Localiza Delivers Solid Q4 2024 Results While Tackling Credit and Market Headwinds

Localiza Rent a Car S.A. (RENT3), as reported by Smartkarma, concluded the fourth quarter of 2024 with strong financial performance despite macroeconomic and sector-specific obstacles.

The company demonstrated resilience through strategic pricing adjustments, fleet renewal initiatives, and disciplined capital management, positioning itself as one of Brazil’s leading compounders on the stock exchange.

Localiza’s consolidated net revenue grew 24.6% year-over-year (YoY) to R$9.9 billion ($1.65 billion), driven by higher pricing across its business segments. However, this strategy led to modest volume growth, highlighting customer sensitivity to price increases.

In the Car Rental (RAC) segment, revenue rose 13% YoY due to a 16.3% increase in average daily rates, while rental volumes dropped 2.9%. Fleet Management (GTF) showed stronger growth, with revenue climbing 16.4% YoY to R$2.2 billion ($367 million), supported by a 4.8% rise in volumes and an 11.3% increase in daily rates.

The EBITDA margin for RAC expanded by 2.9 percentage points to 65.6%, reflecting cost efficiencies in fleet maintenance and preparation. Conversely, GTF’s EBITDA margin fell by 1.7 percentage points to 69.8%, impacted by higher vehicle deactivation costs and increased provisions for doubtful accounts in the agribusiness-heavy vehicle subsegment.

Localiza’s Strong Performance

Localiza’s used car sales surged, with 71,800 vehicles sold during the quarter—a 27% YoY increase—bringing total annual sales to 279,800 units. However, the EBITDA margin in this segment declined to 2.6%, compared to 5.3% in the previous quarter, reflecting normalization trends flagged earlier by management.

Adjusted net income reached R$837 million ($139 million), marking an impressive annual growth of 18.7%. The ROIC spread improved significantly during the second half of the year, closing at 5 percentage points after starting at just 3.1 percentage points.

Localiza maintained its trajectory of deleveraging, reducing its net debt-to-EBITDA ratio to 2.52x by year-end through robust cash generation and disciplined capital allocation practices. The company aims to lower this ratio further to approximately 2x by the end of 2025 while continuing fleet renewal investments.

Despite challenges like credit restrictions and slowing rental volume growth, Localiza’s proactive strategies position it well for long-term success. Trading at a P/E ratio of 8.6x projected earnings for FY25, RENT3 remains an attractive option for investors seeking reliable growth and resilience in a volatile market environment.

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