JOST Werke SE (JST) Earnings Call Transcript & Summary

Good day, and welcome to the JOST Werke Conference Call Quarter 2 2020 Results. Today's conference is being recorded. At this time, I would like to turn the conference over to Joachim Dürr. Please go ahead.

Yes. Thank you, Keith. Good morning, everybody from Neu-Isenburg. I hope everybody is doing well, and I want to give you a warm welcome to our Q1 -- Q2, sorry, analyst and investor conference call. And Christian Terlinde, and I were happy to present to you our Q2 performance and the key developments. So Q2 2020 was obviously impacted by the COVID-19 pandemic and for us, also by the integration of Ålö, which we purchased end of January of 2020. So the post-merger integration of Ålö is fully on track. And as you can see, the profitability improvements are in line with plan. Ålö has raised our sales by EUR 46 million in Q2 and had an adjusted EBIT margin of 12.8%. The COVID impact had an influence on our Q2 operations. Obviously, our total group sales, including Ålö, were down by 13% to EUR 175 million, with an adjusted EBIT of EUR 11 million and adjusted EBIT margin of 6.3%. Organically, on the classic JOST business, that means a drop of 36% with an adjusted EBIT margin of 4%. Q2 was a test for our high operational flexibility. The swift adjustment that our teams were able to do in production volumes and in cost of goods and services was important to maintain the margin stable at 25.2%, and I think that's a quite solid performance of our teams. I also -- I'm very happy to inform you that we had a very strong cash generation with a free cash flow in Q2 of EUR 12.1 million, despite strong sales decline and our net working capital rose due to lower last 12-month sales to 22.3%. The positive net income in all our regions is another thing that we are really happy with. So all regions were able to adjust their costs and come to a positive net income level. The reported net income for the group is EUR 5 million, supported by positive finance results and positive tax income. More details will be given to you in the financial presentation. The adjusted net income was EUR 10 million. How did the markets perform in Q2 2020 and how did JOST perform in this environment? In the traditional markets, trucks and trailer, and that's a good basis for the organic comparison that you see here. That's why we've marked them in dark blue. We see that in Europe, the truck market was down 57% and the trailer market down 45%. Our organic development was minus 38% and which means that we performed better than the market, mainly due to the aftermarket business that is in our business, fortunately, very profitable. In North America, traditional markets down minus 76% on trucks and minus 53% on trailers. And also there, we had a development of minus 51%, which is better than the market supported by growing aftermarket business. In APA, we had minus 10 and minus 20 for truck and traders, respectively, a very mixed bag between China, where we had a strong recovery and the rest of the countries where we had lockdowns like in India and South Africa, our organic development was minus 10%. The agricultural business that we now have a much stronger footprint in is more stable. However, it did decline 25% in Europe and 22% in North America, mainly due to supply chain issues and plant closures. Our overall reported results in sales is minus 11% in Europe, minus 20% in North America, and minus 13% in APA. So we had a severe impact on all markets, except China. We had a solid organic performance and our agricultural business is stabilizing the commercial vehicle business that we're in. With that, I would like to hand over to Christian to give you more details on the financial performance.

Thank you very much, Joachim, and welcome to everyone on the call from my side as well. Ladies and gentlemen, the first half of the year 2020 was severely impacted by the coronavirus. I had, obviously, no news to anyone in this world. And I think that you do see that also JOST was impacted by the outcome of the pandemic. I will focus on my presentation today more on Q2 than H1. You see H1 on the left side of the chart and Q2 rather on the right side. So please allow me to focus on Q2 because I think that's the more interesting part because it's more recent. So you do see that reported, as Joachim already said, we are showing a slight decline in sales of 13.3% for the second quarter compared to prior year. But organically, this is a decline of 33.5% -- 35.5% and this is, again, it's predominantly in Europe and in North America, where we saw several OEM plants being shut down, basically all OEM plants being shut down in Europe and North America. And also in Asia Pacific, in that region, we were impacted by a complete lockdown of the countries in South Africa and in India, where the government chose to lock down the whole country for 6 weeks. Also, it needs to be mentioned, even though this has no impact on sales, but an impact on adjusted EBIT is the fact that also in Brazil, where we only have a 49% joint venture, the government shut down some of the plants and also some of our customers in Brazil for an extended period of time. So what -- despite all those negative news, we also see some positive effects, especially, obviously, the acquisition of the Ålö Group ending -- end of January, strongly impacted our sales performance with a positive result of EUR 46 million, which means 23% higher than in the prior year. Very, very glad that we were able to acquire this group of companies, and they are, as you can see, already performing very well and improving our profile as a group in total, where we see a more resilient agricultural market that is not as impacted by the coronavirus pandemic as the traditional JOST truck and trailer industry is. We are also glad that the economy in China recovered very, very strongly. As you may recall, we were at the epicenter of the pandemic with our production plant in Wuhan that was closed for roughly 2 months in Q1 and with 0 sales basically. And we did see there a strong recovery of the Chinese market that helped us very much. And if the Chinese market is recovering, that usually means there are some additional positive effects going into some other, especially Southeast Asian economies, which benefit from the overall demand in China. Last but not least, obviously, also -- and Joachim mentioned that already, we have a much higher proportion of aftermarket sales in all regions compared to the prior year when we were around 25%. And now we're going above 30% in aftermarket sales. Let's look at the profitability of the company. Let's look at adjusted EBITDA. Unfortunately, our adjusted EBITDA margin declined from 11.2% in 2019 to 6.3% in Q2. That is predominantly driven by the impact of the coronavirus. However, it also needs to be mentioned that we knew that going into 2020 for the truck and trailer industry, this is a -- this would be a challenging year where we are -- we were at the peak of the cycle in 2019, and we knew it would go down in 2020. So overall, we're quite happy that we are doing everything to stabilize the business. And as you can see, the Ålö Group is helping us in that regard, where they were able to generate an EBIT of EUR 5.9 million and an EBIT margin of 12.8% in a traditionally very, very strong second quarter, so please don't expect that to be the norm going forward of 12.8%. But obviously, this quarter, it helped significantly. And even JOST, with its traditional truck and trailer business, we were able to achieve a positive EBIT of EUR 5.2 million and an EBIT margin of 4%. Last but not least, because that's been one of the questions that are being asked in a lot of discussions that I'm having with investors and analysts how were -- how flexible is the business model, how well you are doing in the financial crisis in 2009? And how are you doing today? And I'm very, very glad to report that absolutely in line what we had always said and continue to say, we were able to report a double-digit EBITDA margin for the first half of 2020. I think this is yet another proof of the flexibility of our business model that even in severe downturns with lower sales of 35%, we are able to keep a very profitable margin, and also the free cash flow is a testament to that. So please allow me to go through the different regions, starting with Europe. And Europe certainly was 1 of the 2 regions more impacted by the outbreak of the coronavirus in Q2. And therefore, we are -- on an organic level, we are showing a decline in sales of 38.1%. And this is positively impacted by the Ålö addition with EUR 32 million or 28% more sales. But overall, the decline reported is still 11.1%. Again, the main reason for that were customer plant shutdowns especially on the truck side, in April, where basically all OEM production plans in Europe were closed., ,And the ramp-up starting in May was rather, rather low and slow when you saw compared to normal levels, potentially starting at 20% production volumes, the customers as we were doing everything to social distance our employees so that we could produce. But obviously, production was impaired due to the measures to limit the spread of the virus. Now if you look at adjusted EBIT, you do see obviously, a very significant decline when it went down from 9.9% in Q2 2019 to 2.8% in 2020. And this is driven by a couple of items. And one of the items really being, again, the very, very low sales volumes that were, especially on the OEM side, down by close to 50%, and -- so the first-fit business. And this is something that you probably recall, if you're following us already for a while, Europe bears the main portion of all headquarter costs. So the headquarter costs and a large majority of the R&D expenses are in Europe and this is certainly impacting the margins in Europe negatively compared to all other regions. I would like to express also that we had chosen to deliberately continue our research and development activities because we believe it's necessary as the #1 in the industry to be also the #1 from a technological position. And therefore, we've continued to develop our products, our new products as we had planned. And therefore, the R&D expenses are very stable compared to prior year. Ålö, again, had a very positive impact on our business in Europe. And therefore, it was already very margin accretive in Q2. With that, I would like to go to North America. North America has been a very successful region for JOST, especially in the past 2 years where we were able to generate very high sales, gain market shares and benefit from our position there and move into a clear #2 spot in North America on the fifth wheel market and maintain our #1 position on the landing gear market. Now North America, as I mentioned in prior calls, was at the peak of the cycle in September 2019. And ever since then, we were expecting and we were actually also seeing significant declines in volumes. These effects were unfortunately, exacerbated by the outbreak of the coronavirus. And therefore, as you can see on the slide here, our sales organically dropped by over 50% in North America, and that's, of course, dramatic. But on the other hand, once again, our teams proved to be very flexible. We adjusted costs as quickly as possible. And therefore, we were able to still generate a 5.4% EBIT margin, which is -- I find that quite remarkably with 50% of sales being down and still having certain elements of fixed costs in that business, that the margins only dropped by 57%. So overall, again, we also -- there, we benefited from a very strong aftermarket in North America. So overall, EBIT declined to EUR 2 million which is still positive. And of course, it's below the EUR 4.6 million of last year, but we're quite happy with the development there, and especially the flexibility proven by the teams in North America. Ålö has been supportive. As you may be aware, Ålö has -- the second most important region for Ålö is North America. And we were able to further relocate our production plant from Telford, Tennessee to Simpsonville in South Carolina despite obviously some disruptions on everyday life. And that also -- those disruptions also caused the relocation to go a little bit slower than planned. But overall, we are happy that also Ålö is contributing positively to the adjusted EBIT in North America during quarter 2. Last region for JOST, Asia Pacific, Africa, and this is really a mixed bag of different countries. When we spoke in Q1, you all recall that we -- or I said our sales in China were down tremendously. And fortunately, we still had a strong Pacific region with Australia and New Zealand and also a very strong South Africa. Unfortunately, this pretty much turned around when it comes to South Africa and India, where we now had governmental lockdowns of the whole country, meaning that for 6 weeks, we had barely no sales in those 2 countries. However, China, China grew significantly during Q2, and obviously, there was some pent-up demand for our products caused by our plant shutdown in Q1, but also the overall economy in China recovered significantly and strongly and that was just beneficial for us, where we had very, very strong increase in sales in China. And again, if -- China is usually locomotive for the overall Asian countries and maybe excluding India and Japan, but everything in Southeast Asia pretty much depends on Chinese economy. And that once again proved to be right when we were also seeing in some of the smaller, in our sense, in JOST's sense, smaller countries, like Indonesia and Singapore and some other smaller countries where we saw also an uptake in demand due to the increase of demand in China. So overall, our sales in the Asia Pacific Africa region reportedly, and here, it's pretty much the same as organically declined by 13% only. Despite the 2 countries of India and South Africa being completely shut down. And therefore, it's still a very positive result, if you ask me on the sales side. What even more remarkable is the result on the adjusted EBIT side, where you now see an increase in profitability going from 14.3% to 16.6%. So that's even despite sales being down 13%, you see an increase of EBIT margin by 1.2%. And that, again, despite 2 countries being completely locked down for 6 weeks. And this is clearly driven simply by the overall usage of our production lines and equipments, especially in China, where we were able to record very, very high margins, simply due to the full utilization of our equipment, and that was very helpful to generate those profits. So it's China positive. On the one hand, also the Pacific region with Australia and New Zealand, when they came out of some shutdown measures that was helping. And last but not least, the teams in South Africa and India did everything they could contain to the -- to contain costs and to adjust structures as quickly as possible. So overall, a very positive result for the Asia Pacific and Africa region, and we're quite satisfied with that. Now let me talk a little bit about the adjustments that we have done in Q2. And you do see, if you compare Q2 to H1 see that the amount of adjustments has been minimized. Basically, the only adjustments that you're currently seeing is EUR 7.3 million due to the traditional purchase price allocation amortization. And you see EUR 2.6 million which is related to the utilization of inventory step-ups. So this is not in an accounting sense, it's not amortization. It's the use of inventories that we signed -- to which we assigned a higher value when we acquired Ålö than they had in their books. And these inventories will be used within 1 year. So those EUR 2.6 million for the 1 quarter will be going away after 2020. Then you will only see roughly EUR 30 million PPA amortization every year, and this will be the core of our EBIT adjustments going forward in 2021. So all the other acquisition-related adjustments that you also see in H1 numbers predominantly the consulting fees of EUR 2.2 million, those were all paid and recorded for in Q1. And last but not least, we had always said that Ålö is undergoing an optimization project, and you see the EUR 1.2 million in the H1 column. This project continued. And the only reason why you don't see anything in Q2 is simply because we had a positive onetime effect due to the sale of a property of Ålö in Q2. And therefore, this was netting out and left the EUR 1.2 million from Q1 in the H1 figures. Then I would like to come to the development of earnings after taxes. We were -- in Q2, we recorded a positive net income after a negative net income in Q1 of EUR 5 million, had positive taxes and a positive finance result in Q2, and that means our EBIT. And this is the nonadjusted EBIT. And I think that's also worth mentioning even on a pure accounting level, EBIT, we are showing a positive result for Q2. Now if you then add back the -- just before mentioned depreciation and amortization related to the PPA and the other exceptional, you get to the EUR 11 million adjusted EBIT that we're showing for the second quarter. And we now have a final result that was positive of EUR 3 million and pro forma tax rate of 30%, bringing down the adjusted net income to EUR 10 million. And if you compare the adjusted net income of EUR 10 million for Q2 to the adjusted net income for Q2 in 2019, you see only the -- a slight decline of EUR 4 million, which is in our opinion, a positive result considering the severe drop in sales. Now a few words on the balance sheet. First of all, return on capital employed, unfortunately, declined significantly. Our ROCE went down to 9.4%. Why was that the case? Obviously, the key driver is the Ålö acquisition. Ålö increased -- the acquisition increased our financial liabilities significantly, and therefore, this led to a reduction of ROCE. It also led to a reduction of the equity ratio, which declined from 41% to 27%. And last but not least, we had to finance the acquisition, and we used -- in this case, we didn't use equity, but financial liabilities, and therefore, our net debt increased from EUR 46 million to EUR 268 million and also our leverage increased now to 2.8x. And this is also a question that I'm hearing a lot of times how comfortable we are with the leverage of 2.8%. I think this is something we are trying to actively bring down. But of course, what -- the main driver for the increase in leverage is not only the higher net debt, but it's significantly the lower EBITDA. And what you will see going forward is certainly also in Q3 and Q4, we don't expect to achieve the same EBITDA levels as we had seen in 2019. Now liquid. Our liquid assets increased to EUR 113 million, and that was despite the fact that we used EUR 50 million of cash to finance the acquisition. And I think that brings us already to the next page is our cash flow. Cash flow for the quarter was at EUR 12 million positive. Cash conversion rate remained above 80%. And I think the positive part about the free cash flow is also, if you compare the free cash flow to our adjusted EBIT, which is EUR 11.1 million, this is, in my opinion, cash is always the most truthful measurements, we all know how much happens in accounting. And in the end, if the cash is in the bank, that's a very clear sign, whether or not you're making money. And here, you can see that adjusted EBIT and cash flow is pretty much in line. So we have a EUR 12 million positive adjusted -- EUR 12 million positive free cash flow, and we also have an adjusted EBIT of EUR 11 million. And this is, again, as I said, we believe is just another sign of our positive business model with high ability to generate cash flows. And again, also, if we now speak about CapEx, our asset-light business model certainly supports this free cash flow development, where you see that CapEx remained below the 2.5% that we expect for the full year. Also for Q2, we only invested 2% or EUR 3.5 million. So again, we are looking at cash flow every time we take decision. And this is yet again, if we move to the last item, the net working capital certainly also positively contributed. Unfortunately, as a percentage of sales, net working capital is up to 22%. This is more driven by the development of sales rather than by the development of net working capital. But rest assured, we're doing everything to collect our receivables, to lower our inventories and to keep our payables in -- on a normal level. But overall, I think with the existing net working capital, we cannot be unsatisfied. And with this, I would like to hand it back over to Joachim for a further outlook of 2020.

Okay. Thank you, Christian. Yes, let me give you outlook based on the market information that we have from LMC, Clear Consulting, FTR and from other OEMS. So market for the full year 2020 are expected to be at minus 30% to minus 35% for trucks in Europe; minus 20% to minus 25 for trailers. Tractors, more stable as I said before in minus 10% to minus 15%. That means we will see a slight improvement in the second half of the year over the numbers that we've seen before for the first half of the year. The same is true for North America. But obviously, the impact as compared to the previous year is quite severe, where we expect a market of minus 50% to minus 55% for trucks, and minus 40% to 45% for trailers. Tractors, relatively stable at minus 10% to minus 15%. And for Asia Pacific, Africa, we will continue to have a very mixed picture between the different countries. The strong recovery in China that we've seen in Q2 will somewhat continue, probably not at the same level, but it will continue to be strong in China versus a doubtful what India, South Africa and the other countries in the regions will do. So we -- the market analysis expects some minus 10% to minus 15%. Let's go to the next slide and discuss a little bit on how we see the impact on JOST's business for these regions. For Europe, the truck OEMs, are back in production. Some of them are still on summer vacation until the end of this week, but they will all come back by next week. The current electronic data interchange demands that they send us for half year 2 looks solid, but they will be updated when they come back on vacation, and we will see what the rest of the year looks like. So it will be much more solid than Q2, obviously, but we expect it to be below the previous year and considerably below the previous year for the full year. Trailer builders are also back on -- in business. It's true for all of Europe except U.K., where we see the market being weaker than in the rest of Europe. And the agricultural tractor OEMs also have a stabilizing factor and are relatively stable demand -- have relatively stable demand in their plan for H2, which we will obviously follow. In North America, the truck OEMs are back and have opened their production facilities, but they are operating at lower volumes. And the market we expect to come back at levels beyond of what we've seen in the last 2 to 3 months for the remainder of the year. And the same is true for trailer market. Agriculture markets, the demand for high horsepower tractors has slowed down some, but the demand for the low-end tractors is surprisingly going up. And that's probably because people are spending more time on their little farms as they work from the home offices and spend more time on their little tractors. For APA, the truck demand in China is up, and however, there is a legislation change in September, where the Chinese truck industry will convert from a 3.5-inch fifth wheel to 2-inch fifth wheel as the rest of the world has for the standard application. And it's to be seen how that will have an impact. So we may have seen some pull ahead effects on fifth wheels in the second quarter. But our people in China are still optimistic for the remainder of the year. Also, the trailer market is recovering from the slowdown. However, export of trailers is very limited because China used to export some trailer in the past. Due to the trade war that's going on, that is also somewhat limited. The production plan of Ålö and Ningbo has resumed and is producing at normal levels. So we expect the rest of the year to be below previous year, but much stronger than the second quarter, obviously. We will continue to look at the data, and we will give you an updated official more formal guidance on September 1, 2020. The executive summary and key takeaways from this call. Our Q2 2020 was obviously strongly affected by the coronavirus in Europe and in America predominantly. The Chinese market recovery and our agricultural business has partially offset this effect. The key takeaways for me in this market environment is that JOST was positive in all regions of the world. We had a solid cash generation in this challenging environment. And that, in my mind, confirms the resilience in our business model that we've promoted. The profitability of Ålö is improving as planned. And we've said before that there is an improvement project that is going as planned despite the travel restrictions that we're having, the integration process is advancing quite well. So the teams are working together in a very trustworthy way despite the fact that they have no opportunity to meet personally. So that's also one of the learnings from this corona pandemic that a lot is possible without actual physical attendance. The aftermarket slowed down only slightly, and therefore, had a positive impact on our overall performance in our product mix and JOST overall. And here, I would like to give a big thanks to the JOST teams worldwide, was able to quickly adjust to the challenging environment that we had in Asia in Q1 and in the rest of the world in Q2. Always put employee safety first, customer support and delivery performance was the other objective. And of course, cost and cash were the third priority, all at the same level. And that led to a relatively positive results or impacts to our results that we've seen in Q2, and we could compensate a lot of the impact -- the negative impact that we have. So we are expecting an economic recovery from Q3 onwards. The business in Europe has stabilized and is showing signs of improvement. China will continue to add stability to the APA region, and as said, we will give you a formal 2020 financial year forecast on September 1, 2020. With that, I would like to thank you for your interest and your time. And Christian and I are happy to answer any questions you may have.

[Operator Instructions] We'll now take our first question. It comes from Sarth Patel from JPMorgan.

This is Sarth here from JPMorgan. I have a couple of questions on the profitability on the EBIT bridge. Just if you can get some clarification on what is the volume impact -- the impact of organic volumes on the EBIT? And then secondly, if you could quantify any additional costs you've incurred because of the slowdowns in Europe and North America on your profitability, that would be very helpful?

I think those questions are more geared towards me, Sarth. I'm not fully sure I understand the first question correctly. Is that the development of earnings after taxes that bridge that you're referring to? Or what are you referring to?

I'm referring to the operating profit, the impact of the decline in organic revenues. And how much of that had an impact on the EBIT line?

Well, obviously, the impact was severe. We -- I think the positive sign that we were able to display is that we were able to more or less with a potential small time lag, but we were able to adjust our cost of sales to 100% -- basically 100% to the decline or -- basically to the decline in sales. So when we did have a certain time lag depending on the country and the region, but overall, I would say in the vast majority, we were -- after a month or so, we were able to show 100% adjustment of cost of sales to developments in sales. And that, of course, shows why our gross profit, and you can see our gross profit also in the real H1 report, you will see that our gross profit is basically staying at the same level. So it was 26% in H1 2019, and it was 25.4% in H1 2020. So almost 100% flexibility there. Obviously, this is not the same for our SG&A expenses or SG&A costs, where we have a much higher fixed cost portion or proportion included. And therefore, these costs even though we were trying to do everything we could to reduce those costs, and we use several measures and if you've read our press release, we've done basically everything from furlough schemes in the U.K. to short time work in Germany to layoffs in some other countries. Everything was possible, including voluntary salary reductions on behalf of our staff and the management team. So we've tried everything we could to also reduce our fixed cost burden in the -- on the SG&A side. But obviously, we were not as successful as we are on the cost of sales. But I think that's just normal. We are still a small organization. And therefore, there is a certain burden on fixed cost. And I think -- but overall, you do see how positively we reacted. And with regards to the -- your second question, I understand what -- if I'm not mistaken, you were asking about the impact of the coronavirus. I mean it's difficult to quantify the real impact of corona. But obviously, we had to deal with all sorts of different items that -- I mean, naturally, it's the decline in sales. But also some -- with economies being shut down totally, like India, like South Africa, Brazil, we also had to deal with supply chain issues. So overall, as we had done in Q1, when China was closed, we did everything to put our customers first. As Joachim mentioned, we were able to deliver. We did not -- we never did not deliver an order that a customer placed, so the customers and employees come first. And I think we did everything to live up to that promise.

Okay. So just one follow-up to that. Are there any -- like you mentioned, the cost that you've taken out on the fixed side, on the admin side, are any of these costs that you've taken out structural in nature? Do you expect any of -- just another way to ask that do you expect any of these reductions to come back through the remaining quarters of the year?

I would say we're still in the process to be, frankly, because we're not done yet. And some of those structural adjustments take longer than the short or quick adjustments that you can maybe do on the production side. It certainly depends also on the jurisdiction you're in. In North America, obviously, where we have employment, it will, it's easier to adjust also structural cost compared to Europe where we barely have any employment at will and rather have fixed contracts or unionized plans. And therefore, we are trying to adjust our structural costs still. And at this point in time, I do not expect that we are seeing an increase in structural cost, but we need to very carefully look at the development of sales in -- going into the second half of the year. And this is exactly the reason because we don't have the visibility as of today, why we are not yet issuing a new guidance, but we feel -- we believe we are much more comfortable once the main OEMs in Mainland Europe and also in North America, have issued new EDI call-offs and that means that we have a better visibility for the second half of the year.

But Sarth, obviously, let me add one comment to that. Obviously, we are using government programs just like short-term work and others also on SG&A costs. And if these programs run out, that will be a negative impact. And as Christian said, our management also reduced their salary, and that includes ourselves and the Board. And obviously, if we go back to a normal business, they will go back to the normal salary scheme. So some of the measures that we have taken are crisis measures that have an end date.

We'll now take our next question from Nicolai Kempf from Deutsche Bank.

Nicolai Kempf from Deutsche Bank. Can you give an update on the current trade environment? And do you see an improvement from July compared to June? And my second question is, did you have to stop production in the U.S. also maybe in June and May due to rising corona cases and not just U.S., also maybe in other regions as well?

Okay. Yes. Nicolai, of course, happy to give you an answer to your question. July, obviously, this is already looking forward a little bit, and you know that we usually don't give too much of an outlook within quarter. But what we saw already, basically, there was an upward trend. And I'm now speaking about Europe. There was an upward trend from April to May to June, where we had a significant increase in sales. As we've pointed out, April was a terrible month with all OEM plants being shut down. And that meant that also we, as the supplier, had roughly only trading or aftermarket sales. And that changed now coming -- going from 1 month to the other. So May was already a little bit better. June was somewhat better, and that trend continued also in July. Asia Pacific, similar picture, same trend. But as Joachim pointed out, we're not so certain how long that line will last with China now going into the new regulation in September and that there is some uncertainty. And North America actually was the last region to be impacted by the coronavirus. So I would say that the end of the second quarter was rather not so good in North America, while the beginning was still a little bit better. And in July, I'm cautiously saying -- even though the numbers aren't final yet, I'm cautiously saying that they were on a similar level as we've seen in Q2, and I think this is as much outlook as I can give you for Q3.

Okay. And let me jump in on the -- Nicolai, let me jump in on the production where we had closures for corona. The big closures that we had was in Wuhan in the first quarter. That was all of February and half of March. Then we had end of margins in all of April in Europe, where our OEM customers had a complete shutdown. In May and June, most plants were back in business, were reopened. But in May, we still had some impact on -- in South Africa, in India and also some in North America. But since June, we are operating on a normal level according to the customer demand that we see in the different region.

Okay. So you had no corona chases within your production and that its cost stoppage?

No.

We'll now take our next question from Michele Baldelli from Exane BNP Paribas.

Just a quick question about Ålö because of the strong results in H1 in terms of profitability, do you expect that anyway to keep the same level of absolute EBITDA EBIT for this year in line with last year despite the sales drop?

Well, that's a good question, Michele. We -- I mean, obviously, we were very, very pleasantly -- we've found the result of Ålö very pleasant for the overall group, 12.8% is remarkable. But we need to understand that there is a seasonality in the business model of Ålö. And usually, you see very strong results end of Q1 and beginning of Q2 every year, and that was also the case this year. So I would expect that the 12.8 million is probably on the higher end of what we're seeing throughout the year. On the other hand, as we've always said, they will continue with their optimization project. So we will not sleep well until we see the full effect. And therefore, I would say that we will see the full effect of Ålö really in 2021 and not yet in 2020 when they finalize the optimization project, but I'm very cautious if I would not recommend to use the 12.8% as a guideline for the next 2 quarters.

It appears we have no further questions. Mr. Dürr, I'd like to hand the call back to you for any additional remarks.

Okay. Thank you very much, Keith. No, there's no additional remarks. The only remark that's left to say is thanks, again, for your interest in JOST and stay healthy. If there's any additional questions, you can contact our Investor Relations, Romy Acosta, for any additional detail that you, and we will provide that to you. So with that, thanks a lot, stay healthy, and goodbye from Neu-Isenburg.

This concludes today's call. Thank you for your participation. You may now disconnect.