Nemak, S. A. B. de C. V. ($NEMAKA)

Good morning, everyone, and welcome to Nemak's First Quarter 2026 Earnings Webcast. I am Denise Reyes, Nemak's Investor Relations Officer, and I am pleased to host today's call along with Herve Boyer, Nemak's CEO; and Alberto Sada, CFO, who are here this morning to discuss the company's business performance and answer any questions that you may have. As a reminder, today's event is being recorded and will be available on the company's Investor Relations website. Herve Boyer, our CEO, will lead off today's call by providing an overview of business and financial highlights for the quarter. Alberto Sada, our CFO, will then discuss our financial results in more detail. Afterwards, we will open for a Q&A session, which participants may join live or submit written questions via the Q&A function. Before we get started, let me remind you that information discussed on today's call may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions you not to place undue reliance on these forward-looking statements. Nemak undertakes no obligation to publicly update or revise any forward-looking statements whether because of new information, future events or otherwise. I will now hand the call over to Herve Boyer.

All right. Thank you, Denise, and hello, everyone, and welcome to Nemak's first quarter 2026 earnings webcast. It is a privilege to address you today in my first earnings call as Nemak's CEO. I am honored by the Board's confidence in appointing me to this role, and I look forward to building on the company's strong strategic and operational foundation. I would also like to recognize Armando Tamez, for his long tenor and the solid base he helped establish for Nemak's ongoing development and success. Throughout the transition period and in my initial days as CEO, my focus has been on listening and gaining a deeper understanding of the business by spending time across our operations, visiting different Nemak sites and engaging with our teams and customers. What stands out is the high level of commitment across the organization, the depth of our operational capabilities and the quality of our long-standing customer relationships. From a strategic perspective, our main focus at this stage is clear: to deliver a seamless integration of the recently acquired Georg Fischer Casting Solutions operations. From a financial standpoint, our objectives are clearly defined and embedded in our day-to-day activities. Our priorities remain unchanged: disciplined execution, profitability, cash flow generation and deleveraging. These goals are supported by a prudent and selective approach to capital allocation, ultimately maximizing shareholder return. Such principles are well understood across the company and guide decision-making process for the organization. I would also like to thank our investors and the financial community for your continued engagement and interest in Nemak. We value the ongoing dialogue and the opportunity to discuss our performance and priorities with you. Now I would like to turn to our first quarter 2026 results and give you an overview of our performance during the period. During the quarter, our top line increased by 15%, outperforming the underlying market. This growth primarily reflected in Europe and the rest of the world was driven by the integration of GF Casting Solutions Automotive business, which was effective on February 1 of this year. EBITDA declined by 15%, mainly reflecting extraordinary effects, including a reduction in onetime commercial conversations, extraordinary expenses in North America and the impact of the Mexican peso appreciation against the U.S. dollar. Nonetheless, as this extraordinary effect side, we remain highly focused on translating revenue growth into improved profitability while continuing to strengthen free cash flow generation and deleveraging. Turning to a key strategic milestone in February, the acquisition of GF Casting Solutions Automotive business received full regulatory approval and closed successfully. With the transaction complete, our focus is now on disciplined integration and sharing continuity for customers and executing the value creation priorities of the acquisition. As we integrate GF Casting Solutions into Nemak, we are pleased to welcome 2,500 highly skilled employees, depth of talent, expertise and deep industry experience, strengthen our organization and knowledge base. Following this acquisition, Nemak's global manufacturing footprint has expanded to a total of 53 facilities worldwide. The addition of operations in Austria, Germany, Romania, China and the United States enhances our presence in key automotive regions and strengthen proximity to customers, supporting disciplined execution across our global operations. These additional facilities also support the ongoing evolution of our product portfolio with growth in the e-mobility structure and chassis applications segment, roughly doubling its revenue contribution from 9% to approximately 18%. The complementary nature of Nemak and GF Casting Solutions capabilities expands our reach and our ability to support customers across a broader range of vehicle architectures. The development of our product portfolio further strengthens our positioning in higher value segments and support long-term growth opportunities. In parallel, the acquisition enhances our material capabilities with advanced solutions across aluminum, magnesium and other materials. We are now able to address an even wider range of customer requirements from lightweighting and structural performance through strength, precision and efficiency using the most appropriate material for each application. Building on this combined strength, Nemak now offers a unique range of advanced casting and assembly solutions across multiple processes and applications. Our capabilities span high pressure and low pressure die casting, proprietary technologies, ductile iron casting and integrated assembly. In particular, within high-pressure die casting, the combined platform provides broader capabilities for complex giga castings used in structural components and battery housing. As we move forward, we are working diligently to capture the synergies associated with the acquisition as quickly as possible. This effort involves structured and detailed work streams across the organization focused on cost efficiencies, operational alignment and leveraging the combined platform to expand our reach and value proposition with both existing and new customers. As these initiatives advance, they are expected to progressively support profitability, free cash flow generation and long-term value creation. Turning to new business. We continue to pursue a robust pipeline of approximately $1.9 billion in annual revenue for potential opportunities across key segments. This pipeline reflects ongoing customer engagement and positions us to capture further growth in a disciplined manner. In parallel, we are continuing to see extended ICE powertrain contracts, supporting the long-term use of existing assets and reinforcing the free cash generation profile of the business. During the period, we advanced several strategic programs that reflect the strength of our product portfolio and our presence in the e-mobility structure and chassis applications segment. For BMW Neue Klasse platform, Nemak is a key supplier supporting multiple components, including the battery management system bottom and the status sleeve leveraging our high pressure and gravity casting processes to support BMW's new engineering designs. These programs incorporate advanced sustainability features, including production with 100% clean energy. In parallel, we have begun producing a longitudinal member for the Porsche EV, making our first application for this component for Porsche and reinforcing our position in premium vehicle architectures for high-pressure die cast body in white parts. Moving on to sustainability. Nemak continues to be recognized by the Carbon Disclosure project, having achieved an A- company rating, placing us once again, within the leadership band. In addition, I'm really pleased to share that Nemak earned an A score in CDP supplier engagement rating reflecting our strong engagement with suppliers on climate-related risk and emissions reduction initiative. Moreover, we remain well on track with the objectives established under the Science Targets initiative to reduce greenhouse gas emissions by 2030. For Scope 1 and 2, our target is a 28% reduction in emissions, while for Scope 3, we're aiming for a 14% reduction. Together, decisions underscore commitment to disciplined execution and long-term value creation through responsible operations. As I look ahead, I am highly encouraged by what I see at Nemak, spending time with our teams, visiting our operations and engaging closely with customers has really reinforced my confidence in the strength of our capabilities and the depth of our talent across the organization. I have been particularly impressed by the commitment, the resiliency and the problem-solving mindset of our people who continue to deliver in a dynamic and very demanding environment. From an operating perspective, I have also been very positively impressed by the range and sophistication of the product processes and technologies across the company. The wide state of manufacturing capabilities we have developed across casting, machining, joining and advanced assembly represent a clear and valuable competitive advantage in the market. This depth of know-how allows us to support customers with greater flexibility, scale solutions across regions and consistently deliver complex, high-value products. With this foundation, I am confident that Nemak is well positioned to navigate challenges and continue building long-term value. This concludes my remarks. Thanks for your attention, and I now hand the call over to Alberto. Thank you.

Thank you, Herve. Good morning, everyone. I'll begin with an overview of light vehicle sales and production across our key regions, followed by a review of our consolidated and regional financial results for the first quarter of 2026. During the period, we delivered a favorable top line performance, demonstrating resilience in an evolving demand environment and integration of Georg Fischer Casting Solutions. However, EBITDA declined year-over-year reflecting a high comparison base from commercial compensations recognized in the prior year. Foreign exchange headwinds from the appreciation of the Mexican peso and extraordinary expenses in certain North American facilities. We made solid progress integrating Georg Fischer Casting Solutions as we are aligning processes, commercial practices and operating standards across expanded footprint. While the quarter included seasonal and ramp-up dynamics, we remain focused on cost actions and operational initiatives to support performance in the coming periods. Turning to the automotive industry. In the United States, light vehicle sales were approximately 15.7 million units on a SAAR basis, 5% down year-over-year. This reflects a high comparison base driven by pull ahead sales in anticipation of reciprocal tariffs in early 2025. Underlying demand continues to be supported by a healthy labor market and sustained consumer interest. North America light vehicle production totaled approximately 3.7 million units, 3% below year-over-year as OEMs maintain disciplined inventory management in response to evolving demand signals. Importantly, USMCA compliant production continues to benefit from the exclusion of parts tariffs, an advantage that supports Nemak's North America operations. In Europe, light vehicle sales were approximately 16.9 million units on a SAAR basis, 3% up year-over-year driven by increased demand in EVs and supported by higher imports. Renal production was approximately 3.9 million units, 3% below the same period of last year due to lower export activity and changes in product mix. OEMs continue to adapt their product strategies by expanding hybrid offerings and adjusting powertrain road maps in response to their volume regulatory environment, including the expected review of the 2035 ICE transition time line. Nemak's European operations are well positioned to support customers across powertrain technologies. In China, light vehicle sales reached a SAAR of approximately 21 million units. 12% below the first quarter of 2025, reflecting a seasonally soft February and a recalibration of purchase incentives. Production totaled approximately 6.5 million units, 10% below year-over-year, though continued government support through trading subsidies and purchase incentives through 2027 supports a constructive medium-term outlook. In South America, we saw a strong quarter with light vehicle sales growing 25% year-over-year to 2.8 million units, supported by favorable lending activity and fleet renewals with production up approximately 4% to around 700,000 units. With a global net vehicle production forecast at approximately 92.1 million units for 2026 and against the backdrop of energy price volatility and evolving trade policy, the industry has proven resilient and Nemak's diversified geographic and technology footprint position us well to navigate the environment. Turning to our financial results. Please note that 2026 includes the consolidation of Georg Fischer Casting Solutions effective since early February. In the first quarter of 2026, Nemak's revenue was $1.4 billion, up 15% year-over-year, reflecting the incremental effect from the acquisition as well as higher aluminum prices and a positive foreign exchange effect from the appreciation of the euro. During the quarter, ICE powertrain revenue totaled $1.2 billion, while e-mobility, structure and chassis revenue was $189 million, supported by the consolidation of Georg Fischer Casting Solutions beginning in February. E-mobility, structure and chassis represented 14% of our consolidated revenue in the quarter. As highlighted during our previous conference call, from now on, we will provide segmented revenue information to provide more color on the development of our business. EBITDA was $128 million, compared to $149 million in the first quarter of 2025. The year-over-year decline reflects a high comparison base, which was benefited by commercial compensations, increasing the comparable base. The contribution from Georg Fischer Casting Solutions was more than offset by extraordinary expenses associated with higher production in certain American facilities. The adverse impact of the Mexican peso appreciating against the U.S. dollar and increased expenses, partly related to the integration costs. Operating income was $18 million compared to $15 million in the same period of last year, primarily due to lower EBITDA. In turn, net income was $21 million compared to a net loss of $16 million in the same period of last year, supported by a $16 million noncash effect from foreign exchange gains related to the euro appreciation and income tax adjustments related to positive deferred access. Turning to the balance sheet. Net debt was $1.79 billion at quarter end, compared to $1.6 billion at the end of the first quarter of last year. Current debt levels reflect the seasonal effect of working capital as well as the acquisition, which was funded with a mix of cash, vendor financing and assumed debt. With no significant near-term maturities, we maintain financial flexibility as we navigate the current macroeconomic environment. Cash and cash equivalents were $256 million. On a pro forma basis, our net debt-to-EBITDA ratio was 2.8x versus 2.5x at the end of March 2025. And our interest coverage ratio was 5.5x compared with 5.0x a year ago. Capital expenditures totaled $113 million in the quarter compared to $64 million in the first quarter of 2025. The increase primarily reflects investments to support the ramp-up of our Augusta, Georgia facility. Over the course of the year, we'll continue to evaluate opportunities across our regions to improve profitability and utilization including consolidating volumes and where appropriate, adjusting our footprint. This reflects our commitment to operating excellence and more streamlined global operations. We initiated actions to optimize our European footprint, including the intention to end production within the next 12 months at the Herzogenburg facility in Austria, which was part of the Georg Fischer Casting Solutions acquisition. This decision follows a review of market developments and persistently low production volumes at the site, which have negatively impacted its outlook. As part of this process, remaining products and customers' programs will be relocated to other Nemak facilities in close coordination with our customers. We are committed to managing the transition responsibly, supporting involved employees and ensuring continuity for our customers throughout the process. While we continue to prioritize deleveraging our most recent annual general shareholders meeting approved up to MXN 1 billion, which approximately adds to $57 million for share repurchases. We intend to continue buying back shares as we believe the current price does not reflect the company's intrinsic value. As of today, the shares held in treasury represent close to 7% of shares outstanding, which we plan to cancel at an extraordinary shareholders' meeting to be convened later this year. Moving to our regional results. In North America, revenue was $676 million, up approximately 5% year-over-year, driven by higher aluminum prices and product mix. EBITDA was $54 million compared to $69 million in the same period of last year, primarily due to higher labor costs related to the appreciation of the Mexican peso, a high comparison base related to commercial negotiations and extraordinary costs associated with increased production in certain product lines in North America. In Europe, revenue was $524 million, up approximately 27% year-over-year reflecting the consolidation of Georg Fischer Casting Solutions and aluminum price time mix. EBITDA was $50 million, down approximately 17% year-over-year, reflecting a high comparison base due to customer negotiations of last year's, which more than offset the contribution of the acquired business and the favorable impact from the appreciation of the euro. In the Rest of the World, revenue was $199 million, up approximately 26% year-over-year, driven by the incorporation of Chinese operations from the recent acquisitions and improved product mix. EBITDA was $23 million, up approximately 70% year-on-year, supported by operating initiatives and incremental contribution from the acquisition. As we move forward, Nemak is well positioned to capture the growth opportunities created by the integration of Georg Fischer Casting Solutions. Our focus remains on disciplined execution, accelerating the capture of synergies and leveraging our expanded platform to pursue new commercial opportunities. At the same time, we continue to prioritize operating efficiency, free cash flow generation and a prudent approach to capital allocation. These priorities underpin our confidence in our ability to enhance profitability and create sustainable long-term value for our stakeholders. This concludes my remarks. Thank you for your attention. I will now hand the call over to Denise.

Thank you, Alberto. We are now ready to move on to the Q&A portion of the event. [Operator Instructions] The first question is from Alfonso Salazar from Scotiabank.

First off -- first of all, Herve welcome, and we wish you all the best as the new CEO of Nemak. And I have a number of questions here, but I will refrain myself and ask only 3 of them. The first one has to do with the outlook in Europe. I think Herve can give us his expertise regarding the European market, especially for your operations and for the auto industry, keeping in mind or what we see is a flooding of Chinese new brands entering the European market and that could have important -- we are concerned with the operations of your key clients there. So anything that you can shed light on what's the situation in Europe, that would be very helpful. The second question that I have is regarding the American market, the U.S. market, we have seen over the past quarters how V8 engines, the demand for large engines has been very supportive to your operations there. Is there a change given the fuels, the high fuel prices you expect -- or your clients are anticipating any change in demand for V8? Is this going to be more hybrid. So going forward, are we seeing delays from your clients because of the uncertainty? And the final question is regarding what you mentioned about the footprint. If I understand correctly for now you are looking for opportunities to adjust the footprint by reviewing which operations you can maybe shut down or close and move production to other ones so that you have more efficient way of operating going forward. Is that correct? Or are you also thinking about potential divestments to improve your footprint globally? Those are the few questions.

All right. Thank you, Alfonso, and thank you for your best wishes and your questions. So I will take them one by one. So the situation on the European market, yes, we see that China -- Chinese OEMs already targeting Europe as a key market that we see the increase of the market share of the Chinese OEMs. So that's definitively something we are carefully looking at. That's also something that can now create an opportunity for us. That's a challenge for -- definitively for our base and our legacy customer base. This can be an opportunity because with the integration of Georg Fischer Casting Solutions, we are also now adding new customers in our customer portfolio BYD for instance. And we're already in talks with Chinese OEMs in order to assess the possibility to support them outside of China, Europe, South America is also part of the discussion. One thing that can also influence Europe is definitively some discussions at the European community level, right? Those guys, they are trying to come with a common view, which is definitively a partly a challenge for imposing a certain level of local content for the Chinese OEMs to produce locally and or to sell cars in Europe with moderate tariffs. And this is also something that can potentially influence positively our ability to further penetrate those Chinese OEMs. When it comes to the U.S. market, yes, definitively, the demand for big blocks, V8, 6 cylinders is -- has been quite high and is still high. So we have not seen any inflection, any reduction in the demand so far. We are still producing at maximum capacity level for the Detroit 3, General Motors, Ford and Stellantis. When it comes to the footprint, and I would appreciate that Alberto can also complement my answer. So definitively, that's a constant exercise for us to assess the equation between the capacities that we have and the market situation. So we are assessing and also already implementing. We recently announced some plant closures. So we will definitively adjust the footprint as needed. Meanwhile, that we're also working on lowering the breakeven point of each of the sites in order to make them more competitive and increase the level of sustainability. So yes, footprint adjustment is on the agenda of this company, and we are actively working on it. Alberto, maybe you can complement.

Yes, sure. Just to further complement what Herve Paul just mentioned, I think, as you may have seen on some recent news that we're working on that direction. And as Herve mentioned, we are constantly evaluating the current footprint and the operating levels that we're working at different facilities, talk for opportunities to adjust our operations. And our focus has been on reassigning potentially volume capacity from plants from 1 plant to the other one, but we are not considering any divestment of operating facility. At some point, we might divest real estate and assets, but we're not thinking of the divestment of any of the facilities.

The next question is from Andres Cardona from Citi.

I have 2 questions. And regarding the new disclosure and for me, in particular, the unit was a very useful tool. I was wondering if there's metric to follow. Now I see the EBITDA margin to try to forecast the company? The second question is if you have seen any impact on the -- from the Middle East conflicts in, I don't know, fuel prices, electricity prices, gas prices, perhaps you are more exposed in the European side of the reasons. And the third one is, if you could share the number of the extraordinary cost to consolidate GF Casting?

Thanks for the question, Andres. Yes, as you correctly point out and as we commented on our last call, we discontinued the equivalent unit metric because it's becomes extremely difficult to calculate one equivalent component after incorporating first after growing on the structural and EV segment; and second, with the integration of Georg Fischer just becomes a metric which at some point, doesn't really make too much sense. So that's why we are discontinuing that, but we are giving more disclosure on the segmented revenue side. So to your point, going forward, I think the best metric to project will be EBITDA margin. And certainly, we'll provide guidance on the different elements that move margin up and down, either by further activity or aluminum prices or something else. So I mean, I hope that supports the case better. And I think a real driver of the business value creation will be how fast or slow we can continue growing on the new segment, as you will be probably seeing on this segmented information. Related to your second question about the impact on the Middle East conflict, certainly, we're monitoring the situation very closely. At this point, we have had no effect on any of our facilities, no meaningful one. The only, let's say, consequential effect that we're seeing on that front is the -- as you are aware, the increase in energy prices, particularly in Europe. But European operations, most of them have already firm contracts on price of energy at the facilities for the majority of the consumption. So for at least for 2026 and a portion of '27, most of those energy costs are hedged in the operations. So there may be some marginal effect but not meaningful at the point in time. And certainly, what's important to continue monitoring is the potential consequential effect on potential vehicle sales, which at this point hasn't had any effect. As long as the oil prices remain on a temporary basis at a high level, we should not see any effect. But certainly, if that level stays on a fairly long basis, then we'll have to see how the market in general reacts. But so far, we have not seen anything else. And related to your last question about the cost of the integration of Georg Fischer, I mean, certainly, we have been moving along on a very careful process to integrate the facilities, we started that since before the actual approvals with all the right limits that we could do before getting the formal approval from the antitrust authorities, but we have already started working on PMI, which help us to a very smooth transition on day 1. So the expenses that we have incurred are associated with legal expenses as well as the cost to set up the new systems, images and continued support from third parties. So those expenses during the quarter were mid-single -- mid to low single digit amounts or not really meaningful amount versus the value and synergies that were expected from the Georg Fischer operations.

The next question on the line is from Jonathan Koutras from JPMorgan.

And hello, Herve, I'd like to thank you for your time and good luck to your new role. I have 2 questions on my side. First one for Herve, if you could shed light on what is your main objective or mandate for the next 12 months/year ahead? Or you expect to spend most of your time? Will it be on cost discipline, capturing the potential revenue pipeline that you mentioned earlier in the call of the $1.9 billion, if that's the case, what would be the time line for capturing this? Or will it be integrating GF or will be -- what will you be most focused on? And the second question to Alberto, if you could shed some more light on the higher costs in the quarter that had gross margin, how recurring are they? And what will be the normalized level of gross margin for Nemak given the volatility of recent quarters. When you have the one-off compensations last year, now Georg Fischer should be a tailwind given its reach your mix. But when shall we expect a normalization or an improvement flowing through the results as in the first quarter, you have these extraordinary expenses related to higher volumes in North America. So these 2 questions.

All right. Thank you, Jonathan, and thank you for your wishes. So when it comes to my personal agenda for the next 12 months, I think I would mention 2 words of 3, 1 is continuity, definitively, and we want -- I want to make sure that as I'm getting more familiar with the company, I got a chance to listen to our people, better understand the company and also listen to the customers. The second element and that was part of the presentation today is definitively disintegration of Georg Fischer Casting Solutions. This is something which is really strategic for the company and which can be really transformative when it comes to the ability to step by step change the product portfolio of what we do produce and keep growing the top line of this company. So definitively, this integration, the first phase was really to secure the continuity, which was done successfully. I could appreciate all the work which has been done upfront before the closing. And since then, we have a very structured program management integration, which is supported by a third party. And the objective is to maximize the level of synergies that we can extract out of this operation in order to benefit the long-term run rate profitability of the company. And last but not least, obviously, within a year, we expect as well -- I expect as well with the team to potentially adjust and revisit the strategic plan of the company in order to keep transforming the company and positioning it for the future.

Yes. And Jonathan, related to your second question about the financials of the quarter, yes, as you correctly indicated, and as I highlighted on my initial talks, 2026 first quarter was affected by a certain number of items. We had, on one side, a high comparison base in 2025 because we had still certain onetime commercial negotiations that materialize at that time. But this quarter, we also have, unfortunately, extraordinary expenses related to this very high run rate of large engine applications, particularly in operations in North America and the integration costs that I just mentioned. So all together, these extraordinary expenses are in the neighborhood of close to $15 million to $20 million in the quarter. So it's quite a significant amount, and as we gradually stabilize operations in Mexico with those higher demands, those part -- a big portion of that, those elements should be phasing out in the rest of the year. We may still have a little bit of extraordinary costs in the second quarter because the demand has been way higher than what their facilities can cope with, but we are doing all the adjustments to our operations to make sure that we can cope with that increase in demand. So yes. So those are the main drivers on the results, which unfortunately, that was compensated or was partly compensated -- or that's why you don't see so much of the effect of the acquisition contribution in the quarter.

The next question on the line is from Emilio Fuentes from GBM.

My question is regarding whether you've heard or see any stop start production requests on North American and European customers related to the ability to source memory chips or other electronic components. Do you see any risk on that side similar to what we saw coming out of the pandemic?

Yes. Emilio, Herve speaking. No. So at this stage, we don't see anything of that. As I said, we see the demand the customers being very strong and remaining very strong in North America for what we do supply over there. It is clear that we are also in a very dynamic environment. So nobody knows exactly what can happen. And since COVID, we have seen that uncertainty was certainly one of the key elements of our industry. But so far, we don't foresee anything when it comes to the level of activity coming from a potential shortage of losses.

Our next question is from Pablo Dominguez from Debtwire.

And also congratulations, Herve on the appointment. I have a very brief follow-up on the comments on the divestments and then 3 questions on GF operations and the transaction. The follow-up is if you could remind us what those around $26 million in assets held for sale referred to? And then regarding the GF, out of those $189 million in revenue for the E-Mobility Structure & Chassis segment in 1Q '26, how much does that corresponds to? Then regarding the GF debt, if I recall correctly, in the previous call, you mentioned that you were assuming $44 million in debt from GF. But looking at the BMV report, I'm seeing that you are disclosing around $63 million in Georg Fischer debt plus $17 million in debt related to the Georgia plant, so that would amount to $80 million. So I'm wondering if those $80 million is the final amount of the that you eventually assume? Or is that after the closing of the transaction and through the end of the quarter, you increased the debt related to Georg Fischer? And then lastly, I'm wondering whether -- I saw in the balance sheet the line -- short-term and long-term other provisions among the combination of those 2 amount to around $140 million as of the end of March compared to only $10 million as of the end of December. So I'm wondering whether you are including the remaining installments for the acquisition of GF. And if so, whether that's a nominal value or discounted at present value? And if it's not there, where you are accounting for those future payments.

Thanks, Pablo, for your questions. Yes, the -- what you see on the balance sheet as assets are for sale, those are certain operations that we have already discontinued, particularly one operation in Mexico, which was -- became idle, and we moved part of that production to our office facilities in Monterrey. So part of that is the real estate that we have there, plus other assets that we are also keeping from other facilities that -- or other facilities that will be also being sold in the next months. But again, these are all real estate and other assets within those facilities that are in the process of being closed. Related to your question around the assumed debt, the -- as you correctly point out, and as we discussed, the $80 million -- the $44 million of debt is what we assume from the integration of Georg Fischer. But there is also vendor financing associated with the transaction. So that amount adds to the total amount that you see there on the balance sheet. Out of the -- your second question related to the other revenues. So revenues of structurals and EVs that we reported the $189 million the amount of that, that corresponds to Georg Fischer acquisition stands at levels close to $100 million of the new component sales of the acquired entity. And last but not least, you correctly point out these other provisions, that's where we included those other amounts that are pending with the seller. If you recall, we highlighted that we will be holding certain amounts for any type of contingency that could happen in the future. Those amounts will be released on a yearly basis for 5-year periods, depending on those contingencies, not materializing. So most of the account relates -- or a big portion of that account relates to that.

So Alberto, can we assume that -- so those amounts that appear in the balance sheet and those other provisions liabilities. Is that cash that the company will be disbursing? Or simply if no contingencies emerge they will disappear from the balance sheet, but there will be no cash flow related to that?

Exactly. If no contingency happens, we will release it. If there is a contingency, we will keep part of that, but it's not the entire 140. I mean that includes other accounts as well, operating ones. But then there is a portion of that, that relates to those holdbacks that will be released if no contingency happened.

Okay, I see. And a follow-up on the business from GF. So you said that around $100 million are coming from GF. So that means that it would be around only $90 million for Nemak legacy e-mobility, structured chassis compared to $110 million in the same quarter of last year. So what's the reason for that decrease?

Yes, maybe that $100 million might be around $90 million, $95 million around, I mentioned a small amount. But yes, the corresponding effect of the Nemak side is fairly stable, maybe a small reduction of $10 million, and that's essentially the way on production schedules are being laid out in the year. So the amount of SEV of the legacy business part is relatively stable from last year to this year. .

The next question on the line is from Chelsea Colon from Nuveen.

I have 3 questions. The first one, just following up on the last one on GF. Can you disclose about how much EBITDA came from GF in the quarter?

We're not disclosing exactly the amount of EBITDA of Georg Fischer as it's, again, embedded in the entire business. But what we can tell you is that their EBITDA contribution is pretty much aligned with what we were expecting on a yearly basis. You recall, we had on the EBITDA levels the company has amount to levels close to between $70 million to $80 million. So pretty much aligned with that on these 2 months that we are consolidating the business for. Certainly, that number will start becoming more positive as we ramp up Augusta and as we continue developing businesses, both in Europe and Asia.

Okay. Great. And secondly, can you just clarify, is there any impact at all to you guys with regard to the change in the aluminum tariffs in the U.S. and aluminum-related products?

Yes. No, no impact to us on that side. The components that we deliver to the U.S. are not subject to any of the tariffs on the Section 232 of aluminum.

Okay. So your components are exempt. Is that because you're sourcing the aluminum from like the approved trade partner countries?

Well, it's 2 components. On one side, you have that Section 232, which is the special investigation on the imports of primary aluminum and our products don't qualify for any of those products listed on the Section 232. And then second, under USMCA, our components by meeting the regional minimum content, those get no tariff associated with the reciprocal tariffs that were enacted.

Right. I just thought that there was a change in the past few weeks to the 232.

Yes, our products are not part of the annex of the products listed on that -- on the...

Yes. Okay. Got it.

Yes. The change was to add tariffs not only to the aluminum portion of those items listed there, but the entire value but it did not increase the list of items -- well at least not our products were not included in the list because our products are high value-added types. So they are not products that maybe disguised as products but the naturally end up being just primary long.

Okay. Great. Understood. And then lastly, in terms of capital allocation, you mentioned that you plan to continue on share repurchases, and your leverage has ticked up a bit. So I'm just wondering how we should think about capital allocation going forward in terms of prioritizing deleveraging versus share buybacks versus growth?

Yes. We will continue -- I mean certainly, the main focus of our capital allocation is to assign capital for our strategic opportunities that we have. We anyhow keep a very tight control on the capital spend. The numbers this year, as I say, was guided in the previous conference call, increased because certain acquisitions -- certain investments that we're doing in the U.S. for the Georg Fischer operations. But we are not planning to increase that any further. And with the cash that we're generating from the business, we should be able to self-fund those investments. And any remaining cash will be used partly to buy some shares as we have done in the past. As we indicated, we have already an approved program of up to $50 million of buybacks of shares. We're not expecting to use everything, but we will certainly continue doing in a similar manner as what we have done in the past. So that gives us still room to continue deleveraging by generating some extra cash and as well as the effect of the EBITDA contribution on our leverage. So I would say that in order as far as the strategy of the business, but a very good or let's say, with a very strict objective to keep that to the minimum and then use the remaining balance to primarily delever and a little bit of share buybacks.

The next live question is from Andres Cardona from Citi.

I'd love to get some ideas of how you are thinking the USMCA negotiation? Where are you hearing from your advice or consultants or what things may be more regional content, perhaps introduction of USA type of thing. So just wanted to hear from you what are you hearing, what are you thinking how it could affect your business?

Thank you, Andres. Herve speaking. I'm going to take this one and give a shot. I mean, the way we see it. I see it. And I'm quite fresh in this business, but I have a quite long experience in this automotive industry and in the U.S., in particular, I think we are really on the safe side. So nobody knows exactly what this new USMCA rule could be. But when we look at the nature of our business, we have a setup, which is largely production in region for region, and we have local sources of material. So I don't expect any negative impact coming from the renegotiation of the new USMCA rule in 2026. Once again, is believing. Let's see what comes out of those negotiations. But so far, all the indications that we have received rather positive and confirm that this is going to continue as it has been so far without any input for us.

Okay. There are no more live questions, so we'll move on to the written questions. We have 2 questions from [ Declan Hanlon ] from Santander. The first one refers to the extraordinary expenses and commercial compensations, which were already addressed. The second question reads, please discuss the level of working capital cash usage in the first quarter?

Yes. Let me ask that second question. The -- as you know, the seasonality of working capital is quite high during the year. Normally, the working capital drops by the end of the year associated with the reduction in activity from our customers and then picks up as that production picks up further. So this quarter was no exception with, let's say, a fairly large increase in working capital. Part of that is associated because we have extraordinary positive working capital situation in the end of 2025. So part of that growth that we saw is associated with the normal cycle. And another part is the normalization of the extraordinary positive element that we saw on the last quarter of 2025. .

Thank you, Alberto. The next question is from [ Javier Garzalosano ] from Citi. How would a sustained rise in aluminum prices affect the company's sales and margins in 2026 and beyond?

Well, certainly, we have seen aluminum prices increasing, particularly because of the situation that we saw on the Middle East. Some of you may be aware, some of the primary smelters located in the area were affected by some of the military actions that we're seeing there. So that unfortunately trimmed a little bit the capacity globally of primary aluminum. And that, together with the energy prices has pushed the aluminum prices to a higher level. But remember that all -- in all our cases, aluminum as a pass-through. So we essentially pass on the price effect of aluminum to our customers through the formulas that we have with an adjustment period normally stands at about 1 month. So every month, we adjust those prices. We just have a temporary effect while the price gets adjusted, but that gets normalized quickly. So we don't see ourselves with any, let's say, net effect associated with the higher aluminum prices other than we will see an uptick in revenue for that reason with no down -- with no bottom line -- real bottom line effect. And certainly, that may drive a little bit of lower received margins when you look at it on a percentage of sales basis. But we will certainly be disclosing that as we move along. But for now, the impact on the net margins is on the absolute is very, very small, only a little bit of metal lag, but when you look at the margins, there may be a little bit of a reduction on the percentage, but not on the absolutes.

The next question is from Rodrigo [indiscernible] from Santander. Can you give some color on your net leverage target? What are the main upside, downside risks to that number? And how are you thinking about handling the upcoming debt maturities?

Yes. Yes, just to highlight, as you saw, the average ratio increased a little bit in this quarter, and that was mainly associated with the acquisition of Georg Fischer, which we import in February this year. So we will see a slight uptick from the 2.4x that we have been trading in the last year to levels of close to 1.8x. This should gradually be reducing to levels closer to what we had last year, not there, maybe a little bit higher, but we should be reducing that leverage ratio as we move along the year and generate cash. Our targets remain the same. We're looking for eventually achieving something close to the 2x net debt to EBITDA, which should happen within the next 2 years, if everything goes well. And as we continue focusing ourselves on deleveraging by both cash generation as well as increase in EBITDA. And related to our debt maturities, as some of you may be aware, we have no major maturities for the next 2 years. So '26 from now to the summer of 2028, there are no major amortization. Our first amortization happens in the summer of 2028, and for that specific amortization, we are actively looking for opportunities on how to address that amortization. We will certainly be sharing with the financial community once we take decisions on how to proceed, but we will act as prudent as we can in terms of the refinancing of that facility. So we will be working on that diligently. That's something that most likely will happen at some point this year, but certainly, provided that the market is at favorable levels.

Thank you, Alberto. There are no further questions at this time. And with that, we conclude today's event. I would just like to take this opportunity to thank everyone for participating. Please feel free to contact us if you have any follow-up questions or comments. This does conclude today's earnings webcast. Have a good day.