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Gestamp Automocion SA (BME:GEST) reported a slight decline in revenue for Q4 2024, showing resilience amid challenging market conditions. The company’s stock experienced a minor decline of 1.06% following the announcement, closing at €2.79. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with a P/E ratio of 8.73x and EV/EBITDA of 4.45x. Despite the revenue drop, Gestamp outperformed market expectations in several regions, particularly China, Mercosur, and Eastern Europe.
Key Takeaways
- Revenue decreased by 2.2% to $12.01 billion compared to 2023.
- EBITDA margin remained strong at 10.8%.
- Stock price fell by 1.06% post-announcement.
- EV-related sales accounted for 20% of total sales.
- The company launched the Fenix plan to restructure North American operations.
Company Performance
Gestamp Automocion SA demonstrated its ability to navigate a difficult market environment, with revenues totaling $12.01 billion, a 2.2% decrease from the previous year. The company maintained a robust EBITDA margin of 10.8% despite the challenges. Notably, Gestamp’s strategic focus on premium products and operational flexibility allowed it to outperform market expectations in key regions such as China, Mercosur, and Eastern Europe.
Financial Highlights
- Revenue: $12.01 billion (down 2.2% from 2023)
- EBITDA: $1.294 billion (10.8% margin)
- Net Income: $188 million (down from $281 million in 2023)
- Free Cash Flow: $134 million
- Net Debt: $2.97 billion (increased by $39 million)
Outlook & Guidance
Gestamp projects stable manufacturing volumes at 89.5 million units for 2025, with expectations of low single-digit revenue growth. The company aims to maintain or slightly improve its EBITDA margin from 2024 levels. In North America, the company targets an 8% EBITDA margin in 2025, with plans to exceed 10% by 2026.
Executive Commentary
"We are convinced that we have had good performance in 2024 in a quite difficult scenario," said Francisco Riveras, Executive Chairman. Ignacio Mosquera, CFO, emphasized, "Our focus is going to be profitability and preserving our balance sheet with financial discipline."
Risks and Challenges
- Potential impacts from U.S. tariffs, though expected to be minimal.
- Fluctuations in Mercosur margins due to restructuring efforts.
- Global automotive production decline, with EV production falling short of projections.
Q&A
During the earnings call, analysts inquired about the seasonal profitability in Q4 and the impact of potential U.S. tariffs. The company addressed these concerns, highlighting minimal expected tariff impacts and explaining margin fluctuations in Mercosur due to ongoing restructuring.
Full transcript - Gestamp Automocion SA (GEST) Q4 2024:
Ana Fuentes, M&A and IR Director, Hessant: Good evening, and thank you very much, all of you, for taking the time to attend Hessant’s Full Year twenty twenty four Results Presentation in this very busy afternoon for you. I am Ana Fuentes, M and A and IR Director. And before proceeding, let me refer you to the disclaimer of Slide No. Two of this presentation that has been posted in our website and will set out the legal framework under which this presentation must be considered. The conference call will be led by our Executive Chairman, Mr.
Francisco Riveras and our CFO, Mr. Ignacio Mosquera. As usual, at the end of the conference, we will open up for Q and A session. Now please let me turn the call to our Executive Chairman.
Francisco Riveras, Executive Chairman, Hessant: Thank you, Anna, and good afternoon, and thanks for attending this call in which we will be presenting our 2024 results. Moving to the Slide four. Our group has delivered quite good results in 2024 in a very difficult environment for the auto industry. In terms of revenues, we have been able to reach $12,000,000,000 outperforming the market by 4.6%. In 2024, we have generated million EBITDA excluding the Fenix plan expenses, which means an 11% EBITDA margin with a positive free cash flow ending up the year with 1.6 times debt to EBITDA leverage position and working, of course, very hard in the Fenix plan, which is in track to reach the profitability targets already committed.
2024. In 2024, the automotive end market has suffered from volatility and also lack of growth. In fact, during the year, the data and forecast has changed a lot, moving from an expected growth that we had expected in May to the final minus 1% decrease figures. The total light bake ore manufactured in 2024 has been 89,500,000 units, which means 1,000,000 less than the volumes in 2023, in line with 2019 and one point six percent behind 2017 volumes. As mentioned, in these different difficult market conditions, Hesdan has been able to meet the updated guidance with a 4.6% outperformance of the market in terms of revenues, with an EBITDA margin which is 28 basic points below 2021 in the auto business, with the scrap increasing its EBITDA margin even with lower sales.
And also in 2024, we have generated million free cash flow with positive evolution in the fourth quarter and ending the year with a leverage at 1.6x debt to EBITDA. 2024 has been another year of consolidation of Crestanbe equity story. Comparing with the 2024 results with the ones we had in 2017 at the time of the ARPO, it’s clear that we have done a good performance in terms of volumes, profitability and our group has suffered a big transformation. And this good performance in this period of time, we can see it in terms of revenues, where we have been able to increase from per vehicle manufactured in 2017 to per vehicle manufactured in 2024. In terms of EBITDA, we have moved from per vehicle manufactured in ’seventeen to EBITDA per vehicle manufactured in 2024 and reinforcing our balance sheet with a focus on the free cash flow, allowing to move our leverage from 2.3 times in 2017 to 1.6 times in 2024.
Moving to Slide eight. In terms of sales, at FX constant, we have been able to outperform the market as already stated by 4.6%. We had a clear outperformance in a difficult market like China or in Asia. And also, we have done a very good outperformance in Mercosur and Eastern Europe. In North America, we have been more or less in line with the market.
And we had a worse performance in our Western Europe operation due to the weak performance of some specific products. In terms of the EV market, we have seen slower than projected EV production throughout the year in the different geographical areas, especially in NAFTA and also in Western Europe. In fact, in the beginning of the year, it was expected a total 20,000,000 units manufactured in 2024, and we have ended up the year with 18,700,000 units. In fact, if we just consider this manufacturing of EVs in Western Europe and NAFTA, it was expected in the beginning of the year to produce 5,000,000 units and it turned out to be 3,700,000. So basically, it’s been an increase in the manufacturing on EV bakers in 2024 compared with 2023, but it has been a growth in China of 3,400,000 units and a decrease in between NASDAQ and Western Europe of 300 affiliates.
In terms of the sales of Heshtam, in this environment, our EV related sales in 2024 has amounted around 20% of our total sales in line with the market. This has been the first year of the Fenix plant with a clear priority for us in order to be able to stabilize the bad performing plant and also to be able to push very hard to recover margin by commercial and supplier negotiation. We have in this first year of the plan a very positive outcome because we had the lower sales, especially in the second half of the year, at the end of the day reaching $2,400,000,000 which has been able to slightly increase our EBITDA margin from 6.7 to 7%. And of course, in this first year of the plan, we have incurred in million expenses, 42% of the total plan expenses, but only million in terms of the CapEx. Again, good results, already good ones improving clearly the performance of some of our plants, very good outcome of the different negotiations with customers and suppliers and starting to build a very new and renewed strong and solid team in our North American operations and with a very good visibility of what is going to happen in 2025 and 2026.
Referring to our scrap division, the performance of our operations have been really good in also a very challenging scenario for the scrap business. In fact, we have different lower volumes at the world level and also with the scrap prices in the global market very reduced from the ones that we had in 2023 with an special impact in prices in U. S, but also in China. In that environment, scrap revenues in 2024 have been reduced from $626,000,000 to $574,000,000 by 8%, but the results of Hessramp of Hessrab have improved substantially, with EBIT moving from 37,600,000 in 2023 to $42,100,000 in 2024, a $7,300,000 EBIT margin. And with this, now I hand it over to Ignacio Muscare.
Ignacio Mosquera, CFO, Hessant: Thank you, Paco, and good afternoon to everyone. Moving to Slide 13, we can have a closer look to our financial performance in 2024. In 2024, we have reached revenues of $12,010,000,000 which entails a 2.2% decrease when compared to the $12,274,000,000 from 2023. In terms of EBITDA, we have generated $1,294,000,000 dollars in 2024, meaning a 10.8% margin. Excluding Fenix impact, EBITDA in absolute terms would amount to $1,319,000,000 dollars therefore an EBITDA margin of 11%.
As a result of the nominal EBITDA drop and higher amortizations, reported EBIT decreased by 14.4% year on year to $582,000,000 with an EBIT margin of 4.9% or 5.1% excluding Fenix impact. As Pac already explained Fenix plan aimed at restructuring our NAFTA operations has had a $25,000,000 impact in our P and L and a $6,000,000 impact in CapEx for the entire year. Net income in the year has been $188,000,000 that compares to the $281,000,000 reported in 2023, mainly due to a lower year on year EBITDA in absolute terms, increase of D and A levels compared to last year and higher minority interest, partially compensated by better financial results due to a lower exchange impact in 2024. Net debt excluding Fenix impact has closed the year almost flat compared to 2023 and increased by close to $39,000,000 to $2,970,000,000 on a reported basis. Regarding free cash flow, we have achieved another year of positive generation reaching 134,000,000 in 2024, excluding the extraordinary impacts of the physics plan, $103,000,000 as reported.
To sum up, we continue to demonstrate our ability to perform strongly and maintain our balance sheet discipline in a challenging market environment with a difficult year on year comparable due to the extraordinary growth of 2023. If we now move to Slide 14, we can see the performance by region on a year on year basis. Looking at each region in detail, revenues in Western Europe have decreased by 9.7 year on year in 2024 to around $4,200,000,000 Performance in the region has been strongly affected mainly by volume pressure. In terms of EBITDA, it reached almost $480,000,000 and EBITDA margin stood at 11.4% in the period, down from the 11.6% reported in 2023. Volumes drop in the period has led that despite a lack of operating leverage, we have managed to maintain profitability levels close to last year.
In Eastern Europe, the performance in 2024 has been solid, proving again our strong positioning in the region. On a reported basis during 2024, revenues have grown year on year by 11% up to levels of $1,902,000,000 and EBITDA levels have increased by 2.2% to two fifty four million dollars dollars partially impacted by currency situations in the year. EBITDA margin of 13.3% is below the 14.5% reported last year, mainly due to the inflationary pressures and project mix volatility observed in the first half of the year. In fact, in the fourth quarter, EBITDA margin improves to levels of 14.5%, allowing to reverse part of the first half winter performance. In NAFTA, Phoenix plant continues to show signs of improvement in the underlying operations with a very good EBITDA margin evolution in 2024.
Our revenues have decreased by 2.8% year on year, while EBITDA has slightly increased by 1.9% if we exclude Fenix impact of $25,000,000 in the full year 2024. This is slightly higher EBITDA in absolute terms leads to an EBITDA margin of 7%, improving last year profitability and also surpassing the target we had set of flat margin evolution for 2024. As you all know, turning around our operations in NASA to improve our market positioning and profitability is at the top of our priorities. In Mercasur, the year 2024 has been strongly marked by ForEx evolution in Argentina and floods in Brazil during the month of May. This situation combined with some restructuring executed has led to EBITDA decrease of 16.6% and an EBITDA margin of 9.4%.
On the other hand, revenues had a positive performance of 3.1% in 2024, driven by a very strong last quarter growth. This positive comparable is mainly affected by the extraordinary cash devaluation that Argentina suffered in Q4 twenty twenty three. In Asia, our performance continues to evolve very positively. In the period, reported revenues in this region have seen a strong growth reaching $1,976,000,000,000 dollars in a complex and very competitive market. As we have been seeing in the recent quarters, our approach of focusing on premium products with differential technologies is allowing us to gain good quality market share in a region where there is a strong competition in the AP transition.
EBITDA grew by 4% compared to 2023, maintaining previous period a strong EBITDA margin of 14% and remaining at the region with the best profitability levels in 2024. We keep on working to gain position in this region with a strong organic and profitable growth. Finally, Hesscraft has seen revenues decreasing by 8.3% year on year to $574,000,000 as a result of the sustained decline in scrap prices that Paco mentioned before. Nevertheless, as explained in the previous section, we have managed to improve our profitability with an EBITDA growth of 11.2% year on year and a strong margin improvement reaching 9% in 2024. Overall, we have seen that our unique business model and geographic diversification has supported and driven our performance in a year marked by volumes volatility and lack of growth.
Turning to Slide 15, we see that we ended 2024 with a net debt of $2,970,000,000 which is $39,000,000 above the $2,580,000,000 reported in December 23. This $39,000,000 increase includes dividend payments of $128,000,000 and $40,000,000 of minority acquisitions, M and A divestments and equity contributions. As a reminder, the main impact is due to the repurchase of Mitsui stake in North America at the May 2024. During the year, the company has generated a positive free cash flow of $134,000,000 excluding the extraordinary expense costs achieving the updated guidance for 2024. As we explained in the nine months results presentation, we have not reached the 200,000,000 initially targeted in February 2024, mainly due to lower volumes production and negative currency fluctuation in the year.
Moving to Slide 16, we can see in detail working capital evolution since 2022. On a quarter on quarter basis, we and it leads to our traditional seasonality during the year. Working capital extraordinary impact in the third quarter has been reversed in mainly by a normalization of tooling collection and lower inventory levels in the last quarter. We ended 2024 at normalized levels with similar cumulative impact in free cash flow as past years, consistent with our working capital strategy. As a result of this, we move to Slide number 17, where we see that we ended 2024 with an almost flat net financial debt of $2,660,000,000 if we exclude Fenix plan impact, which implies a net debt to EBITDA ratio of 1.6 times.
Since IFRS implementation, we have been able to maintain almost the lowest level of net debt. Leverage ratio despite being the second lowest ratio for a full year period since the IPO has increased versus 2023 mainly by a lower EBITDA in absolute terms due to the lower production volumes. Hessdam maintains a solid liquidity position without substantial maturities in the short term. Our priority is to preserve our financial strength and we remain disciplined over leverage in absolute and relative terms. Finally, we present in Slide 18 our latest business KPI, the return on capital employed.
In 2024, our return on capital employed has temporarily impacted by tough market conditions if we compare with last year. 2023 was an extraordinary year and as we said at the time, we have had some short term dilution in 2024. Even so, we have managed to reach 15% levels improving by 100 bps since 2022 when we first released our new return on capital employed API. As we have made ourselves clear, we aim at remaining disciplined on CapEx investments and improved profitability. Our lost term strategy is focused on generating value for our shareholders.
Thank you all. And now I hand over the presentation to Paco for the outlook and closing remarks.
Francisco Riveras, Executive Chairman, Hessant: Okay. Thank you, Nacho. So in terms of 2025, we are now forecasting an similar levels to the ones of 2024 and 2019. So even if there is a lot of volatility now, we are expecting manufacturing volumes to remain stable at around 89,500,000 in 2025, quite flat again year on year. So with still big uncertainty around the speed of transition on EVs and of course, with different market dynamics in each of the main regions of the world.
Moving to Slide ’21. In Europe, we see now another year of decline in manufacturing, especially in Western European countries more than in distant ones. Overall, die vapor manufacturing volumes for 2025 clearly below the ones we had in 2019. But on the other hand, for China, we are forecasting a 2% increase of manufacturing from 2024, reaching 6,000,000 units more in 2025 than the ones we had in 2019. For rest of regions, we are forecasting a slight decrease of around 2% in North American region and a good performance in Mercosur and also in India.
So different market dynamics in each region, but also it’s going to be a lot of uncertainty during the year coming from areas like the new tariffs, also about an unclear regulation on EV transition, about news that could come from new OEMs going global or a potential market
Ignacio Mosquera, CFO, Hessant: consolidation.
Francisco Riveras, Executive Chairman, Hessant: For 2025, clearly, we are convinced that we are in within a context of high uncertainty, volatility, limited market growth. So for us, clearly, we need to return to our long established business fundamentals, looking for further value create opportunities. And our focus is going to be in the right execution of our billion backlog, in implementing every single cost initiative in order to enhance our profitability, being very selective in our CapEx policy and of course preserving as a priority our financial discipline. So in more detail in Slide 23, we have ended the year twenty twenty four year with billion backlog, which means a backlog that is covering more than 90% of the expected revenue for the next five years. And the priority, as mentioned, is to drive any kind of soft term initiatives in order to ensure an enhanced profitability.
All kind of cost control measures at all different levels, at corporate, at addition and the plant levels, reevaluating our installed capacity in order to look for any kind of inefficiency or resizing opportunities, looking for further flexibility measures in order to be able to cope with the volatility and of course very much focused in implementing the Fenix plan. And in the other hand, the idea is to have and to preserve a strong balance sheet. The idea, of course, is clearly to have a well balanced equilibrium between growth, profitability and CapEx with a revisited and selected CapEx strategy very focused on return on investment, again very focused in efficiency in order to do a good execution of our backlog and preserving our efficiency in terms of the working capital management. So focus on generating positive free cash flow and of course our priority to keep on strengthening our balance sheet profile. So for this, in terms of guidance for 2025, we are committed to fulfill the guidance and to reinforce our position.
So in terms of revenues, we are guiding for low single digit range outperforming in terms of revenues For in terms of auto business profitability, we have our EBITDA margin in line or a slight improvement compared with 2024 for the scrap. We are expecting a year in line with the 2024, which was a very good year in the scrap. And in terms of leverage and free cash flow to be in the range of what we have already done in 2024. To come back for Fenix in 2025, of course, we are keeping all the pressure in order to have this plan, which is absolutely basic in our own terms of strategy. In terms of market situation, we are not comfortable, but we are already assuming that it’s not going to be easy with a lot of uncertainties around the speed of the EV transition and probably a lot of noise around potential new tariffs and commercial regulation.
Our focus is going to keep on being to work in the three targeted intervention plans with our partner programs and also to be very focused in this action plan with the key pillars, in operations, in purchasing and also in negotiations with customers and also people. And of course, we keep on working in the full restructuring of three plants in order to be able to rebalance our footprint. And of course, long term priority to build a very solid team for our North American operations. So we have already commented that in 2024, we have already been able to increase our EBITDA margin up to 7%. For 2025, we are expecting to generate in the range of 8% EBITDA margin.
Moving into 2026, we should be more than 10% as already committed. And for 2027, we expect our North American operational profitability to be in line with the rest of the group. And with the Fenix cost in line what we have already commented when we have started the Fenix plans. So that means that for this year between expenses and CapEx, we have million spending and we will have only million pending for 2026 between CapEx and expense. So, just to end up, summary, we are convinced that we have had good performance in 2024 in a quite difficult scenario in terms of volumes and also in terms of volatility.
We have the first year of the Fenix plan. We are convinced that we are in the right track and very much convinced that this plan is going to allow us to achieve all the targets that we communicated one year ago. Of course, in 2025, we’ll have a lot of things to do. We understand that the market is going to be quite stable. So our focus is going to be profitability and, of course, preserving our balance sheet with financial discipline.
So that’s all from my side and now we are open for your questions.
Conference Operator: Thank And our first question comes from the line of Francisco Reith from BNP. Please go ahead.
Francisco Reith, Analyst, BNP: Hello, good afternoon. I have three questions. The first one is in Europe. I mean despite the performance that we have seen in sales, Q4 in terms of margin is well above the rest of the quarter. So I don’t know if it’s something extraordinary on this figure, which is something like around 30%, if if I calculate it right.
The second one is on NAFTA. So if you look at the margin in Q4 for the NAC activities are close to 10%, something like around nine point something, while you are guiding to an 8% for 2025%. So could you explain me the difference on the delta? And last but not least, you have guided for 25% on similar leverage in terms of net debt EBITDA, assuming a very small increase on EBITDA, that means that your debt is expected to be growing. But taking into account a normalization of the working capital compared to what have happened this year, Do you feel that this is a very conservative assumption?
Thank you.
Francisco Riveras, Executive Chairman, Hessant: Okay. Thank you for your questions. I think it’s true that as you know always we have some kind of seasonality in the fourth quarter because we are all year long fighting with some kind of things. Most of the sales tooling are generated at the end of the year, so we are able to generate the profit at that time. So that’s why we have the margin in terms of Europe for the fourth quarter.
It was quite good one. And also it’s true that in the beginning of the year, in Europe, it took some time until we were able to implement some kind of flexibility in our labor. So we have ended up in a better condition than the one we had in the first part of the year. In terms of NAFTA, it’s fair your question. I think we have been also very successful in the fourth quarter in terms of profitability.
But it’s also true, as mentioned also for Europe, is that we have been able to generate a lot of specific on onetime opportunities in the case of the fourth quarter. So that does not mean that it’s extraordinary, but it’s opportunities that we should have generated throughout the year. So that means that when we are guiding for 8% for 2025, this will not compare with the profitability we have in the fourth quarter because part of the profitability of the fourth quarter is really coming from the profitability which we have had in the previous quarters. And I think around the leverage
Ignacio Mosquera, CFO, Hessant: Yes, thank you, Paco. So with regards to normalization or normalized working capital, I think that we generated in the year north of $100,000,000 of improvement of working capital. It’s unlikely that those levels are able to be maintained going forward, but we can expect I think that there are some opportunities that we would be able to pursue in terms of working capital. And leverage, I think that we are aiming at closing the year 2025 at similar levels, taking into account the expected evolution and certain investments that we’re going to be doing. Thank you very much.
Thank you.
Conference Operator: Our next question comes from the line of Alexandre Rafferty from Kepler. Please go ahead.
Alexandre Rafferty, Analyst, Kepler: Yes, good afternoon. Thanks for taking the questions. I have two quick questions, please. The first one is, could you please come back to the drop in the Mercosur margins in Q4? I’m not sure I understood the comment.
And what basically we could expect from here in the next quarters? Because I think the drop is quite significant. And the second one, obviously, your guidance excludes potential tariffs, but I think U. S. MCA tariffs are likely to be implemented.
So could you give us please an idea of the potential net impact on the P and L assuming they are implemented on a full year basis? Thank you very much.
Francisco Riveras, Executive Chairman, Hessant: Okay. I can take it. Around the macro fuel, the margin in 2024 has not been so negative, but it’s true that during the fourth quarter we have decided to have some kind of restructuring actions in Tempeco Sur in some facilities, especially in Argentina. So I think, let’s say, the normal margin in the quarter has been quite positive. In fact, we suffered a little bit more during the year due to the floods that Zoro Natural has already commented.
But for 2024, the last quarter has done quite well and but we have decided to do this. So for 2025, we feel quite comfortable about Mercoflu volumes and also about the Mercoflu EBITDA margin. And concerning the tariffs in U. S, there still is a lot of uncertainty. We have conducted different kind of analysis.
We don’t see any risk coming out from this potential tariff on steel or aluminum because we have agreements with our customers. And concerning the impact that could come from U. S. Tariffs on Mexico or Canada, that could be that it is we as you know, well, we manufacture in each country for the vehicles that are assembled in this country, so we don’t have a risk of exporting our components to U. S.
And to pay these tariffs. The only problem and direct problem could come from lower production in Mexico, but that would mean an increased production in U. S. So today, we are, of course, trying to manage different scenarios, but we don’t see any kind of risk and we don’t see any change or variance in the EDIs coming from our customers.
Alexandre Rafferty, Analyst, Kepler: Thank you.
Conference Operator: It appears you have no further questions from the conference call at this time. So I’ll hand the conference back to the management team. Thank you.
Ana Fuentes, M&A and IR Director, Hessant: So thank you for your time today. As usual, the IR team remains at your disposal for any further questions you may have and hope to speak to you again at least in the next twelve or two months, sorry. Thanks. Okay.
Francisco Riveras, Executive Chairman, Hessant: Thank you.
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