© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning. Welcome to the Conference Call of WEG. We released the results of the Fourth Quarter [ph] of 2022. We are transmitting this conference call along with the slides in our Investor Relations website at the address ri.weg.net, and after its completion the audio will be available for you at our investor relations website. [Operator Instructions]
Any forecasts and the documents or any statements made during this conference call about future events, business prospects, operational and financial projections and goals and also to a potential of future growth of WEG are near beliefs and expectations of the WEG's management and they are based on information currently available. Forward-looking statements involve risks and uncertainties and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of WEG and lead to results that will be differ materially from those expressed in such forward-looking statements. As a reminder this conference call is being conducted in Portuguese, and you're listening to the simultaneous interpretation into English.
Today with us in Jaragua do Sul, we have Mr. Andre Luas Rodrigues, Administration and Finance Officer and Andre Menegueti Salgueiro, CFO and IR; Wilson Watzko, Controller; and Felipe Scopel Hoffmann, Investor Relations Manager.
Mr. Andre Rodrigues, you may start.
Good morning, everyone. It's a pleasure to be with you once again for the conference call of WEG. I would like to start with the quarter's highlights, where the net operating revenue grew 22% as compared to 4Q 2021. We have maintained a consistent growth in this quarter as a result of positive demand in the main markets where we operate, combined with our strategy of product diversification and global presence.
EU, there was good demand for industrial equipment such as electric motors and automation components, as well as in solutions related to generation of renewable energy, especially in the business is related to when the solar generation addition to the strong performance in transmission and distribution.
In a foreign market, the performance was also positive with the maintenance of sales volume in the area of industrial electronic equipment and growth in sales in generation transmission and distribution of energy as a result of the portfolio that we've built throughout the year, especially in transmission and distribution businesses.
Another highlight of the quarter was our EBITDA which reached BRL1.8 billion, with a growth of 38.6% as compared to the fourth quarter of 2021. Our EBITDA margin closed the quarter at 19.5%, a growth of 2.3 percentage points as compared to the same period last year. Along the presentation, Andre Salgueiro is going to give you more details about this performance.
ROIC, you're going to see on the next slide has reached 29.4%, a 1.1 percentage point reduction as compared to Q4 '21, especially due to the growth and the capital deployed, mainly explained by investments in fixed and intangible assets in a period. It's important to highlight the 1.5 percentage points growth in relation to Q3 2022, supported by the growth in revenue and operating margins.
Now I would like to give the floor to Andre Salgueiro to continue.
Thank you, Andre. On Slide number five, you can see the evolution of our business areas. In the markets where we operate in Brazil, we continue to have a good performance in electronic and industrial equipment with good demand for short cycle equipment such as electric engines and reducers, with a highlight to segments related to agribusiness and open paper.
Well, we also noted good demand and long cycle equipment such as medium voltage, electric motors, motivation panels, especially in oil and gas mining and pulp and paper. In GTD, we noted the growth in all business lines in Brazil. In addition to the continuity of the delivery of wind, the turbines this shows the performance of distributed solar generation alternators.
T&D business had good revenue volumes driven by transformer deliveries to several major segments such as transmission, renewable distribution and industrial. In commercials engines and appliances, thus far the good sales volume in some segments we noted an oscillation in demand from some important customers and peers such as manufacturers of washing machines and motor pumps. Finally, the demand for paint and varnish products was positive, especially in the segment of metal structures and maintenance.
In international market, we maintained good demand and among different industrial segments where we operate, despite the volatility in some regions. The highlight was the good performance in United States. In Europe, despite the concern with the political and economic scenario in the region, we observed better billing and order placement for long cycle equipment, especially for gas, mining and water and sanitation projects, thereby contributing for the construction of a healthy or their portfolio.
In GTD and T&D sales show a positive quarter, especially in North America where we continue to take advantage of the opportunities in generation business. We highlight the good performance in our operations with an emphasis with the production of hydro generations in commercial motors and appliances. We not that the revenue flat revenue level when compared to the same period in the year before.
Despite the accommodation in sales volume in some markets such as North American Argentina in, we had a sales progress in our Mexico operation, which contributed the growth as compared to the same period the year before. On slide six, you can see the evolution of theta, which drew 38.6% compared to Q4 '21. The ETA margin ended the court at 19.5%, 2.3 percentage points higher than the same period the year before.
This result is the is a reflex of stabilization of cost in recent quarter and the increasing improvement in the performance of our foreign operations. Finally, on slide say seven, you can see the evolution of our investments. We have invested 431 million b l on the quarter modernization, expansion of manufacturing cap capacity, machinery and equipment and new products. 42% of which were meant for manufacturing units in Brazil and 48% were meant for industrial complexes and other facilities abroad.
Now I, my part and I give the floor back to entry. Before we move to our q and a station, I would like to talk about some of our most recent accomplishments and to talk about our prospect for this year. With regards to achievements, I would like to highlight the following recent events. So first we consolidated the first and largest two units of motor control division in Italy in Germany, which were acquired last August.
In November, we opened the new veg engine factory in Algeria dedicated to manufacturing engines for home appliances, especially washing machines. Finally, an outlook for the remainder of the year. We started with a robust order portfolio for long cycle projects, both in manufacturing and in projects in oil and gas, mining, open paper as well as in GT t d in transmission and distribution generation projects, which should contribute to a growth in revenue in the part of the business both in Brazil and overseas.
The standardization of supply chains associated optimization of cost of the main raw material should contribute to the operational dynamics throughout the year. On the other hand, we must keep an eye on the global macroeconomic scenario and possible related risks and volatilities both in the domestic and internationals scenarios.
Now, I end the presentation. Operator, please, we may move to the Q&A session.
[Operator instructions] Our first question comes from [indiscernible] from Itau BBA.
Good morning, everyone. Can you hear me? Thank you. Good morning. I would like to get more details about two things. First, I would like to and understand better electro electronic equipment in the foreign market. We have that North American market consolidated the benefit GTD, but when we look the variation of revenues outside the American market, it's flat.
So what happened in the North American market and the same thing applies to Europe. We understand that we had the benefit of the consolidation, but there was a very strong growth in Europe, especially related to electronic equipment. So I would like to understand more about the short term dynamics quarter-on-quarter and what you're seeing this year for these two markets, both the North American and Europe. And I would like to understand more about market share. In any recent event, we've heard about Siemens, your local market, maybe you should leave just motors and focus more software.
So what do you see in terms of your market share especially in the European market especially comparing to Siemens. Siemens are carving out their engine or their motor operations. So usually focus more on technology and markets that aren't smaller. Would it make any sense for us to think of a carve out of the motors operation globally speaking? That's it. Thank you very much.
Good morning. Thank you for your questions. This is Andre Salgueiro. I will answer the first part about revenues from the foreign market and then he will talk about market share as to North America. When we look at the region as a whole, we have a positive performance and strong demand. And the highlight in the region was T N D, especially because of transformers in Mexico and the US. When we look at other businesses, we are not seeing revenues shrinking except with commercial motors and appliances where we have since some accommodation in a q4 as compared to Q3.
But overall, the manufacturing dynamics is positive and the only thing that we should look at short cycle, especially comparing q4 with a q3, there may be some seasonality towards the end of the year that might impact this dynamic. On the other hand, when we look at the Europe, it had positive performance and we mentioned this in our belief is slightly above what we expected earlier in the quarter, but this is very much related to a project.
So there is industrial and electro electronic equipment which drives the growth. And you mentioned the consolidation of different after November, but also are the businesses performing very well in Europe and projects as we've been seeing long cycle both for oil and gas, water and sanitation. We have a significant concentration of OEMs for these types of projects in Europe.
So we had a very strong port because of demand in Europe. Hi Daniel. Thank you for your question. I will try to answer the second part of your question as for a, a market share on the, our last day we had a very detailed presentation and talking about the company and opportunities that we are seeing as a result of vax internationalization project with solutions and also the fact that we are going into some new segments.
I think that this movement is going to continue. Last year was very positive, most businesses had very good performance and we are going to continue working to keep that. And I think that there are many opportunities in the market which are part of the company's internationalization process. And so this is the positive and we hope to continue advancing in the main markets and where we are starting to have our presence. Another thing is that VA always analyse. We don't usually talk about the processes that are in the market or about to go to market. So we can talk about these things.
Our next question comes from Lucas Laghi from XP Investimentos.
Good morning Rodriguez. Sal, congratulations on the results. There are two things I would like to explore with you. The first one is related to the four months. You tell us a bit more about European market towards the end of two and the macroeconomic is more challenging in terms of recession and supply chain. So how is veg behaving in this market?
So we have more exposure to exports and you're exposed to problems. Was there any reflex in your strategist in the third quarter, especially with regards to motors? I would like to understand the, the company's perspective in European market. And the second question that is more specific about taxes now about 40 million b l in addition to what is most recurrent in terms of tax assets.
So you reduced three points effective rate so can you give us more details about that rate? And do you have any updates in terms of the provisional measure in Brazil in terms of tax rates and its impact on that when anything you may say will help us? So these are the two things I would like to ask about European market and the tax rate in Brazil.
Answering your question with regards to Europe as a region, Europe is a very important region for our company. It's the second biggest region in terms of relevance in terms of international revenues. And as we said in the past, yes, we do have some significant operations in Europe, especially in Portugal and Austria, and many of the products that we sell in Europe, we manufacture, especially here in Brazil or even in China, especially the engines with aluminum casing.
So since the beginning of last year, Europe, the situation is very specific in the prospect towards the end of the year in the last quarter was to have a very strong energy crisis because of the conflict and energy and then may be a slow down an economic activity, which somehow, at least in the short term, was not as significant as we thought it wouldn't be.
So this effect and the combination of less severe winter and as we equalize that the energy did not have such an impact on the short term economic activity in any way, this is something that we need to monitor. We can say that this is completely solved. As we usually say in Europe, there is more concentration of sales or short cycle products.
So we don't have such a long portfolio of visibility. We need to monitor month from month to see the dynamics over the next few quarters. What we can see now in terms of long cycle portfolio, there are some projects and some significant deliveries over the next few months and quarters. And in terms of short cycle, we are seeing some isolation in some countries, but we cannot say that the, it's a downward trend. It's more towards the stability, it's flat the scenario.
So we need to monitor the short cycle from now on. Now this is Rodriguez, and we would like, I would like to highlight two points. First, the higher volume of sales in the foreign market, which has contributed to reduction in effective rate, and then then one off effect of income tax and social contribution on interest rates and select that had an impact.
When we go to 1152, the Brazilian law is that we are monitoring this and this law will impose changes on transfer pricing rules in Brazil. And what we expect is first of all this is just a bill that still needs to be approved in a congress before it becomes a law. So, it'll be -- it'll go to an arm's length concept. The arm's length concept includes five different types of methodology four to define everything, and you depend on all the rules from that are enacted.
And I'm trying to be educational saying that there are still some phases before we know better what is going to happen. And if everything happens during the deadline, there might be an effective impact in the income tax as of 2024 if this bill is presented as it is in the provisional measure. So the current structure that we have today needs to make sense. So the share impacted of our operations is showed in the line of the rate difference and we are publishing that.
And right now, because of the uncertainties that I have mentioned, step by step is difficult for us to have an accurate estimate of that impact in any way. I would like to say that we believe that there will be a benefit. It still makes sense even after the bill is approved. And once we see whatever will come with a provisional measure, we are going to give you more information.
Our next question comes from [indiscernible]
Good morning everyone. Congratulations on the year and on your performance. I would like to touch a point that earlier last year, I think we mentioned that right after the conference call of the Q4 2021, I would like to go back to that point. Back then we had a concern with a possible down and we were seeing some effects, especially slow down outside Brazil.
And one of the points that were addressed in one of our conference calls was precisely with regards to your long cycle revenue backlog. I would like to understand what it is like comparing it to last year and now in the beginning of this year in percentage terms. If you could show that was, I can do lots of calculations and it'll be very helpful. Thank you.
This is Andre Rodrigues. I'll tell you more about the backlog. First of all, when we talk about industrial electro electronic equipment, we are seeing a good continuity in orders being placed along the s both in Brazil and in the international market, in this business line, especially with oil and gas mining and pope and paper. And so there is a good performance and they continue industrial el electronic equipment.
And so we have a healthy portfolio. Now, when we go to GTD we start with a robust portfolio when we talk about Brazil, we can talk about transmission and distribution auctions. Last year we had two auctions total in close to BRL19 billion in June and December very positive and this for that number to go to twofold. So BRL50 billion there will be auctions, if I'm not mistaken in July and December. So it's not a good portfolio and positive outlook for this year. Still in G T D if we look at wind. So we have a portfolio with schedules until the middle of 2024. This hasn't changed in solar sale of equipment for
Solar plants; we have good prospects this year and also a good portfolio for electrical generators, especially from hydro and thermal source. So this is positive in Brazil. Now, if you look at the international market nothing has changed in terms of what we are always telling you.
Once again, in North America, still have a long strong demand from generation and transmission with aerial generators; South Africa also with got prospects for transmission and distribution. So in this manner, we have started this year as we started 2022 with a very positive portfolio for the company's long cycle portfolio.
Thank you very much and congratulations on your performance once again.
Our next question comes from Marcelo Gumiero from Credit Suisse.
Good morning, everyone. Thank you for taking my questions and congratulations for your performance in 2022. I have a specific question about margin. So your margins compared to a very strong level that you had in the last quarter and what do you see in 2023 in terms of profitability?
So we see a slowdown and the prices of commodities globally and how is this translated into opportunities for 2023 years compared to a more competitive pricing dynamics. So if you compare to your peers in terms of diversification, pricing and everything. And, and another question, a follow up.
Globally, we see many incentive programs for the energy transition. So in US and Europe, very significant projects in face value, it's billions and billions of dollars. So in the end, are using that this type of initiative has contributed to warming up demand. What do you see in terms of projects? Are there any differences? Do you see an impact? Those were my two questions. Thank you very much for taking them.
Hi Marcello, this is Andrea Rodriguez entering, I'll talk about margins and then Salgado will answer the, your second question. First of all, we should remember that even though our company does provide any guidance of projected margins our margins should be, should consider longer periods. So we are in the beginning of the year and today, considering our current visibility, our margins will be, we will be probably, we will be able to deliver margins that are similar to what we had in other years.
And so sometimes a focus on effects variations. We've been seeing some volatility in the last few weeks and this is likely to continue some volatility in the slowdown in the global macro scenario, I think that San NATO Salgado talked about that and variations in the cost of commodities for long periods. So the main message is that we'll continue working to deliver margins above those of the market.
Marcello, as to the energy transition and all actions that have been going on both in the United States and in Europe, they're all very positive. And it's important to point out that most of our businesses are exposed to this new trend and the most recent trend. And so we go from the manufacturing when we talk about motors with more energy efficiency automation solutions that may help to reduce conception of energy and also electric mobility, electric and sometimes especially focusing on heavier automobiles such as trucks and buses.
So it's intrinsic to many to good portion of our businesses as we've been doing. So we see this is a very interesting opportunity. It's difficult to measure right now how much this is already happening. Concretely speaking, I think that in the mid and long term it sounds like this is a very positive opportunity to say that this has already moved the needle for us right now. It's very difficult for us to have that perception because as I said, this permeates most of the company's businesses. Thank you very much.
Our next questions comes from Andre Masini from Citibank.
Good morning Rodriguez. Salgueiro, Felipe and the team. Thank you for taking my question. Thank you for the call. I would like to, to ask about supply chain and pricing. So with an improvement of the supply chain how do you see the pricing dynamics in the worst months of the dynamic?
The supply chain was really broken and you say that customers were less price sensitive in the past, the most important was to have the right product at the right time. Not many people were doing that. Now, once we are back to normal, do you think they are again, price sensitive and there is more competition based on pricing?
And can you hear us? There is a little bit of echo, but we can hear you well. Last year, the global supply chain, we went through a period, especially after the pandemic, when we had the major impact of many segments in terms of what was recurrent supply of some components. They started in the beginning of the pandemic and we are reporting normalization in this process. And what I would like to say to you is that today most of the impact we have seen has been normalized.
So most of the part, most of the parts that we use in our process, so freight, cost, availability of ships, all of this has gone back to normal along the last few quarters. And there, there's still something missing in terms of electronic parts, which still affects our automation products. But somehow the situation, especially if we compare to what it was during the pandemic today, it's, it's much better than it was a few quarters ago.
Now, once as we've gone back to normal, we'll be able to see some impacts in, in operational terms, we are going to see operational improvement and we have noted part of that in the fourth quarter with a more positive cash generation because of our inventory levels are going back to normal. So we have started this normalization process and this was only possible because we are in the process of improving that environment as a whole.
As to competition, as we said in other calls, we have used the opportunities as we have a vertical model and as we we're very proactive in terms of that problem and we met the needs of our customers very well along the period. I think that there should be some pressure from some competitors, but we don't see that as a risk. Most of what we built along the last few years, we are going to continue supplying from now one.
Our next question comes from Alberto Valerio from UBS.
Good morning Sal, when Rodriguez, once again, congratulations on the surprisingly very good result that you are reporting. Could you give us some color on whether there was any influence in some specific area or geography in terms of long cycles in Brazil or in United States or Europe because of a stronger margin than usual and weather? Well you have given some of the guidance for 2023. Another point I would like to know, what is your inventory management like? So do you do FIFO inventory average?
So what should expect in the future because there was very strong volatility in the commodities market recently. Hi Alberto. As to margin, we have improved our margins in practically all operations. So this is more or less in line. There was no significant evolution, but when we compare it to last year in as compared to the fourth quarter of 2021, there has been an evolution and most of the businesses I said is natural.
And we have that dynamics of short cycle and long cycle. So we have seen that effect, especially based on the fourth quarter. It continued and as time went by we saw normalization in long cycle. So no major business line or no product line was an outlier. So this is a usual process in terms of the co recomposition of prices and the cost structure, which was stable along the last few quarters and we saw this effect in almost every product line.
Alberto, this is Andrew Rodriguez talking about the supply chain. What I can say is that we didn't have any shortage in raw materials or generalized shortage. So this is a result of our verticalization, our conservative inventory strategy that we have adopted over the past few quarters as we have updated you on that.
So this has helped and the situation is getting better quarter after quarter, however, it still has some impact in some industry special in terms of electro electronic equipment. So in this manner, what you can see is that the more we go back to normal, we can reduce inventory levels. So we can compare the volume of inventory that we had in September. We had an improvement in December, and we'll try to find something better and better quarter after quarter as things go back to normal.
And then with regards to pricing, what I can tell you is that we are also seeing smaller pressure in a cost structure coming from raw materials. And this something that happened along the second half of 2022. Some raw materials showed an accommodation of prices and here we can mention copper and steel and others such as electronic parts are still at high levels of price. And we said a shortage in terms of commodities.
This is all back to normal and we talk about electronic parts. It's not right to say that the same thing happened. So when we answered about that in the beginning of 2022, we had an expectation that the components chain would go back to normal after 2023.
This is not happening. And what we are expecting is for it to go back to normal after 2024. And as I said, if on one hand there is a normalization in the, in terms of commodities, what we have seen recently was a reversal of trends in commodity prices. I talked about steel and copper and they are track of accommodation, but recently we saw some pressure on those prices maybe because of the opening of China. So today, now focusing on inventory, we hope it will get better along future quarters. Perfect. Thank you very much.
Next question comes from Marcelo Motta from JPMorgan.
Good morning. I have two questions. First of all, could you give us more details about the CapEx for 2023? Some expansion in EU and I would like to understand more maybe depending on the segment, so where you are expecting more investments. And the second in the North American market, there are some companies especially thinking in terms of inflation, in terms of labor. Can it pressure mar margins this year or not?
Hi Martha. I will talk about CapEx in 2023. The first thing is that we have approved our capital budget for 2023. A number that is bigger than what we had in previous years. And so last year it was BRL1.2 billion. And part of what I am going to say is something that we've been announcing and things that started in 2023, and they're going to continue in 2023.
And basically those investments are to support the current growth of the company in recent years. Our total CapEx, most of it a little bit more than half was for the foreign market. This year, 55% is allocated to Brazil and 45% to international. So here the focus in UA to sue increasing our manufacturing capacity, a new motor factory, especially for electric motors. And because of the good performance of a T&D in Brazil the team where we have our transformers plant, we have new investments to expand our factory there. In terms of service provision for transformers, IBA, recent acquisition that manufacturers transform us more focused on measurement equipment. So there is this co dynamic that we are seeing in the T&D market.
As said before in the international market in Mexico, the highlight is the increase of capacity. The new plant for transformers is supplying the United States included in India last year, we reviewed our investment. So we opened a new low voltage electrical engines in India and now we have mid and high voltage to use the space to manufacture. I arrow generators 4.2 that we have the intention of starting selling in the market, Portugal.
Two, we have an opportunity with industrials. This is the focus and this is where we are making the investments. United States, after we open our third transformers manufacturing plant, at the same time we announced expansion in one of the existing factories. And this expansion will be complete in 2023. And in China we are going to increase capacity for industrial engines and to increase automation in that country.
And part of the investment will also be focusing on a constant automation and modernization and robotization of our operations. It's important to say that this capital budget I don’t know, maybe we will execute 100% of that amount in the year as we did in last year's, but this is just a snapshot and an overview of how we are going to allocate investments in 2023.
Hi Marcelo, thank you for your question. As to inflation in United States, and we can talk more broadly. So inflation today is a reality in most of the world, not just in the United States and in Europe too. This was something very strong last year and has some impacts for the cost structure.
And I would tell you as it is a Brazilian company and we are very familiar with that dynamic in Brazil and we know a lot about it about that matter and we are going to make all the necessary adjustments. We don't see that as a significant risk that wouldn't have any significant impact on our margins or the dynamics of our businesses. Thank you very much.
Our next question comes from Rogerio Araujo from the Bank of America.
Good morning Salk. Congratulations on your results. I have two follow ups. The first is about transfer prices. There is a line showing the gain and a difference from rates international rates. Can you give us a breakdown, breakdown of how much of that comes from exports and how much of that comes from manufacturing outside Brazil with a lower rate so that we know more what is related to transfer pricing?
And my second question regards solar power. Can you tell us about the market after January 6th which was the deadline? So what do you think in terms of G and d any lags in terms of the placement of orders and how does is that related to deliveries? Thank you.
Hi Rogerio, thank you for your questions. Well, let's do the breakdown of explanatory notes on line 27. We cannot report the breakdown specifically. All I can tell you is that most of the effect on that line is related to the trading, the structure of the trading. Obviously there are different rates in other operations with lower rates than Brazil. And then this difference goes through that. But mainly the, in the effect that you can see, that is the effect related to trading, that's to solar.
And there was a change in regulations now on January 7th and everyone knew that this was something that had been, that was being discussed for a few years. And this new regulation has an impact on distributed solar generation and it still includes a transition period for the projects that were filed until January 7th.
We still have a transition period depending on how big the project was. That can range from 120 days to almost 20 year. The bigger projects in power plants from one to five mega. Those projects from January seven will have one near time for implementation. So considering the transition that will still take place along 2023, we are not imagining any significant impact in solar generation.
But then on the other hand we can say that this is business that is not likely to continue growing at the same path pace as it grew in recent years. So when we look at solar as a whole and it's been getting better and better, and Andre said there is the construction of solar generation that is centralized in the last few quarters. When we look at solar as a whole, we can imagine that solar businesses will continue to grow. So especially in 2023, we don't have any major concern
In terms of shrink in revenues in 20 20 23. We still need to see so we have a short cycle in this area, but as we get towards the end of the year, we can update the dynamics of that business, especially the outlook for next year. It's very clear. Thank you very much.
Our next question comes from Josh Milberg from Morgan Stanley.
Good morning everyone. Congratulations on your results. I have questions about the evolution of your business in Asia Pacific Guru grew below average in 2022. Can you give us an updated perspective about the factors underlying this underperformance discussing the effect of lockdown in China in India, and how you receive the challenges in that market as compared to players from Mexico? A change to a more state controlled economy in more recent years.
And as the end of the COVID-0 policy especially, are we going to see a significant improvement in growth rate in that region in 2023? And in our understanding, we know that it's not Asia, it's not representative in your mix, but I ask cause you have identified in Day as a part, as part of the world where you have major ambitions for future years. Thank you very much. Did you understand my question?
Hi Josh. Yes, this is Rodriguez talking. Thank you very much for your question. So I'll talk about Asia-Pacific for sure. The lockdown in China along the pandemic ever since the beginning. Yes, it had an impact in our businesses and in other companies too. Unfortunately, we are talking all the time to the people in our China plants and overnight everything that was implemented in terms of prevention and control was lifted and disappeared as they very were very quick in implementing it overnight. They just lifted all the rules in terms of limitation of circulation. And then it had an impact on the impact of in the country. Now we are expecting a reversal because of this opening
And this general release in all operations that are taking place since last December. I think that the first point is that we are beginning the year with good prospects for that region. And as the Chinese economy improves, we are expecting growth in China and also good prospects in India too.
When we talk about Asia-Pacific, it's not just about China. We are talking about so apart from China, India is also a country that really believes in. We are leaders in meeting high voltage motors in Brazil. We are delivering relevant projects and the long cycle portfolio with positive for this year. In combination with long cycle businesses, we have opened in unit for low voltage for the manufacturing of low voltage engines.
And then there is our arrow generator and we want to start producing the 4.2 megawatts aero generators in that country. And when we talk about Asia-Pacific, we have a good performance in mining in Australia and has a significant presence. Is a well-known brand and here we combine good prospects that we are seeing both from China, India in 2023.
Our next question comes from Lucas Davis [ph] from Santander.
Good morning, Andre Rodrigues and Salgueiro and Felipe. In terms of working capital. So you said that one of the focus was to regularize operational improvements and cash generation in terms of working capital. So you show that with the protection of inventory, which other initiatives do you intend to implement?
Thank you. Hi Lucas. I think that the main action where we are going to focus is to improve inventory turnover in the companies. So the mid time for us to receive so average payment days it's different from companies than we see average payable days. It's smaller than compared to the rest of the country. It's related it's better and we use this flexibility with components and raw materials. In terms of the cost of products sold, the main focus of the company is for sure to improve inventory turnover. So we have had better inventory turnover than what we had in 2022.
We need to pay attention at the change in the business profiles. So as we have businesses, a solar that have become more relevant in recent years. And so we have a significant performance in solar plates or solar panels, and the company is very much mobilized in all levels in all countries for us to seek improvements along this year.
You mentioned solar panels in inventory. There was a 20% reduction in the price of solar panels because of reduction in prices of raw materials. And you are working with a high inventory in solar panels. Is this going to impact your profitability locus?
Well, all this work of reducing inventory and solar panels, panels, this is something that happened along the second quarter. We had an atypical situation along the first quarter without delays in terms of boarding because in the global supply chain problems that had a negative impact in our inventory levels for panels. And we want to bring it closer to normal in the second quarter. So our levels today are okay which makes it possible for us to compact our businesses without any major risks.
Thank you very much. We now close our questions-and-answer session. I would like to give the floor to Mr. Andre Rodrigues for his closing remarks. Mr. Rodriguez, please.
Thank you very much for your attendance. Have a very good day and see you on our next conference call once we announce the results of the first quarter of 2023. Thank you.
WEG's conference call has now ended. We thank you very much for your participation and we wish you a very good day. Thank you.