JOST Werke SE (JST) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the JOST Werke Analyst and Investor Conference Full Year 2019. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Joachim Dürr. Please go ahead, sir.

Thank you very much. Good morning from a very sunny Neu-Isenburg. I hope this call finds you all in good health, which, at this point in time, seems to be the most important matter. So I'm hoping everybody is in a good position. We would like to present to you the full year results of 2019, but I'm sure we'll also spend a bit time in -- on the outlook of 2020. So let's go straight into the 2019 numbers. Business highlights for end results for financial year 2019, we've seen a relatively good year starting, but in the Q4, especially in Europe, we saw a steep decline in sales and in the market, especially in the truck markets in Europe. As you can see, sales in Europe were, therefore, down 6.9% to EUR 432 million, mainly in effect out of the reduced production volume from the truck manufacturers. North America continued with a very strong momentum. Our sales was up 11.1%, up to EUR 162 million in 2019. In Asia-Pacific-Africa, we had a slight downward trend of 2.1% to EUR 143 million mostly due to a very weak or almost nonexistent Indian market, which we could make up to a large part with strong China sales. So overall, our total sales amounted to EUR 736 million, which is 2.5% points below the 2018 number of EUR 755 million. From an operating results, our adjusted EBIT, we closed at EUR 77 million, which is EUR 4 million short of the 2018 result. The EBIT margin, however, was nearly stable at 10.4%, which is only slightly below the 10.7% that we had in 2018. And the effects of that, mainly out of volume and personnel costs, will be explained by Christian in more detail. On the finance side, our free cash flow, and that's important and very happy about this, has increased to EUR 60 million as compared to 2018, where we had EUR 38 million. And that's because of lower working capital and the high cash generation of our operational business that we consistently have. Net working capital as a percentage of sales were down 0.3% points to 8.2%. Net earnings. Adjusted net earnings declined less than sales to EUR 51 million, so it's a decline of 1.6%. We have decided and distributed a dividend proposal of EUR 0.80 per share. And we are big fans of a consistent dividend policy, and therefore, that's a proposal that we presented. But of course, in the current situation, we will consistently review the situation and evaluate if it's still in the best interest of our company and our shareholders to continue with that proposal. And depending on that assessment, we may alter that before the general meeting where the dividend then will be decided in the end. So far, for the summary, if we look at the market development in 2019, we can see that we had a decline in sales in Europe. We also had a decline in market in Europe for truck on the market side, 2% on the production side. That was higher because we saw a lot of sales in the first quarter and the second quarter in Europe, and these were a lot of vehicles out of stock that were already produced in the end of 2018. That was because of the tachograph, the digital tachograph that was implemented in the first half year, and a lot of people wanted the old tachograph because it gives them, the owners and the drivers, more flexibility. North America, we had 6% increase in truck and 3% increase in trailers, and that compares to a just improvement of 11.1% in sales. So I think, clearly, we're again able to outperform the market in North America. Asia-Pacific-Africa, the market slowed down 5% for trucks and 9% for trailers. As stated before, we have a decline of 2.1%. Big effect here is, one, the Indian market where volume dropped next to nothing in -- over the course of the year 2019. The other positive effect for us is China, where we had a declining market, but our share grew. And that's mainly because we see 2 effects, one is there's more articulated trucks in the market mix and another one is the customer effect. We were lucky enough to work with the customers that were also able to gain market share, and therefore, we were able to have very solid sales in China despite the declining market. Looking at the overall target and the achievement of 2019. Sales, as I said, minus 3% as compared to previous year on an organic basis to EUR 736 million. That is the low single-digit decline as we had in our outlook. On the earnings, we also meet the outlook on the EBITDA. We are a bit above. That's mainly the IFRS 16 effect that is helping there. On adjusted EBIT, as stated before, we have a minus 5% at EUR 77 million. Adjusted EBIT margin around stable, 10.4% versus the 10.7%. CapEx, our target of 2.5% of sales was achieved with 2.4%, EUR 18 million in CapEx investments. Net working capital, we had an improvement, as stated earlier, which also helped up the cash generation to EUR 134 million, and the leverage has improved or stabilized. It's a matter of view, if you see it as an improvement or not, some people like a higher leverage. We think a very sound financial structure is a positive thing, and it's mainly the cash generation that was enabling us to leverage that to 0.46. And that is obviously before the acquisition of Ålö that we signed last year and closed end of January this year, but Christian will go into more detail on the financing structure. With that, I would like to hand over to Christian Terlinde, the CFO.

Good morning, ladies and gentlemen. Also from my side, welcome to our annual full year investor conference and analyst conference. And let me quickly -- not repeat too much of what Joachim has already said, but I would like to speak a little bit more also about the development in Q4 because that is something that you haven't really seen so far. Joachim spoke about the full year and, again, don't want to repeat that too much. Sales down 2.5%, profit on a very stable level of EUR 77 million or EUR 10.4 million in adjusted EBIT. Q4, as already pointed out, was a very, very challenging environment for us in almost all of our regions, especially if you now look at the minus 16% decline in sales from the numbers in Q4 2018. Please bear in mind that in 2018, Q4 was a very, very successful quarter where we did not see the usual typical seasonality where Q4 would be the lowest number in sales. Quite to the contrary, Q4 '18 was on a similar level as Q3, and therefore, it was an extraordinary quarter. In 2019, I think we are back to the normal slowdown in Q4. Unfortunately, these effects were exacerbated by the tremendous decline in production in Europe where -- and I will go into more detail into that. But November and December 2018 were extraordinary low in sales in Europe, and as previously said, this was predominantly driven by the truck industry, not so much by the trailer industry. Obviously, with such a high decline comes a decline in profit, and that is even higher than the decline in sales. And frankly, we are reacting as fast as possible. But as already pointed out, the downturn, especially in November and December, was much, much stronger than we could react immediately to. And we have reacted, and I think we're better prepared for whatever is lying ahead of us. But the decline in -- compared to 2018, where we had record sales in Q4, was, of course also, very much on the EBIT side. So with that, let me go into the different regions. And let's start with the negative surprise first and that is, as always, Europe. Europe had a decline of minus 21% or 21.4% in Q4, and actually, it was close to 30% in December, if you compare it to 2018. So that was a very, very strong decline. We've mentioned that the market for trucks cooled off abruptly, especially in November and December, and that was really driving down our sales numbers. And it's enormous decline, even though for the full year, it is "only" 6.9% for the last quarter, as mentioned, minus 21.4% and December alone, minus 29%. EBIT, somewhat not surprisingly a similar development. And while we have been on a very, very steady path all through Q3 2019, where we enjoyed still an overall profit margin of 10.4% in Europe compared to 10.6% in 2019, we now had to really give into the fact that we have a strong or rather higher overhead burden in Europe, where the group headquarter lies, and that caused now the decline from 9.5% to 8.8% in adjusted EBIT margin. Overall, I would say the story continues. What we've said already in the past quarterly update calls that Europe is suffering from lower sales volumes in -- compared to prior years, but more so from much higher personnel costs, especially in the high-cost countries, and that is predominantly Germany, where we have seen some significant personnel cost increases. So again, for the analysts on the call, bear in mind that Europe bears the full headquarter costs. There is no reallocation of costs. So that is the reason why you see, in a declining development, declining sales development, those kind of costs are rather fixed and not flexible. And therefore, Europe always suffers most when there's a decline in sales. And it is -- basically, that is the result that you're seeing here. Now let's go to North America. The bright spot for 2019. The story basically continued through Q4. So overall, for the full year, we enjoyed 11.1% reported growth, outperforming the market. That is -- that's very, very good. And you also see that in the development of our adjusted EBIT margin, which increased from 9.3% to 9.6% in 2019. And this is basically what we have seen all through the year. We are now better utilizing or fully utilizing our capacity and have a much better flexibility rate there because of the investments that we have done in the past, and now we can react to market's development. However, it needs to be noted that already in North America, and that is something we had mentioned during the Q3 update call, we had already seen the peak of the market most probable in Q3. Q3 was the peak of the North American truck and trailer industry production. And now in Q4, we saw a decline of 16%. And again, even though we had a decline, you see that we were able to keep the margins very, very stable even with a slight increase to 10.3%. So now -- and that's something we are very proud of our North American team. They have been able to achieve double-digit margins for 3 quarters in a row, and that is something we have not seen in North America before. Because prior to this year, North America was historically, the region where we saw slightly lower margins than we saw in Europe and in Asia-Pacific-Africa. So overall, I believe it was a very, very successful year for North America. We're pretty happy about the team there and how it developed in the market and how it also rose to the challenge beginning of the year when demand was extremely high and we were able to fulfill those demands, and therefore, a good job. Well done in North America. Now let's go to Asia-Pacific-Africa. This is our mixed bag, lots of different countries, lots of different environments and economies in there. And so we need to look at the development of Asia-Pacific-Africa slightly different from country to country. So overall, for the full year, you see a decline of 2.1% in sales and a slight decline from 13.1% to 13.8% -- 14.1%, sorry, 14.1% to 13.8% in the adjusted EBIT margin. That is driven by somewhat differing and different effects. So on the one hand, and Joachim mentioned, that the Indian market was absolutely down for almost the full year. Maybe we can say that probably March was the only normal and good month we enjoyed in India. For the rest of the year, it was tremendously down compared to prior years. China kind of started weak, but finished very, very strong. As you may recall, there was this 70-year anniversary of the People's Republic of China in October, where a lot of festivities were ongoing, and so some of the production was halted during that month. However, November and December were extremely strong, and this momentum actually carried also into January until, again, you know why, what happens in -- after January. But China was on a very, very strong and steady growth path in Q4, and that is also reflected in both the sales and EBIT numbers, where you can see that we, despite the weak development in India and -- we were able to enjoy small growth of 0.9% in Q4, and this was very, very much driven by China. Profit declined slightly. That is, again, more or less driven by India, where the development in Q4 was also not very successful. But still, we were able to keep the EBIT margin fairly stable at 12.5% in the last quarter, which is also there a -- usually the most -- the lowest quarter of the year. So let's speak about some balance sheet development and P&L numbers. What you see here on this slide is the development of adjusted net income and adjusted earnings per share, where what -- we had a slightly lower EBIT, not adjusted EBIT. We had a slightly lower EBIT compared to prior year. That was down from EUR 53 million to EUR 46 million. Then we had the exact same number for our adjustments, PPA adjustment of EUR 25 million. And this year, we had slightly higher. Other effects -- the biggest onetime effect included in those numbers are roughly EUR 3 million or EUR 2.5 million for the acquisition cost of the Ålö Group that were booked in 2019. And that kind of explains the increase from EUR 3 million to EUR 6 million of other effects, leading to an adjusted EBIT that we'd already discussed at length today of EUR 77 million compared to EUR 81 million in 2018. Financial results was much better, predominantly driven by the refinancing that occurred middle of last year. So we were down by EUR 3 million from EUR 7 million in 2018, now down to EUR 4 million in 2019. We still have to utilize despite -- and I know there will be probably some questions on that. We still have to utilize a tax rate of 30%, a pro forma tax rate of 30% for all the tax adjustments. And the reason for that is that even though in Germany, which is the dominant country for taxation purposes in the JOST Group, we will enjoy going forward a -- for quite some time, a very low cash tax rate of 12%. We still have to utilize -- because of IFRS regulations, we have to utilize the 30%. And that brings us down to a EUR 51 million net income adjusted compared to EUR 52 million in 2018. Adjusted earnings per share, therefore, are pretty much on the same level of EUR 3.41 per share compared to 2018 EUR 3.46 per share. Now on to some balance sheet figures. ROCE was slightly down from 20.2% to 18.4%, however, bearing in mind that this development is entirely driven by the first-time adoption of IFRS 16, which increased our employed capital by close to EUR 31 million. And so wouldn't it be for that adjustment, we would be on a very similar level compared to 2018. The equity ratio -- despite 2 negative effects, the one is the before-mentioned first-time adoption of IFRS 16, the equity ratio increased from 40.6% to 41.2% despite the negative effect of IFRS 16 and also a dividend payout of EUR 16.4 million that occurred in May 2019. Net debt, as prior mentioned, down compared to the last year. And especially if you look at the leverage, we're now -- we were at 0.46x at the end of 2019, both driven by lower -- since then, same debt level of EUR 151 million, but significantly higher cash of EUR 105 million compared to EUR 66 million. We placed a lot of emphasis on cash generation and cash conversion. So I think this year panned out nicely. We grew our cash conversion rate from 80.1% to 82.5%, and our overall operating cash flow, in a sense, our free cash flow was up from EUR 79.9 million to EUR 83.2 million, not so much driven by CapEx. CapEx was in line with our guidelines of being around 2.5% of sales. Last year, we were 2.6%. This year, we were 2.4%. So very, very stable rate, and we feel very comfortable that we can continue to maintain that rate just going forward in the long run, also including the Ålö acquisition. So overall, cash flow was really driven by operations, and we're quite happy that we -- despite a slightly lower sales level, we were at very similar or even slightly higher level of cash flow this year. Net working capital, down from 18.5% to 18.2%. Also, that is -- an attribute to what we've done and worked on all through the year, significantly reducing the aging profile of our trade receivables, which will help, and also, inventory levels have not grown up -- gone up, but slightly declined. And this is very -- quite satisfactory development. Now we all live in uncertain times, and I'm quite sure that a lot of questions that people around the call will raise is what is your financing structure, how are you prepared for these effects of the coronavirus pandemic and what are you doing. Just to give you a few ideas of our financing situation. Well, first of all, I can assure you that we are monitoring our cash flow daily, and we are preparing also quite frequent updates on our cash flow development for the next coming weeks and months. So right now, I can tell you that we feel very confident that despite the ongoing corona crisis and certain closures of plants, and Joachim will speak a little bit more about that later on, we feel prepared. We are ready. We're on our toes. We're ready to react, and we will do whatever we can to mitigate risks and to steer the ship through this crisis. And again, let's quickly speak about our debt profile. As you can see here, we are very, very well financed through 2023 when you will see a major repayment coming up. So that is in 3 years, basically. In June 2023, we will have to repay our promissory notes or at least the largest portion of our promissory notes that we took out last year. But until then, there are only small mandatory repayments of EUR 6 million this year and EUR 12 million in the years to go, and therefore, we feel very, very confident that this should be sufficient to continue to operate as we have done. Also, we have a fairly high level of cash still in our balance sheet. And we do have a significant revolving credit facility not fully drawn down yet, and so there is even more room to improve our cash situation. Talking about covenants, we -- I'm very glad to report that -- and I've done that already when I spoke about the financing of the Ålö acquisition, that we do not have any leverage covenant in any of our financing contracts. We do, however, have a gearing covenant. And if you're familiar with the gearing covenant, it's a covenant that is, I would say, very -- it's usually lagging behind the development in cash. So it's a balance sheet-driven covenant, and the new term loan for the Ålö acquisition and the existing revolving credit facility have that gearing covenant. So that's 58% of our loans and 42% have no covenants, and that's the promissory notes. So overall, we feel quite comfortable with the financing situation. However, we also need to watch what will happen in the coming weeks and months to be -- to make sure that we are prepared to operate as normal. And again, I can assure you with every person in this company is working on improving situation, and we keep a close watch on our liquidity. So in other words, cash is king in those days, and we're monitoring cash on a daily basis. And with this, I would like to hand over for the outlook of 2020 to Joachim.

Yes. Thank you, Christian. Yes, let's go to the outlook for 2020. This Slide 15 is, in a way, already history. That's the view of the third-party prognosis that we usually use as a basis for our planning, but that was all before corona. So let me go through this rather quickly. There's a few things that I would like to note. One is that you could see that even without corona, the boom years in the commercial vehicle industry in truck and trailer seems to end all over the globe. So that was a projection anyhow, especially in North America, after 2 record years, I think there were a projection that the overall volume would go down considerably, and that's what we had already used in our planning for 2020. The other thing I would like to note out is that we have added the tractor market on here. And on the tractor market, you can see that there's only a slight contraction planned or viewed by the third-party investigators because the crops' prices are relatively stable and healthy, and the farmers are able to invest into new equipment. However, corona will also have a slight impact there but, I believe, not as much as on the truck and trailer business. So let's go to the impact of corona. We've just added, in a fairly neutral way, the data that we see during this week. And mind you, that has been developing extremely quick over the last 2 weeks with a lot of announcement of the OEMs, especially in Europe, that they would shut down their production facilities up to 4 weeks. We have -- depending on the truck OEMs' suspensions, between 2 and 4 weeks. And some of them say even until further notice. So it's a very unclear situation, and they have ramped down their production rather quickly. On the trailers, we don't see it as much. We do see short-term work prepared. We have one trailer producer that has announced a stop. The others are slowing down, but we would expect that, that would be trailing behind the truck business. Depending a bit on the trailer segments, if it's more for consumer goods or construction, it may not go down as much. If it is for the automotive industry, then obviously with the automotive plants being down, the trailer demand is also declining. On tractors, we had to close our small plant in France, which only produces minor components, due to local authority regulations of the pandemic. It will not have an impact to the OEMs because they are also closed in France, and some of the tractor OEMs in Europe have already announced that they will also close for 1 or 2 weeks starting next week. North America, also most truck OEMs have now shutdowns up to 3 weeks. We are also reducing our production volumes. And all over the world, we continue to deliver aftermarket components. In the U.S. and also in China, our plant and components are considered critical infrastructure. They are, in effect, also in Europe, but we don't have that category. But of course, we see it not only as a customer commitment, but also as a commitment to the overall country and citizenship that we keep supplying our parts for this critical infrastructure in trucks and transport, especially when it comes to food and medicine is a critical infrastructure. And in North America and in China, it's even officially considered a vehicle infrastructure. So of course, that will continue in all plants and all white-collar areas are prepared to follow that demand on aftermarket components. In North America, trailers have also reduced their levels, and we will also there, of course, continue with aftermarket shipments. The OEMs for tractors in North America have not yet announced any shutdowns. But as we see corona go around the world, that could also happen in the 2 days or weeks. So APA, China is coming back. We have, obviously, a lot of closure or long closure in China, especially in our Wuhan plant that has been affected by the shutdown. We are ramping up as we speak. We installed the second shift last night, and so the situation there is normalizing. However, in India and in South Africa, our plants have now been paused by governmental authorities, and we see, obviously, a lot of political impacts right now with -- all over the world with the corona crisis. For trailers, also the production has been impacted by the Wuhan closure, but also there, we're coming back. And our Ålö plant in Ningbo, in China was also affected, but since it's close to Shanghai, it's already coming back. And the situation is already back to normal. So that's the current situation. If we look at the outlook, we -- our message is we can currently not give you a reliable outlook. We love to give you outlook. We believe that we are the industry experts because we talk to OEMs, to dealers, to -- into drivers, to workshops. So usually, we like to share our view of the industry. But due to the lack of visibility that we have right now and the governmental actions, where the U.S. has -- is in state of emergency, also in Germany, regulations are applied to reduce productions and meetings, and that has a big impact on the industry. Not knowing the duration and the severity and the consequences of these measures, it's currently impossible to give you a reliable estimate. Anything that we would give you would be flavor of the day, and that would not be a reasonable guidance. However, I will make a few closing remarks on how I see the world as of today. But we -- unfortunately, even though we usually love to do it, I'm not able to give you formal outlook at this point in time. But we will come back to you as soon as the dust has settled and come back with a valuable and reasonable outlook for you. Okay. To summarize, 2019 was another successful year for JOST. We have strengthened our financial position as we've laid out our balance sheet structure, and that allows us to cope well with the economic impacts that we are currently expecting. Our debt structure is very solid. We have a mature profit profile, and it's well balanced. No leverage covenants, and thus, as explained by Christian, we believe that we have a very sound financing structure. Our agricultural business should be less affected by the impacts, especially since, obviously, food production will also be in focus of the government. And therefore, we see that as a valuable addition to our portfolio. We are and we'll use all instruments available to reduce the impact of the corona pandemic to our business, and we have already implemented the cost-saving measures in all our locations. I mentioned we cannot right now give you dependable outlook. However, and now coming to closing remarks, let me give you a bit of the view of the current situation. One is the underlying demand, obviously, is deteriorating in some areas. Automotive plants have been shut down. So the automotive logistics, which are big driver for trucks and trailers, they are down, and obviously, that will have an impact. However, groceries and toilet paper and other things that we need on a daily living is -- there's still very high demand, even an exceptional demand. And we do see that with our trailer builds especially, that they still have demand for these trailers. Also on the construction business, we don't see a big impact right now. The order books are still there. And most people, and I'm one of them, believe that there is a life after corona, and therefore, they're not canceling these orders. Agri, as I pointed out, will be rather stable. Of course, there will be some impact due to government regulations. But overall, from the underlying demand, I don't see a big impact. So for the industry, that means if the demand continues to be there, we have to make sure that the industry stays operational and comes back to operations. There's other influences other than demand. One is the people, and that's why health and safety for our employees is very important. Legislation, supply chain issues, financing, these all drivers that affect our customers. So for us, for JOST, it is important, and we are focusing on 3 things. One is health and safety of our employees. So we've implemented a lot of measures, distancing, social distancing, hygiene measures. We're using much more home offices in white-collar areas. We continue to deliver to the critical customers, the critical infrastructure. So we have applied a lot of measures to ensure health and safety of our workers and our staff. Secondly, as said, deliveries to critical infrastructure and deliveries to aftermarket. That's the second focus that we have. As usual, to all customers, but in this time, we have even special commitment to that because we are considered critical infrastructure, which also allows some of our plants to stay open, where others have to close. And thirdly, but not lastly, of course, it's cost flexibility and cash, and we have already introduced short-term work. We already reduced staff with flex workers, where we can, in order to adapt for the new situation. And we are in our cost control. We have, I believe, a very strong track record in that, and obviously, we'll continue that with 100% focus. And fourthly, in my mind, there will be a life after corona. And in that life after corona, the agricultural industry and the transport industry, which are the main pillars of our business, will continue to be there and will continue to be a very important part of the global economy. So I don't have any doubt that our business concept, because of the fundamentals that are there, will continue to work after corona. Of course, we will learn a lot of things, and we will adopt a lot of things. But the basis and the underlying business concepts will still be there and will still be stable. We have today a local-for-local strategy, where we are able to fulfill most demands of our plants with local suppliers. So we are not -- even though we are a global company, we are not extremely dependent on global supply chains, and that's good. However, we do measure our global supply chain. And any closures or reductions in volumes that we've had in the last weeks or months, none of them has been because of supply chain issues. All were local regulations or demand issues. So we were able to control, and that will be, after corona, the case, too. With our local-for-local strategy, we will be able to supply in our own supply chain, our plants reliably. The cost flexibility will continue to be in focus after that. And the customer focus that we have a proven track record on that will also continue to be our focus after that. And with that, obviously, then comes the benefit also for the shareholders and the investors into our company. So that's how I see the life after corona. Now you can argue how long that is away, and you will find a lot of different opinions on that. I will not add to those opinions at this point in time. But to me, that's the summary of 2019. And if you want somewhat of a personal outlook of 2020, we will get through this. We have the measures in place. We have the right people. And I'm actually very proud of the JOST staff, of how they have adjusted to the new circumstances in all plants. We went already through the corona dip in Asia, and we're coming back. And people are feeling very positive about it. And here, we're doing that, the necessary steps, and we have a very constructive discussions with all parties to do the sometimes difficult measures. Therefore, I'm not afraid of the long-term outlook, but please forgive us for not being able to give you a guidance as we usually are used to. So that's the summary, and we're very open for your questions. Thank you very much for your interest.

We will take our first question from Yasmin Steilen of Commerzbank.

And thanks for sharing your thoughts on the current situation, and it's obviously well understood that your [ risk ] from the guidance. However, can you share some insights on your operating leverage in the downturn. So my understanding is you have around 55% of material cost, which I would seem rather flexible and including temp work. So is it fair to assume that around 65%, 70% of your costs are flexible? And then my second question would be on free cash flow generation. So maybe you can share your thoughts on the free cash flow generation this time. So according to my knowledge, you have been cash flow positive in '08. So is it also a valid scenario for 2020, assuming some working capital release yet? That would be my questions.

Yasmin, it's Christian. To your first question, I think your estimates are not too bad. You're absolutely right. Our material quarter was around 55% to close to 59%, depending on the year you were looking at. I think that will even increase if we incorporate Ålö. Ålö has a slightly higher material quotes -- quota. So you're absolutely right. We assume that material is 100% flexible. And given even a certain percentage of loan, people in Germany and in almost other -- all other jurisdictions, people are employed at will. We have a fairly high flexibility on the COGS side. So given that, I would agree that 60% is probably -- it's a very, very fair estimate or maybe even conservative estimate. I would probably go a little higher. That -- however, it needs to be prudent, and now is the time to prove it. And we're working on it very diligently, and we will see how flexible we really are. But I think we are quite flexible. To your second question, free cash flow, we are currently investigating -- well, first of all, to your last comment, 2018, we were cash positive. That is correct. At 2008 -- sorry, 2008, 2009, rather, that's when the crisis hit JOST, we were cash positive. On this year, we are investigating every cash outflow right now so it may well be that we are postponing or delaying some of the investments. Fortunately, there is no mandatory, major investment required to keep our operations up and running. But we are investigating every cash outflow, and we will do our utmost to ensure that we will remain cash positive. However, if there are major shutdowns and -- in other jurisdictions rather, other than Germany where we are so far only experiencing a production -- significant production decline here in the headquarter plant near Frankfurt, then we will -- it needs to be seen how quickly we can adjust our cash outflow. You know that we are not at 100% flexibility, especially when it comes to white collar. So it's too early to say what will be the end result for 2020, but we do the best we can. And we monitor cash flow daily, and therefore, it's -- I mean free cash flow -- the free cash flow outlook is as invisible as is the outlook for earnings right now. It really depends on the development over the next few weeks. So therefore, I cannot assure you that we will remain cash positive through the whole year, but we will do our best to be cash positive.

Our next question comes from Sarth Patel of JPMorgan.

I just have a couple from my side. Firstly, could you give some color on the operating leverage that you spoke about? I just want to understand now that you've seen the impact from Wuhan and how the production is coming back online, can you just give us some idea that starting from January up until now, as you mentioned, that you have a shift coming up in days, night? How have you seen the market turn there? Any indications that you can use to extrapolate that into the North American, European market? And then finally, how do you think about the demand coming back in China? And just some color on that would be really helpful.

Sarth, yes, that's a good question and -- but a very difficult one to answer, obviously. We've seen in Wuhan that we were able to come back after -- I mean we were never fully closed, first of all. We were one of the plants that is considered critical infrastructure, and we were able to produce with employees that were in, if you want to call it, plant quarantined, that we're able to produce spare parts and small demands for this critical infrastructure. We were able to come back to an almost normal situation. We've seen it with the Ålö plant in Ningbo, that they're back to normal already, that we have the capability and flexibility to come back quite quickly. Now your question on the demand side, how we see the demand in China coming back, obviously, that is -- it's not a switch that you flick, where we see the customers coming back to full levels. We actually see that our customers that are not in Wuhan, that are in North China, they had only been affected 2 or 3 weeks, are still not at 100% capacity. And that is hard to judge if that's from the demand side only or if they still have supply chain issues with other customers -- with other suppliers. So that's a tough judgment. But I would expect that you would see -- no, not extremely steep comeback that it will be a curve that will go over, let's say, 2 to 3 months until they come back to the total demand because there is always a certain amount of vehicles and products or trailers in the chain, the pipeline at the dealers and so on. So -- and there is also the supply side that needs to be managed. So I would guess that we're not at that point in time yet where we can confirm that, that will take another 2 months or so. That -- it will take 2 to 3 months to come back to the full capacity and the full demand level.

Okay. And just one follow-up question. When you're talking to your customers, the trapped OEMs that were shut down their plants 2 to 4 weeks, and generally, what's -- what are the discussions that you're holding right now? What is the visibility on that front? Just can you give us some color on what are the discussions going on with the customers and how are they thinking about it in the coming weeks? And are they open to keeping the plants shut down for a longer period of time? Will they be able to offset those shutdowns that -- the summer shutdowns that they generally have planned? Just some ideas around how the market is thinking about the shutdown at the moment.

Yes. I think the statement of the European and the North American OEMs is that they don't have the visibility. They -- from them, it's almost impossible at this point in time to get the judgment of how they see the volumes in a month or 2 months from now. It all depends on the regulatory impact. I mean we've seen the government stop productions. And as I just mentioned, we've seen that in France but we're also seeing it in South Africa and in Brazil, where the governments actually walked in and closed the plants. And of course, there, it's hard to predict what the market will be and once because, obviously, it's in nobody's hands, and it's a judgment that the medical doctors and the governments take on what they allow and what they don't. So it's a bit of an unprecedented circumstance, and therefore, we don't get any more inputs that I could give you right now from our OEM customers.

Nicolai Kempf of Deutsche Bank.

Nicolai here from Deutsche Bank. So my first one would be on the aftermarket. Can you give some color how the aftermarket's holding up? Do you also see a drop here? And if so, is it a large drop? And the second one would be on the short-term work you're planning in Germany. It's more like 50% short-term work or 20% or 80%? Can you also give us some color here?

Okay. Yes. To aftermarket, it's quite interesting, actually. So thanks for the question, Nicolai. The -- usually, we see -- I always say the aftermarket depends on the kilometers driven. If I'm driving on European roads right now, I'm mainly driving on German roads because we're having a travel ban, but what I hear from others and what I'm seeing and observing, we drive a lot less kilometers right now on trucks than before. However, we see the aftermarket at 100%. And that is probably the fact that people are raising their storage levels, the stock levels at this point in time because everybody wants to keep his vehicle operational. And therefore, we don't see any impact in aftermarket right now as we speak. With the kilometers driven going down, I would expect that, long term, we will also have an impact there. But at this point in time, it's still running very, very solidly. And then your other question on the short-term work, we have right now, in Germany, a very flexible agreement. We can also -- we achieved agreement together with the works council. We've had 50% agreed and started actually last week even with it. We're applying that to white collar and to blue collar. And depending on the demand situation, we are able to adjust this on the blue collar on the daily basis. So today, we're still working one shift. But if demand goes down, then we will increase that to 80% in our facilities. In our trailer facilities, and this is for truck for Neu-Isenburg, in our trailer facilities, we've only seen a small decline in demand so far. But we have the agreement in place, and we will execute them as soon as we run out of production volume.

We move to Frederik Bitter of H&A.

As you would expect to have, obviously, I've got a few questions. So let's start with spare parts again. I'm just wondering what your spare parts availability is in terms of what you have on the inventories, what you could potentially shift from China should your European and North American plants obviously be closed as well, say, it's regulation, et cetera. Just to get an idea of how much spare parts availability that you have.

Okay. Very clearly, on spare parts, we have a local-for-local strategy. So we produce the local spare parts locally. We -- I'm not saying that we don't ship any parts, but the majority of the -- the vast majority of the spare parts are produced in the relevant continent at least. So we don't see any problems at this point in time for spare parts availability, neither on the demand side nor on the supply chain side. As you can imagine, in Wuhan, that has been more of an issue. But as I mentioned earlier, we are considered system critical, if you want, that we were able to continue to produce for spare parts. Things happening here with our agreements that we have for short-term work allow us to produce and deliver all the spare parts. For right now, we don't have any supply issues with spare parts in Europe. We have to be a bit cautious because Northern Italy is becoming a bit of a critical zone. A lot of pipe manufacturers are in Northern Italy. And obviously, with the closing that we see in their plants, that could be an issue. We're monitoring that, but we don't have any impact from that at this point in time and we don't expect any input -- any impact from that. That is true from North America. We produce most of the spare parts in-house, and we have the flexibility to continue to produce and deliver them.

Okay. And then -- and just on that note, well, I'm assuming the worst case, you wouldn't produce any spare parts anymore, how much inventories do you have? Is it like a couple of weeks? Or how well suited are you for such a worst-case scenario?

The -- now you have to consider the whole supply chain, if you do that math because we have a certain amount of stock with our customers already. We work with big dealer groups, and they stock spare parts. And we have in our spare parts warehouse here in Neu-Isenburg, we have probably about 2 weeks of spare parts, I would say. And in addition to that, we have, in the manufacturing plant, also a certain level of stock. So you would have to look at the complete supply chain. And quite honestly, it would not be a reliable answer that I could give you right now of what the total chain would mean. But as I said, it's a case where -- well, I don't see any risk because we have the spare part production in our control, in our plants, and we have the measures in place to continue to produce them. We don't depend on external suppliers for the most important spare parts.

And I would like to add that also the risk of the government shutting down our spare part production is extremely low, that what we've seen in China, in the worst crisis, that we're currently seeing in North America, where we have special authorizations from the governments. And I don't expect that to happen. As you know, our parts are critical for the transportation of essential goods. And therefore, we will -- as long as there's demand, we will continue to produce spare parts for the industry.

Understood. I think that's a very interesting feedback from your side, obviously, considered they're sort of critical supply and also found it very interesting what you said earlier on the production in China on that note. Okay, perfect. Staying with the spare parts respect to your aftermarket business. On the fleet side, could you -- do you have an idea how exposed you are to e-commerce and sort of the shipment of, let's call it, critical products, like groceries, pharmaceuticals, et cetera?

I think our product, obviously, used for all kinds of purposes. We do see that obviously -- especially on the trailer side, but also on the body builder side, we have very different segments. And as mentioned earlier, the curtain siders that are used for automotive production, there, we see the biggest downturn. The -- in the parcel delivery, we see a lot of these box trailers. And there, we supply our legs for these trailers. Therefore, we have -- especially with TRIDEC, a lot of footprint in that parcel business, where you see the steering systems and the independent wheel suspension that are used and tailored for the parcel business, that has been part of the growth that we've had with TRIDEC over the last year. And that business, obviously, continues to grow. And therefore, with TRIDEC, funny enough, we had the situation last week that people wanted us to confirm that we can deliver the volumes, and that was an interesting experience because most of the other customers came and said we should disregard the call ups that they've done, especially on the truck OEM side. So I think your point is correct. We see that, that industry is still growing and probably growing even more because people cannot go shopping, so they just shop online. And we see that already in our demand, especially on the TRIDEC side.

Okay, that's good to know. And I can confirm that, personally, definitely as well, a lot of online shopping happening these days to get some growth in the half. But just -- let's say, obviously, the aftermarket business is like 25% of sales at the moment. Just put it in terms of sales numbers, obviously, things are going to change this year. So what's your best guess? How much exposure do you have from the 25%? How much is e-commerce and sort of the grocery, pharmaceutical shipments, et cetera? Do you have any idea on that, just as a rough ballpark number?

No. Sorry, Frederik, but we don't have that transparency. I mean we can look into that when we talk to the final customers, and we can try to calculate that. But since we're selling to dealer groups, we don't have the visibility of the final customer who actually sell this. So most of the sales of this aftermarket goes to big dealer groups or OES groups. And therefore, we don't see the final customer in our invoices. We do meet them in our sales efforts that we have, and so we can generate the judgment. But we cannot give you a solid number on that at this point in time.

Okay. Frederik, Romy here. I'm sorry, but we have a lot of other people waiting on the line for the Q&A. So I will ask you to ask one more question and then we will need to pass on the ball to the next one. Apologies for that. Usually, we would like to answer all questions, but there are many more waiting.

And then you can give us a call afterwards.

Yes. Obviously, I have a long list as always. Okay, that's the tough one. But okay, let's talk about -- so you -- what's the total available debt facilities you have at the moment? So all-in, basically, with your all lines, anything you can get hold of, just total number. And then how much do you utilize now post the Ålö acquisition?

So overall, now I have to do the math in my -- well, let me give you the numbers. I mean quite frank, it's simple. So we've utilized EUR 150 million of the promissory notes, EUR 120 million for the Ålö acquisition, and we've drawn down now EUR 110 million of the revolving credit facility. So you can do the math yourself. That's EUR 230 million -- EUR 380 million has been drawn down, and there's another EUR 40 million available.

That's not an awful lot of headroom, right? Is there any -- would you feel comfortable with that kind of level?

I couldn't understand the first part of your question.

Sorry, I said that's not an awful lot of headroom you have there. It's only EUR 40 million. Is that something...

We have EUR 90 million cash on our balance sheet in our accounts.

Okay. If I add that up, it doesn't sound like an awful lot, but -- in just kind of adverse scenario we'll be looking at, at the moment. Would you be able to refinance a bit more at the current date?

But Frederik, we're still generating cash.

Yes. I mean obviously, you're looking at worst-case scenarios for this year and obviously the...

Yes. But I mean that will be a very, very worst-case scenario to burn that much cash. But I mean, if needed, we will do. As I said -- as I said to Yasmin, I mean we are monitoring our cash flow daily. The last few days and also the last couple of weeks, we have seen an increase in cash. So I'm right now not that concerned yet, but we are looking at it. I mean we are looking at on a daily basis. And if needed, we will react.

We take our next question from Pierre Vaurice of Midcap Partners.

The first one is on Ålö. Could you give us an update of the integration of Ålö and the implementation of synergies expected in this particular context of pandemic, please?

Yes. Pierre, the Ålö integration is going as planned. The focus for Ålö is to strengthen the operational business and to generate the earnings improvement that they had in their plan. So that, to us, the top priority. Ålö, as we laid out earlier, has an improvement plan that they're executing, and the main focus of our integration is to ensure that they have the capability to execute that improvement plan. We have planned synergies on top of that between EUR 5 million and EUR 10 million, and we are in the process of identifying them. And we -- and that is going as planned, even in times of pandemic. However, some of them were, obviously, on the sales side, that may take a bit longer now, not the identification, but the implementation, if sales are down. But we are finding synergies on the material side, on the operations side, and we are still on that plan to find this EUR 5 million to EUR 10 million. But I said earlier, the investment case in Ålö was never a case based on synergies. It was always the case based on the new pool of profits in the agricultural business, the new leg for job with the agricultural business and the operational performance of a market leader that has a similar market position, a similar setup in operations than JOST, where we have this pull and push principle. And that was just a logical extension of our business, and that was and continues to be the main focus. The synergies we've always seen as the icing on the cake, but we're still on plan to find that icing on the cake.

Okay. That's pretty fair. Another question, I try my luck. Is there any chance you disclose us the gearing covenants attached to the loan for Ålö financing and the revolving facility? If, of course, we understand that we should not worry about it at all.

Yes. But -- I mean yes, there is a gearing covenant. It's market standards, and I'm not sure that we can disclose that -- those details. But I can assure you, it's very much market standard. And again, it's a gearing covenant, and it's not a leverage covenant.

We now move to Mustafa Hidir of Warburg Research.

You already said that at this current state, you are not burning cash. But if this current situation would last a few weeks more, how much would your cash burn rate per week would be?

I mean the question is really how it all will pan out. Obviously, we are now experiencing a significant slowdown in our fifth wheel production plant in Germany, and that is attributable to our accounts for quite a larger portion of workforce. On the other hand, the slowdown in South Africa will not be as dramatic as it may be here in Germany if all plants were closed, but the plants are not yet all closed. So that is important. Again, the U.S. is still producing, and China is ramping up. So it's a very, very difficult scenario. We are looking at worst-case scenarios, but these scenarios are too -- I mean they're too dramatic and unrealistic. It's not realistic that we will have 0 turnover for several months in a row. But we have done those analysis, and I can assure you that we will have plenty of cash for the months to come, even if we have 0 turnover. So that is -- for us, it was quite -- it's okay. But again, we are monitoring and we will see what happens next, and then we're adjusting. But we are doing everything, as I mentioned before, to stop any unnecessary cash-outs. So that is our highest priority, keep the cash in-house. And as I've mentioned, we currently have a cash level of close to EUR 90 million, and that has been increasing over the last few days. So despite all the negative impacts right now, we are still seeing increasing cash.

We now move to Michele Baldelli of Exane BNP Paribas.

Just a curiosity out of one, given your experience, for how long was your facility kept with just spare parts and not producing the rest of the business? How many weeks?

Can you repeat the question?

I got the question. I got the question here. We -- the factory closed down for Chinese New Year, which was end of January. And then has been producing, as I said, spare parts until about, I would say, 10 days ago. Beginning of last week, we started with one-shift operation, and we had -- I think it was 19 people doing our spare parts manufacturing. We brought that up to 58 people beginning of last week, and we're now at above 100 people. And as I said, we're just starting the 2-shift operations. So I don't have a calendar in front of me, but that would be from end of January. Part of that was Chinese New Year. So with the plant shutdown until you could say 10th of March, so that would be 5 weeks. Okay, there are no further -- go ahead.

We have no further questions. Thank you, sir.

Well, then I would like to thank you very much for your interest in these very extremely interesting times. As I mentioned, I think we are in the right business to have a good and profitable future, and we have the right measures in place. Thanks a lot for your interest and all your questions. Stay healthy, and looking forward to talk to you next meeting. Bye-bye.

Thank you.