 5.7 billion, an increase by 12% if compared to September last year. Asset turnover improved to 1.05. If comparison is made to December 2018, assets grew in PEN 394 million or 7%. The variation in total assets compared to September 2018 is explained by inventory that rose by PEN 191 million, led by spare part for PEN 78 million, and components for PEN 44 million. Inventory of mining equipment amounted to $80 million and related to deliveries scheduled for the upcoming months. Accounts receivables were up PEN 196 million, driven by the invoicing of an important fleet of used equipment and Caterpillar Mining machines that will be collected between October and November. And the third explanation of this asset increase is for the fixed assets that were recorded due to the implementation of IFRS 16 that accounted for PEN 118 million, derived from the recognition of leased assets, such as facilities, rental fleet and vehicles.

The cash conversion cycle compared to September last year went from 156 to 151 days as of September 2019.

This result is mainly impacted by inventory days that rose from 143 to 149 but benefited from collection days that dropped from 71 to 64 days. Payable days reduced from 57 to 52 days.

Now let's turn to Slide 13 to discuss our CapEx. Net investments in fixed assets as of September 2019 reached to $24 million, composed mainly by the following. $11 million that were invested in infrastructure and work in progress, mainly for the construction of a rare new facility in Ica for $7 million and complementary work in La Joya for $1 million.

Secondly, $10 million to replace units in the rental fleet. However, equipment was transferred to inventory for -- at the same time, equipment was transferred to inventory for sale for $3 million. Thirdly, $5 million for components for Mining equipment, but at the same time, components for $10 million were transferred to inventory for sale. And finally, $8 million derived from the recognition of leased assets and fixed assets by right of the use and application of IFRS 16. The investment in intangible assets reached PEN 59 million or $18 million related to the implementation of SAP platform. 3 subsidiaries already finished the implementation of the platform, Motored and Orvisa and Unimaq, while Ferreyros should go live June 2020.

Now please turn to Slide 14 to discuss the consolidated financial debt.

As of September 2019, financial debt amounted to $685 million and rose by 22% compared to same period last year, mainly driven by higher investments in inventory of machines and parts to cope with future demand. It is important to note that the financial debt includes $38 million derived from IFRS 16 application.

Leverage ratio, which is net debt to EBITDA, amounted to 3 -- 3.03, and the adjusted debt to EBITDA ratio reached 1.87, both ratios within our covenant limit of 3.5. We also continue to maintain a 95% exposure to U.S. dollar-denominated debt as seen in previous quarters. Maturities for 2019 account for $337 million. An important part of these maturities belongs to debt regarding these growing inventories, which are always financed at short-term and that will be canceled after recording the sale. In this way, current maturities as of June 2019 accounts to 62% of total debt.

Financial expenses during the quarter, sorry, that -- I meant September.

Financial expenses during the quarter posted a 28% growth and amounted to PEN 24 million as a result of more financial liabilities due to the increase of assets just explained and positively affected by the average cost of debt that went down from 3.58% in third quarter 2018 to 3.45% in this quarter. Financial expenses in the third quarter were also impacted by the implementation of the IFRS 16 by PEN 1.7 million.

So closing now, I want to say that we are proud of these results obtained during the third quarter and in the complete 9-months period of this year.

This reflects our ongoing commitment to serve our customers and maximize our opportunities by following all investment projects and service of the existing fleet in the territories we serve, while at the same time, we remain focused on controlling expenses, managing working capital and controlling the assets turnover to the limits our business model allows.

I want to close my presentation with some remarks. We will continue with our strategy aimed to profitable growth and shareholder value creation, leadership in the market and high customer satisfaction and positive impact in stakeholders.

We are confident we are well-positioned for the future with long-term partnership with the brands we represent and strong capabilities in our business, but at the same time, we are developing new models and services to fulfill our customer needs.

At the same time, we remain confident and optimistic about the future of the Peruvian economy and other countries where we operate for the rest of the year and mainly throughout 2020.

Thank you for your time now, and we'll be glad to take your questions.

To make sure that any telephone line issue does not interfere with our understanding of your question, I would like to request that if possible when any of you make a question, shall try to send it at the same time in writing through an e-mail to our IR contact, Elizabeth [Tamayo], who is here with us.

Thank you again, and operator, please proceed to the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Tunde Ojo from Harding.

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Babatunde Ojo, Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner [2]

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Two questions from me. The first is on the rental and used segment of the revenue. What sector in particular is driving that growth? And the second question for me is if you can please quantify the impact of IFRS 16 on net profit for the 9 months and in the third quarter?

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [3]

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So in the used and rental line of business, what we have in the quarter and in the year is a relevant sale to a mining customer -- to a contractor for mining, and we sold to them used trucks that we bought through another dealer and sold to them, that is for approximately $30-plus million, which is in that line. So that is in the sale of used equipment, which is not really what we usually have in that line. What we usually have in rental and used is construction type of equipment, but usually, there's not a lot of used equipment sales in the large mining type of product. This was a one-off deal. In fact, I think last year we also had a similar opportunity. Usually in the used line of business, we have units coming out from our rental fleet or construction units that we receive from customers of trade-ins when we sell construction equipment and then we sell these used.

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Babatunde Ojo, Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner [4]

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So let me understand this, Mariela,

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [5]

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Let me...

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Babatunde Ojo, Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner [6]

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Okay, go ahead.

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [7]

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No. Please, go ahead. You go ahead.

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Babatunde Ojo, Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner [8]

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I just want to be sure, you said a mining contractor. So are these like construction around the mining side? Or is this mining equipment? Just wanted to make sure I differentiate between the two.

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [9]

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Yes. So it's a nice opportunity to explain. Mainly in Peru -- I think it's different in other countries, in Australia, for example, but in Peru, mainly, the large mining companies operate the large mining equipment themselves. And it's only in 2 or 3 mine sites that they are using contractors. And there are 3 contractors in Peru, that have specialized in doing earthmoving for the production of those mines, different from the construction that we have several large, medium-sized construction companies that work for mining companies to construct the roads from the dams and everything in the mine. But earthmoving for the production, we only see it in 3 mines, and we have 3 large contractors for that. So 1 of them bought this used equipment and we facilitated the sale by getting access to that equipment in other dealers in the world. I don't know if that clarifies your questions?

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Babatunde Ojo, Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner [10]

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Yes, that's very clear.

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [11]

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And in the second part of the question. So we explained through the call that the impact in the EBITDA because of the IFRS, for example the EBITDA for the 9 months was PEN 552 million, but then we also explained that if we adjust numbers due to the IFRS 16, the EBITDA would have reached only to PEN 506 million, still higher than what we had last year, which was PEN 427 million. So the impact is around PEN 46 million, the impact in IFRS implementation for the 9-month period.

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Babatunde Ojo, Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner [12]

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Yes, I get that, Mariela, but I was asking for net profit, actually. Impact it has on the net profit because you mentioned the EBITDA, which is a...

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [13]

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Okay. So the -- in net profit, there's no impact really because what we have due to the IFRS is a reclassification. So what happens, if we have an asset that was in a lease contract, no? We were paying installments for that lease and those installments are a reflection of 2 elements. So whoever owned those assets, in the monthly payments was transferring to us a part of the depreciation on the assets and part of the financial costs. Those 2 elements that were in the monthly fees were in our operating costs before the IFRS implementation. Now, with the IFRS implementation, those assets come to our book, recorded as our assets. So that monthly fee is split in 2: the depreciation part, which goes still in SG&A expenses, and the financial expense, which goes to financial expense line of line. So at the end, there's no effect in net profit. There is only an effect in EBITDA because the portion of the monthly rental payment that was related to financial cost comes to the financial cost line. Is that clear?

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Babatunde Ojo, Harding Loevner LP - Portfolio Manager of Frontier Emerging Markets, Analyst of Frontier Emerging Markets & Partner [14]

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Very clear.

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Operator [15]

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(Operator Instructions). We'll go next to Thiago Albuquerque with Onyx.

Do you want to check the mute button on your phone?

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Thiago Albuquerque, Onyx Equity Management Gestora de Investimentos Limitada - Partner & Equities Analyst [16]

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I'm sorry, I was on mute. Mariela, I have 2 questions. The first one is related also to the sales of the used equipment. I just want to try to quantify the impact on gross margins. Could you please provide us the information of what level, more or less, of gross margins you had on those sales of new equipment? And my second question is related to the announcement of the dividends and the share buyback that we welcomed a lot, but I'm just a bit concerned on the leverage size that has been increasing in the past quarters. I just want to clarify if you are seeing a strong cash generation for the fourth quarter that would justify these announcements.

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [17]

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So this used equipment truck sale has a gross margin a little bit lower than what we always have in large trucks. You know large truck margins are lower than the other lines of businesses. And this is slightly lower, not in a significant way, but still it brings a lot of product support stream into the future. Regarding the buyback share program announcement, the -- we don't think we're going to execute the 50 million shares by year-end. So this is a program, we're going to start putting some orders and start buying. And we believe that the execution of this program will -- not do we "believe," we are planning, to execute this program according to the availability of funds. We -- don't worry, we're going to be careful not to put the company in a position where our leverage is not manageable. And at the same time, we have announced this PEN 50 million extraordinary dividend. As you might recall, in the first semester, after a change in the dividend policy to allow for extraordinary dividends on top of the limits we had in the policy, a dividend -- extraordinary dividend was approved, taking into consideration the funds that were liberated when we sold the investment on an insurance company. At that moment it was early in the year, and precisely taking care of what you just mentioned, we just -- or the Board, excuse me, with the recommendation of management, the Board approved an extraordinary dividend for only PEN 50 million, whereas the funds derived from that sale were in the range of PEN 100 million. So now that we're finishing the year, we can -- we are able to complete because our expectation was or our ideas were always to pay back the PEN 100 million that we liberated because that was an asset not related to our needs, to our everyday business. So our intent was to give the PEN 100 million, but in the first semester, we wanted to be careful, so a dividend of only PEN 50 million was approved, and now we're completing a second PEN 50 million. And then in the repurchase of shares, it will be done in part according to both our availability of funds and also the market conditions in the stock exchange.

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Thiago Albuquerque, Onyx Equity Management Gestora de Investimentos Limitada - Partner & Equities Analyst [18]

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Great. Just a quick follow-up. You've mentioned that the increase in receivables was related to some invoices that were not collected. Can you just quantify this, how much you expect to collect on those receivables in the fourth quarter?

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [19]

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So the sale of those used trucks that we mentioned are -- when I answered Tunde, I said higher than -- okay, so it's higher than PEN 40 million in this quarter. And that is the ones that impacted the receivables because this sale is financed by a third-party financial entity. And they were in the process of documenting. So that will be collected in the last quarter.

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Operator [20]

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(Operator Instructions) And it appears we have no further questions. I'll return the floor to Ms. Garcia for closing comments.

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Mariela García Figari de Fabbri, Ferreycorp S.A.A. - General Manager [21]

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Thank you, operator. And thanks to everybody participating today in our conference call and for your continuous interest in our company. I hope we have answered any of your inquiries, and there was no other question. So in the next days, if you have any other piece of information you would like to get from us, we will be very happy to [absorb] them. Please don't hesitate to contact us. Our Investor Relations department and the management team is here to answer your questions. Have a good day.

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Operator [22]

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And this does conclude today's program. Thanks for your participation. You may now disconnect.