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

Welcome, and thank you for joining the Sogefi First Half 2022 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Frederic Sipahi, CEO. Please go ahead, sir.

Thank you, madam. Thank you, ladies and gentlemen, for your attendance today at our call for first semester results. I propose we immediately go to Page #4 for the main highlights of the semester. Well, as you know, we are facing a quite crazy market scenario right now with lots of challenges everywhere. And as you will see in our results, we have been able to face this difficult market conditions quite well with all my team, implementing strong actions in each line of the P&L and of the balance sheet. So as you all see, our sales are up, thanks to the market outperformance in each geographical area and product line. And we have been able, as you will see, to pass through in a quite efficient way to our customer the raw material and energy prices that we have faced during the first semester. And we have implemented a strong and rapid cost base and organizational attention to the market situation. Let's go to the financials. So Page #5. As I was saying, our turnover is increasing versus first semester 2021 with plus 9% at constant exchange rate, benefiting from the pricing effect that we have been able to implement with our customer and also a very good performance from the aftermarket. I will detail that later. Our volume are slightly positive, outperforming a market that's going down by 2 points. Our EBITDA is at almost EUR 100 million versus EUR 108 million last year. Our contribution margin, so the variable cost, we are almost in line with last year, slightly better in absolute value. And the EBITDA, excluding nonrecurring, is very much in line with last year. You have to remember that last year, we had positive one-off impacts during the first semester of the year. Our fixed costs are in line with last year if we exclude the exchange impact, and the ratio is improving by 2 points. So thanks to that, we are able to deliver a net income in line with the first semester of 2021 at EUR 21 million despite the crazy market situation and the free cash flow. And Olivier will mention that later and we'll detail that later, we have been able to deliver EUR 40 million of free cash flow compared to EUR 30 million last year, thanks to specific action on the working capital management and very well management from Olivier, also the financial tools. Thanks to that, our debt is decreasing to EUR 216 million versus almost EUR 260 million last year. If we look now at the sales by geographical area, as I was mentioning, let's look at the figures without the exchange rate impact, so it's the fourth column. You can see that we are able to beat the market in almost all geographical areas. In Europe, we are increasing by 5% in a market going down by 8%. In North America, we are increasing by 10% when the market is increasing by 5%. In South America, we have a very strong position in suspension. In Asia, so India and China together for Sogefi, we are increasing by 8% when the market is increasing by 3%. Mainland China is slightly decreasing versus last year and below the market due to the fact that last year, China was already very strong in our turnover, and to the fact that there has been lockdown in Shanghai area where we are based and impacted in the first half of the year. By business unit, let's start by suspension. You can see that at constant exchange rate, suspension is increasing by 13%. It's mainly thanks to the steel pass-through that we have been able to manage with the customers. Air & Cooling is at plus 1%, mainly thanks to the pass-through to the customers, but impacted by China lockdown during 2 month. And Filtration, we have a very positive trend at 12% at constant exchange rate. Half is for the pass-through to the customer and another half, thanks to strong market share increase in aftermarket business units. Our portfolio by customer for the main one is not changing. So Stellantis is remaining our biggest customer. Ford has increased versus last year. And Daimler is a full customer with exactly the same turnover. For now, we don't see a big change in our customer portfolio, but you will see in our next slides that we are starting to work with newcomers, and I think it's going to be very interesting in the coming years.

If we now move to the performance breakdown on the EBIT comparing H1 '22 versus H1 '21, as you can see, our EBIT '21 and our EBIT '22 are quite similar at EUR 36.5 million. Between both, there is little effect due to volumes, little effect on net fixed costs. Half of it is due to exchange rates, quite nothing on D&A and almost 0 on the squeeze. The squeeze is the delta between the raw material increase and the price increase. Here is our best performance for the first half year of the year because this minus 0.4 is, in fact, plus 60, minus 60 And that's really the performance of our sales team.

Yes, we have been able to pass-through to customers EUR 60 million in 1 semester, so thanks. And then the squeeze at zero.

If we now go to the P&L, thanks to the squeeze, well, we can say that we've done our work. I will not go into the details. Just keep in mind that our ratio are completely puzzled by this operation on price increase and raw material increase. We are showing a ratio of 28.1% on contribution margin. This ratio, without the impact of price increase, should be 30.5%, much more comparable to the previous year. In '21, we had -- our EBIT '21 was sustained by positive nonrecurring and operating income. And despite when we exclude those, we already see it on the bridge, our EBIT, excluding nonrecurring, is in line. Regarding free cash flow, so the main operation done on the working cap is the the utilization of nonrecourse factoring to mitigate the impact of our inventory increase due to the price increase of the material. Nothing else to say. We are quite proud of these results, which leads our debt to EUR 216 million. Regarding our debt profile, we have been able to renegotiate a big part of our lines at the end of '21. We renegotiate EUR 95 million. First quarter of '92 (sic) [ '22 ], we renegotiate EUR 155 million, so our debt is quite secure. And we have an average maturity for 3.5 years. And only 55% of our gross medium-term debt is with fixed rates. So the opposite, we are not so exposed today to the increase of the interest rates.

Thank you, Olivier. So if we start by suspension, which is the business unit with the lower profitability, there are 2 ways to look at these figures. The first way is to say that we were at 9% EBITDA last year first semester, and that now we are at 5.4%, so a decrease. And this is one of the way you see it. But there is an alternative way that I would like to comment to you is that if we look at our profitability on the second semester of 2021, the 5.4% that we reached in first semester were, in fact, 2.5%. So yes, we are lower in suspension than first half of 2021, but compared to the second part of the year, we have been able to double the EBITDA margin. So suspension, as you know, we have a big challenge on the turnaround of this business unit from an industrial point of view and also the way we produce and we consume material. We're starting with my team strong actions in order to totally turn around business from an industrial point of view. And we have already launched a lot of action on the energy efficiency actions because this business is consuming a lot of energy compared to the 2 others. And we have implemented already in April and May actions in order to reduce our dependency to the gas consumption. And for sure, we will continue to improve point by point the profitability of this business unit to make it acceptable. If we look at the 2 other business units. Thank you, Stefano. So Filtration, the first -- the top line I already commented before. We have done a tremendous job on aftermarket in order to continue to deliver to our customers the right product at the right time at the right quality and at the right price. And this quality of service helped us to gain market share during the first half of the year. And we have also done our job from a pricing point of view. And when you look at the profitability in absolute value, we are now at EUR 40 million EBITDA versus EUR 35 million last year, comparable in percentage, but there's a dilution impact on the 15.1 of this year compared to last year. If we look at Air & Cooling, Air & Cooling, the picture on the EBITDA is roughly the same. On the top line, we have an increase versus last year despite the impact of China lockdown. And China is very important in Air & Cooling turnover. And the EBITDA in absolute value is increasing, and in percentage, slightly diluting, but we thought the dilution impact will be at same level. So when we say that we are at the same level as last year when we are already at 18% EBITDA, it doesn't mean we have done nothing as management. It means that the management has been able to implement a lot of actions to offset the crazy market conditions of Air & Cooling alternative raw materials. We are using more and more recycled materials. We have totally changed the supplier base, and we have implemented new supply chain and industrial model in order to be more agile in Air & Cooling and Filtration. So the stability doesn't mean we have done nothing. It means thanks to our agility, we have been able to offset the negative impacts of the market. Let's go on to our models. So I define it as a resilient model because Air & Cooling and Filtration are proving that our model was the right one and is the right one. So you all know the current market situation and lot of challenges that we are facing. So as I was mentioning, we implemented a lot of actions in all the business units both on the defensive and offensive way to be able to continue in this market scenario that will not change in the next 6 month. Yes, you can go on Stefano. So I just want to spend a few minutes on aftermarket because until today, I never answered in the detail. And as I said before, aftermarket has really performed very, very well in the first semester. You all know the brands of Sogefi in aftermarket. What is interesting to look at is that the market of aftermarket is a growing market right now because of the challenge that the OEMs are facing. And it's a market where the pure aftermarket, players are also growing. And the age in Europe -- the car park age in Europe is foreseen as growing year after year to reach an average of 13 years old in a few year. If we continue Stefano. So a few statistics about our performance in aftermarket. The first one is that we are able to continue to serve our customers with almost no backlog even despite the current crisis from a supply chain point of view. So when you see a class service rate of 93% it means that almost 100% of the orders are delivered on time at the right quantity, right quality and right place. And today, the 99% that we see on the bottom means that we are able to propose to our customers the coverage of the range almost at 100%, thanks to the supply chain management that we have and the warehouses that we have in Europe, and also to the fact, and it's a big difference versus our competitor, that we are now producing 93% of our product that we propose to our customers. And 2 years ago, this 93% were 75%. So we are only purchasing 7% of our range and 93% we are producing. So the transformation of e-mobility for Air & Cooling, you all know everything that we have implemented. So I will go in the next slide, you can go Stefano to concrete example. And I would like to start by speaking about the new entrants in the market. So of course, we are pushing with the legacy customers, BMW, Stellantis, and all the other legacy OEMs. But more and more, in a selective way, we are working and we have been awarded on businesses with the new entrant on the market. So sorry, here, I am calling them new entrants. But for BYD side are not new entrants in the market, but are new for us. BYD, we are working with them for 5 years. And BYD is selling more EV cars than Tesla, in fact. And we have also new entrants in the EV cars, such Arrival, [ Xiaomi ], which is a big giant electronic company in China, which has started to do EV cars. So more and more, we are diversifying our portfolio of customers and also working with the 2 Chinese OEMs because the volumes are very, very interesting. A few news about the business development that -- on which we have been awarded in the last 6 month. So for Air & Cooling, as you already know, because I mentioned it last time, we have been able to sign a quite big contract in North America with a pure LCD manufacturer to produce 100% of the product for the thermal management of their batteries. And we also had a new contract that will be for Europe with this customer. The second line is very important, and I will present this product in a few minutes. This is the battery system. So it's a branding product that we have developed and patent for which we have signed a big contract with one of our legacy premium German customer. Filtration, we continue to have strong development of in ICE, but also in the air and water filtration management. And in suspension, this is important to mention, we have signed in China a contract for stabilizer bars for EV player, a newcomer in the market, which is coming from the electronic business. As I was mentioning, we had a very positive commercial activity in the first half. Of course, with customers, as you have seen in the figures, we have discussion about pricing. So this is what I would call the short and medium term. But we have never stopped and we continue to push very hard on the long-term development of Sogefi and the EV application. And as you can see on the picture, it's a bit technical, but we have been able to be awarded on many applications that are now in development or already in production for some of them. One example is the cooling plate. So for the people who know our legacy products, from a manifold, producing plastic, and so can we roll to this kind of product, you can imagine that we have to invest R&D, both on the product and the process. But I'm quite happy because now, we are able to propose this kind of solution to our customers with a much higher selling price and higher added value than the legacy product of Air & Cooling Sogefi. And with base solution, and that's why our customers are really enjoying this technical proposal that we have done in innovation, they can save 95% more energy than versus another process, which is the [indiscernible]. The battery vent, I was mentioning this product before, so we developed it both between Filtration and our Air & Cooling teams. And it's clearly a very important device for the EV cars because you will have something like 4 per engine. And it help to regulate the pressure of the battery pack for EV car and avoid internal over pressure. So this is key for the battery range and for the OEMs. We have developed that for a German premium brand. And now, we are duplicating and producing this product to all our customer base. And in suspension, I'm quite happy because as I said, we have been able to sign a quite important contract with a giant electronic company, starting by X. It's not an innovation for the battery or whatever, but it shows that even suspension now, we are able to totally switch from legacy ICE cars to EV cars, and to work with the newcomers so strong from a financial and technical point of view is very important for Sogefi because it is creating also opportunities for Air & Cooling and Filtration. If we look now at the picture of our current business quotation, and I have to admit that we have a lot of on the pipe right now, almost 83% of our quotation are currently for e-mobility solutions. So in the same time, we are facing strange time because our aftermarket business is going very well, thanks to the ICE application and also Air & Cooling. But at the same time, all our quotation -- most of our quotation are not for e-mobility, so we are balancing the short, medium and long term for Sogefi. A topic which is very important, and I will not enter too much in detail because I think you all know this topic, but we continue to really improve and have a higher level month after month on all the ESG activities. And I mentioned it many times, we are not doing it just to please the banks, the market or because it's trendy to do it. We do it at Sogefi because we believe it's key and it's really part of our management activities. As quality, finance, logistics, ESG is becoming more and more important each day for us, and we always apply it in a pragmatic way at Sogefi. So as an example, to be able to promote the green energies is, as you know, becoming key and will become more and more important. So we are investing in solar panels in most of our plants, and we push very hard the waste prioritization in each of our plants because finance and ESG have a common goal on these topics. We have done it in a very pragmatic way. And to be sure that you reach the targets that you define, it's important to have figures, in fact, in front of it. Here I'm presenting figures between '21 and '25. But of course, to track the evolution with my teams, we follow that almost in a quarterly basis. And one example of KPIs that we are following is our ability to totally switch our product portfolio from ICE to e-mobility products. So the target that we have is that by '25, 45% of our revenues will be generated by e-mobility products. The orders in -- I already mentioned. So our target was 65% for innovate. We are already overperforming. And to be able to reach that, you need to invest in R&D. So by '25, we will at least have half of our R&D spending focused on e-mobility. The market outlook. Right, here in this slide, you have the forecast of IHS, which is now called S&P. You know how much I was cautious and we were cautious with Olivier on IHS prediction when we built our project last year. We have been much more conservative than IHS, and we have done well because first semester was not as expected by IHS. Right now, IHS is forecasting a very, very strong second part of the year, so strong that, I'm going to be very honest, we have not considered a rebound of 21% in the next 6 month due to the market condition. I always prefer to be more conservative on the future of turnover and then do all the work from a cost point of view rather than believing that the market will strongly rebound in the next 6 months. So I prefer to consider right now that basically second part of the year will be in line with the first semester from a volume point of view. And then if there's a good news on the top line, we will have a good news on the P&L. The raw material outlook. Right, you all know the situation. We are facing quite challenging days, sometimes, with the rationale and sometimes with no rationale. So suppliers are, of course, pushing very hard to increase the prices on steel, on plastic, on [ media ], on packaging. We continue to be very proactive in defending this price increase with our suppliers. As I said, we have implemented strong actions internally in order to be also able to compensate part of this increase in generally. And I will continue, and we will continue with my team and with Olivier to do exactly as we have done during the first semester, to have fair discussion to reach fair agreements with our customers in case of inflation on raw material or energy. So as you have seen and as Olivier mentioned, we have been able to do it in a successful way in the first 6 month, and we will continue to have the same discipline during the second part of the year. The new thing that is happening now is energy. Of course, energy prices are increasing almost everywhere. I do believe that the market in a global way may be affected in the second part of the year. That's why it will be so important to continue this discussion with the customers to seek for fair compensation from them for part of the increase of energy and the other part being able to compensated by our staff. Well, the outlook, I have to admit it's quite challenging for a CEO to be able to give a very accurate outlook of the market. And that's why I have a very low understanding of financial markets. I will let my CFO to do it. It's a crystal ball. No, to be clear with you, of course, the market -- we are lacking visibility on the volumes on the energy prices on the raw material. Nevertheless, what I believe in is that we have a strong management team. We have been able, in the last 6 months, to do things that, honestly, were not easy to do. We have a strong financial discipline. Now we will have to continue in this way in the second part of the year. That's why I'm keeping the guidance that we gave during the first quarter to say that if there is no big, big drama in the second part of the year, we should be able to deliver the level that we delivered in 2021, excluding the nonrecurring cost, of course, that were positive last year for the EBIT. This was our presentation. We are now at your disposal to answer to all your questions.

[Operator Instructions] The first question is from Martino De Ambroggi of Equita.

My first question is on the last part of your presentation concerning the guidance. So if I understand, in your flat operating profit ex nonrecurring, you are assuming a market similar to the first half, so down roughly 2%.

Yes, it's correct.

Okay. Could you provide a rule of thumb of what is sensitivity or incremental margin every 1 percentage point of higher or lower volumes, just a very rule of thumb. Just to understand what could be the upside or the downside in case of a different market environment.

Yes. The PPA is basically something like 30%. So for each EUR 1 million additional [ deliver ] that we may have, it depends from where it will come. To be honest, I hope we may have a good news on aftermarket, for example, whether the [ deliver ] is higher. But basically, on EBIT, it will be incremental by, say, 15% basically. 15%. So that's why I assume that the market will remain flat. And then if we have a good news, in theory, it should help us to do better.

Okay. And in terms of free cash flow, you guided for at least EUR 32 million. If I exclude the factoring -- the higher factoring in the first half, you already generated EUR 27 million in the first half roughly. So I was wondering if, okay, there is a second half down 2 percentage in terms of volumes, but probably 32 could be updated?

Yes. We are facing some big challenges from a supply chain point of view, which put under pressure our balance sheet. As an example, inventories are becoming very key to be able to continue to serve our customers. So we may have some inventory challenge there. And we also need to get back the money from our customers because you can imagine that in the current situation, it's becoming challenging to be paid on time. Nevertheless, I would say that we have low risk to not deliver what we are seeing, very low risk.

Okay. And CapEx in your guidance are always EUR 110 million roughly?

A bit less. To be honest, we are optimized as a team closer to EUR 100 million.

Okay. And very last on Slide 31, you are providing the percentage of sales for e-mobility, which was 15% last year. You have a target of 45%. Could you provide what was this figure in the first half of this year and what you expect for the full year '22?

No, I can't because this is something very detailed to be done. And right now, we are doing it once per year for the indicator, number one. And it's also because it's figures that I need to have the validation from the auditors that are working with us. So we have not built up out in detail the figures for the first semester -- I'm sorry, I will them -- I will have provided them this year, but I don't have them.

Okay. And can we assume...

Yes, I can assume that it's higher than '21, for sure, but I don't have accurate figure on that one.

Okay. And if I assume this e-mobility business has higher profitability than the rest of the business, am I right? Or probably it's more or less the same?

For the current sales, absolutely, even if it's difficult to say exactly what it will be in 4 or 5 years. You can assume, except aftermarket of Filtration, that is higher profitability than OEM of Suspension, OEM of Air & Cooling or even of OEM of Filtration. Yes, it's correct.

The next question is from Monica Bosio of Intesa Sanpaolo.

We will try to read on her lips.

Is your microphone on mute? No? The next question is from Alexandre Raverdy of Kepler Chevreux.

I'm on the phone because I had trouble connecting with the video. Sorry for that. I have a first question on the squeeze. So great achievement in H1, I would say. What should we expect for the second half, please, just in order of magnitude given probably that we would see some higher energy costs, for instance. Then the second question, I would like to come back to the guidance because you are basically assuming global light vehicle production around 10 points below IHS. So I can understand that you want to be cautious, but why are you so cautious? Because one other European supplier, for example, reported today and is assuming a 2% to 5% growth in global light vehicle production. So I just wanted to understand why you are so cautious here. And the final question I would have is on natural gas, whether you would be directly or indirectly exposed to any disruption in the supply.

Yes. So just to answer first to IHS. On IHS, each time I'm discussing with you, I'm more cautious than IHS. And each time, we are right and IHS is wrong. So I'm doing that for almost 5 quarter now. And unfortunately, we have been always more accurate. And I'm going to be honest, Alexandre, the second part of the year, why people should buy more car than the first part of the year? I don't see. You still have the technological uncertainty. In Europe, I would say we have some political and social challenges to face. It's not the right time to buy a car. Second, the production of car. We don't know what's going to be the energy shortage or not in the second part of the year. So that's why these 2 factors, I took them and I applied a discount factor on IHS, saying maybe the market is supposed to rebound, but due to potential shortage of energy at the OEMs, due mainly to supply chain challenges with a small supplier that may stop a giant OEM, and also due to the fact that I don't think, except a big incentive from government on VAT or something like that, that people are ready to buy a lot of car in the second part of the year. I hope I'm wrong, and I hope IHS is right, which will mean for us that we will do a good year, but I really prefer to be conservative. So I can understand that it looks like a strong discount, but there are a lot of uncertainty. Second, on the squeeze to make it synthetic, I would say it's basically the same magnitude between semester 2 and semester 1. Not the same component, but at the end, the global figures may be very close. Energy, we know, are increasing a lot. We will be in winter time. So my feeling is basically the magnitude to recover in the second part of the year than the first year of the first part. I've already started the discussion with the customers. Now, we know what to do. So we have been very proactive. And also thanks to the great job done by Olivier and his team at finance to provide the right figures to the sales team, we have anticipated the discussion with the customers in order to be sure that we don't have a big lag between the increase of material and energy and the positive impact on the P&L. And first, it was a gas disposition, right?

Gas disruption.

Disruption. So the only business unit that really used gas is Suspension. Air & Cooling and Filtration, it's more electricity. The situation is not the same country per country. So you have some countries where, first, the price are still blocked. And you have other countries where, unfortunately, the prices are not blocked and we are buying gas, I would say, almost on the spot market for the last 6 weeks. My purchasing teams there are doing a great job in order to secure the needed quantities at the right price when it's possible. But you have some countries where it's becoming almost impossible to secure the gas for the second part of the year, of which Germany a big challenge for sure. Italia and U.K. are challenged. So in theory, I don't see a direct exposition. But if the government decides to prioritize the heating of households rather than the industry, of course, I will be affected exactly the same as all the industry. And I think it's something we cannot exclude in some countries where you may get a letter from the government saying you have to stop the production next week because we don't have enough gas. Of course, we are not forecasting that, but it's something that I'm trying to prepare in case of it happens. You know me, I'm a bit -- let's say I prefer to be prepared for the worst to have good surprises, and we already started to see how we can switch part of our process from gas consumption in suspension to electricity, because at least, we would be ready if it happens. Nevertheless, as everybody, I think, there is an indirect exposition. Our suppliers, the steel suppliers, are consuming a lot of gas, so they are exposed. And when they are exposed, we are exposed. It can be from a price point of view or delivery point of view. Our customers are exposed. They consume a lot of gas for the painting lines of the cars. So when the customers are suffering, usually, it makes more difficult our life, too. And then we are trying to, as much as it's possible, [ mitigate ] quantities for the last part of the year when it's possible. So it's -- and I know the gas is too early for everybody right now. We are all discovering the challenges week after week.

The next question is from Monica Bosio of Intesa Sanpaolo.

Okay. [indiscernible] comment on the pricing power that it was much better than expected. Even considering a second half with volumes at minus 2, if we project the same pricing impact that you had in the second quarter, would you see as achievable a total turnover by year-end in the region of EUR 1.5 billion? Or my math is too aggressive? And I remember that in the last conference call, Frederic, you say that the company is confident to recover 80% of the price of the raw material price increases. It seems to me that things are going much better. I was wondering if you think to change this indication. And as a more general sense, let's take apart 2022. If you look at the 2023, and if we assume a potential slowdown in the demand, in the final demand, do you believe that Sogefi has room to keep this kind of sound pricing, maybe thanks to the higher penetration in EV? Or do you expect a slowdown in the pricing going forward?

Thank you, Monica. Yes, about the pricing power that I understood was expected lower, I have to admit, my teams have done a crazy job. Each day was a strong discussion with the customer. But the customers are also improving their defense. To be honest, we have seen that between the first negotiation from October, November last year and the last discussion that we had in July, we can see that the customers are becoming very strong in their defense. So it will require for me and my team new way of negotiating, new way of convincing the customers and always keeping good relationship, of course. So I would prefer to continue to keep 80% of recovery, which is not my target. My target is to recover 100%. But I prefer to say that 80% is more reasonable. And it's not 80% in the exit part. It's 80% as a P&L impact mainly due to the lag because customers -- well, I was saying, we're becoming better and better. They are becoming very good in managing time. So between the time you stop the negotiation and you finalize that, you have to call them 20 time, go to meet them 20 time, and it takes 2 months, 3 months. And if you are not able to have a retroactive impact, it hurts your P&L. So that's why for the second part of the year, I prefer to shoot at 80% as a mid line and then try to beat that, and also try to recover 20% internally by doing our own work. If I'm able to recover 100% and do 20% internally, it should help the P&L. Then about the EUR 1.5 billion you said for the full year, it seems to be a bit aggressive, Monica, to be honest with you. I will shoot for something a bit lower, but not so much. Is it right, Olivier? You are not too far. I would be very happy if we reach this figure. I will go for EUR 20 million, EUR 30 million less. If I have to give a figure, it will be EUR 30 million less, which is in line to say the market will remain basically the same.

Okay. And what do you think for the next year?

Monica...

Basically, my concern is on the ability of the company to keep this kind of pricing going forward if demand is going to slow down.

It's a good point. Everything we are implementing in '22 is worth nothing if it's not recurring for '23, '24. So each time, the game is becoming more difficult. And I have been lucky during my first year as CEO because, yes, the challenges improved each time and increased each time. Each time, my team and Sogefi has been able to also increase the level of our game, and we have been successful each time. Now the big question is more than on Sogefi is what's next for the automotive industry. You all know that the OEMs had the policy in order to maximize their profit to only push the high selling price car, the car in which we are doing high profit. It has been a good strategy for the first 12 month, 18 months. But the issue is that volumes are dropping and may drop because here, we are comparing the market versus 2021. But the reality of European market in '22 is that it's 30% below '19. 30%. It's crazy for an industry like automotive. We have investment. The OEM have investment, we have investment. So in fact, we don't speak of a crisis. But to reduce by 1/3 the volume in a business like that, it's impressive. And I'm not sure there will be an immediate boom on the volumes. We will we continue to do our work from a cost point of view a footprint point of view if it's required, also taking in consideration the new energy prices. This is a new parameter that is coming now that we didn't have in mind 3 years ago. Where energy will be more affordable, in which country, based on that, what do we do from an industrial point of view? Do we keep high-consuming machines everywhere or do we totally change our industrial strategy? It's clearly points that I need to address from September with my team when we will build up 2023 and 2025 because there are many new parameters in our life and in our business that I need to take into consideration for next year. Then on our strategy, long-term strategy we will change nothing. We continue to push aftermarket for Filtration. On Air & Cooling, thanks to the market, we have a very dominant position on ICE application. The competitor are slowly but surely exiting or reducing their presence in our product range. We continue to the e-mobility on Air & Cooling. And on Suspension, we do the turnaround, sorry, mainly the turnaround mainly to be more aggressive in 2024 Suspension due to the energy prices. But I have yet to give a clear mid line on that. I need to address that once the options and the assumptions will be a bit more stable for next year.

Okay. I understand. And just a final question just for housekeeping. Can you give us an indication of the expected restructuring charges for the current year?

Sorry, I have not been able to catch what you said, Monica. Can you repeat that?

Recharge for 2022.

The restructuring?

Yes.

EUR 8 million to EUR 10 million.

EUR 8 million.

EUR 10 million?

EUR 10 million. Already integrated -- sorry, already integrated in the forecast I gave for the end year basically. When I gave our expectation of profitability for end year, it already take in consideration the restructuring -- for the cash.

The next question is from Roland Konen of Value Holdings.

Yes. Can you hear me?

Yes.

Yes. Only a few questions open. First of all, congratulations to the really great result in this very difficult circumstances. First one is really easy. I didn't catch the figures for your factoring and how the factoring figures developed in quarter-on-quarter and year-on-year. Maybe you could give me there a number? And my second question would be on order intake and order placements of your customers. Did you see any slowdowns in order placements from your customers because of all the difficult circumstances, inflation, geopolitical issues and so on? Are they -- is this going to give you new orders, or what is the behavior there?

Do you want me to start on business nominations? Yes, in Europe, we can see clearly that the customers are almost no more looking on the market new business for ICE. I think for ICE, there are really a few. And when they are, it's not new engines or new cars, it's basically because they want to outsource the competitor. So yes, in Europe, you can feel it. On e-mobility, no. On e-mobility in Europe, I don't see right now a slowdown. I would say we continue in the same pace as we had last year. In China, it has been a bit strange. There has been 1.5 month where nothing happened basically when it was closed. And now, it's impressive. The pipeline of potential business and the business on market with Chinese customers is very, very high. And in North America, I would say it's stable. They continue to have the same proportion of ICE application. So you continue to have [ reviews ] for ICE application. I would say most likely maybe also the last generation with high volumes. But in North America, I have not seen a decrease on the business pipeline. No, not yet. And there has not been also a lot of cancellation. I was a bit afraid that due to the current situation, there may be a lot of cancellation of programs or engines. And currently, no, we don't see a lot of cancellation. Olivier, the factor?

Yes, we have right now 2 factor. At the end of June, the amount of factor without the cost is EUR 112 million. We were, last year, at EUR 98.8 million. So an increase compared to last year, end of June roughly EUR 14 million.

The next question is from Gabriele Gambarova of Banca Akros.

Yes, sir. A couple. The first one is on your guidance. I was wondering if this guidance is consistent with gross margin around 28% as you -- as the one you recorded in the first half of the year. So basically, the question is, are you assuming that you will able to protect margins from energy and further raw material cost increases. And the second one is more specifically on Suspensions because if my calculations are right, in Q2, the revenue of the business went up by 19% year-over-year. While the EBITDA margin was almost, let's say, I mean, it was down to 5.2% from 8% in Q2 2021. So am I right in thinking that there was a stronger price increase probably for the steel cost, but it was almost entirely even more than offset by rising energy costs at the margin? Because revenues were up 19%? Margins were down from 5 -- sorry, from 8% to 5% in Q2.

In Q2, so I will answer to your first question, yes, our guidance is based on the fact that basically, we keep the 28% of first semester in the second semester with different challenges because in second semester, we will have mainly the energy impact. But yes, the guidance is based on 28% stable in the second part of the year. Then on your second question, I will need you to...

I think the old company did 19% grew in Q2. We have in the appendix, Q2 19% is the old company, is 19% percent growth, Q2. Probably Suspension is even more because it's the division where we're increasing price more.

The question was on margin, EBITDA margin. That in Q2, if I'm not wrong, was around 5%, Q2 2022. And instead, it was 8% in Q2 2021. So there was a strong top line growth, but apparently, the margin was down year-over-year.

Yes. For Suspension, you are absolutely right, but it's mainly linked to the fact that we are comparing here semester 1 versus semester 2 or Q2 versus Q2. You are totally right. But you have to remember that in Suspension, we suffered already increases in Q3 last year, Q4 than Q1 this year and Q2. So we have been able to pass through the increase of Q1 this year and Q2 this year. But nevertheless, when you compound the first quarter of last year or second quarter of last year, there was not yet the price increases. So this explains the gap is that because in the figures of Q1 and Q2 of this year and Q2 this year, we are already impacted by the Q3 and Q4 of last year. So it's mainly due to the energy, as you said, which basically in our P&L have doubled almost for suspension.

Okay. And my last question, again, on Suspension. I mean what can you materially do to improve profitability? I mean, is there room on prices mix since we got this interesting new contract with the Chinese?

Before the answer of Frederic, remember that in first half, Romania has a negative impact on Suspension of EUR 4 million. So sooner or later, the next couple of year, the Romania should go at breakeven. So this is one room of improvement.

Absolutely. Thank you, Stefano. You are totally right. Yes, we are still in ramp-up phase for Romania plan, losing EUR 4 million in 2 quarter. Then does I have room for improvement? For sure, basically, this business, we cannot stay at this level, so we have to do the job from an industrial point of view to change the process in some plants to make the process more agile. In fact, most of our process was done to be profitable or to not lose money with a 100% load. And in the meantime, the market has dropped by 30%. So we are working with the team not by investing millions of euro, but by changing the footprint and the layout of our management and our plans to add some point of profitability here. And we are doing our job from a footprint point of view, as you know. In the current figures, we don't have yet the positive impact of the closure of Germania, which will be closed end of September this year, right. and the U.K. factory will be closed next year basically. So we are starting the processes for these 2 factories. One will be closed in a few month. So we will have, in the last part of the year, the positive impact of the closure of [indiscernible]. And then next year, we have to close the U.K. facility.

All this already been accrued the structure...

The P&L is accrued. The [indiscernible] are accrued, but we don't have the positive impact of the savings in our figures currently. So if we start to pay for Germany last quarter and for U.K. from next year.

Okay. So sorry, just as a reminder, can you remind me what would be the positive impact of the 2 plant closures in Germany in the U.K., more or less? Difficult question.

No, no, no, it's not difficult. I try to remember, I had it in mind per years. Per year, in the past when we have them, assumption was something like EUR 7 million, okay, per year. But it depends on your reference. Because if you are comparing with today figures, now with the energy increase in Germany and U.K., this EUR 7 million are closer to EUR 10 million, in fact,. So it depends, the reference point. But it's good improvement. And also with the cost of energy that we suffered in these figures and that we'll continue to see in second factor, once you closed 2 factories in Germany and U.K., we will have a strong benefit in our profitability. And as Stefano said, the restructuring costs are already booked.

Okay. And just -- and last one on this EUR 4 million of impact of Romania in the first half, where do we see this number in the second half and possibly in 2023?

Second part of the year, I'm going to be very honest, there won't be big miracle because it's different programs that we are starting. You have to remember that we have created and launched this factory during COVID. So unfortunately, our processes were not totally ready to be able to meet the volumes. So we have to work in a manual way. So I would say that the trend will not change. Here, you have to address deep changes. But from '23, our ambition is to reduce the loss of Romania and to divide it by June '23, again by June '24, and then '25 arrive at something in the neutral area or slightly positive area. So next year is also a part of the question of Monica. We will have the benefit of the closure of Germany that we had from second part of this year, U.K. and the improvement of Romania. So unfortunately, we are not in a stable world. Because everything will be stable, the prices, the energy and so on, I would be able to implement my action and arrive in a positive area. In the meantime, the energy prices increased also. So we are also -- or more to do from an energy price point of view. It's part of a new challenge for Suspension for '22 and '23.

[Operator Instructions]

Well, I think we are done. So thank you very much for your attendance, your questions. We wish you a nice summer break. And let's see each other beginning of October [ depending on our ] --Thank you.

Thank you.

Thanks a lot.

Bye-bye.

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices.