MAHLE Metal Leve S.A. (LEVE3) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and a warm welcome to the conference call about the 2024 Annual Results of MAHLE Group. [Operator Instructions] You can also download the presentation from the MAHLE Investor Relations website. The presentation will be followed by a Q&A session of up to 20 minutes. [Operator Instructions] On the call today, MAHLE Group is represented by Markus Kapaun, CFO of MAHLE Group; Jan-Frederek Thiele, Vice President, Finance and Accounting Europe; and Florian Ulrich, Head of Group Financing and Investor Relations. Now I would like to hand over to Mr. Kapaun.

Thank you very much for the introduction, and welcome to everybody to our investors update call. My colleagues and I, as usual, will now present to you the annual results of 2024. After our presentation, we'll be happy to receive your questions. 2024 has been another challenging year, an environment of continued geopolitical uncertainties and economic constraints kept consumer demand volatile and weak. This environment further increased the importance for MAHLE to adapt and to enhance the company's resilience. Let me share with a few major KPIs at a glance how we navigated through 2024. The challenging market conditions are reflected in our sales figure with a considerable sales decline of 8.9% to EUR 11.7 billion. The main reason for the decline were volume reductions due to lower consumer demand in Europe and North America, deconsolidation effects as well as negative FX translation effects. Despite the challenging market conditions and the lower sales, we were able to increase our EBITDA margin to 8.3%, which is 1.1 percentage points higher than in the previous year. The increase was mainly achieved by improved productivity, increased sales prices and gains from the sale of our joint venture, BHTC. In addition, we were able to reduce MAHLE's net debt-to-EBITDA ratio to 1.2x. This was attributable to the higher EBITDA and an improved net debt position. Free cash flow for the full year of 2024 is EUR 394 million. That means that we have generated a free cash flow of almost EUR 900 million over the past 2 years. MAHLE's credit ratings are currently Ba2 with a negative outlook by Moody's and BB- with a stable outlook by Standard & Poor's. Compared to last year, we reduced headcount by around 5,900 employees, including loaned personnel. This decrease is a result of our continued adjustments to navigate through the volatile market environment and several portfolio cleanup activities, for example, the sale of our stake in the joint venture, BHTC. Now moving on to the market and business highlights. The weak and volatile consumer demand is reflected in the production figures of passenger cars and light commercial vehicles. Based on figures published by S&P Global, 98.5 million vehicles have been produced globally in 2024, a decrease of 1.1% compared to the same period in 2023. This was primarily driven by reduced output in Europe, North America and East Asia due to a slowdown in consumer demand, while especially China and India showed an overall production growth. For 2025, S&P Global expects 0 growth in global production figures compared to 2024. This forecast is mainly attributed to the continued decline in the European region and uncertainty in North America. China, India and South America are expected to maintain their good momentum, compensating the weaker regions. In S&P's forecast, the recent tariff developments and the potential resulting negative impact on the market are not yet fully factored in. We currently believe the 2025 production figures to be weaker compared to 2024. The 2024 production of the medium- and heavy-duty vehicles market fell short by 6.4% on a year-over-year basis. This was mainly driven by a considerable output reduction in Europe with minus 22%. Only South America showed a production growth. A production growth in 2025 expected by S&P can be jeopardized by a tariff-driven reduction in demand. According to our market analysis for light vehicles, the trend of the electrification of the powertrain is expected to continue in the decade ahead, albeit at a smaller pace in Europe and the U.S. given regulatory uncertainty. The U.S. announcement of worldwide tariffs will probably lead to a further overall market reduction due to a highly volatile market environment. In China, however, the momentum of the transition to new energy vehicles is even increasing. The share of battery electric vehicles in the world market as a whole has largely developed in line with our expectations in the recent years, falling short slightly in 2024, which is expected to continue in 2025. Looking at the key regional markets worldwide, the picture is much more differentiated. BEV adoption in Europe and the U.S. in 2024 has considerably fallen short of expectations and will continue to do so in 2025. The major reasons are costs, insufficient infrastructure and regulatory uncertainty. The market in China, however, continues to be the main driver worldwide of BEV adoption. The BEV growth considerably exceeds expectations since 2022. This development is driven by low-cost BEVs and supported by a local price war as well as increased exports. The expected trends towards powertrain electrification of medium heavy-duty vehicles has weakened recently. According to current estimates, the global share of battery electric, fuel cell and hybrid engine solutions of all trucks will grow to close to 25% by 2035. At the same time, roughly 75% of LHV vehicles are expected to remain pure combustion engines. Similar to the light vehicle scenario, the trajectory remains highly uncertain through 2035, driven by evolving regulations and infrastructure readiness. 2024 was successful for MAHLE as several large customer projects were acquired across all solution fields. In particular, EUR 1.2 billion order for thermal management modules, the largest single order in our company's history stood out. This acquisition shows the success of focusing on system solutions in our thermal business. So no reason to party like that, but anyway, good music introduction. This acquisition shows the success of focusing on system solutions in our thermal business. We have also been successful in the field of electrification in which we are focusing on innovations, enabling profitable e-mobility leading technology with highest efficiency. We secured large e-motor orders for light vehicles as well as for 2- and 3-wheelers. But also our business with conventional internal combustion engine remains important and stable, supported, for example, by significant orders for pistons and power cell units. In this field, especially, but actually in all of them, we lay our focus on cost leadership, while still delivering superior products. In total, the acquisition of new business has been on a stable level since years despite intense price negotiations. Given the uncertainty in the market, we have seen postponements of sourcing decisions by OEMs. The projects postponed in 2024 lead to additional potential for acquisitions in the coming years. Our focus in 2024 also remained on improving the efficiency of our organization. During the year, we made strong progress in line with our MAHLE 2030+ strategy, delivering several key achievements that contributed sustainably to our performance in 2024. The slide shows the key highlights for the year. We were able to improve productivity at our plants and enhance purchasing efficiency, saving EUR 282 million. We successfully renegotiated sales prices, improving our result compared to last year of about EUR 142 million. We initiated the new organizational structure by acquiring the remaining stake in MAHLE BEHR, streamlining management and combining business units. We cleaned up our portfolio, selling noncore businesses and assets, closed 4 plants and downsized another 4. We reduced our workforce by approximately 5,900 in line with the reduction in demand and continue to rebalance our workforce globally to optimize costs. Already 64% of employees are localized in best cost countries. Lastly, we are proud to have earned the leadership status from CDP, recognizing our strong commitment to sustainability. With this, I would like to hand over to Jan-Frederek Thiele, who will give you some more insights into our financials.

Yes. Thank you, Markus, and also a warm welcome from my side. Following our record sales of EUR 12.8 billion in 2023, MAHLE Group has generated sales of EUR 11.7 billion in the business year 2024. Adjusted for deconsolidation effects and negative effects from currency conversion, the organic sales decline amounted to 5.6%. Significantly lower call-off figures from a few of our main customers, especially in Europe and North America were the main cause for that decline. The delayed ramp-up of e-mobility also affected our development of sales. Sales performance was supported, however, by our efforts in renegotiating prices with our customers, which partially offset the volume decrease. Now let's take a look at MAHLE Group sales by business unit for the year 2024. The Engine Systems and Components business unit reported sales of EUR 2.4 billion, a year-over-year decline of about 8.9%. The business unit represents 20.6% of the total group's sales. The Filtration and Engine Peripherals business unit generated sales of EUR 2 billion, which is 5.2% lower compared to the same period in 2023. The business unit makes up for 17.3% of our total group sales. The Thermal Management business unit accounted for sales of EUR 4.1 billion, reflecting a year-over-year decrease by 11.2%. The business unit accounts for 34.9% of total group's revenues. The Electronics and Mechatronics business unit reported sales of EUR 1.3 billion, falling short by 7.1% of sales compared to the same period last year. The business unit represents about 10.8% of total group sales. All of those business units were impacted by the aforementioned low customer demand. Lastly, the Aftermarket business unit generated sales of EUR 1.3 billion, a slight year-over-year increase of 3.1%. The business unit contributes 11.1% to the total group's revenue. Adding the OES business, aftermarket sales would be higher by EUR 0.7 billion, resulting in a total sales of EUR 2 billion. The 4 profit centers, which serve specific market and customer segments reported sales of EUR 622 million compared to the EUR 841 million last year. This represents a significant decrease of 26.1%, driven, however, mainly by the sale of our shareholdings in the joint venture, BHTC. We operate globally close to our customers and develop innovations based on the needs of the respective markets. We produce regionally where our customers need our parts in production and development locations in 28 countries. Our sales are well distributed across our core markets in Europe, North and South America as well as Asia Pacific. MAHLE sales are also spread across the distribution channels. The original equipment business for light vehicle accounts for about half of MAHLE's sales followed by the aftermarket business of 18% as well as the OE business for medium and heavy-duty vehicles of 12%. Our customer portfolio is diverse. While none of our customers account for more than 10% of sales, our 10 largest customers represent less than 50% of total sales. Profitability in 2024 was severely affected by the considerable sales decline. In addition, increases in personnel costs had a negative impact on earnings. In order to counter the challenging market environment, we have successfully continued measures to increase profitability as part of our Back on Track 2025 program to improve earnings and liquidity. This means we were able to significantly increase productivity in almost all areas. Despite the challenging environment, we were able to increase EBITDA from EUR 917 million to EUR 964 million, and EBIT from EUR 304 million to EUR 423 million in 2024. Also contributing to this increase has been earnings from the sale of our shares in the BHTC joint venture. Our EBITDA margin increased to 8.3% and EBIT margin to 3.6%. The increase in EBIT margin from 2.4% in 2023 to the 3.6% in 2024 is mainly attributable to gross margin improvement. Despite an increase in personnel costs, the SG&A expense could be reduced slightly in absolute terms, but had a negative effect on the margin. Other items, including gains from the sale of our joint venture, BHTC, had a positive effect on the margin. Over the past 2 years, MAHLE has generated nearly EUR 900 million in free cash flow. In 2024, free cash flow has been EUR 394 million a year-over-year decline of EUR 87 million. Our free cash flow benefited from the successful sale of our shareholdings in the joint venture, BHTC. However, this could not entirely be offset the onetime effect from the implementation of the ABS program launched in 2023 as well as higher tax payments in the current year. Net debt decreased slightly to EUR 1.2 billion at the end of the year 2024. The reduction was mainly achieved by cash received from the sale of our BHTC joint venture as well as our improved operating results. Leverage decreased to a sound level of 1.2x due to an improved EBITDA and lower debt. I would now like to hand over to Florian Ulrich to give you an update on our financing profile.

Thank you, Jan, and welcome, everybody. As of December 31, our debt maturity profile is well structured. MAHLE's main cash funding instruments are 2 corporate bonds maturing in 2028 and 2031, respectively. Our syndicated revolving credit facility in the amount of EUR 1.2 billion provides for short-term cash flexibility and is virtually undrawn. As of January 2025, this credit facility has been extended with an all lenders consent to February 2028. This collaborative effort reaffirms our strong relationships with leading financing institutions and highlights our ongoing commitment to maintaining a robust financial structure. Our funding portfolio is well diversified. The main funding instruments are bonds complemented by the syndicated RCF, Schuldscheindarlehen, bank loans and working capital financing programs. As of December 2024, liquidity from committed credit lines plus cash on balance sheet totaled EUR 2.1 billion. For MAHLE, ESG remains important. As a foundation-based group, ecological and social responsibility form the unifying theme of our actions, and we fully support the goals of the Paris Climate Agreement. MAHLE has been recognized by EUPD Research with a transparency award for our 2023 sustainability report. Besides our yearly published sustainability report, you will also find a summary of sustainability KPIs called facts and figures on our website for your convenience. It will be made available on April 23. The link to the website is shown at the bottom of the slide. Based on the sustainability rating from EcoVadis, MAHLE ranked amongst the best 5% of automotive supplier companies in 2024. Moreover, for the first time, MAHLE was added to the so-called CDP A list, receiving an A grade in the category, Climate Change as well as an A- in Water Protection. The Science Based Targets Initiative has validated MAHLE Group's climate goals. This includes the CO2 emission reduction path until 2030 for Scope 1 to 3. Already back in 2020, we set a CO2 reduction target for MAHLE Group for Scope 1 and 2. By 2040, we aim to be carbon-neutral in terms of all direct CO2 emissions and those associated with purchased energy. Our Scope 3 targets relate to emissions in the supply chain and emissions from product use and were approved by the Management Board in November 2022. We aim to reduce these emissions by 28% from their 2019 levels by 2030. You will find this information on our MAHLE Investor Relations homepage besides our yearly published Sustainability Report. I would now like to hand back to Markus to give us an update on our outlook and upcoming events.

Thanks, Florian. As already outlined in the last investor call in 2024, MAHLE has been implementing a new organizational structure effective from January 2025 onwards. To summarize the major changes. The former business unit Engine Systems and Components and Electronics and Mechatronics have been combined to the new business unit Powertrain and Charging. The former business units, Filtration and Engine Peripherals and Thermal Management have been merged into the new business unit Thermal and Fluid Systems. The Aftermarket business unit is continued as a separate business unit under the name of Lifecycle and Mobility. The profit centers were integrated into the business units. The reorganization follows industrial logic by pooling business areas with related production technology and competencies. We are reducing interfaces and are enhancing collaboration and speed. In addition, our aim is to increase the efficiency in asset utilization and CapEx as well as to streamline the organization and optimize tax charges. U.S. tariffs is the dominating subject in the business world in recent weeks. In 2024, MAHLE imported goods to the U.S. amounting to about USD 960 million, where we were importer of record. That means directly liable for potential tariff payments. More than half of this figure stems from imports from Mexico and about USD 200 million from the European Union. Considering these volumes, the potential gross tariff risk for MAHLE is USD 310 million per annum in an annualized manner. Employing risk mitigation measures, most notably USMCA certifications, MAHLE can reduce the risk to USD 250 million per annum. For the calendar year 2025, MAHLE expects the tariff risk to be at about $165 million. This is based on the most recent announcement as of last week; however, these figures do not include negotiations with our customers. We have addressed the tariff impact to all customers in the U.S. The tariff discussion makes our planning for this year more difficult. Not only do we face the risk of direct tariff cost, we also face the risk of a reduced consumer demand affecting also callers from our customers. For 2025, we currently expect our sales to be in the range of EUR 12 billion, an EBITDA margin of roughly 7% and a net debt-to-EBITDA ratio of 1.4. These figures do not include a potential demand decline from continued tariffs uncertainty. It does contain, however, the expectation that we are able to pass on resulting tariffs to customers. Yet, we strongly believe that we are well equipped to face the challenges in the market. Our continued efforts on increasing the efficiency of our organization will ensure a competitive cost basis. Moreover, MAHLE is active in business areas that are key to further developing the electrification and the automotive industry, most notably the thermal business as well as products for the electric powertrain. The resulting growth potential is complemented by the company's traditional ICE business that will still provide for stable revenues and earnings for many years to come. With this, we are coming to an end for the Annual Results 2024 investor call and would like to mention upcoming calls already. Our next call is the Q1 2025 call scheduled for May 27. The half year results 2025 call is on September 9, followed by the Q3 2025 call on December 4. For further updates, please visit the Investor Relations section on our website, mahle.com. Thank you very much for your attention. We would now like to start the Q&A session and are available for questions in the following 20 minutes.

[Operator Instructions] The first question comes from Stephanie Vincent, Bank of America.

Thanks for the overview on the tariffs. My first question is actually probably a bit surprising, this is slightly positive. I saw that in handles that there was some news about increasing penetration on range extenders. My understanding is that you guys are part of the supply chain for those products. So just wanting to know what percentage of your business are related to this and what sort of growth rates that maybe we could expect from that relative to your other products? My second question is just on the outlook for sales, and then I guess we can go on to profitability. So you're saying you're looking for around EUR 12 billion. I mean when I'm looking at your order intake, which is EUR 10.3 billion, I believe, and then very simply, I just add on the Aftermarket sales and maybe that's being too general, but you are getting slightly shy of EUR 12 billion of sales. How comfortable do you feel with that order intake given the tariff outlooks and some of the call-offs that have at least been announced, particularly from EU exporters out into the U.S. and even some of the exports that are coming out of Canada, Mexico from some of your customers. And then my last and final question, because I don't want to take up all your time, is just on your view about capital raising. We've seen -- I realized that you have a very like good balance sheet when it comes to like upcoming near-term maturities, but do you not think it would be potentially prudent to raise cash now even though you're at a somewhat high level just because there is so much uncertainty in the market. And that's it for me.

So thanks, Stephanie, for the questions, and I will try to take them in the order you placed them. So the first one was regarding the range extender part in our sales. And if we look at, let's say, the global markets in around '24, '25, we see that the plug-in hybrid or the full hybrid, so also the range extenders are present is about 10% to 15% of the market share. It's increasing especially drastically in China also. And we just see recently, while this was in Europe so far, not really that relevant because of the ICE ban in 2035 that we see more customer interest again in the range extender. And we showed that sometimes in our strategy meetings that actually that would be the best of both worlds for us because we would obviously be in there with our traditional ICE combustion engine components, but we would also be in there with thermal and electrification elements. So from a content per vehicle perspective, the ideal world, and we are in there. Nevertheless, all our scenarios, which we look at are strongly still related to the ICE ban in Europe. So we see range extender increases in all of the regions, especially in Asia, but to be seen. So we are cautious here in Europe, but would be ready. And also for North America, we would be ready here. And that leads a little bit into maybe the second question on the outlook. And this is -- I mean, you mentioned it, and I said it also in the S&P figures, whatever an indirect impact on volume from tariffs is not yet factored into those numbers, which would be true for this year, but potentially also the year to come, potentially different also when we look at light vehicle versus medium heavy duty. So we have 2 or 3 hypothesis which we have. If we take a look at the current tariff discussions and we say, okay, that will ease out somehow, we come to a conclusion in the next 2, 3, 5 months. We see a potential reduction versus the current forecast in automotive production of 1 million to 1.5 million. And if we say, okay, this is going to be, how do you say, ever-increasing escalation in the discussion, this will further impact and we would see potentially somehow even a decrease up to 5 million vehicles for this year because the tariff aspect will impact North America from a volume perspective because cars will increase in their prices, so volumes will go down, but we also see that then in Japan or in South Korea or out of Europe for the export part, which goes into the U.S., which will also decrease. So -- and depending on how we look between those hypothesis, these are the ranges, and we just have to watch that very carefully. We saw in the first quarter that a couple of plants from the American OEMs, whether it was in Canada or in Mexico, they stopped production for 1 week or 2 weeks. They are taking it up again. But in the consequence, we would be affected also in our sales, respectively, to our ratio. But to tell now a number in detail would be difficult to say, but we are watching carefully because besides the tariff risk, the second one which we have to mitigate is capacity adjustment, whether it comes out of tariffs and consequence discussion or out of our own homework, which we anyway are working on. And then maybe the third one was capital raising. And yes, we are thinking about that. Obviously, 2, 3 weeks ago -- or let's say, even last week, markets are very volatile. And with that, also the appetite for capital raising maybe from investors might be a bit lower, but we are ready to go short, mid or long term in that respect. Florian, I don't know if you want to add something to that.

We are closely monitoring the market. At the moment would not be the best moment to go on the market. But certainly, if a window opens up and from our business perspective, however it develops, it would be suitable, then we would be ready to do it, yes.

Then we would be moving on to the next question. First, we will take the questions from the conference call and then move over to the questions submitted in written. [Operator Instructions] The next question comes from Tom Gibney of ADF Asset Management.

The first one is it was -- it's great detail you've given us in terms of your volumes where you are and your sales where you are the importer of record. I just wondered if you could give us an indication of how much of your sales are sold to customers for use in vehicles that are then shipped into the U.S. So I guess, what is your indirect exposure to products that are being sent to the U.S.? And then the second one is since the tariffs that are planned have been escalated since the reciprocal tariffs were announced, have you seen any reduction in call-off volumes either in the U.S. or other markets because of that or that you think is because of that?

Yes. Thanks, Tom, for the question. I would go with the second one first. Actually, what we see still for Q1, at least in this year that also the call-offs are lower. So we see sales in the U.S., for example, are higher because I think there is a rush on the dealerships. But when we look at the production volumes of the customers, they are about 9% lower already. So we are not that much lower. We are maybe 2% to 3% lower, and this is also what we see for the full year in the moment. But again, there might be some indirect effects coming up, but not yet really fully, how do you say, reconcilable with the tariff discussion.

So that's -- sorry, so that 9% is the North American production volumes?

Yes, not from us, but from our customers what we see.

Understood. And sorry -- why have you only got 2% or 3% lower? Is that because of the market share growth or different exposures?

No, I think it's a delay in the call-offs and also with the customers -- with their production. And the question is now if we don't see, I think, a solution to the tariff discussion per se, little by little, we have to expect that, that also will trickle into our reduction volumes. But hard really to project that in detail. It's really what we would say, in Germany, somehow we drive on site on a day-to-day basis here to be sure we -- and what we can do is adjust our capacities as quick as possible. And then it's hard to also answer the questions for our customers because some of the programs we deliver into, I mean, go into export and some of the same programs not. So we cannot really have that transparency fully. But indirectly, we kind of -- in our hypothesis, we made a conclusion that we said, okay, out of Europe, for example, we have about 900,000 exports. And we could expect that this could go down in, let's say, this first hypothesis, whereas I have said, we come to a conclusion over the next 2, 3 months by about 300,000 vehicles. And if we go further and there is the unsecurity, this will go further down. And the exports from Europe will fall away basically fully in that. But I would not be able to speak really directly, okay, which element goes into an export car, but this is something we can deliver also afterwards. For sure, we have this data available.

The next question is from Christian Tesi of Aquila Asset Management.

I have 2 questions. First of all, what is the expected CapEx in this environment? Given the lower demand, I assume your clients have also halted or requested a slowdown production, so we'll expect a lower CapEx for this year? And my second question will be how much did the volume drop compared to the previous year?

Yes. So thanks, Christian. On the CapEx, and we have proven that, I think, also last year in '23, we had budgeted CapEx of EUR 550 million, and we spent EUR 420 million without jeopardizing 1 customer program, very much related to delays on customer demands, but also optimization in our CapEx. For this year, in budget, we have EUR 500 million. I expect to stay significantly below that as well because we see this postponement of demand. I wouldn't give you a number, but it would be coming to the range what we saw also in previous year in terms of delta. And the second question was on the volumes. And for this year and if I compare it to last year, and this is why we have to be cautious also on the forecast of the EUR 12 million (sic) [ billion] in sales, which somehow EUR 11 billion, EUR 8 billion to EUR 12 billion, but this is impacted by FX translation impact into the euro or a weaker dollar and some others. And if we consider as of, let's say, last -- end of last month's perspective, we see about EUR 450 million of volume down in our sales compared to previous year. And this is approximately the range. Again, if there is further implicit volume downs out of what we just discussed on the tariff side, it could be further than that, but this is the current estimate. Some growth in Asian countries, still China, but also India, especially, but South America stable, but mainly Europe and North America, potentially now to see Japanese OEMs, Korean OEMs with their deliveries also into the U.S. on a lower level. We'll take 1 question maybe from the online ones, and it would be [ Marco Kamo ]. And Jan, if you would take that one.

Yes, I can take that, Marco, you were asking between the difference of EBITDA and the operating cash flow before tax and working capital. So you're comparing the EUR 964 million with the EUR 502 million, I guess. And the difference is, on the one hand, our cash out for taxes, which amounted to EUR 187 million. Then you have cash out of the financing arena. And then the most important thing is in the operating cash flow, we are not showing the proceeds from the selling of our BHTC shares. And if you amount those 3 elements up, you pretty much come to the gap or to the delta.

And then maybe we take the second question -- or now the first question also from [ Remi Ramadu ] asking to provide a pro forma EBIT or EBITDA adjusted for the one-off benefit of BHTC. So here, you would have to deduct about EUR 164 million on both numbers basically. And the '24 year result is better than the guidance. Yes, it was slightly on recoveries, but also we have been quite prudent and conservative on our, let's say, administrative expenses and efforts, what we achieved there in terms of economizing on administrative expenses also as a second element. Those were the 2 biggest contributors. Maybe a quick pause if there is another verbal question.

Sure. So we are moving on with the verbal questions then. The next verbal question would be from Mehmet Dere, Deutsche Bank.

Just on the tariff mechanism, first of all, how is this going to work? I think there are not direct cost pass-throughs, right? So I think you got to cover these costs in the first stance and then will be rewarded at the end of the year. Is this going to work like that back in the days with the supply chain problems?

Yes. Yes and no. So you're absolutely right that this is just now another level of what we had out of Corona of chip shortages, of material cost increases, tariff increases, volume. Now it's tariff. So it's somehow in the same logic, how we have to apply it. We nevertheless have with some customers already some alignments that we will get a recovery also, let's say, with an invoicing after month end. Nevertheless, we will see that really only to kick in with the second semester, but I expect not everything into Q4. But then there is another -- and this is mainly the OEMs, if I may say so, in the discussion. And then on the others, it's somehow going to be the same level again. The OEMs will pay, let's say, the smaller suppliers first to keep them alive and have discussions ongoing with us towards Q3 and Q4, and it will be also certainly discussions where we have to lift our leverages on that.

Okay. Got it. And then on the RCF since you've extended this to '28, is there an option to extend this even further to '29? And can you even use that to repay the '28 bond?

First of all, yes, there's an extension option for February 2029. Second of all, it would be usable to repay a bond, our aim would nevertheless to refund earlier. Yes, we will not wait until 2028 to refund it via RCF drawing, but rather via capital market transactions in '26 or '27 at the latest.

Okay. So then just a follow-up on a previous question because you said that you would potentially consider a capital raise. I guess this is debt capital raise and just wanted to ask what will that be used for?

That could be used for partially repaying the 2028 bond. That would be the first goal if we would do that.

Okay. Got it. Another question on the provision release in Q4 looks pretty heavy. Can you give us some color about what was behind that? And what should we expect in the next year?

Yes. I mean we would have to go into really detail, but generally speaking, right, we could release a few restructuring accruals. And on the other hand, you have out of the seasonality releases for various accruals in the personnel area like vacation accrued, overtime being accrued, bonuses being accrued, et cetera. And that taking the size of the group amounts fairly quickly to a substantial amount, but nothing super extraordinary to disclose.

Okay. And then also on your restructuring costs, can you give us also some sense for next year, where do you expect this given also the tariff discussions we are having?

Budget numbers, I think this is -- when we shared it, our restructuring cost for 2025 was in the amount of about EUR 40 million, a little bit shy of that. And maybe going hand in hand with that to mention. So the restructuring need, which is dropping out now out of the reorganization, which we announced end of last year is fully provided for in the balance sheet already. So there would be nothing coming out of that.

Okay. That's good. I have 1 more last question actually because on the last call, you've mentioned after the -- with the takeover of -- entire takeover of MAHLE BEHR, there are some options for tax loss carryforward. Can you give us an update there about the timing again and on the final amount you can use there?

Yes, I can. So basically, this is not only tax loss carryforwards, but also you can take this, what I said, EUR 30 million, EUR 60 million, EUR 90 million. So short term, we see somehow synergies of about EUR 30 million, midterm EUR 60 million, and long term, so in 2030, EUR 90 million. And on the tax loss carryforwards, it's really depending on what transaction we do in what year. We see this year on the tax loss carryforwards proportion, which could be between, let's say, EUR 10 million and EUR 30 million. It's really related to legal entity restructuring and how quickly we can adopt that in the regions. It's North America, it's Japan, it's Italy, it's Germany. But on an overall basis, I would expect just out of the tax loss carryforward usage in a steady basis, some EUR 30 million per year. And to come to that, this will take 2 or 3 years with all the reorganization.

So we are coming to the end of the Q&A session slowly. So the next question and maybe the last question would be from Diomidis Ntountounakis from Chenavari.

Thanks for the disclosure on the tariff. So I think you mentioned about $1 billion of imports in the U.S., about half of that through Mexico. I think you also have local sales in Mexico of about $350 million and about $90 million in Canada. Is that taken into account into that $1 billion? Or is that separate? And how is that included in the calculation?

Yes, the Canada is fully included. But on the Canadian sales, we are to 95% GM and Stellantis are the importer of record. This is why you see, I think, it was only $5 million or so on the slide, which we have shown out of Canada. And out of Mexico, yes, there is also some sales to Mexican customers, which stay in Mexico, which obviously are not underlying then those tariff elements.

And of that, like $0.5 billion, how much -- do you know how much is USMCA content and how much is related to non-USMCA content?

Yes, we have -- it really depends on the product group we sell. Our USMCA content is between 50% to 70%, depending on product group. And we are continuously working still to increase that. So if you look over the last 2, 3 months in the discussion intensified, we have increased that on average by 15% to be USMCA-relevant. And there is some further percentage points to improve here for mitigation.

Last question, what kind of products do you ship out of Europe into the U.S. directly?

Not too many. Honestly, there is, for example, some cooling modules, but this was an alignment with BMW. This should stop anyway in April, it should have been in March already. So -- but it's really smaller portions. There is not too much coming out of Europe. Then maybe I would take one last question, which is on top on the online questions. And this is in relation to the EUR 165 million tariff impact. Do we assume that to pass that on to the customer and whether this is how the guidance is to be understood? And yes, this is how the guidance is to be understood. Maybe a comment to those EUR 165 million now. So over the last weeks, the pendulum is kind of moving between, let's say, EUR 70 million to EUR 165 million, EUR 90 million to EUR 165 million, depending on what is being voiced out of the current U.S. administration, and we are watching that carefully.

So with that, thank you very much. Dear ladies and gentlemen, we are closing the Q&A session for now due to time limitations. Thank you very much for your participation. And I'm handing the floor back over to Mr. Kapaun.

Yes. Thanks a lot also from my side. And obviously, the questions, which still came in here online, we will answer them in due time to everybody. Thanks a lot for joining the call and looking forward to the next one. Bye.

Thank you. Bye.

The recording has been stopped. Your conference call has come to an end. Thank you for attending. Goodbye.