Good morning. This is the Chorus Call Conference Operator. Welcome, and thank you for joining the Sogefi First Quarter 2023 Results Conference Call. As a reminder, all participants are in listen only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Frédéric Sipahi, CEO of Sogefi. Please go ahead, sir. Thank you, Madam. Hello, and thank you for joining this call. I'd like to start with a quick summary of the first quarter. It has clearly been a quite good quarter from activity and volume point of view. The alternative market performed quite well, even if still below levels of 2019. As you may have seen in our presentation, we had a strong growth in all geographical areas and business lines. We have been able to preserve our margin despite energy prices and inflationary tension on some commodities. We also have scaled on our fixed costs. At the end, EBIT is improving both in absolute value and percentage. As the presentation has been made available Friday, I propose we move to question and answers. Thank you. This is the Chorus Call Conference Operator. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star one on their touch tone telephone. To remove yourself from the question queue, please press star two. Please pick up the receiver when asking questions. Anyone who has a question may press star one at this time. The first question is from Monica Bosio of Intesa Sanpaolo. Please go ahead. Good morning, everyone. Good morning, Frédéric, and thanks for taking my questions. I have three. The first one is on the guidance. I see that you changed a bit the wording in the guidance, and now the company is flagging an EBIT margin at least in line. I was just wondering, does this mean that you feel more confident on the volume trend by year-end, and that maybe your mid-single digit growth revenue target might be a bit conservative, and the company has room to deliver a high single digit growth rate? The second question is on the pricing, which was positive by more than 5% in the fourth quarter. On the back of the announcements made by Tesla, I'm expecting price pressure going forward. Do you expect to keep a positive pricing effect, or do you expect that the pricing effect will go to zero over the year? The very last is on the suspension business, which delivered a bit of improvement in the EBITDA margin. Do you have in mind a margin for the full year for the suspension business? Thank you. Hello, Monica. Thank you for your questions. yeah, for the first one on the guidance, as usual, yes, I have been a bit conservative on the volumes. To predict the trend of volumes for the full year is quite difficult. Nevertheless, we have seen the first quarter very strong. Second quarter seems to be, to be in line with the first quarter, very high activity. What can happen in the second part of the year, is very difficult to predict. That's why I prefer to be conservative on the volume side, but a bit more aggressive than usual on the EBIT, because basically our position is to say, based on the first quarter, results, based on the actions we are implementing, we will deliver EBIT, premium recurring in line, at least in line, in percentage, but de facto with higher volume, so with a better conversion in absolute value. It's also linked to the second question you asked. Basically, yes, Tesla has done a big move last week. I think, OEMs were preparing anyway themselves for a war, mainly due to the Chinese OEM that are about to come or that are coming on the market. Tesla has done it quicker. For sure there will be a strong pressure on the price, it has never been easy. Basically, don't think because OEMs were doing good margin, that the discussion and the negotiations were easy. It has never been easy. Even when they are doing a lot of money, when they have strong margin and strong position, it's very tough. I expect some tough discussion. I expect some tough negotiation, I would say it's our business. It's a business in which we are. For sure it's a big move. The question is about this price reduction that the OEMs will have to operate, will it affect the volumes? This is a bit too early to say it. The positive side of the coin will be that basically the volumes may increase or at least continue as in the first quarter. Always we will keep our discipline on the pricing. Basically, it's what we are doing for two years now. We are not obsessed by doing volumes if it's not sustainable. We want to have a sustainable growth, so the pricing topic will be key for the quarters to come and for the second quarter. About suspension, I'm happy you noticed the improvement. Basically, yes, the actions we have implemented are starting to pay. As you all know, it's an aging industry and suspension. There is a long lead time between the time you implement the actions and you see the results in the P&L. We have seen, I would say, for the first time, real results in the P&L this quarter. We continue to do our job, basically on the pricing of course with the suppliers, the customers. Also from an industrial point of view, as you know, we will shut down U.K. facility by the end of the second quarter. In this semester, U.K. has been one of the top of suspension due to energy prices. Once U.K. will be out of the equation, this will really help. Where we continue to do small steps, but sure steps of improvement, industrial improvement. Also a rationalization of the product that we are producing there in order to reduce the diversity. It's difficult to commit on a full year results for suspension, but the trend is starting to be a bit positive compared to what we had in the last two years. We continue to do the job, and then I'm sure at one point it will pay. Okay. Thank you very much, Frédéric. Thank you. You're welcome, Monica, and thank you for your questions. The next question is from Martino De Ambrogi of Equita. Please go ahead. Good morning, Frédéric. Good morning, everybody. My first question is on the operating leverage. I understand you have a cautious view on volumes, but clearly rule of thumb, what is the impact in terms of EBIT for every 1 percentage point of higher volumes, just to have a rough idea what is the sensitivity? This is my first question. Well, thank you. Hello. Yeah, the question is a good question. Unfortunately, to answer in a very straightforward, it's quite difficult because it depends from where the volumes are coming. The profitability level is quite different between North America, China, Europe, and different between the three business unit. I'm sorry, I cannot answer in a very accurate way with a figure. The only thing that I can say is that each time we have one point increase on revenue, we are able to scale on our fixed cost. Basically, we continue to have a strong discipline on the fixed cost, and even with a very, very strong activity, especially in Europe in the first quarter, we have been able to maintain a strong discipline on it. With the job we are doing on the pricing, in theory, with the margin that we have been able to keep, it should continue with this approach. I would say that consider that with 1 point revenue more, we are able to generate at least, I would say, contribution margin close to 1/5 of it, is close to what we have achieved until today. Okay. It depends. Basically, sometimes it's better to have three points of revenue increase than to have 30% in one facility localized. Even if the first quarter was very strong from an activity point of view, inside with these figures, we have a lot of diversity. Basically, some weeks were very strong in some facilities, some weeks were weak, so it's quite irregular growth. The question will be on Q2, if the customers will continue to be irregular in their volumes, or if it will be a bit more smooth. This also plays a lot in our industrial capacity to flex the cost and generate as much contribution as possible. Okay. very roughly, if I understand, is 1%, okay, with all the assumption we can take it's at EUR 3 million, very, very roughly, so 20% operating leverage. Yeah. Your calculation is very right way. Okay, okay. The second is still on prices because you've got a 5% increase in Q1 for pass-through. I understand it is difficult to predict the full year, but the visibility on Q2 would be for another plus, or is it already strongly declining compared to the + 5%? No, it's in the middle. Basically, what we can see in beginning of Q1, the index of steel especially were very low. There has been a slight re-increase end of the quarter. With the customers, the price negotiation for Q2 have started beginning of April. I expect them to be finalized beginning of June or even close to end of June, it's basically what happened first quarter. We had low visibility on our prices until the end of the of the quarter, first quarter, we have been able to find fair deals with the customers. I would say it will depend a lot about the material prices and the steel prices, maybe energy prices, we run it on energy prices on Q2 we have a quite good visibility. For sure there won't be, again, a 5% increase compared to Q1 and Q2. Basically, our target is to try to continue to have a neutral pass-through, but to have on commodities prices a positive pass-through will be very difficult. We are waiting the end of April to see where are going the index in order to advance with our negotiation with the customers. I would more expect stable price, which would be a good achievement in the current situation, rather than increase of selling prices versus Q1, except some specific case such as repricing of low margin or volume claims or things like that. Okay. If I understand, it's slightly positive, although lower than in Q1. This is only for the second quarter? Yes. Then first quarter, fourth quarter, it's impossible to predict where the energy and steel prices will go. The only thing we do, we continue with our strong discipline, to say, here is the impact on material, then have a discussion, fair or tough with our customers in order to pass through it when it increases. Yeah. The last question is on Air & Cooling, because it's the only division that despite the double-digit top line growth, was unable to improve the absolute value, but even lowering EBITDA margin. That is probably due to the price increase that pass-through. Why you were unable to increase the EBITDA margin in absolute value for the Air & Cooling? No. In fact it's, there are two effects, but the biggest one is due to the geographical mix. China in the first quarter has been quite low everywhere in the three business units, and also as a market compared to the other markets. China is quite big in percentage in Air & Cooling compared to the two other business lines. When China is not growing as much as Europe and North America in Air & Cooling, it directly impacts the percentage of gross margin or profit before tax. Second, you are right, we have a strange situation in Air & Cooling linked to North America, where most of the components that we have are in directed buy. Means, plastic, especially for Ford and GM, are directly managed by the customer. You have a pass-through of 1: 1. In North America for PS6 and PA66, there has been a price decrease in the first quarter for the plastic that we had de facto to give back to the customer. It's also a strong protection when the prices are going up. Air & Cooling, the visibility is a bit different from suspension due to the geographical mix and the fact that in the biggest geographical area, which is North America, most of the raw material are directed buy. In Europe, we have done the pass-through. Air & Cooling has been negatively impacted as anticipated basically in the budget and by the increasing cost of rubber, especially for gaskets, and we have been able to pass through that to the customers. Thank you very much, Frédéric. You're welcome. The next question is from Alexandre Raverdy of Kepler Cheuvreux. Please go ahead. Yeah, thank you very much. Good morning. I have two very quick questions. The first one on the, on the volumes. Frédéric, you mentioned that you are more conservative than S&P Global on volumes overall. Could you please tell us where you feel that they are potentially more aggressive, at least in which region? One of the U.S. listed suppliers last Friday mentioned Europe specifically, so I wanted to understand whether you share their view. You mentioned that you still suffer from some color visibility, volatility, sorry. Is it affecting you more than in one region compared to another, or is it fairly spread? Are you seeing now in April some improvement, or is it still a bit challenging? Thank you. Thank you, Alexandre, for the questions. On the volume, I'm conservative, but this time not due to the market itself. Basically, I think the drivers of the market are quite green. IHS prediction, S&P, sorry, Global predictions are accurate, and I'm not able to challenge their prediction by geographical area. My cautiousness is more linked to the supply chain, basically. As an example, Stellantis had to close big factory two weeks ago because there was a component missing. Boom, they shut down two weeks or three weeks their facilities. In North America, the third quarter, there will be the salary negotiations between the central union and the three big car makers. Here again, it can affect in one way or another, the volumes. I would say that my cautiousness is more linked to the instability of the supply chain rather than the fundamentals of the automotive markets. My big question mark is on China. China had slow or let's say low first quarter. Q2 seems to be low. The question is, when in July, if they again have tax incentive to purchase cars, if the market in China will boom or will increase at a high level or not. The only question mark I have in my mind about the fundamentals will be China, which is a big question mark right now. I hope, let's say Q3 will be higher than the beginning of the year. The volatility, sorry, instability on the commodity prices. It's part. It's not as last year, basically, where everything was increasing double digits. Here it's more spots where you have some very spot commodities like rubber, gaskets, some grade of steel, some grade of metal, where you will have a bubble or inflationary bubble, you will have to negotiate strongly in order to secure the supply chain. We had less than last year, but we still have sometimes hot discussion on some commodities with our suppliers. Right now, we have always been able to secure both the deliveries and the prices with our customers. Of course, we get ready for any possible crisis. We got to be ready. Energy crisis seems to be behind us for now, I prefer to also have a quite cautious position on that topic because we don't know what's gonna be winter next year. Yeah, I think it's not yet stability time on the purchasing prices. Based on geographical areas, I would say that it's mostly in Europe. North America and China, I would say it's quieter than in Europe. It's especially in Europe where you will have these kind of issues. Understood. Thank you, Frédéric. Thank you. The next question is from Gabriele Gambarova of Banca Akros. Please go ahead. Yes, good morning. The first question is on this acquisition of ATN. If you could give me some more color on this move. Why, what do you see in this asset and how it can help you in your growth processing? Any comment on this acquisition? Thank you, Gabriele. It's a fair question. The first thing, ATN, basically is one of the key supplier of Air & Cooling for years. We were used to purchase half of our tooling from them and half of the tooling from China. Let's say with the current situation, macro political situation, we were willing to secure the tooling, the manufacturing very close to Air & Cooling hub, in the east of France. First in order to secure the tooling production and second, to be ultra reactive, because what has changed for us is that in the past, with ICE application, we had almost, I don't know, 24 months to develop the tooling, then do the needed adjustment on the tooling, and we had the time to send back the tooling to the supplier, correct, wait, discuss with the customer and so on. Since we are working with e-mobility players, especially one which is very quick in the development, starts with a T. In fact, we have to be ultra reactive, and you only have four months to validate your tooling. Having ATN inside Sogefi, the first big advantage will be that we will be able to develop and adjust our tooling in a very, very quick way in order to ensure the requirement of e-mobility programs and e-mobility developments. Second point, ATN is working for all, let's say, major automotive suppliers, and they have a strong know-how, and for us it's clearly a plus. Third, even if it's a small company, it's quite profitable, so it's not, it's not diluted. It was really making sense to acquire ATN. Plus, we have obvious synergies between Air & Cooling and ATN. From a know point of view, many things that we are currently subcontracting maybe to other companies, we will be able to develop now in-house with ATN. To keep the know-how in-house in the coming years, I think will be very key on everything linked to strategic development for e-mobility application. The rationale was this one basically. Many advantage, we decided to go for it. Okay, thank you very much. My second and last question is about, it's a more general question about, let's say business portfolio. I mean, do you think that the current portfolio has, is okay? I mean, you have a meaningful synergies between business and another. Would you also, let's say contemplate, would you be open to, I don't know, mergers or acquisition disposals and so on? Or you are happy with it like it is? Yeah. Again, a good question. I would say that the synergies between the three business units are not huge, basically. It's not about having big synergies between the three business units. I would say it may be an advantage when time are like as today, basically unstable. When Air & Cooling volumes are decreasing, suspension is going well. Suspension is not affected by e-mobility transition. Filtration may be affected by diesel decline, but has a strong portfolio in aftermarket or U.S. with a good resilient. I would say that until today, I'm quite happy about the balance between the three business lines. Now the world is going so fast that by definition I'm open to everything always. It could be innovation in the product, it could be strategical decisions. Until today, the balance between the three business units was good. We have been able to go through COVID thanks to that. We have been able to go through the last two years thanks to that. Now times are going so fast, changing so fast that, at one point we will see if this balance is still an advantage or not. If you look from, you know, with a macro perspective, suspension is not affected by the energy transition, but needs a turnaround. It's what we are doing. Air & Cooling has a big potential in business acquisition for e-mobility that will require R&D. Filtration has a very strong position in aftermarket and the U.S. with a good profitability, which helps in this transition phase. The three are quite well balanced. Synergy is not the core point, basically. That's true that most of our competitors are specialized competitors. Basically on suspension, the number one is a specialized company in suspension. In filtration, we have a very good competitor, German one, which is more and more specializing in filtration. In Air & Cooling, the competition landscape is a bit different. You have a lot of diversity of companies, some coming from thermal, some company coming from electronic, and so on. We are one of the few to have three business lines quite different from each other with low synergy. Sometimes it's an advantage, sometimes it can be a disadvantage to invest more in a growing area. I've done a broad answer there. It's the most accurate answer I can give to you. Okay. Okay. Thank you very much. Thank you. You're welcome. The next question is from Roland Könen of Value- Holdings. Please go ahead. Yes, good morning. Many thanks for taking my questions. Most of them have already been answered. First of all, congrats to the very good figures. My first question would be on your debt profile. You were showing, I said, in 2023, roughly EUR 50 million maturing. Could you please elaborate a bit on the evolution of the interest rates in the next quarters? Will they increase further or will they be more stable, as roughly 50% of your gross debt is fixed, so 50% or somewhat below 50% is not fixed? My second question would be on your reported EBIT and your EBIT excluding non-occurring issues. If we look at the difference, this year and the last year, I could assume that in this year you are taking a rather conservative approach in the light of the very good operating result. Is it right or not? Additional question on this topic. You have lower restructuring costs of EUR 0.8 million versus roughly the other amount in the last year. What would be the best case for the full year for the restructuring costs? My last question would be on the tax rate. It was very low at roughly 30% in the first quarter. What could be also the roughly the run rate for the full year 2023? Thanks a lot. Thank you, Roland. Yeah. First of all, thank you because you are the first to congratulate us for this, for this result. Thank you very much. You're welcome. It's the only thing I will tell you, because then I will let the four questions which are very financial and technical to Olivier. Thank you, Roland. I appreciate your acknowledgement. Olivier? Yes. Yes. With regard to our interest rates, you notice that 45% of our gross medium-term debt is with fixed rate, 55% with fixed rate. That means that 45% is based on EURIBOR plus the margin. Yes, we are exposed on this part with the EURIBOR evolution. As you notice, low exposed because we are just talking about 45%. Let's say that 1 point of EURIBOR increase represents on a full year roughly EUR 1 million, EUR 1.2 million. We have... I don't know if it answers your question because I cannot predict the impact of the increase of the EURIBOR in the coming months. I can just do my best to mitigate the impact for the group. With regards to our tax rates, it has been a little bit higher than last year, but it will remain between 25%-30% by the end of the year. I think that the question related to the business is more for you, Frédéric. The one on the cautiousness, yeah, I think I answered it. I have a conservative approach on the volumes, de facto on the, on the EBIT, because we don't know what's gonna happen in the second quarter. Nevertheless, let's say we have a strong track record to overperform the commitments that we are taking. We are only in April, we have done the first round, still three to go. Let's see mid of the year if I will feel a bit more aggressive about the guidance that we can have on the, on the EBIT. For now, the start is good. Still two to go. Okay, great. Yeah. Maybe an additional question on this topic. On the non-recurring and non-operating issues. Yeah. We saw or I saw a restructuring cost of EUR 0.8 million, a deviation between the reported EBIT and the EBIT excluding non-recurring of EUR 2.7 million. One question would be, how much restructuring costs are you planning for in 2023? What is the difference between the restructuring costs and the other non-recurring, non-operating issues you're adjusting? On the first quarter, it's nothing to restructuring. It's linked to exchange impact, Olivier, if I remember well. Sorry. Yeah. Negative exchange impact. Yeah. At the opposite of the first quarter of 2022, where the exchange were positive. On the first quarter, it's mainly due to the exchange impact on the balance sheet due to our open position in foreign currency in some of our countries, especially in North America. Concerning the restructuring actions in the current situation, we won't be higher than the previous years. Basically, we continue with the, I would say, the normalized trend of restructuring that we had the last two years. The closure of U.K. plant was already from a P&L point of view, booked in the previous years. I don't expect on the restructuring a big hit this year. On exchange, I would say we already have the bad news in Q1 2023. Let's see if it will reverse or not in the next quarters. It mainly linked to the USD and RMB valuations in the coming months. Perfect. Many thanks for the answers and all the best for the next quarters. Thank you very much. Once again, if you wish to ask a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. The next question is a follow-up from Martino De Ambrogi of Equita. Please go ahead. Thank you. Two questions on the debt evolution, because, if I look at CapEx, they were down at EUR 2 million in Q1, and you guided for the full year in the region of similar of last year, if I remember correctly. Is there any update on this? On net working capital in the slides, you mentioned some specific actions in order to get a positive contribution in Q1, trying to understand what could be the evolution for the rest of the year, and if these actions are structural or temporary. You want me to talk about the working cap, Frédéric? Yes, Olivier, you can. With regards to the working cap, we have been able to mitigate the impact of our sales increase thanks to our non-recourse factoring, which has been which has followed the trend of our sales. No, no more, in fact, but enough to mitigate. You know that we have a cash and a working cap, a cash which is seasonal. The profile of our cash. Is not the same quarter-over-quarter. We are on track to achieve our target for 2023, which is a cash similar or slightly higher than last year. I hope that answers to your question with regards to the working cap. Maybe on the business side. On the business, CapEx, basically, it's not a, it's not a delay. It's EUR 2 million basically. We continue to think we will spend the same amount of CapEx as last year, maybe with some plus somewhere and with some minus, as well. I would say that if we have more CapEx on Air & Cooling side, it will be quite a good news, because the topic on CapEx is changing a bit. Hello? Ladies, and gentlemen, please hold the line. We will reconnect Mr. Sipahi, as soon as possible. Hello, we have Mr. Sipahi back online. Please go ahead. Sorry. There are crazy storms here. And there was a thunder very close to me, but I'm safe. Don't worry. I was saying that the CapEx will be in line except good news on Air & Cooling if we are awarded on new business, which will require a quick investment for the tooling or the machinery on this application. CapEx, we keep the trend. As Olivier said, working capital in an unstable environment, we continue to do the job in order to deliver the cash flow this year equivalent to last year. Thank you. If I may, the last one, on the two plans that you mentioned during the call. First, in Romania, you guided for halving the losses of last year in the region of EUR 80 million. Is this still correct to foresee such a performance for the Romania? In the suspensions, you mentioned that the U.K. had a very weak performance in Q1. It is consolidated. Could you provide us an idea what is the contribution of this U.K. plant that will disappear starting from the second half of this year? Sure. For Romania, I would say that the industrial actions are going in the right direction as planned. The only big uncertainty we have, which is not in our hand, are energy prices. It's one of the few countries where you have very, very, very low visibility on the energy prices, starting from May, if I remember well. We have been impacted quite negatively in the first quarter. The question is if the government will do some actions to support the energy prices. On the other topic, we have started the launch of the program for two main consumers there with lot of diversity. The question will be to check if the volumes are as forecasted by our customers because there has been some alerts that the volumes on these two programs may be lower as forecasted. We are in the middle of checking with our customers if they will or not respect the volumes. These two programs are key for Romania. It's 80% of the turnover. Except that, I would say that we are going as planned. For U.K., basically the loss on the first quarter has been close to EUR 1 million, Olivier, if I remember well. EUR 1 million on one quarter is quite a big hit. I would say it's not linked to the performance of U.K. plant. It's output, it was linked to energy prices, which in U.K. are increasing a lot. Of course, due to the special situation of this factory, my customers, let's say refused to support us, knowing that we would close this factory. I would say that once U.K. is out, based on the first quarter, it will improve compared to first quarter by EUR 1 million. Okay. The second quarter is already out or is still in with another similar performance? The second quarter, we have already done some necessary steps to reduce the volumes in this factory. It will be totally shut down beginning of July, end of June. Of course, the volumes are starting to decrease a lot because we have done, I would say, already half of the transfers. De facto, the loss shall reduce in Q2 from an operational point of view. The exposure we may have in this factory are always exchange rates and things like that. From an operational point of view, as we are reducing the volumes, it should decrease the loss. In Q3, of course, it will totally disappear. Thank you. You're welcome. As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. Gentlemen, there are no more questions registered at this time. Thank you. Thank you very much to everybody, and have a nice day. Thank you very much. Bye. Thank you. Bye.