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

Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Sogefi 9 Months 2021 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Frédéric Sipahi, CEO of Sogefi. Please go ahead, sir.

Thank you, Elan. Good morning, ladies and gentlemen, and welcome to our 9 months 2021 earnings call. I think you all received the presentation, so we will go through it with Yann. And then at the end, of course, as usual, we will answer to questions. So could you please go to Page #4, where we have the highlights of the first 9 months 2021. So Page 4, I think we can say that we have good results for the first 9 months of 2021, in regards to the current automotive market situation, clearly solid on the sales side. I can say that in all regions, we are beating the market. I will come back in detail on that later. EBITDA and EBIT are much better, of course, than 2020, but also '19. And most important, a free cash flow positive by EUR 27 million. We'll come to this later, but I can say that to get this free cash flow, we have to improve the business model of all business units and implemented very strong actions in the working capital and CapEx management. I propose we go to Page #5, please. As I was saying before, our sales are much better than the market. Cost of raw material and transportation have increased during this quarter. I will give some more information when we come to Suspension, as still in one of the commodity, which increased a lot during this year. And we will explain, of course, in detail the impact on the margin of the quarter 3. Page 6, please. As you can see and as I was saying before, our model are quite diversified from a product and geographical point of view. It's paying as we are showing minus 5% of sales versus '19 at constant exchange rate with a market down by 15%. And if you look by customer, Page 7, so we don't have the change of customer portfolio versus June presentation. You can see, nevertheless, a big increase in BMW versus '19, thanks to the start of many new products that we launched in '20 and '21. Visiting Page 8 per business unit. You can see that Air and Cooling and Filtration are showing great resilience, thanks to the start of new business and also aftermarket and OES. Suspension is basically following the market trend with minus 14% versus '19 at constant exchange rates. Page 9, please. I will give more information in a few minutes after the financials sort of examination. But as you can see here, we have continued to be very dynamic from a business nomination point of view, and we will continue, of course, in the next quarter -- in the last quarter and next year. So now I will let Yann comment the financial slides. Yann, please?

Thank you, Fréd. So we move on to Page 10. As usual, we compare our results with 2019 versus the prior period. You can see the first box, no big news. Fréd mentioned that already. It's the impact of minus 9% of sales versus 2019. The second box is less positive than it was before. We already start seeing the impact -- the negative impact of the increase of raw materials, although it is partly hidden and I'll come back to that. The main takeaway of this slide is the following box. It's fixed cost savings, EUR 30 million fixed cost savings versus 2019. When you have start-up cost of Romania and as we mentioned at the end of Q2, strong positive one-offs versus 2019. So all in all, as you can see, an EBIT which stands at 5% when it was 3.8% in 2019 before COVID. Then we move on to Slide 11. So the 9% less sales we already commented. Contribution margin appears ahead of 2019 but will show in the following slides that it's not exactly like this. Restructuring costs below 2019. What is important is we mentioned this in our previous call. It's the net income from discontinued operations, EUR 24.7 million loss, including EUR 20.6 million of reversal of the translation reserve linked to the disposal of Filtration Argentina. I insist on it because it's an accounting matter. It's noncash. It is just a reversal of accounting impacts since I think 2004, so nothing to do with the operations. And as you can see, the net income of operating activities is still far ahead of what it was in 2019 at plus EUR 22.7 million versus EUR 12.1 million. If we move to Slide 12. Slide 12 it shows Q3. And Q3, as it stands in the current accounts, as you can see, Q3 contribution margin looks high at 31.7%. What we have done is that we have included in Q3 a special project, which Fréd maybe will comment later, which slightly distorts the numbers. And when we take it out, which is the comment on the right-hand side, you can see that contribution margin is at 28.4% instead of 31.7%. So we have really a strong negative impact of the increase of raw materials. Fréd mentioned this in our last call. There is a deferred impact. We are fighting to get it back from the carmakers, but it really already shows very strongly in Q3. Gross fixed costs, it's still the same. We are still doing our homework. And as you can see, we still have an EUR 8 million savings of fixed costs versus 2019 in Q3. Write-downs high at EUR 5 million in Q3. And then all in all, a result of net operating activities, which is a loss of EUR 2.2 million in Q3 2021. It was a profit of EUR 3.6 million in Q3 2019. I shall not comment too much on the following line, which is discontinued operation is what I referred to before in the reversal of the translation reserve of Argentina. If we move to Slide 13. Free cash flow, funds provided by operations are slightly distorted by the inclusion of the loss of the translation reserve. So if it was not included, it would be slightly higher than it was in 2019. As you can see, positive free cash flow on 9 months positive by EUR 26.5 million. It was negative by EUR 0.5 million in 2019. And as you can see, we have done a whole work both on working cap and CapEx. CapEx, this includes a high investment in Romania. So we have focused investments on the necessities of Sogefi. And at the end of the day, we ended the quarter with an NFP of EUR 267 million, which is in line with what it was at the end of 2019. And I'd say we have not pushed on factoring, because as you can see, factoring stands at EUR 87 million. It was at EUR 103 million 2 years ago. So we have not pushed up on this. We probably might have taken more factoring. Page 14, debt profile. I'd say not much change since our last presentation. We still have EUR 126 million of cash on hand, plus EUR 140 million of undrawn lines. We have started the negotiation of the lines maturing in 2022 and 2023, and we already are working to renew a first batch of EUR 50 million at the line. Then we move to the results by BU, so Page 15. Page 15, Suspension. As Fréd mentioned, it is 20% below 2019 in terms of sales. And also, the contribution margin stands roughly in line with what it was 2 years ago. Less sales means that we have less contribution. The contribution margin already is suffering because it's a BU which is most impacted by the raw materials. So the increase of iron costs already hitting the BU and it will keep on hitting it in Q4. Gross fixed costs minus 16% versus 2019. I insist on it, it's EUR 14 million fixed cost savings. This is a big saving, but not enough in view of the reduction of sales. So we are going to focus our actions in the coming quarters on improving operational efficiency, which will also imply reduced -- certain reducing fixed costs. Filtration is a different profile. As Fréd mentioned, sales roughly in line with 2019, minus 1.2%. And this, coupled with the 14.7% reduction on gross fixed costs generates a high increase of EBITDA, which also is slightly carried with positive one-offs. Air and Cooling, it's much the same. As you have seen, sales also in line with 2019, only 3.2% lower than they were at in 2019, which is far better than the acquisition of the market. Gross fixed costs, minus 11.2% versus 2019. And third, this generates a further improvement of profitability, which already was very high in 2019 at 16.4% up to 18.5% in 2021. Fréd?

Thank you very much, Yann. So I propose we move on to Slide 19, please. As I already explained before, we started the process of the project portfolio transformation in Air and Cooling and Filtration already a few years ago. And you will see in the next page that it is paid with new business awards. So let's go to Page 20. In Page 20 here, I decided to focus only on the pipeline of orders for full EV products or cars. Why? Because for hybrid cars, in fact, our products are for most of them already 100% compatible. And we have currently a very good portfolio of business in quotation in the pipe. And you can see in this page that 60% are for Air and Cooling today. And 34% of our quotation for the new route are for full EV products or cars. So that's quite interesting for the future because one of -- what is very important is that this quotation will obviously transform in business awards and then will transform to turnover very quickly in 2023, '22 or '24, which is very different from business for ICE application. So if we go to Page 22, here, we have a few examples of the business on which we have been awarded in this year, during this year. And you can see that we have 2 new businesses compared to June. One is for a premium German car maker and another for an American 100% LCV pure electrical player. So Page 23, this is the illustration of the project for the German premium car maker. And what is very important to understand here is that, in fact, in the project such this one, we have 5x more added value than an average manifold for Air and Cooling. And also, the process is very important because we have been awarded in this business, thanks to a new welding process, very clean welding process that we developed especially for these kind of products. In Page 24, it's a reminder of our innovation for Filtration with a feature HEPA, so very high protective feature. We have been awarded already in aftermarket in North countries of Europe, such as Norway and Sweden. And I'm sure that in the coming quarters and years, it will become very important in the rest of Europe, too. So we are very confident about this product range. If we go now to the market outlook, Page 26. As you can see and know as such we are forecasting a very low quarter 4 at minus 20% versus 2019. Here, I have to be very transparent for -- with you. It's not a surprise for us basically because as you may remember, we are seeing for 1 year now that we were prepared and preparing a very low 2020 year -- '21 year. So for us here, there is no surprise. Page 27, a room, a view on -- on focus on steel. So as Yann mentioned, we have been impacted in quarter 3 by the steel prices and the pass-through to customers. Here in this page, and thanks today, we were presenting to you only 1 index. What is important to understand is Sogefi business model is that in fact, we are purchasing 4 types of steel, and we don't purchase raw steel. We purchase already transformed steel, and each of the steel have an index to follow the trend of the prices. And as you can see and as you all know, of course, the indexes have increased a lot in 1 year. What is very important is what I will show in the next slide. So Slide 28. Here, you have a comparison versus the market price and oil prices. So you can see, in fact, in the curve of the Sogefi prices, which is in red, that there is a lag of 3 to 6 months between the evolution of the index increase or decrease and the impact in oil prices. Why? Because it's what I mentioned before, we are purchasing transformed steel and not raw steel. That's why in Q3, the impact is so big compared to the first quarter -- 2 first quarters because during the first 2 quarters, we have been able first to register an increase; and second, there is this lag of 3 to 6 months between the impacting in our prices and the indexes. If we move on to Page 30, as a kind of conclusion, if I may say. There has been, unfortunately, no surprise, as I was saying on the volume. We were ready and prepared for a very low 2021 year, with very uncertain markets. We expect in Q4 still low volumes and unstability in volumes and purchasing price, but we have reacted very well and quickly to these market conditions. All plans are integrated with various actions in order to mitigate the market impact. So we continue the view that we expressed during the first semester results, means to achieve the full year EBIT margin at least equal to the one that we recorded in '19, which was a different year for us. So we have finished with the presentation. Thank you for your attention. I propose we move on to the questions.

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

I have 3 questions. The first 1 is on the performance. With no doubt, Sogefi outperformed the market over the 9 months. I didn't see the slide regarding the third quarter, if you can give us some highlights on the performance on just the third quarter of the year. The second question is on the -- if you can quantify the impact of the raw material prices increases as a delta in the third quarter and if you can give us some flavor on the last quarter of the year. In terms of EV supply, 34% of the quotations are for EV. This will transform into revenues. Just a flavor, let's say, 3, 4, 5 years' time, what could be the percentage of EV sales at first for Sogefi? And the very last is on Romania. When do you expect to achieve the breakeven for the Romanian plant?

Thank you, Monica, for your questions. So I think your first question was about the Q3, right, the focus on Q3 performance. We have it in Page 12, in fact. So here, we have done a comparison versus the quarter 3, 2020 and '19. And as Yann was mentioning, yes, the quarter has been difficult mainly due to the fact that we had the impact of the steel concentrated in this quarter. So I think it was your second question. Basically to make it clear on the Q3 increase, it's exactly the one that we were expecting and that we mentioned during the June results. And at the end, the pass-through that we have been able to do to the customers has been very low during the quarter. Because remember, in fact, we have to wait end of the quarter in order to start the negotiations with our customers. So to give a flavor in the Q3, we have been able to recover to 1/3 of the increase, and this is mainly the contractual part. All the negotiation part is postponed to the quarter 4. So the specifity of quarter 4, in quarter 4, we'll recover the contractual part of Q4, one part of it, and the negotiation part for the Q3. So in the Q4, we still, let's say, expect material increase because even if the index are stabilized now, you have the kind of irrationality in the prices proposed by the suppliers also due to the increase of energy and CO2 and so on. And for now, the assumptions that we are -- and I think we are pretty accurate on it, is that we will be able to recover in the Q4 half of the increase expected in the last quarter. So the impact will be less than in Q3. So I can give you this flavor. And my assumption is that we will also improve the profitability of Suspension, thanks to the actions we launched compared to Q3 by 1% on the material and gross margin effect. Now for the EV, I think it was your question -- your third question. For the EV, yes, it's very dynamic. So basically, our conversion rates currently on ICE application used to be, let's say, 25%, means if you had a quotation of EUR 100 million, we were able to conduct EUR 25 million. On e-mobility, it's difficult to say because we don't have the same story and background. Our expectation directly, as you can see in our pipeline of orders currently, we are beating the market in full EV. So the fact that whatever it will be the percentage of EV penetration in the next years in the market, we will beat this rate, except, of course, there is a big revolution next year that I don't see. But currently, in our projections, we are beating the market from an EV penetration point of view. And we can already see it in our sales of 2022 and '23, which is a good thing because in the EV right now, it's very difficult to predict what's going to happen after 2026, '25, '24. But '22, '23 are very soon. And we can see that we are always above the market, especially, of course, in Air & Cooling where we started the mediation 5 years ago, and it gives us a big advantage with customers because we have acquired a know-how and customer intimacy during the past 5 years. And I have to say also the good surprise in Suspension basically, not because the products are special for EV. Of course, it's the same product. That's because we are already -- let's say, we have a good position on EV platforms of our customers. So my feeling is that Suspension could be -- could achieve a good penetration in EV products and cars and platforms. And right now, we are focusing, of course, on new customers 100 EV in order to increase this rate of EV. For Romania, this new plant, of course, we have to create this plant in a difficult year. Last year was not, let's say, the most easy year to create a facility in Romania. We have the issues with our suppliers in order to neutralize. Now we are catching up. We are normalizing the situation from an industrialization point of view and installations point of view, and we are now focusing to make it, let's say, profitable day after day, focusing on our material -- steel consumption material, wage -- labor wage, CapEx and free cash flow consumption. So I would say that usually when we creep into such a big facility in a new country, it can take to 3 to 4 years to make it profitable, especially in such an environment like what we are facing today, where the instability is big from a supplier point of view still because the situation is not easy because our suppliers maybe live in China and so on. So I would expect to come back to profitability as soon as it is stabilized from an industrialization point of view, and that the material consumption is normalized.

Our next question is from Martino De Ambroggi from Equita SIM.

Sorry to bother you on road map, but probably I missed the figure or if it's not available, just a rough indication of what was the impact of raw materials in Q3, first question.

It's exactly like we anticipated. It's very close to 2-digit impact. The growth figure and then the recovery, as I said, is 1/3.

Okay. So net-net is probably EUR 5 million, EUR 6 million?

Yes, you are very close to it, yes.

Okay. And probably will be less in Q4, we -- you mentioned?

Yes. If the indexes are as forecasted, it will be a bit less. Now what is very difficult to estimate is the irrationality of the crisis from our suppliers, plus I think you have all heard about it that you have the kind of crisis on the energy prices, energy availability. And currently, the suppliers are leveraging on it, saying, okay, the indexes are decreasing. But on the other hand, we have a crisis on the energy. We may have to shut down some factories during winter in order to save energy. So this will create an inflation in the prices or at least the price will remain the same. So the fact that we have today with our customers we are -- with our suppliers, sorry, it's to have the index effect of the decrease of the stabilization in the next quarter. But it's quite difficult to predict because you have in one side an uncertainty in the index. And on the other hand, let's say, a push from the suppliers in order to contain the pricing as they are. But if everything remains as we forecasted, yes, in Q4, the impact should be less and also our capacity to recover from customers should be higher.

Okay. Can we say, if I remember correctly from the past calls, you are able to recover through negotiations in 3, 6 months, let's say, 70%, 80% of the change in raw mat?

It's very close. In fact, it's not only from negotiation. You have the part of it which is invest in the contract. So this one, even if it's a fight with the consumers because they never volunteer to apply, you get it. And then the remaining portion is based on negotiation, it could be negotiations to compensate the increase of prices or not give the productivity that is each year we are productivity to give to the customers. So we do a kind of deals, and we don't deal with the productivity this year, next year. And okay, we'll compensate. But your ratio is correct. The 2 together are covering 70% to 80%. The big issue that we had in quarter 3, it's a time difference between the time you have the increase, and you are able to pass-through to the customers. You have a time effect. And of course, our customers are very good to play with this time, and we are changing in order to get what we have to get.

Okay. And very last one, raw mat always. Can we say that if the market doesn't change a lot, so it remains stable, you are able to recover in the first half of next year, you are able to recover -- fully recover this 70%, 80%?

Fully recover from an absolute value, it's difficult because you don't have many occasion to have retroactivity. So to recoup in absolute value in this regard, nevertheless, to recover in index point of view in order to not have a carryover for the next years is our target. But as you said, it means that the prices of the index are stable. So if it's stable, it's a game of you are right where we need to go back to the index where we need to be. If it decreased, then it can ever been another negotiation with the customers. That's why we are tracking very carefully where it will go in 2022 because it will be important for us.

Okay. Okay. And the last point from my side is on the guidance. First of all, IHS is projecting higher volumes in Q4 sequentially compared to Q3, up 15%. I don't know, should we expect you are able to outperform the market also in Q4 versus Q3? So should I expect a double-digit top line growth, others it's difficult because we never know if the client stopped production in the middle of December instead of Christmas time. But just to have an idea what is the trend in Q4 for top line? And also for free cash flow, what should we expect for free cash flow in Q4?

Yes. Good question and good point about December. My feeling is that December is going to be a long month of closing for the automotive, especially, I would say, the German and the French. So we are preparing for that in case it happens. I mean usually, it was closing 10 days, it could close longer in December, which will make sense for the whole industry because rather than cutting on November and October, the customers may decide to have a long break during December in order to save as much as possible costs. So my position is to be ready as we are going to plan today for the low market, for the low December, de facto, as we have done in time today, you will beat the market whatever is the market. The question is to know exactly what will be the market. But yes, we will beat it. But I prefer to be ready for big cuts and not forecasted cuts, which is the worst because you don't have time to prepare. That's why we are very agile. And each week, we prepare the potential closure of our customers in order to react very, very quickly and sometimes even to anticipate. So this is my strategy for the last quarter. I expect, yes, a low quarter, but to beat the market. And from a cash point of view, we will continue all the actions that we have implemented in the first three quarters, especially from a normalized point of view. I don't see a reason why our cash flow trends should deteriorate and continuing to push a lot on the working capital. And one thing about the negotiations with customers and suppliers that we have, for sure, we try to get the price increase from our customers and the price decrease or stable from our suppliers, but we are also pushing on the payment terms because at the end, cash is also key in our business. And I don't see any reasons why in Q4, we should have that surprise. And from a reporting point of view, as Yann said, we have been able to generate the cash that we presented to you without pushing too much the Factoring and over normalization tools. So I would -- if the market remains as forecasted, we will continue in this way.

Okay. So we should expect free cash flow generation ex Factoring in Q4 stand-alone?

As we have done the first quarter, the cash that we presented in normalized was reported Factoring, and Yann mentioned that we have not pushed the Factoring. So even report pushing it -- or reported is improving a lot versus '19 and '20. So yes, we will continue to push the cash in quarter 4. It's key. So I don't expect any bad surprises in cash lending of this year.

To your question, Martino. Free cash flow for the full year should be close to what it is at the end of Q3.

Okay. So basically 0 in Q4?

It might be slightly negative, but we are pushing to get to even.

The next question is from François Robillard with Intermonte.

First one is on the P&L that you have in your press release. I see that you have EUR 18 million for other nonoperating expenses in the third quarter. Can you please give us just more color on that?

Sure. So it is linked to the special project we mentioned and which is distorting the Q3 figures. In fact, that's why we normalize it to present it to you in Slide 12. In fact, you have -- we have a turnover in the revenue, and we have an invoice to our customers in the line revenues, and we have offset this positive effect that we have in revenues in the line that you mentioned. So right now, the assumption in Q3 is that this project is neutral from an EBIT point of view. We have the positive effect in revenues and the offset of this positive effect in the nonoperating. So that's why, in fact, that's the main impact.

Okay, all right, because it was quite a bump in your fixed cost structure. Can you give us just more detail what the project was. I guess I missed it. Can you please explain?

No. You don't miss it because I don't say any. So in fact, I cannot give you all the details because, of course, I have some confidentiality to respect for my customer. What I can say is that, in fact, it was a special project on which BMW awarded us 2 years ago. They asked us to work on this very special project. And then in July, they decided to cancel it. It was supposed to generate turnover in '22 and '23, so it was not a long-term project. And it has nothing to do with the diesel impact or electrification or whatever. It was a very special project. So the good thing about it is that, in fact, from the beginning, we define what's going to happen if we invest around the machinery and spend time on it and that it is canceled because we knew that if it may happen, BMW was looking for some alternative. At the end, they decided to cancel it. But I would say that the settlement has been fair, more than fair between BMW and us. And we will not have any loss about that in Q4. It will be even, I think, the opposite. We are still negotiating to settle some position with our suppliers, but I expect a positive effect of it. But I cannot disclose what was the special project because it's very confidential on the BMW side. It is not a recurring effect. This is my point. It's not linked to the diesel decrease, EV or whatever. It was something totally different.

Okay. All right. And once you had EUR 10 million of positive one-offs in the first half, any other one-offs we should be aware of in the third quarter?

Yann, I don't think, except the BMW that we have very special other big impact compared to June, right? The big [indiscernible] was concentrated in June year-to-date, if I remember well.

Absolutely, Fréd, the increase is linked to this special project.

And remember, in June, year-to-date June, in fact, it was -- it were mainly position, of course, nonrecurring such tax settlements of the previous year, pension settlements. These were the main impacts. So de facto nonrecurring in Q4 or next year.

All right. And just on CapEx for the year, can you give us some kind of guidance for the 4th quarter? You already gave us for free cash flow, but just to have a bit more granularity on the composition for fourth quarter?

So in fact, our CapEx right now, the composition is very different from what we used to have in normal years. Right now, we concentrate, as Yann said, our CapEx for the Romania project to have everything ready for our customers on time. And then it's also linked to what I said about EV. The good thing about EV products, once you are awarded, the turnover is generated 18 months after compared to 36 in the highs. The negative effect is that you need to invest very quickly. So for the 2 big programs on which we have been awarded on EV, we will have to invest in Q4. And one of this program will already generate turnover next year. So it's quite impressive the time difference with ICE and EV application. Nevertheless, we don't expect, of course, to spend more CapEx than forecasted over the previous years. We have been quite conservative in the past 9 months, and I will continue to have a smart allocation of our CapEx. The idea is always the same, rather than focusing on the amount, we focus on what generates value on the short, medium and long term. So right now, I allocate the CapEx of the group where we know we will generate money and value on the long term, and it's mainly focused on EV products for example Romania plants that we are finalizing.

To just like sharing, François, we are shooting for EUR 6 million, EUR 7 million less CapEx on a full year basis than in 2019.

Next question is from Roland Könen with Value Holdings.

First question would be an add-on on the special project sales. If I look at the nonoperating income after Q2, we have a positive EUR 5.1 million. Now we have roughly EUR 18 million minus. So it's a delta of roughly EUR 23 million. But the special sales project, sales number was just 14, 14.2, So the difference is the loss on this project. Could you confirm this? And the second question would be on the outlook for 2022. It's a bit early, I know. The IHS figures stayed for roughly 10 million or 11 million plus in the global production last year. For this year, '22 or '21, you were very cautious and it was absolutely right. What is your guess for the next year? Do you think the 10% to 11% would be fine? Or are you also for the next year a bit cautious?

Thank you for the question. Yann, maybe I'll let you comment on the first question and then I get to the second.

Second question -- the first question, Fréd mentioned it was related to mainly the special projects. So I'm not sure I get your point, Roland.

Yes. You had a positive nonoperating -- or other operating income after the first 2 quarters of roughly EUR 5 million. Now after 9 months, you have negative expense of roughly EUR 18 million. So it's in delta in the -- just in the third quarter of roughly EUR 23 million. And if I deduct the special product sale of roughly EUR 40 million, I have a negative loss of EUR 7 million to EUR 8 million. Is this the loss you have to book on this settlement or this special project? Or are there any other things in there?

There is no loss on the special project as Fréd mentioned. It might even turn positive. We've been quite prudent in our assumptions. I need to double check the one-offs, because there's nothing really significant in Q3 apart from the special projects. So I'll get back to you on this.

And yes, to your second question, Roland, of course, I don't pretend to know better than EHS or whatever. It's more a managerial position that I have. I prefer to be cautious, honestly, in the first 6 months of 2022 because still a lot of uncertainty. So the way I see it, I don't see a [indiscernible] for first quarter and second quarter of 2022 versus what we are facing today from a volume point of view and supply chain point of view and so on. Then the assumptions that I'm building that most likely, NAFTA will restart quicker than Europe once the supply chain issues will be solved. So in Q3 and Q4 next year, we can anticipate good news from NAFTA. And then for Europe, I prefer to have, let's say, a position where I'm a bit cautious. It's a bit too early to give accurate figures. So we will do it beginning of next year when we present you the full year figures. But yes, we will be a bit more cautious than this year, because we don't have macro size that everything is going to be better next year. This is our first feeling on that, my first feeling and we are linking up the next year's forecast based on cautious assumptions at least for the first part of the year.

Okay. Maybe 1 additional question on your restructuring costs. They were very low in the first 3 months -- 3 quarters, having in mind the very difficult environment we are in. Do we have to calculate the small restructurings in the next 3 to 6 months?

We will -- sorry, Yann.

We do expect some of the restructuring in the region of EUR 2 million, EUR 3 million number for Q4.

Well, I think we don't have other questions.

There doesn't seem to be any follow-up question. Operator, can you confirm, please?

Excuse me, there is a question from Gabriele Gambarova from Banca Akros.

Just a couple of questions on the tax rate. 45% in the 9 months, I was wondering I mean what could be for the whole year and going forward in '22 and following years after the disposal of Latin America? And I didn't get, sorry, what you said about CapEx vis-a-vis 2019 and possibly also for 2022?

So Gabriele, the tax rate for operating activities, because we should take apart the disposal of Latin America, it should be in the region of 40% on operating activities on a full year basis. And we are aiming to improve it to reduce it for the coming years. And on CapEx I said that all in all, for 2021, we are currently shooting for EUR 6 million, EUR 7 million less CapEx than in 2019 despite the Romania investment.

Okay. And regarding 2022, is it possible or is it too early to understand what would be the level of CapEx?

I would say it's a bit too early to give you accurate figures, but there is no reason that it should be higher than this year. This is the indication I can give.

Okay. Despite the Romanian plant?

Yes. Because the Romanian plant big investments have already been done this year and last year. So I don't see a very different figure for next year, but I see a different composition. Of course, Romania will continue to have some CapEx. But I see a composition focused a lot on EV products already awarded. This is where we will go. And I don't see a big delta versus the 2021 amount.

The next question is from Martino De Ambroggi with Equita SIM.

Just a follow up on the guidance, because you are guiding for return on sales in excess of 3.3%. It was 5% in the 9 months. So I don't know if you could elaborate a bit more on this, specifying what are the nonrecurring items, which are factored in your guidance this year. And frankly, we do not expect Q4 to be loss-making to be just slightly above 3.3%, but just to have an idea of what do you include as nonrecurring. If you can summarize what happened in the 9 months, because you have many different positive and negatives, which are nonrecurring.

Sure. So in fact, you are right. In the beginning of the year, in the first 9 months, we had very positive nonrecurring impact. The first one, as we mentioned in the June presentation, a tax item that we settled in Mercosur, which is EUR 4.4 million. Then we settled also with the pensions for U.K., very old subject about EUR 2.5 million. And then we have also, in the first 9 months, positive impact for H2, so EUR 2 million and we had reimbursement from insurance for fire that we had some years ago for EUR 2 million. So you can see that, in fact, in the first 9 months, we had an alignment of nonrecurring and nonoperating positive effect. So de facto, in fact, once you have EUR 2 million exchange impact positive in first 9 months, we don't expect the last part of the year to be so positive. Insurance, we don't have anything anymore to be reimbursed. And the tax and pension items were really one-off. So in fact, one of the big delta between the first 9 months EBIT you mentioned and the last part is that we consider that we won't have any more of this kind of positive one-off impact in the last quarter. But you are right, this year we have an alignment of positive nonoperating effects and one-off impact in the first 9 months.

And your guidance is including all of them, I suppose.

Our guidance, of course, is increasing the first 9 months, plus the forecast of the 3 months.

Yes. So because at the end, my question would be, okay, in excess of 3.3%, but is it possible to have a narrower range for the full year?

Right now, I think due to all the uncertainty, as I have done in time today, I have done it in June, I have done it in March. I would avoid to be very accurate percentage. I know it can be frustrating for you. Nevertheless, to give an accurate percentage nowadays with all the uncertainty could be -- it's too unstable to give an accurate percentage. So that's why I prefer to keep this recommendation and hope as we have done in time today have a good news when we will be in front of you beginning of next year.

It's clear. I will share your views, okay.

Without giving you a number, we are still shooting to beat 2019 by a fair margin.

Yes. And really, I don't want you to think all of you that we don't want to give an amount. It's more that there is so much uncertainty that we are focusing on beating the market, doing all the actions. And we prefer to come with good news versus what we expected rather than overshooting and then a bad surprise arrive. And right now, in the current environment, the bad surprise could arrive each day, and we are facing them each day as we have done in the past.

Gentlemen, there are no more questions registered at this time.

Thank you to everybody for your questions and attending. Have a nice day, and thank you again. Bye-bye.

Ladies and gentlemen, the conference is now over. You may disconnect your telephones. Thank you.