- Adjusted EBIT Margin from Industrial Activities: 6.9%, 10 basis points better than Q2 2023.
- Consolidated Revenues: Slightly down versus last year.
- Consolidated Adjusted EBIT Margin: 7.5%, in line with Q2 2023.
- Adjusted Diluted EPS: EUR0.63, EUR0.02 more than Q2 2023.
- Cash Dividend: EUR0.22 per outstanding common share, paid on April 24.
- Share Buyback: 859,000 common shares for EUR9 million as of July 12.
- Net Revenues of Industrial Activities: EUR3.8 billion, down 5.8% year-over-year.
- Financial Services Net Revenues: EUR142 million, up 21.4% year-over-year.
- Adjusted EBIT of Industrial Activities: EUR264 million, 6.9% margin.
- Financial Charges: EUR49 million, positive year-over-year trajectory.
- Adjusted Net Income: EUR182 million, up EUR15 million year-over-year.
- Free Cash Flow of Industrial Activities: Negative EUR98 million.
- Available Liquidity: EUR4.2 billion as of June 30, 2024.
- Truck Net Revenues: EUR2.6 billion, down 10% year-over-year.
- Bus Net Revenues: EUR612 million, up 22.4% year-over-year.
- Defense Net Revenues: EUR285 million, up 30% year-over-year.
- Powertrain Net Revenues: EUR918 million, down 16.7% year-over-year.
- Truck Adjusted EBIT Margin: 7.4%.
- Defense Adjusted EBIT Margin: 9.8%, up 70 basis points year-over-year.
- Bus Adjusted EBIT Margin: 5.2%, up 200 basis points year-over-year.
- Powertrain Adjusted EBIT Margin: 6.6%, up 80 basis points year-over-year.
- Managed Portfolio: EUR7.9 billion as of June 30, 2024.
- Stock of Receivables Past Due: 2%, historical low.
- Return on Assets: 2%, stable.
- Investments: EUR210 million in Q2 2024.
Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Iveco Group NV (IVCGF, Financial) reported an adjusted EBIT margin from industrial activities at 6.9%, which is 10 basis points better than the all-time high second quarter of 2023.
- The order backlog in trucks by the end of the quarter was at a more normal level, with around 13 weeks of production already sold for light commercial vehicles and around 9 to 10 weeks for medium and heavy trucks.
- The bus business unit's order backlog covers all of 2024 and stretches well into 2025, with the first half of next year fully covered.
- Financial services net revenues totaled EUR142 million in the quarter, up 21.4% compared to the prior year.
- Iveco Group NV (IVCGF) signed a memorandum of understanding with Foton to explore potential collaboration in electric vehicles and components, which could extend their light commercial vehicle lineup.
Negative Points
- Consolidated revenues were slightly down versus last year, and consolidated adjusted EBIT margin was at 7.5%, which is in line with the same quarter last year.
- The company experienced a negative temporary one-off in net working capital linked to extra efforts in finalizing and getting a certain number of model year 2024 vehicles ready to ship.
- Truck deliveries were down in the second quarter by 18% on a worldwide basis versus the second quarter last year.
- The company faced challenges in ramping up the new Model Year 2024 production, which impacted the second quarter performance.
- There is a lack of visibility into the volumes and pricing for the fourth quarter, which could impact profitability.
Q & A Highlights
Q: Can you provide visibility on pricing for the second half of the year and assumptions embedded in the guidance?
A: We have included a reduction in pricing and volume pressure in our guidance for the fourth quarter. We expect a pickup in the latter part of the year, particularly in the fourth quarter, driven by the rollout of Model Year 2024. (Olof Persson, CEO)
Q: Is the defense segment considered a core asset for Iveco in the medium to long term?
A: Yes, defense is a core part of our 2028 plan, contributing positively in terms of profitability and order backlog. (Olof Persson, CEO)
Q: What are the expectations for free cash flow recovery in the second half of the year?
A: We expect to fully recover the temporary working capital absorption by year-end, with some benefits visible in Q3, although Q3 is typically a cash-absorbing quarter. (Anna Tanganelli, CFO)
Q: Can you provide insights on the profitability of the medium and heavy-duty truck segments?
A: For medium-duty trucks, we expect mid-single-digit profitability. For heavy-duty trucks, we anticipate breakeven to slightly positive territory. (Anna Tanganelli, CFO)
Q: How is the bus segment performing, and what is the order backlog like?
A: The bus segment is strong, with an order backlog covering up to the first half of 2025. We see many opportunities in both city and intercity buses. (Olof Persson, CEO)
Q: What levers do you have to maintain profitability if the market remains depressed into 2025?
A: We will adjust production rates, manage production costs, and maintain a disciplined pricing strategy for Model Year 2024. Additionally, bus and defense segments are expected to increase output next year. (Olof Persson, CEO)
Q: Can you elaborate on the Foton partnership and its potential expansion?
A: The partnership focuses on electric vans below 3.5 tons for Europe and South America. We are also exploring supply opportunities with Powertrain, but there are no discussions about heavy-duty trucks. (Olof Persson, CEO)
Q: What challenges have you faced with ramping up Model Year 2024 production, and why should we be confident in resolving them by Q4?
A: We have realigned our entire European manufacturing system for Model Year 2024. The production setup is now fully operational, and we are confident in ramping up production smoothly. (Olof Persson, CEO)
Q: How do you view the flow of orders and deliveries for the new Model Year 2024 into 2025?
A: We expect a sequential pickup in order intake for both light and heavy trucks in the second half of the year, driven by the rollout of Model Year 2024. (Olof Persson, CEO)
Q: How confident are you in achieving more than EUR1 billion of free cash flow in Q4, given the market conditions?
A: We are confident in achieving our guidance, as the market performance and pricing pressure were already factored in. We have several levers in place to meet our targets. (Anna Tanganelli, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
