SAF-Holland SE (SFQ) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the SAF-Holland SE conference call regarding the H1 2021 results. [Operator Instructions] Let me now turn the floor over to your host, Mr. Schickling.

Yes. Good morning, and welcome to the H1 2021 Analyst and Investors Conference Call of SAF-Holland. This morning, we have published our full set of numbers as well as the presentation slides used in this call. Your hosts today will be our CEO, Alexander Geis; and Inka Koljonen, our CFO. We will start with a presentation followed by a Q&A session. This call is scheduled to 1 hour, and we will try to cover as many questions as possible. I now would like to hand over the microphone to our CEO, Alexander Geis.

Good morning, everyone, and a very warm welcome to our today's H1 2021 call. This is Alexander Geis speaking. And together with our CFO, Inka Koljonen, we will be presenting our H1 and Q2 figures today. Your SAF-Holland performed well and we, the executive team, continued our profitable and sustainable growth path. Our today's presentation consists of the highlights of half year 1 2021, our financial performance and the outlook for the remainder of the year. Please let's get started on the next page with the highlights. Our group sales in half year 1 2021 reached EUR 608 million versus only EUR 476 million the year before. This sales increase was driven by all our 3 regions. Due to an increase of sales, a favorable customer and product mix, our cost discipline and despite massive raw material increases, we increased our adjusted EBIT from 5% in H1 2020 to 7.7% in the first 6 months of this year. Our CapEx ratio equaled 1.4% of sales. Safeguarding material availability and longer logistics ways were the main drivers for our net working capital ratio of 14.8%. And last, but not least, our operating free cash flow came in with a positive EUR 7 million. More details and the quarterly distribution we can see on the next page. Starting with the upper left, you can see that our sales increased by 27%, adjusted by FX by 32%. Especially, Q2 2021 came in with a strong EUR 323 million, driven by all regions. Speaking of adjusted EBIT, we reached a solid 7.7% for the first 6 months with even a slight increase to 7.8% in Q2 of this year. Strong performance despite heavy cost increases on the material side. Absolutely worthwhile to mention that our restructuring costs are significantly down from EUR 9.4 million in H1 2020 to now only EUR 1.1 million in the first 6 months of this year, and Inka will come back to this later on. On the next page, I will start with our region EMEA. Sales in EMEA reached EUR 361 million, which is a plus of 34% or 36% FX adjusted. Strong increase in all product groups, trailer, truck and aftermarket. Beginning of April, we already ramped 1 of 2 axle plants up to a 3-shift operation. And beginning of May, then the second plant, 2. Our 2 axle plants in Germany, our Turkish axle plant as well as our fifth new plant in Germany are fully booked, and we are increasing our capacity further. Special thanks to our sourcing and supply chain teams who manage material excellently. Due to a favorable customer and product mix and a strong aftermarket, our adjusted EBIT came in with 9.8% versus 8.0% the year before. Speaking in quarters, Q1 was 9.6% and Q2 2021 with 9.9% adjusted EBIT. Next page for Americas, please. Here, sales came in with EUR 195 million, which is an 11% increase or 22% FX adjusted. Especially in the second quarter and with EUR 105 million, we had a solid quarter again. Our truck business, which consists mainly of fifth wheels and truck suspensions, is running well with actions underway to further increase capacity, too. Trailer business is strong, which means for us, all product groups there, axles, suspensions, landing legs and kingpins. And also our aftermarket business is running excellently with increased sales. Speaking of adjusted EBIT, we can report a solid 5.5% in H1 2021 compared to 2.6% the year before. Looking at the quarters, you can see a 6.0% in Q1 versus a 5.1% in Q2 of this year. Main reasons are the extraordinary increase of raw material and logistics costs as well as production ramp-up costs in Q2 in the U.S. A big portion of our OE business is with truck OEs, where we have a 3 to 6-month delay of steel price recovery. And that means that our Q2 steel price increases we got we will get back from our customers in the second half of 2021. APAC on the next page, please. Here in APAC, sales increased from EUR 34 million in H1 2020 to now EUR 52 million, which is an increase of 53% or 55% FX adjusted. Despite another COVID outbreak in India in Q2, the team managed to keep our high market share there and continued producing to overall achieve EUR 25 million of sales in our APAC region in Q2. And the good news is that our adjusted EBIT reached 1.7% in H1 2021 versus a negative 6.9% the year before. Q1 this year with 1.4% adjusted EBIT, and the second quarter came in with 2.0% adjusted EBIT. And now I would like to pause for a while and hand over to Inka, please.

Thank you, Alex. So good morning also from my side, and we would continue directly with the CapEx investments. So here, we see the CapEx development on a quarterly basis for last year's quarters and this year's quarters year-to-date. So we see that the CapEx ratio as of sales went down from 1.9% in Q1 to 0.9% in Q2. So that represents 1.4% CapEx from sales for the first half year. We see that we are below or lagging behind our full year guidance of 2.5%. Main reason for this is timing issues. You know that CapEx spending is not a linear topic. But we have here also bigger topics, which are punctual then. But the reason is also higher growth than expected. And this means that the percentage ratio is going down, obviously. Nevertheless, we expect a catch-up for the second half year. And overall, content-wise, we are talking about investing in further automatization. Of course, efficiency increase. But in this environment, it means also capacity increase punctually where it's needed. And originally, we are talking then also about the high-growth regions. So we are investing especially in the EMEA region, but also Americas. Less in APAC, which we have been highlighting that here we have a state-of-the-art factory. So on the next page, we have the net working capital development. Net working capital, clearly driven by growth. You see here inventories going up, receivables going up driven by growth, obviously. At the same time, the sales of the last 12 months have been increasing steadily and strongly. So therefore, overall, the ratio of net working capital as of sales is a little bit deteriorating, but more or less stable at the high level of 14.4% in Q1 and now 14.8% in Q2. And reason for this is really -- and you know this all. We've been discussing this in separate meetings throughout the year. We really do have a special cycle with extreme tightness in supply chain. And in this special growth situation and supply chain situation, we want to do everything to secure availability of products to our customers and to be able to deliver in this high demand environment. So therefore, we have been really consciously building up net working capital in the first half year, but I really do expect that the situation will ease up to some extent in the second half year. So on the next page, we see the same topic from another perspective. We're talking about the cash conversion rate. How do we define the cash conversion rate? We say we come from the EBITDA of EUR 34 million in Q2. EUR 23 million, so these are rounded numbers now that I'm referring to, is then invested in net working capital build-up. And that leaves us with an operating cash flow of EUR 12 million in Q2. So that represents about 35% of cash conversion. So this means that the 35% of the EBITDA has been -- we have been able to convert to cash, which is then available to invest to CapEx and free cash flow. And again, what you can see here from last year's quarterly development, that in the second half year, the situation and the net working capital trending turns around. So this is what we also expect for this year, as mentioned before. Then on the next page, we see our balance sheet structure and the debt situation. Think here very positive news. The structure is further improving significantly. So the leverage is down to 1.75x EBITDA. So we are already quite significantly better than the defined target range of 2 to 3x. What is the main driver here? It's clearly the strongly improved EBITDA. For this ratio, we used the unadjusted EBITDA of the last 12 months. So here, clearly positive development and further improvement is expected as the EBITDA recovers in the future. What does this mean for us as a company? Definitely it increases our flexibility regarding any investments into the future. And here, our strategy regarding balance sheet and M&A remains unchanged. Yes, and with these remarks, I would like to hand over back to Alex for the market data and for the outlook.

Thank you, Inka. On the next page, I would like to summarize how we see the markets for whole 2021. And here starting on the left side with Europe, you can see our new numbers for the truck business is expected to grow somewhere between plus 25% to plus 30%. Trailer, also very bullish with the plus 20% to plus 25%. And speaking of North America, truck, plus 45%, still very bullish. And trailer also with a plus 45%. South America. Truck, plus 45%; trailer, plus 20%. And here, a reminder that we have a suspension specialist, KLL, in Brazil, which produces a lot of truck suspensions, and we are quite happy with that. China. Truck, somewhere neutral with 0 to minus 5%, so a slight decrease. And trailer with a minus 5% to a minus 10% decrease. India, very strong with truck plus 115% and trailer with a plus 100%. Here, a reminder that we acquired 2018 company, York, which is an excellent suspension specialist. We are located in Pune, India, and we have about 60% market share in the trailer business, which we can really see now in the market developments. What does that mean for us as a summary? That means for us a significant rebound in North America and India; higher volumes in Europe and South America; and China, lower volumes. Next page, please. Your SAF-Holland delivered a solid half year 1. Despite all difficult circumstances like COVID development, logistics issues and raw material challenges and given the solid order intake in all our major regions, we as an executive team feel very confident by raising our guidance as follows: Starting with the sales. Sales to be up from a range of EUR 1.050 billion to EUR 1.150 billion before to now sales of between EUR 1.1 billion to EUR 1.2 billion. Adjusted EBIT up from before around 7% to now around 7.5% in adjusted EBIT. CapEx is unchanged with around 2.5% of sales. We are benefiting from the upswing in Europe, North America, Brazil and India based on leading market positions. Our structural cost discipline safeguards strong operating performance. We do have a disciplined approach to manage accelerating customer demand and working capital investments in recovery cycle. And as Inka said, a further deleveraging is expected. And material price impacts are including in our revised full year guidance as well. Our company is in good hands, and more is to be expected. Thank you for your trust in us, and I think we are now open for any questions you might have. Thank you.

[Operator Instructions] And the first question comes from Mr. Philippe Lorrain.

A couple of questions from my side. So perhaps first on the raw mats inflation impact on margins. It looks like EMEA was not really feeling anything and that the situation there is just really good. Surely, there's a product mix effect that in the region seems to be mostly with trailer products with lower steel content and more processed parts. So besides that, is there anything in particular that you would like to highlight as well that is really bringing up these margins? And perhaps as well, would you share with us where you see these margins heading to in terms of midterm potential?

Philippe, this is Alex speaking. Well, I would like to take that question in regards of EMEA. Of course, we are not guiding any margins in steel prices. Or in the future, we cannot do that, of course. But what we can share is that I think there is no company not having any troubles with raw material increases. I have never seen that. Like this year, the scrap prices are just skyrocketing as steel prices are at an all-time high. And well, the secret is basically -- and I have to -- just to come back to what you said about the steel content in trailer products. This is not really quite -- like you said, of course, our excellent suspensions, they have also a very high steel content because they are made of steel and all the parts are made of steel. I think first of all, we have a team which is excellently dealing with steel price increases. We, of course, get them in, but we balance that with also on the sales side with increases because we have to pass that on. It is possible to do that quicker than on the truck side, which is a delay somewhere around 3 to 6 months by contracts. So basically, we already did some price increases towards our customers on the trailer side, but also on the aftermarket side. Then what also helps to counterbalance the steel price increases is economics of scale. So we have a much higher output. As I said before, in Europe, we ramped up in April the one plant -- the biggest 1 already to 3 shifts. And in May, another 1 to 3 shifts. All our plants are running with high capacity. Output is really good. Economies of scale are counterbalancing that. And of course, we have to watch that very carefully for the remainder of the year. But as I said with my last statement, material price impacts for the remainder of the year are also included in our revised full year guidance now. I hope that helps.

Yes. Yes, that's true. I get that on the steel content. I was just thinking like relatively speaking versus a fifth wheel, for instance. It's more like, let's say, via the purchase of processed parts, which means you're not probably just like 100% or directly hit by the increase in the raw mats. That's what I was meaning with the comment. Perhaps like a second question related to the topic as well since you mentioned that you take into account the raw mats situation in your guidance. But by how much do you reckon that your prices go up in this environment due to the passing through of this input cost inflation to your customers? And I guess, probably there's a difference between aftermarket and the OE business.

Maybe I can comment on that. Just on the first part, at least, we don't make our own price assumptions. We are not raw material price forecasting experts so we really use here official data of the market experts. And the second part, Alex, maybe you want to answer on that.

Well, on the aftermarket side, it's a little bit easier to increase prices because most of our, let's say, customers in the aftermarket sector are dependent on us. And it's a little bit easier to increase prices. Of course, you have to also stick to, let's say, the timing to do such increases. And on the OE customer side, we are not speaking about any data or percentages because this is internal data. So we are not willing to share that with the outside world. But also here, of course, if you get high material price increases in the company, you also have to pass them on, on the customers.

You were mentioning as well that you can pass on these raw mats price increases basically to your trailer customers a bit quicker than in trucks. Why is it so? Is it because the customer base is a bit more fragmented and the customers that you address now tend to become a little smaller versus the past when you had like the top 3 guys in Europe?

Well, I wouldn't say that it's easier to pass on price increases to trailer customers than to truck customers. Everybody -- every company, of course, is, first of all, denying any price increases, of course. It's been a matter of negotiations. And of course, our customers also see on their purchasing side because everybody is buying steel, of course, for their structures. And for the trailers, for instance, they know what's going on, but it's, of course, due to negotiations. And I think the teams did very well on both on the sourcing side, but also on the sales side.

Okay. But I understand correctly that you pass through the price increases quicker in trailers than in trucks?

Not to all trailer customers.

Not to all. Okay. Okay. Okay, perfect. The last question is more for Inka. It's about the M&A targets and strategy. So could you remind us a little bit of your typical targets and strategy? I think you were mentioning in the Börsen-Zeitung interview that you want to be quite conservative now. So -- and you mentioned as well that the strategy is relatively unchanged. So any refresh here would be helpful.

Yes, absolutely. So -- but the remarks and always -- the strategy has always been kind of also related to the balance sheet structure. So I've been saying, and this is always valid, that the priority is to have a solid balance sheet structure. And last year, when I started, we were really on, I would say, on the edge of where we want to be. Now meanwhile, we have managed to improve the leverage ratio, and I would say we are really in a very good situation. But I mean, overall, what is the strategy? The strategy is that we are -- and how we deal with this topic is that we, on a regular basis in the management Board meetings, have a look at a potential target, analyze strategic fit, valuations and so on and then discuss if there's -- if we see a potential for us. So this is really basically unchanged. Focus and priority is to have good balance sheet structure. And a part of that, on a regular basis, we are reviewing targets.

Okay. Perfect. And I guess now with the situation that you've got, you probably monitor a little more like what's happening in the selling market rather than like a year ago.

It's true. It's true. And what I also said in the interview, and Alex and myself are aligned on this and the whole management Board, is that we would rather do something which makes really a strategic difference for us, right, rather than adding maybe a small topic. So that's my view on this.

The next question comes from Nicolai Kempf.

Nicolai Kempf here from Deutsche Bank. I appreciate that APAC is stabilizing right now. But do you think that the slowdown in China post the emission laws could slow this recovery? And my second question would be a bit on the guidance. I mean post-H1, you had 7.7%. You guide for 7.5% for the full year. But do you understand that -- from the raw mats side, do you expect that to ease a little bit because you pass it on to your customers? What are the other headwinds for the second half of the year?

Let's start with APAC. Well, actually, basically, our APAC region consists of India, where we have a big production facility; consists of China, where we also have a very big production facility; Australia, New Zealand and Singapore for Southeast Asia. This is basically where we have our subsidiaries and also our manufacturing or our assembly plants. First of all, I have to admit, I'm very happy that we went from a negative now. We turned the wheel coming from a negative last year to a slightly positive 2.0% now in the second quarter. I'm not happy with the 2%. Our margin in APAC should be not dilutive to the group as a target to us, and we are working on that. We take now India. We are happy with the development also. For Pacific, we are quite happy. Also Southeast Asia, we are still working on getting more market share in China and filling our production there. And once this is happening -- and we are targeting only the premium segment, which is air suspension and disc brake, plus export of landing legs into specifically North America. Once we have achieved this, also we then can see that the margins are going up further. And as I said, our internal target is that no region should be margin dilutive. Does it help for APAC?

Yes, that's clear.

Okay. And maybe, Inka, you want to answer or come back to the 7.5% in our guidance.

Yes, absolutely. So regarding headwinds in the second half year, so I think it's general unsecurity and question marks about raw material price. But also not only raw material price, but in general, the price inflation. So it's -- I would say it's a mix of those 2. And then, of course, our own mix and product mix has been helping us also in the first half year. So this is also quite a situative topic. So I would say no specific big headwinds expected for the second half year, rather a general conservative approach.

Okay. Makes sense.

Nicolai, maybe the last, yes, let's say, saying from my side. I think you listened to what I said before. When I said we feel very confident by raising our guidance as follows, we want to stay cautious. As Inka said, we don't know what's happening in the second half year with parts being available. I really wonder how our teams manage that we really fill every single shift at the moment. They do an excellent job, and I hope we also can achieve this for the second half year of this year and then it should be really good.

[Operator Instructions] And the next question comes from Johannes Ries.

You can hear me?

Loud and clear.

Okay. Maybe some short follow-ons to the questions before. Maybe first with the price increases compared to the higher cost for materials. Only give us a feeling, do you think with the time lags, you nearly can fully pass the material price increases to your end customers because it's -- at the moment, you think the strength of the market more sellers than a buyer market? Is it possible? Or is it too optimistic like other companies turning now only 70% or 80% are possible?

Well, basically -- and to be honest, we do not want to tell you a percentage here. But I have never seen that a company was able to recover 100% of steel price increases. This is a very delicate situation where you are in. First of all, you have customers. You don't want to lose the customers. Of course, you also have to fill your productions. And I spoke about economics of scale before. This is really important for us as well. But basically, it will be a very high percentage we are targeting to get back from our customers. But I've ever seen that a company was able to recover 100%.

Okay. But in the other way, if surprises come down, do you have to give everything back to the customer?

It's a big wish, but you don't know our customers. They are really good in negotiations, of course. Once steel prices are going down, for sure, there will be talks.

Okay, clear. That's clear. The question is only if you have to give them -- it's the same way in both direction. Maybe on the development -- the margin development you have on APAC. How fast or how -- what's the reason that there's this difference in the U.S. to Europe? And how fast we can close the gap? What is to do there? Maybe what makes the difference that you are close to 10% in Europe and around 6% -- 5%, 6% in the U.S. despite booming markets on both sides of the Atlantic?

Here, I have to go back a little bit in time. You know that we did a plant consolidation in 2017, which totally went south. That means we didn't do a good job at that time. We had big issues then to recover in 2018, 2019. The team was very hard working in 2020, 2021 by consolidating our production, increasing the fill rates but also reducing the complexity of all our products. Give you an example, basically, what we did now in the product group of fifth wheels, we have more than 2,000 different fifth wheel configurations. You have to match that, okay? And about 95% of those were for 80%, 85% of the sales. So basically, we narrowed that down now to less than 500 million, so only 25% of what we had before. Of course, you lose 1% or 2% of sales, but your cost comes down. And we are further working on that. We are not done yet. There is more to come, but I'm very happy with the recent developments, not only on the truck side with the fifth wheels and with the truck suspensions, but also on the trailer side. Target is clear that we are not selling any product anymore with negative margins. We're not here to exchange money or to lose money. We're here to increase the value of the company for our shareholders. And this is what we are doing. And we said that in the past as well. We were in the ballpark of the EMEA regions before in Americas, and this is our target. I'm not saying when and how we are going to do that. But this is clearly the target also for Americas, and the potential is there.

Like you said, no region should be dilutive. Only a side remark, I hear that in the U.S., in the industrial space, it's partly hard to find people. Have you any problems with attrition and hiring people in U.S. fab?

Well, we also faced the same issues with that. We have a couple of plants where the availability of workers or workforce is very limited. And I have to say, what the U.S. administration did with the stimulus package, in my point of view, is not really helping because they pay the money to stay home. And basically, they get more money by staying home than getting money while they are working. This is not really helping. This is also what we faced a little bit in Q2 in the U.S. When I was saying ramp-up costs or production ramp-up costs, we had to hire temps at a higher price than before. Yes, we have to pay the money for this, but we're also now working and already working -- or did work before on a risk mitigation for the future on this. We also have a big plant in Canada. We have a big plant now in Mexico for 2 years now. We are further ramping up.

Okay. How is the utilization difference between Europe and the U.S. in your fabs?

Well, if you give me 25% more capacity in the U.S. on the truck side, I would be very happy. We can sell that easily. So we are fully booked. Really 6 days, 24 hours around the clock as we do here in Europe with 5 days, 24 hours. On the trailer side, we are booked not at 100% in the U.S., but we are working on that. But as I said before, our focus of our team is to grow profitable. We're not selling anything at a negative margin, and the team is working on that. And we now, again, lucky us, see a shift back in the U.S. to air suspension and air disc brake that was a little bit paused in 2019 and 2020 specifically during the COVID time. And we see now a recovery, and we are selling much more disc brakes now in the U.S. And we hope that, that continues in the future as well.

Because yes, they have a structural driver. That's clear.

Yes. Yes.

On APAC, still the most lagging part of your business or -- despite the improvements you have seen there. So way -- so much longer than in the U.S. And China is, I think, the most -- the highest -- India is much more profitable than the average, I think, in APAC. Is that right?

Well, we are not guiding any specific production facility or country in any region. And you asked before what is the difference between Europe and the other regions. In Europe, we are the market leader. We have much more than 40% market share. We are the clear dominant player in air disc brake. And Europe is air disc brake and air suspension only. There is no mechanical anymore, less than 1% or 2%. And also the drum brake is less than 20%. If you carve out the U.K., it's less than 10% for Continental Europe. Once China is even more pushing and we saw the legislation turning in 2019 and 2020 also more towards air suspension combined with air disc brake. This is where we are good in. This is what we are focusing on. Then also here, we get higher economics of scale. And once in China we get higher market share in the premium segment, then I have good faith that also APAC will be -- we could be happy in the future then with APAC as well.

Okay. Underutilization is the highest in APAC? Clear. Is there any -- yes?

Not in all plants. But if utilization would be as good as in Europe or in the U.S., then we would be very happy.

Totally clear. Okay. There was one question, but it's a little bit out of my mind. It was more general. Okay.

And the next question comes from Hans-Joachim Heimbuerger.

Two questions from my side, if I may. First of all, slightly stronger than expected recovery of the markets in 2021. Can you give us a little bit of feeling what is the sentiment and the mood of your customers going into the next year? And the second one would be, can you give us guidance for the full year on the adjustments to the EBIT line you are likely to see?

Okay. May I recommend that I take the first question and the second one leave to Inka then? So speaking of the bullish markets recovery, yes, there is recovery, but please keep in mind that 2020 was a disaster. So basically, in all the regions, trailer and truck build rates went down drastically. So basically, everybody has to eat. And you have logistics, which is increasing heavily due to the fact that during the COVID crisis, the people tended and still -- they are still doing that. They are ordering online. Everything is being transported in small boxes, okay? I typically use the example, before, if somebody got 200 pairs of shoes, that was in one pallet being transported in a trailer. Now everybody is ordering online and not going into the cities and buying the shoes in the shops. So basically, there are 200 pairs of shoes now sitting on 5 pallets maybe. So what I would like to say is that the transportation volume increased heavily. There's a shortage of trucks and specifically trailers in both in EMEA and also in North America. And this is why all the fleets are keen on getting more trucks and trailers because the business is there. And also with the interest rate policy on both sides of the ocean that also is really helping because money is cheap and people are investing. We are fully booked in all our plants in Europe. We are fully booked in the plants in the U.S. until end of the year. We even shift or confirm orders into the first quarter already of next year here in Europe, and that's a good sign. And we really watch that carefully, but there are no signs that the orders are not continuing to come in, which is a good thing.

Then on the adjustments, we have 2 adjustment lines, right? And this is unchanged. And one is for the depreciation and amortization of the PPA. Here, the number is unchanged. So we are talking about for the first half year of EUR 4.6 million. So for the full year, you can expect double of that. And this is not going to change so much midterm because the amortization period is very, very long. The second line is the restructuring cost line. Alex mentioned this quickly. Restructuring costs are significantly down from somewhere around EUR 9 million in first half 2020 to about EUR 1 million in the first half year this year. For the remaining part of the year, we do expect some restructuring. And I guess, there will be need for restructuring also on a regular basis on a smaller level, but we're not talking about similar order of magnitude like in previous times. So a really low single-digit number is what we expect here for the full year for restructuring.

And the next question comes from [indiscernible].

Two questions from my side. First is the guide. Are you happy about the momentum of gaining new customers in China? Maybe you could comment on the progress you make on this. And the second one is on the aftermarket business, which had a very strong comeback in Q2. I would not guess that these volumes could be seen in the next quarters also, but maybe you could comment whether the H1 sales volume of aftermarket could be a guidance for the total year.

Okay. First, speaking of China, I will be then satisfied if a production facility or a country or a region is double-digit margin. This is what we are working on, okay? That would be really good in China. We have a state-of-the-art facility. It's not utilized fully yet. We're working on that. And also once we have created the population on the OE side with our disc brakes and air suspension, we also can earn money in the aftermarket side. Teams are working on that. It's the way to go. Of course, you cannot change a market within 1 or 2 years. But as I said, we have a good team. We have a state-of-the-art facility. We have now a good product for that market, and we are working on achieving better results there. On the second question on the aftermarket. Aftermarket is basically very stable for us in normal years. Also in peak years, of course. If you have a shortage of trailers, more trailers will be refurbished and then you need aftermarket parts. But also in the recent years, our aftermarket, specifically in the EMEA region but also on the Americas region, North America, is very stable. We are surely increasing -- slowly increasing the overall sales by keeping our profits there. And also, please don't forget that we pumped in the last couple of years huge populations of axles, air suspensions in Europe, but also axles, air suspension and fifth wheel specifically in North America, and those parts need repairs. And for those repairs, you need our aftermarket spare parts. So I'm very happy with the development there.

And the next question comes from Sebastian Mueller .

Congratulations for your results once again and also what you've been doing on the margin. Just a quick question as the order are really booming. In fact, I guess, historically, the visibility as well has been as strong as it is now. How do you monitor nevertheless the risk of any inflated order? Because we've seen this in some industries, where the client wants to be sure they get delivered and there is clearly some behavior of inflated order. Is it something that you monitor? How do you deal with this? Is it a topic or not?

This is a really good question you are raising. And indeed, we are monitoring them on a weekly basis. We are in very close contact, not only by telephone but also face-to-face with our customers. We meet with them. What we basically do, we see their production rates. We know our share of their markets. And also then we see if they try to place some orders which we cannot understand. We come back to them. And basically, most of our orders are fixed placed orders for deliveries in upcoming weeks. We only have a limited number of customers having frozen zones. That means they can shift orders within 3 to 4 weeks of maximum. But this is, I'd say, a percentage, we are not risking any orders that we then could see to be canceled. But indeed, we are monitoring that together with our customers by using their build rates, our market share and our production capabilities in axles but also fifth wheels, and we don't see that yet.

And the next question comes from Philippe Lorrain.

Yes. A couple of things. I just wanted to make sure I understand the comments you made like a little bit earlier. You said you will be satisfied only if originally it's double-digit margin. Do you mean like EBIT margin?

Well, you can see the numbers we achieved in Europe. That was a hard work over the last couple of years. With 9.9% now in the last quarter, we are very close to that. And if we have a really good, strong OE business and then also strong aftermarket business, yes, this is achievable. And this is basically what you asked. The question was asked, what do I want? What do I see? And I said my wish is that originally it should be double digit and earning money and not being dilutive to the group, and this is what the whole teams worldwide and globally are working on. And the executive team is working on that. First of all, now we have to turn Americas. Now you saw our numbers, 6.0%, 5.1%. We are trending in the right direction. As a reminder, in '19, we were breakeven or even loss-making. Last year, APAC was loss-making. Now we are slightly positive. We are trending in the right direction. But of course, we cannot be happy with APAC with 2%. Of course not.

No. No. But the underlying question I got was that you typically have different mixes in the different regions, be it OE versus aftermarket, the product mix itself, trucks versus trailers and so on and so forth. And I was just wondering whether -- what you mean with all the regions should be more or less like on par in terms of margin, but there is no such big mix effect on the margin anymore going forward so that the share of aftermarkets normalizes across the whole group towards a certain level and these kind of things. So is it the way to see the situation? Or is it more like related, let's say, to only purely the factory utilization?

Well, Philippe, first of all, our midterm target we published last year is 8% by 2023. We stick to that midterm target. And we also said profitable growth at that time. But I have to repeat myself, a region with 2% or 4%, 5%, we cannot be happy and lay back. We are working hard on getting better in all the regions. And basically, you have regions, you have areas where you are not so much dependent on the aftermarket profits. You also can make money selling OE components. We have niche markets. We are a specialist for instance. This is also why we bought in 2018 York, but only because of the leading market position in axles and suspensions in India. But we are also one of the only ones of the few ones worldwide selling axles, for instance, up to 20 tonnes, okay? Very specialty products. And of course, if you have a niche market and you are the market leader in this, you have to earn money. And this is what we are increasing in different areas. Mining sector is booming at the moment. In most of the areas, Australia, Indonesia, Papua New Guinea, this is where our products are running and we are selling and we are running under steam. And we see good profits also on the OE side. So you're not all the times dependent on the aftermarket profits.

Okay. So I understand that correctly that it's not at all -- let's say this margin trajectory is not going to be driven by normalization, let's say, of the aftermarket levels across the group, but more basically like the different profitability levels among the different product groups that can offset this kind of mix.

Well, basically, it's easy. Don't lose any money in the OE business. If you are a niche player make -- also earn money in the OE business. And then if you can get the aftermarket, also increase your overall profitability.

And the last question comes from Johannes Ries.

It was a follow-on question I forgot. Only a clarification because you just answered a little bit before with another question from a colleague. Did I get it right, you don't said exactly anything about your order backlog or so -- but you said -- is it really covering, especially in Europe and U.S. in most parts without maybe trailer in U.S., the revenue for the rest of the year? Therefore, you have a much better or very good visibilities than you normally have.

Mr. Ries, the question before was, if I'm not mistaken, what is the utilization. And I said at the moment, we are running under full steam. But I also said before when I was guiding you guys through our presentation that we are working heavily on capacity increases. So for instance, it gives me a little bit more insight what we did in Europe. As I mentioned before, we have 2 big plants in Germany for axles and suspensions. We also have a -- since 2016, an axle and suspension facility in Turkey. We further ramped that up. And for instance, in July, the team was able to ramp up another friction welding machine in Turkey, which is a big, big machine, like 75 tonnes, which welds the stop ends onto the axle tube. We didn't have that before in Turkey. That was a little bit of a bottleneck because the German plants need to manufacture that axle pin component and then we send it over to Turkey. So by being able now to also manufacture that in Turkey itself, we have a slight release here in the production facilities in Germany, which increases the capacity further. And also in Turkey, we have now increased. So we are working on that. But also on the North American site, we also initiated beginning of the year some capacity increases and initiatives to do so. So we are able now in the next couple of weeks, months to further increase our capacity.

But the overall...

Yes, please.

Yes. But your order book is very good and you have a good visibility for the second half in most of your regions. That was the question, okay.

Yes.

There are no more questions.

Okay. Then if there are no more questions, we as the executive team would like to thank everybody listening to us. And especially, thanks for your trust and stay healthy. We'll talk to you soon. Thank you.