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

Good evening. Thank you very much to all of you for taking the time to attend Gestamp Half 1 2025 Results Presentation in this afternoon for you. I'm Ana Fuentes, M&A and IR Director. And before proceeding, let me refer you to the disclaimer on Slide #2 of this presentation that has been posted in our website and with it our the legal framework and in 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 let me please turn the call to our executive Chairman.

Good afternoon, and thanks for attending this call in which we will be presenting in the H1 and Q2 results of our group. Basically, we have delivered a very positive set of results in H1 despite the difficult market conditions in Europe and in North America. In this context, the revenues of our auto business at FX cost have been reduced by 1.1% in Q2 and by 0.9% in the first half 2025 compared with the previous year. But even with a slight lower volumes, we have been able to increase our EBITDA margins up to 12% in the second quarter of this year. And we have also recorded EUR 182 million free cash flow in the second quarter and close to EUR 100 million in full year in the H1. So very solid set of results, which will help us in order to be able to have a good visibility to reach the full year 2025 guidance. Global light vehicle production volumes have been quite solid in the first half of the year, reaching 41.3 million units in our footprint, meaning an increase of 3.7% comparing with H1 2024. Even if it's a solid growth, it's mainly driven by a very positive performance of manufacturing volumes in Asia and mainly in China. On the other hand, in Q2 and also volumes in Europe and North America have been lower than the previous year and especially in Western Europe, with volumes far behind the ones we had before the pandemic. In this context of a very heterogeneous market, Gestamp auto business, revenues at FX constant has been reduced by 0.9% in H1 2025, meaning an underperformance of 4.6% compared with the market. By regions, we had a slight underperformance in Western Europe, but it has been compensated with a very good overperformance in East Europe. In America, we had some underperformance in North America and our performance in line with the market in Mercosur. And the main impact is coming from Asia, where we have reduced our revenues in H1 by 3.3% and while the market has grown by 8.2%. Gestamp reported revenues in H1 has amounted to EUR 5,844 million, meaning a minus 4.8% compared with H1 2024. But out of this decline of our reported revenues in H1, 2/3 of it is coming from negative ForEx evolution due to the strong performance of the euro versus most of the currencies. As part of FX, H1 revenues have also been impacted by the decline of scrap prices and also by the decrease of auto manufacturing in Europe and North America, as already stated. So we had a record profitability for the second quarter despite a difficult market environment, especially in Western Europe, which remains to underperform versus the market and with the volatility, with high volatility arising due to the tariff uncertainty, especially impacting North American volumes. So in Q2 2025, we have generated EUR 332 million EBITDA, meaning a 12.1% EBITDA margin, which is 101 basis points better than second quarter 2024 and with lower revenues. And in full H1 2025, our EBITDA has reached EUR 626 million, excluding finance cost, an 11.3% margin, which is also 49 basis points better than the one in H1 2024 and again, with lower sales. So we have been able to do that due to the implementation of structural and short-term actions, such as important cost reduction initiatives implementing flexibility measures, having some kind of constructive customers' negotiations and, of course, very focused in a good delivery in Phoenix. So strong profitability, which has helped us to have a very good visibility for the full year 2025 guidance. In terms of Phoenix, of course, we have believed during the first half of the year, a complex market environment also in North America. With a decrease in terms of the units of manufacturing in the first half of the year of 4.1% in North America, especially a decrease in U.S. In terms of the Phoenix plan, we are on track, we are doing well, even with lower expenses than expected. In the first half of the year, we have accounted EUR 9.5 million expenses and CapEx up to EUR 5 million -- but we have been able to improve our EBITDA margin quarter-on-quarter. So in the second quarter we have generated 7.7% EBITDA margin, which means a substantial improvement versus 6.4% we have in the first quarter 2025, and in the complete semester, we have reached a 7.1% EBITDA margin compared with 6.6% EBITDA margin in the first half 2024. So we are clearly in line to reach the target of the 8% EBITDA margin for this year, even if we are facing worse market conditions. And of course, as I stated several times, Phoenix remains as a very high priority for our group. Moving to Slide #10 and scrap, very good performance also of scrap in the first half of the year despite a scrap prices decline. And this decline of the scrap prices has happened in the first half of the year, mainly in Europe but also in China, and this decline on the scrap prices has forced our revenues in the first half of this year to be reduced by 11.3% and even if we have less revenue than the previous year, we have been able to sustain quite well the EBITDA margin, the EBIT margin for it. So we have reduced this EBIT margin from 7% in the first half 2024 to 6.7% in the first half 2025. So overall, we are quite satisfied with the performance so far of scrap because it's offering a good financial return and also a good strategic fit within the strategy of Gestamp. We see growth opportunities for Gestamp for scrap. And in this Q2, we have closed the acquisition of the company, López Soriano, a company which is based in Spain, a company that will help a scrap to consolidate and enlarge our market position and is also adding new activities to the group such as the recycling of electrical and electronic equipment. And with this, now I hand it over to Ignacio Mosquera.

Thank you very much, Paco, and good evening to everyone. If we move to Slide #12, we can have a closer look to our financial performance in the first half of 2025, as Paco has already explained, Phoenix plan aimed at restructuring our NAFTA operations has had a EUR 9.5 million impact on our P&L and a EUR 5 million impact on CapEx for the first half. And as a reminder, in the first half of 2024, we had an impact of EUR 12 million in our P&L. We have included comparable figures for both periods, excluding Phoenix. For the first half of 2025, we have reached revenues of EUR 5.844 billion, which entails a 4.8% decrease when compared to the EUR 6. 140 billion from 1 2024, mainly due to the strong ForEx impact in the period. Revenues for the auto business, excluding Gescrap, at FX constant have been almost flat with a 0.9% decrease year-on-year in 2025. Thus FX has negatively impacted results by EUR 205 million. In terms of EBITDA, we have generated EUR 641 million in H1 2025, meaning an 11% margin. Excluding Phoenix impact, EBITDA in absolute terms would amount to EUR 651 million with an EBITDA margin of 11.1%, improving 2024 profitability in almost 50 bps and providing visibility to reaching full year 2025 EBITDA margin current. Reported EBIT is almost flat in the period, increasing by 0.1% year-on-year to EUR 286 million with an EBIT margin of 4.9%. Excluding Phoenix impact, it would amount to EUR 295 million, reaching a 5% margin. Net income in the first half has been EUR 75 million. That compares to the EUR 106 million reported in the first half of 2024. This lower net income is explained mainly by the negative financial result performance which has been strongly impacted by ForEx evolution in the first half of 2025 and a comparable first half of 2024, which was positively impacted by one-off hyperinflation. Net debt has closed the first half in EUR 2.141 billion, reducing net debt in EUR 50 million compared to the first half of 2024. As for free cash flow, we have had a strong positive free cash flow generation in the quarter, offsetting Q1 negative free cash flow due to normal business seasonality as we will later detail. To sum up, a solid set of results considering the volatile environment with less sales where we have demonstrated our ability to improve profitability in the period, providing visibility for the year and preserving our balance sheet discipline. If we now turn 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 3.9% year-on-year in the first half 2025 to EUR 2.117 billion. Revenue evolution in the region has been affected mainly by volume pressure in the period and to a lesser extent, the continuous fall in raw material prices. In terms of EBITDA, it reached almost EUR 270 million and EBITDA margin stood at 10.3% in the period, down from the 10.9% reported in the first half of 2024. Profitability in the first half has been impacted mainly by volume drop, which still limited -- with still limited operating leverage. Western Europe is a region where, despite flexibility measures being taken, these are slightly more challenging to implement and see the result. In Eastern Europe, the performance in the first half of 2025 has been very solid, providing a gain or a strong position in the region. On a reported basis, during the first half of 2025 revenues have grown year-on-year by 5.4%, up to levels of EUR 999 million. Despite the strong impact of ForEx evolution in the [indiscernible]. EBITDA levels have increased by 29.9% to EUR 153 million with an EBITDA margin of 15.3%, beating the 12.4% margin reported last year first half. The profitability improvement is mainly attributed to a better project mix, highlighting the strong project ramp-ups in Turkey during the period. In NAFTA, Phoenix plan continues to show signs of improvements in the year with good underlying operations that led to a sequential EBITDA margin improvement quarter-on-quarter in the period. Our revenues have decreased by 11.2% year-on-year, mainly due to a complex market environment leading to a negative volume production performance in the first half. However, on the other hand, EBITDA has decreased to a lesser by 5.6% if we exclude Phoenix impact of EUR 12 million in the first half of 2024 and EUR 9.5 million in the first half he good evolution of Phoenix plan leads to an EBITDA margin of 7.1%, improving last year profitability in around 40 bps and setting the pace to achieve the target of around 8% EBITDA margin range for 2025. As you all know, turning around the operations in NAFTA to improve our market positioning and profitability is at the top of our priorities. In Mercosur, the first half of 2025 has been marked by the ForEx evolution in Brazil and Argentina, leading to lower revenues in the period, decreasing in 6.8%. At FX constant, we grow in the region more than 9%, outperforming the market once again. EBITDA levels dropped in the quarter by 5.6% that led to an EBITDA margin of 10.8% despite the decline in revenues in reported terms, we have been able to maintain similar levels of profitability, thanks to the flexibility measures were implemented in the region and a favorable comparative with last year due to the floods we suffered in May 2024. In Asia, reported revenues have decreased by 5.4% year-on-year in the first half to EUR 904 million within a complex and very competitive market. Our negative performance in the period is mainly due to the extraordinary revenue growth in first half 2024. Despite the difficult comparable, we slightly improved our performance at FX constant quarter-on-quarter from minus 5% in Q1 2025 to minus 1.6% in Q2 2025, leading to a lower underperformance in the region. EBITDA level in absolute terms have decreased by 4.9% and EBITDA margin stood at 14.6%. We have been able to maintain a stable profitability in the period due to the good performance of our new projects in India. Our approach continues to be focusing on premium products in the region, and we keep on working to gain positioning in this region, maintaining strong levels of profitability. Finally, Gescrap has seen revenues decreasing by 11.3% to EUR 281 million and EBITDA in absolute terms by 9.1% year-on-year, reaching EUR 24 million for the period. This situation is mainly due to the sustained decline in scrap prices, as Paco mentioned before. Nevertheless, we have a slightly improved profitability levels that led to an EBITDA margin of 8.6% in the first half of 2025. Overall, we have seen that our unique business model and geographic and global diversification has driven our profitability improvement in the first half of 2025. Turning to Slide 14. We see that, as we already mentioned in our Q1 results call in May, we are back to positive free cash flow generation in line with our typical business seasonality. As shown on the slide, excluding finish costs in Q2 2025, we have generated EUR 182 million of positive free cash flow, a record free cash flow generation in the second quarter, providing a strong visibility for the full year. As a result, during the first half of the year, the company has generated a positive free cash flow of UEUR 99 million offsetting first quarter negative free cash flow. The EUR 99 million free cash flow generation considers dividend payment of EUR 39 million, EUR 25 million of minorities, M&A and equity contribution, EUR 65 million of ForEx impact in the quarter and excludes Phoenix impact of EUR 9.5 million of P&L and CapEx of EUR 5 million. From now on, as mentioned in Q1 2025, we will exclude the ForEx impact in our reported free cash flow to eliminate either the effect, either positive or negative. For 2025, we are committed to meet the full year guidance, generating free cash flow in the 2024's range. As a result of this, we move to Slide 15. Where we see that we ended first half of 2025 with a reported net financial debt of EUR 2.141 billion, which implies a net debt-to-EBITDA ratio of 1.7x. If we assume Phoenix plan impact in H1 2025, leverage ratio further decreased by up to 1.6x in the period. We have managed to improve our net financial debt, delivering the lowest first half level since IFRS implementation and sustaining the same leverage as first half 2024. Our priority is to preserve our financial strength, and we remain disciplined over leverage in absolute and relative terms. As we turn to Slide 16 and as we have just announced, we are proud to share that we have signed today a partnership agreement with Santander that will contribute to deliver on our strong balance sheet and leverage commitment. The agreement foresees Santander making a capital injection of around EUR 246 million in a set of Propcos taking a blended of around 39% stake on Gestamp's Spanish real estate assets. This new company will be the owner of our 23 industrial plants in Spain within a total value of EUR 379 million according to a third-party valuation. Gestamp will keep full control of the assets that will continue to operate through a lease agreement and the shares owned by Santander will be included as noncontrolling interest in Gestamp's financial statement. With this partnership, we give entrance to our reference shareholder, crystallizing value from Gestamp's asset and is strengthening our balance sheet profile. Furthermore, we will be able to reduce our net debt, leading to a leverage ratio pro forma for the first half of 2025 of 1.5x. This would be the lowest ratio Gestamp would have reported and in line with our commitment presented in our 2023 Capital Markets Day. With this, thank you all, and now I hand over the presentation to Paco for the outlook and final remarks.

Okay. Thank you, Ignacio. Going to the next slide, Slide #18. Light vehicle manufacturing in 2025 has been difficult to forecast, especially due to the uncertainties around tariffs even if volumes were expected to fall in April after tariffs announcement, at the end of the day, H1 has been positive versus H1 2024. And the latest forecast is showing an increase of 0.4% compared with the previous year. Of course, we need now to take into consideration the latest tariff yields, the one which happened between U.S. and Japan some days ago and also the agreement with Europe and U.S., which happened yesterday that probably will provide more visibility for the rest of the year. In any case, the growth expected for full year remains very heterogeneous, which meaning that there's going to be some decrease expected in North America of around minus 4%. In the case of Western Europe, we are also expecting a decrease for full year of something around 5% compared with the previous year, and an improvement in Mercosur of 7.1% and also in Asia of 2.5% compared with the first half 2024. In any case, in Asia, it's expected some decline in H2. So we have a sustainable strong financial profile. We have good results of this first half of the year, which clearly shows the commitment of our group towards reinforcing our strong financial profile but also preserving our strategic leadership position in the market, a market which seems to be with a limited growth ahead of us and also with high uncertainty. In this sense, we have focused our efforts, and we will focus our efforts in improving profitability, implementing all kind of cost control measures at all levels of organization, no matter whether it's plant, division or corporate having constructive negotiations with our customers, focus on operational improvements and also implementation of flexibility measures in order to preserve profitability with market and of course, with a strong commitment in the delivery in the Phoenix plan. A part of improving profitability, at the same time, we want to preserve a strong balance sheet profile trying to find the right balance between growth, profitability and CapEx with a CapEx strategy more and more focused on return on investment. With a clear focus on free cash flow generation, reserving a strong liquidity level and also trying to crystalize the value of some of our assets with transactions such as the one that has been commented by Natura recently, which is a very important milestone for ours. So moving to Slide 20. And despite the difficult market conditions and following good results in H1, we reiterate our guidance for the full year 2025 for our auto business in terms of revenues, even if we have underperformed in H1 we are looking for an improvement in the second half of the year. And in terms of EBITDA margin, we had a good performance in H1, and we are targeting an improvement for the full year compared with 2024. For Gescrap, even if with lower prices of scrap, our profitability should be in line with the one we had in the previous year. And in terms of leverage and free cash flow, we are confident to reach 2024 range on a full year basis or better. So just ending up, I would say that we have had a very good set of results in the first half of the year, which is providing a strong visibility in order to deliver in the full year 2025 guidance. Of course, Phoenix plan remains as a key priority for the company, and we are quite confident that we will reach all the EBITDA margin targets and of course, very focused in reinforcing our financial profile in terms of profitability on free cash flow. So with that, now we are open to your questions.

[Operator Instructions]. And our first question comes from the line of Francisco Ruiz from BNP.

My first question is on this situation in terms of growth, I mean, is remind me to one of your local competitors, which is something that I like. So do you think that the situation of lower growth but the higher foreseen profitability is something for the medium term and not only for the short term? Or this is something that you are adapting to the currency situation and probably growth will return in the in the coming years. And also in line with this question, probably this effort will come with a lower level of CapEx, which has not been the case in this semester. So could we expect a weaker CapEx in the second half? The second question is on the deal with Santander. So we got the proceeds, but could you tell us what is the impact on -- in the P&L? I presume that Gestamp will pay a fee to the -- to this company and this will come as a minorities or something like that? I mean if you could give us the final impact on net profit as well. And last but not least, you are reiterating your free cash flow guidance when you are already at EUR 100 million versus EUR 130 million of last year. Do you think that this is quite conservative, taking into account the traditional seasonal effect on what's capital in Q4?

Okay. Thank you very much. So I'll take the first two questions, and thank you for your questions. So regarding the lower growth and better profitability. I think we are all aware that in the last years, we have seen level limited growth and a lot of uncertainties around, so the message is that we are sending to all our teams and all our plants is that we need to be able to deliver in limited growth. That does not mean that we keep on moving in some of the -- some projects in different areas in the world. But the idea is that we need to be able to reduce and not just trying to improve our profitability whenever the volumes are going up. So always, there could be some kind of short-term wins, but the truth is that we are now committed to be able to increase this profitability in the long run, no matter even if the volumes are not really growing. That's the point. I think here, when we talk about the cost control measures, we have a lot of opportunities. We should not forget that our company has been continuously growing throughout the years and the moment of stability or more stability is helping us in order to find a lot of opportunities and advantages in a cost basis, and we can talk also about the flexibility. So sustainable, yes, without higher volumes. And in terms of CapEx, I think we have already announced that we were in clearly to reduce our intensity of our intensive CapEx model and also we have stated that it takes some time because we have some commitment and these commitments take some time until they are materialized. So that's why still we have some CapEx in place and probably for this year and part of next year, we will still have this kind of high CapEx. But clearly, the trend that we have for the future is that we don't need to have such a CapEx intensity for the future, and we should be able to use our existing investments in terms of generic assets in order to be able to deliver on new projects. And maybe, Ignacio, you can talk about Andromeda?

Sure. With regards to your question on deal with Banco Santander, First of all, we will not be paying a fee to Banco Santander as such as a minority shareholder, they're entitled to shareholder remuneration, such as dividends in the same way as we are entitled to it. and that shareholder remuneration will be subject to the shareholder agreement and the Board of Directors of such company. So basically, there is no commitment with Banco Santander to pay any fee. With regards to the cost, certainly, it's a cost which is below our cost of equity and weighted average cost of capital. And at the same time, you have another impact, which is basically that the liquidity will be used to reduce debt, and we will reduce certain interest expense. So overall, it provides an attractive cost ratio, which is well below our average cost of debt. And finally, this deal, what provides us the value realization of our assets. Certainly, the value of our assets right now valued externally and upon which Banco Santander has invested in this Propcos is EUR 379 million, but the book value of it is certainly much lower, about 1/3 of that amount. On your last question around free cash flow guidance, and where we're being conservative, I think that we need to acknowledge that we're living in a volatile environment. And within this volatile environment, we're taking a prudent approach towards free cash flow generation. We should expect in Q3 that working capital will have a negative movement as a consequence of normal seasonality and that we will recover it in the course of Q4. And we want to take a prudent approach. We believe that we will be in the range of 2024 amount and that's the best case that we have at this moment.

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

The first one would be coming back to the topic of growth a bit. Obviously, your constant currency growth includes negatives from steel. Could you give us a rough indication of your out performance or underperformance issue exclude potential negative steel price effect? Or if you can eliminate the steel price? Would you be closer to your original guidance of an out performance? Or any indication really would be appreciated because it seems like it makes a relatively sizable difference also in Q2. And then on Europe, -- did you see more recently towards the end of June, early July, any more significant changes in the call-off patterns or in the schedules of major customers considering that we had 2 profit warnings or 2 warnings related to Europe is there anything that you would see which will be more significant in that regard?

Okay. Thank you. In terms of your first question, I think clearly steel has an impact in 2025. Probably, I would say that the main impact we can find it in Europe rather than in rest of the world, and it has some limited impact, whether a part of this underperformance is coming from that, that is true. But it's also true that we really check where we have the underperformance and mainly underperformance toward the market is in Asia. And it's clear that the Asian market has performed well, especially in China, and that has been driven by the growth in terms of manufacturing by some Chinese local players. And we have not been able to grow with them in line with the kind of cost we have in other areas. So that is the main impact. I would say that, of course, the steel prices declined mainly in Europe has some impact in order to consider this underperformance. And the second question? Yes. In terms of the -- what is our view, what is going on in July and June, I think that the kind of information we have from all our plants is that the programs from our customers remain quite stable. There are no bad news. There are no good news. There's been some kind of improvement in some programs related to EV vehicles. We still see some geographies like U.K. quite depressed. Germany has done a little bit better, and especially in EVs. But to be honest, we have not seen any big change in the mood of our customers, which should be at the end of the day reflected in their programs. So basically the same trend.

Our next question comes from the line of Robert Jackson from Banco Santander.

Just 2, 3 questions. First of all, regarding the North American market, can you give us any view on how you're progressing with increasing your exposure to the U.S. OEMs and possibly the reassuring impact we could be seeing in the future or the near future? Secondly, regarding your Indian growth, can you give us an update of how that is progressing? And when do you think that you will be seeing some impact from these -- the investments taking place there and considering it's a high -- relatively high growth market. And then thirdly, regarding the Chinese growth can you give us any messages regarding the negotiations or potential growth there, whether it's still long term or whether we could see anything in the shorter term? Those would be my questions.

Yes. I think, Robert, I did not hear very well. I understood the last maybe I can answer this question, and maybe I will try to understand a little bit more about your first one. But regarding the Chinese growth, in terms of -- for us, for Gestamp, I think last year, we did a very important increase in terms of our turnover in the market. So we did quite well, and we outperformed the market. And this year, we are doing a little bit worse. That is related in some extent, that some of our customers, which largely have performed quite well. This year, in the first half, they have performed a little bit worse. If we just to provide a little bit more detail on what is going on in China, probably in the last month, I think it's much more public the kind of discussion in the Chinese market about this kind of competition between different OEMs in order to gain market share. It's been some kind of position from the government in order to refrain to do this kind of reduction in terms of prices. And it's true that we have seen already some kind of changes in the manufacturing volumes of some of these Chinese domestic players. I cannot provide with more details, but it's true that some of the customers, which we're doing quite well in the beginning of the year, now they have slowed down a little bit due to this. So probably in terms of manufacturing, it could be that we see some kind of reduction compared with the performance in the first half of the year in China. So the first question was related to North America. I understand.

Yes. Correct. Yes. And the volume reshoring in the U.S. and your exposure to the U.S. OEMs. How is that progressing?

Yes. I think, as you know well, we have the exposure in the U.S., not just for the, let's say, U.S. manufacturer, but also for the Europeans and also for the Asian customers. I think in our case, what we have seen is that there is some decline in terms of sales coming out from the different programs, especially from some European programs. And also, there's been some delay and decline of some of the existing programs with some U.S. manufacturers. I can -- usually, I would like to provide more details on that. but it's true that they are suffering and not only, let's say, the foreign companies, but also the local players. So volumes, I think that the kind of program that we see for the second part of the year are not bad. I mean the trend we see is not bad. But still, I think many of these companies were very much waiting and see what was going to happen with the tariffs. And some of them are also related and impacted by the problems in Mexico and Canada because some of them are in the manufacturing, they are importing a lot of components coming out from Mexico and Canada. So I think right now, so far, I cannot provide you with more light on that.

And the third question was related to India, your investments in India and how that is progressing by when -- when do you expect to see some impact in that in the Asian growth could that help to compensate some of your weakness or slowdown in China?

Yes. India is already improving. I mean in terms of our sales in India are already improving. We used to have at least last year, 3 plants, 2 of them located in Pune, and another one in Chennai, now we are investing in 2 additional plants, 1 located in the area of [indiscernible] and another 1 also in the area of Pune. We have good nominations in different programs, not only with let's say, Indian OEMs like Tata or Mahindra, but also we have some businesses from some other companies, not only from Europe, but also from Asia. So we see that the growth that we are intending to have in the next years from now is going to be quite solid in terms of organic growth, and we see a lot of opportunities in India moving forward. For instance, the demand of hot-stamping in India is clearly growing, and we are right now about talking about 5 hot-stamping lines in India.

[Operator Instructions]. Our next question comes from the line of José Asumendi from JPMorgan.

Few questions, please. Paco, can you talk a little bit about the actions you're taking in the U.S. to improve margins, maybe from the head count from a utilization of the of the plants or any other actions you take to improve the profitability. I am aware that the environment has not been easy and probably the customer call-offs have been very, very volatile in the first half of the year. Second, China geography, are you finding the customer call-offs in China from your key customers in China are becoming a bit more reliable. I mean we've seen a very sharp decline from -- in German OEMs, I think, in the last year, in the first 6 months of '25 as well. But I think there are some signals of stabilization. You think you can benefit from this stabilization into the second half. And the third question, I would love to understand a bit better the logic of the deal with Santander. I mean when I look at your leverage, I think you don't have a very low leverage debt-to-EBITDA, but it's not very high. It definitely it is not stretched. You have a strong balance sheet. So I was just wondering if you could speak a bit more about the logic of the deal and how does it reinforce strategically your balance sheet? And does it open up any other strategic opportunities going forward?

Okay. Thank you, Jose. Basically, around the U.S. and what we are doing in the Phoenix I think it's a bunch of different things. In the beginning, we stated a plan where we were trying to focus not just in the plants themselves which were the main problem, but also trying to get synergies in the area of purchasing. In fact, we have improved a lot in our purchasing areas, also purchasing from different areas in the world that we were not doing. We were buying very locally. We have also conducted very constructive negotiations with customers. I think we were not moving fast enough in order to be able to recover the high levels of inflation, which happened in 2021 and 2022. Also, we have done a very good job in trying to reinforce our culture and trying to be able to retain people, talent, which is a big problem in our U.S. plants. Probably the most clear advance that we have done is that we have focused our efforts in 3 plants, then we moved to 4 plants. And these plants were doing very bad in terms of EBITDA margins. Now I can tell you that we put in for each of these plants, we did a partner company from Europe and the teams of this company have been working together with the teams in the plants in U.S. And now I would say that two of these plants are already out of this program because they have already been able to generate more than 10% EBITDA margin. We still have 2 companies, which are in a position to really improve. Of course, we have done a very important analysis of people and also a very important revamping of some of the lines. So everything is basic work that we are doing in U.S. and with the support of our teams, especially from Europe. Regarding the -- your second question around the volumes in China, it's true that the -- let's say, the nondomestic Chinese OEMs are losing ground versus the domestic companies. And that has happened already in the last 5, 6 years. I remember that back in 5, 6 years, the market share of this domestic Chinese was around 40%, and now we are -- they are close to 65%. So this has been a very important trend. It's true that since already 2, 3, 4 years, there are some Western companies, which are trying to defend their positions. And I think some of them are doing a good job. And some of them are also trying to get and reach agreements with Chinese players in order to improve their efficiency and the profitability. That's the case, for instance, of what is Volkswagen doing, trying to find some kind of agreements, working with JAC, working with [indiscernible]. So these kind of things seems to be moving in the right position, so they are starting to stabilize. And also, we see that even though Mercedes and BMW are suffering, it's true that they have a little bit more time because the combustion engines in this segment, in this premium segment are performing much better than the ones in other kind of segments. So it's true that we see some opportunity, even though the trend still is negative for the foreign companies in China. And I think confirming Santander, Ignacio?

Yes, sure. I mean, Jose, thank you for your question. I think that what you mentioned with regards that we're not very leveraged. I think it's actually correct. And we've had higher leverage in the past, and we've been able to deal with it. But we also had a very firm commitment in 2023 when we did our Capital Markets Day to be below at 1.5x and to generate positive free cash flow and to be between 1 and 1.5 to be actually correct. What has happened between 2023 and now is that essentially our top line and our EBITDA have been penalized by volumes and by effect. Under free cash flow generation, obviously, it's not at the levels where we expect it to be at that moment in time. but we are still firmly committed to that leverage ratio, and we thought this was a very good opportunity to ensure and to help achieve that leverage that we committed to. But further to that, it's also because we're really crystallizing value. We've been doing a substantial amount of investment in the past years. And that value is not shown in our balance sheet. And right now, with the transaction like this type, can we demonstrate that there is a lot of value in our balance sheet that should be taken into account.

And probably to add a little bit more on that. Right now, with a market which is not intended to grow too much. And after the kind of footprint and facilities that we have in place, I think to be able to reduce the debt, it's also providing us some kind of optionality in order to be able to be looking for potential future opportunities.

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

Well, thank you for taking the time to attend today's presentation. As usual, the IR team remains at your disposal for any further questions you may have, and we wish you all a very good vacation.

Okay. Thank you. Bye-bye.

Thank you.