Sogefi S.p.A. (SGF) Earnings Call Transcript & Summary

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Sogefi Full Year 2020 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Mauro Fenzi, CEO of Sogefi. Please go ahead, sir.

Thank you very much. So good afternoon, good morning. Before starting with the presentation of the 2020 full year, I would like to inform you, if you didn't see on the press, that I am, today, leaving Sogefi. So this will be my last call with you on this subject. On the other side, here with me, virtually, I have Frédéric Sipahi, who today took the Chair of Sogefi. So before starting myself with the presentation, I would ask Frédéric to have a couple of minutes of introduction to all of you. Frédéric?

Thank you so much, Mauro. And first of all, thank you also, Mauro, for everything you have done these last 12 months for Sogefi. So I am Frédéric Sipahi, 40 years old. I am at Sogefi for almost 10 years now. I had first started career as Controller, Business Unit Controller, then CFO of Air & Cooling and Filtration and then General Manager of Air & Cooling. And the last 2 years, I was in charge of Air & Cooling and Filtration business units. Before joining Sogefi, I worked 5 years at Faurecia and 3 years at Peugeot as Controller. So I am very excited to be with you today as a first. Thank you very much. And thank you, again, Mauro.

Thank you, Frédéric. So now we go straightforward to the point, I would like to start from Slide #4, which is reporting, as usual, the last quarter highlights. We are talking about quarter 4 of 2020, of course. So let's start with the revenues. The revenues achieved in the last quarter, EUR 364 million, a value which is very close to the last quarter of the previous year, 2019, even slightly above last year, 2 years' quarter results. The increase has been driven in Sogefi mainly by 3 geographical areas: China from one side, thanks to the market recovery, which has been pretty fast and very effective; India for a similar reason and then in North America, as well. In North America, as you will see later on, is not only because of the market, but it's also because Sogefi is launching new projects that are delivering in this period of time revenues as well. Going to EBITDA. The EBITDA is EUR 39 million, slightly below the last quarter of 2019. It's 10.7% on sales versus 12.3% of the last quarter 2019. But it's very useful to remember (sic) [remind] you that the EBITDA has been reached by a combination of a higher contribution margin, which in this challenging period has been a very good result, I think; and the lower fixed cost ratio thanks to all the actions that we implemented last year to minimize the cost and the cash out. This has been balanced by higher restructuring charges, which are achieving EUR 30 million, but we are going to talk about this later. If you take the EBITDA without restructuring cost, the margin reached last year 15.4%, which is higher than the previous year result, which was 13.4%. Going at EBIT level, the quarter has shown a EUR 4 million positive result versus EUR 5.4 million same period 2019. Again, if we exclude restructuring cost, the EBIT quarter level would have been EUR 21 million, equivalent to almost 6% on the sales versus a EUR 9.4 million equivalent to 2.6% in 2019. So this, again, is a very positive result of the recovery of the company done in the last period of last year. At the net income level, unfortunately, the result is negative EUR 12 million, but again, we have to keep in mind as well the restructuring cost which affected the last quarter quite heavily. On the cash side, the free cash flow of the quarter has been positive EUR 8.7 million versus EUR 9.9 million of the last quarter, 2019. And the net debt went to EUR 291.3 million versus EUR 256 million end of 2019. We have to remember that in end of September, the net debt was almost EUR 300 million. So there has been a recovery. If we jump to the next slide, which is Slide #5. We see the sales by geographical area. Again, we are talking about the last quarter. As you see from the table, we overperformed everywhere with different ratio, slightly better in Europe. Very, I think, important overperformance in North America and the same as well in South America and China. Going to the sales by business unit, which is Slide #6. We see, again, the last quarter, Air & Cooling did a report change an increase of almost 7 point percent (sic) [ 7% ] with respect to the 2019 numbers. So Air & Cooling reached EUR 113.6 million with a very good and positive trend on the sales side. Filtration as well has been slightly below, but has been, again, positive as well with a 4% reported change increase. Suspension, that I remember (sic) [remind] everybody that we are going to talk about Suspension later on is playing on a geographical footprint, which is mainly European driven, has been affected on this side by the market and reported sales in the fourth -- in the last quarter of EUR 121.7 million, minus 4% with respect to last quarter of 2019. In Slide 7, we decided to show, again, the comparison quarter-by-quarter with the effect -- the different effect on the breakdown. So you see that we did -- we had a EUR 2.2 million GAAP positive on sales. We have seen the sales volumes before. But what is also very positive is that we had also a EUR 1.3 million positive effect on the variable cost. I remember, again, that the period has been very challenging because of the -- I would say, the stop and go of the production and the availability of components and raw material. Fixed costs contributed, again, a positive way, EUR 3.5 million. And then on the write-downs, we had also a contribution positive, almost EUR 5 million. As I said at the beginning, this has been balanced by the decision to go for restructuring, and this is a negative value of EUR 13 million. Now having said that, I will leave Yann the task to drive you through Slide 8.

Thank you, Mauro. So Page 8, revenue, as Mauro pointed out, up by 2%, and I also remind plus 8.9% at constant exchange rates. Cost of sales, also variable costs, we improved the ratio from 68.8% down to 68.4%. And what's very relevant is a strong reduction of gross fixed costs, which are down more than 2 points versus Q4 of last year for a similar revenue. Mauro pointed that Q4 was impacted by far higher restructuring cost, as you can see, EUR 17 million of restructuring costs, mainly related to the closure of a plant in Germany for Suspension and the ongoing social plan in Filtration plant. And as pointed out, this gives a better result in EBITDA if we take out the restructuring costs, far better than in previous year. D&A is slightly down. Write-down also down versus the same quarter of last year. EBIT, excluding restructuring, more than 3 points above last year. We have to take the hit, but you can see that the ongoing performance of the company is improving. Financial results, we are slightly heavier. Income tax, it doesn't happen often that we have a very low-income tax charge. The really important factor is the last one line, which is the net income from discontinued operations. We have sold Filtration Brazil at the end of 2020, and we also have sold our Filtration plant in Spain in January 2021 and these are the impacts of the 2 operations. So as a result of which, between the discontinued operations and the restructuring costs, we end up the quarter with a net loss of EUR 12 million versus EUR 5 million side last year. Moving on to Slide 9. In terms of cash flow generation, you can see that we ended up the quarter -- usually Q4 is a good quarter for Sogefi, slightly lower than last year for Q4. This is an exceptional year, and we had a very good recovery in Q3. As you can see, we have a less favorable impact in working cap, and we'll see that as well on a full year basis. And we compensated the shortfall in funds provided by operations by more focused CapEx investment.

Thank you very much, Yann. Now we go to the full year. So we go to Slide 11. So at full year level, the revenues were slightly above EUR 1.2 billion. In '19, it was EUR 1.464 billion. So it's down 17.8% on a reported basis and at constant exchange rate, it's down 14.2%. You will see later in the next slide that in any case, we overperformed in all the regions. For example, in Europe, we went at minus 18.1% at constant exchange rate versus a market underperforming at minus 23.3%. At EBITDA level, full year, EUR 137.6 million against EUR 177.4 million last year. Also here, we need to see that at percentage level, 2020 was very close to 2019. We are talking about 11.4% in 2020 against 12.1% of '19. The volume impact -- negative impact has been, again, here mitigated by reducing the gross fixed cost. On the other side, at full year, we have more than EUR 30 million restructuring cost. I remember (sic) [remind] you that in '19, the same cost category was EUR 9 million. Also here, we did an exercise. We excluded restructuring from EBITDA. And in this case, in 2020, we reached 14% against 12.7% in '19. So a much better percentage on EBITDA if we exclude the restructuring impact. At EBIT level, again, full year, we went at EUR 7.2 million against EUR 48.4 million in '19. In this case, of course, the volumes -- so the revenues impacted the number. And the also nonrecurring charges, as we said, went in the same direction as well. On the net income level, we closed the year with minus EUR 23.2 million versus EUR 8.3 million end of '19. We have, again, to highlight a couple of points here. The tax charges are, in this case, minus EUR 3.6 million against EUR 13.5 million negative value in 2019. And as Yann highlighted before, there is also the impact of the sale of Brazil and the Spanish plant, which are impacted for an amount which is very close to EUR 15 million versus EUR 8 million of the 2019. On the free cash flow, here, we talk about minus EUR 34.1 million, but we have to highlight if you remember that the last quarter on the free cash flow level went positive like the third quarter of last year. The net debt closed at EUR 291.3 million versus EUR 256 million of 2019. Also here, we were end of September at EUR 300 million on the debt side. So I would like to go to Slide 12. The Slide 12 is just summarizing the actions, the highlights of 2020. About the footprint optimization, as been already mentioned, affected mainly Filtration business because we are talking about 2 location producing Filtration products. We did, like we mentioned before, an action plan last year, which has been executed to reduce the fixed cost as well, either using the social tools where available in the countries applicable, like also using reduction -- permanent reduction actions where possible. On the financing side, probably you remember already the presentation of the last quarter. We secured the medium-term financing needs of the company, but we'll have a slide later on to talk about this point. I confirm again after having said this in the last calls that we decide to protect the investment for Suspension on the Eastern Europe perimeter to be more competitive very soon on the market. This has not been affected by the emergency of last year. And we did also efforts to protect the new powertrain technologies' development, mainly in Air & Cooling, in order to be on the market in the right spot and to offer solutions that are in line with the market. Of course, I'm talking about EV and I'm talking about hybrid cars and powertrains. Now we can go, I think, on Slide 13. Here, we see the favorable geographical area full year. Again, we overperformed in all the geographical areas, also at a full year level. Europe, in this case, has been overperforming pretty well. North America, South America and China as well is even better. I remember (sic) [remind] you that on Europe, Sogefi at group level is doing revenues for almost 60%, 62% of the full revenues. Now we go to the next slide, which is Slide 14. As usual, I present you the trend customer-by-customer year-on-year. Every time, I remember (sic) [remind] you that the development time of our products are pretty long. So the effects of the other acquisition are coming usually 2, 3 years later. But the trend is going in the direction that I discussed with you in the last calls. So we have the German premium brands like Daimler and BMW, which are growing, as you see, already considering 2019. And the U.S., brands like Ford and GM doing the same with a very positive price. Going to the sales by business unit, which is Slide 15. At full year, Air & Cooling went at EUR 362 million against EUR 466 million almost of 2019. At constant exchange rate, it's minus 11%; filtration, minus 8.1%; and suspension, for the reason I told you, went at minus 22.7% on a year-by-year comparison level. On the business awards, I'm going to Page 16 now. Also here, I have to confirm what I told you already during the last quarter call that Sogefi in 2020 signed new contracts in line with the previous years. So despite of COVID, the order acquisition didn't suffer. The second bullet is -- I already presented this last time. We got from a premium German OEM for Air & Cooling a [ relevant ] or on the manifold side. This is very important for 2 reasons. One is because it's strengthening the leadership of the division in this technology. And second is also using aluminum, which is the new trend for most of the OEMs. So it's really confirming the good trend of the business unit. On the same business unit, almost 25% of the order acquisition are for hybrid and full electric applications. The Suspension business got a very key order from a North American full heavy OEM. And also the Suspension business is getting a relevant portion of orders on the same type of technologies, which are hybrid and full electric. On Slide 17, we show, again, the same EBIT comparison between '19 and 20 with a breakdown. Of course, the volumes affected pretty heavily the EBIT side on this year, reaching EUR 85 million GAAP. But again, also at full year, so not only the last quarter, but this is also at full year level, fixed cost actions amounting at EUR 44 million and the efficiency on variable costs, which are amounting at almost EUR 6 million have been able to balance partially the gap that we had on sales. Write-downs are positive of EUR 12 million and restructuring we talked about are affecting EUR 17 million on the opposite side, the GAAP analysis between the 2 years. Now, Yann, if you want to comment the P&L.

So Page 18. We are not going to hide, it was a tough year with sales down 18%, especially after Q2, which was ugly. If you remember, we had sales down by 56% in Q2. But the company reacted fast, and we have described to you in previous calls all the efforts which were made. And thank you, Fréd, for the work you did in Filtration and Air & Cooling because these are where most of the action took place. And action to reduce gross fixed costs, you can see that the gross fixed costs went down more than the sales. And all the restructuring plan is aimed at lowering the breakeven point of the company by fixing our industrial footprint. So all in all, of course, less EBITDA than last year. But if you exclude the restructuring costs, as Mauro pointed out, 14% EBITDA versus 12.7% last year, so very preparing for the future, and you will see us more, obviously, quarter-by-quarter. Same in terms of write-downs because when you clean up your operations and decide to optimize your footprint, we had to do some write-downs. And you can see, we had EUR 13.6 million of write-downs, let's just say, more than EUR 4 million more than in the previous year. All in all, EBIT, excluding restructuring, still below last year at 3.1% versus 3.9%. But as you will see, we've [ bounced back better ] in the second half of the year. Financial results above last year, which is to say, it is a cost for us. But we took all the financing we could in the midst of the crisis, and now we are safe with medium-term financing, which I will describe later on. Saving on income tax, a good effort result because we pay less income tax such because we have less revenue. What is important is the split of the net income because you can see, we ended the year with a net loss of EUR 35 million, of which EUR 15.5 million linked to discontinued operations. So it no longer will be with us last year. And the net income of operating activities is a loss of 20 -- EUR 20 million EUR, but after EUR 30 million of restructuring and EUR 13.6 million of write-down. If you move to Slide 19, I think it says more, Slide 19. It shows how ugly the first half of the year was, sales very much down with an indicating fact, both on EBITDA and EBIT. As a reminder, we closed the first half with a negative EBIT of EUR 12 million. And even without restructuring, we had a loss in terms of EBIT. So very detail second quarter, especially, like most companies in the automotive. Q3, far better. Although the volumes were not yet totally there, you can see that EBIT, excluding restructuring, was at 6.7%. As a reminder, last year on a full year basis 2019, we closed at 3.9%. So 6.7% in Q3, 5.8% in Q4. So as I said before, all the company was focused on improving its operational performance and preparing for a future which still is uncertain. That's to say we are preparing the company to fight against volumes, which probably will remain lower than [ previously ] for a while. And I believe that the EBIT level business restructuring shows that we are going in the right direction. Net income as you can see in terms of operating activities, as they say, they show Sogefi of tomorrow, a loss of EUR 21 million in the first half and slightly positive in the second half. Free cash flow, of course, the first half was ugly. A cash flow result IFRS 16 of EUR 71 million, a good recovery of EUR 28 million in Q3 and still a good performance in Q4 with cash generation of EUR 9 million. If we go to Slide 20, this is the cash flow on a full year basis. Of course, the first line tells you something, less volume, it means less funds generated by the operations. We fought against this cash trend by reducing our CapEx. You have seen, we reduced our CapEx by EUR 20 million versus the previous year. Despite the investments, we haven't touched the investment of new Suspensions plant in Eastern Europe. This plant is key for restoring the profitability of Suspension. So this was safeguarded. But nonetheless, overall, a saving of EUR 20 million versus the previous year. And what you can see is that the main impact all in all of the year is a working cap impact. Mainly, we carry less suppliers at the end of the year than in previous year. On the other hand, as you can see, the level of restructuring is quite similar than it was at the end of last year. And so all in all, a free cash flow plagued IFRS 16, which is a cash burn of EUR 34 million, but you can see EUR 32 million from the working cap, and I believe we shall recover this negative impact in the coming years. And at the end of the day, we end the year with a net debt of EUR 291 million versus EUR 256 million last year but after a good recovery in the second half of the year. If I move to Page 21. As I said before, the top priority was to secure new financing. As you know, in October of last year, we signed and cashed EUR 135 million of new loans, medium-term loans. So these are loans with final expiry in 2026. As a result of which, at the end of 2020, the group has committed lines in excess of EUR 340 million. This is not an unusual surplus. As a reminder, EUR 100 million of those EUR 340 million will be used when we repay the convertible bond in May of 2021.

Thank you very much, Yann. Now as usual, we cover the business units. So if you don't mind, we go to Slide 23. As usual, we start with Suspension. On the sales side, on the left, we see the reduction between '19 and '20. We have already seen it in the previous slides. We are talking about a minus 22.7% at constant exchange. And I -- again, I remember (sic) [remind] you that the geographical footprint on which Suspension is operating is -- has been last year much more difficult than they are on us because we are talking about mainly Europe and the second area is South America, which has been strongly affected by the volume reduction. Nevertheless, on the right, you see the EBITDA of the business unit, excluding restructuring. And you see that there's been -- the business unit has been able to keep the same percentage compared to the previous year 2019, which is 9%. This has been really possible for many reasons. One of it is the material cost that up to year-end were in the favorable direction. Restructuring, I think we talked already. The new Romania plant, again, has been protected. And on the EBITDA level, unfortunately, had a negative impact of EUR 2.5 million. And then on the total gross cost, we have to remember that the business unit is operating -- was operating last year with EUR 22.9 million, which has been a decrease compared to the previous year, but unfortunately, an increase in percentage year-on-year because of the volumes decline we had. So now if you don't mind, Frédéric, maybe you can talk about Filtration and Air & Cooling.

Sure. So Slide 24, we can start by Filtration. So as you can see, the sales are down by 8% at constant exchange rate. This performance is thanks mainly to our aggressive attitude on OES and aftermarket, which helped us to recover the loss on the OEM market. We had also a major decline in the South American market and Indian in the -- mainly in the quarter 3 and quarter 4. But when we look at the percentage of EBITDA, excluding restructuring, you can see that in percentage, we have been able to increase by 2% with decreasing volumes. What does it mean? It means that we have flexed much more of the fixed costs and also improved our profitability and gross margin, much better than the sales of -- the decrease of sales. The good news, the decrease on fixed cost that you can see of EUR 20 million is down, as Mauro mentioned, with some structural actions -- sorry, contractual action. So actions like the social help we get from the government and the countries. But we have implemented long-term and medium-term reductions and that will help us as a carryover in the coming months and the coming quarters. So on Filtration, we have been very aggressive during this tough period on the fixed cost reduction in order to restart with lower breakeven in the coming years. When we look at the Slide 25 for Air & Cooling, the decrease of sales is at 11% at constant exchange rate. In Europe and North America, we have been, of course, impacted by the COVID. But in China, we recovered everything we lost in the first quarter of 2020, and we have done much better sales than 2019 by almost 25%, mainly thanks to new businesses we acquired in the last years on the Cooling part of the business unit. The EBITDA, we have been able to improve one more time at 19% thanks to a strong reduction of the fixed costs again and also a good profitability on the programs that we acquired. The EBIT is at 5.4 versus 5.8 in '19. Of course, the -- to amortize the depreciation is more difficult with lower sales.

Thank you very much, Frédéric. So now, as usual, the last couple of slides, I'll talk about the future. So I would go to Slide 27. As usual, we show in this slide the last IHS forecast. Here, we are talking about -- because the situation is changing month by month, so it makes sense to highlight. We are talking about February, so the last forecast IHS did, February 2021. On the left, you see the comparison between the full year 2020 and the last quarter of the year. You see the recovery pretty well in this slide while on the right side, you see the forecast of IHS year by year, measured with respect to the previous year. So let's talk, first of all, about the current year, which is 2021. Before going to this number, I remember (sic) [remind] you and I well remember (sic) [remind] you as well in the next slide that the visibility on the market, by the way, still remains pretty challenging because of the situation. COVID is not over, unfortunately. But IHS is on 2021 forecasting a recovery, which will be quite important on North America. You know pretty well that North America is a very dynamic market. They suffered a loss during COVID. But if you look at the recovery last year, in the third quarter -- in the last quarter has been impressive. So they say that the recovery will continue, that there is a 25%, 24% positive improvement with respect to '20. If you go to the comparison between '21 and '19 North America is forecasted to be at a recovery level at the end of the year. This is not happening on the other 2 regions, which are Europe and South America. Unfortunately, both of them are below -- are expected to be well below the '19 levels in '21, Europe at 10% negative and South America at almost 8% negative. South America, as you see on the left side, has been strongly impacted by COVID on the market. You see that among the regions has been the worst last year on the market side. So the recovery should be, as you see, quite aggressive. But nevertheless, they will not reach the same level '19 at the end of the year. A different picture, of course, is on China. China, as you see, already recovered, if you want, almost everything at the year-end last year. So the recovery will continue. And on this side, this account it is showing even a slight increase '21 on '19 because they are talking about 1% more. If you see the coming years, of course, the visibility is -- it is what it is. So when we talk about '22, '23, '24, it's much more difficult to be right, I would say. Nevertheless, also here, the recovery is expected to continue in '22, almost in all the regions. While in '23 and 24, the recovery in Europe and in North America is expected to be less effective. In South America, the recovery will continue also in '23, while in '24, it's expected to be a little bit less positive. China is expecting to grow 4% year-on-year in the coming 3 years on the period we are talking about. Now which is the outlook on '21 we see at Sogefi? We had a very strong recovery, as you have seen, in the last 2 quarters of the year, but this should not really be considered too much positive for the future because the visibility, as we discussed, is very low. And still, the COVID rules are -- even if vaccinations are starting and give a little bit of -- from this point open for the coming months. But the visibility is also quite difficult because some lockdowns could be implemented, for example, in Europe, pretty soon. The -- in the last couple of months, additionally, the raw material availability and price has been very unstable. So we have seen difficulties in having the material in quite some time in some areas. And also the price is showing a very nervous trend in the last period of time. On top of it, I think that the automotive market today is also affected at the customer level by the availability of a very small component, but very key for the car, which is semiconductor. This semiconductor is very difficult to be found. Some of our customers are showing some difficulties in keeping the production rates in all the plants for all the models, as expected. And this is also combined with the last difficulty, which is transportation or logistics, mainly from, I would say, from China, from Asia to Europe and North America, mainly. Today, it's very difficult to be fast and effective in transportation as well. On the other side, as you have seen, IHS is forecasting a rebound this year, pretty important. And Sogefi has been, again, quite careful because as incorporating the expectations, of course, in higher market with respect to 2020, but still lower probably than 2019. I think that what is very important highlight, as Yann and Frédéric said before, we implemented actions in all the business units in order to lower the fixed cost. And this will, of course, help this year, even if maybe the volumes would not be at the level expected. And this will be, I think, very conservative and important to remind you. Of course, having said that, Sogefi is expected to return in 2021 into a full year positive result. So now I think we went through all the slides of the presentation. I think we are on time. And as usual, I leave the last part of the call to the questions you may have on this challenging year. Thank you very much.

[Operator Instructions] The first question is from Monica Bosio of Intesa Sanpaolo.

The first question is on the outlook. I know that it's very difficult to make projections for 2021. But with a plus 13% increase in car production, the first question is do you expect to perform at least in line with the car market production trend? And the second one is on the EBITDA margin, 15.3% in the last quarter of 2020 and 14% in the entire 2020. I know that in 2021, the group will have to face raw material prices increases, transportation cost increases, bottlenecks from the chip in the sector. But can you give just a rough idea of what could be the EBITDA margin before restructuring in 2020? And we take as a proxy the 2020 level or maybe raw materials will penalize more than this? And the very last, can you give us an indication about the potential restructuring charges in 2021?

Monica, Mauro talking. So I try to reply on the 3 questions. About the outlook, as I said, Monica, the outlook today is -- and the visibility is pretty low. So the situation is getting a little bit better. We expect, of course, the peak of crisis last year. But on the other side, we are having challenges and challenges, Monica, because the lack of material at OEM level has been a new point coming out, as you probably know, in the last, I would say, 4 or 6 weeks. And by the way, we don't have visibility on when this trouble will be really over because it's a very critical component going to the electronics of the engines, and there are very few producers globally that can do it. So what we did on the outlook has been, Monica, to be, as usual, quite conservative on the volumes. So with an improvement, of course, with especially last year. But what is more important is that -- and we go to the second question, that we protected the EBITDA with real actions on costs. There are actions on costs, Monica, that are giving the feedback, a positive feedback along the year, along with the current year because they're ramping at the moment. So the trend of cost will improve month by month. And with this, we are quite, I would say, confident to deliver a good result year-end. In the net visibility, the market is what it is because, to be honest, as I said, the lack of components is a new point, which is -- was not known up to 6 weeks ago. About the last question...

Restructuring. As you may have seen, we have done our homework in 2020. We have booked EUR 30 million of restructuring costs as a result of which, for the time being, we do not plan to have much in terms of restructuring costs in terms of P&L in 2021. Probably a normal level than in usual years.

So lower than in -- obviously, 2020 is not a reference year, but lower than the previous years?

Yes.

Okay. Sorry, the line is a little bit noisy, and I cannot hear you well.

But Monica, it should be below EUR 5 million next year for the [ year ].

The next question is from Martino De Ambroggi of Equita.

The first question is on the strategy because we saw a couple of divestitures, small, but loss-making. Should we expect any additional similar action going forward? This is on the strategy. And the second is on the issue you already commented, steel, plastic transportation costs. Could you remind us what is the coverage policy you are able to exploit? Because I remember, steel, you are able to recover it, but with some lag, and in any case, not 100% and probably the same for plastics.

Sure, Martino, Mauro speaking. So let's go to the sales we did last but also this year because Spain has been executed in January. At the moment, on 2021, we are not forecasting any other sales like the ones you have seen. On the other side, I do not exclude them in principle. But in our forecast, we didn't include any additional actions like this. About the coverage, I don't know if I got 100% your question, Martino, but I try to reply, then you tell me if I was right or wrong. If you talk about the raw material fluctuation cost versus the customers, there are, of course, contracts and contracts in our business, depending on the customer and the projects also. Most of them are covered. Of course, the coverage, you need to discuss with the customer. And some of them are automated, but some of them need some efforts. It's a difficult period for everybody, including our customers. So the discussions are, unfortunately, in this last couple of months, on the table almost every day because the price fluctuation is pretty dynamic in this period of time. I don't know if I replied, Martino.

Yes. If I may, just a very rough indication on what could be the percentage of raw material costs covered by automatic adjustments, although with some time lag? And what is the uncovered percentage very roughly?

Martino, it's very difficult to give you this indicator because contract by contract, the type of coverage is different and there are gray areas too. Most of them are covered by the way. So we are on the right side of the -- but it's also a difficult period as well because also the customers are suffering the same issues.

Yes. Yes. That's clear. If I may, a question for Frédéric, welcome. So being responsible for the Filtration and the air cooling, what is the normalized profitability in, let's say, normal time, once they will be back, for these 2 divisions in the medium term?

Thank you for the question and nice to meet you too. So it's quite difficult to answer because what was normalized before 2020, I'm not sure the norm will stay the same after the COVID situation and after 2020. So I think it would have been very easy for me to answer before 2020. Right now, the norm is very difficult to evaluate. Why? Because basically, the normalized profitability is based on the acceptance of the company to get some business at one profitability or to let go some businesses when you don't reach this profitability. And right now, it's very difficult to estimate the impact of the COVID crisis, plus all the CO2 regulations, the electrical car rate, the hybrid cars that are coming. And what will be the impact on the profitability of the consumers and the factor, the pushback that will be on us and on our shoulders. What I can see is everything what Mauro said is totally right. It will be our business model. In 2021, we will have crisis of supply chain, crisis of material to solve. I think we will be able to manage this situation. At one point, there will be a stabilization, both of the shortage and the prices. So right now, the first one we are preparing is to -- let's say, to be able to have a squeeze neutral, means if the materials are increasing, to get back as much and as quick as possible from the customers. Then as we said before, we have done a lot work on the fixed cost point of view in 2020. There will be a carryover in 2021. But we will not benefit from all the helps we get from the government in 2020. So we are missing this in 2021, and we will need to get it from actions. So I don't know if 2021 will be the year where we can beat in Air & Cooling and Filtration a percentage what we have done. Nevertheless, a good target for me could be to keep the percentage we have been able to do in 2020 with much higher sales, which de facto will convert in EBIT. I'm sorry, I don't answer with a sharp figure. Why? Because I have been appointed a few hours ago. So give me a few weeks and a few months before fixing the standard answer profitability of the group and the business units. And second, because we are in a very, let's say, strange period where everything we knew is changing. But I don't see that -- let's say, of course, it may be a risk, but I see more opportunities than risk in all the change that I foresee.

Okay. When you talk about -- it's difficult to repeat the same profitability of last year for the Air & Cooling, are you referring to margin as a percentage of sales or in absolute terms?

No, not in absolute. I was speaking in percentage. De facto, in absolute terms, we will be helped, in theory, by the recovery of the volumes. In Air & Cooling, if you look at 19% of EBITDA, of course, we can always look for a few points more or maybe we can have a few points less. When I say a few, it's 0.5, 0.5. But the real question, for example, of Air & Cooling, I think, is not if we can have 20% or if we will have 18%, it's trying to keep in percentage the same profitability what we can invest from an R&D, CapEx point of view in order to prepare the future within 3 years, 4 years when the electrification and hybridation will increase. And that's what I'm doing for a few years now in Air & Cooling. It's not just to deliver a correct percentage year after year, it's also invest and prepare the future, which is very important in our business, as you know, especially in the engine side.

If I may, a very quick question on CapEx projections.

Yann, do we have -- I don't know if we have a figure. I'm sorry, I don't have the answer right now for the group.

CapEx, we cut very sharply in 2020. We believe we should be roughly at the same level in 2021.

Okay. And Mauro, all the best.

Thank you very much, Martino.

The next question is from Alexandre Raverdy of Kepler.