Iveco Group Nv

Good day ladies and gentlemen and welcome to today's iweku group 2024 second quarter and first half years result conference call and webcast we would like to remind you that today call is being recorded after the speaker remarks there will be a question and answer session and you'll be have you'll have the opportunity to ask questions this can be done by pressing star 1 on your telephone keypad if you require assistance at any time please press star zero and you'll be connected to an operator. At this time, I'll now turn the call over to Federico Donati, Head of Investor Relations. Please go ahead, sir.

Thank you, Alan. Good morning, everyone. We would like to welcome you to the webcast and conference call for Iveco Group's second quarter financial results for the period ending 30 June 2024. This call is being broadcast live on our website, and it's copyrighted by EVECO Group. Any other use, recording, or transmission of any portion of this broadcast without the express written concept of EVECO Group is strictly forbidden. Also today called are EVECO Group new CEO, Olof Burson, and our CFO, Anna Tanganetti. Olof and Anna will use the material made available for download on the EVECO Group website early this morning. Additionally, please note that any forward-looking statements we might be making during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation material. Additional information pertaining to factors that could cause actual results to differ materially is contained in the company's most recent annual report as well as other recent reports and filings with the authorities in the Netherlands and Italy. The company presentation may include certain non-EU IFRS financial measures. Additional information, including reconciliation to the most directly comparable IFRS financial measures, is included in the presentation material. I reiterate here again that 2024 financial data shown in the precedes and in this presentation exclude Magirus and refer to the continuing operations only, unless otherwise stated. In accordance with applicable accounting standards, the figures in the income statement and statement of cash flow for 2023 comparative periods have been recast consistently. I will now turn the call over to our CEO, Olof.

Thank you very much, Federico. And also from my side, a warm welcome to all of you joining our call today. To start, I'm, of course, very excited to begin my new role as the CEO of EVECO Group. I'm really looking forward to continuing to build and expand on the solid foundation laid down in the last two and a half years of the company. As you know, I've been a member of the company's board of directors since the beginning and And I have been involved in our strategic direction since then. And I have witnessed firsthand the pride and passion our vehicle group teams have not only for our businesses and brands, but perhaps most importantly for our customers. I will, together with the team, work hard to continue aligning the vehicle group with the rapidly changing market as we have laid out in our pathway strategy. Moving forward, we are going to continue to accelerate on our ambitious pathway strategy. The strategic plan requires full focus and very consistent execution to achieve our 2028 targets. And this quarter shows that we are on the right trajectory. Today, we are reporting our results for the second quarter of 2024, which follows our Recapital Markets Day hosted in March this year and the first quarter with a very solid performance. As we announced in our press release issued earlier this morning, we have continued the year with consistent profitability improvements and resilience across all business units, leading to an adjusted EBIT margin for industrial activities at 6.9%, which is 10 basis points better than the all-time high second quarter of 2023. During this quarter, we did not experience any unusual or unexpected increase in order cancellations or net price erosions. As we earlier reported, we opened order intake for our new model year 2024 lineup in all truck segments in the first quarter to manage the transition from other model year 22, both in sales but also in production. As Anna will detail later in today's presentation, we have experienced a negative temporary one-off in our networking capital linked to extra effort in finalizing and getting a certain number of our model year 2024 products. vehicles ready to ship. The changeover from model year 22 to model year 24 has been a major task for organizations. All our truck models and configurations and all our European truck manufacturing sites were involved. Despite the challenges, the team has done an absolutely fantastic job to secure quality and performance of the model year 24 trucks to get them ready for the market. Our expectations is that model year 24 trucks delivers will gain momentum in the latter part of the year and into 2025, and we expect to fully recover the one-off working capital impact during the second part of the year. Though the backlog in trucks by the end of the quarter was on a level what we would consider more normal with around 13 weeks of production already sold for light commercial vehicles and around 9 to 10 weeks for medium and heavy. More than 90% of the order book in light and commercial vehicles and more than 70% of the heavy, medium and heavy, relates to our new model year 2024. When looking at our robust business unit, the order backlog covers all of 2024 and is now stretching well into 2025, with the first half of next year fully covered. In defense, we already disclosed that our order backlog, referring only to orders already funded by customers, covers basically the entire top line for the business plan period, with a solid potential upside at the back end of our plan. Recent signed contracts in both bus and defense further reinforce this solid order backlog, providing an even stronger foundation for their pathways. Finally, in Powertrain, we are well on track to reach our target of 100 basis points margin improvement per year, supported by our efficiency plan and an increasingly higher contribution from aftermarket activities. When looking at our financial service business, the link prices on book for less than 30 days remained at a historically low 2%, which is sequentially flat and 30 basis points better than last year. Finally, as discussed in our previous earning calls, we have made significant efforts together with partners to solve bodybuilder capacity bottlenecks that slow down the timing of deliveries to customers and affected, as well, other OEMs. The situation has substantially improved, and we expect it to normalize in the third quarter. Then looking at the vehicle group financial performance for the second quarter, our consolidated revenues were slightly down versus last year, and consolidated adjusted EBIT margin was at 7.5%, which is in line versus the same quarter last year. Our adjusted diluted EPS was at 63 cents at the end of the second quarter, which is 2 cents more than the second quarter of 2023. And during our annual general meeting held on the 17th of April this year, the shareholders approved our proposal to distribute the cash dividend of 22 cents per outstanding common share, and this was paid on the 24th of April. As you have seen from our periodic report on the buyback activities, as of 12th of July, we have bought back 859,000 common shares for a total net consideration of 9 million euros. Let's now look at the highlights of EVQ Group's main achievements during the second quarter, as you can see on slide four. On the 4th of June, we signed a memorandum of understanding with Photon, a leading commercial vehicle manufacturer in China, to explore potential collaboration in the areas of electric vehicles and components, as well as joint business opportunity for Europe and South America. The non-binding agreement is intended to extend a relied commercial vehicle line-up to the gross weight vehicle category below the 3.5 tons. Supply opportunities, including our powertrain brand, FIT Industrial, will also be discussed. Also in June, we signed an important term loan facility for €150 million with CDP, and the loan will go towards our investment in research, development and innovation. Finally, as we announced earlier this year, I also wanted to mention that Iveco Group played a major role in supporting the heavy metal band Metallica on the European leg of the World Tour. From May to July, we provided multi-energy heavy-duty trucks as a part of the Metallica convoy that moved the band and its equipment between venues. This initiative has strengthened our marketing activities in Europe, reaching hundreds of current and new customers and reinforcing Iveco's brand awareness throughout all channels. and also aligning positively with our group's vision of going beyond. Moving to slide five, in addition to the group's achievements, our individual business units reached also important accomplishments this second quarter. And if we look at slide five, let's begin with our truck business unit. In April, the Italian Transport and Logistics Operators MET Group confirmed its order for 100 new Iveco SL Fuel Hero trucks fueled with HVO, to be delivered by the end of this year. The order is the latest in the long-term partnership between Iveco and Smet Group, which shares a forward-looking approach and focus on innovation. In June, the Iveco S-Way won the prestigious Red Dot Award for Product Design, one of the world's largest design competitions, and this award recognized the product's functionality, aesthetics, ease of use, sustainability, and responsibility. Also, IRECO Bus won a Red Dot Award for product design thanks to the all-new front end and dashboard on the crossway bus. Our bus business unit increased its presence in Brazil last quarter when it delivered the first 55 buses to Rapido Samara, a large urban transport operator in Sao Paulo. 18 more units will be delivered this year to contribute to our customers' renewed fleet in Sao Paulo. IECOBOS and VIA, a market leader that combines software innovation with service design, signed two memorandums of understanding in May, the first with Politecnico di Milano and the other with Humanitas. Both will implement pilot projects to offer customized and flexible demand-responsive transport solutions. On slide six, we see the main achievements of our defense business units last quarter. In June, the Iveco Ottomilare Consortium signed a contract to supply 28 state-of-the-art Centauro II vehicles to the Italian Army. This will complete our customers' requirements for 150 units and includes 10 years of logistic support. Commenting on powertrain, we see on the slide that in April, FPT Industrial and Longan Power, a genset and industrial power equipment manufacturer, signed a comprehensive agreement to expand into global power equipment markets. Over the next three years, FPT Industries will supply high-efficiency engines for long-term power gem sets, and the companies will work together to promote the application and development of gem sets and industrial power equipment for the global market. Moving down onto slide seven, we show the total industry unit registration change versus the second quarter of 2023. And the quarterly performance of the industry in Europe, excluding UK and Ireland, was solid across all segments. Light-duty trucks were up double digits, while medium and heavy were up 8%. For buses, the industry in Europe was up 11% versus the previous year's second quarter. In Latin America, industrial volumes were down by double digits in light-duty trucks and down 7% in buses, while double-digit increased in medium and heavy-duty trucks. As a reminder to all of you, our Latin America figures include Argentina, which is down year-over-year, particularly in the light-duty tracks. On a worldwide basis, as you can see, the market experienced sub-digit volume growth for light-duty tracks and a more moderate 5% increase in medium and heavy-duty tracks, while it was slightly down in buses. Moving on to slide number eight, and there we have our recurring quarterly update on channel inventory statistics, which reflects only finished products. Company inventories were sequentially down, both in light duty track and medium and heavy, reflecting our effort to normalize the level of order pipeline due to normal seasonality. Looking at dealer inventory, this was sequential down 10% in light duty tracks and slightly higher in medium and heavy. due to the legislative requirements linked to our model year 22. As you can see from the takeaway message at the bottom on the slide, the percentage of dealer and company inventories already sold to customer cross segments has remained solid around 70% for both actual dealer inventory and company inventory. Lastly, looking at production activity, we have continued to adapt our production rate to the market demand for both light-duty trucks and medium and heavy-duty trucks. Production was sequentially done by 17 percent in light and 10 percent in medium and heavy. As I move on to the next slide, with order intake and delivery statistics at the end of the second quarter, As disclosed previously, we are approaching a normalized level in our truck order book, covering almost 30 weeks of production in light-duty trucks and around 10 weeks for medium and heavy-duty trucks at the end of June. Our model year 2024 has been very well received by customers, and our order book now represents more than 90% of the total light-duty truck orders and more than 70% of the medium and heavy-duty truck orders. As I mentioned earlier, deliveries of the new model year will gain momentum in the second half of 2024, particularly in the latter part of the year. A robust business unit order book covers the full year of 2024 and the entire first half of next year. Tracks deliveries were down in the second quarter by 18% on a worldwide basis versus second quarter last year. Europe was down 22% in trucks, with light-duty trucks down 18% and medium and heavy down 31% versus the second quarter of 2023. Bus deliveries were up 32% on a worldwide basis and up 2% in Europe. Order intake for trucks was impacted in the quarter by our planned effort to normalize the order book combined with a focused pricing discipline during the phase-in period of model year 24 and the phase-out of model year 22. Guide number 10 is a new addition. It focuses on electric product deliveries as for the first half of 2024. And let's start with our e-daily range. As you can see, deliveries have ramped up visibly, and our water bag stock is solid. On our e-access side, product deliveries have increased quarter over quarter, and we expect that to continue going forward. And we actually have now an order book with more than 2,000 e-access. Those e-access will be delivered in the upcoming quarters. In addition, the electric bus deliveries have continued to increase year over year, and based on our current order backlog, already funded, we will deliver around 2,000 e-buses from now to the end of 2025. So this means, and as you can see, we're fully on track on ramping up all our electric products across the segments, and we are confidently positioned to meet the upcoming European Emission Standard Regulation. I'm moving to slide 11 and talk a little bit about market shares in Europe, excluding UK and Ireland in our truck and bus segments. In light duty, we ended the second quarter strongly at a 14.8% market share in the 3.5 to 7.49 ton segment. We further solidified our market share leadership in the chassis cap segment with a 32.5% market share, and we continue to maintain our historical leadership in the upper end of the light duty segment with a market share of 63.6%. In heavy duty, we increased our market share with 120 basis points versus the second quarter of 2023 at 8.9%. And in medium and heavy combined, our market share was up 170 basis points to 10.2%. And we maintain a very strong position in the CNG, LNG, heavy duty truck segment with a market share of 43.6%. For bus, we further solidified our leadership in intercity, closing the quarter at 53% market share in Europe, up from already high 45.7% in the same period last year. In city bus, we closed the quarter with a solid 13.3% market share. And with that, I will now hand over to Anna, who will take you through the second quarter financial highlights. After, I will come back and conclude with some final remarks.