Good morning, this is the Chorus Call Conference Operator. Welcome, and thank you for joining the Sogefi Q1 2024 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 0 on their telephone. At this time, I would like to turn the conference over to Mr. Frédéric Sipahi of Sogefi, Chief Executive Officer. Please go ahead, sir. Thank you, Anna. Hello, and thank you for joining this call. I think your. One moment, please, and we will reconnect Mr. Sipahi. Mr. Sipahi, please go ahead, sir. Sorry. I think you'll receive the presentation about Q1 results. So, as you may have seen, we have done the job one more time, so I propose we move directly to questions and answers. Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. The first question comes from Monica Bosio of Intesa Sanpaolo. Good morning, Frédéric and everyone, and thanks for taking my question. I hope you can hear me. I have three questions. The first one is on your performance in Europe. I've seen from the press that in Europe, in the first quarter, Sogefi revenues were down by 8.5% against a market which was down by 5.9%. I was wondering if you can elaborate a bit more on the underperformance versus the market. The second question is on the pricing outlook. How do you see the pricing evolution across the year, and should we expect some deterioration in the coming quarters? This is related also to the EBIT margin evolution. I was wondering if we can expect in the coming quarters a progression in the EBIT margin similar to the first quarter, which was very sound. The third and last question is on the factoring. What is the factoring? If you can give us an indication on the factoring by year-end? Thank you very much. Hello, Monica, and thank you for your questions. So, yeah, Europe on this quarter is slightly below, especially on suspension due to the portfolio of customers we have in this business unit, which is mainly focused on Stellantis, Renault, and Daimler. And basically, these three customers have not performed very well compared to last year this quarter. I'm going to take the data, but if I remember well, Daimler had a drop of almost 11% versus last year, Stellantis almost 10%, and Renault also in this range. So the portfolio of suspension is very focused on these three customers. For air and cooling, the trend is very different because air and cooling Europe is close to 0 compared to last year thanks to BMW and new customers, such as EV customers, that have been able to compensate the drop on Stellantis, Renault, and Daimler. This was about the question on European markets. I don't know if I was clear, Monica, or if you wish to? No, very clear. I imagine that was due to the three customers in the Suspension unit. Okay. Yeah, yeah, these three ones suffered a lot during this quarter. Concerning the pricing, basically, so on the first quarter, we have been able to keep our selling price roughly flat versus Q1 of last year. I would also say roughly flat versus the exit point of 2023 selling price when we have been able to generate savings on purchasing and energy prices, which also explains the improvement in our profitability. My approach and my forecast and my strategy for the next quarters, basically, will be to continue to fight to keep our selling prices at least flat, doing some smart repricing when needed, but not general repricing as we have done in the last two years, and continuing to fight to get savings from raw material, taking profit off the drop on the raw material prices, or also the fact that we are now including new suppliers on our portfolio. So basically, this is our pricing strategy for this year, which means that, in theory, our profitability should remain close to the one that we had in Q1 or maybe slightly better, but not doubling or increasing by 5 points. Concerning the EBIT trend, well, the EBIT was not too bad, I would say, for this quarter. It's 5.5% excluding the non-recurring. I have to admit that this 5.5% is more the result of all the actions that we implemented in 2023 generating carryover in 2024 rather than actions of Q1 generating improvement in 2024. So the actions that we implemented in Q1 2024 will start to pay off from Q2, Q3, and Q4. So I don't say we will double this 5.5, but we will fight to keep it at least at this level, continuing to improving it slightly quarter after quarter. And then concerning the factoring, I think your question was kind of forecast for the end of the year. Yes, correct. Right? So I would say with filtration, we would have done roughly EUR 100 million factoring as usual. Without filtration, it would be they are situated, correct me if I'm wrong, around EUR 60 million. So it would be EUR 60 million without filtration. And I just want to highlight also the fact that we have done less factoring in Q1 2024 versus Q1 2023 by choice. Basically, it's not because we were missing turnover or invoice or whatever. It's really a decision that we have taken with Olivier and Béatrice in order to optimize our financial costs. And as you have seen, our free cash flow generation was good. So we decided to factorize EUR 20 million less in Q1. It's a company decision. Comparable, it would have been EUR 50 million free cash flow generated in Q1 2024 versus EUR 40 million in 2023. About the factoring, it's really a company decision to optimize our costs to factorize less. Okay. Thank you. We factor when we need, of course. We push when we need. But I do prefer to generate as much as possible free cash flow coming from the business. And then, of course, we will do what is required for the factoring. But when we can optimize and factor less, we do it. Thank you very much, Frédéric. Thank you, Monica. As a reminder, if you wish to register for a question, please press star and 1 on your touch-tone telephone. The next question comes from Martino De Ambroggi of Equita. Thank you. Good morning, everybody. My focus is on the suspensions. If you could split what are the main changes in terms of improvement in profitability? So I suppose the main contribution is from Mexico. Just to understand, focusing only on suspensions, the 300 basis points of improvement, if it comes from shutdown of the plants you announced last year or, as you mentioned, raw materials, energy cost decline, just to have a rough idea? And always on suspension, what is the expectation for suspension standalone margin in 2024, and what is the maximum level achievable for this division in your view? The second is on the capital allocation. Considering the new financial structure, what is the CapEx plan over the next two to three years for the new perimeter? If you are thinking about eventual M&A deals for acquisitions, well, the dividend policy, I suppose, will maintain at least what distributed for 2023 results. So just a rough idea of what is your new capital allocation policy. Hello, Martino. Thank you for your question. Well, about suspension improvements, compared to Q1 of last year, it's a kind of mix. So yes, we had the benefit of the variable profitability thanks to lower material and energy prices. Basically, it helped by roughly 3.5% the profitability in percentage, the material plus energy. So it's roughly 1.5% of the turnover savings in energy and 1.5% in material. As you pointed out, we have done the job from an industrial point of view, so with some carryover benefits in 2024, including the closure of the UK facility, but also good improvements in Oradea facility. So if we summarize compared to last year, between the material, energy, and industrial actions, our variable profitability improved by 4% of the turnover. We were roughly at 24%. We are at 28% this year of variable cost margin. As you may have noticed, our turnover decreased by roughly EUR 10 million. We have been able to keep the fixed costs fixed, unfortunately, so when we should have been able to decrease them in order to absorb the decrease of activity. But we still have some inflationary pressures on our fixed costs, and the saving actions we have generated helped us to maintain our fixed costs. Clearly, in the next quarter, we will have to focus to improve our percentage of fixed costs if the activity continues to be low. So that's basically the equation of the improvement versus last year. It's more on the top of the P&L, so the variable cost, rather than the fixed cost. Also, we have almost all facilities now generating money and being in the black, which was not the case until three years ago. We have improved the efficiency in Oradea, Romanian facility, which has been launched three years ago and which was bringing a lot of money in the last three years. There has been a really good improvement there, both from an operational and financial point of view. So clearly, this will contribute a lot also in the next quarters. Concerning the full-year forecast, well, it's a bit difficult to give a clear indication on the forecast of the full year. We reached almost 10% EBITDA. I would say that thanks to the carryover of the action of last year, our continuous effort on the pricing plus Oradea turnaround, we should continue to improve, sorry, this profitability slowly but surely to reach an EBITDA exit point around 11%, I would say. The full potential of this business unit is not known yet because I think it will be known once we will have totally improved the situation in our Romanian facility. It's a business also that is very linked to the load of our facilities. So it's very CapEx-intensive, and machineries are very big. So if your facilities are loaded higher than 65%, you generate money. If it's lower, then you've got an issue. So the big question mark will be on the activity in Europe for S2 and the load of the European factories, Western European factories, especially in France. If the activity continues to decrease, of course, we will have to check if structural actions are required or not in Western Europe in order to continue to improve profitability. The last question, I think, is a bit more tricky, Martino. So I'm just an industrial guy. I answer to industrial questions. This one, I will ask the help of Olivier and Béatrice. But to answer to your question, it's a bit too early to answer to the new subject with filtration. Of course, we cannot answer to the question if we plan to do merger and acquisitions in one direction or another. But we are very pragmatic management. We are a very pragmatic management. The market of automotive is changing very quickly, both on the EV side, but also consolidation side. We will maintain a pragmatic approach. If opportunities arise, the good news is that now we will be in a situation to address them with a very low debt amount in our balance sheet, with improved profitability in suspension, with Air and Cooling continuing to grow. For sure, we will be in a better position than three years ago to address these opportunities if they are worth it. I know you were very specific, Martino. Maybe if you don't mind, can you just repeat the last question? No, it was all-inclusive. So the capital allocation, including Capex. Well, the Capex plan could be extrapolated. And if I may, just a follow-up on the capital allocation and your last answer. Should we take into account that if opportunity arises, both for acquisition and for divestiture, or just in one way? Well, disinvestment, it's not totally on me to ensure, but I think we have done the job. Basically, we have disinvested the factory, which were losing money in Air and Cooling, in Filtration, and in Suspension last year with Mexico. So I don't see any strategic disinvestment to be done in the coming 24 months. And concerning the big disinvestment, we don't have that as a plan as for today. Concerning an acquisition, it's where we will need to be very pragmatic. As I was saying, the market is going very fast. If opportunity arise, we are in a position to address them. I don't say we are planning to do it today because we are all focused on closing the deal of Filtration. But I say at least we will be in a position to address them. But the market is also very tricky because EV technology is not mature yet. So to do an acquisition on EV technology, it needs to be waterproof from a technology point of view. And doing consolidation move in ICE, it needs to be a strong business model. It means the cost of acquiring externally should be really lower than consolidating internally with business acquisition on ICE or gaining market share. So it's not an obvious move to do an acquisition in the current market, according to me, in all businesses. Okay. And on Capex plan? Capex plan, I hope I will have a lot of money to spend in Air and Cooling. Olivier will be a bit upset, but me, I will be very happy because it would mean that we are continuing to acquire a lot of new businesses on EV or hybrid. In the last weeks and months, the discussion with our customers is refocusing a lot on hybrid application, which for Sogefi is very good because it means selling both ICE products or legacy products plus EV products, if I can call them like that. And in Air and Cooling, it can go very, very quickly because if we acquire a business today, Capex expenditure is immediate, I would say, three months after. And I really hope that in the coming weeks or months, we'll be able to spend a lot of Capex in Air and Cooling. To answer to your question, strategically, it's to continue to spend Capex, maybe more Capex than last year's, on Air and Cooling to finance the growth. On suspension, we have capacity. We have enough capacity in stock. So I don't see Capex increasing on suspension. If Capex increased, it would be in Air and Cooling because new business, new process, or new capacity required. Okay. Thank you. You're welcome, Martino. Have a nice day. The next question, sir, is from Gabriele Gambarova of Banca Akros. Yes. Good morning, and thanks for taking my questions. Again, on Capex, if I may, is it possible to have a more quantitative indication, rough indication how much could you invest on, let's say, on average? And then, if I may, an indication on the free cash flow. I mean, the Q1 was very strong, so I wonder if you could, let's say, tell me more broadly for 2024, what is your expectation with the new perimeter? And the third one is on the European market. From your standpoint, I mean, we saw that mass market producers, Stellantis, I know, and so on, performed pretty badly in Q1. So I was curious to understand what is your, let's say, view on the market for the coming months. There is also, of course, the aspect of the Chinese imports. Any, let's say, comments from you would be very interesting, I guess. Thank you, Gabriele. Hello. Let me start by the market if you agree. Well, the market has been low yet for the big OEMs, generalists, if I can call them, especially Stellantis and Renault. Daimler, it's a bit a different case. I would say it's the new models that are still struggling to generate a lot of sales. For sure, when we discuss with our customers, there is a kind of anxiety about the European market. Remember, it was always my position to be ultra-cautious on the European market because of the financial situation of Europe, higher interest rates, kind of negative bashing on automotive in the big capitals of Europe, and technological uncertainty. EV has been pushed a lot. Then a bit less. ICE was dirty, but now it's no more so dirty. People are a bit afraid about acquiring an EV car and not being able to sell it a few years after due to the battery or whatever. So yes, the European market is a bit cloudy right now. Will it continue to decrease more than what happened in the first quarter? I don't think so, basically, or maybe a few points, but I don't see, again, a new big decrease of 10% because at one point, customers will mitigate the volumes with a different pricing approach. And we can start to see the first strikes. I think Tesla decided again to decrease the price of these cars. So I guess there will be a kind of pricing approach from the OEMs in order to limit the volume decrease, which is good on one hand because it means volumes will maybe stop decreasing or remain stable. But on the other hand, it will increase the pressure on the pricing with the suppliers. But it's something we are ready for, basically. We always knew that this year will be a challenging year with our customers about pricing discussions and also volume discussions because you can imagine that when we have a big drop, there are some discussions with our customers about that. So my view on the European market, it will remain in Q2 in the same trend as Q1, so with a decrease compared to last year, around 5%-6%, I would say, compared to last year, with generalists suffering more than the others. And yes, Chinese at one point will arrive. They have started the export. At one point, there will be factories in Europe, and at one point, they will start to sell cars. I don't see that as a bad news. It's even the opposite. We have a very strong relationship with the major Chinese OEM for a decade in China. So if they arrive in Europe, we will continue this good relationship. I'm thinking to big OEMs such as BYD, SAIC, of course, Geely, even if it's a bit different. So let's see. I see more the Chinese OEM arriving in Europe as an opportunity for the European market to be a bit more rational from a pricing point of view and for us to continue to diversify our customer bases in Europe. So this is my answer, Gabriele, about the market. I don't know if I was clear or if you wish more information about that one. No, no. It was perfect. Thank you. On the cash, yeah, cash was good Q1. I have to admit that I'm quite happy that it was good also because of business cash, if I can say, generation. Also, cash in Suspension, the trend has reverted a lot versus last year, sorry, also because it has been mentioned Mexico is no more here, but also thanks to the actions of the team, now our ambition in Suspension is not to no more, just not burn cash means to be at break even from a cash-out point of view, but at one point, to generate cash. So still a lot of efforts to do in order to generate what I would consider an acceptable cash, but at least the cash burning in Suspension has been stopped in this quarter. Air and Cooling has continued to generate good cash, steady cash. So it makes me very confident for the future of Sogefi, knowing that now suspension is not consuming cash anymore, and Air and Cooling cash, despite all the efforts required for R&D and so on, is continuing to generate steady cash. Concerning the capex allocation, I will just ask to Béatrice and Olivier if you have the amount of EUR 23 trillion by business units. It is around EUR 70 million without Filtration 2023. 70, yeah, Bea? 70? No, 70, yes. It's only the tangible Capex, Gabriele. So I don't know if your question will include also the intangible. No, sorry, Frédéric, it includes all the intangible. 70, 30. Sorry, that's my point. It includes the intangible, the R&D. So I don't know if your question was a global approach or only on the tangible CapEx, but basically, the EUR 70 million of last year, it were half and half between suspension and Air and Cooling. I would say that Air and Cooling this year should go more around EUR 40 million rather than EUR 35 million, and suspension consumes less, EUR 30 million rather than EUR 35 million, which at the end will be the same CapEx allocation for 2024 but with more CapEx for Air and Cooling and less for suspension, which makes sense because in suspension, we also had CapEx for the Romanian factory still last year. And my feeling is that in 2025, this trend may continue with Air and Cooling growing to EUR 45 million and suspension going to EUR 25 million. Of course, if new business acquired big businesses, we will have the strike force to increase the 70 to 80, 90, or 100, which will be a very good opportunity for us. But right now, in Europe, I'm continuing to be very careful on my Capex allocation, even when it's EV, because volumes remain a bit uncertain in Europe. So before spending a lot of amount, a lot of Capex, we do a very strong risk analysis to be sure that we won't have a bad surprise in two years. Okay. Thank you very much, Frédéric. If I understood well, 70 is all-inclusive? Yeah, yeah. It's also the intangible, what we call the intangible. Okay. Perfect. Thank you very much. You're welcome. The next question is from Roland Konen of Value-Holdings. Yes. Good morning from my side. Thanks for taking my question. First of all, congrats to the figures. My question, it goes to the Filtration business. Could you please give us an update on the selling process? First question. Second question, do you see some higher restructuring costs there on the holding level after the selling process is ended? And the third question on this topic would be, could you give us the amount of the non-recurring costs in Filtration in the first quarter, and how much do we expect till the end of the selling process? Thanks a lot. Hello, Roland. Thank you for your questions. Well, Filtration selling process, everything is going as planned, very smoothly, both with unions in France. You remember, there is a process to respect in France and also with all the regulation that we have to fulfill, such as antitrust, in a few countries. So everything has been going as planned in a very smooth way. So I don't see any potential issues concerning the closing of this deal. Am I answering to your question, Roland? On that one, you want more precise information. No, no. It's fine. Thanks a lot. So it's under control, and everything is going very smoothly. Higher restructuring costs than last year? I would say no because in the last years, I've been a bit active on this field. There will be some spot optimizations, but I will not call that AD restructuring because we have anticipated already some actions in order to be as lean as possible from end of last year. So no, I don't see a huge amount of restructuring in 2024 that could unbalance the cash generation of the year on the all-winning or central cost. Of course, if volumes drop, then I will have a different approach concerning the footprint in Western Europe or maybe possibly on central cost. But in the current situation, nothing too big to unbalance the cash generation. On the last question, Roland, sorry, I've not been able to catch everything. Can you repeat it? Yes. You're talking about some non-recurring costs in Filtration because of the transaction. This was the explanation for the decrease of the net result of this business line. Could you please give us a rough indication of this costs in Filtration, what you have booked in the first quarter? Sorry. On that one, I've not been able to catch the question. Béatrice, Olivier, you get it? We would like to know the cost related to the deal. To the deal? Yes. Yes, I think. Okay. We can say that the cost related to the deal are already accrued in March 2024 in a range of EUR 4 million, more or less. Yeah. Okay. But not impacting. Yeah, absolutely. Do you expect much, much more cost there, or? No. No, no, no. We booked the big part of the cost we will have for this deal. Perfect. Thanks a lot and all the best. You're welcome. Sorry. Thank you. The next question comes from Alexandre Raverdy of Kepler. Good morning. Thanks for taking the question. Two very quick questions, please. The first one on the tax rate. I think it was 41% in Q1, a bit higher than what I had in mind. So if you could please give us some indication on the full year level and very quickly on free cash for the full year. So effectively, very strong start to the year. I think, Frédéric, you have not really answered the question of Gabriele, who was asking more granularity on the free cash for the full year. So we have the Capex. Then we can do the math. But is there any reason why free cash flow for the full year should not be above EUR 30 million? Thank you. I start by the last one, and then I will let Béatrice and Olivier answer on the tax rate. So yeah, first quarter has been strong. No, you know my approach. I'm always very cautious. There are four quarters in one year. Automotive is always full of surprises during the year. Q2, volumes are uncertain in Europe. Q3, there is North America elections. And Q4, I don't know yet, but I'm sure there will be something there to worry about. So we cannot do a multiplication by 4 or cash of Q1 and say, "Okay, it will be EUR 30 million multiplied by 4." You know that we usually generate good cash in the first quarter. This year, we have smoothed a bit the cash generation of Q1 using less factoring, I would say, which has created a kind of buffer for the next quarters if we wish to use it. I don't see any reason to have a lower cash flow than last year or bad cash flow this year, but I prefer to be cautious until the middle of the year about that because things can go, it can go very quickly, big decrease in Europe or North America issue with the election, and then something can be overconsumed. The good news is that we have a good advance in Q1. It's much better than generating lower free cash flow in Q1 and then having to catch up in the next three quarters. So we will continue to be ultra-aggressive on our cash generation, on inventory level, payment terms, other due fees with our customers. And in theory, the cash generation should continue to be good versus last year. So I know I'm not totally answering your question, and I'm sorry for that. But I pushed really a lot in Q1 in order to have an advance to manage rather than being late and have to catch up. So cash should be good. Now, the amount remains to be precise in the next quarters, Alexandre, if you agree. On the tax rate here, Bea, I will let you. I guess it's kind of a deferred tax issue or something like that on some countries. Yes. Yes. In Q1, there was a negative and non-recurring items for around EUR 0.7 million. For total year, we can estimate an average tax rate in a range of 30%-35%, more or less. That's very clear. Thank you very much. Thank you. As a reminder, please press star and one for questions. For any further questions, please press star and one on your touch-tone telephone. Mr. Sipahi, there are no more questions registered, sir. Thank you, madam. Thank you, everybody, for your attendance and your question. I know it was a bit early, so thank you very much for your attendance. Have a nice day, and speak to you very soon. Thank you. Have a nice day. Bye-bye. Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.