CT Automotive Group plc (CTA) Earnings Call Transcript & Summary

Good morning, and welcome to the CT Automotive Group plc Annual General Meeting. [Operator Instructions] The company may not be in a position to answer every received during the meeting itself. However, the company can review all questions submitted today and publish responses where appropriate to do so. I'd now like to hand you over to Raymond Bench, Non-Executive Chairman. Good morning, sir.

Thank you, Paul. Ladies and gentlemen, welcome to CT Automotive Group plc's 2025 Annual General Meeting. My name is Ray Bench, and I'm Chair of the Board. All of the directors of the company are present in person or online, including Grant Davis, the Chair of the Audit and Risk Committee; and Tim Blake, who is a Non-Executive Director. Simon Phillips, our CEO; and Salman Mohammed, CFO, will both be giving a short presentation after we conclude the formal business of this meeting. You will have received notification that the annual report and accounts for the year ending 31st of December 2024 and notice of meeting were available on our website, and you would have received a paper copy of the same. I can confirm that requisite notice has been given. And with the permission of the meeting, I would like to take the notice as read, which includes the full text of the resolutions. For those shareholders who have joined us on the Investor Meet Company platform, I'd like to point out that you not need you present at the AGM. But if you have any questions, please type them into the Q&A function on the meeting platform and the Board will address any questions after the presentation. I can confirm there is a quorum present, so we can now proceed to deal with the formal business of this meeting. To accurately reflect the views of shareholders of the company, voting today will be done by way of a poll for all resolutions, and I appoint the Company Secretary to conduct the poll, and the final results of the voting will be announced via our regulatory information services as soon as practicable following the conclusion of the meeting. I now propose the following resolutions, which will each be separately put to a poll. Resolutions 1 to 10 are ordinary resolutions requiring a simple majority to be passed. Resolution 11 is a special resolution, which requires a majority of 75% to vote in favor to be passed. So resolution 1 to receive the report and accounts for the year ending the 31st of December 2024. Resolution 2 is to receive the directors' remuneration report as set out in the report and accounts ended 31st December 2024. The next 5 ordinary resolutions #3 to #7 relates to the reappointment of each of the directors who have each retired and offered themselves for reappointment. Accordingly, myself, Nick Tim Blake, Grant Davis, Simon Phillips and Salman Mohammed each retire at this Annual General Meeting and offer ourselves for reelection. Resolution 8 is to reappoint BDO as auditors of the company and Resolution 9 is to authorize the Audit and Risk Committee to fix the auditor's remuneration. The final ordinary resolution is Resolution 10, which is to authorize the directors to issue shares. Whilst the directors have no current intention of exercising this authority, this resolution is in keeping with market practice and guidelines. The one special resolution is Resolution 11, which is to give the directors authority to allot shares for cash without first issuing them to existing shareholders on a preemptive basis. Again, the directors have no current intention to exercise this authority. This resolution is in accordance with market practice and preemption group's guidelines. I will now take any questions on the formalities of the AGM. So thank you for joining us for the Annual General Meeting and for your continued support as shareholders of the company. I declare the formal part of the meeting is now closed.

Fantastic. Thank you, Ray. That now concludes the formalities of today's AGM. I'd now like to hand you over to Simon Phillips and Salman Mohammed, CFO, for their presentation, followed by Q&A.

CT Automotive is a fast-growing specialist supplier of interior automotive components. We serve over 55 different vehicle models across 22 OEMs. Our end-to-end production capabilities spanning everything from design and production forecasting to packaging and shipping allow us to offer a true one-stop shop solution from air registers to wrapped assemblies and HVAC systems, our innovation-led approach continues to define us. Our global customer base includes some of the most respected names in the automotive industry. We supply a range of OEMs from volume brands like Volkswagen, Fiat and PSA to premium names, including Bentley, Audi and Lamborghini as well as EV pioneers such as Rivian and VinFast. Many of our Tier 1 partnerships like Marelli and Forvia have spanned more than a decade with several over 15 years. We're also welcoming new relationships with Kasai, Yanfeng and Draexlmaier, further expanding our strategic footprint. The automotive market continues to face headwinds, ranging from the transition to electric vehicles to new tariffs, the rise of Chinese OEMs and growing geopolitical tensions. Despite this uncertainty, we're focused on what we can control. That means delivering efficient, low-cost manufacturing, driving consistent gross margin improvement, leveraging AI and automation and providing tariff-smart solutions to our customers. Our commercial team is also expanding globally, empowered by AI-driven insights. Technology and innovation are driving CT Automotive's gross margin performance and AI sits at the heart of this transformation. AI is now embedded across every aspect of our business from production planning to HR, delivering real measurable results. These include reduced operational costs, improved efficiencies and in most cases, a full return on investment in under a year. Our commercial strategies are also evolving rapidly. AI is helping us streamline complex business processes and accelerate digitization. This agility enables us to cut costs while staying highly responsive to market shifts and emerging technologies. As early adopters, we're well aligned with customer demands. More than ever, our clients seek automation-led efficiency. CT Automotive's openness to innovation gives us a competitive edge that few others can match. We've already implemented several technical advancements. These include the use of avatar-based videos to engage our workforce in their local languages, AI-powered vision systems to support quality control and AI-driven business planning tools that strengthen decision-making at every level. Mexico has become a vital hub for CT Automotive. Established in 2022, our facility there is ideally located for near-shoring North American production. In response to tariff changes, it's created new commercial opportunities, leading to several transfer program wins already in 2025. We've allocated over $3.4 million in capital expenditures this year alone, reflecting strong confidence in our growth pipeline and the facility's role in serving global OEMs cost effectively. As we reach the halfway point of 2025, CT Automotive has made meaningful progress and remains firmly on track in delivering its strategic goals. Despite continued disruptions across the automotive industry, further intensified by the introduction of global tariffs, we are on course to meet full year FY '25 market expectations for profitability. While anticipated sales growth is expected to be slightly softer than initially forecast, this has been more than offset by ongoing improvements in our gross margin position. A key part of our growth strategy has been investment in our Mexican facility. This year alone, we've allocated over $3.4 million in capital expenditures. This significant commitment reflects our deep confidence in the strength of our secured business pipeline and in the facility's role as a cornerstone of our low-cost near-shoring manufacturing model. Global tariffs continue to present challenges across the industry. Yet to date, their impact on our operations and financial performance has been minimal. This is thanks to a proactive and agile approach where additional costs are either passed on to customers or absorbed with minimal disruption to operations. In the past 6 months, we've achieved a strong run of customer wins. This has given us increasing visibility and confidence not just for the second half of FY '25, but into FY '26 as well. Looking further ahead, our long-term growth pipeline remains robust. Sustained investment in artificial intelligence, automation and digitization continues to drive margin expansion and operational excellence. With a solid foundation, a culture of innovation and a clear focus on efficiency, CT Automotive is well positioned for continued success in 2025 and beyond.

Please note that this presentation contains forward-looking statements, which involve known and unknown risks and uncertainties. Actual results may differ materially. Viewers are encouraged to consult with professional advisers and review all disclosures thoroughly. This presentation should not be regarded as investment advice or a solicitation to buy or sell securities.

[Operator Instructions] I'd like to remind you the recording of the presentation along with a copy of the slides and the Q&A can be accessed via your investor dashboard. [Operator Instructions] And then if I may just ask you to read out the question where appropriate to do so and give your response, that would be fantastic.

Okay. Thank you, Paul. I'm going through the questions. I will ask them and then I'll get Simon to answer those. The first question is, could you discuss the competitive environment and your positioning? How are you taking market share from much larger competitors?

Okay. So as far as it goes in the marketplace at the moment, competition has never really been more fierce than it is right now. To answer the question, and I'll do it in a most simplistic way that I can, is that there's 2 elements to reduce cost. One is to reduce it in the fixed cost, one is to reduce it in the variable cost. In the fixed cost area, what we're doing is we're doing mass digitization and AI deployment, which is why we've seen such a significant reduction in our fixed costs, and we think that will continue with what we're doing. When it comes to the cost of sales area, there's 2 ways that you can affect it. One is to reduce your direct labor cost element, and the other way that you can do it is to reduce your material cost element. So when it comes to reducing the labor cost element, what we've done is we've deployed mass robotization. And to do that, the level of robotization that we've had to achieve to improve the gross profit margins to the extent that we've done so far has meant that we've actually created our own team within our technology center in Shenzhen that does a lot of the design engineering of the robots that are specific to our type of products and our industry. When it comes to reducing the material cost element of the business, we've bolstered our design engineering department in India and the objective of that design engineering department is to do ongoing VA/VE activities to look at how products can be made lighter, structurally equally as strong, but also looking at alternative materials that we're suggesting to the OEM customers so that we can reduce the material content. So in simple terms, that's it as far as the business goes. We have to offer the most competitive price for the best possible product. And in order to do that, we address 2 simple areas. One is to reduce the fixed cost element, two is to reduce the variable cost element.

Thank you, Simon. The second question regarding AI. I do believe we've answered that already as part of question one and also during the presentation. And really, that kind of brings us to the end of the Q&A as well.

Okay. I mean if we've come to the end of the Q&A, it's just really a bit of a wrap-up and to anybody who's listening in at the moment or future people that will be looking at this presentation. Just thank you for taking the time to be part of the Annual General Meeting and to understand a little bit about where we've been trading to the 6 months so far, which is very good and our forward-looking position also looks very strong. So thank you very much.

Fantastic. Thank you very much indeed to the Board of CT Automotive plc. Could I please ask attendees not to close the session to be automatically redirected to provide your feedback in order the team can better understand your views and expectations. It's going to take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the Board of CT Automotive Group plc, we'd like to thank you for attending today's Annual General Meeting. That concludes today's session, and good morning to you all.