Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Forvia SE (FURCF, Financial) posted an organic sales growth of 2.7%, outperforming the market by 290 basis points.
- Operating margin grew by 20 basis points year on year to 5.2% of sales, reflecting margin improvement in all business groups except for a one-off impact in North America.
- The company successfully issued around EUR2 billion of new debt instruments, extending its average debt maturity to 3.6 years.
- Significant progress in the second disposal program, achieving 25% of the EUR1 billion target with the sale of Hug Engineering and Forvia Halla's stake in BHTC.
- Strong order intake driven by Asia, with EUR6 billion made in Asia and significant awards from Chinese OEMs and other global players.
Negative Points
- Worldwide automotive production was broadly stable compared to H1 2023, with a 5% decline in Europe, impacting Forvia SE (FURCF)'s sales.
- The company faced a one-off operating loss of EUR47 million in North America due to a supplier-driven issue, impacting the operating margin by 30 basis points.
- Sales were down by 0.6% on a reported basis due to unfavorable currency impacts and the negative scope effect from the sale of the CVI business.
- The company recorded a breakeven net income, impacted by high European restructuring costs and a nonrecurring expense related to the supplier issue.
- Customer mix in China led to a sales decline with BYD and leading U.S. EV carmakers, affecting the overall performance in the region.
Q & A Highlights
Q: Can you explain the adjustment for 2025 sales targets and its impact on operating margins?
A: We adjusted the sales targets due to currency fluctuations and market conditions. The new margin ambitions for 2025 might be slightly lower than the previous 7% target, but we expect to be close to it. (Patrick Koller, CEO)
Q: How do you expect to achieve better operating leverage in H2 2024 despite potential market declines?
A: We traditionally perform better in the second half due to carry-forward commercial actions, cost reductions, and synergies with Hella. We also expect additional business growth and outperformance of 300 basis points. (Patrick Koller, CEO)
Q: What is the outlook for free cash flow excluding working capital and factoring for the full year?
A: We expect positive net cash flow outside working capital and factoring, with a significant portion of the EUR650 million net cash flow target coming from these areas. (Olivier Durand, CFO)
Q: Can you provide more details on the automotive apps market share target and current position?
A: We are targeting a 20% market share by 2025, with 25% of this already booked. Our approach is favorable due to less demanding data ownership requirements and the ability to display apps as desired by OEMs. (Patrick Koller, CEO)
Q: What are the expectations for the interiors business margin in H2 2024?
A: We are conservative in our forecasts, but we believe the interiors business in North America will perform better than expected, as they were back to normal conditions by the end of June. (Patrick Koller, CEO)
Q: What are the assumptions for inflation in 2025?
A: We are assuming marginal inflation for 2025, with potential positive impacts yet to be confirmed. (Olivier Durand, CFO)
Q: Why did you include the EUR47 million extraordinary cost in the US in the H1 figures?
A: The EUR47 million one-off cost related to launches is included in the interiors EBIT margin. The EUR34 million related to the CosmoPlast litigation is under other expenses. (Olivier Durand, CFO)
Q: Can you explain the EUR12 million associate loss in H1 and expectations for the year?
A: The associate loss is mainly related to Symbio. We expect a lower negative impact in the second half. (Olivier Durand, CFO)
Q: Why did tooling revenues jump 45% in H1?
A: The increase in tooling revenues is associated with the high number of launches in H1, particularly in interiors in North America. (Olivier Durand, CFO)
Q: What are the full-year 2024 expectations for net interest and net restructuring expenses?
A: Net financial costs should be below EUR500 million, including capital gains. Recurring restructuring expenses for the year should be around EUR300 million, with cash-outs around EUR200 million. (Olivier Durand, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
