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 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, everyone. Thanks a lot for attending this meeting for Sogefi third quarter figures. As usual, I will do a very short introduction. We published yesterday the press release. You have seen the presentation on our website. So we'll do a very short introduction, and we will to the Q&A. So in a nutshell, the results in -- for the first 9 months of '25, our revenue reached EUR 745 million stable at constant exchange rates and minus 2.8% at current exchange rates versus '24. Our EBIT reached EUR 48.5 million. It was EUR 38 million in the first 9 months of '24. Our net profit from ongoing operations is at roughly EUR 30 million compared to EUR 15 million in '24. Our free cash flow is at EUR 21.6 million. Last year, I remind you that we had a very positive impact from the Filtration business units. So comparison needs to be readjusted. And our debt, excluding IFRS 16, is at EUR 30.9 million following the distribution of dividend of roughly EUR 18 million. So we are in line with our forecast. We are in line with our guidelines. And talking about the guidelines, for '25, we are expecting a decline of low single digit at constant exchange rates and an EBIT margin to grow slightly compared to what we recorded in '24. So in line in absolute value. So that means an improvement in terms of margin in an environment which is extremely shaky, let's to say it like this. So as well, we'll continue with our Sogefi way, i.e., being very cautious with regards to the market evolution, and continue to work on our strength, i.e., the improvement of our own margin and the development of our new products. As said previously and expecting some questions on this, we are not highly exposed to the tariffs directly. Our main concern is the evolution of the market for the coming months. So as usual, we will be very cautious and we will continue to work on our own improvement, better to work on our strengths than expecting a rebound on the market. So I'm available for any of your question, please, if we can jump in the Q&A.

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

I have 3. The first one is on the group performance in North America in the third quarter, it was quite strong, above plus 10%. Can you give us more color on this side, any details would be helpful. The second question is on the free cash flow generation. In comparison to my estimates, the 9 months free cash flow generation was a bit higher than my estimates also because the CapEx maybe was lower in the third quarter. So if you can give us an update on the free cash flow guidance and on the CapEx expected in the year. And finally, on the restructuring charges, any indication for this year, but above all, are you planning an acceleration in the restructuring in 2026.

With regards to the free cash flow, yes, you're right. We are a little bit higher than what you expected, mainly due to CapEx phasing. CapEx will remain in '25 in our range, so between EUR 75 million and EUR 80 million. So by the end of the year, we should be more in line with what you were expecting. With regards to restructuring, as I said, we will continue to work on our industrial organization and our industrial footprint. So our expectation is to remain in our flows. I mean, the restructuring will be -- we're not -- will not be lower, that's for sure. We have to work on our footprint. We have to continue to work on our, let's say, efficiency. So in this industry, that means restructuring. With regards to NAFTA, we are above expectation in terms of sales. Yes, let's be cautious for the end of the year. We cannot target such improvement for the coming months. let's be cautious. But yes, you're right, we are a little bit above what we were expecting.

Okay. Maybe if I can follow up on the restructurings, would it be fair to assume roughly EUR 5 million for this year and maybe something higher for the next year? And the second, on NAFTA...

Yes.

Okay. Perfect. And on NAFTA, the stronger performance in the third quarter, was it due to some key clients or maybe the...

Both. New products, key clients, we have also certain competitors who are facing trouble, so we can benefit from this. So let's say, it's a mix. It's a favorable mix, but let's be cautious about the future. .

The next question is from Martino de Ambroggi of Equita.

The first question is on the guidance because you're guiding for an adjusted EBIT slightly better than the 5.1% of last year. But if I look at your first 9 months, you already got 7.0%. So is there any particular trend or item or cost affecting Q4 or probably the slightly better is too conservative?

Well, our guidance is to be slightly better in absolute value. So that means an improvement in terms of percentage, if I may.

Okay.

Our guidance is a slightly better margin in terms of absolute value. So with lower sales, a better margin in absolute value means an increase of the percentage, you're right.

Yes. But if I look at the absolute value, last year, you got EUR 50, if I'm not wrong, EUR 52 million, and you already got in the first 9 months, EUR 52 million.

Yes. So we are expecting something.

So cannot be slightly, should be more than slightly. So that's the point. So if I understand, there is something in the middle that is offsetting this trend over the first 9 months.

We will -- the last quarter could be difficult, but we will not offset during the last quarter such big variations. So yes, we are expecting a better margin with improvements.

Okay. The second question is on CapEx. You mentioned higher CapEx for new products. Could you elaborate on which kind of products and what is the potential upside coming from this in the next few years, if any that's major.

We'll elaborate on the expectation for the next few years, you can understand that it's hardly difficult for me here. Let's say that we are confident. The CapEx will -- the amount of the CapEx will remain in our usual envelope, so i.e., between EUR 75 million and EUR 80 million. Yes, we are doing well in terms of new products, both in Air and Cooling and in Suspension, but the CapEx will be for the Air and Cooling development, especially for the Cooling plates. We are able to catch new development, which will be in production in -- some of them even in '26, but mainly '27, '28. I cannot give you now the expectation in terms of growth in sales. The only thing I can say is that we are developing those products with a new customer, especially battery producer. So we are, let's say, '26 will be difficult for the market. But for the time being, we stick to our strategy.

Okay. Okay. And the last is on the tariffs because it's clear, no price pressure on your side. But are you planning any CapEx to reshuffle the output capacity because of, I don't know, requests from your customers or nothing specific on this issue.

Nothing specific on this issue so far. We, of course, scout the opportunity because we will need -- we may need capacity improvements. Sorry, there is a lot of noise. Yes, we scout the opportunity. But so far, nothing on the table for this. We do not -- we didn't identify a major risk, which could force us to change drastically our footprint.

Okay. And the last -- very last on free cash flow, EUR 15 million in the 9 months, which is probably better at the end of the year. So we've got 2 in front of 1.

If you have in mind, Monica's question, EUR 15 million is a bit higher than what was expected. And I said that the CapEx by the end of the year should put us more in line with what we said previously, i.e., the cash flow generation of this entity is more between EUR 10 million and EUR 15 million per year than around EUR 20 million.

[Operator Instructions] There is a follow-up question from Monica Bosio of Intesa Sanpaolo.

Yes. Sorry, a follow-up on the heavy duty segment that this year is really down. And I think it's not truly a real core business for you. Have you seen any interest from some players on this segment, sorry if I ask.

Well, Monica, you can ask. You're totally free to ask. But you can understand that I will not answer.

Okay. But can you confirm that it's not strategic for you?

Well, it's not our core business, but it's an important part of our business. In the past, it's a business which generates a lot of cash and EBIT. We are working on it for recovering those margins. We are at a low point in terms of market. I cannot say that it's something irrelevant for us. But as usual, nobody knows what will be the future and what will be the potential opportunity tomorrow.

The next question sir is a follow-up from Martino De Ambroggi of Equita.

On your Romanian plant, I saw in the presentation, you mentioned that it's a breakeven at EBIT level. So what is the path, the growth we should expect for the Romanian plant and its contribution? And could you remind us the total amount of sales for this plant, if it's possible. And the second is on the Suspensions because you achieved a 12.4% EBITDA margin in the first 9 months. Do you expect to improve it in '26?

Be sure that we will work in '26 for improving the margin of Suspension. You know that's our main focus in Suspension to improve the profitability with industrial framework, let's say it like this. The Romanian business unit is, yes, at breakeven for sales around EUR 47 million to EUR 50 million. This factory has been built at the time for a much higher sales. So we had free capacity there. And we are working for improving the workload of the -- yes, we are working or optimizing the -- our industrial footprint and the workload of this footprint. You know that we will continue to restructure, you understand. I will let you make the link between the dots.

[Operator Instructions] There are no questions registered.

Thank you very much, and talk to you again in 3 months' time. Thanks a lot.

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