Earnings call transcript: CIE Automotive sees 100% profit growth in FY 2024

CIE Automotive reported its full-year 2024 financial results, highlighting a significant net profit increase of 100% compared to the previous year. The company achieved nearly $4 billion in sales with a 1.1% growth at constant exchange rates. Despite a challenging market environment, CIE maintained strong profitability margins and continued its deleveraging strategy. According to InvestingPro data, the stock has faced significant pressure recently, taking a notable hit over the last week and showing weak performance over the past month.

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Key Takeaways

• CIE Automotive’s net profit doubled year-over-year, reaching $326 million.
• The company maintained an EBITDA margin of 18.4% and an EBIT margin of 13.6%.
• CIE continued to focus on emerging markets and innovation in forging technologies.
• Global vehicle production trends showed mixed results, with growth in China and Brazil.
• The company distributed $120 million in dividends and continued its deleveraging process.

Company Performance

CIE Automotive demonstrated resilience in a challenging market, achieving a net profit of $326 million, a 100% increase from the previous year. The company’s sales reached nearly $4 billion, with a modest growth of 1.1% at constant exchange rates. CIE’s strategic focus on emerging markets like Mexico and India, along with innovation in forging technologies, contributed to its strong performance. The company also maintained high profitability margins and increased its market share across all continents.

Financial Highlights

• Revenue: Nearly $4 billion, 1.1% growth at constant exchange rates
• EBITDA: $728 million, 18.4% margin
• EBIT: $538 million, 13.6% margin
• Net Profit: $326 million, 100% increase year-over-year
• Operating Cash Flow: $464 million
• Financial Debt to EBITDA Ratio: 1.34

Outlook & Guidance

Looking ahead to 2025, CIE Automotive expects growth in India (6%) and China (2%), while anticipating declines in North America (2%) and Europe (5%). The company aims to achieve a 19% EBITDA margin and continues to focus on cash generation and shareholder returns.

Executive Commentary

CEO Jesus Maria Herrera emphasized the company’s strong market position: "CIE will keep on increasing its market share in all the continents in which we are present." He also highlighted the company’s role as a consolidator in the industry: "Competitors are suffering importantly, some of them are closing and a reduction in capacity helps strong companies like us increase its market share."

Risks and Challenges

• Potential tariff impacts could affect international operations.
• The decline in vehicle production in North America and Europe poses a challenge.
• Maintaining high profitability margins amid global economic uncertainties.
• The need for continuous innovation to stay competitive in emerging markets.
• Managing financial leverage while pursuing growth opportunities.

Q&A

During the earnings call, analysts inquired about potential mergers and acquisitions, with a focus on India and Brazil. Executives expressed optimism about increasing shareholder returns and highlighted the company’s strategic positioning in the market.

Full transcript - CI Com SA (CIE) Q4 2024:

Conference Moderator, CEI E Sodermaqui: Welcome to CEI E Sodermaqui’s Fourth Quarter twenty twenty four Results Conference. We’ve got Jesus Maria Herrera and we will have a Q and A session at the end of the meeting. Please remember that you will only be able to ask recent questions to the website tour.

Next (LON:NXT), we’d like to give the floor to Luria. Thank you. Good morning, everybody. Welcome to the fourth quarter conference. As you know, today, as Juan mentioned, we have our CEO with us, Jesus Maria Herrera.

I am sure you have many questions for him. So we will start with a brief review of the fourth quarter and 2024 before moving on to the Q and A session. We will start by reviewing briefly the situation Industry markets in Europe, while production have continued to contract throughout the fourth quarter registering the largest quarterly decline of the year at minus 10%, Beyond the uncertainties looming over the European market, two specific factors have impacted these volumes. On the one hand, the strike at Volkswagen (ETR:VOWG_p) in Germany during December 2024, which ended with an agreement with the unions and also the withdrawal of incentives for electric vehicle purchases in important markets such as Germany throughout 2024. Overall, 2024 has recorded a decline in production of 6%.

The total has been 15,700,000 vehicles produced, 18% below pre COVID levels. The delay in the purchase decisions due to uncertainty about what they call to buy, the withdrawal of incentives to electric vehicles and increasing demand for imported Chinese cars, which should drain European production, are probably some of the main factors behind this negative evolution of the European markets. The main consequence of this scenario is the overcapacity across all lanes of the supply chain. Idle capacity has estimated around 35%, which is equivalent to an idle capacity of over 8,000,000 vehicles. In this context, we have continued to see throughout this fourth quarter some restructuring announcement both from our OEMs and suppliers, Decisions that we expect will contribute to the health health improvement of the European automotive sector in the mid and long term, but only in 2024, they have already meant the loss of almost 60,000 jobs.

Let’s go now to North America and it has suffered a production loss of 4% in the quarter, influenced by the inventory reduction strategy of the big three in The United States comparing inventory levels in December 2024 compared to those in September 2024 for us to take a look at the evolution. Stellantis (NYSE:STLA) reduced its inventories by 30% in the quarter from ninety to sixty three days. General Motors (NYSE:GM) reduced their stock by over 20% from sixty eight to fifty three days. Ford (NYSE:F) reduced them by over 10% from ninety to eighty days. As all, the stock inventories of U.

S. Industry were around forty six days in December 2024, which was a drop of over 15% compared to those fifty six days we had in September, although we have seen some well, a bit of a rebound at the start of 2025. While the positive note in the North American market was once again Mexico’s production grew again in the fourth quarter by almost 3%. Overall, throughout the year, we see a North American market has contracted by nearly 2% with a total production of 15,400,000 vehicles and Mexico grew by 5%, the U. S.

Contracted by 2% and Canada keeps on losing volumes quarter after quarter and it is now less than 10% of North American production. If we talk about China, the fourth quarter with 9,500,000 vehicles produced, Well, the highest quarter in China saw the strongest growth with a growth of 8%. Behind these very positive figures, we have the major headlines in the Chinese market. First, domestic demand driven by government incentives. It is important to mention that the fear that scrap metal incentives which were ending in 07/24 were not going to be renewed caused many consumers to advance their vehicle purchase to the fourth quarter of twenty twenty four.

However, while at the end, the renewal of the incentive scheme has already been announced in January for one more year. The second headline in the Chinese market, discount or consumer discounts hit their ceiling in the final weeks of the year to be able to meet the annual sales targets of manufacturers in the context of an intensifying price walk. As an example, in the Chinese market, two twenty seven car models received the price cuts in 2024, much more than the 148 models that saw these price cuts in 2023 and significantly more than the 95 models whose prices were reduced in 2022. This price war I mean, this price war favors Chinese manufacturers whose market share kept on growing up to 66% of production in 2024, which means that the that’s a market share increase of seven percentage points compared to 2023. Third, and also linked to Chinese manufacturers, the increased penetration of electric vehicles in the market with an increase of no less than 11 points in 2024, reaching while new energy vehicles reached 47% of production in 2024 compared to 36% last year.

And last, the success of Chinese exports And China is now consolidating its position as the world’s leading vehicle exporter. Exports that grew by 20% in 2024, reaching 6,000,000 vehicles exported, further widening the gap with the second largest exporter, which was Japan, with over 3,800,000 vehicles. The result of all the previous comments is a Chinese market that grew by nearly 4% over 2024, and it has now surpassed for first time ministry 30,000,000 vehicles produced. Brazil well, the Brazilian market grew in the fourth quarter by 17% in a quarter in which OEMs pushed especially hard to restore inventories to normal levels. This normalization was possible thanks to a solid demand that can be seen in data such as the sales of vehicles in October that have reached unseen figures since December 2014.

The demand of vehicles has been impacted by a reduction in unemployment, lower interest rates during 2024 despite the upturn at the end of the year and in 2025 and the renewal of fleets. Overall, well, we can see significantly a significant growth in production of 8% and it turns Brazil into the market which has grown the most in 2024. And it’s now back in the eighth position amongst the top vehicle producing countries. I must highlight that besides the growth on 2,400,000 vehicles being produced, it’s still only 15% below pre COVID levels, which means that has significant potential for growth. Now we get to India, the Indian market has grown by 3% in the fourth quarter, driven amongst other factors by stroke festive season, the launch of new models and an attractive discount policy at year end by many manufacturers.

The macroeconomic environment is also contributing to this growth with political stability and increased available income. And for the full year, vehicle production have grown by over 4%, reaching almost 6,000,000 units. It’s closer to 11,000,000 now, consolidating its position as the fourth largest passenger vehicle producer globally. And as you know, when we talk about India, it is important to mention as well the evolution of the other segments that we are exposed to. The Motorcycle segment grew by 8% in the fourth quarter, driven by strong prospects in rural India.

The year has been even more positive with a growth of 16%. The tractor segment has benefited from the goodborn soon and strong harvest has also grown by 12% in the quarter, recovering part of what it had lost in previous quarters. And last, the heavy vehicle segment that suffered in 2024 due to delays in public works and a negative evolution of some of its key industries such as coal and cement. And it’s been reduced by 12% in the whole year. Let’s now talk about the results, our CIE results, excellent results.

And they are even more surprising in a challenging context like the present one and with some peers reporting results that are significantly lower. The fourth quarter with sales of $950,000,000 with an EBITDA margin of almost 18%, slightly impacted by your usual end of year context like provisions and maintenance stoppages by customers or own stoppages and so on. But above all, with a net result of 67,000,000, which is over seven which means that over 7% of sales have become benefit. And the quarter then consolidated success of twenty twenty four in which sales reached almost $4,000,000,000 although they were penalized by ForEx effects, growing by 1.1% at contract exchange rates and outperforming the global market by over two points. This growth was driven by almost all regions in CIE, especially in Brazil and India, Two of our key markets, both for the present and for the future.

And besides sales, well, the whole P and L is blind, sorry, evolving positively an EBITDA of $728,000,000, which means that there is a margin of 18.4% on sales and EBIT of $538,000,000, that’s a margin of 13.6%, exceeding by 40 basis points the margins of December 2023, and they consolidate our operational strength. The best that all geographies or CIES geographies have contributed to this improvement of operational margins. In all of them, we have seen an improvement of operating margins in 2024 when they are compared to 2023. We should highlight especially good performance in Asia. In India, we exceeded EBITDA margin of 18% and in China.

We have maintained our focus on profit early and we exceeded 19%. Also Europe, the most challenging market today and well despite of the or more the hard situation, we’ve been able to improve our profitability. And in addition to these operational improvements and a strict investment control, both well, financial and tax policies that allowed us to get to a net profit of SEK326 million, which was 100% higher than the previous year with a comparable scope, adjusting for the profit contributed by the sale of German businesses in 2023. At a constant exchange rate, it will be even higher. What we can truly see about solid positions between the P and L is actually in our ability to generate cash flow with a conversion of EBITDA into operating cash of 67% with $464,000,000 of operating cash flow generated.

In terms of working capital, it’s been a very efficient management year that allowed us to stabilize both the operating working capital as well as reducing our de factoring reviews without significant peaks in consumption oil generation in terms of investments, maintenance CapEx that was stable in line with previous quarters, ensuring the efficiency and operability of our facilities and the growth CapEx that prioritized our expansion in emerging markets such as Mexico and India, regions in which you’ve been able to see that our CapEx to sales ratio is slightly higher than the global ratio and our investments will definitely contribute to more sales in the coming years. On, well, shareholder returns, we have distributed more than CHF 120,000,000 in dividends CHF 108,000,000 to the parent company and CHF 14,000,000 to minority shareholders, especially in India and in one of our Chinese subsidiaries. And it’s true that shareholder payments is one of the main priorities of the CIEE project and in 2024, about half of the $250,000,000 the generated cash flow have been allocated to dividends. And despite all these dividends, we have continued with our deleveraging process and financial debt and EBITDA ratios at 1.34, A level that’s below our comfort area, comfort of around two times.

So we have a room for future investment in corporate operations. With results in 2024, we’d like to briefly review, it’s in the presentation, our progress towards our 2025 objectives. In these four years, twenty twenty twenty one to 2024, we have already achieved our objective of growing by or growing 20 percentage points above the market, thanks to the strong very strong organic growth in our regions. The EBITDA margin was 18.4%, which is approximately 90% of our target of 19% even in a challenging inflationary context. At CapEx, it’s still solid and aligned with the plan at around SEK1 billion.

The corporate tax payment still stable at around 2% of sales. And in terms of cash generation, which is probably the most important guidance of all the 2025 objectives because it implicitly includes all your objectives. We in 2024, we have achieved almost 90% of the NOK 500,000,000 target with over SEK $460,000,000 of generated operating cash flow. And now after the course of 2024, we have to keep on looking forward and looking at the future into a sector that’s still facing an uncertain context, probably especially marked by macroeconomic, geopolitical and transitional factors in our sector with very different dynamics by region. India will still be leading global growth with probably an advancement of plus 6% in 2025, a strong domestic demand driven by the growth of the middle class, also a stable economic environment, while the country consolidates itself as an import export hub.

In terms of other segments beyond passenger vehicles, also very good prospects. With the truck segment, that is growing over 5%, it’s got a compound annual growth rate of over 5% for the next five years. Truck segment is going to have expected growth close to that of Trucks and motorcycle segment. We’ll have even higher growths between 79% of a compound annual growth in the next five years. Russia is expected to grow by or strongly by at around 5%, driven by lower interest rates and improved credit access, the stability of the financial sector financial market rate.

And global manufacturers making new investments in Brazil, reinforcing the local industry. China is expected to grow by 2% in 2025, keeping that stable evolution. And the well, it’s there’s a challenging trade environment, but it’s a country that’s taken measures to boost domestic consumption and uphold the sector’s activity. The incentive scheme for scrap metal has been renewed for 2025. Expanding the range of vehicles that are eligible for this incentive.

And this with these new promotions offered by OEMs will surely contribute to this growth in 2025. North America will reduce its production by 2%. Big differences amongst the different parts of the region. The United States will probably fall by 3% due to the economic slowdown and interest rates that are still limiting credit access. Mexico will keep on growing by probably 2%, driven by the growth of the manufacturing sector and the arrival of new investments production investments.

In Europe, production will probably drop by 5% and a key year in which regulations will set the roadmap for the sector with the new CO2 regulation that’s going to have an impact on the production mix and the plants of manufacturers. We could be in a certain situation in which manufacturers will need to reduce internal combustion engine production to improve their mix and limit the penalties. And at the same time, electric vehicle demand that’s still not working without incentives. And in many countries, those incentives are being reduced or even withdrawn As mitigating factors in Europe, maybe good GDP prospects, controlled inflation, interest rates that might be lowered and some tariffs implementing 2024 to electric Chinese vehicles that could favor European production. Taking all of it into account, we’re facing 2025.

I understand that production will remain stable with differences between different regions and emerging markets will continue to grow while mature markets are still showing a weakness. What’s important of this production figures for 2025? Well, the hypothesis or the fact that IHS production are uncertain, such as the evolution of tariffs to vehicle inputs. The hypothesis that IHS assumes for these for the 02/2005 figures are that Mexican cannot will have no tariffs yet, a universal tariff of 10% of the European Union, the United Kingdom (TADAWUL:4280), Japan and South Korea starting in spring twenty twenty five and an additional tariff of 10% on China. It seems this is the scenario we’re going to have to face in 2025.

It is complex And it’s also worth mentioning that our current strategic plan, what was defined at the end of twenty twenty and it was made public in early twenty twenty one in a context that was completely different until today. We were projecting additional 25,000,000 vehicles produced during that period and inflation and interest rates and global geopolitics were entirely different. And despite all of it, we are here and we keep on advancing every quarter and every year and that’s the message I like to finish with. Given the positive evolution of our strategic plan up until December 2024 and our outlook for the next quarters, we’d like to confirm once again that we’re going to keep all our commitments for 2024. And now let’s move on to the Q and A session.

We’d like to remind you that Jesus Marie is here with us, Jesus Marie Herrera, our CEO. So please, Juan, to go ahead with questions. We have many questions. The truth is that probably more than in previous occasions. So please, I am sorry well, I’m trying to get everything organized, but it’s not easy.

So please, I’m sorry well, let’s start. First question in terms of 2025 for 2025, Are we expect to grow at a constant exchange rate? And if we could talk about the performance expected by region in 2025? Well, first of all, good morning, everybody. It’s a pleasure to be here again.

And I will try to answer all your all your concerns about our project and not talking about 2025, what will be a reality is that CIE will keep on increasing its market share in all the continents in which we are present. But given that we cannot value what’s going to happen in those well, we don’t know what’s going to happen in all those continents, but we know that our TIE is a winning player. And as such, it will keep on growing above average above market rate. And that’s also guaranteed for 2025, which was basically the question, right? And they’re asking what to expect one for our performance in 2025.

So how different markets are going to work on the margin? Well, there are markets such as the European market that are still suffering. Behavior will be better. The American market is also suffering. We have a strong bet in Mexico, so our performance is a bit better.

And then we have two markets like Brazil and India that are going to grow strongly. And in those markets, we will interest our markets here as well. In terms of margins, well, our objective, it will be to keep on improving margin in the different markets to be able to reach objective, which is to reach 19% of EBITDA in this in the present context in the sector. And of course, the variables were not included in the strategic plan when it started. Inflation, interest rates and growth, about 20,000,000 plus less being produced.

But despite that, our figures are positive and we will still meet all the commitments we have made. Next question is about EBITDA margin of 16% of 19%. What challenges to get there? I think at CIE, we’ve never base our margin in important increase in volume. We always look at inputs to improve our margins.

And of course, we are analyzing and improving all our processes to try to get to that 19%. It is true that we have closed 2024 at 18.4%. We only need to make a jump of about 0.5 and that jump well, we believe that we are going to be able to make it and you’ll probably see in the next quarters. One question about a different topic, M and A, are we expecting some transaction in 2025? I’m sure we’ll have some transactions.

Of course, we keep on working. I mean, it’s key to the growth of CIE. And I would like to elaborate a bit more about it. I believe that Europe, well, we need to understand that there’s an excess capacity and it’s also true Well, we are realizing things in Europe. But of course, it’s very risky.

Everything in Europe is risky. Europe is suffering. Comparable competitors are suffering a lot. And taking a very high risk in Europe is not part of our objectives. If our clients ask us and tell us that they need us, well, of course, we will undertake acquisition projects.

Our main focus is now in India and Brazil. Brazil is a closed market. It’s a market that we master. There are opportunities, of course, not as big as the ones in India, but opportunities in which we can be able to integrate and improve and generate value. And that’s the key objective for our company.

And in India, we’ve been assessing companies for a long time, important companies as well. But I think it tends to happen in that country. Well, things normally take longer than we used to. And I mean negotiating with the Indians normally, well, it doesn’t take nine months like in other places, it probably takes years. And for some years now, we have been talking to some companies and I hope this while this company is really part of our group and I hope we will be able to integrate it because India is certainly in the improved market where we want to put our bets in.

And in case the M and A does not happen, what would be the best use of the cash of cash given we have an all time low leverage ratio? Well, the truth is, you know that our focus is always to pay our shareholders. You’ve seen that we have increased our dividend year after year and we have but despite that, we have been able to reduce our debt drastically. It’s a bit below $1,000,000,000 adjusted financial debt, adjusted financial debt. And undoubtedly, the big issue is that we have a big cash generation and a lot of money.

So we will keep on analyze all the different tools, all the possible tools to increase the payments to our shareholders. We believe that we should keep on growing with this market consolidation. We have to keep on integrating companies and betting on that growth. And otherwise, I mean, we will get close to we’ve got debt reduction that tends to zero because our generation is very important. So there are a thousand ways to do it.

But it is to keep on paying our shareholders and we could increase our dividend or we can find any other formula that makes investing in CIE automotive more appealing. We are now in of course about CIE India. They are asking about the Indian market. They see a loss of market share with our clients. So and while other comparable competitors are increasing their market share, how are we going to tackle this issue?

Well, I think everybody knows CIE Automotive and we have two objectives to increase our market share as long as the market share we win is linked to an increase of profitability increased profitability. So this year, we have increased market share in India. Maybe some competitors have won more market share by reducing their margins and that’s forbidden at TI. That’s just forbidden. So market share is important.

But margin growth is even more important and that’s what you can see in India. As what I was mentioning, we are very close we’re close to 8% and we have to keep on increasing our margins. So I mean, it is not as important it is important. But we shouldn’t increase our market share by reducing prices and by reducing prices, reducing margins. I know there’s a price war, but we’re not going to enter it.

We are only entering when we can guarantee the return of our investment. In a group, that return is 20%. Now they are asking about the European business and our forge business. So how are we losing there and how we’re planning to tackle these issues in our business? Well, quite obviously, I mean, it’s forging is one of the technologies that could and that is actually suffering a bit more.

In other technologies, we are actually growing. But what’s important is that we are able even with a drop in those technologies to have extremely high profitability margins. And we are investing in new forging technologies such as aluminum that should provide us with a recovery of that promise. So in our technologies, in this case, in the Forged business, we have alternative plans to compensate for that possible drop due to the evolution towards electric vehicles. And in Castello, metal, they are very strict in terms of clients and products.

How could we reinforce its resilience? Because how sustainable is it to export to The United States indeed’s new environment in which we are in? Well, I believe that somehow we need to understand that while the final client of Metal Castello, Metal Castello is I mean, there are clients who are in a sector, I mean, it’s farming machinery and construction machinery. So I mean, it’s always been seasonal and there have been cycles. Now we’re at the lower point within that cycle, but as it always happened, it will come back.

And I’d like to highlight in Metal Gas del Norte that despite we are in the lower part of the cycle, our EBITDA is still important at around 20%. And I believe that’s something important to highlight right now. But I’d like to insist. I mean, the cycle will come back and I hope it will be back in the midterm. So I’m sure it will the cycle will be better in 2025 and we’ll recover.

And on tariffs, that’s going to be the usual question this year. Well, I’m sure you’ll share with me that despite what well, the president of The United States is an expert in generating news, news that are then what they they are able to reach agreements and in practice, it doesn’t really have an important impact. It actually has a very residual impact and that’s what we expect. You’ve seen well the times they want to have in Mexico and Canada and they’ve delayed it once, they’ve delayed it again. So I’m sure I assume it makes sense.

There are agreements that will help the world actually change as much. Sometimes when you read the newspapers, it seems things are not going to be normal, but they will. And as I mentioned earlier, I mean, we just got the data and things are not changing as much. The productions they estimated different markets both in Mexico and Europe and so on for 2025 fab exactly the same as the ones they had before from becoming the president of The United States. So, oh, I believe what we are we have to, of course, be attentive, but we’re not going to suffer that much.

We didn’t suffer that much with the previous government of when Toronto was present before. And of course, I mean, CIE is present all around the world. So there could be risk in one region or another. But of course, there will always be opportunities in other markets. So what’s lost some in one area can be won in a different area and because AI is a global project that’s present in all the countries and I know the content of vehicle production is are important.

And I think it’s always seen it’s seen in our heads, but when The United States produces 10,000,000 vehicles, but the consumption is 16,000,000. So The United States is what needs? They need imports making it impossible to produce 6,000,000 more in a country where there is full employment. It’s hard for all of us to have qualified workers. And the inflation that could mean it’s just not feasible.

So Josemario said that these are just headlines and we’ll see what happens. But just for you to understand what the figures look like, 10,000,000 being produced over 16,000,000 vehicles being sold. So they need imports. And besides that, there’s no installed capacity in that sector. And we’re talking about components in The United States to cater for those volumes.

So I mean, if we talk about cost, the cost in Mexico is a third of the cost in The United States. So American clients will still have an issues in 02/2008 with very heavy losses if they don’t resort to the cheapest source, which is Mexico. Okay. One question about India and investors saying that it could be worth much more under the CIU’s umbrella. So there’s a potential growth happening in CI India.

Why is that not being done if it will be a price increase? I mean, if you’re able to guarantee that price increase, I’ll do it. And I mean, if they’re able to guarantee that, we’ll do it straight away. But you know and we’ve mentioned this these are different businesses and we have it’s got nothing to do. And all our control business has nothing to do with the automotive component business.

One is process based on process and the other one is a product based business. That’s why we are not blending it. But if that was the case, truly was the case, I know we have had different meetings in India. They were saying that it will be very interesting. We’ll analyze it, but I think we shouldn’t.

I mean, we’ve got a comfort business and I mean, we’re pressing in different countries in Mexico, China, in The United States, in Europe and in India. And really breaking that business just one part of it, which would be, I wouldn’t we’re not sure that’s going to add value. But I mean, if that business acts independently from the other sector and that we will have just one leg of the stool separated, which would be India. Take into account that CIE’s stock price is lower. Could we increase our participation up to 75%?

That’s what’s allowed. Well, it seems this is the result presentation for OCIA India. I’m just joking, but I’m not annoyed by the questions coming from India, of course not. But obviously, the drop has been a drop not just of CDIE but all our comparables, a drop of between 20 something and 30 something percent. So we’ve dropped 20 something percent, some others 30 something percent.

So it’s a generalized drop. And we still believe we’re thinking about CIE Automotive, not CIE India. Because if we were thinking about buying stocks, we’d be thinking about buying CIE Automotive, because in our opinion, Its price is really, really low. The price of CI India, well, there’s been a drop, but some years ago, we were at 180 really, and we’re now at 400. So there’s been a growth.

So I mean, but CIE in Spain, we’ve been at the same level of around 25 and now even below 25. So below 25 and I believe people are not really valuing everything we are achieving with this strategic plan. I’d like to remind everybody that This was twenty twenty one, twenty twenty five and CIE is generating over SEK 2,500,000,000.0 of operating cash flow and CIE is reducing its debt by over $700,000,000 and going from 3.5 times to around one time at the end of twenty twenty five. And this has not been valued and that’s why our idea is that CIE is much, much cheaper than CIE India. Even if CIE India has a behavior that’s close to our comparables in India, I think I mean, they all went up to $600,000,000 and now it’s I mean, all companies have adjusted the price.

That’s now changing Western Asia. They’re basically asking about margins for the next quarter, both of China and India. They’ve been significantly lower than the previous year, so on to see if there’s some sort of explanation here. Well, the truth is they have been on, yes. But what’s important is that it’s not I mean those drops are not recurring.

Those drops margin are not recurring. It is true that in China, we have had very, very high margins and there has been a correction in the fourth quarter. And but what’s important is for us to keep the margins of 2024. Margins have grown in all the geographies in 2024 and they are helping us reach our objective of having an EBITDA of 90%. So we’ll probably have better margins than last year.

And it’s been due to the different events that have happened. They happen in all the geography in this case not just China and India. Also in Brazil or in Mexico. And they are the result of many different variables. In some countries, wages are rising in October.

In some of the countries, given the price increase of dollars, There’s been an increase over the prices of raw materials. And so there are 1,000 variables that well, in any given quarter, we can have a drop of margins the Electron System, the fact that they are not recurrent given that a contracted result is the minimum recurrent result for the next few years. Let’s now go to Europe. Well, Europe in general, but yeah, India and Europe. It’s a market without growth.

So what’s the are you thinking about closing plans or any important restructuring plan? Well, certainly, the European market is suffering important drops. In the first quarter, it was a double digit drop. And CIO will drop less than the market. Why?

Because we are a consolidator. Competitors are suffering importantly, some of them are closing and a reduction in of capacity helps strong companies like us increase its market share. Closing companies, we’re not really thinking about closing any of them. We need to realize that CIE has not made strong investments from investments in Europe in the past few years. We are focused on growth markets and we have not got an excess capacity in Europe.

It is true that some other companies have invested in electric vehicles and other issues. And while investments were made for both combustion and vehicles and electric vehicles as well, that’s why we haven’t got an excess capacity at CIE. We keep on working every day. And we believe that under these circumstances, we’ll be able to keep on improving our margins well by doing what we always do, just adjusting ourselves to the demand and our costs need to be adjusted to that demand. So our margins are still high, just like the ones we’ve got today.

And on European regulations, let’s see if do you expect any relevant regulation or announcement in March? Well, I think everybody’s quite lost. Everybody is not really unsure about what to do, and we see that in Europe as well. I don’t know. I think that regulating too much, it can also be bad.

And I believe that somehow, well, things just given their nature need to evolve in a logical way. My hope and I believe nothing’s going to change dramatically and I’m sorry. And I was supposed to say I mean, the rumors I don’t know if that’s the right question, taking the right term. But what they’re talking about with this strategic dialogue in Europe, they’re talking about you know that March, we are going to present the action plan that will stem from that action plan, from that strategic dialogue. And now they are talking about three potential changes in European regulations, but it would be to increase flexibility of emissions in 2025, creating a multi annual plan, so not just including 2025, but I’m making it 2025, ’20 ’20 ’6, ’20 ’20 ’7.

And the multi annual result will the results were fine. So it would be sort of is giving more time to the sector to decarbonize. And second, there is certainly one of the main topics here in Europe is the lack of coordination between different countries. So some of them are getting rid of incentives to elect EVs and some others are have certain doing it in a certain way. And well, they’re talking about pan European incentives or incentives to European vehicles that are exactly the same in all markets.

And I don’t know if the word is rubles on the drafts that are on the table. And CIE is, of course, involved in that dialogue through and the vendor associations. So we’ll see what the action plan looks like. And the question was about changes in regulations. Well, those are basically the two that we can think about.

Also on CapEx, what do you expect this year? CIE said that there will be many but you’ve got Greenfield in Mexico as well. So what do you expect this year in terms of CapEx? We’ve seen a maintenance in investment that was a bit low. So on a CapEx level, 2024 was the most important year in terms of CapEx.

You’ve all seen it. And the results, I mean, it’s been due to this new company. I mean, in North Mexico with an investment of $100,000,000 And the investment, I mean, by the end of twenty four, so about $7,000,000 were there, so we’re only missing $30,000,000. So this year, we expect to have a CapEx reduction. Normal CapEx in the CIE is about 5%.

And that’s 1.5% to 2% of maintenance CapEx and the rest is growth. So I mean, this year, we will go back to 5%, around 5%. Maybe with this 30,000,000 we’re missing from the Korean for the Mexico, it could be a bit more than that. But in this plan, our plan was 5% of CapEx, so we’re going to meet that. And we have I mean, with that this principle, that’s going to give us it’s going to help us a lot in 2026 and even more in 2028.

So we’ve got like two phases. The growth phases, one is going to be in 2026 and the other one is going to be in 2028. And we will see that in the next plan. They’re also asking about tariffs if it might not be the right timing for this greenfield project in Mexico. I’m thinking about starting a second one in Mexico, in fact, because it truly is the best place in terms of logistic costs and to export to The United States.

In no. The Mexico, I mean, it’s basically US. It’s basically US. Our clients have, I mean, our clients have supported us, struggling and our clients trust is going to be a success. And I’m happy talking, but before we start, they’re already asking about another one with other technologies.

That’s where we need to be. And it’s very, very competitive for The United States. And there’s a lot of volatility in the markets, but they’re asking about underperformance in the fourth quarter and how the first quarter has started. Well, I think I mentioned this already. Well, we started, honestly, quite well.

And January seemed to be a bad month, but it’s been better than last year. But as I’m in the three continents in which we are present, we see a better behavior than the market and we see a margin improvement. The margin improvement we are better than so we are optimistic. Still very soon and the year is long. So as we usually do, we are happy with the task we’re carrying out and with our position in the markets.

And there’s a clear objective to reach and meet all of our commitments. On that underperformance you mentioned in the fourth quarter. Well, I think it was just punctual really, but there were some factors there in North America, for example. There’s a very important client for us, Stellantis. And as you know, the CEO was dismissed.

So I mean, there wasn’t the nexus of stock in The U. S. They stopped production for well, in the last quarter. So of course, that has had a big impact on us because they are a very important player in North America. So they have been one of the most important players.

But those are factors that have an impact in one quarter or one month, but they are not recurring. And there’s something that’s fully mathematical here. In the last quarter, well, we see a growth in China and now in the result of the market. As you know, China is over a third of global production and a lower exposure to China. And what the reason for some of that underperformance, if you compare us to the global markets, of course, there’s a bit of underperformance.

But if you compare us against the CIE mix, well, that basically disappears. So the stat is to take into account the geographic mix and the effects on the different markets and the revolutions. And now to talk about China, we just got a question about Chinese OEMs coming to Europe and CKD and Bamimoto. So we are afraid we might be losing this market due to the CKD models in Chinese companies entering Europe. Well, we have a relationship with different Chinese clients like BYD (SZ:002594) or Sherry in different countries.

And I mentioned this already, but we also have we are also well with Gerry in Mexico and also in Europe. So what do Chinese OEMs do? They come to this new market for them? And the first few years, they use the CKD system, but they know that’s not won’t work in the future. And they’re going to do that in 2025, ’20 ’20 ’6 and we’re already negotiating with them to rationalize component production.

And we’re there with them. We’re working because the future I mean, this is always temporary. Now thinking about the Chinese domestic market, The question is, if we see image in the drop of sales of CIE in this market and how the development of new products is going? Well, first of all, I’d say that I mean, China has been a great investment on our side with a great catch generation and a great return on that investment. So well, it’s also true that I mean, that underperformance we could have is linked to the growth of local manufacturers in China.

And I mean, we were focusing focusing around the JVs between Chinese manufacturers and European brands. So but let’s not forget that we have different projects with different Chinese clients that we are developing and we’re growing with both products to be able to increase our market share with those clients. Question that’s different. Margin of Brazil in the fourth quarter has been the lowest one in the year. That’s high.

The growth on the strong market, any reason behind it? There’s always a reason, as I mentioned earlier. In this case, in Brazil, we need to realize that I mean, negotiations there in September, in January, in Brazil, which is increased by sometimes double digits. And of course, that has an impact. That does have an impact in October.

So that’s why after October, we have had the impact of that. And that’s why our margin was reduced by a few points. But it will just take a few months to translate that to our clients. So that margin reduction won’t be there in a few months. And closing the margin conversation, the margin in the last quarter was the worst of the year, something extraordinary there globally.

Well, it’s basically what I mentioned. But having said that, the margin was 18.4 throughout the year. And in the first quarter, it was 18.6. And there was one was 17.8. So we are talking about decimal points really in a quarter in which the sales were $9.50 and throughout the all of 2024, we’ll have had quarters.

I mean, in some quarters, 24,000,000 vehicles, but this is 20,000,000. So it’s very important to look at comparables because I mean the difference between one quarter or another, we’re talking about decimal points rather here. They’ve been talking about Tesla (NASDAQ:TSLA) entering India. It seems that it’s going forward. What do we think about their presence in India?

Well, I think we are one of the reference suppliers for these clients. It doesn’t really allow us to say much about it, but we started in North America, then in Europe, and we have a I mean, we have a great presence in India. I’d like to remind you that we are one of the most important Western groups in India. So I mean, just like a key client follow-up for us in all of the other continents. So we have excellent relationship with them at a very high level.

And they are very important client for us. In terms of capital allocation, we’ve mentioned it. But could we think about an intermediate measure of increasing recurring dividend or a stock repurchase program to Bamba? I’ll be there for M and A instead of a one off dividend. Well, as I mentioned earlier, you know that CIE, we are a company that thinks about everything.

We take a look at all the different possible alternatives. As I mentioned earlier, the stock price of CIE is low, it’s very, very low. And of course, we focus around paying our shareholders. I think that we should also keep on growing and keep on investing. Basically through organic growth.

I cannot at least today mention our ideas, but please bear in mind that CIE will be a company that will pay special attention to paying our shareholders, especially given its very strong cash generation. There’s probably nobody in this sector that can generate that cash. And that cash flow comes from that EBITDA of say, we hope to get to 19% this year. So that means that we are controlling our CapEx. And the rest is our objective this year of operating cash flow generation is EUR 500,000,000, EUR 5 hundred million are going to be used to inorganic growth or paying our shareholders and paying update because there is now half our capital.

So our capital is 2,000,000,000 and our debt is now a bit below 1,000,000,000. So we are a company the company with probably the healthiest balance, which will allow us to do many things. But of course, we don’t lose sight of growth and a growth that allows us to add value and a growth that will allow us to provide profitability for our shareholders. And in fact, I’m sorry if we’ve mentioned this, but when will the new user plan be here? They just asked the question.

So we haven’t finished the present one, but we are already working on the next one. Of course, I mean, the lead forward in the past few years has been relevant. I’d like to ask to value it. And for CIE to be feel even more enthusiastic And I think it’s important to value what we’ve done in the past four years. We have generated over 2,100,000,000.0 of operating cash flow this in the past four years.

We have reduced our debt very importantly. So I think we all need to understand what it all meant. And maybe in the next two quarters, we will be able to see that we are almost able to guarantee 100% of our commitments. So when that’s done, we will start working on the next strategic plan. This new strategic plan will, of course, be ambitious.

That’s how we are here at CIE Automotive. And we hope that the market is able to value this new strategic plan as well. One last question right now about what we think about consensus 2025. And I’ve got the figures. $4,100,000,000 in sales, $780,000,000 of EBITDA, $585,000,000 EBIT, and $365,000,000 in terms of net results.

And debt, yes, it’s here, $7.91. Well, that was the concern. I well, it’s nice to see to hear how optimistic they feel about CIE. So all the questions are only I mean, of course, there’s uncertainty and risks and tariffs. So many of the other things we’ve been talking about, but then consensus, I mean, they’re all thinking CIE is it’s amazing and it’s going to increase margins and it’s going to generate more flow, more cash flow.

Given that we’re not generating too much, we would probably generate more. We continue to use on that. So it’s great to listen to how much they trust the CIE Group. And we are I don’t know if I mean, it will be very hard to determine part of we’ll meet well, I don’t know, 90 or 102% of these analysts know us very well. And so but once again, it wouldn’t make sense I mean, this question is about risk and this amazing result.

You’re saying about SEK780 million of EBITDA here and I mean, the net benefits, well, and reducing our debt in $210,000,000 basically. So, well, I’m sure we’ll be around there around there between 95105% will be there. So that’s going to be a challenge. And we trust CIE. Well, once again, as it always has, when you reach an all time high just like 2024 and that’s also happening in 2023 and 2022.

So for fifteen years, we’ve been hitting all time highs. So this year, probably as well, we’ll fight for it. I mean, still February, but we hope will reach an all time high with the figures you just mentioned. Great. No more questions.

Manny, well, thank you very much. And not much more to say. Thank you very much. Thank you, everybody. And still, if there’s anything else, we’re looking for you.

Thank you, Casa Romani, for being with us. And we’ll keep on talking. Great. Really, it’s a true pleasure to be able to try to answer your questions and your concerns. So once again, it is truly an honor to see the trust you have on CIA.

So it’s still a reference company in terms of profitability worldwide. So I mean, it is great for the whole team at CIE Automotive.

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