Cie Automotive Sa Ord

Good afternoon everyone. Welcome to the Q3 results release of CIE Automotive. Questions can only be asked in writing by the webcast. The conference will start soon. Thank you for waiting. Good afternoon, everyone. Ladies and gentlemen, welcome to the third quarter results release for CI Automotive. We have Lorea Aristizabal, Director for Corporate Development. There will be a Q&A at the end and it will only be possible to ask questions in writing by the webcast. I'll now hand over to Lorea. Go ahead, please. Good afternoon, everyone. and if you agree we'll start with the presentation by reviewing the evolution of the various markets during this quarter. A quarter that presents a picture that's very similar to the one we saw in the first half of the year with very different developments between geographies which confirms even more so if possible the growing role of Chinese manufacturers in several geographic areas. Thank you very much. Chinese brands have surpassed 11% market share during the months of July and August in Europe compared to 5% in the same months of 2025, thereby doubling their presence in just 12 months. Given this situation, it seems that Brussels could implement new measures although they are still in the preliminary stages and I would like to highlight two themes that stand out On the one hand, an initial agreement between Brussels and Beijing to limit imports of Chinese hybrids into Europe to 350,000 units in 2027 compared, and this is important, to the forecast imports of 800,000 vehicles in 2026, a measure that would be in effect for four years with annual quota increases of 6%. The second theme I would like to highlight is the important rapprochement of positions between Germany and France regarding the Industrial Accelerator Act. You know that Germany has agreed to strengthen European local content requirements. Ayrton Senna Ayrton Senna Meanwhile electrification continues to gain ground in Europe driven largely by this growing penetration of Chinese manufacturers with an increasingly broad and competitive supply and by the rising fuel prices stemming from the Iran war. Thank you for watching. This European environment continues to be extremely demanding, but I think that it's still important to highlight that CIE Automotive once again has shown its ability to grow above the market, accumulating an outperformance of 13 percentage points in the first nine months of the year, driven by the addition of Aludeck and the strong organic growth of the company. North America A geography that has experienced a deterioration in its market conditions during this third quarter, with a fall in vehicle production of 5%, which gives us 2% on the year to date. This situation is mainly due to the moderation in US demand, with vehicle sales that accumulate a drop of 2% in the year. What's the context? Persistent inflation, high vehicle prices, high fuel prices for consumers, and on the other hand... A significant tariff uncertainty with the revision of the USMCA for manufacturers, which continues to constrain their production and investment decisions. Therefore, in this context of volatility and uncertainty, CIE has recorded a drop of close to 5% in the first nine months of the year compared to 2% for the market. A situation that we are convinced will be reversed in the coming quarters U.S.M.C.A.' 's regulatory framework becomes clearer and more visible China, a situation which remains as it was in the first half with a 6% fall in production both in the third quarter and in the year to date and to summarize a great deal, three major dynamics in the region The sustained growth of exports which exceeds 8 million vehicles in the first nine months of the year, 66% more than in the same period of 2025. Secondly, a domestic demand which continues to show a strong contraction with a drop in sales of 22% in the third quarter in line with the cumulative figure for the year. and the persistent price war which still continues. In this context and with this dynamic, the Chinese government presented its new five-year plan for the period 2026-2030 in September with the aim of addressing the sector's problems and to try to make it a more stable and profitable sector for all players involved. This is the context for CIE and our sales in this context have dropped 11% on the year to date with a 5% underperformance compared to the market. Although I want to highlight that we maintain high margins and high cash generation which is what's important and a priority for us. and looking ahead a possible moderation in the price war favored by the measures announced by the Chinese government which could help stabilize the market and create a more favorable environment for our business. We are moderately optimistic. Brazil continues to consolidate as one of the most dynamic markets in industry with sustained growth and very favorable prospects with productions that have grown by 9% in the quarter and 10% in the year to date. A brazilian industry which continues to rely on strong structural factors such as the low motorization rate still below 30 percent financing conditions that have measured have improved somewhat and local supply chain incentive programs launched by the government Apellaniz, Aitor Zazpe With a view to 2027, the coming into effect of new tariffs on vehicles imported under the CKED regime could help moderate this trend and will provide more incentives for more local production and favor the Brazilian automotive industry. In this context, we have recorded a growth of 17% with... Thank you very much. Apellaniz, Aitor Zazpe Apellaniz, Aitor Zazpe Goni, José Ramón Berecibar Mutiozabal, Maria Miñambres Garcia Apellaniz, Maria Miñambres Garcia We close the chapter on individual markets and refer to the global market, which has fallen by 2% in the quarter and 1% in the first nine months of the year. CIE has accumulated an 8% growth at a constant exchange rate in 2026, surpassing the global market by nine points, and we can say that approximately half is due to Apellaniz, Aitor Zazpe Goni, José Ramón Berecibar Mutiozabal, Maria Miñambres Garcia Prospects are improving medium to long term with an annual growth expected to be between 1% and 2% through 2030 in a scenario that will be driven by the stabilization of the more mature markets, including China. We include China here. And a strong growth in markets like India and Brazil that will gain weight in the global output. and a growth in our sales which also spills over into our P&L with a third quarter with magnitudes higher than those recorded in the same period of the previous year 1,037 million euros in sales, 195 million euros in EBITDA With this extraordinary margin of 19%, an EBIT of 14%, and a net profit of $83 million. The third quarter has reversed the negative exchange rate recorded during the first half, with a favorable evolution of both the dollar and the real. Apellaniz Positive headlines that are also reflected in the year's cumulative figures with results for the first nine months that show a combination of growth and profitability that is extremely good with a margin of 19% in line with our guidance and an EBIT margin above 14%. A very well balanced profitability across geographies. We always mention this, but we have to emphasize it. This reinforces the strength and the stability of the group's margins. Talking about cash flow, we see a third quarter in which there have been no corporate transactions or M&A's. Apellaniz, Maria Miñambres Garcia An operating cash generation that is extremely high and which continues to enable us to execute our capital allocation priorities in parallel. We can move forward in the integration of new companies as we've done with the acquisition of Aludeck at the beginning of the year. Apellaniz, Maria Miñambres Garcia So, all in all, the group's net financial debt, which stands at 940 million euros, with a DFN-BITDA ratio of approximately 1.2 times, Thank you very much. and it's a compliance that we believe should be underlined. We believe it's particularly relevant in the current sectoral context in which some of the main European suppliers have scaled back their forecasts as we've seen in the last few days and this highlights the strength of our business model. So we finish up on a positive note and now open up our question time. Thank you very much for your attention. We start the questions and group them together by themes to make it easier for everyone. A first question on how we protect our margins in this inflationary context. Are negotiations more difficult with OEMs than in the past? We've gone through situations like this and questions like this not so long ago. If you remember in 2002 we had peak inflation in materials and in energy specifically with the Ukraine war in Europe. So, yes, there are significant negotiations with the clients, but remember that for materials we have the pass-through and indexing clauses, and for other issues, such as energy, we have one-off negotiations where our track record shows an extremely high level of recovery rate. With clients that understand the situation, so we're going to continue to monitor and hope to have good news as happened with the negotiations at the end of 2022-23. A specific question on the Brazil margins, which have been particularly strong in Q3. Is that sustainable? What's behind the high margins in Brazil and is it sustainable in the short term? You know that that's a question that's difficult to answer and we usually always give the same answer. One quarter is just a sign. I think that we have to look at the cumulative figure for the nine months. This does set a trend. We're looking at a Brazil which is practically above the global margins for the group. Apellaniz, Aitor Zazpe Apellaniz, Maria Miñambres Garcia Brazil is gaining weight in the total of CIE and secondly these margins are above the average global margins and we expect this to continue. Continuing with Brazil, we're asked about the Chinese OEMs that are localizing and our status with them. There's not much new, I'm afraid. A few days ago we were talking to our Brazilian executives and they confirmed that we are not only approved as potential suppliers for some Chinese suppliers, but we are also Apellaniz, Maria Miñambres Garcia We'll monitor this because this is the great window of opportunity. It's also true, and I'm going to be very honest, it's also true that we have to understand that when you start to localize, you often start with elements such as tires or glass. We're not initially local, but we expect to be there in the second round, and that's what we're working on. What gives us that outer performance? It's a good question because I don't think that the answer is particularly obvious Thank you very much. Apellaniz, Maria Miñambres Garcia Apellaniz, Maria Miñambres Garcia Pardo Villanueva Thank you very much. Having said this, the underperformance has been there for a couple of quarters, it's true, the underperformance in North America. Let's look at the context. We have a very volatile environment, and I said that there was a weakness in U.S., Apellaniz, Aitor Zazpe and I added that we have an especially demanding base at CIE and an additional loss in some volumes in Mexico due to some one-off decisions made by some customers where they've moved part of the production. Apellaniz, Maria Miñambres Garcia But above all, and above everything else, our interpretation of the situation has to do with a very volatile market environment and a very uncertain environment around the revision of the USMCA. This is constraining the decisions on production allocation, manufacturer decisions, especially in Mexico. And this is a complicated context that we're sure is going to turn around in the coming quarters. Regarding the CapEx in India that you referred to in the recent India call, there have been some focuses on inorganic growth and more CapEx in the future. Could you give us more color on that? I'm delighted that people also listen to the CIE India results conference call. What can I say about that 8%? Well, first of all, that our investments don't have the same intensity over sales in the various regions. That's obvious. For instance, last year in North America, we invested almost 6% and in Europe we invested 4%. These are market contexts, growth contexts, and investments with a different degree of intensity. This comment, I think they explained it, but I'm also going to try to explain it a little. It's a comment about India being one of the CIE areas with a Apellaniz, Aitor Zazpe What it implies is an increase in capacity. I think that they even mentioned a project to increase capacity for the Chacán stank presses. And there are a number of growth projects that could lead to new greenfields. and I'm not going to break the news and it will be explained when it makes sense to do so in the coming quarters. But that's the context, that strategic priority that CIA has with a market which without a doubt is growing, without a doubt it's gaining weight in world production. And we're following the pace. But as a figure, to give you an idea, India is approximately 7% of world production. And in the coming years, it will be over 8%. It's gaining weight. So we're there to make the most of it. We're asked about regulatory news in Europe. The industrial acceleration, emissions, etc., Well, I mentioned two things that we feel are among the most important in what's going on. That agreement between Brussels and Peking, or pre-agreement between Brussels and Peking, to set a limit on imports would be 350,000 imported hybrid cars. Thank you very much. Apellaniz, Maria Miñambres Garcia and there's going to be a hard cap it's not that there's going to be an initial tariff after car number 350,001 there's going to be a hard cap and no additional cars can be added But we're awaiting regulatory clarifications in the coming weeks and we'll see how it goes. And I think I also mentioned the Industrial Accelerator Act and the new agreement between France and Germany which I think is extremely important for the first time. Thank you very much. Thank you very much. Now they do understand that there needs to be a significant part of local content, so the unofficial forecast is that the European Environment Commission plans to vote on this context on November 4th. The text should then go through the European Parliament in mid-December, more or less, and the approval process would be put... Apellaniz, Aitor Zazpe Goni, José Ramón Berecibar Mutiozabal And now we're asked about news in the M&A area. And where are we in the various processes? Active, very active. Active, very active. I'm looking for the right word. And with the optimism of being able to give some good news in the near future. and we're asked about the guidance bearing in mind that we've had such a good first nine months why only confirm and not expand insatiable as usual I think that in the current market context where the only headlines we read every day are profit warnings and downscaling of forecasts maintaining the guidance deserves a gold medal and linked to this, what do we think about the Bloomberg Consensus, the most recent one? Well, I saw this morning the Bloomberg Consensus to get ready just in case and I think that our analysts haven't listened to the conference results from the second quarter and they haven't listened to our CEO because the Bloomberg Consensus is practically the same as in June and I think that Jesus Maria was very explicit about the fact that in sales and operating margins EBITDA and EBIT he felt comfortable but he felt that the non-operating costs in the P&L were undervalued and since I've seen that the consensus hasn't changed that's why I think that they haven't listened much to Jesus Maria's words and I think that a revision will need to be made and in view of the share price why not a share buyback program we've never said no to that I've never heard anybody say no We've shown during our history that we know how to remunerate the shareholder in all the various modalities with a dividend.

No, nobody has said no.

Well, these are the questions we had. Well, great. Thank you all very much for your attention. And you know that we're here to follow up on any other questions. Thank you.