Cie Automotive Sa Ord

Welcome to the presentation results of Q2. I would like to remind you that you would be able to ask your questions via the webcast and the conference will start very soon. Thank you for your patience and thank you very much for waiting. Good afternoon everyone and welcome to this results presentation of the Automotive TV Hercules, Jesus Maria Sa Ord and Lorea Aristizabal, who is the Director for Corporate Development. At the end of the presentation, there will be questions, but you would only be able to ask your questions in writing by using the tool in the webcast. And now I'm going to give the floor to Lorea, so please go ahead Lorea. Hello good afternoon everybody and welcome to this Q2 presentation and we're going to kick off by reviewing the evolution of the different markets in Q2 and once again we've seen that there's been an important divergence between geographies and each region has evolved at different speeds and with a completely different dynamic approach but let's kick off by reviewing Europe Where production has been reduced by 2% during the quarter with a drop of more than 1% in the first half of the year. However, sales are still very positive with plus 4% in the quarter and plus 4% in the half year. And this shows that there's a disconnection between demand and levels of production. But most of that disconnection can be explained by the greater penetration of Chinese manufacturers in the European market. In other words, more and more sales are being covered by vehicles imported from China, that is imported in a CBU format, that is complete vehicles, and also imported in the CKD format. and this is setting aside the production that was done in Europe historically and it's true that some Chinese manufacturers are now considering having local assemblage capabilities but we're still very far away from locating these supply chains or from making a significant contribution in terms of the European industrial fabric but it's the context in which we also have a regulatory debate that is becoming increasingly important In Brussels, they are still negotiating initiatives like the Industrial Accelerator Act that is geared towards achieving a greater localization of our production. And in Brussels, they're also making it possible to extend import tariffs to apply them to hybrid vehicles that are currently only applied to electric vehicles. but there's another relevant aspect of this quarter in Europe has been the growing penetration of electrification that has been boosted by the fact that fuel the price of fuel has gone up because of the conflict in Iran and also because new incentives have been deployed by several European governments and also because there's um offer a product that is more extensive and competitive so this is why electrified vehicles have now and they've come to the forefront and they've reached now 30% of sales in the first half of the year compared to 24% in the first half of the year of 2025. And this first half of the year in Europe where Thier Automotive has grown 14% vis-à-vis a market of minus 1% with an outperformance of more than 15 points with a contribution that is close to 8 points of inorganic growth of ADUDEC. North America now we will continue now with North America where as in Europe the industry is still dealing with a favorable that is not very favorable because on the one hand the United States where production shows that it has become stagnant with a slump of minus one percent in and it's been practically flat in the accumulated figures of the semester but compared to Europe sales there are penalized by a consumer that is under more and more inflationary pressure and also because there's been an increase in the energy costs originated from the conflict in the middle east and sales have dropped in by three percent in the united states and we also have two structural factors that do not help the market either we have levels of motorization that are very high nearly 80 percent with a very very mature market and the removal of the seven thousand five hundred dollars of incentives for the purchase of electric vehicles but the positive thing or a positive development In June, the Novelis plant opened again in New York after nine months of no activity. And considering how important this plant is for supplies in North America, the fact that it's been reopened should make it possible to continue Thank you for watching. and there's also regulatory uncertainty in the region that is still pretty significant after the decision that the United States have not renewing the USMC8 in its current format. But it is true that the agreement will remain in force until the year 2036 but now we have entered an annual revision process that reduces visibility for manufacturers and it's this week when people North American and Mexican officials were met up in the city of Mexico to address issues that were related to trade connected to the automotive business and tariffs. The Trump administration still defends more strict regional rules and it also wants to maintain certain tariffs even Thank you very much for joining us. China has had a production of 3% in the quarter, which means that the accumulated figure is minus 5%, and it's been significantly affected by a very weak first quarter of minus 8%. There are three main reasons that explain this. Internal demand, for instance. There's been a very strong contraction because there's been a reduction in sales of 20%. Both in Q2 as well as in the first half of the year, an internal demand that is still being adjusted after the strong rates of growth reported in the years after the pandemic. This is a market that has matured, that is becoming increasingly electrified with a record level of penetration of 63% of the sales in the month of June. The second factor is that there's lots of competition arising from the persistent pricing war, even though the Chinese government has tried to moderate that pricing war. And then the third factor is the sustained growth of exports that have been boosted by China. The combination of a very weak domestic demand, the need to place the production somewhere, and also because there are very high levels of capacity that is not being used. So Chinese exports that are growing a lot, for instance, they've reached 5.1 million vehicles in the first half of the year, which is 65% more than the figure reported in the first half of the year 2025. In June, they reached the historic maximum figure with more than 1 million exports in the month of June. But as you know, our exposure to China is limited. It's especially limited to local Chinese manufacturers. However, the market share has grown in a sustained manner until the current figure, which is 70%. and this means that we're growing below the market levels although we have a clear and sustained strategy in other words we are not going to sacrifice profitability for volumes and the outperformance of more than two points reported in Q1 responded to the improvement of the competitive position of the western OEMs but this has had no continuity in the second quarter and this has been reflected in another performance of minus six points in the first half of the year so let's move on to markets that are better in Brazil there's been a very positive move as we also had in Q1 there's been a very strong demand and growing production too It's a very solid market with growth of sales of 24% in Q2 and with production levels that have grown about half what the sales have, about 13%. And we have an accumulated figure of the first half of the year, the same as in Q2. It's sales plus 20 and production plus 10. There's a divergence between sales and production that respond to those sales that still are playing a significant role in the case of Chinese imported vehicles. Brands like BYD or Cherry or Great Wall are achieving more and more market share and are doing so very quickly, especially in the cheaper markets. Martínez de Almeida, Martínez de Almeida, Ayrton Senna Maria Miñambres Garcia Maria Miñambres Garcia Thank you very much. So with this context in mind, we're dealing with a Brazil that in the case of this first half of the year, Fiat Brazil has grown by 23% and compared to the market growth with 10% with an outperformance of 13 points and a contribution that is very similar in terms of organic and inorganic growth. Let's continue now with India, a market with structural growth and diversified growth. And I'm not going to talk about passenger vehicles, but I'm also talking about other segments too. With a production of passenger vehicles in India that is growing at a very high rate, that is with 16% in Q2 and 14% in the first half of the year. And this has been followed by a very solid growth of sales. Well, that is true that we do expect that in the next few quarters, we will see a slight reduction of growth as the positive effects of the tax and there could also be monsoons which could possibly be weaker and so therefore there is a strong India market because of structural elements like contained inflation the launch of new materials and new export markets everything helps of course and there's a competitive advantage of theory in India that is based on having technology transfer and diversification and which is helping us Maria Miñambres Garcia With similar levels of organic and inorganic growth compared to a negative market of minus 1%, which means that we have an outperformance of more than 10 points. But for the year 26, we expect that there will be a reduction in production of minus 2%, which would mean that in the second half of the year, we would have a slump in worldwide production of minus 3%. So these might seem somewhat negative in the short term but in any case these prospects will become positive with growth figures of plus one and plus two percent in the next few years a scenario in which there will be a greater stability of more mature markets and there will also be growth of other markets like India or Brazil for instance that will play a much more outstanding role in terms of international production. and this growth of the sales can be transferred to the profit and loss account with Q2 that in absolute terms is very similar to Q1 of the year. More than 1 billion euros in sales, more than 200 million euros in EBITDA and an EBITDA margin in excess of 90%, an EBIT margin over 14% and a net profit that reaches 95 million euros, which is nearly 10% over sales. and all of this even in spite of the impact that has been produced by Forex that is still hurting us with a semester where the impact in which the impact has been nearly 80 million in sales and this obviously has had a negative impact for our results. and these are very high record high figures very exceptional figures that could be seen in the accumulated data over the year were the first half of the year that maintained sales above 2000 and a beta margin above 19.1 percent Ayrton Senna Ayrton Senna In this generation and deleverage, we can see that our cash generation capacity is high and especially recurrent because in the first six months of the year, the EMT has generated 275 million euros of operating cash flow. That is 71% has to do with EBITDA conversion above 65% that can be seen in our guidance. and also a generation a generation that is allowing us to fulfill all of our priorities in terms of capital allocation because we're advancing the integration of new companies like the acquisition of Adodec at the beginning of the year we are also paying our dividend to the shareholders and in the first half of the year it's been 70 million euros that were paid with the dividends and in the meantime we are still strongly boosting organic growth for the group with an investment in capex of 40 million euros in the quarter and more than 85 million in the Semester so our net financial debt now stands at 945 million euros we have a rate of leverage of 1.19 times that is a historic figure and it's a bit of 1.26 times that was reported 12 months ago we have a solid cash flow generation and we have a balance sheet that is becoming increasingly robust and we're still reinforcing our financial position. So we're going to close by talking about the future and I would like to stress what we pointed out in Q1 and that is that in view of the excellent results obtained in this second quarter and based on our forecast for the second half of the year we have to reaffirm our guidance and we're now going to move on to the questions and today we have our CEO with us so thank you very much for your attention and we're now going to move on to the questions. Thank you. Okay, well, let's divide this into themes or subjects. What are our plans for India? Well, because of the market share in India and the changes in terms of the market share. So what kinds of plans do we have to change that approach? Well, in the information that we've just presented and talking about in India, and as Lorea just pointed out, we have grown by 22% in this first half of the year. The market has grown by 13.6%, so that means that we have an outperformance of 8.9%. But like everybody knows, we are focused much more on profitability and instead of on growth. So this is why we have achieved an EBIT of nearly 15%, which is something that doesn't happen all that frequently in the Indian market. But I can state that we are really putting our stakes on India and that we have a number of greenfield projects. Because we want to carry on growing organically and we understand that this is the most suitable way of achieving growth, bearing in mind that the valuations of the companies are really very good. Okay, well, continuing with outperformance in the market, there's a double question here. And that is, what was the general outperformance like in QT? And could you say something about NAFTA and outperformance there? That is North America, please. Well, as regards NAFTA, Well, I think that as everybody knows, and since the tariffs were implemented by the Trump administration, what we are seeing is that there's been a minor temporary shift of production from Mexico to the United States in the case of certain manufacturers. But in our case, the industrial mix is different in both countries because in the United States, we are mainly present with plastic, with machinings and roofs, whereas in Mexico, We also have aluminium, stamping, forging and painting technologies. And as the comparison is carried out with the global management, this displacement of production that's only a temporary thing penalizes us to a certain extent in relative terms. But according to our forecast and according to what our customers say for the next few months and for the next year, we'll see that there's going to be outperformance there too. and I would like to stress something that we mentioned previously and that is well we have to we mustn't forget the volatility of the North American market during the negotiation of the USMCA I think that it's something that will become more stable in the next few quarters in the future and it's going to give us much more visibility and And we have volatility this year because of the uncertainty and it's not the best context you can have. And Juan, you were also, it was a double question, NAFTA and Q2. Well, it's been very similar to If in the semester and the first half year it's been nine for the year in growth and minus one for the market with 10%, as regards the quarter, it's been something like eight and something with growth with a market close to minus one. In other words, an outperformance of nearly nine points that is very similar. There's a question on Europe now that the impact that you expect from the reduction in production announced by OEMs and in particular by Volkswagen, Well you the truth is you know that we are very diversified with all of our customers whether they be tier one or OEMs and the truth is that all of the information that we are currently receiving well this is something that we're paying a lot of attention to but we don't really see any kind of substantial changes in other words fear of the first half of the year is going to be very similar to fear in the second half of the year and obviously with the effect caused by the holidays and by December because you know that the second half of the year is always worse than the first half of the year but in any case let's say that everything is normal and we can see that there's also recurrence in what is going on well perhaps there are a couple of more questions here on your so do you think that we What do we expect in Europe in terms of our performance and what about the future market share in Europe? Well, you've seen that we have gained market share in the first half of the year. It's been very significant. And not only because of Adodec, because of the presence of Adodec, which represents 4.8 points, but we've also grown ourselves. From an organic perspective, we've grown by 4.5 points and the market has dropped one. So you can see that we are still growing over and above the market. And in this case, we're talking about 5.5 points. So we have to... Bear in mind that in this sector people are suffering a lot and this means that our customers are trusting any companies that have investment capacity. And this investment capacity that is given to us by our wonderful ratios of financial debt versus EBITDA means that our customers trust us much more. So if the market shrinks a little bit, that doesn't mean that it's not going to carry on growing and it's not going to increase its market share either. And well, just to continue now with Europe. When do you expect that new rates will be applied to hybrid vehicles? And what about local content? Anything to say about that? Well, let's only hope how we know Brussels is going to do things and how quickly. Well, it seems that we need to have a crystal ball here. Yes, we need that crystal ball. What is true is that in Europe, yes, progress has been made, although we don't really think that there has been a homogeneous European response. So now they're currently working on local content and on measures that had to be implemented to reinforce the European value chain. We think that they're walking down the right path because it's not only about where the vehicles are to be assembled, but rather how much technological and industrial value is created for Europe. Thank you very much. We saw how GD has come to Spain to set up a joint venture with Ford. They're going to set this joint venture up in Valencia. And I think that this does reinforce This does reinforce Europe and also reinforces the future of its production. But why? What do I mean? Well, because we know that the European market does have absolute freedom or liberty. But I think the worst news would be to have Chinese manufacturers to come along to add on additional capacity. But I think that this is very good news because the key word here is efficiency. And it's great to see that they are using the currently available capacity for future local productions. So let's only hope that this kind of approach will be repeated once again in the future, and that it will allow us to achieve the localization that our CEO was talking about in terms of production. So what about the second half of the year? What does it look like? Well, I think that Christos Marek has already spoken about that, if I'm not mistaken. Well, if you want, I can answer that question again. Well, it's very similar to the first half of the year, and the only difference is the production Canada because of the summer holidays and because of the month of December. Okay, well, more specifically, they're asking here about the possible impact that Iran could have in the second half of the year. So could you please say something about this? I don't know, something about the pass-throughs? Well, yes, we have seen a certain amount of tension with Iran, especially in the case of certain raw materials, mainly plastic and aluminium. Although it is true that what we have to do is review things with our customers. We have nothing on this in the first half of the year, but this will be covered in the second half of the year. And if this issue of the Iran war continues, yes, there will be problems. Well, in fact, just to finish off with this, as the outperformance has been very solid in the first half of the year and compared with the guidance, are we considering an upgrade? Are we considering upgrading this performance? Well, yes, we want to improve our margins and we want to have our performance and we want to be much better than the guidance internally, too. But let's say that we have to be somewhat objective because we are now living in a market that is dropping. It's more competitive. So let's say that we are managing to forge ahead thanks to the growth in margins. with the very high cash flow generation that we've spoken about before. But the important thing about this first half of the year is that we have integrated ADUDEC, as you all know. So let's say that the integration represented something like 200 million euros. And in only six months, we have been capable of paying out a dividend. And we've also been able to maintain the same financial debt EBITDA ratio And I know of no other companies that can do it in that manner, but you can see how in only six months this ratio between financial debt and EBITDA has not increased, even though there was a major disbursement. So also along the lines of this issue, the Bloomberg consensus. So what do you think about the consensus of the year? Well, that's a very good question, because I think that it's very pertinent too, because I believe that there are some, well, Jesus Maria, sorry, I would just like to say that the last thing we have on Bloomberg is 4.378 billion EBITDA, 580 of EBIT and 368 of net results. Okay, well, if I have to refer to the data that Lorea has just pointed out, that I think that as regards sales and as regards EBITDA and as regards EBIT, let's say that we are 100% in line. Although I think that they've been somewhat optimistic in terms of net results, because I think that they haven't taken into account that we've lost lots of financial revenues. And why? Well, because it was expected that interest rates were going to drop and because of the devaluation of the real in Brazil, we've brought the money from Brazil and you know that Brazil normally pays you at 15% and we've brought this money back because of the possible devaluation of the currency and also because the interest rates were going to drop and we've used that money to buy Aludeck. So in a nutshell, what Adodec is contributing in terms of EBIT is nearly gobbled up by the financial expenses. So this is why there have been less financial revenues. And this is why that in terms of net results or the bottom line, you've been somewhat optimistic, but otherwise we are 100% in line with everything. There's a question now on the working capital. To what extent is it possible to maintain such an efficient working capital? Well, let's say that we have to bear in mind that historically, the first half of the year always presents a better cash conversion than the second half. And basically because of the seasonality of the business and also because of the production calendar. And as I said before, because of the holidays in August and December. Although we still think that 65% is a suitable reference for the overall fiscal year. So having said that, I believe that the important thing that has to be underscored is that this year, what we also have to do is point out how much strength we have in terms of cash generation. And it is true that the generation of operating cash flow is 61%. But you have to bear in mind that with the very high investments in growth, this is what allows us to achieve such a significant outperformance. Thank you very much. I'd say it's a unique company in this term. The focus is on the flows and the flows that we are obtaining are very important. And as I said before, this allows us to acquire important companies and not increase our net financial debt EBITDA ratio too much. And that is something that you don't see in other companies. Okay, as regards M&A now, So how do things stand in the area of M&A? Could we have an update, please? Well, I think that everybody knows that as regards of the guidance, what we said is that the target, well, that we have an auto performance in the market and it's been obtained over and above what we said. We've improved the margins too, or at least we've reached the same levels and perhaps we are improving them to a certain extent. And then we said that we were going to focus on M&A. So we, at the beginning of the year, we closed the aludec issue and now we are working on different options and some could be sorted out during this year. and as we've mentioned on previous occasions we are making investments in countries where there is growth or in products that are global so to speak so in other words we are facing a wonderful M&A moment and some people are getting in touch with us directly or companies are getting in touch with us directly because They prefer to leave these companies in the hands of Thea and not in the hands of others, whoever they may be. So I think that this is a very positive moment and next year we will be changing things significantly if we manage to close these operations, some of them. And some of them we are already doing the due diligence in July and August and others we expect to start off with the due diligence in September. So, in other words, it's going to be something very beautiful and it's also going to make a very significant leap in the short term and we obviously want to take even further leaps in the midterm. Our cash flow allows us to do this, our balance sheet also allows us to do this. Well, we have a couple more questions here on the P&L that have cropped up here. So what kind of contribution does inorganic growth make in terms of sales and margins? And if the slump we saw in the margins in Brazil, is there anything you can say about that or what we could expect? Sorry, I didn't understand that question. No, the contribution that is made by inorganic growth in terms of the P&L. Well, Adelaide is contributing something like 4% of the sales. And obviously, this has obviously assisted the EBITDA margin of the group because you've seen that it has increased somewhat. And the second question was what? I'm sorry. Oh, the evolution in Brazil or the situation in Brazil. It was about how the margins have changed in Brazil and their sustainability in the future. Are they going to be high? Are they going to be recurrent? Well, Brazil is like the crown jewel for us. It's always been that because we're talking about margins. But let's talk about the EBITDA margin that it's at 20 or whether we talk about EBITDA margins that stand at 17. That is sustainable, of course, because it's always been the case. to a greater or lesser extent so these margins pose no risks and they can be maintained and with all the growth that we have there and with the growth that we will have with all the inner granite that we will have in the future we will be able to as we always buy with lower margins we will be able to achieve these levels of margins and obviously generate more worth or more value for our company And changing the issue completely now and with our financial strength and with the weakness of the price of the share, are we going to do any buybacks, any share buybacks? Well, that's another very interesting question, in fact. Well, I have to start off by telling you the truth, and that is our gut feeling tells us that all of the members of the board are very unhappy with the valuation of the stock exchange of our group, and that is an absolute reality. So this is why at all points in time, what we considered were different alternatives. We've always done that. Any kind of alternative. But why? Well, the answer is very straightforward, because we understand that the most profitable and the safest investment in this sector is still theory, because we have wonderful prices. And the last question that is closely related to if we are going to be selling shares from the portfolio, the acquired. No, not for the time being, no. No, we have no plans to do that, at least for the time being, and even less so at these prices. No, we are contemplating other alternatives. Okay, well, that was the last question on the list. OK, well, many thanks to all of you. Thanks for your attention. It's been a pleasure as usual for me to speak to you and to participate in this results call. And I hope that you will carry on trusting Thea. It's like having a life insurance policy in the automotive sector. and I would I hope that you have some wonderful summer holidays and I think that now we all have to relax and take it easy so that when we come back in a few weeks time we feel much more energized so goodbye everybody and thank you very much for listening thank you very much so you know that your entire disposal if you need to ask us any further questions goodbye