Release Date: July 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CIE Automotive SA (CUOTF, Financial) reported a growth in sales at constant exchange rates of 2.5% in the second quarter and 3.1% in the first half of 2024, outperforming the market by 3 points.
- The company achieved an EBITDA margin of 18.6% over sales in the second quarter, showing an improvement compared to both the second quarter of 2023 and the first quarter of 2024.
- CIE Automotive SA (CUOTF) has maintained a well-balanced geographic distribution in sales, with a gradual dilution of Europe in favor of American and Asian markets.
- The company reported a 3% growth in net income in a challenging interest rate environment, reaching EUR184 million in the first half of 2024.
- CIE Automotive SA (CUOTF) continues to deleverage, with a debt ratio of 1.45 times net financial debt over EBITDA, below their usual comfort zone of 2 times.
Negative Points
- The European market experienced a contraction of 6% in the second quarter, with a forecasted overall contraction of 5% for 2024.
- Brazil faced a 2% drop in production in the first half of 2024, impacted by poor export performance and increased imports of Chinese vehicles.
- The Chinese market is experiencing an intense price war, with prices estimated to have reduced by 20% on average compared to last year.
- CIE Automotive SA (CUOTF) underperformed in the Chinese market due to the growth of local Chinese customers and suppliers, which are not profitable for the company.
- The company faces challenges with high labor costs in various markets, including Europe and the United States, impacting overall profitability.
Q & A Highlights
Q: What are the drivers for CIE Automotive's outperformance in the second quarter, and is it purely a gain in market share?
A: Maria Herrera, CEO, explained that the outperformance is a trend seen across all geographic areas except China. This is due to CIE being one of the strongest players technologically and financially, leading to an increase in market share in various regions.
Q: How sustainable are the margins achieved in China during the first half of 2024?
A: Maria Herrera, CEO, stated that despite a drop in sales, CIE has improved margins in China by focusing on profitability rather than volume. The company applies its management model consistently across all regions, which has proven successful even during challenging times like the COVID year.
Q: What is the expected impact of import duties on Chinese electric vehicles in Europe?
A: Maria Herrera, CEO, mentioned that while duties are not ideal, they are necessary to level the playing field. In the midterm, Chinese OEMs setting up in Europe will likely need local suppliers like CIE, which could mitigate the impact of these duties.
Q: Why has there been an increase in CapEx, and is it necessary for the outperformance?
A: Maria Herrera, CEO, explained that the increase in CapEx is due to commercial success, particularly in Mexico, where investments in technology are expected to drive higher sales in the midterm. The strategic plan anticipated a slight increase in CapEx due to inflation.
Q: How is CIE managing the increase in labor costs across various markets?
A: Maria Herrera, CEO, acknowledged the rise in labor costs but emphasized that CIE is becoming more efficient. The company has managed to grow sales and margins while maintaining or reducing headcount, which helps sustain profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
