Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Iveco Group NV (IVCGF, Financial) reported a solid financial performance in the third quarter, with an adjusted EBIT margin of industrial activities at 5%, despite a slight decrease from the previous year.
- The company improved its free cash flow by EUR56 million compared to the same period last year, due to lower working capital absorption and partial recovery from previous impacts.
- Iveco Group NV (IVCGF) successfully launched its model year 24 product lineup, receiving positive feedback from customers and maintaining a competitive truck product portfolio.
- The bus segment saw a significant increase in market share in Europe, with a strong order book extending into 2026, highlighting the company's leadership in sustainable transport solutions.
- The defense business unit achieved key milestones, including a contract with the Brazilian army and a cooperation agreement with Rheinmetall Group, reinforcing its strategic position in the industry.
Negative Points
- The adjusted EBIT margin of industrial activities was 30 basis points lower than the all-time high in the third quarter of the previous year.
- Net revenues of industrial activities contracted by 7.4% year over year, primarily due to lower volumes in trucks and powertrain, combined with a negative mix.
- The powertrain segment experienced a 22% decline in net revenues, reflecting a severe volume drop and challenging market conditions.
- The company anticipates a reduction in company inventory in the fourth quarter, following normal seasonality trends, which may impact production levels.
- Iveco Group NV (IVCGF) faces a complex and uncertain macroeconomic and industry outlook for the remaining part of the year, which could affect its financial performance.
Q & A Highlights
Q: Can you provide insights into the light commercial vehicle delivery market outlook for next year, considering the book-to-bill ratio has been below one for six quarters?
A: Olof Persson, CEO, explained that the transition from the 2022 to 2024 model range is ongoing and progressing well. The focus is on maintaining pricing discipline and managing inventory levels. The transformation is expected to be completed by the first quarter of next year, with positive customer feedback on the new model year 24.
Q: With the commentary on lowering CapEx and OpEx, how should we think about the balance sheet and cash allocation to shareholders?
A: Olof Persson, CEO, stated that the efficiency program has identified areas for accelerated implementation and reprioritization of investments. The focus remains on enhancing profitability and maintaining a strong balance sheet, with more details to be provided in the next quarter's results.
Q: What explains the decline in truck margins both quarter-on-quarter and year-on-year, despite the new model year rollout?
A: Anna Tanganelli, CFO, attributed the decline primarily to lower volumes and underabsorption. Positive pricing and product cost improvements in Europe helped offset these effects, but the launch of the new model year 2024 and high inflation in Argentina negatively impacted costs.
Q: Can you provide a sense of whether bus margins will improve beyond the current 5% level next year?
A: Anna Tanganelli, CFO, noted that while specific guidance for 2025 isn't available yet, the bus segment is on a positive trajectory with strong pricing, higher volumes, and a solid order book extending into 2026. The focus remains on continuing this momentum.
Q: How confident are you in achieving the free cash flow guidance given the weaker market environment?
A: Anna Tanganelli, CFO, expressed confidence in operational levers to support the guidance, including adapting production levels and completing the recovery from Q2's impact. Improvements in financial charges and potential currency devaluation in Argentina are also factors.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
