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spk06: 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 of 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. Olaf 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 statement we might be making during today's call are subject to the risk and uncertainties mentioned in the safe harbor statement included in the presentation material. Additional information pertaining to factors that could cause actual results to be fair materially is contained in the company most recent Anna Tanganelli 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 reconciliation to 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 press release and in this presentation exclude McGill's 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 Olaf.
spk03: 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 activities 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 truck product portfolio which will support our journey to further strengthen the vehicle brand on the market. Bus ramped up the deliveries of electric city buses and executed on the strong order book load 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 cyclical 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 op-ex 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 solution 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 e-movie 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 EIA, 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 a truck industry performance by region and a vehicle's market share in Europe, the European industry performance was as predicted, resilient to 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 registration, 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 to 290,000 registration, 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 truck 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, where 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 the sign 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 a 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 in medium and heavy were 11 and nine 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 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 24 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 .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 the last year. New contracts signed for hydrogen and battery electric buses are not only a critical to our profitability trajectory, but also highlight our leadership in the transition to sustainable transport solution. Our IVECO 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 Industries presence at the EIA Transportation 2024 in Hanover. And firstly, we showcased our Xcursor 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 reduce emission, but also provides a reliable solution for diverse energy needs. Next, the Xcursor nine 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 logistic, aligning perfectly with global decarbonization goals and providing a competitive edge for companies committed to green initiatives. Lastly, we also unveiled the EAX 200-R, the FPT Industries latest generation of electrified axles. Tailored for light, medium, and heavy application, it sets new standards in energy efficiency and performance. This 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 units. 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 longstanding 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 these vehicles, set to commence in 2026, will take place in our Cete Lagoas plant, reinforcing our commitment to local manufacturing and supply chain strengths. And on 2nd of August, we entered into a significant cooperation agreement with RenK 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 a 200 manticore medium tactical vehicle to the Dutch Army. This vehicle tailored to meet the Dutch military requirements and 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 delivery, showing the figures for the first nine months of 2024. And that starts with our e-daily range. Deliveries ramped up visibly and our order backlog continue growing along with our market share. We are now starting to release the Model Year 24 for our e-daily 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 e-bus deliveries in the upcoming quarters. Our e-AXE 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-AXE, the EX200-R presented in our order 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.
spk01: Thank you, Olof 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 euros and net revenues of industrial activities of 3.35 billion euros, contracting year over year by 7.1 and .4% respectively, due to lower volumes in trucks and powertrain combined with a negative mix, partially offset by continuously positive year over year price realization also in this quarter. Financial services net revenues totaled 132 million euros in the quarter up .9% compared to prior year. Group consolidated adjusted EBIT closed broadly in line with prior year at 206 million euros 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 euros, 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 euros, resulting in an adjusted diluted EPS of 39 euro cents, up 7 euro cents compared to last year. The adjusted net income attributable to Iveco Group closed in line with the consolidated figure, up 20 million euros versus prior year. Moving to our cash flow performance, Q3 closed with a C56 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 UNRON 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 rescheduling 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 power train decreased versus Q3 2023, with power train 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 .4% year over year to 547 million euros driven by higher volumes, a better mix and a positive price evolution. Net revenues of defense continue to grow substantially in the period at plus 32.7%, reaching 264 million euros, thanks to higher volumes and a positive mix effect. Power train net revenues were down .1% year over year to 742 million euros, 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 power train. The operational and product cost improvement actions implemented in Europe today, 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 .4% adjusted EBIT margin despite lower volume, a negative mix between LCBs 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 220 basis points 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%, 120 basis points year over year, as a result of higher volumes in Europe and in Brazil. The latter linked 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. Power train 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 plan 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 euros, an increase of 6 million euros 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 euros at the end of the quarter, of which retail accounted for 43% and wholesale 57%, up 508 million euros compared to 30th September, 2023. Worthwhile to be highlighted here is that the stock of receivables passed 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 .9% versus .3% of prior year. Finally, return on assets as shown in the chart on the top right hand corner of this slide remains solid at 2.2%. Moving now to our Q3 2024 free cashflow and net industrial cash evolution on slide 25, as said in the first quarter of this year, free cashflow 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 links the launch of our model year 2024 track range. This improvement is particularly remarkable considering Q3 is usually a week quarter given the summer shutdown and in light of the top plan contraction experienced in the period. In this regard, please note that our four years into 2024 free cashflow of 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 cashflow build up. Q3 2024 adjusted EBTA was in line with prior year while provisions and similar contributed negatively for 72 million euros compared to Q3 2023 due to a reduction in commercial provisions as a result of lower volumes over the period, partially obsessed 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 year, for the full year are confirmed at around 1 billion euros. Finally, the 59 million euro year over year improvement in the effects 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 30th September 2024 stood at 4.4 billion euros with 2.5 billion euros in cash and cash equivalents and 1.9 billion euros of un-drawn 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 continue 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 Olo for his final remarks.
spk03: Thank you very much, Ana. Let's conclude with the industry and financial outlook as well as the key takeaway messages. In terms of the total industry outlook for the current year, we have confirmed it in its totality, so I will not spend too much time on the slide. I will just say that in reaffirming this outlook, we are obviously confirming fourth quarter 2024 to be down year over year as stated before for both light duty trucks and medium and heavy duty trucks in Europe. On the next slide, number 29 has our full year 2024 financial guidance unchanged from the previous call and the company is confirming its guidance as followed. At the consolidated level, group adjusted EBITDA at between 920 and 970 million euros and for industrial activities, net revenues, including currency effects to be down around 4%, adjusted EBITDA from industrial activities at between 790 and 840 million euros, industrial free cash flow at between 350 and 400 million euros and investments in property, plant and equipment and capitalizing tangible assets at around 1 billion euros. Guidance has been confirmed on the back of a solid year to date results and evolving order backlog despite macroeconomic uncertainty in the short term. And we will continue to manage our production capacities during the fourth quarter in line with the lower market to sensibly manage cost and cash and to finalize the recovery of the already mentioned second quarter one of impact. On slide 30 and in conclusion, let me provide some key takeaways from today's earnings call. Firstly, as stated in our press release this morning and repeated in my opening remarks, starting from 2025, we will accelerate the implementation of our efficiency program and reprioritize some of our investments, reducing our total operating capex and op-ex spending without affecting our product then. Our aim is to further increase the agility of our company and the speed of reaction to any market movements. In the next quarter review, in addition to our preliminary financial guidance for full year 2025, we will provide more details on this effort. Secondly, our commitment and effort towards the successful rollout of our model year 24 new product range is pivotal to support our journey, both in terms of our profitability trajectory and further strengthening of the IVECO brand image at 360 degrees in the market, especially in Europe. And thirdly, our priority remains optimizing our work in capital management to ensure financial health and sustainable growth. Efficient work in capital management means improving operation processes, reducing costs and freeing up additional resources for investments. And finally, our performance here today has been solid. We have been able to counterbalance volume declines with a solid pricing strategy and cost containment actions that will allow us to proceed in delivering sound full year 2024 result. In conclusion, we are preparing the group as we move with full force into 2025 and beyond, remaining strongly committed to the long-term targets outlined in our strategic business plan. Thank you.
spk06: Thank you, Olof. That concludes our prepare remarks and we can now open it up for questions. Be mindful of the time. We kindly ask that you hold off on any detailed modeling accounting questions on which you can follow up directly with me and the investor relation team after the call. Operators, please go ahead.
spk02: Thank you. As a reminder to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We are now going to take our first question. The questions come from the line of Daniela Costa from Goldman Sachs. Please ask your question. Your line is opened.
spk10: Hi, good morning. Thank you for taking my questions. I have two questions. I'll ask them one at a time. First, starting with your light commercial vehicle, you have a very high delivery market outlook of flat for next year. Can you help us think through the cadence of that because we observe now for yourself, book to build below one now for six quarters. Sort of how do you see those deliveries panning out and how do you schedule production based on that?
spk03: So first of all, we are giving our preliminary 2025 and we will sort of, we will not go into the sort of prioritization of it, but I think it's a fair point, discussion a little bit about our transformation between the 2022 and 2024 model range, which is ongoing right now in both lines up. It's not only in the LCD, but also in the heavy, of course. And we have to keep in mind that this is a total change of all the products we have in the truck that we now need to sort of implement into the market and do a changeover. The work is progressing well. We are very much focused on keeping our pricing discipline. We are very much focusing on making sure that we have a sound inventory level throughout the whole system, including our own inventory, the commercial inventory and the dealer inventory to make sure that we have a good status on that. And that is a work that is ongoing. It's according to plan. We are going to focus doing that this quarter, quarter four coming into the first quarter next year, where we estimate the most of this transformation and transition in the dealer network will have to be done. Also, I'd like to add on that, the feedback from our customers that we're getting from our model year, 24, is very positive and good. So it's something that we really would like to sort of conclude as quick as we can.
spk10: Thank you. And my second question is regarding sort of the commentary regarding lowering capex and opex, but particularly on the capex side, you're already net cash, you have a buyback. How shall we think about sort of the balance sheet going forward? Does this change your view on like cash to shareholders, capital allocation? Yeah.
spk03: I mean, the reason for, you know, highlighting this in our release today is we have been sitting down and go through the efficiency program in detail, and we've found a number of areas where we feel that we can increase the speed of implementing. And we also found when we go through the whole investment list and project list that we have in our product plan, that we also there can reprioritize some of the investments that we are planning to do. And this is basically something that we're now putting together, and we will come back then in next when we present the fourth quarter results and with more color and details around that. To me, I mean, and the whole team has always been focusing on, you know, uplifting our profitability as quick as we can, making sure that we have a balance sheet that generates the cash needed. And this is something that we continue to do. And I think it's a good sign that we now have found areas where we can increase the speed of this. And during 2025, we will sort of come back with more color on this one as well. So this is a natural sort of progression of the work that we're already doing.
spk02: Thank you. Thank you. We are now going to take our next question. The questions come from the line of Miguel Boriga from BNP Paribas Exam. Please ask your question.
spk05: Hi, good morning, everyone. Thanks for telling my questions. The first one, just on the truck margin, I know this is a seasonally weaker quarter, but help us understand why you saw such a decline both quarter and quarter and year on year, considering I suppose the new model year is being rolled over and also on a year on year basis, mix should be positive given the declining deliveries for medium and heavy and positive for light duty. So what explains the lower margin in trucks on a year on year and quarter on quarter basis? That's my first question.
spk01: So, well, the main explanation is the decline in volumes. So in the revenues we have seen, as we said, this was then partially offset and it translated also down to the profitability for a continuously positive pricing, but obviously the main effect is driven by the revenues and also the under absorption of a lower volume trigger. Having said that, we have been able to very well compensate this effect and the result of the truck profitability is extremely solid in the quarter. Then on the product cost, as we said, we had a positive contribution because the negative effect, as we said, is the volume contraction, but we had two positive contributions. One, as we said, is pricing, the second is in product cost. But we please note that the product cost was in turn negatively affected by two main factors. One was on trucks, the one of cost links the launch of the model year 2024. And second, the performance of Latam, Argentina specifically, you may have seen actually the performance in product cost was negative year over year in Argentina, in Latam, linked by the fact that the inflation there is still extremely high, also year over year, has slightly reduced, but it's still substantial. And this unfortunately has played against from a year over year perspective. But other than that, as I said, pricing and product cost in Europe has performed very well. And we are quite happy with the profitability result reached by the truck business unit in the quarter.
spk05: Thank you. And then on buses, we see now other peers with high single digit margins. You said your backlog now extends to 2026. I guess the whole point of being full kind of implies a better margin over time. So can you give us a sense if you're gonna see margins going beyond the 5% level into next year perhaps?
spk01: Well, I'll answer, but then I'll let all of integrate. I think we are not ready to give you guidance for 2025 yet. You saw the journey that BAS has done so far and what still lies ahead also in the coming years in our business plan as we announced it in March of this year. The result of BAS in the quarter is remarkable. I absolutely agree with you. They have benefiting from positive pricing from higher volumes. So they've won a number of tenders which have a nice profitability. So I think we can just answer saying the trajectory is there. The journey is halfway through. And for now, I mean, everything is marching ahead of in line with plan. Yeah, no, I think
spk03: you're absolutely right. And I think adding to that is also the position as I mentioned in my remarks as well, right? It is now completely integrated into the bus with the development of new novelties around the electrification of the bus sector, both within the city bus, which is coming very rapidly as we speak, but also in the intercity buses, there are definitely a lot of opportunities there as well. And being out early, getting the volumes, making the experience we have now, plus adding then a very solid product development plan into the bus means that we also, both from a volume point of view and I would say absorption point of view in the factories, but also from the fact that we then can be very, very competitive. And it's not over yet. There will be new things coming presented by the bus side during the year and the years to come here. So we are marching along in a good pace there, I think.
spk05: And then if I can squeeze in one more question on free cashflow. So over the first nine months, you're down 800 million. Basically you need 1.2 billion in Q4 to achieve your guidance. And this would be in line with last year, Q4 versus last year, but this year on a weaker market environment. So what level of confidence you have or maybe give us a sense on the drivers to achieve your guidance. Will you rely for example on more factoring this year or what other drivers do you have to achieve the free cashflow guidance? Thank you very much.
spk01: Thank you. Now, thank you for your questions. Now the drivers are purely operations because we are now in November. So we are already halfway through the quarter. So obviously as we said during the call, we have adapted in the past month, our production levels to the level of deliveries. So we see in terms of demand. And these will have a positive impact on our product payment activity in the quarter. So that will offset to your point, the revenues contraction we might experience here over here in Q4. So the two effects will balance themselves. Then we still have a recovery to complete. As you might remember in Q2 of this year, we showed we posted a gap versus last year, which we are very happy to have partially recovered in Q3. This is what we had promised to you and to the market. And we were able to deliver that, but the journey is not completed. We said we were gonna complete it by the end of the year. So we still have Q4 to go. And then last but not least, from a year to year perspective, you have to remember we have also an improvement in our financial charges, actually a strong improvement there. We guided for 300 million euros, full year of financial charges. Last year, our financial charges were around 450 million euros. So that also obviously affects positively our cashflow performance. Then we also said we still expect, so this number, the 300 million euros of financial charges amount for the full year still implies a potential server devaluation in Argentina, which right now our local team is still seeing the potential event to occur between this month and the next one. But obviously nobody knows. So in case it won't occur, that might also have a positive impact. So we have operational levers to support our guidance, despite the fact that obviously the elements themselves might be slightly different to what we experienced last year.
spk02: We are now going to proceed with our next question. The questions come from the line of Monica Bosio from Inteso-San Paolo. Please ask your question.
spk09: Good morning and thanks for taking my question. I have three. The first one is, first of all, sorry, thank you for anticipating as the volume scenario for 2025. You also say that you're going to accelerate the efficiency program. I'm just wondering, what is your view on the pricing scenario, electric commercial vehicles and medium and heavy for the next year? I think that you are taking a very prudent stance. Am I right?
spk03: Yes.
spk09: It is the first.
spk01: Sorry Monica, you wanted to answer or you had a couple of questions? Yeah, just
spk09: one at a time. Yes, please.
spk01: Of
spk09: course. So
spk03: if I understood you correctly, it was the pricing for LCV next year. How I see that. Well, I mean. Yeah, LCV and medium. Well, listen, I've been very clear and Christy clear, both I think to the market and internally as well, that our model year 2024 is a product that deserves and has all the features, feasibilities, quality, and is up to the standard with the absolute best in the market. And therefore, our pricing policy and our pricing discipline will go hand in hand with that. And that will not change in 2025. It will not change in 2026. I mean, this is a model year program that we're gonna have for many years to come. And we are already, as I said before, having this quarter, next quarter, and the quarters to come, a very solid pricing discipline in place. And we're gonna continue to do that. So I don't think we're prudent. The efficiency program is disconnected from that. So that is a true internal operational, where we review the efficiency program we have that we can accelerate. And if we find that, of course we do that, right? That's it. It's
spk09: a... Okay. Okay. Got it. And my second question is on a thank you, is on the power train. Are you still confident to reach 100 basis point margins improvement on an annual basis, given the deterioration in volumes?
spk03: I think the... If I start and then I can... No,
spk00: of
spk03: course. I think first of all, I truly, I'm impressed by the way the team in power train has managed this downturn. It's been a year of the, where the volumes have sort of gone down. You know that they have a lot of fixed costs in power train that needs to be covered for to avoid under absorption. And I think they have really done, as Anna said before as well, a superb job in mitigating that and coming up with a solid performance. And we have to, year over year, if you take the full year, I still think they are up compared to last year, which is just a very good performance by itself. And then we'll see what happened during the Q4, but the commitment there is to do it. But I also would like to reiterate, that is good, really appreciated. But as I said in my remark as well, it is also the very heavy focus on getting more third part of business into power train going forward, both on the on and off road segment. And that they also have been doing great progress during the quarter as well, because that is building the foundation for what I call the powerhouse that we do have in power train being one of the largest manufacturer of engines and access in the world, that is sort of confirming and also solidifying and building that robust basis. But Anna, if you want to talk about numbers. You said
spk01: it all, but just to give you that some data points Monica, so a year to date, as you noted, obviously the volumes were down, revenues were down 25%. And despite that, they were still able to achieve a 40 basis point. So, I mean, we are very happy. Then the important thing is given the market outlook and the volume performance they experienced this year, the important thing is that they show a profitability uplift. Then if it's 100 is slightly less, I think the important is the signal, because as I said, the volume contraction has been significant. The target of 100 basis point remains overall, let's say throughout the business plan period. But as I said, the important thing is not necessarily, it's more the signal, let's say the trajectory that they have been showing as Aurope was saying, they will continue to show today.
spk09: So, yeah, you're right. The track record is very good. They're not withstanding in the strong volumes decrease. And my very last question is on the market share gains in medium-heavy duty. Can you give us some color on this side? What was the view to the old models or to a combination of the old and the new ones? Any color would be helpful. Thank you.
spk03: I think it's the, I mean, you took the medium and heavy, the market share in totality. I think it's pretty flat. As you can see, we don't have that much of an impact. We had a little bit of an impact of the pre-buy effect, of course, in the Q2 as we had on the LCV side, but less visible. I would say in the market share. I would say that the important thing now is that doing the Model Year 22, 24 shift by the dealers and making sure that we get our Model Year 24 out to the customers. We're in the beginning of that right now. We have been talking about Model Year 24 for a long time, but it's first now that we see the rubber hit the road and we start to get really the customers out there. And we do a lot of different marketing activities. And then I think we will see the ones we have only, the 24 models out there in terms of market share, we definitely gonna see. And our aim is of course to make sure that we are taking our share, our share that we should have in with a product like the Model Year 24. But there remains to be seen. We are comfortable, customers are happy. The product is good. And we just need to make sure that we get out there in the best possible way.
spk09: Good, good. Thank you very much.
spk02: Thank you.
spk03: Thank you. Thank you, Monica.
spk02: We're now going to proceed with our next question. The questions come from the line of Shaquille Kirinda from Morgan Stanley. Please ask your question.
spk04: Hi, thank you Shaquille, Morgan Stanley. Power train revenues, so they fell about 22% year on year. Half of that will be from your own business. And what about the external cost? Which segments and customer types is Power Train most exposed to? Because the year on year decline was quite sharp this quarter versus the first half.
spk01: Hi, Shaquille. So as you said, the drop was both on road and off road. So these are the two most effective segments. So I wouldn't necessarily name customers. I would say the whole industry was down and Power Train is exposed both to on road as well as off road. So the other obviously component is the off road industry.
spk04: Thank you.
spk01: Problem.
spk02: We are now going to proceed with our next question. The questions come from the line of John Luca Bertuzzo from Intel Montesim. Please ask your question.
spk07: Hi everybody and thank you for taking my question. The first one is on the guidance. Do you see results trending toward the low end, mid point or high end because Q4 looks a bit wide at this stage. Second question is, thank you Anna for the explanation about the evolution of production costs and the inflation effect in South America. I guess you've said that through higher pricing there. Can you maybe quantify how much of the total pricing effect was attributable to South America as well? And the last one is, can you maybe share the evolution of orders into Q4 as of let's say, the latest number you have? Thank you.
spk03: Want to
spk00: take the
spk03: guidance? Yeah, the guidance is the guidance. And I think if you look at having the span that we have, we have had it all the year and we're keeping that and we will see where we end up in that. We confirmed the guidance and I think with the numbers that we present. So I don't really think we need or should or can speculate in that right now. If I then take the last one, which was done the orders in the last week. I would say that, I mean, the work of, and this is an ongoing activity and I really want to be clear on that. The ongoing activity of transformation, transforming the dealer inventory model year 22 to 24 is a very sort of delicate exercise that we are dealing with. We're playing on all strings of the guitar in terms of the inventory level. We're playing on the pricing disciplines. We're making sure that we are doing the right marketing activities on the right market with the right products. So it's a very delicate issue. And that is of course, something that we have in the forefront of us right now. So I think the order intake is sort of a reflection of that effort that we do, that we will do down up until the first quarter of next year when majority will be done. And I don't think we really give any last week's kind of development. Things are going, I mean, steady as you go, so I can say. I mean, it's ticking in the orders. And I said, with the feedback from the customer, that is important thing, but with the positive feedback, you sooner or later get the orders. That is the key issue that I'm looking at as well.
spk01: New question on pricing. I would say then the component of pricing is a little bit the same after product cost. You're right, we are offsetting inflation or compensated recovery, sorry, inflation also for pricing. To be honest, not only because we have a good position and both in, especially in Argentina, but also in Brazil. Having said that, say out of the whole pricing impact in the quarter, I would say a little bit more than a third is Europe and remaining part is Latin. But as I said, it's not entirely inflation because there are different effects there in Latin, but I mean, ballpark, this is the magnitude of the share between the two regions.
spk07: Thank you, very clear.
spk02: We are now going to take our last question. The questions come from the line of Nikolai Kemp from Deutsche Bank, please ask a question.
spk08: Yeah, good morning, Nikolai Kemp from Deutsche Bank. Thank you for taking my question. My first question is also on pricing. On the Q2 call, there was a slide from comment that you expect pricing pressure to come in Q4. I missed this comment now on the slide. So it's a positive sign that we do not expect to see pricing pressure to come in Europe
spk00: in
spk08: Q4. And my second one, because of housekeeping, I think in the past you've got only net financial sales. Can you just confirm this again? Thank you.
spk01: Thank you. To take very quickly, the second one, I think is on the financial charges you were asking. We got it for 300 million euros for the full year. And as we said, and I'm sure if you missed it earlier, we said it also in the previous call, this also assumes a potential for devaluation in Argentina. And I just want to highlight that just because with the keep on pushing it throughout the year, now it's expected November, December, but obviously if it won't occur, that might impact the 300 million euros amount one way or the other. But for now we are guiding and maintaining our estimate of 300 million euros for the full year.
spk03: And on the pricing pressure, I mean, it is of course a very competitive market out there. So that's definitely the case. But we are in a position right now with the shift over by the dealers that we of course are running, keeping our price position very firm, as I said, and then running marketing activities on both sides. But one is to get our model year 24 out to the customers and start to get them into the market. And the second one is of course then to try to trade space with the dealers by selling out the 2022. So that is sort of the situation we are in right now.
spk08: Thank you.
spk02: That will conclude the question and answer session. I will now turn the call back to Federico Donati for any additional and closing remarks. Thank you.
spk06: Thank you all and have a nice day. Bye bye.
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