Good afternoon. This is the Chorus Call Conference operator. Welcome, and thank you for joining the Sogefi full year 2019 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. Mauro Fenzi, CEO of Sogefi. Please go ahead, sir.
Mauro Fenzi speaking. It's the first time with you. I'll talk about Sogefi 2019 results. Before going on with presenting the last year results, I would like to spend just a few minutes presenting myself to you because I think it makes sense. I spent the first 15 years of my career working for the aerospace business, first for 10 years, and then five years later on the oil and gas side. During the oil and gas work period, I've been in Japan for a couple of years working with the most important oil and gas OEMs, like Mitsubishi, Kawasaki. I came back, and I started working for FCA Group in 2001, entering into Comau. In Comau, I covered many different roles, including business unit management, project management roles.
From 2009, I went to live in Detroit after the Chrysler acquisition, following Mr. Marchionne, implementing the integration principles in the area. I spent three years of my career in Detroit from 2009 to 2012. When I come back in 2013, I took the Comau Chief Executive Officer role that I covered until last year, December period. Now I'm here to talk about Sogefi results. I apologize, by the way, for the late start, but it was a technical issue with the files. I will cover slide by slide. Hopefully, you have the presentation with you. Starting with slide number three, which is covering the main numbers of the year. At revenue side, last year has been a year with EUR 1,519.2 revenues volumes. That compared to 2018, that has been EUR 1,770, is down 3.3% on the reported basis, and 2.2% on constant change rate.
You will see later on in the presentation that, by the way, with respect to the market trends, the company did better. On EBITDA, we closely are at EUR 174.3 against last year, EUR 179.9. 11.5% on sales, in line with previous years. We are confirming Q4 year-over-year and 2019 growth improvement, we will see later on these numbers. EBITDA has been at EUR 39.6 million, which is 2.6% on sales on the year. We have to highlight that in this number, we have been negatively affected by EUR 10.6 million of non-cash asset write downs. That was EUR 5.3 million in the previous year. During last year, Sogefi did also activities to cover the startup cost in Morocco and Romania with the new brands we are launching. The net income is at EUR 3.2 million.
The positive free cash flow is positive of EUR 4 million, EUR 3.9 million, versus EUR 14.2 million last year. The net debt at the end of the slide, you can see that is now at EUR 156.2 million versus EUR 250.5 million end of 2018. If you change the slide and we go to slide number four, here you see the revenues by geo area. On the left you see the Q4 on Q4, and on the right side, you see the full year. There are a couple of areas to highlight. If you follow me on the table, on the total line, first of all, we see that going from the left to the right, the quarter-to-quarter numbers are reported change -3.5% from 2019 to 2018.
With the constant exchange rate, we jump at -2.2%, are negative numbers, but on the other side, considering the market trend, which is in the same period of time, -5.4%, we are over-performing the market by 321 basis points. On the right side, you see the full year. The full year is again showing a reported change, -3.3%, which is because the change of -2.2%. Again, you see the same trend. The market is down roughly 6% with 359 basis points better. I would say that Europe is the key for Sogefi to achieve these numbers, and you know how Europe is important for the group. If you go to the right, discussing the full year, we have also to remember that we have been affected by the strike at GM U.S. for a certain period of time.
In the next slide number five, you see the revenues by business unit. Again, same report. On the left quarter- to- quarter, on the right full year. On the quarter- to- quarter, we can see again that on the Air and Cooling business, we are at cost on exchange rate -3.7%. Filtration is positive of roughly 8%, 7.7%, and Suspension is down 10% on the quarter. If you go to the right, you see that Air and Cooling is down 3.5% as exchange cost exchange rate, while Filtration is up more or less of 3%, and the Suspension is down of 5.6%. At six, you see the 2018-2019 customer portfolio. As you see, the top four are roughly at 10% share on volume, with Renault, Nissan, PSA, Ford, and the FCA/Stellantis group.
GM, Daimler, Volkswagen, Audi, Peugeot, and BMW are slightly below this value. The portfolio customer is quite in line with the group portfolio, and our presence on some customers, like BMW, is improving. Going to slide number seven, you see a very level graph reporting the EBITDA performance from 2018 on the left to 2019 on the right side. In 2018, and maybe Yann can be more precise than me, there has been a claim on Dieco that has affected the profitability with the EUR 6.6 million. If you go from 2018 EBITDA on, we see that the volumes affected in a negative way of EUR 14.5 million, while the company reacted pretty well on the efficiency and variable cost side with EUR 6.5 million, and also recovered pretty well the fixed cost with EUR 8.6 million.
Going on from left to right, you see D&A and others for a negative amount of EUR 7.1, plus, as you know, we are ramping up the two plants of Morocco and Romania for a near cost of roughly EUR 5 million. Reporting the EBITDA 2019 adjusted at EUR 43.9. On top of it, we had to write down EUR 4.3 million, and the EBITDA reported 2019 is going to EUR 39.6. Now we leave to Yann, who knows better than me the 2019 year, to comment the slide number eight.
Thank you, Mauro. After a difficult start in Q1 of last year with an EBITDA of 10.6%, you can see we recovered quite steadily in Q2 to Q4. Q4, we closed the year at 11.8% of EBITDA, whilst in the same period of the previous year, we only achieved 9.7%, despite higher sales. The performance of Q4 2019, with sales EUR 40 million below that of the previous year, are quite good, actually. In terms of EBITDA, you may have seen that Q4 was hit, as mentioned by Mauro, by a number of write-offs, hence the 0.6% EBITDA that compares with 1.1%. This said, excluding these write-downs, which are non-recurring, you can see that in Q4, we achieved a 2.9% EBITDA, whilst in Q4 of the previous year, with sales higher than this year, we only achieved 1.5%, therefore a year of improvement nonetheless.
Thank you very much, Yann. I have decided to give you, in the coming slides, a better view on the businesses. If you go to slide nine, you see the Suspension trend in sales and EBITDA, sales on the left and EBITDA on the right. The sales of Suspension went from EUR 602 to EUR 550 in 2019. There is an 8.8% negative on volumes. We have to highlight that in Europe, the gap is -6.5%, so less. About the EBITDA, we have to remember that in 2019, the Oradea, Romania plant was a difficult startup phase, so affected heavily the cost of the business unit, but Romania is very key for the future. If you exclude Romania from the EBITDA side, you should see the 2.1% in 2018 against 1.9% in 2019.
EMEA is improving quite well the profitability exercise and Suspension, while unfortunately we see LATAM and China a margin decrease. On Suspension, the cost of raw material is very important. If you jump to slide number 10, we decided to show the indicative steel price evolution for 2017, 2018, and 2019. The last period of time, I talk about 2019, the steel price, as you see, reduced after a peak in end of 2018, and this affected also the Suspension profit and loss. Going to Filtration, which is slide 11. You see that Filtration improved the sales volume from 537 to 546, so there is a growth of 1.7%, which is roughly 3% across exchange. Sogefi being successful in growing the Filtration business almost everywhere, with the only exception of North America. On the right, you see the profitability, that unfortunately suffered a bit in 2019.
We went from 4.5% to 2.9%. Again, we have to highlight that EMEA, like for Suspension, is improving profitability pretty well in Filtration following the plan, and that EBITDA, again, without the Morocco start up cost, should be read at 4.2%, against 4.5% last year. Slide 12, you see the Air and Cooling business unit. This business is almost flat on volumes 2018 and 2019, with a 1.7% difference. We have to, again, highlight that Europe, also EMEA, is up 5% on the previous year. Unfortunately, we have to highlight that North America, we have been affected, as mentioned before, by the GM strike last year. On the profitability, Air and Cooling is improving the profit, the EBITDA, from 5.2% to 5.7%. Again, the main area of improvement we are talking about is EMEA.
Going back to the full P&L on page 13. Just a reminder, 2018 and 2019 are comparable. That to say, as mentioned by Mauro earlier on, we've taken out from 2018 the EUR 6.6 million advantage coming from the settlement of the claim, in order to be comparable, and 2019 and 2018 are presented both with IFRS 16, in order to be consistent. EBITDA, as you have seen, stands at EUR 39.6 million. Reduction, I'd say improvement of the financial result on the year, EUR 23.8 versus EUR 27.5 a year before. What remains significant is the income tax. Income tax is EUR 13.7 million versus a pre-tax of EUR 15.9. We are not where we wish to be. It's an 86% tax rate, which is amazing. As mentioned in previous meetings, this comes from the fact that we have new plants on which we have taken a prudent stance.
That to say, till they become profitable, we are not going to book deferred tax assets. There are other areas, especially in Latin America, where we've been very cautious, not to book deferred tax assets due to the uncertainty of the possible recovery. In the years forward, we'll try to improve this. I know the question will come, we are shooting, let's say, for a 60% tax rate in two years from now. We still will have the start-up cost of the new plant in the coming years. As I said, till they reach breakeven, we are not going to book the tax assets. Minority interest comparable to the previous year.
All in all, after the write-downs, which we mentioned before, the net income of our trading activities is a loss of EUR 28 million, which fortunately is more than offset by the profit coming from the disposal of the French plant, which was a EUR 4 million net profit. All in all, a EUR 3.2 net income for the group. If we move to slide 14, the free cash flow. As discussed in previous meeting. In 2018 and 2019, we had some one-offs.
In 2018, in terms of cash, it was the acquisition of the 30% minority share of our Italian-Indian subsidiary. In 2018, we cashed EUR 5.1 million of 5. The second leg of our big warranty claim, of which we paid EUR 1.8 in 2019. In terms of cash, whilst the fresh cost disposal only netted EUR 7 million net reserves in cash, this brought EUR 7.2 million of fresh cash.
Going down the tab, working capital, EUR -2.1 versus EUR 5.9 in previous years. We must highlight that we have been struggling collecting some receivables. A lot of car makers probably are struggling with their cash, they are deferring payments. We have more deferred payment than in the previous year, and this is something we'll be working on in 2022 in order to make it right. In terms of tangible CapEx, EUR 60 million versus EUR 58 in the previous year, of which EUR 9.5 had movement. The movement is mainly Romania. Romania accounts for roughly EUR 8 million of that amount, and this will keep on in 2020, because in 2020 we still shall have around EUR 30 million of CapEx for Romania. Intangible and IFRS 16. IFRS 16, I remind you, still in. Less intangible than still in by EUR 7 million than in the previous year.
All in all, net free cash flow without IFRS 16 at EUR 9.3 million versus EUR 3 million in the previous year. IFRS 16, I just remind you, is the booking of the debt and cost regarding the leasing arrangements we commit to. To give a more constant view, taking out the one-offs which started with, that to say, the acquisition of the Indian subsidiary, the Dieco claim, and the windfall coming from the disposal of our plant in France, the free cash flow for the year stands at EUR 3.9 million versus EUR 13.2 a year before. As a result of which, the net financial position without IFRS 16 again stands at EUR 256 versus EUR 260 a year before.
Factoring for Monnaria is below the tab, so you will make your calculation, and you will see that we have not pushed on factoring, because factoring is at EUR 94 million end 2019, whilst it was EUR 5 million higher a year before. If we move to slide 15, it's a point we didn't have time to comment with you, but we made a press release. As you know, in November, we completed a private placement of EUR 75 million, which was a non-convertible bond. The bond is unsecured. It has a fixed coupon of 3%, and it will mature in November 2025. The purpose of the bond was to extend the maturity of our debt, something we are working on. We are safe till 2021, and now working on extending the line beyond 2021, in order to secure the long-term financing of the group.
Thank you very much, Yann. Now we go to the future. If you go to slide 17, we talk a little bit about market evolution. In this slide, we reported the last IHS forecast of February, so in month. As you can see, probably due to the coronavirus in place in this period of time, which is affecting mainly China, you see China dropping in Q1 roughly 28%, and Europe with a -6% on Q1 too. The forecasts are considering this Q1 as one difficult quarter to be recovered in the other three, because globally, the year is forecasted at -2%, as you see in the slide.
If you move to the next slide, which is 18, you can see how Sogefi is covering the market with the revenues, and this will be also important later on in case of questions, that will come for sure. Europe for Sogefi is representing really 60% of the sales, strong positioning in the area, while, as you see, the car production is only accounting for 24. In North America, Sogefi is at 20. In Asia Pacific, there is a total amount of 20. If we talk about China, Sogefi now is covering 5% of the revenue on China. South America is a good market for the company. We are at 11% against car production at four. It's the first time, I think, we show you, or we give you some information about Romania, which is in slide 19. It's a new plant.
As we said before, it's under ramping up phase. Will be a plant covering Suspension business. It's very key for the future because of cost. There is a timing, which is considering a start of production to be considered in 2021, with some intermediate steps. We got important orders from German premium OEMs to ramp up the plant, and it's a plant that, for Sogefi, is important not only because of the location and the cost, but also because of the size, because we are talking about 30,000 sq m and the plant at full speed will be roughly 150 people working at full capacity. Now a quick outlook on the 2020 year. As you have seen from the slide before, in Europe, which is very key for Sogefi, there will be a decline, which is in the range of 1.4%.
Unfortunately, the first quarter will be even more challenging, as we have seen before. By the way, not only in Europe, but mainly in China. It is also true that the 5% we have in China is not putting Sogefi under a very huge risk in this moment of time. On the contract portfolio, we expect to be on sales substantially in line with 2019, and going on with the performance, which will be slightly better than the market. On the profitability side, we want to continue protecting the profitability in Europe, as you have seen from the previous slide, which is the major market for us. Suspension business will be key in this respect in Europe to recover and to improve profitability. We are also forecasting a good recovery also in North America, mainly thanks to the Air and Cooling business, where we got a very key customer contract.
As I said, because I covered in the previous slide, Romania is going to continue the ramping up during the year. We have to tell you that Romania is going to start contributing to the business from 2022. Of course, we have to close this presentation saying, mainly these days, that coronavirus, for the time being, is not considered, even if, as I said, our portion of sales on China at the moment are in the range of 5%, are not very critical in this respect. I'm at the end of the presentation, now, I would be glad to reply to questions, with the help of Diana and Stefano.
Excuse me, this is the Chorus Call conference operator. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up to receive when asking questions. Anyone who has a question may press star and one at this time. The first question is from Monica Bosio with Intesa Sanpaolo. Please go ahead.
Yes, good afternoon, thanks for taking my question. The first one is on the guidance on the revenue that should be flat or above the market. I'm just wondering if you can better qualify the assumption that you have behind the markets. What do you mean for global car production slightly declining? To me, it seems that the main provider, IHS, are calling for -0.5%, -1%, but the perception is that at the end of the year, given also the coronavirus, the car production might be much worse than this. Also for Europe, you are calling for a -1.4%. I'm just wondering if this guidance is including the coronavirus or not, or if you do not believe that this guidance, in terms of car production, might reveal too optimistic. The second question is on the profitability side. You have improved in the last quarter of the year.
You have told us that you are going to defend margins in Europe, recovery in North America. At the end of the day, can you give us an indication, a rough indication of profitability by year-end, just to quantify? If you can quantify the potential ramp-up cost related to Morocco and Romania, should we expect further ramp-up costs that could depress the profitability by year-end? Thank you.
Yeah. I'll try to reply to the two questions. First of all, I'll start with the first one, which is relevant to the volume. As I said, we are not covering coronavirus at the moment in the numbers. Why? Because, first of all, the evolution of this very key element is unfortunately in front of us, and it's very difficult to predict really the possible duration of the event and the footprint affected. Second is because Sogefi on the Chinese side, so I talk about local to local.
Yeah, no.
We have only two plants, and their revenues are quite limited. Today, the two plants are, by the way, open. We don't have all the workers inside, but we have, as today, more than 50% of the workers already in place. Up to now, let me say there will be some impact that will be hopefully limited. On the overall economy and the overall market, it is clear that the visibility we have today due to the coronavirus is very limited. On the other side, the portfolio of orders from customers we have for 2020 is quite safe, and with these numbers, we are also protected a little bit with some efficiencies, planned a possible reduction of volumes, which would be reasonable, hopefully not out of the, let me say, range.
About profitability, we are planning to continue or to protect the profitability we have in Europe because of the core market for Sogefi. Again, without covering coronavirus, we expect to slightly improve the profitability at company level with respect to 2019.
Slight improvement?
Yes.
Okay.
You asked for the two new plants, which are Romania and Morocco. If you, Yann, you can add a couple of points.
Monica, with the slides we haven't shared, you might work out, read us the numbers, and I'll find them.
I'm sorry, but I can't hear you well.
Okay. Morocco was a loss of EUR 6.5 million in 2019, and Romania, EUR 1 million. All together, EUR 7.5 million of startup costs. Last, in 2018, we only had Morocco at a loss of EUR 2.7 million. Hence, the EUR 4.8 million better representation, which was mentioned by Mauro in the notes we presented to you. Next year, Romania should weigh more because we'll be in full on that site. The EBITDA we are projecting should be in the region of EUR 5 million in next year.
EUR 5 million?
Negative.
Okay. Sorry, but the line is really disturbed. Thank you very much. Just a quick follow-up. You are not including coronavirus, but I am just asking if your assumption on the global car production are not including the coronavirus as well. Is it correct? The -1.4% in Europe is not including the coronavirus. Is it correct?
If you refer to slide 14.
No, to slide 20, to the first bullet in the 2020 outlook. The sector sources are expecting 2020 global car production to decline slightly with Europe at -1.4%. This guidance from sector sources are not including the coronavirus impact on the automotive sector.
No, it's not, Monica. No.
Okay. Thank you very much.
The next question is from Martino De Ambroggi with Equita. Please go ahead.
Thank you. Good afternoon, everybody. Mr. Fenzi, you arrived a few months ago. Three general questions instead of being specific on the results. The first is on the restructuring activity, because for several years, Sogefi every year had EUR 10 million, EUR 12 million of restructuring costs. Are you planning to accelerate this kind of activity, or we will continue to see every year some initiative, maybe with the same magnitude? The second is, PSA, FCA are going to be merged, well known, but this will generate a client with more than 20% of your sales. What is your feeling on what's happening, knowing that they want to put pressure on prices for all what is purchasing for them? The third, you have three different businesses. In the past, there were rumors.
I'm not asking you if in your mandate, there is the possibility or the mandatory obligation to sell something or making merger, but what is your idea on the potential M&A? Thank you.
Let me say that, first of all, I asked the shareholders to have a period of two, three months really from today to prepare a roadmap for the future, because I just started, and we have to be fast, but we have also to be professional. To be honest, learning from the company, how it works and how the market is going. Even if the market I know pretty well, because I was working in the same market before. About restructuring, I will define a better plan or a different plan in this coming period, I will be more precise maybe next time we talk. On the FCA PSA question, I have to be very careful because I come from FCA. Until two months ago, I was really within the group.
The first check I did in Sogefi, by the way, on this respect, seems to be very positive because we are covering on both sides a good market share, and I think the product portfolio harmonization will help Sogefi from this standpoint to be a better supplier for the joint group. Of course, pressure on prices will come, and we need to react. From the portfolio standpoint, I see Sogefi well-placed in this game. About the three different business units, again, I have to apologize for the reply, but I will take the coming months to understand and to take some actions or to prepare a better plan. What is very key for me for the time being is to improve the value of the company, because this is very urgent, and for me, it's the first priority I have, including cash.
The three business units are improving in some areas, the profitability. I think I have to be sure that this roadmap is covering all the geographical areas, and it's covering, I would say, the scenario we have just discussed. Again, my first task is to make Sogefi, I would say, to give more value to the shareholders and to improve profitability.
Okay. Thank you. Two quantitative questions for Yann. Sorry, I missed your indication of tax rate. Was it 50% for this year and going forward because of the startup cost, or I missed something?
I know it's a question of great interest to the analysts. You know we have not been good in previous years because we've had a very high tax rate, which is 56% in 2019. We are going to keep on having startup costs in the new plants, especially in Romania. As I explained before, till Romania gets on black ink, we are not going to accrue different tax effects. That's one reason why the tax rate will remain higher than we wish. We also have areas in loss, and I'm not going to hide, Latin America is struggling at present, and this is going to keep on for a while till we fix it. Therefore, what we are shooting for is a tax rate roughly of 60% in 2021. There should be an improvement in 2020. We are shooting for roughly 50% in 2021.
If the plan happens as we have made it, we should reach something in the region of 30% in the following year.
Okay. Thank you. Just your target in terms of financial costs?
Our target in terms of financial costs is to keep on reducing them. The main item to reduce them will be to restart generating cash in the coming years.
Okay. Thank you.
The next question is from Alexandre Raverdy, Kepler Cheuvreux. Please go ahead.
Good afternoon, gentlemen. Thanks for taking my question. I have two questions, please. The first one on the sales guidance. I just wanted to clarify one point. I mean, is the guidance of flat sales on an absolute or relative basis? Just to understand if you expect global production down 2%, do you expect to outperform by 200 basis points? Then on profitability, some suppliers took a more cautious scenario already. You expect -2, some of them said -3, whatever. Do you still expect to improve profitability even with the market down 3%, for example? From which level does it start to be a bit stretched for you? Any indication would be helpful. Thank you.
What we have said in terms of sales guidance is that, disregarding the impact of the coronavirus, which no one can know at this stage, we are shooting with total sales for the group, roughly in line with 2019. This is against a scenario in which, for the time being, the IHS predicts a -2% evolution of the market on a full year basis. We plan, based on our other input, to beat the market by roughly 200 basis points.
Mauro speaking. On the second question, the reply is yes. We are planning to continue the improvements on cost that have been, I would say, quite visible in last year, if you remember the slide I showed with the bridge. In order to be safe for 2020, mainly in Europe, where, of course, this task is more important than in other regions.
Okay. That's clear. Thank you very much.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from François Robillard with Intermonte. Please go ahead.
Hi. Thank you for taking my question. Just a quick one on South America. You mentioned it as it was still a source of loss for the company this year. The growth projection by IHS for the market next year are pretty good, 4%, if I recall correctly. Is there any particular developments you are looking at for this region going forward? For the Romanian plant, if I understood correctly, we should not expect any contribution on top line margins for 2021. Can you confirm that? Thank you very much.
I reply for Brazil and Argentina. The market there, as you said, is in good shape. We need to talk business by business because we have different scenarios. First of all, for Suspension, we would like to leverage our market position, which is pretty strong on both sides, Brazil and Argentina, to improve a little bit market share and profitability locally. On the Filtration side, unfortunately, the situation is a little bit less critical, under recovery. We are not planning to grow Filtration locally more because we are improving the performances of this business unit in Brazil and in Argentina. About Oradea, that I think has been the last question, as I written in the slide, the contribution will come from 2022 on to the business. Currently, we are ramping up the plant.
We have the first clients already sold, and this will last this year and also next year, too.
Nothing unusual there. It is the standard ramp-up of a new plant. It is meant to be a significant plant for Sogefi. It should be our largest plant at the end of the five-year plan. Therefore, ramp-up costs till 2021. We expect a positive contribution in 2022, and there should be a big increase of the contribution from 2023 onwards. This is totally in line with the standard ramp-up of a new plant.
Thank you. Just in terms of volumes, what kind of output are you expecting? We know in terms of square meters, but in terms of annual pieces production capacity, if you can give us some indication on that.
The range we expect at full speed, because as Yann said, is a plant which will be at speed one of the largest plant of Sogefi. By the way, also the content of automation in the plant is, I would say, higher than in other places to guarantee quality and cost, will be in the range of EUR 60 million-EUR 70 million.
That's in euros? That's in EUR 60 million-EUR 70 million?
Yes.
Okay. Thank you very much.
You're welcome.
The next question is from Gabriele Gambarova with Banca Akros. Please go ahead.
Yes, thank you for taking my questions. The first one regards the CapEx level for 2020. Another question on variable and fixed costs. They had a positive contribution in 2019. I was wondering if you envisage a positive contribution even in 2020, especially in terms of raw material costs. What do you expect? Last question on the writedown, the EUR 10.7 million writedown. I was wondering, what does it refer to? I understood that nearly 50% regards Suspension, and I argue it has to do with, let's say, the classic spring Suspension, but any granularity would be useful. Thank you.
On CapEx, as I mentioned before, we closed the year with roughly EUR 60 million. Next year, it should be higher. Next year, it should be more in the region of EUR 67 million of CapEx, of which a sizable amount, EUR 30 million, are Romania.
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 Gabriele Gambarova with Banca Akros. Please go ahead.
Yes. Sorry, I also asked you, I don't know if the line was okay, but I asked you also if you think that you will recover in terms of variable and fixed costs this year in 2020 as you did in 2019. I don't know if you got the question.
Sorry about the line. It was quite disturbed. Yes, the reply is yes. As I said before, the idea is to go on with what we did last year, and to get a benefit also this side in 2020.
Okay. My last question regarding the writedown, the EUR 10.7 million writedown you made in Q4, if you can tell me what was it about?
Okay. In the amount we mentioned before, I'm not going to expand too much, but we have more than EUR 4 million of what I might call non-recurring, because it's really a one-off, one thing we have cleaned up, and which won't happen again. Then we have done a lot of cleanup in research and development.
Okay. Thank you.
Once again, if you wish to ask a question, please press star and one on your telephone. The next question is a follow-up from Martino De Ambroggi with Equita. Please go ahead.
Yeah. Thank you. Just to know, what is your assumption on the raw mat, particularly for the Suspension Division that this year should benefit finally after two or more years of negative impact, should be positive this year. What is the underlying assumption in your improvement in margins this year coming from raw mat?
Of course, for Suspension, as you said, the cost of raw materials of steel is key, and that's why it would be relied. In the plan, we assume that this trend will be continued. Of course, we need to talk about region numbers because it makes no sense to have a very level figure for it, because region by region is slightly different. Let's say that in Europe, where we have most of the business, as we said before, we are considering a 1% benefit in cost in Europe. Let's say as a follow-up that costs are going in the right direction.
Yes. Okay. Thank you.
For any further questions, please press Star and one on your telephone. The next question is a follow-up from Gabriele Gambarova with Banca Akros. Please go ahead.
Sorry, very last question from my side. Do you see any potential risk coming from the supply chain? What I wanted to know is, if you basically work on a local-for-local basis in every region, or you depend in some way or another from imports from China. What I would like to understand is, if, let's say, the problems in China can have a material impact even on other markets you serve. Thank you.
From our speaking, from this standpoint, I would say that most of the buying volume we have is outside China. Of course, like others, we have a few cases where we rely on Chinese suppliers, and we are today with the task force, as I said before, managing them carefully day- by- day in order to be in time to get our deliveries with the customers. I would say that compared to other companies, Sogefi is more buying in other places than in China. Of course, we have to be careful in some specific cases to pay the right attention on Chinese suppliers. It's not very significant, but as all actors in the automotive, we may be hit directly or indirectly, and we monitor the situation very closely. We monitor different solutions, because no one wants to interrupt the production of a car maker.
For the time being, we've found solutions.
Okay. Thank you.
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I really would like to close this call, thanking all of you for your time. Hopefully, next call will be a little bit more detailed in some areas. Again, to the next time, and hopefully when we have the next call, the coronavirus issue will be more manageable than today. I thank you very much for your time. Thank you.
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