Earnings call transcript: Rotoplas Q4 2024 reports mixed results amid challenges

Grupo Rotoplas, a leader in sustainable water solutions, reported its fourth-quarter and full-year 2024 financial results, highlighting mixed performance across its markets. According to InvestingPro analysis, the company maintains a GOOD overall financial health score and appears undervalued based on its Fair Value assessment. The company faced significant challenges in Argentina, impacting overall growth, while also making strides in innovation and digital transformation. The stock saw a decline of 3.6% following the earnings release, reflecting investor concerns over certain regional performances and future growth prospects.

Key Takeaways

• Full-year net income declined by 46%, with notable challenges in Argentina.
• Mexico sales rose by 10%, showcasing strong regional performance.
• Introduction of new digital platforms and IoT solutions.
• Stock price fell 3.6% post-earnings announcement.
• No specific EBITDA margin guidance for 2025, with a focus on profitability.

Company Performance

Grupo Rotoplas experienced a challenging year, with a 46% decline in net income, largely due to economic difficulties in Argentina, where sales plummeted by 41%. However, the company reported a 10% increase in sales in Mexico, indicating robust performance in its home market. The US and other countries saw varied results, with a 6% decline in the US and 12% growth in other regions. The company’s strategic focus on digital transformation and innovation was evident, with new e-commerce platforms and IoT solutions being launched.

Financial Highlights

• Revenue: 2.72 billion USD for Q4 2024.
• Full-year EBITDA margin: 13.8% (excluding severance costs).
• Net debt to EBITDA ratio: 2.6x.
• Return on Invested Capital: 7.8% (8.3% excluding severance payments).

Earnings vs. Forecast

Rotoplas reported actual revenue of 2.72 billion USD for Q4 2024. Despite the challenges, the company’s performance was in line with expectations, though the lack of detailed EPS forecasts makes it difficult to assess the full impact on investor sentiment.

Market Reaction

Following the earnings announcement, Rotoplas’ stock price fell by 3.6%, closing at 17.24 USD. The decline reflects investor concerns over the company’s performance in Argentina and uncertainty regarding future profitability. InvestingPro data shows the stock has declined 28.2% over the past six months, though analysts maintain a positive outlook with expectations of profitability this year. The stock remains closer to its 52-week low of 14.89 USD, indicating broader market pressures and challenges within the sector.

Outlook & Guidance

Looking ahead, Rotoplas remains cautiously optimistic about a recovery in Argentina and continues to invest in digital capabilities. The company has maintained dividend payments for 9 consecutive years, demonstrating financial stability. While no specific EBITDA margin guidance was provided for 2025, the company is focused on improving profitability and expanding its services segment, which could potentially match product revenues. For comprehensive analysis including Fair Value estimates and growth projections, investors can access the detailed Pro Research Report available on InvestingPro.

Executive Commentary

Carlos Rojas Abumrad, CEO, emphasized the company’s commitment to innovation, stating, "We remain committed to our vision of providing innovative and sustainable water solutions." CFO Andres Pliego highlighted the global importance of water, noting, "Water will continue to grow in importance globally."

Risks and Challenges

• Economic instability in Argentina affecting sales.
• Slow recovery in the construction sector.
• Volatile market environments impacting growth.
• Potential supply chain disruptions.
• Continued pressure on profitability margins.

Q&A

During the earnings call, analysts inquired about the Vevia service’s growth, driven by customer referrals, and the company’s strategic focus on the US market beyond water tanks. Executives confirmed no plans for further workforce reductions and mentioned that any potential dividend would depend on the company’s financial health.

Full transcript - Rotoplas SA de CV (AGUA) Q4 2024:

Conference Moderator: Good morning and welcome to Grupo Rotaplas’ results conference call. Please note that today’s call is being recorded and all participants are currently in listen only mode to prevent background noise. The host will open the floor for questions later. Today’s discussion contains forward looking statements. These statements are based on the environment as we currently see it and as such there may be certain risk and uncertainty associated with such statements.

Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. The company disclaims any intention or obligation to update or revise any forward looking statements whether as a result of new information, further events or otherwise. Please allow me to remind you that the company issued its earnings press release yesterday after market close. It can be found in the Investors section of its website. Also, the presentation for the call and the webcast link are in the Investors section.

Today’s call will be hosted by Mr. Carlos Rojas Abumrad, Chief Executive Officer and Mr. Andres Pliego, Chief Financial Officer. I will now turn the call over to the speakers.

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Good morning, everyone, and good afternoon to those joining us from other time zones. We greatly value your support and interest in Grupo Rotoplast. Today, we’ll reflect on the challenges and accomplishments of 2024 and share how we’re positioning ourselves for the coming times. We have just closed a particularly challenging year, largely due to the recession in Argentina, which placed significant pressure on our top line and profitability. Although these headwinds tested our resilience, they also underscore the importance of continuing to invest strategically in the future of our company.

As many of you know, we had two major projects underway, both of which demanded substantial capital and organizational commitment. The first was our project in Mexico focused on upgrading our manufacturing of storage solutions. The second was a broad technological revamp across the entire group. Together, these initiatives represent a combination of a multiyear investment cycle designed to strengthen our foundation for the next phase of growth. Starting with the smart project, we install new machinery and equipment to modernize the production process of our legacy product, Netinaco.

This upgrade enables a more efficient, faster and cleaner manufacturing process, ultimately improving the quality of the product and the user experience across fabrication, logistics, sales, installation and maintenance. Our second major initiative has several facets. At the group level, we migrated all our data to Google (NASDAQ:GOOGL) Cloud, unlocking advanced digital analytics and AI tools. On the commercial side, we introduced new data driven and IoT functionalities, giving the end user better insights into water consumption and quality. We also launched our and B2B2C e commerce platforms in Mexico, an entirely new channel for Rotoplast, allowing us to work more closely with distributors and end users alike.

Despite the difficulties encountered this year, we’re very proud to achieve the highest Net Promoter Score in Grupo Rotoplast’s history. Through dedicated UX committees and active customer listening, we’re continually refining our process and improving every interaction with our clients and consumers. Additionally, our Vega service continues on a strong growth trajectory, adding subscribers at a healthy pace and receiving excellent feedback from the Vegas market. Now that these two major projects are operational, our immediate focus consists with what we shared on our day is to optimize expenses and investments over the coming quarters. Specifically, we are capitalizing on omni channel and digital capabilities.

We will leverage the Webia three point zero platform and our new e commerce channels to better serve existing customers and attract new ones. Reversing the decline in EBITDA, we’re taking decisive steps to reduce expenses in November. We undertook we undertook a difficult but necessary restructuring that reduced our overall headcount by 4%. This measure helps streamline operations and position us to be more agile and competitive. Focusing on free cash flow generation, we aim to boost operating profit through disciplined working capital management and strict capital expenditure control, thereby ensuring a stronger cash flow position to drive strategic initiatives.

Looking ahead to 2025, we remained guided by our four strategic pillars: one, sustainable growth of our products two, ongoing development of services three, continued digitalization and four, generating value for all our stakeholders. Every year brings its own challenges and 2025 will likely be no exception, whether due to macroeconomic variables or political uncertainties in multiple geographies. However, we will continue to adapt and remain as agile as water itself, always seeking new ways to bring sustainable water solutions to millions of people. We have also made significant strides in our environmental, social and governance commitments, which have positively impacted our stakeholders. Through the upgrades in our manufacturing process for storage and our transition to renewable energy in Mexico, we have reduced Scope one and Scope two emissions by approximately 12%, aligning our efforts with the objectives of the Paris Agreement.

Additionally, we published our sustainable development impact disclosure report in collaboration with JPMorgan, becoming the first company in Latin America and only the second worldwide to disclose how our strategy aligns with the United Nations’ sustainable development goals at this level of detail. We invite you to read this report, which is available in our Investor Relations website. In the realm of community social action, our Escuela’s ConAgua program stands out, conducted in partnership with the Coca Cola Foundation, eight bottlers of the Mexican Coca Cola industry and Isl Urbana. The program successfully closed 2024 with the installation of 300 IoT enabled rainwater harvesting systems in schools across Mexico. This initiative directly benefits students and teachers, improving their access to water and raising awareness about responsible water usage.

Finally, before handing over to Andres, I want to express my gratitude to our employees, partners, distributors and especially our shareholders for their trust and support throughout this challenging year. We remain committed to our vision of providing innovative and sustainable water solutions, and we look forward to seeing the opportunities ahead. Thank you again. Now I will turn the call over to Andres.

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Thank you, Charlie, and good day to everyone. I’d like to begin by highlighting the most significant factors that shaped our quarterly and full year performance. As you know, the challenging economic conditions in Argentina had the greatest impact on our overall results. If we exclude Argentina, our quarterly sales would have grown by 7.5% and our full year sales by 7.8%. Unfortunately, lower sales in Argentina combined with our planned investments in digital initiatives affected our margins, ultimately limiting our full year results and contributing to a 46% decline in net income for the year.

As we mentioned during the Agua Day and as Charlie briefly recap, we have two main financial priorities I’d like to elaborate on. The first is reversing the EBITDA trend through cost and expense reduction. In this regard, we have already taken several measures, including a workforce restructuring that unfortunately led to the departure of some employees, reducing our headcount from to resulting in severance payments of ARS54 million in the quarter. Excluding these severance costs, our full year EBITDA margin would have been 13.8%. Moreover, if we remove this cost from the fourth quarter expenses, we see an 8% reduction compared to the previous quarter, showing a sequential improvement.

We will continue adjusting our costs and expenses according to market conditions in the countries where we operate. Exercising strict control over capital expenditures. We have drawn up plans to further reduce inventories, particularly in Argentina and to continue improving our account receivable management in Mexico, leveraging technology to streamline our processes. Regarding CapEx, we’re prioritizing maintenance investments that support our existing product lines, while discretionary spending requires monthly approval under more stringent criteria. Our Services division in our Services division, we have adopted a pay as you grow strategy to ensure that the highest return projects receive investment first.

We believe these actions will positively impact our return on invested capital going forward. Moving on to regional performance. Mexico posted a 10% annual increase in sales, driven by growth in both services and products. In products, we saw a solid expansion in the first half of the year, followed by a slower pace in the second half, with the fourth quarter sales ending in line with the same period in 2023. Services, on the other hand, continued to post steady double digit growth.

EBITDA margins in Mexico contracted due to higher digital expense and softer product sales in the latter part of the year. In addition, the increased weight of services where we have not yet reached profitability further pressured EBITDA. In Argentina, net sales declined by 41%, reflecting the country’s recessionary environment, which eroded both demand and pricing power. Condition worsened each quarter, resulting in a negative EBITDA margin in the quarter. However, full year EBITDA margin remained positive.

Although several indicators such as slowing inflation, improving fiscal accounts, increased credit availability and some positive consumption signals owing to a potential recovery, we have yet to observe a rebound in the construction sector, which is typically one of the last segments to recover. We remain cautiously optimistic about Argentina in 2025, yet the timing of any meaningful improvement in demand remains uncertain. In The United States, net sales declined by 6% in 2024, largely because there were no drought conditions and the agricultural sector contracted, reducing demand for our tanks. Despite negative EBITDA, our cost control measures are helping to improve margins. Meanwhile, net sales in other countries grew by 12% for the year with the strongest increase occurring in the fourth quarter, driven by growth in Peru, Central America and Brazil.

However, higher logistics and distribution costs coupled with increased investments in our water treatment plant operations in Brazil exerted pressure on margins in these regions. Regarding our segment performance, services now represent 8% of total revenue, supported by the continued success of Permian, which recently surpassed 133,000 subscribers. Notably, BevySmart accounts for over 70% of new contracts indicating that customers value have more detailed information about their water usage. Other services such as water treatment and irrigation continue to expand their client base. Dividend margin in the services remains in negative territory, but this improving as we move forward.

Meanwhile, as previously mentioned, our product segment has experienced a decline, primarily due to the economic situation in Argentina, which has significantly impacted sales volume pricing and margins. Turning to our cash position, we ended the year with ARS $732,000,000 in cash and cash equivalents. Our net debt to EBITDA ratio stands at 2.6 times. We view this as a temporary situation and expect it to return below two times. Today, financial debt amounts to ARS4.7 billion with ARS684 million in short term obligation, mostly in time to working capital and ARS4 billion in long term from our fixed rate sustainable bond.

The blended cost of our debt is currently at 9%. With respect to capital allocation, our total CapEx equated up to 5% of sales and 7% decrease compared to 2023, with 93% of these funds deployed in Mexico. The primary investments include new technology for manufacturing storage solutions, which aligns with our long term commitment to sustainability as well as ARS 101,000,000 for the construction of our Xtapa Luka plant, ARS 121,000,000 for Bevia and ARS 54,000,000 for water treatment plants. Our return on invested capital stood at 7.8%, which is four forty four basis points below our cost of capital. If we exclude the severance payments, the ROIC increases to 8.3%.

Moving forward, we intend to focus on improving NOFA to restore positive spread between ROIC and WACC thereby enhancing profitability and delivering the lasting value to our shareholders. On ESG and in addition to what Charlie mentioned about our overall performance in this area, I’d like to focus on specific goals. We successfully achieved five out of our six public ESG targets. The only shortfall was our gender goal. However, we did see an improvement in female representation moving from 23.7% to 25.1% of our total workforce between 2023 and 2024.

We remain committed to more inclusive hiring practices as well as the retention and development of female talents throughout the organization. Looking ahead, we will continue working to generate a positive impact on both people and the planet, ensuring long term viability of our business model. Thank you once again for your time and interest in our company. We remain committed to delivering strong results while keeping our long term recyclable industry. We believe we’re in the right industry as water will continue to grow in importance globally.

Moving forward, we will continue on we will concentrate on the levers within our control to enhance profitability and strengthen our operations. With that, we can now begin the Q and A session.

Q&A Moderator: We will now begin the Q and A session. Please type your question in the Q and A section, including your name and the name of your company for a fund. We have now the first question from Carlos Alcaraz of Balachie Research. Hello and thank you very much for the call and for taking my questions. So there are three questions, but I’m going to read first just one and then go back to the rest.

So first, in terms of international expansion, do you see opportunities for Vevia in markets outside of Mexico?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Carlos, thank you for joining the call. There is definitely opportunities in other markets. I think that what we have designed for Vevia as an offer is very noble and has very strong capabilities. But we have decided to focus on Mexico for the moment being. We think that Mexico offers a very, very large opportunity.

We continue to validate the hypothesis. It’s a market where point of use water purification offers tremendous benefit and value for our customers. The experience of Vevia is unmatched and customers enjoy that experience very much. And so we think we can grow significantly by focusing on Mexico. We will continue to consider other markets in the future, but for the moment, we will focus on Mexico.

Q&A Moderator: We have the second first shift done from Carlos Alcaraz, and it’s about CapEx. What proportion of this, it means CapEx for 2025, will be for maintenance and what proportion for growth?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: [SPEAKER JOSE RAFAEL FERNANDEZ:] Thank you, Carlos. First, as we mentioned, we will be very strict with CapEx in general. We will obviously prioritize maintenance CapEx, which we expect to be low. And then the rest of the CapEx for new projects will be very on a case by case basis. What we can say is that CapEx will be lower than this year than last year, sorry.

We had lower CapEx in 2024 than in 2023. So we expect that to continue. And in terms of the proportion, I mean, at this point, I would say, I mean, most of it will be maintenance. But as we see improvement in results and as we see projects with high return on invested capital, we will start investing a little bit more in CapEx. So we don’t have the proportion to the end of the year, but that’s what we can say at this point.

Q&A Moderator: Moving to the third question. On the migration of data to the Google Cloud that you mentioned, will this allow margins to improve during 2025?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Definitely. I think our AI capabilities will enable our talent to increase efficiency. We do expect for new businesses to continue to grow. They have been growing steadily. And so rather than needing more resources to service that growth, I think we’ll be able to do it with current resources, with current talent.

And so that should improve margins. Not only should the efficiency grow or improve, they should also enable businesses to grow more rapidly. So we do expect margins to improve as a consequence of adopting AI capabilities. Thank you for your question, Ben Carlos.

Q&A Moderator: Thank you, Charlie. So we are moving to another question from Martin Lara, Beyond Global Research, and it’s about Mexico. So Mexico sales have been a little bit slow in the last two quarters. What can we expect going forward, especially taking into account the opening of the Xtapa Luka plant? Do you expect margins of the Mexican operations to return to the mid-20s?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: We do expect to have stronger demand on, I mean, after the first semester of last year, which was very high demand, Then we had a period of much lower demand as a consequence of that first semester high demand. Eventually, demand should recover. On the Istapaluka plant and the rest of the other plants with the manufacturing, with the new blow molding manufacturing, those allows us to improve slightly market shares, like CDC product that has been adopted by the market very positively. So we do think that, that can also improve volumes to some extent. Now the margins should improve, but more so because the new manufacturing process is much more efficient.

This efficiency generates benefits in terms of margins and also sustainable in terms of sustainability consumes much less energy to produce the water tank. So we do see an improvement in margins. Thank you for your question, Martin. And thank you for joining.

Q&A Moderator: Thanks, Ode. One other question. Emilio Amador from GBM is asking, with the ongoing cost reduction strategy, what should we expect in terms of dividend for this year?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: We have been having a very consistent practice of giving out dividends. We need to make sure that we prioritize the health of our financials. So we will first prioritize going forward the recuperation of our cash position and the net debt to the ratio. We do think that we will be in reasonable shape to be able to have a dividend at some point in the year. It might have to be at a different timing as the previous years.

But again, if we have on the healthy financials we’re looking for, we should continue with our dividend practice. And there’s anything else that you would like to add regarding dividends and financial and the relationship to our financial help?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: No, no. Well, probably just sort of what I mentioned on the CapEx. We will, at this point, nothing is for certain. So we, as we move along in the year and as we improve our results, we will take more capital allocations decisions. But other than that, nothing more to add.

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Thank you for your question, Emilio. Thank you for joining.

Q&A Moderator: Now we have a question from Felipe Barragan, BTG Pactual. And it’s, can we expect further workforce restructuring for the coming year? Or do you guys feel in a good place?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Well, I think we have rightsized the company. We have further opportunities to improve our EBITDA through lower expenses, not by reducing workforce, but a lot of the ongoing projects that we were culminating last year, they’re actually coming to an end where we can have a better a lower expense and expense as a percentage of sales that is trending more to our traditional levels. So I think we will be focusing more on those expenses and on harvesting what we have been investing for so many years. And I don’t think we will need to make any other workforce adjustments. But obviously, this is considering our market expectations do meet or the market’s performance do meet our expectations.

The volatility environment in our main markets is pretty high at the moment.

Q&A Moderator: Thank you, Charlie. So now we have a question from Sofia Martin, GBM. And what EBITDA margin should we expect for this year? Thank you.

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Go ahead, Andreas.

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Yes. As we mentioned in our Agba Day, we are removing any guidance for 2025 at this point. So it’s uncertain at this point, Sofia. We cannot give any guidance at this moment. We think, as Charlie mentioned in the previous question, we think we have right sized the company and we have invested in the last five years to continue our long term margin expansion, our sustainable profitability, but nothing specific for 2025.

Thank you.

Q&A Moderator: Thank you. Now we have Maria de la Madrid from GBM asking, how do you foresee Argentina’s development through the year?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: I’d love to have that crystal ball. Construction is an industry that affects us very much in Argentina. And Construction last year never recovered in Argentina. A lot of different sectors did recover in Argentina, but Construction was one that didn’t. And it is expected to be one of the highest recovering sectors in this year.

But we are waiting to see when that recovery starts to then really go after growth in Argentina. We will wait till that moment to take action. I think anticipating when that will happen is difficult to be assertive on. And so we do not have a particular expectation of how quickly the construction sector will recover in Argentina. It is the most lagged and it is the one that’s expected to recover the most, but we will make decisions until it happens.

Andres, anything else?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Not really, Charlie. I think I agree with your response.

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Thank you, Maria.

Q&A Moderator: So now we have a question from Rodrigo Salazar, AIM Advisors. Could you please give me more color on services? I would like to understand why sales fell quarter over quarter in the third quarter and then increased quarter over quarter in the fourth quarter. As we understand, services should be more stable. It seems the strong movements are in water treatment plants.

So if you could please elaborate on these and if you expect these variations to continue?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: [SPEAKER JOSE RAFAEL FERNANDEZ:] Thank you, Rodrigo. We had a one off capital sale in Brazil in the second quarter. So that’s why you saw the change in the quarter over quarter from the second to the third quarter. The fourth quarter had no one offs. So we just saw the regular trend of the business.

So I guess that was what made noise in the first half of the year.

Q&A Moderator: Now we have a question from Michelle, Zenon Investments, and it’s about the working capital. Can you explain the reasons behind the strong increase in accounts receivables and even stronger in inventories tying up cash? Is there a risk for write outs? And how do you want to drive inventories and receivables down?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Thank you, Michael. Yes, we saw an increase in receivables and in well, in working capital in general in the fourth quarter. In inventory, we had a one off that we registered the inventory that was in transit. We used to not have that in inventories. We now have it in the fourth quarter.

So during the 2025, we will continue to see that. So it’s going to be more normalized. Also driving inventories is Argentina. Argentina, given the slowdown in the demand, inventories have increased. So the plan for this year is to reduce inventories as we produce less and we product we plan to produce less and the demand improves in the hopefully in the coming months and we will see inventories going down.

In receivables, I would nothing in particular. The plan here is to continue to implement technology and AI and improving our communication with our main clients and having having a stronger receivable department. But I would say that nothing out of the ordinary there.

Q&A Moderator: So for the next question, there are some different analysts and investors asking again about Argentina and what we are expecting. So are there like two or three questions, something else to add or we just move to the other questions? Charlie, there’s something else to add. It’s about what we are foreseeing, what we are expecting for the coming year, maybe the first half or the second half?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Yes. One thing for sure is that I think Argentina took measures that will be transformative for the country. We are expecting a changing trend for the country as a megatrend, something that had been a dynamic for Argentina for multiple decades. We think it might change, and so we’re very excited to see that. It was a very challenging year.

The measures that were implemented slowed the economy down. We put it in a very, very aggressive recession. And we do see that recovery will happen and that Argentina as a market, the whole profile of the country will change in a very positive way in the longer term. We’re very excited to see what will happen in Argentina. Today is not a moment to be investing heavily in Argentina as it is very difficult to be accurate on the timing of the recuperation of the country, but we will be very attentive to see when this starts and how to make sure we’re serving the market appropriately.

And hopefully, a very long term bet that we have made in Rotoplast in Argentina will be a good one in the longer term. Andres, anything else?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: I guess only we see it as a timing issue, right? More than a structural issue. I think the structural changes have happened. We are seeing recovery in consumer, in energy, in, I mean, electrodomestics. We are seeing improvements in many sectors.

Construction, not yet and our products are very linked to that. So we’re, again, cautiously optimistic about the recovery. I think the question is on when that will happen. Hopefully, it’s sooner than later, but we’re optimistic and we have a great team. We have great capabilities over there.

So it’s we’re ready for when the time comes.

Q&A Moderator: Thank you. There’s another question from Rodrigo Salazar. Would you give us some color on what do you expect for 2025 in The U. S?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Well, The U. S. Has been a country that now for a few quarters has not needed any cash from Roto plus So that has been great. They have focused on cash flow and now starting to get to a better profitability position to then focus on profitably growing. The market has not helped us very much in The U.

S. As well. Two big sector or two big drivers for The U. S. Is both agriculture and then the need for water storage because of droughts.

And it had not been a cycle that benefited this business. I imagine this will change. The problem of water scarcity has not been resolved. I think that the need for these water solutions will continue to grow in the longer term. So we are hoping that the market will begin to shift and also give us some tailwinds here.

Now we have continued to learn about how to better serve different opportunities in The U. S. Other than water tanks, which is the biggest business in The U. S, One of them being septics. We have talked a lot about this in the past.

We see a tremendous opportunity, but we have not decided yet to invest heavily in this opportunity until we really understand it very well and we can be sure that it will deliver a high return. We want to make sure that when we make bets in The U. S, we will be finding very long term growth opportunities that will be very profitable. I think it’s important for Roto plus particularly today that we made these investments also when we are in a better, stronger financial position. So I think that’s what I can share about The U.

S. Arnaud. Andres, if you have anything else that you’d like to add?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Nothing at this point, Charlie. Thank you.

Q&A Moderator: Thank you, guys. So moving to the last question, it’s from Suresh Antivanis. And he’s saying, Vevia has grown strong has shown strong growth, sorry, surpassing more than 133,000 subscribers. What are the key strategies to further scale its adoption? And how do you envision its role in Bratoclass long term revenue mix and digital transformation strategy?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Thank you very much for your question and for joining. We’re super excited about BVIA. Bavia is this business that is continuing to grow very aggressively and that is delivering on expectations more closely even considering different dynamics in the market, even considering this volatile environment. We continue to see they are growing very aggressively. One of the main drivers is customer satisfaction because dissatisfied customers are referring us to new customers.

That is the biggest source of new customers, referrals from satisfied customers, which gives us also tremendous hope in Bevia. Now for Bevia, Bevia was a very different business for Rotoplast. It was very digitally enabled. So RotoPlas had digital capabilities to operate in manufacturing business, but not to connect with hundreds or over 100,000 customers and to service them continuously. But we’ve had developed these capabilities very successfully and proof of that is customers being satisfied and referring us to new customers.

So we’re very, very proud of what we’ve accomplished there, and we will continue to develop those capabilities, which will benefit Beja. But not only Vega, they will continue to benefit our traditional businesses. Like we said, we launched the B2B e commerce and the B2B2C e commerce, and we’re leveraging these capabilities. So it’s very interesting to see what Bevia will do in the future, how it will continue to grow and even more so how it will support and drive the growth of the rest of the business with these new capabilities that we have developed. In terms of mix, Telia (ST:TELIA) for sure grows at a much higher rate than the rest of the business.

So that will be catching up. We are also expecting the rest of the business to grow, the products business to grow. So hopefully, it doesn’t catch us up too quickly because we are strongly growing products, but we do see services catching up with products and at some point services being as large as products. Andres, anything else that you’d like to add?

Andres Pliego, Chief Financial Officer, Grupo Rotoplas: Yes. Probably just add that what we saw last year was one of the bright spots of the year was Varian. The trends in unit economics in general have been trending positively for the last, I would say, couple of years. And what we’re seeing for the next couple of years is to continue that trend. So yes, just to finalize, actually, I was finalizing.

Obviously, BBR will take larger part of the revenue share in the future. But so we’re excited about BBR in general. Thank you.

Q&A Moderator: So there are no more questions. We can conclude the webcast. Something would you like to add, Charlie, on this?

Carlos Rojas Abumrad, Chief Executive Officer, Grupo Rotoplas: Yes. I would really like to reiterate our appreciation for your support for joining in this very challenging year that we just had and looking forward to our next call next quarter.

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