Gestamp Automoción, S.A. (GEST) Earnings Call Transcript & Summary

I am Ana Fuentes, IR Director. Before proceeding, let me refer you to the disclaimer on Slide #2 in this presentation that have been posted in our website and that will set out the legal framework under which this presentation must be considered. The conference call will be led by our Executive Chairman, Mr. Francisco Riberas; and our CFO, Mr. Ignacio Mosquera. As usual, at the end of the conference call, we will open up for a Q&A session. Now please let me turn the call to our Executive Chairman.

Thank you, and good afternoon, and thanks for attending today's call in which we will present our 9 months results. We are living in a quite complex market scenario in the second half of this year. Following a solid market recovery in 2023, we were all expecting a flat '24 improving in the second half of the year, but it has not been the case. For instance, according to S&P, third quarter light vehicle manufacturing has dropped by almost 3% comparing with the one in 2023. In this weak environment, [indiscernible] revenues up to September have been EUR 8.9 billion, outperforming the market at FX constant by 6.3%, and we have generated our EBITDA up to September of EUR 952 million, which means a 10.7% to revenues, excluding Phoenix Plan expenses. Moving to Slide #5 and as mentioned, the market is not performing as expected this year. Light vehicle production volumes in Gestamp footprint up to September are minus 0.6% below the ones of 2023, being, of course, Western Europe, the most impacted region with a decrease of 3.1% compared with the previous year. In this market, moving to Slide #6, our revenues in the third quarter have been slightly higher than the ones in Q3 2023, showing an improved performance quarter-on-quarter and despite more challenging market conditions. All regions are showing this improvement, and this is an improvement that is in despite of the continuous negative ForEx impact throughout the year. Up to September, FX constant has grown by 5.7%, which means an outperformance versus the market of 6.3 percentage points. We are outperforming the market in every geographical region, but in Western Europe. But I'd like to highlight that the Gestamp growth in Asia has been very relevant, almost 11% in a very demanding market such as China. And in the case of Western Europe, even up to September, we are still down compared with the previous year. The truth is that in the Q3, we have already reverted this trend. Moving to Slide #8; during the first 9 months of the year, Gestamp has generated EUR 915 million EBITDA. This amount represents a decrease of 6.1% if we compare with the previous year, but is our second highest level recorded in our history. And of course, these lower revenues is basically one of the main reasons behind this fall of EBITDA in 2024 is the fall in terms of revenues, as mentioned, in Western Europe, the most impacted region. As far as we don't expect a clear recovery in Western Europe in the near-term, we are already implementing actions in order to have a clear strict control of the cost to implement all kind of initiatives in order to improve the efficiency and the flexibility of our plants and of course, with constructive negotiations with all our customers. Moving to Slide #9 around the Phoenix Plan; the market environment in NAFTA up to September has not performed bad. In fact, in terms of NAFTA, there is a kind of 0.9% increase compared with the previous year in terms of light vehicles manufacturing, but this trend has also reverted in the third quarter with a negative minus 2% in NAFTA and minus 5.2% if we refer to U.S. light vehicle manufacturing. In any case, the delivery of the Phoenix Plan is on track during this year. We have already committed actions, which are impacting our profit and loss account already by up to EUR 17 million. And we have some CapEx actions that we have decided to postpone to 2025. Even if our EBITDA margin of our North American operations up to September is still below the one we had last year, we are on track of reaching last year full year margin of 6.5%. And even if the market conditions have worsened, the performance of our North American plant has started to improve, and we are confident to reach our midterm targets in the region. I mean Slide #10, refer to Gescrap. This year, the Gescrap prices in international markets are lower than the ones we had in 2023 and of course, aligned with the decrease of steel prices year-to-date. In this context, Gescrap has performed well during the first 9 months of the year because even if we have suffered a decrease of 10% in our sales, the efficiency of our operation has allowed us to improve our EBIT, both in absolute terms and also increasing the EBIT margin from 6.2% to 6.9%. And now I hand it over to Ignacio Mosquera.

Thank you, Paco, and good evening to everyone. Moving to Slide #12, we can have a closer look to our financial performance in the first 9 months of 2024. For the 9 months, we have reached revenues of EUR 8.9 billion, which entails a 1.6% decrease when compared to 9 months 2023. In terms of EBITDA, we have generated EUR 936 million in the first 9 months of 2024, meaning a 10.5% EBITDA margin. Excluding Phoenix impact of EUR 17 million, EBITDA in absolute terms would amount to EUR 952 million with an EBITDA margin of 10.7%. As a result of the EBITDA fall and higher amortizations, reported EBIT decreased by 20% year-on-year to EUR 405 million with an EBIT margin of 4.5% or 4.7% excluding Phoenix impact. Net income in the 9 months has been EUR 127 million that compares to the EUR 225 million reported in the same period last year, mainly due to a lower year-on-year EBITDA in absolute terms, increase in depreciation and amortization levels and higher minority interest, partially compensated by less financial expense for the 9 months. Net debt has increased by EUR 379 million to EUR 2.437 billion, mainly due to negative free cash flow evolution affected by some extraordinary impacts in Q3 2024 that we will detail in the following slides. To sum up, we continue to demonstrate our ability to perform strongly in a challenging market environment with headwinds from FX and with a difficult year-on-year comparable due to the extraordinary first 9 months of 2023. If we now move to Slide #13, we can see the performance by region on a year-on-year basis. Looking at each region in detail, revenues in Western Europe have decreased by 8.6% year-on-year in the 9 months to around EUR 3.2 billion. Performance in the region has been strongly affected by -- mainly by volume pressure in the period and to a lesser extent, the falling raw material prices in the first 9 months. In terms of EBITDA, it reached almost EUR 341 million and EBITDA margin stood at 10.8% in the period, down from the 11.5% reported in 9 months 2023, given market volumes dropped in the period. As Paco mentioned before, we're already reacting by implementing different measures in the region. In Eastern Europe, the performance in the first 9 months has been solid, proving again our strong positioning in the region. On a reported basis, during the first 9 months, revenues have grown year-on-year by 6.5%, up to levels of EUR 1.338 billion, although EBITDA levels have decreased by 3% to EUR 172 million, partially impacted by currency fluctuations. EBITDA margin of 12.8% is below the 14.1% reported last year, mainly due to inflationary pressures, project mix volatility observed in the second quarter. In fact, in the third quarter, EBITDA margin improved to the levels of 13.8%, and we expect to maintain this positive evolution during Q4 to reverse first half situation. In NAFTA, Phoenix Plan continues to show signs of improvements in the underlying operations with good EBITDA margin evolution in 2024, even though our operations have been impacted by volume decreases in some clients. Our revenues have increased by 3.4% year-on-year, while EBITDA has decreased by 13.6% if we exclude Phoenix impact of EUR 70 million in the first 9 months. This lower EBITDA in absolute terms leads to an EBITDA margin of 6.3%. As we have seen, profitability will continue to evolve positively until reaching at the end of the year, similar levels to full year 2023, excluding Phoenix Plan impact. As you all know, turning around our operations in NAFTA to improve our market positioning and profitability is at the top of our priorities. In Mercosur, despite a third quarter with a positive evolution in both revenues and EBITDA, our results in the first 9 months continue to be impacted by ForEx in Argentina and floods in Brazil during May that has led to revenues and EBITDA decreasing in the 9 months by 6.7% and 16.7% year-on-year, respectively. EBITDA margin in the period has decreased versus last year's to levels of 10.9%. In Asia, our performance continues to evolve very positively. In the period, reported revenues in this region have seen a strong growth, reaching nearly EUR 1.5 billion with an outperformance in a complex and very competitive market. Our approach of focusing on premium products with differential technologies is allowing us to gain good quality market share in a very competitive EV world. As a result, EBITDA grew by 20.7% compared to the 9 months 2023 with EBITDA margin improving to 14.6% in the period showing an extraordinary operational execution of our projects and remain as the region with the best profitability levels in 2024. We keep on working to gain position in this region with a strong organic and profitable growth. And Asia continues to be a great opportunity for us. Finally, Gescrap has seen revenues decreasing by 9.8% year-on-year to EUR 435 million as a result of the sustained decline in Gescrap prices, as mentioned by Paco before. Nevertheless, well-managed operations have allowed for EBITDA to increase by 2.2% year-on-year, maintaining a strong margin improvement quarter-on-quarter, reaching 8.5% in the first 9 months of 2024. Overall, we have seen that our geographic diversification has supported on a solid performance in the first 9 months. Turning to Slide #14; we see that we have ended the first 9 months of 2024 with a net debt of EUR 2.437 billion, which is EUR 379 million above the reported in December 2023. This EUR 379 million increase includes dividend payments of EUR 122 million and EUR 22 million of acquisitions, mainly due to the repurchase of Mitsui stake in North America at the end of May 2024. During the 9 months of the year, the company has generated a negative free cash flow of EUR 214 million, excluding extraordinary Phoenix costs. We have experienced a negative evolution in the 9 months period due to EBITDA decrease in absolute terms, extraordinary negative currency fluctuation and negative working capital evolution affected by some extraordinary impacts in the third quarter. We expect a significant improvement in cash flow for next quarter as some of the extraordinary items are due to be reversed. If we move to Slide 15, we can see in detail working capital evolution since 2022 quarter-on-quarter. Despite third quarter business seasonality, we have seen in 2024 an extraordinary working capital outflow mainly due to higher inventories in selective projects despite the lower activity in the quarter and a temporary increase in tooling collection period. Both impacts are not structural in our working capital and are forecasted to be reversed in Q4 at normalized levels, driving to an improved working capital performance in the year, consistent with our last year's strategy. Finally, in Slide 16, as a result of this, where we see that we have ended September 2024 with a higher net debt of EUR 2.416 billion, excluding Phoenix Plan impacts, which implies a net-debt-to-EBITDA ratio of 1.8x. Leverage ratio, which despite being the second lowest ratio for the 9-month period since the IPO has increased versus last year due to the strong negative impact of free cash flow. Priority is to preserve our financial strength, and we remain disciplined over leverage in absolute and relative terms. Thank you all. And now I hand over the presentation back to Paco for outlook and closing remarks.

Thank you, Ignacio. So if we go to Slide #18 for the full year, the latest forecast shows that a relevant decrease in the market comparing with the expectation in the beginning of the year. For 2024, we are now expecting global light vehicle manufacturing to be in the level of 88.5 million units, clearly below '23 levels and the initial expectations. And for 2025, we are -- clearly, we are also below the expectations to the ones or the '23 ones, and we are expected -- and the ones that were expected in the beginning of the year. So basically, we are still thinking something below 90 million units. And the drop of the volumes considered in the latest forecast for 2024 is mainly attributed to the slowdown in EV penetration and mainly in Western Europe, but also in U.S. Moving to Slide 19 and assuming the year-to-date results and taking into consideration a short-term outlook, which is very challenging with the lower production volumes, especially in Western Europe and with the negative currency fluctuation, we have decided to update our 2024 guidance to reflect lower growth and consequently, lower operational leverage and free cash flow generation. So in this sense, in terms of revenues, even if it's going to be lower sales than expected in the beginning of the year, we keep our outperforming target. In terms of EBITDA, we are moving from flat to a slight increase in terms of EBITDA margin, and now we see it in slightly below the margin we had in 2023. In terms of free cash flow, from a guidance of around EUR 200 million, we now see a positive free cash flow generation. And in terms of leverage from 1x to 1.5x net-debt-to-EBITDA, now we see our leverage by the end of the year in the range of 1.7x. Moving to Slide #20; clearly, what we want to stress in this slide is that we see a clear scenario of uncertainty. But already in this scenario with the kind of different and difficult volumes, we are already implementing global initiatives in order to be sure that we are preserving our -- the most important pillars of our strategy, which is the profitability and, of course, our financial soundness. In terms of profitability, if we refer to Europe, we see a clear volatile environment, and we focus now in ensuring the cost competitiveness of our operations, trying to look for resizing operations as necessary to trying to further implement any kind of measures around efficiency and flexibility and of course, having constructive customer negotiations. In the case of North America, we are absolutely committed to the implementation of the Phoenix Plan in all different levels. And if we refer to our operations in Asia and in Mercosur, we have a strong business. We try to keep on growing based on our solid positioning and of course, trying to obtain any kind of opportunity in order to improve our operations. But any case, no matter what happened with the sales, we are absolutely committed and it's mandatory for us to preserve our financial soundness. And in this sense, we are, of course, thinking in the future, trying to leverage our future in the real value of our very good assets, of course, trying to see whether we can redefine our -- the CapEx intensity of our model and of course, preserving and putting a lot of attention in the working capital discipline. So just to summarize, we are living in a quite challenging scenario in the auto sector in the second half of the year. But from Gestamp side, we are reacting quickly. In the case of the short-term with urgent ideas and activities in order to be able to preserve the profitability and the financial health of course, working very hard and absolutely committed in the implementation of the Phoenix Plan in our North American operations and preparing ourselves in order to be able to tackle the new challenges for the future. And with this, now we are open to your questions.

[Operator Instructions] And our first question comes from the line of Alberto Espelosin from JB Capital.

I have 3, if I might. My first question is on NAFTA. I would like to understand the reason behind lower EBITDA margins in third quarter versus the second quarter. Is this just due to lower volumes in the regions? And you have highlighted that the Phoenix Plan is well on track. What should we expect for North American profitability in 2025, assuming the current expected volumes in the region? My second question is on -- also on NAFTA and the Phoenix Plan. You announced around EUR 60 million of extraordinary cost impact for full year 2024. However, you have only incurred around EUR 20 million in the first 9 months. Why is this? Are you postponing any costs for 2025 or do you now expect lower cost -- extraordinary costs from the Phoenix Plan? And my last question is regarding Volkswagen and other OEMs capacity shutdown announcements. In the past months, I would like to understand -- to what point is this affecting you? And are you planning any restructuring plan or plant closures in Western Europe?

Thank you very much for your questions. And starting with NAFTA. Yes, we have a lower profitability in third quarter. A very important part of this profitability is linked to the lower sales. These lower sales, which is -- which are impacting not only our plants which are under the program of the Phoenix Plan, but also the other plants which are running okay. So that's -- we have, let's say, net sales and revenues. And in terms of the operations, the trend that we see is that we keep on improving all our operations inside the Phoenix Plan, and that's why we feel optimistic to be able to do a turnaround for the next years to come. For 2025, it's still early to say. We don't know what is going to be the market. We are not expecting a very important recovery of the market by 2025, but we see a clear recovery of the operations, which are under the plan of the Phoenix Plan. So as far as the volumes are more or less in line or improving a little bit with the ones that we have, we clearly see an improvement compared with 2024. And of course, the message here is that we are online to be able to go and to hit the target that we announced the Phoenix Plan. Moving to your last question around the latest announcement by Volkswagen and other groups. I think, of course, we all know that all these companies, especially the European OEMs are, in some case, impacted by these lower volumes, especially in Europe. And then in each case, they are suffering also with different volatility in different markets like in China. So of course, there is a clear global impact in all the operations. In our case, what we see today is that the volumes already right now that we are working are very -- still are already low. So we are going back and trying to analyze whether what kind of actions we need to do. And of course, what we are doing is implementing all kind of flexibility measures in the software. For instance, we are implementing all the [indiscernible] and flexibility we have in our plants in Europe. We have a lot of temporary work that, of course, we are adapting depending on the volumes of the market. And of course, we are analyzing everything, and we will have any kind of action that will be needed for the future. But so far, as mentioned, what we see is that we have enough flexibility, especially in our operations in Europe in order to keep on moving. And referring to the cost associated with the Phoenix Plan. In any case, it could be some delay in all these expenses because part of the actions that we have right now, we have decided to postpone, for instance, in the area of the CapEx because we need to stabilize the operations until we are able to take some specific actions in some specific plants. So overall, we preserve, and we remain with the same kind of estimation we have for the plan, but probably it's going to be less impact for 2024.

Our next question comes from the line of Christoph Laskawi from Deutsche Bank.

The first one would be also coming back to NAFTA. You already elaborated on the volumes. Is this primarily one customer and the obvious one would obviously be Stellantis cutting production to work on the inventories or is this across-the-board other customers as well in the region? And then is there any indication for Q4 to see a slight uptick versus Q3 already or largely unchanged? And then just following up on your comments on Europe; looking at German production data, which came out today, it's actually up 17% in October. So it looks like Q4 started quite okay. Do you confirm that that Q4 in Europe looks slightly better than Q3 or would you say that the environment with your customer mix is basically unchanged, and you keep on seeing the same headwinds as in Q3?

Okay. Thank you for your questions. And referring to NAFTA, I think I would say that the reduction in terms of volumes in the third quarter has not been only in the case of Stellantis has been a kind of much more general impact. It's true that we see some customers that they are already -- they have already started in Q3 and also in Q4 to reduce the level of inventories, and that has kind of impact. And of course, there are some of our customers there with different kind of problems in terms of sales. But I would not like to point out especially to Stellantis, but it's going to be something a little bit more across the board. And for Q4, if we see any kind of positive sales in North America, today, I don't have any kind of, let's say, better expectations. It's true that we have some good signals in some programs, but it's also true that we see other programs which are not performing well. So today, we are planning for a kind of non-recovery for the fourth quarter in NAFTA because we believe it's always better to react if we have better volumes that to do the opposite. And in terms of Europe, it's true that when we see some of the programs on some of our plants in October, we have not done bad in some specific programs that were very -- were performing very bad in the third quarter. But still, it's very early to say what is going to happen in the fourth quarter because we see also some clear position from some of our customers to be very careful with the level of inventories by the end of the year. So it could be that the October month is okay, but we still don't know what is going to be the outcome in December. So we are, again, trying to be conservative with our forecast for the fourth quarter because we don't see -- we don't have a clear view in terms of any improvement.

And a follow-up to NAFTA, if I may then. If there's no basic improvement fundamentally, it's probably fair to assume that come year-end the margin should be closer to 6% than it currently is. So around 6% for NAFTA is where you feel comfortable, right, if I understood it correctly?

We have clearly done an analysis every month in North American operations. And as have already been mentioned, we are now targeting a level of around 6.5% EBITDA at the end of the year for our North American operations, very much aligned with the kind of margin we had in 2023. It's true that in the fourth quarter 2023 last year, this quarter was not very good. So we are going to do much better this year than the fourth quarter 2023. That's why we will reach the same level. And that's why we are also optimistic around 2025.

Our next question comes from the line of Enrique Yaguez from Bestinver Securities.

I have 3 questions. The first one is regarding the guidance of sales outperformance for this year. The current guidance would imply a market underperformance in Q4. So why are you so cautious regarding Q4 in terms of market outperformance -- it's just because of Europe? Second, some questions regarding the Europe plants as well. I would like to know if you could quantify the measures implementing in Europe and if you foresee the potential need of deeper restructuring actions in Europe, which might include closures in capacity? And finally, I would like to have some comments on the CapEx intensity that you foresee for the business given the delays in the EV transition.

Thank you for your questions. In terms of guidance, yes, it's true that we are up to September a little bit better than the initial guidance in terms of outperforming the market. And to be honest with you, we try to be conservative, but we don't see a clear change in the trend in the fourth quarter in terms of this outperformance. If we refer to the European plants, I think our first message to all our plants has been to react very quickly. So right now, what we are doing is using the existing flexibility we have in all our plants in order to be able to adapt to the lower demand. Whether we will need further restructuring in some of our operations. Today, we don't have this kind of visibility. We should not forget that we are already running in Europe at a kind of very low-capacity utilization. And I think it's not going to be the case, but we are open. And if we need to take any action, we will do. And regarding the CapEx intensity of the model, what is true is that we are thinking right now for the future, and we understand that for the future, we -- one of our targets is to reduce the ratio between CapEx and revenues of the company. And it's true that we have very good assets. We have invested for some years in very good plants, state-of-the-art with the best of the facilities. And even if it's going to be new programs in place, what is true is that we have capacity in place in order to cope with that. So we are confident that for the next period of investment, we will be able to reduce the CapEx intensity of the model. And it's also true that in the case of EVs, it's true that there's going to be a lower penetration in terms of the EVs. But the reality is that, that will mean probably less requirement in terms of specific investments in the next years to come.

Our next question comes from the line of Akshat Kacker from J. P. Morgan.

Akshat from J. P. Morgan. Three questions, please, quick ones. The first one on your full year 2024 EBITDA guidance. When I think about the implied Q4 EBITDA number, it still implies a meaningful pickup versus the run rate that we saw in the first few quarters, specifically Q1 and Q2. Could you just elaborate in terms of what drives the improvement sequentially in Q4 versus the early part of the year? The second question is on your free cash flow guidance for the full year. Now you expect a positive number. Could you just tell us underlying embedded in that assumption, what are you expecting in terms of working capital contribution for the full year, please? And the last one on CapEx; I know you don't guide on CapEx as a KPI. But given that we are 9 months through the year, could you just help us in terms of what are your assumptions for Q4 in terms of CapEx because you have talked about pushing some of the CapEx into 2025 to preserve free cash flow.

Okay. So just referring to the EBITDA margin, if I understand properly, what we are expecting for the fourth quarter is something which is a little bit more aligned with the kind of trend we had in the previous year, but of course, in a different level. So overall, we are now considering that the overall EBITDA margin by the end of the year is going to be slightly lower than the ones that we have in the previous year. So we are now fighting in this fourth quarter to be able to do a little bit better than the average of the year, but I cannot guide you for more in that. So I think for you, just for your reference, take into consideration that we are going to be something in the middle between what we have until now and what we did in the previous year. And maybe Ignacio, you can elaborate in the other 2 questions.

Sure. Hi Akshat. So with regards to free cash flow guidance, it is obvious that we have had a very negative impact due to extraordinary items in Q3, which we expect to revert during Q4. And that reversion in Q4 would bring to a normalized working capital and hence, it would be a contribution -- a positive contribution in order to meet the free cash flow new guidance that we have provided. With regards to CapEx, as mentioned, we don't usually provide -- and we don't want to provide any guidance on CapEx as we are more focused on profitable growth. Nevertheless, I think that what you can expect for Q4 would be more or less in line with what has been or what has happened over the rest of the year. And with regards to pushing CapEx to 2025, and as Paco referred to before, I think that it relates more to the client demands and it relates more to future investments, but we remain cautious, and we remain very focused on basically on meeting our leverage targets.

[Operator Instructions] And our next question comes from the line of Alvaro Lenze from Alantra Equities.

I have a couple. The first one is on the working capital impact on this quarter. You mentioned that you have higher inventories. You expect to correct that into Q4. I was wondering whether that means that you're going to reduce the activity levels to produce less inventories and then sell the inventories that you have built through Q3 and whether that would imply higher cost for production in Q4 as you have lower fixed cost dilution? That's my first question. And the second question would be just maybe your views on your positioning for EV market. I don't think -- I know that the expectations for EV adoption have come down, but I don't think in the long-term, there is much of a change in that EV is probably the future. But I just wanted to understand whether this slowdown for you means that your clients are not launching the products they were expecting to launch or that their launches are just being commercial failures due to competition from China? And if that is the case, what should we expect for the coming years? Because at the end of the day, if production is delayed or launches are delayed, we would expect revenues to pick up. And if it's a commercial failure, just to know what can you do about it, whether the CapEx you have done in the past few years can be repurposed for other clients or maybe if you can capture the Chinese OEMs coming into Europe if they finally come? Just to get a sense of what could happen in the medium-term for the -- for your position in EVs.

Okay. So maybe, Ignacio, you can start with the first one.

Sure. With regards to working capital and specifically to inventory, I think that it relates more to the fact that volumes in Q3 have decreased, and it has been a sharp decrease, which has basically caught not only us, but probably all of the sector with a different situation in terms of inventories with a more volatile demand from our clients with EDIs, which have been more erratic and that has related to that increase of inventories. During the fourth quarter, what we are seeing is a normalized -- a more normalized demand despite the volatility. And hence, we will be producing normally and reducing our inventory on a normal pattern to achieve levels which are more commensurate to historical levels where we were.

Yes. And referring to your question around EV and EV market, I think we have a complete different picture if we see what is going on in China and what is happening in Western Europe and U.S. In China, I would say that the penetration of EV is still running at a good level. The latest information we have is that more than 40% of the market is already EV or full hybrid. So that is going in, let's say, in the right direction. The problem is coming from this penetration in Western Europe and in North America. So far, what we see from all our customers is that there are some delays, but the most important thing is coming from lower volumes than expected. And in some cases, some ramp-ups of the volumes, which are a little bit longer than the ones expected. Our belief and the belief of our customers that is a delay in the penetration of these EVs, but it's not going to be, let's say, a problem in terms of the final penetration of EVs in the long run. So what we see now is that this short-term gap in terms of EV penetration is basically substituted by more sales in terms of ICE and also extending the, let's say, the life of the existing vehicles. So -- and coming back to your question today, we see some plans, and we are working with some of our Chinese customers when they are right now building up some plans to open facilities in Europe. So we are working on them. I think we do have the advantage that we have a very good assets here in Europe and that we already have a very solid positioning with them working locally in China. So that will mean that whenever that happens, whenever it happens, when it happens, I think we are going to be very well-prepared to capture an opportunity.

Okay. Just a follow-up if I may. Just for the sake of the argument, assuming that -- imagine that your projects in Western Europe were not as successful for your clients as initially expected. Do you think your capacity can be repurposed for other clients? And also, given that the actual production of -- or the actual volumes are coming below expectations, do you think -- is there anything you can do for future contracts to be more protected against deviations between the plants and the actual production?

Yes. I think it's a good question. What we -- when we refer to the investments to the EV programs, a big part of these investments are the same, whether they are referred to EVs or talking to ICE our plans, our processes are basically the same. And then we do have some specific assets, especially focus in the final assembly and final welding of the parts that are a little bit specific. Of course, part of these facilities in one case that this -- any kind of project will be finalized, we could be able to reuse the same way we are doing everywhere. But today, we are not in this position. But I'm referring to the conversation with our customers. It's true that this volatility in terms of EV is opening a door in order to find different ways of cooperating with the customers. Situation is clear. They know what the supplier base is suffering. And in order to be able to get the commitment of suppliers to invest for the new programs, they need to be a little bit more flexible in this kind of new programs. So we are working with them. I would like to say that we have constructive discussions, not only in the existing delays or volumes missing, but also about the future programs. So -- and I think everybody now knows that it's a delay, and we need to work together in order to be able to find solutions.

There are no further questions at this time. So I hand the conference back to you.

So thank you for your time today. As usual, the IR team remains at your disposal for any further questions and hope to hear from you again at the latest on February. So have a good evening.

Okay. Thank you very much.

Thank you.