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spk07: Good evening, ladies and gentlemen, and welcome to the Martin Luya International First Quarter 2024 results conference call. Instructions for submitting questions will be provided to you later on in the call. I would now like to turn the call over to Mr. Rob Wildeboer. Please go ahead, sir.
spk05: Good evening, everyone. Thank you for joining us today. We always look forward to talking with our shareholders, and we hope to inform you well and answer questions. We also note that we have many other stakeholders, including many employees, on the call, and our remarks are addressed to them as well as we disseminate our results and commentary through our network. With me are Pat DiRamo, Martin Reyes' CEO, and our President and CFO, Fred DiTosto. Today, we will be discussing Martin Reyes' results for the quarter ended March 31, 2024, a very solid quarter as you see from our press release. I refer you to our usual disclaimer in our press release and file documents. First, Pat will make some comments, then Fred, then me, and then we'll do Q&A. And now, here's Pat. Thanks, Rob. Good evening, everyone. As noted in our press release, we generated an adjusted net earnings per share of 62 cents and adjusted EBITDA of $163 million in the first quarter. Adjusted operating income margin came in at 6%. which is 160 basis point better than the fourth quarter, on production sales that were up about 8%. Recall that in the fourth quarter, we were impacted by the UAW strike and a significant disruption by one of our suppliers, both of which were resolved at the end of last year. Operationally, we continue to perform very well. Industry headwinds from the supply shortages, inflationary cost pressures, and tight labor markets continue to improve. Production volumes in North America had a decent start to the year as the industry bounced back from the strike that affected Q4. And the number of our top platforms had strong production volumes quarter over quarter. While Q1 production sales in Europe were sequentially higher, they remained below planned levels. Production sales in our smaller rest of world segment were down quarter over quarter, but are expected to increase over the coming quarters as we launch and ramp up on the new program we won in China, for BMW. Despite the overall production sales growth, the industry continues to face headwinds from lower than many expected ramp-up in electric vehicle programs, resulting in underutilized assets in the industry. We are experiencing some of this also, as we have discussed in the past. Based on our current product offering and capabilities, fundamentally we are largely agnostic to propulsion type, so we can adapt our business over time to any mix of EV, ICE, or hybrid vehicles using our existing footprint and asset base. Commercial negotiations aimed at offsetting inflationary cost pressures, as well as some volume shortfalls on certain programs, continue with our customers, and I'm happy with the progress our team has made on this front at the start of the year. Quarter over quarter, commercial settlements were higher in Europe steady in North America and lower in the smaller rest of world segment. Commercial activity will continue to be a key focus through the remainder of this year. Moving on, I'm pleased to announce that we've been awarded new business worth $30 million in annualized sales at mature volumes consisting of 20 million in lightweight structures commercial group and 10 million in our propulsion systems group with existing customers including General Motors and Toyota. In addition, We were awarded replacement business on both lightweight structures and propulsion systems with approximately $150 million in annual sales at mature volumes with a variety of OEMs, including General Motors, Ford, and Honda. Overall, we're pleased with the performance of our first quarter. While EV softness and higher interest rates are likely to result in relatively flat year-over-year industry production volume and profile, we expect 2024 will be a good year. with steady production sales and strong positive free cash flow. I would like to thank the entire Martin Rea team for their hard work and dedication in these continued challenging times. With that, I'll pass it to Fred. Thanks, Pat, and good evening, everyone. As our first quarter results demonstrate, we had a good start to the year as we bounced back from the disruptions we faced in Q4 from the strike and supplier issue that Pat mentioned earlier and that we spoke about on the last call. First quarter adjusted operating income margin rebounded to a level consistent with the third quarter, with first quarter adjusted EBITDA margin actually up 50 base points over Q3 last year before these short-term disruptions surfaced. I am proud of the work our team has done in delivering these results. Taking a closer look at the results quarter to quarter, we generated an adjusted operating income of $79.2 million, up from $56.6 million in Q4, On production sales, they were up about 8%, reflecting a rebound in industry production volumes coming out of the strike and strong production numbers on some of our core programs. As expected, tooling sales declined by nearly half, representing a more normal level as a percentage of total sales. Adjusted operating income margin came in at 6%, up 160 base points quarter-by-quarter. Note that adjusted operating income excludes $6.3 million in restructuring charges, which reflects the right size and of certain operations in North America and Europe that we previously announced. Based on some incremental cost-saving opportunities identified, we may see some additional restructuring charge in the next quarter or two, though at a reduced rate. Moving on, adjusted net earnings per share came in at 62 cents in the quarter, a big improvement over the 37 cents generated in Q4 due to the same factors affecting adjusted operating income, as well as a $4.9 million net foreign exchange gain, which compared to a $1.3 million net foreign exchange loss in the fourth quarter. Free cash flow came in at negative $1.4 million in the first quarter, significantly better than the negative free cash flow of $31.5 million in Q1 last year, a good start to 2024. We generally experience a normal season of build and non-cash working capital in the first quarter of any given year, and this year was no exception. Excluding lease payments under IFRS 16 accounting, Q1 2024 free cash flow was negative $13.7 million compared to negative $42.2 million in Q1 last year. As indicated on the last call and similar to 2023 results, we expect to generate the bulk of our free cash flow in the back half of the year. Looking at our performance on a year-to-year basis, and I'll be brief, first quarter adjusted operating income of $79.2 million was up about 5%. On production sales, that were up by 1.4%. and our adjusted operating income margin of 6% was up 20 base points from the 5.8% generated in Q1 of last year. I refer you to our Q1 MD&A for commentary on year-over-year variances. Turning to our balance sheet, net debt, excluding IFRS 16 lease liabilities, increased by $74 million quarter-per-quarter to $857 million. This reflects the free cash flow profile for the quarter, as previously outlined, as well as the funding of approximately $22 million in cash restructuring costs, roughly $16 million spent to repurchase approximately 1.35 million shares under our normal course issuer bid, an $8 million investment in Ecospheres Inc., a leading-edge supplier of aluminum powder for additive manufacturing or 3D printing applications, and about $4 million in dividends, along with some negative non-cash foreign exchange translation driven by the weakening of the Canadian dollar against the U.S. dollar during the quarter. Rob will elaborate some more on our capital allocation activities following my remarks. Our net debt to adjusted EBITDA ratio ended the quarter at 1.51 times, up from 1.4 times at the end of Q4 2023. While our leverage raised to a slightly higher quarter for the reasons I explained, it remains within our long-term target range of 1.5 times or better, and we intend to keep it that way. Turning to our 2024 outlook, it remains unchanged, and we remain on track to meet it based on our Q1 performance. As a reminder, our 2024 outlook calls for total sales of between $5 and $5.3 billion, an adjusted operating margin of 5.7 to 6.2%, and free cash flow, excluding IFRS 16 lease liabilities, of $100 to $150 million. Lease payments are currently running at approximately $12 million per quarter, so the free cash flow outlook, including IFRS 16 lease payments, is roughly $50 to $100 million. As noted, we expect to generate the bulk of our free cash flow in the second half of the year, which again is similar to what we experienced in 2023. Looking forward, we expect a solid year, both financially and operationally. We continue to perform at a high level and our balance sheet is in great shape. With that, I now turn it back over to Rob. Thanks, Fred. A final note related to capital allocation. Our approach is described in an investor note on our website. In Q1, we generated approximately $39 million in cash from operations. Capital expenditures were about $58 million as we continued to invest in support of new business wins and incremental equipment needs. We made an $8 million strategic investment in Equispheres. Equispheres is a leading-edge company developing innovative technologies for the production and use of advanced materials, including high-performance aluminum powder for additive manufacturing or 3D printing applications. The proven technology of Equispheres enables printing speeds that are up to nine times faster than industry standards, thereby lowering production costs by as much as 80%. Equispheres is a specialist in aluminum powder, and Martin Ray is an expert in aluminum components. The high-performance powders that Equispheres supplies should enable us to provide increasingly complex and sophisticated assemblies and other products to our customers, which is the main goal of our project breakthrough strategy. Next, we paid our usual dividend to our shareholders, approximately $4 million, or $16 million on an annualized basis. Lastly, we purchased approximately 1.35 million shares for cancellation under our normal course issuer bid, as Fred noted. Total cash spent was approximately $16 million. We believe our stock is a great investment, particularly at the current valuation, which is near its historic low on a multiples basis. We repurchased approximately 1.7% of the outstanding shares of the company during the quarter, which is fairly aggressive, especially considering that we were only active in the month of March after coming out of blackout following the release of our Q4 results. We renewed our normal course issuer bid for another year, and our intention is to continue to buy back stock at these levels. To summarize, we have invested in our business, made some positive strategic investments, kept our balance sheet strong, and returned capital to the shareholders in the quarter with our dividends and buyback. In terms of allocating capital, we will consider anything that makes Martin Rant better, but not at the expense of our strong financial status. We believe consistent free cash flow generation is the road to a higher valuation. Finally, a big thank you to our people. This is a challenging business in a challenging world, and we continue to deliver. Thank you for your dedication every day. Now it's time for questions. We see we have shareholders, analysts, employees, and even some competitors on the phone, so we may have to be a little careful with our answers, but we'll answer what we can. And thank you for calling in.
spk07: Thank you, Mr. Wildeboer. We will now take questions from the telephone lines. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. Please press star one at this time if you have a question. There will be a brief pause while participants register, and we thank you for your patience. Our first question is from Tammy Chen from BMO. Please go ahead.
spk06: Hi, good afternoon. Thanks for the question. I wanted to circle back on the supplier issue that you had and talked about from last quarter, and I'm just wondering if in the Q1 results, Was there an accrual that you received from this because the supplier couldn't deliver?
spk05: No, that issue is essentially behind us at the end of last year.
spk06: But I thought the issue was that the supplier couldn't deliver. At least that's what I recall you said last quarter. And I thought when that happens, usually you would receive a compensation. Was there not that element?
spk05: No, no. This is a long-term supplier, and we don't necessarily do that. I mean, we know that some customers go after their suppliers when they have a problem, but that's not our philosophy fundamentally. Yeah, as we said, it was a fourth-quarter issue.
spk06: Okay, understood.
spk05: And my second question is... I mean, there's associated costs with that that... you know, we'll get some recovery from, but nothing substantial for this quarter or going forward.
spk06: Okay, got it. And my second question is for Europe. It's been a bit volatile the last number of quarters. I understand part of it is the factor of recovery. Just trying to get a sense of the business the underlying business and where it's at and how we should think about that and then the element of recovery over the coming quarters.
spk05: Thanks. I mean, as you noted, it's a smaller segment compared to North America, so you do tend to see some volatility, particularly in this environment the last couple of years with all the commercial negotiations. So you see some up and down. You've got to kind of look at the margin profile over a longer period of time. I mean, operationally, I think overall it's performing well. So I think from that perspective, it's in good shape. We are experiencing some long headwinds there, in particular some of the EV platforms. So that's a bit of a headwind that we're all dealing with. I think longer term, we're happy with where we are, considering some of the systemic differences between Europe and North America from a cost perspective. We do expect it to continue to be positive, in particular after some of the restructuring we've done there. So we're happy with where we are, and we see a pretty good path in that segment overall.
spk02: That's a good question, Paul. Yeah.
spk07: Thank you. Thank you. Our next question is from Michael Glenn from Women's Dreams. Please go ahead.
spk03: Okay. Maybe just the first question. like the sales guidance of the five to 5.3, um, given what you saw happen in Q1, I guess one of the, one of the questions that we were getting quite a bit, uh, exiting last quarter was that looked like a really conservative guide. Like, do you, do you see yourself trending towards the higher end of that range given what you saw in Q1?
spk05: Uh, if you mean from my perspective, I think, uh, the corn results kind of validate our outlook, uh, to some extent. I mean, it's extremely Q1 over four quarters. You're within the range. With that said, you know, there is a potential expectation here based on some forecasts that the back half of the year, the volume will get back into some level of seasonality. So the back half may be um, lower than the front half, but, uh, overall, I think, uh, we're comfortable with, with the guidance you provided. And, uh, I think we're, uh, we're coming in within that range. Yeah. When you're looking at year over year, remember we had a lot of tooling revenues last year, uh, which were kind of one off. Yeah. That was certainly higher than we would normally have. So even though we had 5.3 billion or something, I think the tooling was, was higher by a couple hundred billion than what it usually would be. Right. So. Okay. Now, having said that, if volumes come up, it's a good thing. I do think in a very general sense, and you folks that are analyzing the industry are very good at pointing out that the EV rollouts by a lot of people are a lot slower than was anticipated. So I think that that is a down draft on the industry for the next couple of years in that context, but at the same time, volumes can surprise you. The other thing that I think we think is pushing down on sales is the interest rates, particularly in the United States where most of these vehicles are sold. I think people got to get used to where they are and hopefully they come down a bit. When people are used to very low interest rates for a very long time, a 7% or 6% or 5% interest is certainly something that is a headwind. But as people get more used to it, it's less of a headwind. And the other thing that we're seeing is incentives from the OEMs are actually increasing. And so you might see 3.9% for 60 months or something like that, which is now viewed much more favorably than it would be, say, four years ago when it would be viewed as a big penalty.
spk03: Okay. And you mentioned the EVs, and I'm just trying to get an idea. You've made some capital investments towards some EV programs. To what degree are you able to give us an idea how much those are dragging right now on your overall margins?
spk05: I wouldn't say directly, but I can tell you we have a variety of negotiations that took place at the front end of a lot of the EV vehicles. There were the one extreme where all capital was covered up front and our risk was minimized all the way to some programs that we have high confidence that there'll be good volume sales where that wasn't necessary. and everything in between, including getting capital quicker up front and volume commitments and those types of things. So we're comfortable with where we are, but it's still capital that's not running at full out. Most of the EV programs that have launched, they're just at lower volumes. So it's really going to be a matter of how quickly they ramp up. We had seen some delays, but most of them are starting up. They're just not hitting the numbers that they originally were going to be focused on. And then there's some past ED programs whose volumes haven't reached what they were supposed to as well that seem like they will steady out at a lower level. And we've adjusted for a lot of that. It's a tough question to get too granular on. just based on our CAPRA program and so forth and the way our plants run. But you saw an uptick in our depreciation in the last few quarters, so that's a byproduct of that. And I think it's safe to say that based on our planning, we thought our sales would have been a little higher at this point had the EVs been where they were supposed to be. So there is an impact there, but to specifically quantify it, it's not an easy thing to do. And we played this pretty well. We expected EVs would have a much slower start than what the public anticipated. But as Fred implied, it's probably even slower still than what we anticipated. On the positive side, as the industry normalizes and basically sorts itself out as opposed to artificial pushes or pulls, I think that, you know, that's good for everyone in the industry. Yeah, and what we are seeing is some rise in some ICE products that was unexpected. In fact, in some of our engine programs, we can't make enough almost. I mean, the demand is super high. So, you know, in some areas you can pick up some work that you otherwise thought was going to diminish.
spk03: And the restructuring, I know that you're taking some restructuring charges. But is any of that, I haven't read through everything yet, but is any of that related to charges on EV programs specifically? And are we, should we think about a scenario where you do need to take some impairments against some of this EV capital that you've invested up to now?
spk05: I'm not expecting any impairments. I think longer term, you know, the expectations of OEM will come. As it relates to the restructuring, some of it was OEM related and some of it tied to EV programs. And some of it was just cost saving opportunities that we identified across our operations. We made a lot of improvements in some of our facilities in Europe that allowed us to do some of this as well. Okay. Thanks for taking my questions.
spk07: Thank you. Our next question is from Jonathan Goldman from Scotiabank.
spk05: Good evening, and thanks for taking my question. Maybe to start off, one for you, Pat, sticking with the EV theme. Given the industry reset and EV volumes that were lower versus the original plan, do you think we've bottomed, or is there more downside risk to volumes in the near term? For EVs specifically? Yeah, exactly. Yeah, I think I don't know that it's bottomed. But my belief is it will remain at a low level for a period of time, maybe a longer period of time than most. There's still more people buying them than in the past when you look year over year. But you've also seen in some particular companies whose volumes have gone down. So my feeling is it's going to ride on the low side for a while. You know, we're seeing, again, some programs, studies being done to – current ICE programs and hybrid programs. Studies are being done to extend. So I think the OEMs are really rethinking, you know, their whole product lineup, and you've seen it in the papers and so forth, and we're seeing it on our side as well. And so I, you know, they'll pick up, but I'm not expecting or hoping it's going to be anything significant in the next year. You know, the customer's king, right? That's the nature of the of the industry and you can't mandate a sale. And we think that's actually a good thing. Let the customer sort things out and that's better for the business because people can adjust on the basis of what the customers are willing to buy, what they're willing to buy and at what price. There's a lot of demand out there and a lot of pent up demand still. And I think that if you look at the average age of vehicles and so forth, it's approaching 13 years. There's a lot of people willing to buy. The question is when and what. And I think there's another piece of this that's fallen out that we've seen in the last year or so. There's a whole lot of focus on how far can you go on a battery charge. And I think what the OEs have found with some of the lower priced EVs is that a lot of the EV buyers are are not going that far every day. So they don't need 500 or 600 miles. They need 100, 250, whatever. And so the battery technology they can put in those vehicles is lighter and cheaper. And so I think there's a lot of efforts going on for that right now. And I think as those come into market and the cheaper EVs that's associated with those batteries that maybe only go 250 miles or less, I think you'll see it pick up. We saw it pick up on some products that did not have the distances and so forth to some of the more expensive EVs. And I think you're going to see more of that come in the next couple of years. And I think that'll help sales a lot. That's great, Tyler. I really appreciate that. I guess my second question then, really nice improvement in profitability in Europe. I guess, Fred, how much of the restructuring benefits have you realized to date? I think you were discussing, you know, somewhere equal to the charge you took of $28 million over six quarters. How has the cadence of those benefits been so far? As I know, some of it was bond-related, some of it's cost opportunities, and restructuring Germany and Europe and Germany in particular is quite expensive. So we're starting to see the benefit of that, and I think from a payback perspective, I know one to one and a half years is generally the rule of thumb in Europe. That kind of answers the question, I think. Yes, no, got it. And then maybe this is one more on the commercial recoveries. I believe on your last call you discussed how guidance makes in at least some level of recovery. You know, some of the stuff we're reading, automakers are making pretty aggressive comments around no more claims. Is there any change in terms of your expectations for recoveries at this point? From my perspective, no. So, as a note, we did bake in some of that in our outlook, so... I think we achieved their objectives in Q1, as Pat noted in his open remarks. Those discussions are getting, I would say they are getting tougher, but they were always tough. And we'll work through that, and we're confident we'll be able to meet our objectives this year on that front. And to be fair, you know, sometimes you see they'll make a comment and, you know, throw out a comment that they're not going to do certain things, but the majority of OEMs, They're fair. They're tough, but they're fair. And they work with us. We're not asking for money that we don't need or deserve through whatever process, and they know that. And we have the math with it. They know that. And they're working with us. It doesn't make it easy, but they're not all bad. Let's put it that way, by any means. And some are particularly good, and those are the best ones to work with. As you know, our industry is very collaborative on technology and so forth. And if you're a leading edge supplier, we get invited to the table for quotes. There are things that we need that they need from us as we need from them. The other thing is that the industry is in fairly good shape. OEMs have made a lot of money. And at the end of the day, even though they're spending a lot of capital on EVs and such, you know, it's very good to be making money. We've been in times in this industry when the customers are not making money, and that's not a good place to be. And keep in mind, 70% to 80% of every vehicle out there is made by the suppliers. So there's definitely a lot of need for good suppliers, and the OEMs know it. And they want to treat your suppliers well because they need them as they go forward.
spk02: Got it. Thanks for taking my question. Thanks for calling.
spk07: Thank you. Next question is from Christa Friesen from CIBC. Please go ahead.
spk00: Thanks for taking my question. And that's on the quarter. I was just wondering, obviously, you've moved past the supplier issues that you saw in Q4, but when you think of Q1, how smooth are operations running now versus pre-pandemic? Are things pretty close to normal, or is there still room for improvements?
spk05: It's funny you say that because we were having this discussion this week as we were assessing, making sure if you could take out all the inflationary and costs that have happened, where would we be sitting? And our assessment is we're actually running measurably better operationally than we ever have. If you had taken the impact of the pandemic and all the cost creeps that have gone on with inflation, I think you'd see some fantastic numbers. So I feel real good about the operation. I haven't felt better about it. And, you know, we have a few plants that are struggling with a few issues here and there, but compared to the last five years, it's substantially less. And our supply lines, you know, again, we've been pretty lucky with the exception of last quarter. But stability is definitely noticeable in areas where before it was been, you know, pretty volatile, especially in the United States. The U.S. had, you know, workers, that type of thing were very volatile. But this past year, it's gotten much better. And sometimes the ups and downs come from the customer that's dealing with another supplier. But that's better than it was to. Yeah. Yeah. Agree. So I'm pretty happy with our operations right now.
spk00: Okay, great. And then maybe as we think about the rest of the year, I mean, Q1 was quite good. Where do you see the potential upside? Does it really come down to volume surprising to the upside? Or are there any kind of internal levers that you can pull? Where could we see kind of more room there?
spk05: I think there's three things, volume obviously being the quickest and easiest. There are still a lot of operational opportunities. It's funny, as you start to get better, you find more opportunities to get even better. So our plantability to identify opportunities just continues to improve. So that's an internal lever that we're definitely pulling. I'd say lastly is there are certain materials we have exposure on that aren't directly covered by our customers. Like, you know, a lot of our material is not on resale for certain products. And we're starting to see some opportunities to go to other suppliers and reduce our material costs. So I think over the course of this year, we'll start to see some improvement in that. So as we go into next year, we'll have a better base, I believe.
spk00: Okay, perfect. Thanks. I'll jump back in the queue.
spk01: Thanks.
spk07: Thank you. Next question is from Brian Morrison from 2D Securities. Please go ahead.
spk04: Oh, thank you. Good evening. Good quarter, sales, margin, capital allocation. I want to follow up on a couple of questions. Commercial recoveries. When you talked about that, I understand it's getting more difficult, but are you going after labor or commodities or both at this point in time? What's the forefront?
spk05: Most of it in the past, a lot of it was inflation, labor, those types of things. On the go-forward basis, it's more volume-related, I would say. Yeah, some volume and still some ice-sharing material. Yeah, some inflation is true. Okay.
spk04: And then I guess I want to ask on that in terms of volumes. Do you have any risk-sharing or minimum guarantees within your EV contract? And then conversely, on the new ice contracts that you take in, Are there sunset provisions like volume guarantees within those as well?
spk05: Volume guarantees just straight up are very rare, but there are, especially on EVs, as I said earlier, there are contracts that we have that have some protection in them, a lot of protection and others not as much, but we negotiated a lot of that as we went into the EV space. I wouldn't say there's anything unusual in the space currently that's different than before. But volume guarantees are very rare in our world. They love to happen, but it tends not to happen. If you don't get some type of recovery for a program that goes south, then the OEs know that there's less suppliers that are willing to come to the party on new programs. So they work with you. Okay.
spk04: And then I guess just housekeeping, Fred, maybe in terms of cadence of margins on a going forward basis, should we think that they should be pretty consistent as we proceed through the rest of the year? Or do you expect some sort of volatility? And maybe can you address that specifically with respect to the second quarter?
spk05: I mean, I alluded to it a bit earlier. So obviously a good start to the year. Q1 met our expectations. We're expecting a good second quarter as well. Back half of the year should be consistent. strong as well, but you may see some more volumes based on seasonality. Again, I'm basing that on what some of the forecasters are showing, and we kind of model after that. So whether that happens or not is to be determined. Again, if rates start dropping, that could be a bit of a tailwind on Vaughn and so forth, so that can help. But overall, that's kind of how I currently see the year playing out, all kind of reflected on our outlook. At this point, we feel pretty comfortable with our marginality for the year.
spk04: And do you have good visibility, like 13, 14 weeks on releases still?
spk05: Yes and no. I mean, you know, the old days where you get, you know, releases, you know, and they tend to happen, doesn't always happen these days, right? So sometimes you can't rely on them. So there's still some volatility from that perspective. So I wish it would be more definitive, but it's gotten a lot better, but Complete visibility, probably not there yet. What will happen, there's still supply issues out there with DOEs, and you'll see a release for a week, and you'll get to Friday, and the release will drop out because they've had a part problem during the week. So that's the volatility. I still see quite a bit of it. Much better? Much better. But it's still happening.
spk04: Okay. And the last question, Fred, any kind of color, and maybe it's in here. I haven't seen it yet. A couple of us had a prior call.
spk05: um tooling sales for the year can you give us a ballpark i have about a 250 in there yeah we were at 65 for the quarter so i think the last call mentioned 250 to 300 so in and around that range i think we're still trending to that all right well done thank you thank you thank you thank you please press that one at this time if you have a question our next question is from david ocampo from core max securities please go ahead Thanks. Good evening, everyone. I just had a two-part question for me, and it's no surprise on EV, but have you guys ever disclosed how much capital that you guys have deployed into those programs that are specific mainly to EV where you can't switch it over to ICE? And then the second part of that is when we think about the compensation that you guys are seeking, is the compensation required in order to kind of hit your return on capital thresholds? And if you guys don't get any compensation, you guys would be essentially below that return to capital and destroying value.
spk02: I kind of missed the first question. It came across a little bit muffled.
spk05: Dividing how much capital we spent on these versus ICE. Yeah, we don't disclose it that way. We kind of just kind of outline our capital program in full. But if you go back to some of our releases, there's been a quite a nice mix between EVs and nice wins that we've announced. So I think, you know, I would say if I were to just off the top of my head generalize the mix, I would say it's fairly balanced over the last two, three years in terms of what we've won, and that would kind of align itself with the capital we've deployed in the organization. Any second questions? Yeah, sorry, just on the compensation. Okay. Is it required to hit your return on capital threshold or is it not necessary at all? To some extent, yes, because when you're short on volume, obviously your original modeling would be challenging to kind of hit those returns. So to some extent, yes. And that's where it gets tricky, right, because a lot of the OEMs don't want to pay for profits and all that kind of stuff. So that's where the ARIC forum can negotiate. But, you know, when you're dealing with the volume expectation, yeah, I mean, it's safe to say that, you know, we're trying to target those returns that we signed up to initially. Yeah, it is fair to say that the volume shortfalls have been an EV program, so that's a nice program.
spk02: Oh, yeah.
spk05: And can you refresh us what your IR targets are or return on investment capital targets are?
spk02: Yeah, so we...
spk05: We started off in our 15, and we have disclosed this in the past, and as rates have gone up, we've increased to some extent from that level. So we're a bit higher than 15. Got it. That's it for me. Thanks, everyone. Thanks. Thank you.
spk07: There are no further questions registered at this time, so I'll return the meeting back over to you, Mr. Wildeboer.
spk05: Well, thank you. It's amazing how quick a call can happen when there is a playoff game. And we hope that everyone has a chance to watch a leaflet if it happens. Thank you for the questions and discussions. At the end of the call, let me summarize on behalf of the group. Three takeaways. Propulsion agnosticism supports solid results in a volatile EV environment, which I think we talked of. In the quarter, we produced good results with solid margins and free cash flow. And we will have... We will have free cash flow this year. The first quarter was a very good start to that, much better than last year. And we think there's value in the stock and we're buyers. So if any of you have further questions, want to talk to any of us or Neil Forrester, please feel free to contact any of us. The information's in the press release. Thank you and have a great night.
spk07: Thank you. Your conference has now ended. Please disconnect your lines at this time and we thank you for your participation.
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