Iveco Group Nv

Good morning, everyone. We would like to welcome you to the webcast and conference call for IVECO Group third quarter financial results for the period ending 30th September 2024. This call is being broadcast live on our website and is copyrighted by IVECO Group. Any other use, recording, or transmission of any portion of this broadcast without the express written concept of IVECO Group is strictly forbidden. Hosting today's call are IVECO Group CEO Olaf Persson and our CFO, Anna Tanganelli. Olof and Anna will use the material made available for download on the IVECO Group website earlier 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-IFRS financial measures. Additional information, including reconciliations with the most directly comparable EU IFRS financial measures, is included in the presentation material. I would like to reiterate that 2024 financial data shown in the precedees and in this presentation exclude Magirus and refer to continuing operation only. unless otherwise stated. In accordance with applicable accounting standards, the figures in the income statement and the 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 welcome all of you joining our call today. Our financial performance in the quarter was solid, leveraging on continuous positive price realization and diligent cost management with counterbalance the expected impact on volumes. The adjusted EBIT margin of industrial activity stood at 5% or 30 basis points lower than our all-time high in the third quarter last year. Our free cash flow performance improved by 56 million euros versus the same period last year, as a result of our planned lower working capital absorption and the partially recovery of the Q2 one-off impact linked to the new model year 24 launch. During the quarter, we maintained a steady flow orders and our pricing strategy remained robust, demonstrating the trust our customer placed in our brand. We also intensified the introduction of our model year 24 product lineup for truck onto different markets. Feedback from customers is positive, and we now have a very competitive product portfolio, which will support our journey to further strengthen the Veco brand on the market. Bus ramped up the deliveries of electric city buses and executed on the strong order book flow, which now covers production all the way into 2026. Powertrain continue expanding the number of third-party clients in both the on and off-road industries, diligently managing its cost base in the short term. And in defense, we continue delivering on the back of our solid multi-year order backlog. Looking to further improve our agility to react promptly to our recyclable industry and to lower our profitability break-even point, starting from 2025, we will accelerate the implementation of our efficiency program as well as reprioritize some of our investments and thereby reducing our total operating spending, both CAPEX and OPEX, without affecting our product plan. We will provide more color on this during our full year earning release at the beginning of next year. Moving to slide five, let me talk a few minutes on what we have showcased at the EIA Transportation 2024 in Hanover for our truck business. We introduced our innovative lineups of vehicles, engines, and services demonstrating the full range of solutions powered by all propulsion options that we offer. We are ready for whatever direction our industry takes because we have all the technologies from natural gas to hydrogen combustion engines and from battery electric to hydrogen fuel cell propulsions. We unveiled the eMovie and the SE Wave Rigid, two very important additions to a vehicle's extensive vehicle lineup. Both models exemplify our commitment to multi-energy strategies and sustainable transport solutions. Also at EAA, we introduced the Model Year 24 full lineup of products for all our categories, light, medium, and heavy trucks. As you know, in Europe, we have been taking orders exclusively on Model Year 24 since the first of July this year. and we expect to continue to gain momentum during the remaining part of this year and into the next. We are continuing to implement our technology roadmap as per our strategic business plan, ensuring we remain at the forefront of innovation in the transport sector. If we then move to slide six, with the truck industry performance by region and in vehicles market share in Europe, The European industry performance was, as predicted, resilient for light-duty trucks and down in heavy-duty. Latin America saw industry volumes grow double-digit across segments, which highlights the regional recovery. We are reconfirming our full-year 2024 total industry volume expectations in Europe for heavy-duty trucks at 300,000 registrations, as well as the industry estimates for medium and light-duty trucks. Our preliminary industry forecast for heavy-duty trucks in Europe in 2025 is at between 280,000 to 290,000 registrations, signaling a stabilization of the market. For medium-duty trucks, we're expecting industry volumes to be slightly down versus the full year 2024. And for light-duty trucks, our preliminary European industry forecast is basically flat versus 2024. In terms of European market share, excluding UK and Ireland, the LCV segment experienced a sequential decline primarily due to the model year 2022 pre-buy effect in the second quarter of 2024, preceding the launch of the model year 24 range. Our medium and heavy track market share in the quarter showed strength, raising by 110 basis points year over year. Moving on to slide seven, continuous pricing discipline and our commitment to successfully managing the introduction of our new model range were the drivers for our recent performance. In the light duty truck segment, the order intake was driven by continuous pricing discipline and pre-buy effect of the model year 22 during the first half of 2024. The book-to-bill ratio remained below one by design to effectively manage the phase-out of the older models and the introduction of the new model year 24 range within our dealer network. For medium and heavy-duty trucks, we experienced a solid 12% year-over-year increase in order intake globally, with the book-to-bill ratio rising significantly by 51% to 0.9%. As of 30 September, the weeks of production already sold for light duty truck and medium and heavy were 11 and 9 respectively. Despite the overall industry slowdown in Europe, our expectation is that the model year 24 truck and van deliveries will continue to gain momentum in the last months of this year and into 2025, while we're maintaining a strong pricing discipline. Moving into slide eight, we show the truck channel inventory and production level. As highlighted in the slide, our production levels are continuously adapted to align with expected retail demand. We anticipate a reduction in company inventory in the fourth quarter, following enormous seasonality trends, both in light duty and medium and heavy duty trucks. In light commercial vehicles, our total inventory remains stable year over year, while in medium and heavy, it was down 16% versus last year. Our ongoing efforts to phase out the model year 2022 vehicles and phase in the model year 2024 models with our dealer network are progressing as planned. We are on track to complete the majority of this transition by the first quarter of 2025. Next slide, number 10, has our bus segment market share performance. And during the quarter, we saw a significant increase in our market share in Europe for city buses, up 11.4% year over year. This upward trend underscores our effective market strategies and the strong demand for our products in this segment. Additionally, our market share for intercity buses in Europe experienced an increase of 260 basis points compared to last year. As we continue to build on this momentum, we remain focused on leveraging our strengths and solidifying our leadership position in the industry. Let's move to the next slide with the order intake and delivery statistics as of the end of the quarter for the bus business unit. Our order book now covers production into 2026. This extended horizon is a direct result of our robust performance in the recent quarter. Order intake surged 66% versus the same period last year, showcasing the growing confidence of our customer and partners in our products and services. And this surge is not just a testament to our market strategy, but also to the innovative solutions we are bringing to the market. Deliveries were up 12% versus the same period last year. The book-to-bill ratio stood at 1.12 at the end of the quarter, almost a 50% increase over last year. New contracts signed for hydrogen and battery electric buses are not only accretive to our profitability trajectory, but also highlight our leadership in the transition to sustainable transport solution. Our E-vehicle bus brand is at the forefront of this shift. The strong uptake of our battery electric buses underscores our competitive edge and the market's readiness to embrace green alternatives. To summarize, the health and the depth of our bus order book, combined with our strategic initiatives in sustainable transport, make IVECO Bus very well positioned for the future. Passing now on to slide 13, it's time to talk about FPT industrial's presence at the EIA Transportation 2024 in Hanover. Firstly, we showcased our X-Cursor 13-liter multi-fueled single-base engine that stands out for its flexibility. Designed with a common core, it's optimized performances across multiple fuels, diesel, natural gas, and hydrogen. This not only ensures efficiency and reduced emission, but also provides a reliable solution for diverse energy needs. Next, the Curson 9-liter hydrogen internal combustion engine was on display. It's a zero CO2 emission engine specifically designed for heavy-duty transport while minimizing environmental impact. It represents a significant leap forward in sustainable logistics, aligning perfectly with global decarbonization goals and providing a competitive edge for companies committed to green initiatives. Lastly, we also unveiled the EAX200-R, FPT's industry's latest generation of electrified axles. Tailored for light, medium, and heavy application, it sets new standards in energy efficiency and performance. These innovative products underscores FPT Industries' leadership in the energy transition offering practical, efficient, and sustainable solutions for the transport industry. In the short term, we will continue to adapt our production to customer demand and to activate all the levers of our efficiency program in order to partially offset volume declines. As shown in the chart, engine volumes were down 24% versus the same period last year, But on the other hand, we are making substantial progress in expanding our third-party customer base, which aligns with our long-term targets across both on- and off-road segments. Our efforts today are not just about managing the short-term challenges, but are focused on building a stronger, more resilient future for our powertrain business. Moving on to the next slide, number 16, and here we show the main achievements in our defense business unit. First of all, despite an increase in deliveries, our order book remained consistently robust, covering almost 80% of our business plan top line, underpinned by significant achievements and key milestones. On the 5th of July, IDV signed a contract with the Brazilian Army for the provision of 420 light multi-role vehicles, This contract spanning over 10 years signifies a major step forward in our long-standing relationship with the Brazilian Army, contributing to the growth of Brazil's defense industry and the strategic development of its ground forces. The production of this vehicle, set to commence in 2026, will take place in our Sete Lagos plant, reinforcing our commitment to local manufacturing and supply chain strengths. And on 2nd of August, we entered into a significant cooperation agreement with REN Group to develop propulsion systems for defense tracked vehicles. This collaboration pulls the expertise and experience of both companies and thereby accelerating the development of advanced combat platforms. This agreement also addressed the need to bolster the European supply chain, ensuring increased production capacity and contributing to the technology advancement of our defense capabilities. On the 3rd of October, we successfully delivered the 200th Mantic Core Medium tactical vehicle to the Dutch Army. This vehicle tailored to meet the Dutch military requirements exemplifies our commitment to delivering high performance, adaptable solutions for diverse operational needs. These milestones demonstrate our strategic focus on innovation and collaboration, ensuring we remain at the forefront of the defense industry. By securing significant contracts and forging crucial partnerships, we are well positioned to meet our long-term targets. On the next slide, number 18, is our usual focus on electric product deliveries, showing the figures for the first nine months of 2024. And that starts with our eDaily range. Deliveries ramped up visibly, and our order backlog continued growing along with our market share. We are now starting to release the model year 24 for our eDaily range, and importantly, we are winning key international customers across Europe. Moving to electric buses, we have a solid order book that will be deployed starting from the fourth quarter this year and throughout 2025. So you will see a strong pickup of eBus deliveries in the upcoming quarters. Our e-axle product deliveries have increased quarter over quarter, and we expect to continue this trend going forward, also on the back of the just mentioned pickup in electric bus deliveries. We are steadily investing in our portfolio extension, and our latest generation of e-axle, the EX200-R presented in Hanoi, provides further evidence of this. So we are fully on track of ramping up all our electric products across segments, and we are comfortably positioned to meet the upcoming European emission standard regulation. And I will now hand over the call to Anna.

Thank you, Olaf. And good morning, everyone. Let's now take a look at the highlights of our third quarter 2024 financial results on slide 20. Before we start, let me please remind you that as was the case for the previous two quarters, All the financials shown in the next slide refer to our continuing operations only, as our firefighting business unit has been classified as discontinued operations following the signing of a definitive agreement for its transfer of ownership in March of this year. As a result, in accordance with applicable accounting standards, also our 2020 free figures have been recast consistently. Finalization activities of this transaction are well underway, with closing confirmed to occur within January 2025. So Q3 2024 closed with consolidated net revenues of €3.4 billion and net revenues of industrial activities of €3.35 billion, contracting year-over-year by 7.1% and 7.4% respectively, due to lower volumes in trucks and powertrain, combined with a negative mix, partially offset by a continuously positive year-over-year price realization also in this quarter. Financial services net revenues totaled €132 million in the quarter, up 3.9% compared to prior year. Group consolidated adjusted EBIT closed broadly in line with prior year at €206 million with a 6% margin. while adjusted EBIT of industrial activities reached 167 million euros, maintaining a solid 5% profitability. Financial charges continue to post a positive year-over-year performance also in this quarter, ending at 61 million euros as a result of the series of actions implemented to date to contain our foreign exchange rate exposure and to reduce our cost of hedging in Argentina. combined with a positive hyperinflation accounting impact in the period. Reported income tax expenses for Q3 2024 totaled €38 million, reflecting an adjusted effective tax rate of 27%, both for the quarter and year to date. Consolidated adjusted net income for the period was €106 million, resulting in an adjusted diluted EPS of €0.39, up €0.07 compared to last year. The adjusted net income attributable to IVECO Group closed in line with the consolidated figure, up €20 million versus prior year. Moving to our free cash flow performance, Q3 closed with a €56 million cash flow improvement compared to previous year, thanks to a lower working capital absorption driven by the targeted partial recovery of Q2 exceptional negative effect linked to the model year 2024 track range launch. Finally, available liquidity, including undrawn committed credit lines, stood solid at 4.4 billion euros on the 30th of September, up almost 200 million euros from June end. Let's now focus on net revenues of industrial activities on slide 21. As you can see from the chart on the top right-hand corner of this slide, all regions contracted compared to prior year. The 3% decrease in South America, however, is entirely linked to Argentina. whose drop is a result of an adverse industry trend over the period, combined with the effect of the risk hedging actions implemented to date to shield our bottom line result from local currency fluctuations. Net revenues in Brazil alone, on the other hand, posted a robust double-digit growth compared to prior year. Looking at our net revenues evolution by business unit, bus and defense were solidly up versus prior year at plus 17% and plus 33% respectively, while truck and powertrain decreased versus Q3 2023, with powertrain in particular posting a minus 22% net revenues contraction compared to previous year. More in detail, truck net revenues totaled 2.3 billion euros in the quarter, mainly thanks to continuously positive price realization and discipline, both in light commercial vehicles and in medium and heavy duty trucks, which partially offset the contraction in volumes we had foreseen in our guidance for H2 2024, as well as the impact of the adverse foreign exchange rate evolution mainly in Argentina. Bus net revenues increased by 17.4% year over year to 547 million euros, driven by higher volumes, a better mix, and a positive price evolution. Net revenues of defense continued to grow substantially in the period, at plus 32.7%, reaching €264 million, thanks to higher volumes and a positive mix effect. Powertrain net revenues were down 22.1% year-over-year to €742 million, mainly as a result of a decrease in volumes, with sales to external customers accounting for 49% in the quarter. Turning to slide 22, let's now briefly comment on the main drivers underlying the year-over-year performance in our adjusted EBIT margin of industrial activities. As previously highlighted, net pricing continued to be positive in the quarter, offsetting the negative impact of lower volumes in truck and in powertrain. The operational and product cost improvement actions implemented in Europe to date contributed positively for around 60 million euros, compensating one-off costs associated with the launch of the new model year 2024 truck range, as well as the negative impact on raw materials of the still severe inflationary trend in Argentina. As a result, Q3 2024 adjusted EBIT margin of industrial activities closed with a solid 5% profitability, substantially in line with prior year. Let's now take a look at each industrial business unit adjusted EBIT margin performance in the quarter on slide 23. Truck closed with a solid 5.4% adjusted EBIT margin despite lower volume, a negative mix between LCVs and heavy-duty trucks, and a continuously adverse foreign exchange rate impact compared to prior year, mainly linked to Argentina. all compensated by consistently positive price realization in the quarter, combined with a substantial product cost improvement, especially in Europe. As for defense, adjusted EBIT margin posted at 220 basis point uplift versus prior year to 8.7%, thanks to higher volume, a better mix, and an increasingly positive aftermarket contribution in the period. Bus adjusted EBIT margin closed at 5.1%, up 120 basis points year over year, as a result of higher volumes in Europe and in Brazil. The letter links to the ramp up of deliveries of school buses as part of the tender won with the Brazilian National Education Development Fund, combined with positive pricing, mainly in Europe. Powertrain adjusted EBIT margin closed at 5% in the quarter despite the severe volume drop suffered in the period. This reconfirmed the remarkable resilience and flexibility of this business unit, which was able to rapidly adapt production levels and implement a series of self-help cost containment actions to counter the minus 22% year-over-year top-line contraction and maintain a solid profitability. Let's now have a look at the performance of our financial services business unit during the quarter on slide 24. Q3 2024 adjusted EBIT closed at €39 million, an increase of €6 million versus prior year, primarily resulting from higher receivables portfolio and a better collection performance on managed receivables. Financial services managed portfolio, including unconsolidated joint ventures, was €7.6 billion at the end of the quarter, of which retail accounted for 43% and wholesale 57%, up €508 million compared to 30 September 2023. Worthwhile to be highlighted here is that the stock of receivables past due by more than 30 days as a percentage of the overall on-book portfolio further declined in this quarter, reaching a historical low of 1.9% versus 2.3% of prior year. Finally, return on assets, as shown in the chart on the top right-hand corner of this slide, remained solid at 2.2%. Moving now to our Q3 2024 free cash flow and net industrial cash evolution on slide 25, As said, in the first quarter of this year, free cash flow of industrial activities improved by 56 million euros compared to prior year, as a result of lower working capital absorption, which contributed positively for 181 million euros year over year, driven by the targeted partial recovery of the Q2 one-off impact linked to the launch of our model year 2024 track range. This improvement is particularly remarkable, considering Q3 is usually a weak quarter given the summer shutdown, and in light of the top-line contraction experienced in the period. In this regard, please note that our full year 2024 free cash growth industrial activities target remains unchanged at between 350 and 400 million euros, despite a still complex and uncertain macroeconomic and industry outlook for the remaining part of this year. Let me quickly comment now on the other line items of our free cash flow build-up. Q3 2024 adjusted EBITDA was in line with prior year, while provisions and similar contributed negatively for €72 million compared to Q3 2023, due to a reduction in commercial provisions as a result of lower volumes over the period, partially offset by the improvement in financial charges. Investments in the quarter total 195 million euros, substantially in line with prior year, and the total investments for the full year are confirmed at around 1 billion euros. Finally, the 59 million euro year-over-year improvement in the FX and other line item was mainly linked to the redemption of certain USD-linked bonds purchased in Argentina as part of the already mentioned hedging strategy implemented in the country. Moving now to my last slide for today, page 26, our available liquidity as of 30 September 2024 stood at €4.4 billion, with €2.5 billion in cash and cash equivalents and €1.9 billion of undrawn committed facilities. Looking at our debt maturity profile, we confirm that the majority of our debt will mature beyond 2026, and with our cash and cash equivalent levels, continues to more than cover all the cash maturities foreseen in the coming years and totaling 2.1 billion euros. Thank you, and I will now turn the call back to Ollo for his final remarks.