This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

Nemak S A B De C Fnl Ind
10/23/2025
Good morning everyone and welcome to NIMAC's third quarter 2025 earnings webcast. I am Denise Reyes, NIMAC's investor relations officer and I am pleased to host today's call along with Armando Tamez, NIMAC's CEO and Alberto Sada, CFO who are here this morning to discuss the company's business performance and answer any questions that you may have. As a reminder, today's event is being recorded and will be available on the company's investor relations websites. Armando Tamez, our CEO, will lead off today's call by providing an overview of business and financial highlights for the quarter. Alberto Sada, our CFO, will then discuss our financial results in more detail. Afterwards, we will open for a Q&A session, which participants may join live or submit written questions via the Q&A function. Before we get started, let me remind you that information discussed on today's call may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company coaches you not to place undue reliance on these forward-looking statements. IMAC undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events or otherwise. I will now turn the call over to Armando Tamez.
Thank you, Denise. Hello, everyone, and welcome to NEMAX Third Quarter 2025 Earnings Webcast. This quarter, our top line remained stable compared to the same period of last year, supported by the continued resilience of the automotive industry. EBITDA declined 15% year-over-year, ending the quarter at $143 million. This change is primarily explained by a high comparison basis in the same quarter of last year, when we benefited from one-time commercial adjustments as well as the typical seasonality of the third quarter, when summer shutdowns and major maintenance activity take place. While these dynamics were particular to this quarter, for the full year we expect to achieve the high end of our EBITDA guidance at $600 million. with capital expenditures totaling $290 million. Our focus remains firmly on executing our strategic priorities and positioning the company for long-term value creation. In line with this commitment, we recently announced the agreement to acquire the Your Featured Casting Solutions automotive business, a milestone that will mark an important step forward in strengthening Limex's capabilities and a significant advancement in our strategic journey. Your feature is an outstanding player in the industry and its capabilities are expected to be highly complementary to NEMAX. This transaction is well aligned with our strategic focus and technical strengths in lightweighting. It will enhance our business profile and be accretive from both a commercial and operational standpoint. It will also expand our innovation platform and extend our reach in R&D, particularly in high pressure die casting technology. Additionally, we will be able to broaden our product offering, particularly in high complex aluminum and magnesium parts for the immobility, structure and chassis application segment, which continues to offer ample potential for future growth. From a geographic perspective, the integration of your feature casting solutions will increase our footprint in Europe and China. The transaction perimeter includes two manufacturing plants in Austria, two in Romania, a tool shop in Germany, an R&D center in Switzerland, three plants and a tooling shop in China, and one facility currently under construction in the United States. This new plant will be dedicated to highly engineered structural components and it is expected to begin operations during the second half of 2026. In addition to footprint diversification, this transaction will provide a valuable entry point to serve important Chinese OEMs, including BYD, Tensa, Geely, HongKey, LiAuto, NEO, Xpeng, and Secure, among others. Beyond the opportunities with new Chinese customers, this acquisition will also positively impact business with our existing Western customers. These include Audi, BMW, Jaguar Land Rover, Mercedes Benz, Porsche, Stellantis, Volkswagen and Volvo, among others, reinforcing our commitment to serve a diverse and globally recognized customer base. As part of this transition process, we're eager to welcome a highly skilled and experienced management team, along with a dedicated workforce of approximately 2500 employees. We look forward to the integration phase ahead and the opportunity to combine the strengths of two competitive and complementary cultures. The transaction remains subject to customary regulatory approvals across the various regions involved. While we expect to close by the end of the year, the timeline continues to follow the procedures established by the respective regulatory bodies. Moving on to commercial activity, during 2025 we have secured $250 million in awarded business across all our regions, 80% in the ICE powertrain segment and the remainder in the e-mobility, structure and chassis application segment. These new programs will mostly reuse existing assets, deploying capital efficiently, while continue to deliver high-quality, cost-effective solutions to our customers. The new contracts also highlight the ongoing relevance of the ICE Powertrain segment. whose life cycle has been extended due to the current electric vehicle adoption trends. In line with this, we have also experienced robust demand for V8 and I6 engines in North America. In other recent developments, I am proud to share that four of the ten vehicles recognized in the 2025 World's Out of Best Engines and Propulsion Systems include components manufactured by NEMAC. This recognition reflects the trust that leading OEMs place in our technology, as well as our ongoing contribution to efficient high performance proportional systems. Notably, this year, hybrid power trains dominated the list, underscoring the growing relevance of electrified solutions. Moving on to innovation, the integration of artificial intelligence is becoming increasingly essential to our efforts in this area. At NIMAC, we are successfully embedding AI into our business practices to enhance decision-making and operational efficiency. A clear example of this is the evolution of our patented NORIS system, which stands for NIMAC Online Real-Time Information System. This system has been running successfully for over a decade as a chop-throat information system. Recently, we introduced NORIS GPT, A new AI power layer that significantly enhanced the system capabilities. Our manufacturing processes involve managing a wide array of variables and parameters. Norris GPT enabled us to quickly turn data into actionable insights, combining this enhanced information with domain expertise to deliver real business outcomes. This advancement reflects our ongoing commitment to innovation and our ability to leverage cutting-edge technologies to heighten our competitive position. Turning to our sustainability agenda, we continue to make meaningful progress in advancing responsible practices across our operations. Our commitment to the aluminum stewardship initiative remains strong, and this quarter we achieved two additional certifications under the performance standard at sites in Europe. In addition, our melting center in Mexico was certified under the chain of custody standard. This is a key milestone in producing certified alloys for our casting facilities in the country. These milestones demonstrate our continuous commitment to integrating sustainability across our value chain. Moving forward, we plan to have the majority of our sites certified in the near future. This concludes my remarks. Thank you for your attention. I will now hand the call over to Alberto.
Thank you, Armando. Good morning, everyone. I will begin with an industry overview of the regions where we operate, followed by a discussion of our consolidated and regional financial results for the third quarter of 25. During the third quarter, the top line remained stable at $1.2 billion on the back of sustained pricing and a favorable product mix. EBITDA decreased by 15%, due to the effect from commercial negotiations in the third quarter of 2024, which elevated the comparison basis and extraordinary expenses during the period. During the quarter, we generated positive free cash flow on the back of operating results and a prudent approach to capital expenditures. In turn, this allowed us to maintain our net debt to EBITDA ratio at 2.5 times. Turning to the automotive industry, during the third quarter, light vehicle sales in the United States showed a 5% year-over-year increase on a standard basis to 16.4 million units. This was mainly due to a pull-ahead effect prior to the phase-out of the Inflation Reduction Act incentives and tariff potential impacts. Light vehicle production grew 3% year-over-year to 3.9 million units, driven by sustained demand. On a start basis, light vehicle sales in Europe grew 2% year over year to 15.7 million units. OEMs continue to introduce less expensive trims, therefore improving affordability. Light vehicle production in the region remained at 3.4 million units, similar to the same period of last year. In China, light vehicle sales on a SAR basis increased 7% year over year to 28.6 million units, propelled by trade-in programs and government incentives. Light vehicle production increased 2% year over year to 7.4 million units, driven by stable domestic sales. In Brazil, light vehicle sales decreased 1% year-over-year and production increased by 3%, driven by export activity. Moving to NEMAX Results During the third quarter, NEMAX volume was 9.6 million equivalent units, in line with the same period of last year. Volume was driven by stronger production in North America and partially offset by lower production in Europe. Revenue was $1.23 billion, stable when compared to the same period of last year. As updated pricing and the appreciation of the euro offset the absence of the one-off effect from commercial negotiations in 24. During the quarter, EBITDA was $143 million, a 15% decline year over year. This was due to the lack of commercial negotiations versus the same period of last year, and launching expenses associated with the ramp up of volumes and mixed changes in certain platforms. In turn, the unitary EBITDA margin was $15 per equivalent unit. Operated income decreased to $26 million from $73 million in the same period of last year. The decline was mainly attributable to lower EBITDA and impairment charges of $17 million related to non-operating assets, primarily in North America. Net income increased to $25 million from $5 million in the same period of last year, reflecting lower net financing expenses and a favorable tax effect from foreign exchange movements, particularly the appreciation of the Mexican peso against the U.S. dollar, which more than compensated for lower operating income. The combined effect of disciplined execution and reduced financial expenses and capital expenditures allowed us to generate during the quarter a free cash flow of $18 million. This is aligned with the business seasonality and our expectations for the year and places us in a good position to continue reducing our leverage. In turn, by the end of September, net debt was $1.59 billion. $173 million lower than in the same period of last year. This is a testament to our disciplined capital allocation and operating efficiency, which more than offset the foreign exchange impact on our balance sheet from Euro denominated liabilities. Looking forward, debt reduction remains a key priority. At quarter end, the net debt to EBITDA ratio was 2.5 times compared to 2.9 times at the end of the third quarter of last year. Conversely, the interest coverage ratio was 4.9 times compared to 5.0 times in the same period of 2024. Our cash position at the end of September was $328 million. Capital expenditures during the quarter totaled $17 million, 27% lower than the same period of last year, in line with our disciplined investment strategy that prioritizes projects with adequate profitability. Moving on to the regional results. In North America, revenue rose 2% year-over-year to $651 million, supported by higher volumes. EBITDA decreased 14% to $67 million, Many due to the absence of prior year commercial negotiations and additional costs associated with the volume ramp up of specific platforms. In Europe, lower volume drove the 4% decline in revenue to $401 million. This decrease was partly offset by improved pricing and depreciation of the euro. In turn, EBITDA decreased by 26% to $50 million. mainly due to the lower volume and the absence of one-off customer payments following commercial negotiations on inflation compensations in 2024 which more than offset the benefit from the appreciation of the euro in the rest of the world revenue increased by three percent to 175 million dollars as lower volume was more than offset by an improved product mix EBITDA of $26 million was 11% higher driven by performance and product mix improvements. In relation to the acquisition of George Fisher Casting Solutions Automotive Business, the enterprise value is $336 million. At closing, we will cover a payment of $160 million with existing cash. The remaining of the enterprise value is structured through a combination of holdbacks Not related to performance, but subject to the absence of contingencies, as well as a portion of assumed operating and financial liabilities. This portion of the transaction will be funded by a vendor financing agreement. Overall, we continue to focus on maintaining profitability, even when facing a very dynamic landscape in the automotive industry. We believe the diversification and potential synergies of the York Fisher acquisition will lead us to strengthen our value proposition. In conjunction with our customary discipline execution, we believe these measures will enhance our business profile, delivering value to our stakeholders as we continue to make strides in our commitments to leverage and create sustainable value for the future. I will now turn the call back over to Denise.
You're reading a preview of the NMAKF Q3 2025 earnings call.
Free account.