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Edited Transcript of RAPT4.SA earnings conference call or presentation 5-Mar-20 2:00pm GMT

Q4 2019 Randon SA Implementos e Participacoes Earnings Call

Mar 28, 2020 (Thomson StreetEvents) -- Edited Transcript of Randon SA Implementos e Participacoes earnings conference call or presentation Thursday, March 5, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Raúl Randon

Randon S.A. Implementos e Participações - President Director & CEO

* Esteban Mario Angeletti

Randon S.A. Implementos e Participações - Planning Manager & IR Manager

* Hemerson Fernando De Souza

Randon S.A. Implementos e Participações - Planning & IR Manager

* Paulo Prignolato

Randon S.A. Implementos e Participações - Vice-president Director and IR & Financial Officer

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Conference Call Participants

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* Catherine Kiselar

BB-Banco de Investimento S.A., Research Division - Analyst

* Lucas Marquiori

Banco BTG Pactual S.A., Research Division - Research Analyst

* Marcelo Garaldi Motta

JP Morgan Chase & Co, Research Division - Research Analyst

* Renata Faber

Itaú Corretora de Valores S.A., Research Division - Sector Head

* Victor Mizusaki

Banco Bradesco BBI S.A., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, and thank you for waiting. Welcome to Randon S.A. Implementos e Participações Q4 2019 Results Conference Call. We have with us today, Mr. Daniel Raul Randon, President, Director; Paulo Prignolato, CFO and Investor Relations Director; Hemerson Fernando De Souza, Investor Relations Director of Fras-le; Esteban Angeletti, Financial and Investor Relations Manager; and the IR team.

We inform that this event is being recorded. (Operator Instructions) The event is also being broadcast simultaneously via webcast. You can access it at the address ri.randon.com.br where you will find the presentation. The slide selection will be controlled by you. The replay will be available right after the end. We remind you that the participants in the webcast may send questions to Randon. They will be answered after the end of the conference by the Investor Relations department.

Before we continue, we would like to say that any declarations made during this conference call, concerning business perspectives of Randon operational goals, financial goals, are based on assumptions and beliefs of the company's Board and also based on information currently available. Considerations about the future are not guarantees of performance. They involve risks and uncertainties because they refer to future events and depend on circumstances that may or may not occur.

Investors and analysts should understand that general economic conditions, sector conditions and other operational factors may affect the future results of Randon and may lead to results that may differ materially from those expressed in this presentation.

Now I would like to pass the floor to Mr. Daniel Raul Randon, Chairman, who will begin the presentation. Sir, you may proceed.

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Daniel Raúl Randon, Randon S.A. Implementos e Participações - President Director & CEO [2]

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Good morning to all those participating in this conference call and through our website. I'd like to begin saying that 2019 was a very special year for Randon. In the year, when we celebrated our 70th anniversary, we had one of the best results of the company in history with a record in revenue and EBITDA. This performance was the result not only of our effort and discipline during the year, but because of a structural change that we made during the last crisis, making the company more efficient and solid, both in industrial processes and in expense control, allowing us to deliver more consistent results to our shareholders.

The growth of the volumes in the areas where we are present during the last few years was fundamental for the evolution of the operational results. An example of this was the performance of sales at FENATRAN exhibition, the largest cargo transportation exhibition in Latin America, which surprised us. It was one -- Randon was one of the highlights of the events not only due to the results in the sale of road equipment, but also due to the 20 innovations that we launched, reinforcing Randon as one of the most innovative companies in this segment in Brazil.

To close the year, we announced in December, through our controlled company, Fras-le, the intention to acquire Nakata Automotiva, an important player in aftermarket parts in Brazil. And once it is approved, will contribute for Fras-le to have new products in new markets, strengthening its position as one of the largest companies in aftermarket parts in Brazil.

I would like to mention also that the year of 2019 was also marked by the evolution in our management practices, giving support to the development of our employees, strengthening our culture of innovation and improving our initiatives in environment, health and safety, aspects that will be detailed in our sustainability report to be published in April 2020.

Finally, I would like to use this occasion to thank our employees, clients, suppliers, distributors and investors who helped us to build these 70 years of history and to say that we are more and more and better and better prepared for the future to work, to connect people and reaches generating prosperity.

Now I would like to invite you to see our guidance for 2020 in -- on Slide 4. When analyzing the main indicators in the guidance, we may observe that we are very close for the expectations during the year, which shows the capacity of our year to execute what was planned. Even with the challenges that we had in 2019, the guidance of 2019, the growth of the revenue during all the quarters happened due to the good sales volumes and supported by the growth of heavy trucks market and also road equipment. The revenue from export revenue was a little lower, affected by slow demand in some of the markets where we are present. Imports, on the other hand, were above the guidance. Thus, as we have mentioned in the previous quarter, the main reason was the increase in the units brought from Argentina, helping to reduce surplus capacity in Argentina and offering more products to the Brazilian market that had strong demand.

Talking about CapEx, we maintained the discipline during the year, and even with a series of project as the increase in production capacity, automation and improvement in processes, we invested in line with what we had planned.

Now I would like to pass the floor to Paulo, and he will give you a detailed presentation of the results.

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Paulo Prignolato, Randon S.A. Implementos e Participações - Vice-president Director and IR & Financial Officer [3]

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Good morning to all. Now going on to the next slide, we see the market numbers in the main segments where Randon is present in the market.

Beginning with semitrailers, 2019 was the second best year of the company in this segment, only behind 2013 when there were many tax incentives for the purchase of capital goods. The improvement of the macroeconomic scenario with lower interest rates and lower inflation together with the renewal of fleets and positive scenario in agribusiness, we see that we had a production that was very high, much higher than 2018, 35.8% compared to 2018 with 66,000 units. The growth in sales was also higher, 42.3% in comparison with the previous year, 63,437.

In the truck market, production grew a little less, although the category of heavy vehicles grew similar to semitrailers. There was a reduction in Argentina due to the low performance of sales of light trucks.

Now we'd like to talk about the company's results in Q4 2019. In Q4 2019, the company reached $1.3 billion in net -- consolidated net revenue, an increase of 6% when we compare this with the same period of 2018. The revenues from OEMs and Auto Parts grew at a similar speed, 5.9% and 5.8%, respectively, in comparison with Q4 2018. We'd like to remind you that this comparison with the last quarter of last year was higher, especially due to the strong sales after the elections.

Going on to exports. In a year when the export market was challenging for all our business lines, the last quarter was not different. We had a drop of 6.1% on a quarterly basis. As we mentioned on other occasions, the strong reduction in products exported to the relevant country, especially in South America were the main negative reason in the quarter.

The consolidated EBITDA in Q4 2019 totaled BRL 160.6 million with an EBITDA margin of 12.5%, an increase of 2.2 percentage points in comparison with the same period in the previous year when we recorded an EBITDA of BRL 124.6 million and an EBITDA margin of 10.3%. In Q4 2019, we also had the positive effect of IFRS 16 in EBITDA, which added BRL 5.6 million. Although the margins have been lower than Q3 '19, we remind you that the last quarter has seasonal effects, especially for concentrating vacation period, which reduces the number of workdays and also the volumes produced.

In Q4 2019, we had nonrecurring factors that benefited the EBITDA by BRL 3.5 million. Adjusting the EBITDA to these factors, we get to an adjusted EBITDA of BRL 157.6 million and adjusted EBITDA margin of 12.3%. In the full year, the EBITDA -- consolidated EBITDA reached BRL 690.7 million or 13.6% on the net revenue of the period, a growth of 0.5 percentage points in relation to the previous years. The nonrecurring factors in 2019 hurt the EBITDA by BRL 38.4 million, BRL 36.2 million in hedge accounting. Adjusting EBITDA to nonrecurring factors, we get to an adjusted EBITDA of BRL 729.1 million, with adjusted margin of 14.2%. And finally, we have the net result, which was BRL 52.7 million in the quarter, representing an increase of 49.2% in comparison with the same period in the previous year. During the year -- in the year, we got to BRL 247.6 million of net profit, a margin of 4.9% or 1.3 percentage points above the net margin of 2018 when the profit was BRL 151.7 million.

I invite you all to go to Slide #7, where we will have a general view of the different segments beginning with OEMS. In this quarter, we saw the demand for semitrailers, very strong. We had a recovery in the market share, getting to 37.2% of the market showing that the added capacity in Q1 was fundamental to improve our participation in sales. When considering total sales in the quarter, we got to 6,400 units, which made us reach an expressive volume of 25,406 road equipments produced in 2019, practically equal to the best year in our history, 2013. Although we had good sales in the Brazilian market, in the export market, things are different. The main countries for semitrailers outside Brazil had a weak demand. And thus, sales had a drop of 41.9% when compared to Q4 2018, going from 1,125 to 654 units only.

Now going on to Slide #8. We have the highlights on railway cars and special vehicles. We closed 2019 as the worst year of the decade for railway cars. The delays in renewing concessions in Brazil was the main reason for the poor performance of this segment. The expectation for 2020 is a light recovery but still far from historical levels, which were 3,000 to 4,000 units a year.

Concerning special vehicles, we sold 91 products, 4.2% below Q4 2018, but with a better sales mix, which had off-road trucks, which bring a better revenue and better margin.

Now on Slides 9 and 10, we will speak about the Auto Parts division, beginning with Fras-le on Slide #9. We divided Fras-Le's products into 2 large groups, friction materials and non-friction materials. The first had a growth of 7.2% in volumes comparing quarter with quarter, especially due to the inventory of clients in the export market, especially in the U.S.A. Two, we -- in the previous quarter, we had the opposite, and they had decreased their inventories for the closing of the year. Now non-friction products had a reduction, a drop of 16.3% due to the drop in light vehicles in Brazil and the low demand in Argentina. This was also aggravated by the comparison since in Q4 2018, we began to include Fremax. We did not have this in 2018.

Now talking about the perspectives in the markets where Fras-le is present in operations outside Brazil. We have different situation in each country. Although a drop is expected in the U.S., the sales levels have remained positive as we saw in Q4 '19. In Argentina, this scenario is low demand and a continuation of economic crisis. In China, in spite of the negative short-term effects due to coronavirus, we are striving to increase our market share in the local market, and we want in China and India, too.

Now talking about the Brazilian market, we see that the sales for OEMs have a good performance, with the support in the growth of volumes in heavy trucks, such as trucks and truck and also road equipment. We are looking now at the aftermarket for light vehicles, which begins to show a reaction but has not had an important growth. For more information about Fras-le, we recommend that you read the quarterly release of the company, which was made available on March 4.

Now we will talk about the Auto Parts company. As already mentioned, previously, the seasonal effect of the last quarter hurt the production volumes for trucks, which had a drop of 8% in the comparison with Q4 2018. With this, there was a reduction in the demand for Auto Parts, especially items that depend on this market such as coupling systems, axles and suspensions, which had a drop of 7.9% and 10.8%, respectively. Nevertheless, the brake systems by Master had a growth due to the increase in the volumes exported to the U.S. In the case of Castertech, growth came from the supplementary business lines for heavy vehicles, for example, agriculture. In these companies, the geographic diversification of the portfolio mitigated the drop in the production of trucks.

On Slide 11, we will talk about the shares, Randon shares, RAPT4, in capital markets. At the end of December, RAPT4 closed at BRL 13.40 per share, an increase of 44.7% in relation to the end of December 2018. The market cap of the company was BRL 4.4 billion at the end of the period, an increase of BRL 1.5 billion in -- when compared to the closing of 2018. The average volume of preferential shares per day was 23.6 million in 2019. And in the last quarter, we reached a daily liquidity of BRL 31.9 million.

The year of 2019 was the fifth consecutive year when we had an appraisal of RAPT4 shares with a substantial growth of liquidity, which makes us believe that apart from the consistent improvement of the company's results and return to shareholders, the work we have been doing with the capital markets has been recognized by more -- the more than 20,000 shareholders that make up our investor base. In relation to the distribution of dividends and JCP, during a meeting on December 13, 2019, the council decided to pay JCP interest on capital to shareholders for -- between January and November 2019 worth BRL 57.9 million, corresponding to BRL 0.16 a per share.

Now going on to Slide 12. We'd like to begin the financial results of the company. At the end of 2019, the company had a gross total debt, BRL 2.9 billion, 17% in foreign currency and 83% in local currency, with an average maturity rate of 2.8 years. The average cost of the debt in reais is 6.7% a year; in foreign currency, 4.8% per year. The reduction in the cost is due to the lower interest rates in Brazil and abroad. In this quarter, we highlight the improvement in NCG, especially in taxes to be recovered.

To talk about more details about leverage and consolidated net debt, I invite you to go to Slide #13. At the end of 2019, the consolidated net debt without Randon Bank, was $535.5 million. The improvement in NCG mentioned in the previous slide contributed to reduce the net debt, which, together with the gross cash generation of the company, reduced operational leverage, without Randon Bank, 2.79x EBITDA -- consolidated EBITDA, best leverage since 2011. Considering consolidated numbers, leverage was 1.26x the EBITDA of the last 12 months. Net debt, BRL 877.9 million. Our objective is to maintain that leverage under control through financial discipline.

Now I'd like to pass the word to Mr. Daniel.

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Daniel Raúl Randon, Randon S.A. Implementos e Participações - President Director & CEO [4]

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On February 17, we gave our guidance with the main projections for 2020. We believe in another year with growth in our operations. The evolution of the revenue is based on the growth in volume in our markets, especially in Brazil, supported by more positive scenario and expectation of growth of the GDP, which will be higher than the previous year. In the export market, the situation is more challenging. We estimate revenue of $250 million, lower than the ones in 2019 since we have a global scenario with a high degree of uncertainty.

The expectations of imports for imports, $80 million is related to the need for products that we buy from global markets, and which are superior to those in Brazil. Our investments projected by BRL 220 million are in line to maintain the current operations and the projects that we will have in automation and also robots.

I would also like to stress 2 points concerning our guidance for 2020. The first, it does not take into consideration the results of Nakata, the acquisition, since we are waiting for the approval. Another point is the possible negative effect of coronavirus in it's -- the first projections given by risk agencies are showing growth in the main economy. This is still early to talk about in Brazil or the effect on our operations. We're monitoring this, working with alternative scenarios if we need them.

We'd like to close the presentation, but I remind you that in the webcast, you have available the full presentation with slides that give you more details about the indicators mentioned. We are available for clarification and comments. I thank you for your attention. And now we'd like to begin our Q&A session. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Victor Mizusaki, Bradesco BBI.

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Victor Mizusaki, Banco Bradesco BBI S.A., Research Division - Research Analyst [2]

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I have 2 questions. The first concerning railway cars. 2019 was a difficult year, could you give us an update, your opinion for this market in 2020, '21? And in a scenario where we see a normalizing of orders, how could this -- how would this affect the EBITDA margin, railway cars? The second question, financial services. When we look at the results, we see pressure on margins. Could you comment on this?

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Esteban Mario Angeletti, Randon S.A. Implementos e Participações - Planning Manager & IR Manager [3]

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Victor, thank you for the question. And this is Esteban speaking. Concerning railway cars, as mentioned by Paulo, 2019 was one of the worst years in the last decade. For 2020, we expect a recovery, the beginning of a recovery in volumes, but we believe that we will not reach in 2020 normal levels. When we talk about normal levels, we had a market between 3,000 and 4,000 railway cars per year. In our vision, this will not happen in 2020. So the renewal of contracts is to be approved. This could bring -- this would bring additional volume only in 2021. The impact on EBITDA margin, traditionally, railway cars have a better profit margin than road implements. Of course, now our plant is working with road equipment, so the EBITDA we had in 2019 was built by road equipment. So our expectation is that any additional volume for railway cars would have a positive effect on EBITDA margin.

Now concerning financial issues, the result we observed in Q4 '19 was not under pressure. In 2018, in Q4, we had some reversals in the consortium and the bank with credits that had been accrued for losses, and then we reversed them. So this helped the results in 2018 when we see this in comparison with 2019.

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Operator [4]

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Our next question comes from Lucas Marquiori, BTG Pactual.

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Lucas Marquiori, Banco BTG Pactual S.A., Research Division - Research Analyst [5]

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Two questions, please explain the guidance. I understood that you haven't included Nakata, but I'd like to understand, what is the assumption for heavy vehicles that supports this projection in net revenue? How do you see the growth of the markets, truck markets? We'd like to know how the basis for organic growth.

Then another point, 2 comments on CapEx. Last year, you gave us this CapEx for 2020. We had doubts concerning expansion. You maintained the same volume of investments in 2020, and you already had growth. So what are the main projects for CapEx? Is it maintenance? What is the focus of the investment plan?

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Unidentified Company Representative, [6]

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Okay, Lucas. Thank you for the question and for participating in the conference call. So the assumptions, growth in revenue. In relation to the market, we estimate that roads, equipment and heavy truck markets will grow with 1 digit because we have had 2 years of strong growth. 2018, we had a growth of 80%. 2019, another 35%. So the rationale that the basis is weak doesn't make sense. When we look at road equipment in 2019, it was the best year in history. So growing double-digit growth on top of high numbers is not usual, both in road equipment and heavy trucks also our assumptions to prepare this growth. We're expecting a GDP growth of 1.8%. The market began talking about 2.4%, 2.2% GDP growth. And now the last reviews are in line with our number for our planning.

Now concerning CapEx. As announced by the guidance, we expect to invest BRL 220 million. Of this amount, BRL 140 million, BRL 160 million are CapEx for maintenance, and the rest is for added capacity and productivity. So it's more and more difficult to separate things. When we talk about productivity, we decrease cost and we increase capacity at the same time. In terms of the divisions, Auto Parts and OEMs, the surplus is going equally to these 2 areas.

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Operator [7]

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Our next question comes from Catherine Kiselar, Banco Brazil.

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Catherine Kiselar, BB-Banco de Investimento S.A., Research Division - Analyst [8]

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Two questions. You mentioned in the release about the good visibility of the orders in the Brazilian market. Can you give us an idea of the pipeline for 2020 in this segment considering the -- your target for market share, 40%, and also Auto Parts?

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Unidentified Company Representative, [9]

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Okay, Catherine. Thank you for participating and for the question. In fact, when we mentioned the portfolio, it was built during the last quarter of 2019, with the excellent exhibition FENATRAN that we had. The period during the exhibition helped us to form the portfolio we have in the backlog we have. Right now, we have a good visibility until May this year, and new orders are within expectations to maintain this good portfolio of orders.

Now concerning Auto Parts, visibility is shorter. It depends on the releases of the OEMS. Normally, we work with a visibility of 3 months of release. For the time being, they are in line with our guidance.

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Catherine Kiselar, BB-Banco de Investimento S.A., Research Division - Analyst [10]

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A second question. Do you have a follow-up about Nakata, the acquisition?

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Unidentified Company Representative, [11]

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Yes. Concerning Nakata, we began to work especially the approval by the authorities. Our expectation is that we should conclude the acquisition by the end of the first semester or beginning of the second semester.

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Catherine Kiselar, BB-Banco de Investimento S.A., Research Division - Analyst [12]

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Congratulations.

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Operator [13]

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We have a question from the webcast. I will read the question. [Kailo]. "In 2 years, the Brazilian currency lost 40% of its volume -- of its value. We should become more -- this could help us to become more competitive and access new markets in Latin America and in the world with the exchange rates. So is there an exchange rates, a target, which could help the company to go into new markets?"

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Unidentified Company Representative, [14]

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Thank you, [Kailo]. We analyzed in a more structural way. We want to be competitive, independent of the exchange rate. Exchange rate is a variable we don't control. With this level of exchange rate, it makes it easier for us to be more competitive in some countries. But when we look at Argentina, our competitors in Argentina also import. So a similar competition. In any way as I said, our expectation when we go to a new market, we always work with the long -- in the long term. We cannot depend only on exchange rate. We must have quality, a good product and a good cost. An example is Suspensys in Mexico. They did this with a new product, and the cost is much more attractive for that market independent of the exchange rate. I hope I answered your question.

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Operator [15]

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Now we have Marcelo Motta, JPMorgan.

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Marcelo Garaldi Motta, JP Morgan Chase & Co, Research Division - Research Analyst [16]

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Question on coronavirus. Have you seen any pressure in terms of raw materials? Iron ore? How do you see the supply chain and cost of materials due to coronavirus? And when we look at the outlook of the company's margins, since this year, we had more moderate growth. What can we expect in terms of better margins? Do you have gains to be captured?

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Esteban Mario Angeletti, Randon S.A. Implementos e Participações - Planning Manager & IR Manager [17]

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Okay, Marcelo. Thank you for the question. This question also came via webcast. [Kailo] had included this question. So we will answer both of these questions. Concerning coronavirus, I will divide the answer with Hemerson. He can help us with the opportunities. I will concentrate more on the possible effects in the short term, concerning coronavirus.

First, it's too early to talk about the impact or to try to quantify impact. We have here a forecast for GDP growth, global, China, Brazil, it has been reduced due to coronavirus and should have some impact on demand. In the short term, we have a direct presence in China. Fras-le has a unit in Pinggu, which has an annual revenue between $10 million, $15 million. First point, no one in the unit was affected. No one was affected. They are receiving assistance through our unit in Brazil. And they began to operate again in February right after the Chinese New Year. And in March, our plant is operating at 100% capacity. And now, the office, the unit is working normally.

Another point is supply chain. Today, approximately 5% of our raw materials are imported directly from China. But we have inventory for the production line until April. We also buy items for vendors who import from China. For the time being, we received -- we did not receive any information saying that they would have problems. As an alternative, if we need, we have local suppliers for most of the raw materials. At least for the important raw materials, we have alternative suppliers in Brazil, and also demand for our products. As I mentioned, we have some effects on growth expectation. It could also lead to lower demand for commodities in China and also agricultural products from Brazil. But our agribusiness could be directed to other countries or stored. Then we would have more demand in the future, and this would demand to export and transport these agricultural products to go to China. So we may have a delay, but not a loss. We may have a delay in revenue, but not a loss. Hemerson can talk about opportunities in Auto Parts.

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Hemerson Fernando De Souza, Randon S.A. Implementos e Participações - Planning & IR Manager [18]

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Thank you, Esteban. Thank you for participating. We asked the same question yesterday with Fras-le's conference call. And we talked about the difficulties, but another side is that we asked local producers and with export capacity to many markets. The difficulty we have today in terms of suppliers from China opens a window of opportunity for us. I can mention about Fras-le, the Auto Parts division, which is more globalized. Fras-le has felt a higher demand, a stronger demand for business. One of the controlled companies, Fremax, an acquisition we made in October 2018, has sold more since January. We received orders in some countries that are higher than normal orders by 100%. Additional demand also in Europe. And many clients and nonclients consulting, especially from the U.S. to buy parts. Also in Argentina, where we have business with Armetal, part of the production that we would sell with other brands. Now they are also exporting Fremax products. So there are opportunities, and we're doing our best to capture the opportunities. Daniel.

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Daniel Raúl Randon, Randon S.A. Implementos e Participações - President Director & CEO [19]

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To all the participants, I'd like to reinforce, we know the concerns right now that the world has had. It happened in China, but it affects the whole world, with the risk of reducing or causing drops in GDP. We're also looking at the opportunities. As Hemerson said, we see -- we have had higher demand in some lines. We know that most of the automotive chain, most products come from China. So now they are looking for local products. This can help us sell more auto parts in Brazil. Also, we've seen the exchange rates going up, increasing the competitiveness of our exports and also lower interest rates. Once again, this strengthens our segment in transportation, better financing, more credit, lower interest rates.

But we're looking at this cautiously. We know our guidance is one that where we maintain these points, and we're working on the opportunities. And also, there is a trend when the exchange rate goes up, the cost of the commodities also go up, and this affects the cost of our companies. So there are some points of attention. We have also looked at opportunities to be more aggressive and to offset the risks of lower demand, once again, saying that we don't see any risk in our portfolio. We have a comfortable portfolio of orders. And Brazil has some areas becoming stronger, like construction. In the last few years, construction was very weak. So we believe in the country. We have also many opportunities, privatizations coming. This can increase demand in some sectors where we have suffered in the last few years.

Marcelo, concerning your second question, the margin, margin perspectives for the year. Of course, our operation depends on operational leverage. So any increase in volume improves margin, but we have to monitor this during the year. As I mentioned, it's still early to quantify the impact of coronavirus on supply and demand. So we have to be cautious concerning the evolution of margins.

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Operator [20]

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Our next question comes from Renata Faber, Itaú BBA.

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Renata Faber, Itaú Corretora de Valores S.A., Research Division - Sector Head [21]

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I would like to ask about the organizational changes. First, you announced a CEO. What do you expect in terms of gains? Would it generate more revenue? Can you talk about opportunities? And the second point, you also created the CTO. Also, you announced Randon Ventures. So please comment more on these start-ups.

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Daniel Raúl Randon, Randon S.A. Implementos e Participações - President Director & CEO [22]

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Thank you. Daniel speaking. First, we -- as of April, we reorganized the company. Sergio Carvalho is responsible for all the operations, except services and the bank. Alexandre Gazzi was responsible for OEMs. Alexandre Gazzi now helps us in the council in the joint ventures in Peru and also in Master, some strategic projects we're working on to increase the business apart from also being representatives. So we see an opportunity with -- to have a better alignment between the units. So we have a Director for Innovation in Processes and Products taking care of all Randon companies. He was with us at the exhibition FENATRAN. Many investors and clients saw that with -- now we have a hybrid. We have a hybrid trailer truck with electric parts. So we launched innovations, and we're working on these new embedded technologies.

The second point, we can implement services in aftermarket. Auto Parts OEMs do more synergy between the companies with more opportunities so there is this opportunity of synergies. At the same time, we have developed new leaders for succession in the company where we empower some leaders. For years, we have been working on this, enabling these executives to have a good succession. Now -- so in terms of a single CEO, this helps us to give more synergies to the operations and also growth in scale and also innovation, operational excellence and one -- and also taking care of smart manufacturing, smart manufacturing. A manager taking care of health, environment and safety and also smart manufacturing, manufacturing 4.0. We want more synergies, and we want a single policy in these areas.

In terms of the CTO, Chief Transformation Officer, we have worked on this vision at Randon in the last few years. So we have a Chief Transformation Officer. So we want -- we are concerned with digitalization of the business and new businesses. So the CTO, we have Daniel Ely, responsible for human resources, and he has taken care of Randon Exo, Randon exponential. We began this 2 years ago. The structure has more than 16 people from all the units connecting start-ups to our projects for productivity. So this area of innovation has been a transformation. It is based on 3 points.

The first for us, this part, the mindset of the leaders, CTO has this role, CTO, to transform and help leaders to change the culture as we have done in the last 4 years. So it's no use having information, digitalization. The leaders must be open-minded to accept the changes.

Second, collaboration. We're working -- we began with Randon Marcopolo and another 2 companies in the region. So by the end of the year, we should have 20 companies in this effort. We call it Ely's Institute. It is increasing the work together with start-ups to solve company's problems in the region. And this has been very important. It has brought many opportunities. So within the companies, we have 40 start-ups connected to our projects from back office, health, safety, product, environment until the core business and technology and especially taking care of areas with -- in artificial intelligence.

And the fourth, looking at the client, how we can continue being client oriented. Also, autonomous vehicles, electric vehicles, we're seeing fast change, so how we can work in these areas. And this is linked with the creation of Randon Ventures. Randon Venture, we launched the first investment in a start-up, TruckHelp, and we have this vision of being closer to the clients, understanding the clients' needs and creating new opportunities for services and also information and knowledge about clients' demands. So this is a development. Randon Venture, we invested BRL 3 million. We want to invest BRL 100,000 to BRL 300,000 per start-up. It's -- so we have projects to be developed, but they are linked to our business, Randon. So this will happen and be a success if we are closer to the client, and the CTO has this role of aligning all these things, the leaders. So this has been important for us, too.

Randon believes that this is our role, to grow the current business, but we cannot be -- we should be close to the clients and connected with the new start-ups, which are disrupting business and thus, looking for services to improve our product from Auto Parts to semitrailers, off-road and services where we can grow and also create new areas to supplement our current businesses.

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Operator [23]

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We'd like to close the Q&A session. Now I'd like to pass the floor to Mr. Daniel for his final comments.

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Daniel Raúl Randon, Randon S.A. Implementos e Participações - President Director & CEO [24]

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Once again, I'd like to thank you all for participating in our conference call. Before closing, I'd like to make 2 invitations. First, Randon Day on April 9 at our headquarters. The link will be sent to you next week. And the second invitation, please follow us on social networks, Randoncast, available on Spotify. The second episode this afternoon talks about the results in 2019. I'd like to once again say that we're available for any clarification you may need. Please get in touch directly with our Investor Relations department for clarifications. Thank you. And we will meet again in the next conference call.

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Operator [25]

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Randon's conference call is concluded. We thank you all. We wish you a good day, and we thank you for using Chorus Call.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]