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 First Half 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Olivier Proust, Chief Financial Officer. Please go ahead, sir.

Hi, everybody, and thanks a lot for joining this call. So as usual, I will make a quick introduction. You have already the press release. We published on Friday the presentation. So it will be a very short introduction, and then we will jump immediately to the Q&A. So talking about our performance in the first half '25, we are in line with our forecast and expectations, i.e., we have a 3% decline in revenue compared to the first half of '24, down 1.2% at constant exchange level. This was expected. And nevertheless, the group achieved improved operating results and higher profit from continuing operations compared to the first half of '24. Our EBITDA amounted to EUR 69.5 million, up from EUR 67 million in the first semester of '24 with the EBITDA margin rising to 13.7% from 12.8%. The EBIT is at EUR 32.7 million compared to EUR 27.8 million in '24 with an EBIT margin up to 5.3%. And as a result, our net profit from ongoing operations amounted to roughly EUR 20 million compared to EUR 11 million in '24, thanks to lower financial expense following the repayment of our debt last year. The free cash flow from continuing operations amounted to EUR 15.2 million compared to EUR 21 million in '24. But I remind you that in '24 we had nonrecurring positive cash flow related to the settlement of the intercompany payable with our Filtration business unit prior to the sale. Our net debt at June 30 after the payment of roughly EUR 18 million in dividends amounted to EUR 19 million, excluding IFRS 16. EUR 59 million if we include IFRS 16. So rough -- a little bit higher than December '24, but due to the fact that we made a distribution of EUR 18 million on the first semester. So pretty in line with our -- very in line with our forecast. I will not explain on the second quarter, which reflects the same comments. So I will immediately jump to the tariffs, the big topic of this first semester. So as already explained, Sogefi is not directly -- significantly impacted by direct impact with regards to the tariffs. We are a local producer. We are producing in Europe for Europe, China for China and NAFTA for NAFTA. So the direct impact are not significant at present. The point is that this commercial, which might be not given what has been signed over the last few days, the impact for Sogefi could be only indirect due to if any drop on sales due to the increase of the car price on the U.S. market. For the time being, we haven't seen such a drop. We are not forecasting a huge drop, but it's extremely difficult to predict what will happen as the group is exposed to indirect impact, if any, and the direct impacts are not significant. So based on this, what is our outlook for the last semester? Sogefi confirms its forecast for '25 expecting mid-single-digit revenue to decline and EBIT margin to grow slightly compared to what we recorded in '24. And as said, this forecast do not factor in the effects of the ongoing trade war on the global economy and automotive production as such impacts are difficult to predict. However, a sharper decline in volumes than currently anticipated in the coming months cannot be ruled out. Saying that, Sogefi, as we did in the past, is ready to fast -- to face any potential crisis. Okay. That was for my introduction. I hope it was clear. And if you don't mind, we can jump now to the Q&A.

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

I hope you can hear me well. I have a few questions, the first is on the free cash flow. Can you just help to figure out what free cash flow are you expecting for the full year 2025? And if you can indicate to us the level of factoring for the year. The second question relates to Suspensions. What margins do you see for the final year for Suspensions? And what could be margins on a sustainable basis? And still on Suspensions, what are the margins that you are looking for, for the Romanian plant? And would it make sense to transfer part of the production abroad to the Romanian plant and thus achieving a good efficiency level? And very last question is on the customer mix in the Heavy Duty segment. Can you elaborate a little bit on this?

Okay. So that's a lot, Monica. Regarding the free cash flow, our guidance was and remains a cash generation between EUR 15 million and EUR 18 million per year taking into consideration our current level of CapEx. That's our guidance and we will remain on this. Not taken into consideration, of course, the dividend distribution. With regards to Suspension, let's say that we are progressing well in Suspension, improving our margin in a positive way. I said already in the past we are expecting a double-digit margin on the EBITDA. The Romanian plant will reach our level of expectation in the coming months. It's not already done, but we are in a good direction. I cannot expand on your question with regards to transfer of production to Romania, but I think that we demonstrated in the past that we know how to reallocate production in the proper way. So we'll let you go to your own conclusion on this. You can understand that I cannot explain.

Okay. So can we expect that Suspension will keep the margins already achieved in the first half? That's a check. And if you can remind me the factoring -- the expected factoring for 2025. And the last on the customer mix on the Heavy Duty.

Yes, sure. So we improved the margin of Suspension, and we will continue to improve the margin of Suspension. So that's for answering your first question. With regards to the customer mix in Heavy Duty, we are working on new -- potential new areas. In Heavy Duty, we can target the defense sector. We can target the railways. That's something we are working on. But it's a little bit too early for talking about a shift of our customer mix in Heavy Duty. But for sure, there is room for a kind of diversification.

Okay. And the factoring for the full year?

Oh, factoring for the full year, sorry. My bad. Factoring at the end of December will be a little bit lower than what we have at the end of June. It's always a bit higher at the end of June than December simply due to the fact that we have much more sales in May and June than in November and December. And factoring is the kind of a ratio on our sales. So we do not expect an increase of the factoring by the end of the year. It will be proportionally in line with what we have in June, so i.e., a slight reduction.

The next question is from Martino De Ambroggi of Equita.

Yes. The first question is on the Argentina contribution, just to understand if it's possible to have an idea of what could be the contribution in the second half because it was a major contributor to Suspensions improvement because I suppose it is 100% for Suspensions. You mentioned free cash flow EUR 15 million, EUR 18 million, but could you remind us what is the CapEx assumption? And in terms of prebuy, did you benefit from prebuy in North America? And still on duties, did you receive any request for customers -- from customers in terms of additional price pressure or nothing happened?

So with regards to Argentina, yes, Argentina is fully on Suspension. We had -- we benefit from Argentina on the first semester. We are in a good shape in Argentina. We have a very efficient plant there. We have a strong customer. So there is no reason to foresee a slowdown in Argentina for the first -- for the second semester. So Suspension will come to benefit from Argentina. The economical situation of Argentina is much better than it was. We have been able to repatriate part of our cash there. So the situation is kept normal, but going back to something more business friendly. With regards to our CapEx, I just have an issue with my PC, but here in that we expect something around EUR 80 million in '25, 80, 8-0, compared to EUR 70 million in '24. And I forget your third question.

Was if you benefited from prebuy in NAFTA region?

Price pressure.

And yes, if there was any price pressure coming because of tariffs and so on.

I forget it because we are always under price pressure. Every month, every 6 months, our customer push on price. We are used to this. I remind you that we are not a commodity producer. Our products are specific, so we are able to resist to this price pressure. And we do not foresee a deterioration of our margin due to a price war especially in NAFTA.

And did you benefit from prebuy in North America? Is prebuy...

Prebuy, no. That's not something which is significant. What do you mean exactly by prebuy?

Just anticipation of orders because of the tariffs start.