CIE Automotive, S.A. (CIE) Earnings Call Transcript & Summary

Good morning, and welcome to CIE Automotive Fourth Quarter '24 Results Conference. We've got Jesus Maria Herrera and we will have a Q&A session at the end of the meeting. Please remember that you will only be able to ask written questions through the website. Next, I would like to give the floor to Lorea. Thank you.

Good morning, everybody. Welcome to our Fourth Quarter Conference. As you know, today, as Juan mentioned, we have our CEO with us, Jesus Maria Herrera. I'm sure you have many questions for him. So we will start with a brief review of the fourth quarter and 2024 before moving on to the Q&A session. We will start by reviewing briefly the situation in the different markets in Europe, while production have continued to contract throughout the fourth quarter, registering the largest quarterly decline of the year at minus 10%. Beyond the uncertainties looming over the European market, 2 specific factors have impacted these volumes. On the one hand, the strike at Volkswagen in Germany during December 2024, which ended with an agreement with the unions and also the withdrawal of incentives for electric vehicle purchases in important markets such as Germany throughout 2024. Overall, 2024 has recorded a decline in production of 6%, and the total has been 15.7 million vehicles produced, 18% below pre-COVID levels. The delay in the purchase decisions due to uncertainty upon what vehicle to buy, the withdrawal of incentives through electric vehicles and increasing demand for imported Chinese cars, which should drain European production are probably some of the main factors behind this negative evolution of the European markets. The main consequence of this scenario is the overcapacity across all lanes of the supply chain. Idle capacity is estimated around 35%, which is equivalent to an idle capacity of over 8 million vehicles. In this context, we have continued to see throughout this fourth quarter some restructuring announcement both from OEMs and suppliers. Decisions that we expect will contribute to the health improvement of the European automotive sector in the mid- and long-term. But only in 2024, they have already meant the loss of almost 60,000 jobs. Let's go now to North America, and it has suffered a production loss of 4% in the quarter, influenced by the inventory reduction strategy of the big 3s in the United States, comparing inventory levels in December 2024 compared to those in September 2024 for us to take a look at the evolution. Stellantis reduced its inventories by 30% in the quarter from 90 to 63 days. General Motors reduced their stock by over 20% from 68 to 53 days. Ford reduced them by over 10% from 90 to 80 days. As all the stock inventories of U.S. industry were around 46 days in December 2024, which was a drop of over 15% compared to those 56 states we had in September, although we have seen some -- a bit of a rebound at the start of 2025. Well, the positive note in the North American market was once again Mexico's production grew again in the fourth quarter by almost 3%. Overall, throughout the year, we see North American market has contracted by nearly 2% with a total production of 15.4 million vehicles and Mexico grew by 5%. The U.S. contracted by 2% and Canada keeps on losing volumes quarter after quarter, and it is now less than 10% of North American production. If we talk about China, the fourth quarter with 9.5 million vehicles produced. Well, the highest quarter in China also the strongest growth with a growth of 8%. Behind these very positive figures, we have the major headlines in the Chinese market. First, domestic demand driven by government incentives. It is important to mention that the fear that scrap metal incentives which were ending in December 2024 were not going to be renewed, caused many consumers to advance their vehicle purchase to the fourth quarter of 2024. However, well, at the end, the renewal of the incentive scheme has already been announced in January for 1 more year. The second headline in the Chinese market discount or consumer discounts hit their ceiling in the final weeks of the year to be able to meet the annual sales targets of manufacturers in the context of an intensifying price war. As an example, the Chinese market -- in the Chinese market, 227 car models received the price cuts in 2024, much more than the 148 models that saw these price cuts in 2023 and significantly more than the 95 models whose prices were reduced in 2022. With this price war, I mean, this price war favors Chinese manufacturers whose market share kept on growing up to 66% of production in 2024, which means that the -- that's a market share increase of 7 percentage points compared to 2023. Third and also linked to Chinese manufacturers, the increased penetration of electric vehicles in the market with an increase of no less than 11 points in 2024, reaching -- well, new energy vehicles reached 47% of production in 2024 compared to 36% last year. And last, the success of Chinese exports. And China is now consolidating its position as the world's leading vehicle exporter. Exports that grew by 20% in 2024, reaching 6 million vehicles exported, further widening the gap with the second largest exporter, which was Japan with over 3.8 million vehicles. The result for the previous comments is a Chinese market that grew by nearly 4% over 2024, and it has now surpassed for first-time industry 30 million vehicles produced. Brazil, well, the Brazilian market grew in the fourth quarter by 17% in the quarter in which OEMs pushed especially hard to restore inventories to normal levels. This normalization was possible, thanks to a solid demand that can be seen in data such as the sales of vehicles in October that reached unseen figures since December 2014. The demand of vehicles has been impacted by a reduction in unemployment, lower interest rates during 2024 despite the after -- at the end of the year and in 2025 and the renewal of fleets. Overall, well, we can see a significant growth in production of 8%. And it turns Brazil into the market which has grown the most in 2024, and it's now back in the eighth position amongst the top vehicle production -- producing countries. I must highlight that besides the growth of 2.4 million vehicles being produced, it's still only 15% below pre-COVID levels, which means that has significant potential for growth. Now, we get to India. The Indian market has grown by 3% in the fourth quarter, driven amongst other factors by strong festive season, the launch of new models and an attractive discount policy at year-end by many manufacturers. The macroeconomic environment is also contributing to this growth with political stability and increased available income. And for the full year, vehicle production have grown by over 4%, reaching almost 6 million units. It's closer to 6 million and 5 million now, consolidating its position as the fourth largest passenger vehicle producer globally. And as you know, when we talk about India, it is important to mention as well the evolution of the other segments that we are exposed to. The motorcycle segment grew by 8% in the fourth quarter, driven by strong prospects in rural India. The year has been even more positive with a growth of 16%. The tractor segment that's benefited from the good monsoon and strong harvest has also grown by 12% in the quarter, recovering part of what it had lost in previous quarters. And last, the heavy vehicle segment that suffered in 2024 due to delays in public works and a negative evolution of some of its key industries such as coal and cement. And it's been reduced by 12% in the whole year. Let's now talk about the results, our CIE results, excellent results, and they are even more surprising in a challenging context like the present one and with some peers reporting results that are significantly lower, the fourth quarter with sales of EUR 950 million with an EBITDA margin of almost 18% slightly impacted by the usual end of year context like provisions and maintenance stoppages by customers or own stoppages and so on. But above all, with a net result of EUR 67 million, which is over 7 -- which means that over 7% of sales have become benefit. And a quarter that consolidated success of 2024, which sales reached almost EUR 4 billion, although it was -- they were penalized by ForEx effects, growing by 1.1% at constant exchange rates and outperforming the global market by over 2 points. This growth was driven by almost all regions in CIE, especially Brazil and India, 2 of our key markets, both for the present and for the future. And besides sales, all -- well, the whole P&L lines are evolving positively an EBITDA of EUR 728 million, which means that there is a margin of 18.4% on sales and EBIT of EUR 538 million. That's a margin of 13.6%, exceeding by 40 basis points, the margins of December 2023, and they consolidate our operational strength. The best that all geographies, all CIE's geographies have contributed to this improvement of operational margins. In all of them, we have seen an improvement of our operating margins in 2024 when they are compared to 2023. We should highlight especially good performance in Asia. In India, we exceeded EBITDA margin 18%. And in China, we have maintained our focus on profitability, and we exceeded 19%. Also in Europe, the most challenging market today and despite all the hard situation, we've been able to improve our profitability. And in addition to these operational improvements and a strict investment control, financial and tax policies that allowed us to get to a net profit of EUR 326 million, which was 5% higher than the previous year with a comparable scope, adjusting for the profit contributed by the sale of German businesses in 2023 and at a constant exchange rate, it will be even higher. We can truly see solid positions between the P&L is actually in our ability to generate cash flow with a conversion of EBITDA into operating cash of 67% with EUR 464 million of operating cash flow generated. In terms of working capital, it's been a very efficient management year that allowed us to stabilize both the operating working capital, as well as reducing our -- the factoring we've used without significant peaks in the consumption of oil generation. In terms of investments, maintenance CapEx that was stable in line with previous quarters, ensuring the efficiency and operability of our facilities and the growth CapEx that prioritized our expansion in emerging markets such as Mexico and India, regions in which you've been able to see that our CapEx to sales ratio is slightly higher than the global ratio. And our investments will definitely contribute to more sales in the coming years. On -- well, shareholder returns, we have distributed more than EUR 120 million in dividends, EUR 108 million to the parent company and EUR 14 million to minority shareholders, especially in India and in one of our Chinese subsidiaries. It's true that shareholder payments is one of the main priorities, the CIE project. And in 2024, about half of the EUR 250 million of the generated cash flow have been allocated to dividends. And despite all these dividends, we have continued with our deleveraging process and our net financial debt/EBITDA ratio is at 1.34x, a level that's below our comfort area or the comfort of around 2x. So we have room for future investment in corporate operations. With the results in 2024, we'd like to briefly review, it's in the presentation, our progress towards our 2025 objectives. In these 4 years, 2021 to 2024, we have already achieved our objective of growing by -- of growing 20 percentage points above the market, thanks to the strong -- very strong organic growth in all regions. The EBITDA margin was 18.4%, which is approximately 90% of our target of 19% even in a challenging inflationary context. Our CapEx is still solid aligned with the plan at around EUR 1 billion. The corporate tax payment is still stable at around 2% of sales. And in terms of cash generation, which is probably the most important guidance of all the 2025 objectives because it implicitly includes all the objectives. We -- in 2024, we have achieved almost 90% of the EUR 500 million target with over EUR 460 million of generated operating cash flow. And now, after the course of 2024, we have to keep on looking forward and looking at the future into a sector that's still facing an uncertain context, probably especially marked by macroeconomic, geopolitical and transitional factors in our sector with very different dynamics by region. India will still be leading global growth with probably an advancement of plus 6% in 2025, a strong domestic demand driven by the growth of the middle class, also a stable economic environment, while the country considers itself as an import/export hub. In terms of other segments beyond passenger vehicles, also very good prospects with the truck segment that is growing over 5%. It's got a compound annual growth rate of over 5% for the next 5 years, tractor segment is going to have expected growth close to that of trucks and motorcycle segment will have even higher growth between 7% and 9% of compound annual growth in the next 5 years. Brazil is expected to grow by -- or strongly at around 5%, driven by lower interest rates and improved trade access, the stability of the financial sector -- financial market and global manufacturers making new investments in Brazil, reinforcing the local industry. China is expected to grow by 2% in 2025, keeping that stable evolution and the -- there's a challenging trade environment, but it's a country that's taken measures to boost domestic consumption and uphold the sector's activity. The incentive scheme for scrap metal has been renewed for 2025, expanding the range of vehicles that are eligible for this incentive. And this -- with these new promotions offered by OEMs will surely contribute to this growth in 2025. North America will reduce its production by 2%, big differences amongst the different parts of the region. The United States will probably fall by 3% due to the economic slowdown and interest rates that are still limiting credit access. Mexico will keep on growing by probably 2%, driven by the growth of the manufacturing sector and the arrival of new investments, production investments. Europe, in Europe, production will probably drop by 5% in a key year in which regulations will set the road map for the sector with the new CO2 regulation that's going to have an impact on their production mix and the plans of manufacturers. We could be in an uncertain situation in which manufacturers will need to reduce internal combustion engine production to improve their mix and limit the penalties. And at the same time, electric vehicle demand that's still not working without incentives. And in many countries, those incentives have been reduced or even withdrawn. Mitigating factors in Europe may be good GDP prospects, controlled inflation, interest rates that might be lowered and some tariffs implemented in 2024 to electric Chinese vehicles that could favor European production. Taking all of it into account, we're facing 2025, by understanding that production will remain stable with differences between different regions and emerging markets will continue to grow while mature markets are still showing weakness. What's important of the production figures for 2025? Well, the hypothesis or the fact that IHS production are uncertain, such as the evolution of tariffs to vehicle inputs. The hypothesis that IHS assumes for these -- for the 2025 figures are that Mexican canal will have no tariffs yet, a universal tariff of 10% to the European Union, the United Kingdom, Japan and South Korea starting in spring 2025 and an additional tariff of 10% on China. It seems this is the scenario we're going to have to face in 2025, but it's complex. And it's also worth mentioning that our current strategic plan was defined at the end of 2020, and it was made public in early 2021 in a context that was completely different until today, projected -- we were projecting additional 25 million vehicles produced during that period and inflation and interest rates and global geopolitics were entirely different. And despite all of it, we're here and we keep on advancing every quarter and every year, and that's the message I'd like to finish with. Given the positive evolution of our strategic plan up until December 2024 and our outlook for the next quarters, we'd like to confirm once again that we are going to keep all our commitments for 2024. And now, let's move on to the Q&A session. We'd like to remind you that Jesus Maria is here with us. Jesus Maria Herrera, our CEO. So please, Juan to go ahead with the questions.

We have many questions. The truth is that, probably more than in previous occasions. So please -- I'm sorry if -- well, I'm trying to get everything organized, but it's not easy. So please -- I'm sorry if -- well, let's start. First question in terms of 2025 -- for 2025. Are we expect to grow at a constant exchange rate? And if we could talk about the performance expected by region in 2025?

Well, first of all, good morning, everybody. It's a pleasure to be here again. And I will try to answer all your concerns about our project and talking about 2025, what will be a reality is that, CIE will keep on increasing its market share in all the continents in which we are present. But given that we cannot value what's going to happen in those -- we don't know what's going to happen in all those continents, but we know that CIE is a winning player. And as such, it will keep on growing above average -- above market, sorry. And that's also guaranteed for 2025, which was basically the question, right?

And they're asking what to expect, Juan, for our performance in 2025. So how different markets are going to work on the margin?

Well, there are markets such as the European market that are still suffering. Behavior will be better. The American market is also suffering. We have a strong bet in Mexico, so our performance is a bit better. And we have 2 markets like Brazil and India that are going to grow strongly. And in those markets, we will increase our market share as well. In terms of margins, well, our objective it will be to keep on improving the margin in the different markets to be able to reach our objective, which is to reach 19% of EBITDA in this -- in the present context in the sector. And, of course, the variables were not included in the strategic plan when we started. I mean, inflation, interest rates and growth, 20 million cars less being produced. But despite that, our figures are positive, and we will still meet all the commitments we have made.

Next question is about EBITDA margin of 16% -- of 19% which are the keys to get there?

I think at CIE we never base our margin in important increase in volume. We always look at inputs to improve our margins. And, of course, we are analyzing and improving all our processes to try to get to that 19%. It is true that we have closed 2024 at 18.4%. We only need to make a jump of about 0.5 point and the jump -- well, we believe that we are going to be able to make it and you'll probably see in the next quarters.

One question about a different topic, M&A. Are we expecting some transaction in 2025?

I'm sure we'll have some transactions. Of course, we keep on working. I mean, it's key to the growth of CIE. And I would like to -- yes, I would like to elaborate a bit more about it. I believe that Europe, well, we need to understand that there's an excess capacity, and it's also true. But we're analyzing things in Europe. But, of course, it's very risky. Everything in Europe is risky. Europe is suffering. Comparable competitors are suffering a lot. And taking a very high risk in Europe is not part of our objectives. If our clients ask us, they tell us that they need us, well, of course, we will undertake acquisition projects. Our main focus is now in India and Brazil. Brazil is a close market. It's a market that we master. There are opportunities, of course, not as big as the ones in India, but opportunities in which we can be able to integrate and improve and generate value, and that's the key objective for our company. And in India, we've been assessing companies for a long time, important companies as well. But as it tends to happen in the country, well, things normally take longer than we used to. And, I mean, negotiating with the Indians normally doesn't take 9 months like in other places, it probably takes years. And for some years now, we have been talking to some companies, and I hope these -- well, these companies will be part of our group, and I hope we will be able to integrate because India is certainly the growth market where we want to put our bets in.

And in case that the M&A does not happen, what would be the best use of the cash -- of cash, given we have an all-time low leverage ratio?

Well, the truth is, you know that our focus is always to pay our shareholders. You've seen that we have increased our dividend year after year. And we have -- but despite that, we have been able to reduce our debt drastically. It's a bit below EUR 1 billion adjusted financial debt. And undoubtedly, the big issue is that, we have a big cash generation and a lot of money. So we will keep on analyze all the different tools, all the possible tools to increase payments to our shareholders. We believe that we should keep on growing. With this market consolidation, we have to keep on integrating companies and betting on that growth and on. Otherwise, I mean, we will get close to -- we got a debt reduction that tends to 0 because our generation is very important. So there are like thousand ways to do it, but it is to keep on paying our shareholders, and we could increase our dividend or we can find any other formula that makes investing in CIE Automotive more appealing.

We are now in -- a question about CIE India. They're asking about the Indian market. They see a loss of market share with our clients, and other comparable competitors are increasing their market share. And how are we going to tackle this issue?

Well, I think everybody knows CIE Automotive, and we have 2 objectives to increase our market share as long as the market share we win is linked to an increase of profitability -- increased profitability. So this year, we have increased market share in India. Maybe some competitors have won more market share by reducing their margins, and that's forbidden at CIE. That's just forbidden. So market share is important. But margin growth is even more important, and that's what you can see in India. As what I was mentioning, we are very close to 8%, and we have to keep on increasing our margins. So, I mean, it is not as important. It is important, but we shouldn't increase our market share by reducing prices and by reducing prices, reducing margins. I know there's a price war, but we're not going to enter it. We are only entering when we can guarantee the return of our investment. In a group that return is 20%.

Now, they are asking about the European business and our forged business. So how are we losing there and how we plan to tackle these issues in our business?

Well, quite obviously, I mean, forging is one of the technologies that could and that is actually suffering a bit more. In other technologies, we are actually growing, but what's important is that, we are able, even with a drop in those technologies to have extremely high profitability margins. And we are investing in new forging technologies such as aluminum that should provide us with a recovery of that drop. So, in our technologies, in this case in the forged business, we have alternative plans to compensate for that possible drop due to the evolution towards electric vehicles.

And in Castello Metal (sic) [ Metalcastello ], they are very -- in terms of clients and products, how could we reinforce its resilience because how sustainable is it to export to the United States in this new environment in which we are in?

Well, I believe -- but somehow, we need to understand that -- well, the final client of Metalcastello. Metalcastello is -- I mean, there are clients who are in a sector. I mean, it's farming machinery and construction machinery. So, I mean, it's always been seasonal and there have been cycles. Now we are at a lower point within that cycle. But as it always happened, it will come back. And I'd like to highlight in Metalcastello that despite we are in the lower part of the cycle, our EBITDA is still important around 20%. And I believe that's something important to highlight right now. But I'd like to insist, I mean, the cycle will come back. And I hope it will be back in the midterm. So -- and I'm sure it will -- the cycle would be better in 2025 and we will recover. And on tariffs, that's going to be the usual question this year. Well, I'm sure you'll share with me that despite what the -- well, the President of the United States is an expert in generating news, news that are -- they're able to reach agreements and in practice, it doesn't really have an important impact. It actually has a very residual impact, and that's what we expect. You've seen -- well, the tariffs they wanted to have in Mexico and Canada, and they've delayed it once, they've delayed it again. So I'm sure it makes sense. And there are agreements that will help -- that will not change as much. Sometimes when you read the newspapers, it seems things are not going to be normal, but they will. And as I mentioned earlier, I mean, we just got the data and things are not changing as much. The production, they estimate in different markets, both in Mexico and Europe and so on for 2025 are exactly the same as the ones they had before Trump becoming the President of the United States. So, well, I believe what we have to, of course, be attentive. But we're not going to suffer that much. We didn't suffer that much with the previous government of -- when Trump was President before. And, of course, I mean, CIE is present all around the world. So there could be a risk in one region or another. But, of course, there will always be opportunities in other markets. So what's lost some in one area can be won in a different area because CIE is a global project that's present in all the countries and in all the countries the vehicle production is -- are important.

And I think it's always in -- it's in our heads, but when the United States produces 10 million vehicles, but the consumption is 16 million. So the United States is in needs. They need imports, making it impossible to -- I mean, to have produce 6 more million in a country where there is full employment. It's hard for all of us to have qualified workers and the inflation that could mean it's just not feasible. So, as Jesus Maria said that these are just headlines, and we'll see what happens. But just for you to understand what the figures look like, 10 million being produced over 16 million vehicles being sold. So they need imports.

And besides that, there's no installed capacity in that sector. We're talking about components in the United States to cater for those volumes. So, I mean, if we're talking about cost, the cost in Mexico is 1/3 of the cost in the United States. So, American clients would still have any issues in 2008 with heavy losses if they don't resort to the cheaper source, which is Mexico.

Okay. One question about India and investors saying that it could be worth much more under the CIE's umbrella. So a potential growth happening in CIE India. Why is that not being done if it will be a price increase?

I mean, if he's able to guarantee that price increase, I'll do it. And, I mean, if they're able to guarantee that, we will do it straight away. But -- and we've mentioned this, these are different businesses, and they have -- it's got nothing to do. And all our comfort business has nothing to do with the automotive component business. One is a process -- based on process and the other one product-based business. That's why we are not blending it. But if that was the case, truly was the case, I know we had different meetings in India. They were saying that it will be very interesting. But we'll analyze it. But, I mean, we've got a comfort business, I mean, we're present in different countries in Mexico, China, in the United States and Europe and in India, and really breaking that business just one part of it, which I would -- we're not sure that's going to add value. But, I mean, if that business acts independently from the other sector and that we would have just one leg of the stool like separated, which would be India.

Taking into account that CIE stock price is lower, could we increase that division up to 75%?

That's what's allowed.

Well, it seems this is the results -- the result presentation for CIE India. I'm just joking, but I'm not annoyed by questions coming from India, of course, not. But, obviously, the drop has been a drop, not just of CIE, but all our comparables, a drop of between 20-something and 30-something percent. So we've got 20-something percent, some others 30-something percent. So it's a generalized drop. And we still believe that we think about CIE Automotive, not CIE India because if we would think about buying stocks, we would be thinking about buying CIE Automotive in our opinion, its price is really, really low. The price of CIE India, well, there has been a drop, but some years ago, we were at INR 180 really, and we're now at INR 400. So there has been growth. So, I mean, about CIE in Spain, we've been at the same level of around EUR 25 and now even below EUR 25. So below EUR 25 and I believe people are not really valuing everything we are achieving with this strategic plan. I'd like to remind everybody that this strategic plan was 2021, 2025. And CIE is generating over EUR 2.5 billion of operating cash flow. And CIE is reducing its debt by over EUR 700 million and going from 3.5x to around 1x by the -- at the end of 2025. And this is not being valued, and that's why our idea is that, CIE is much, much cheaper than CIE India. Even if CIE India has a behavior that's close to our comparables in India. I think -- I mean, they went up to INR 600. And now it's -- I mean, all companies have adjusted the price.

Let's now change in Western Asia, they're basically asking about margins for the next quarter, both of China and in India. They've been significantly lower than the previous year. So want to see if there's some sort of explanation here.

Well, the truth is, they have been lower, yes. But what's important to state now, I mean, those drops are not recurring. Those drops in margin are not recurring. It is true that in China, we have had very, very high margins and there has been a correction in the fourth quarter. And -- but what's important is for us to keep -- to have the margins of 2024. Margins have grown in all the geographies in 2024 and they are helping us reach our objective of having an EBITDA of 19%. So, we'll probably have better margins than last year. And this has been due to the different events that have happened. They happen in all the geographies, in this case, not just China and India, also in Brazil or in Mexico. And they are the result of many different variables. In some countries, wages are rising in October in some of the countries, given the price increase of dollars, there has been an increase of the prices of raw materials. And so, there are thousand variables that -- well, in any given quarter, we can have a drop of margins, but I'd like to insist on the fact that they are not recurrent, given that our consolidated result is the minimum recurring result for the next few years.

Let's now go to Europe. Well, Europe in general, both CIE India and in Europe, it's a market without growth. So what's the -- are you thinking about closing plants or any important restructuring plan?

Well, certainly, the European market is suffering important drops, in the first quarter was a double-digit drop. And CIE will drop less than the market. Why? Because we are a consolidator. Our competitors are suffering importantly. Some of them are closing and the reduction of capacity helps strong companies like us increasing its market share. Closing companies, we're not really thinking about closing any of them. We need to realize that CIE has not made strong investments in Europe in the past few years. We are focused on growth markets, and we have not got an excess capacity in Europe. It is true that some other companies have invested in electric vehicles and now they have issues. And while investments were made for both combustion vehicles and electric vehicles as well. That's why we haven't got an excess capacity at CIE. We keep on working every day. And we believe that under these circumstances, we'll be able to keep on improving our margins well. By doing what we always do, just adjusting ourselves to the demand and well, costs need to be adjusted to that demand. So our margins are still high, just like the ones we've got today.

And on European regulations, let's see if -- do you expect any relevant regulation or announcement in March?

Well, I think everybody is quite lost. Everybody is not really unsure about what to do, and we see that in Europe as well. I don't know. I think that regulating too much, they can also be bad. And I believe that somehow -- well, things just given their nature, need to evolve in a logical way. My hope and I believe nothing is going to change dramatically. And...

I'm sorry. And I was going to say in the rumors. I don't know if that's the right question, the right term. But what they're talking about with the strategic dialogue in Europe, they are talking about that March 5, we are going to present the action plan that will stem from that action plan from that strategic dialogue. And now they're talking about 3 potential changes in European regulations, one would be to increase flexibility of emissions in 2025, creating a multiannual plan, so not just including 2025, but make it 2025, 2026, 2027. And the multiannual result will -- the results were fine. So it will be sort of just giving more time to the sector to decarbonize. And second, one of the main topics here in Europe is the lack of coordination between different countries. So some of them are going to rid of incentives to the EVs and some others are -- have certain -- doing in a certain way. And they're talking about pan-European incentives. So incentives to European vehicles that are exactly the same in all markets. And I don't know if the word is rubles or the drafts that are on the table. And CIE is, of course, involved in that dialogue through the vendor association. So we'll see what the action plan looks like. And the question was about changes in regulations. Well, those are basically the 2 that we can think about.

Also on CapEx, what do you expect this year? CIE said that you've got greenfield in Mexico as well. So what do you expect this year in terms of CapEx? We see a maintenance in investment that was a bit low. So...

At a CapEx level, 2024 was the most important year in terms of CapEx, you've all seen it. And the results, I mean, it's been due to this new company. I mean, in North of Mexico with an investment of the $100 million and the investment, I mean, by the end of '24, so about $70 million were there. So we're only missing $30 million. So this year, we expect to have a CapEx reduction, normal CapEx in the CIE is about 5%. And that's 1.5% to 2% of maintenance CapEx and the rest is growth. So, I mean, this year, we will go back to 5%, around 5%. Maybe with this EUR 30 million, we're missing from the greenfield, the Mexico. It could be a bit more than that. But in this plan, our plan was 5% of CapEx. So, we're going to meet that. And we have -- I mean, with this greenfield, that's going to give us -- it's going to help us a lot in 2026 and even more in 2028. So, we've got like 2 phases. The growth phase is one is going to be in 2026 and the other one is going to be in 2028. And we will see that in the next plan. We're also asking about tariffs, if it might not be the right timing for this greenfield project in Mexico. I'm thinking about starting a second one in Mexico, in fact, because it truly is the best place in terms of logistic costs and to export to the United States. In Northern Mexico, I mean, it is basically U.S. It is basically CIE -- our clients trust -- I mean, our clients have supported us strongly and our clients trust is going to be a success. I'm joking, but before we start already asking about another one with other technologies, that's where we need to be and it's very, very competitive for the United States.

And there's a lot of volatility in the markets. But they're asking about underperformance in the fourth quarter and how the first quarter started?

Well, I think I mentioned this already. Well, we started honestly quite well and January seemed to be a bad month, but it's been better than last year. But in the 3 continents in which we are present, we see a better behavior than the market and we see a margin improvement, the margin improvement we are betting on. So, we are optimistic. Still very soon and the year is long. So as we usually do, we are happy with the trust we are carrying out and with our position in the markets. And there's a clear objective to reach and meet all of our commitments.

And on that underperformance you mentioned in the fourth quarter.

Well, I think it was just punctual really. But there were some factors there. In North America, for example, there's a very important client for us, Stellantis, and as you know, their CEO was dismissed. So, I mean, there wasn't the excess of stock in the U.S., they stopped production for -- well in the last quarter. So, of course, that has had a big impact on us because they are a very important client in North America. So, they have been one of the most important players. But those are factors that have an impact in 1 quarter or 1 month. But they are not recurrent.

And there's something that's fully mathematical here. In the last quarter, well, we see growth in China. And now in underserved markets, China is over 1/3 of global production, and a lower exposure to China. And the reason for some of that underperformance, if you compare us to the global markets, of course, there's a bit of underperformance. But if you compare us against the CIE mix, well, that basically disappears. So the stand is to take into account the geographic mix and the effects on the different markets and the revolutions.

And now talking about China. We just got a question about Chinese OEMs coming to Europe and CKD and [indiscernible]. So, we are afraid we might be losing this market due to the CKD models in Chinese companies entering Europe.

Well, we have a relationship with different Chinese clients like BYD or Chery in different countries. And I mentioned this already, but we also have -- we also work with Chery in Mexico and also in Europe. So what do Chinese OEMs do? They come to this new market for them. In the first few years, they use the CKD system, but they know that won't work in the future and they go to that in 2025, 2026. And we're already negotiating with them to rationalize component production and we are there with them. We're working because the future -- I mean, this is always temporary.

Now, thinking about the Chinese domestic market, the question is if we see limits in the drop of sales of CIE in this market and how the development of new products is going?

Well, first of all, I'd say that China has been a great investment on our side and with a great cash generation and a great return on that investment. So -- well, it's also true that -- I mean, that underperformance we could have is linked to the growth of local -- well, manufacturers in China. And, I mean, we were focusing around the JVs between Chinese manufacturers and European brands. But let's not forget that we have different projects with different Chinese clients that we are developing and we're growing with both products to be able to increase our market share with those clients.

Question that's different, margin of Brazil in the fourth quarter has been the lowest one in the year. That is high. The growth in strong market. Any reason behind it?

There's always a reason. As I mentioned earlier, in this case in Brazil, we need to realize that -- I mean, negotiations are there in September. Generally in Brazil, wages increase by sometimes double digits. And, of course, that has an impact. That does have an impact in October. So, that's why -- I mean, after October we have had the impact of that and that's why our margin was reduced by 3 points. But it'll just take a few months to translate that to our clients, so that margin reduction won't be there in a few months.

And closing the margin conversation, the margin in the last quarter was the worst of the year. Is something extraordinary there globally?

Well, it's basically what I mentioned. But having said that, the margin was 18.4% throughout the year and in the best quarter was 18.6% and the worst one was 17.8%. So, we are talking about decimal points really in a quarter in which the sales were 950. And throughout all of 2024, we have hard quarters. I mean, in some quarters, 24 million vehicles produced and in some others 20 million. So it's very important to look at our comparables because, I mean, the difference between 1 quarter or another, we're talking about a decimal point traffic here. And...

They've been talking about Tesla entry in India. It seems that it's going forward. What do we think about their presence in India?

Well, I think we are one of the reference suppliers for these clients. They don't really allow us to say much about it. But we start in North America, then in Europe and we have a -- I mean, we have a great presence in India. I'd like to remind you that we are one of the most important western groups in India. So, Tesla is a key client for us in all the other continents. So, we have excellent relationship with them at a very high level and they are a very important client for us.

In terms of capital allocation, we've mentioned it, but could we think about an intermediate measure of increasing recurring dividend or the stock repurchase program to be there for M&A instead of a one-off dividend?

Well, as I mentioned earlier, you know that at CIE, we are a company that thinks about everything when we take a look at all the different possible alternatives. As I mentioned earlier, the stock price of CIE is low, is very, very low. And, of course, we focus around paying our shareholders. I think that we should also keep on growing and keep on investing basically through inorganic growth. I cannot at least today mention our ideas, but please bear in mind that CIE will be a company that will pay special attention to our shareholders, especially given its very strong cash generation. There's probably nobody in this sector that can generate that cash. And the cash flow comes from that EBITDA. We hope to get to 19% this year. So, that means that we are controlling our CapEx and the rest is -- our objective this year of operating cash flow generation is EUR 500 million. They are going to be used in inorganic growth or paying our shareholders and paying our debt because that is now half our capital. So, our capital is EUR 2 billion and our debt is now a bit below EUR 1 billion. So we are a company -- the company with probably the health of the healthiest balance, which are -- will allow us to do many things. But, of course, we don't lose sight of growth and growth that allows us to add value and growth that will allow us to provide profit relief for our shareholders.

And in fact, I'm sure if we've mentioned this. But when will the new strategic plan be here?

They just asked the question.

So we haven't finished the present one, but we are already working on the next one. Of course, I mean, the leap forward in the past few years has been relevant. I'd like to ask to value it. And for CIE to feel even more enthusiastic and -- but I think it's important to value what we've done in the past 4 years. We have generated over EUR 2.1 billion of operating cash flow in the past 4 years. We have reduced our debt very importantly. So, I think we all need to understand what it all meant. And maybe in the next 2 quarters we will be able to see that we are almost able to guarantee 100% of our commitments. So when that is done, we will start working on the next strategic plan. This new strategic plan will, of course, be ambitious. That's how we are here at CIE Automotive, and we hope that the market is able to value this new strategic plan as well.

One last question right now about what we think about consensus 2025 and our credit figures? EUR 4.1 billion in sales, EUR 780 million of EBITDA, EUR 585 million EBIT and EUR 365 million in terms of net results and debt as it sits here, EUR 791 million.

Well, that was the concern. Well, it's nice to see -- to hear how optimistic they feel about CIE because all the questions are -- no, of course, there's uncertainty and risks and tariffs or many of the other things we've been talking about. But then consensus, I mean, they're all thinking CIE is amazing and it's going to increase margins and it's going to generate more flow, more cash flow. Given that we are not generating too much, we will probably generate more. We're going to use our debt. So it's great to listen to how much they trust the CIE Group and we are at -- pardon me, I mean, it'd be very hard to determine part of -- we're meeting with, well, I don't know, 98% of -- 102% of this. Analysts know this pretty well and so -- but once again it wouldn't make sense. I mean, these questions about risk and these amazing results, they're saving about EUR 780 million of EBITDA and, I mean, net benefits as well, and reducing our debt in EUR 210 million basically. So, well, I'm sure we'll be around that. Between 95% and 105%, we will be there. So, that's going to be a challenge. And we trust CIE will once again, as it always has reached an all-time high just like 2024 and that's also what happened in 2023 and 2022. So for 15 years, we've been hitting all-time highs. And so, this year probably as well, we'll fight for it. I mean, it's still February, but we hope we'll reach an all-time high with the figures you just mentioned.

Great. No more questions. There were many.

Well, thank you very much and not much more to say. Thank you very much. Thank you, everybody. And -- but still, if there's anything else, we are here for you. Thank you, Jesus Maria, for being with us and we'll keep on talking.

Great. Really, it's a true pleasure to be able to try to answer your questions and your concerns. So once again it is truly an honor to see the trust you have on CIE. So it's still a reference company in terms of profitability worldwide. So, I mean, it is great for the whole team at CIE Automotive. [Statements in English on this transcript were spoken by an interpreter present on the live call.]