Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Localiza Rent A Car SA (LZRFY, Financial) reported strong net revenue growth in the Car Rental division, totaling BRL2.4 billion, an increase of 18.7% year-over-year.
- The Fleet Rental division also saw a significant rise in net revenue, reaching BRL2.1 billion, a growth of 23.9% year-over-year.
- Seminovos, the used car sales division, achieved a net revenue of BRL5.1 billion, marking a 43.7% increase compared to the previous year.
- Consolidated net revenue grew by 32.3% to BRL9.7 billion, with EBITDA advancing 24.1% to BRL3.3 billion.
- The company maintained a strong profit of BRL812 million, reflecting a 22.2% year-over-year growth, supported by increased EBITDA and effective cost management.
Negative Points
- The Fleet Rental division experienced a slight reduction in fleet utilization rate by 0.5 percentage points compared to the previous year due to higher decommissioning of cars.
- Seminovos margins are expected to gradually converge to low single digits, indicating potential pressure on profitability in the used car sales segment.
- The company faces challenges with the high mileage of decommissioned cars, which could impact the average price of cars sold.
- There is a need for continued price adjustments to maintain ROIC spread amidst rising interest rates, which could affect demand elasticity.
- The company is dealing with the impact of increased preparation costs due to a higher volume of prepared cars, including severe used vehicles.
Q & A Highlights
Q: Can you provide insights into the trends in Seminovos sales and how they compare to pre-pandemic levels?
A: Rodrigo Tavares de Sousa, CFO, explained that the used car market is showing positive trends, with prices dropping by 40 basis points, similar to pre-pandemic levels. Despite rising interest rates, financing remains strong. The sales mix is currently 40% retail and 60% wholesale, with a focus on decommissioning higher mileage cars to rejuvenate the fleet.
Q: How are you managing the elasticity in demand with rising rates in the RAC and Fleet segments?
A: Rodrigo Tavares de Sousa, CFO, noted that despite rate increases, sequential volume growth is observed in both rental car and fleet segments. The company expects a strong fourth quarter due to high demand for airline tickets and a more adjusted industry fleet. The trend of fleet renewal and rate increases is expected to continue.
Q: What is the outlook for growth in the two main segments, and how is the heavy-duty market performing?
A: Rodrigo Tavares de Sousa, CFO, stated that growth fundamentals remain solid, with a focus on replenishing margins in the short term. Moderate growth is expected next year, with robust revenue growth in RAC and fleet segments. The heavy-duty market is focusing on higher value niches, contributing positively to ROIC spread.
Q: Can you elaborate on the impact of fleet rejuvenation on rental margins and the expected timeline for fleet renewal?
A: Rodrigo Tavares de Sousa, CFO, highlighted that fleet rejuvenation is evident in reduced mileage, which positively impacts operating margins by lowering maintenance and preparation costs. The process is gradual and expected to continue throughout 2025, with a focus on reaching a standardized cycle of 15 months.
Q: How are you addressing the competitive dynamics in the RAC and GTF segments amid higher interest rates?
A: Rodrigo Tavares de Sousa, CFO, mentioned that the competitive environment remains rational, with no significant changes among major players. The company continues to focus on maintaining a strong position in the market despite the challenges posed by higher interest rates and depreciation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
