Good afternoon. This is the conference call operator. Welcome, and thank you for joining the Sogefi full year 2018 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. Laurent Hebenstreit, CEO, Sogefi. Please go ahead, sir.
Hello to all participants. Laurent Hebenstreit, CEO, Sogefi. Welcome to this call concerning the 2018 results. I am here together with Yann Albrand, Sogefi CFO, and with Stephane Pianon, Sogefi investor relations. Let's start with the document which is available on our website, on page two, which is 2018 highlights. Revenues came in at EUR 1.6 billion in sales. At constant exchange and constant accounting principles, revenues are up by 2.4%, outperforming the market as the production in 2018 declined by 1%. Yann will update you on the difference which made the accounting principles between this 2.4% and the 3% which you have read in the press release. Q4 revenues were below expectations, mainly due to Q4 market in Europe, -5.4%, and in China, -16.2%. EBITDA came in at EUR 190 million or 11.7% on sales, whereas we were at 12.6% in 2017.
EBIT came in at EUR 61.9 million, at 3.8% on sales. It was 5.2% last year. It is impacted by IAS 29 hyperinflation accounting, which Yann will come to, and write-downs, which will be detailed later in the presentation by Yann. Net results came in at EUR 14 million versus EUR 26.6 million in 2017. Free cash flow came in at EUR 2.9 million, whereas it was EUR 34.4 million in 2017, mainly reflecting investments in India and in Morocco. We are happy to report that Q4 2018 free cash flow came in at +EUR 25.7 million, recovery of working capital. The cumulative effect of all these indicators, both in terms of debt and EBITDA, came into a debt-to-EBITDA ratio at 1.4. Moving on to page three, we would like to draw your attention to what happened in the fourth quarter, this time by business unit.
By business unit, we have a very different impact of the evolutions, because if you look on the delta at constant exchange and constant accounting principles, Suspensions was hit at -3.5%. Air & Cooling was slightly negative, -0.3%, and Filtration was up at 3.2%. Quite different pictures by business unit, which are explained by two factors. The first factor is that suspension is a chassis part, which means it is the car assembly plants which are receiving the delivery. Whereas Filtration and Air & Cooling is mostly powertrain, which means that it is the engine plants. What has happened in the last quarter was a complete shut down for the end of the year for the vehicle assembly plants at some car manufacturers, which explains the hit as well as the geographic mix, which is different between Filtration, Suspensions, and Air & Cooling.
If we now take a broader view for the year, we should notice the fact that, again, at constant exchange and constant accounting principles, this time accumulated over the year, Suspension came in at + 3%, Filtration + 3.2%, and Air & Cooling 0.5%. Our presence in Argentina and the fact that Argentina has switched into the hyperinflation accounting criteria, which is called IAS 29, had a positive effect on revenues of EUR 13.5 million, of which EUR 8.5 million for Suspension and EUR 5 million on Filtration. If you look at this by geographical area on page four of the presentation, you will see that with the exception of Europe, all areas grew at constant exchange rate in 2018. I will start again from the quarter. In the quarter, the reference market went down 5.4%, whereas Sogefi came in at constant exchange rate and accounting principle at -0.3%.
We did better than the market, which is also true for the year. As for the year, we have -1.5% reported. At constant exchange accounting principle, as I was saying in my very first sentence, 2.4%, 3.2% just at constant exchange rate for a market which is down 1%, which means Sogefi, in terms of sales, outperformed the market. We included a table with the trend of production, which is quite impressive because you see that in contrast with the Q1, which was a bit soft, we had a Q2 in terms of car production which went up 4.7%, propelled by a relatively strong Asia, of which positive China at 10.9%. In Q3, we really had a reversal as overall the market went down 2.9%, of which 7.3% in Europe.
Switching on to Q4, this becomes even worse because we have Europe -5.4%. Fortunately, North America was holding positively at 2.1%, South America was down 9.2%, and China -15.2%, which made for a difficult environment. It's not an excuse, this is one of the explanations of why we didn't fully achieve the expected EBITDA which we had targeted. If we start looking into the future, which we will come back to later, the IHS forecast, which is referenced in our industry, is foreseeing a pickup in China at 1.6%, South America positive at 6.4%, slight decrease in North America, down 0.5%, and Europe at -0.3%. I would like Yann Albrand, Sogefi CFO, to take you through the profitability evolution, starting on page eight.
Thanks, Laurent. As Laurent pointed out, 2018 was highly impacted by exchange rates. The impact on the top line was a - EUR 75 million, which is significant for Sogefi. This partly explains the slowdown in terms of contribution margin. Another significant impact was the increase of steel prices. As in 2017, we estimate that the loss due to steel cost increases was around EUR 12 million. In terms of EBITDA, as pointed out in the Q3 conference call, we had a favorable impact which was the result of the settlement with the carmakers, which was a + EUR 6.6 million in terms of EBITDA. This was counterbalanced by a negative impact due to the exchange rates, which was approximately the same amount, a - EUR 6.2 million. Moving on to EBIT, page seven. EBIT was hit on top of the previous impacts by the impact of IAS 29.
The move to a hyperinflation regime in Argentina, when Argentina exceeded 100% of inflation over three consecutive years. This had a negative impact on EBIT by EUR 2.6 million. This is non-cash, but this is the application of the new accounting principles. Another impact which we alluded to in previous calls was the write-off of intangible assets linked to the Fraize plant. The Fraize plant is the plant we discussed earlier, which we said was going to be sold. It has not yet been sold. It is just about to be signed. Before the sale, we had to book an accounting loss, again non-cash, of EUR 5.2 million write-off of intangibles. Financial results strongly improved. That is to say, it is a cost. The cost was reduced from EUR 31.7 million- EUR 23.9 million. Interest went down from EUR 22 million in 2017 to EUR 21.4 million in 2018.
What makes up the bulk of the difference towards the previous year was, one, less impact of the fair value to assess the value of the Indian subsidiary which we bought during the year. EUR 1.8 million in 2018 versus EUR 6 million the year before. This is, of course, non-recurring. The second one was less hedging costs. We had EUR 1.7 million hedging cost in 2018 versus EUR 3.7 million the year before. This is simply due to the fact that some hedging contracts stopped mid-June 2018, and therefore we won't have such costs in the coming year. Net income. It is the story of a half-full, half-empty glass. Less taxes than the year before, but still a very high tax rate. You can see a 54% tax rate. What actually happened is that we didn't book deferred tax assets in some countries in which we had losses.
Let us say mainly Latin America. We prudently decided not to put deferred tax assets on country's inception, that is mainly with reference to Morocco. On Morocco, it is quite simple. Still, we developed a plan, and still the new unit becomes entirely sustainable. We are not going to give up assets, so we hope that is going to be next year. But for the time being, prudently, we decided not to. On top of which we didn't record either any tax credit on IAS 29, which is just an accounting issue, which has no impact on local financial statements and on the fair value of India. Altogether, a 54% tax rate, and next year, for the same reasons, in all likeliness, the tax rate is going to be in the region around 50%. Moving on to the next page.
Due to a tough environment, we decided to cut on cost during the year. We reduced fixed cost by roughly EUR 6 million in 2018. If you move to the next slide. In terms of free cash flow, for the same reasons, we decided during the year to cut on CapEx. As you may remind that when we had the last call, we said we are going for an amount of CapEx in the region of the previous year, that is to say, in the region of EUR 61 million. Actually, what happened, due to a tough environment, we decided to cut that amount by EUR 10 million, and therefore we end the year EUR 10 million below the previous year, despite the fact that in the EUR 58 million we have EUR 8 million from the new investment on Morocco. The line above working cap, Laurent already mentioned.
At the end of Q3, we had a very unfavorable working cap. We recouped most of this in Q4. Therefore, the working cap evolution on all of 2018 is roughly in line with that of the previous year. If you go down the free cash flow statement, another significant line, which is not new, is the impact of the acquisition of the 30% minority shareholding in India. We paid EUR 16.7 million for that 30% minority shareholding. Of course, this is going to be non-recurring, since we now hold 100% of the company. All in all, a free cash flow at EUR 2.9 million+ in 2018 versus a positive of say EUR 4.4 million the year before. Just a reminder, India plus Morocco has explained the shortfall towards the previous year. After India, you have the numbers at the bottom as always.
If we move to the next slide. As Laurent mentioned, when we looked at EBITDA margin by BU, the bulk of the adverse variance towards the previous year comes from Suspensions. Suspensions was very hit by steel price. You can see that the EBITDA margin went down from 12%-8.1% in a year. As all BU Suspensions also was hit by adverse exchange rates. Moving on to Filtration. Filtration was hit by IAS 29, which had a 20% impact, negative impact on EBITDA. The result of the year includes the start-up costs of Morocco, which are far below the cash burn. Start-up cost in the region of EUR 2 million. Air & Cooling, a good trickle gross margin improvement. We are going for the better on Air & Cooling, going from 13.9% EBITDA to 16.1% in 2018.
Thank you, Yann. Laurent speaking again. We are on page seven of the presentation. A few comments on the evolution with the customers. We are quite happy with the growth of our activity with PSA. I had previously mentioned that we expected to capture some of the synergies of PSA and Opel. You know that PSA and Opel together finished the year -6%. You see that we were growing, which means that we are increasing our penetration as we benefit from the synergies between PSA and Opel. Commenting the number concerning now Ford. The regions where we are with Ford outside of North America, which means in Europe, in South America, and in Asia, Ford has been quite hit in terms of market share. The sales of Ford have gone down more than 50% in China. It's a very severe reduction.
The good news here is that the announcement made on the agreement between Volkswagen and Ford could present opportunities for Sogefi, both on the Filtration side, where the diesel engine, which has been developed by Ford, could be selected as the basic engine for the new light commercial common-base between Ford and Volkswagen, therefore with higher volumes. Also for Suspensions, as we are right now competing to get the coils and the bars for volumes which incorporate both Ford and Volkswagen volumes. We have been successful in the case of PSA Opel, and we look forward to benefit from the new agreement between Ford and Volkswagen in the field of light commercial vehicles.
Progressing on Fiat Chrysler, here we are seeing factory and this decrease is linked with the end of life of a product, which is an EGR product, exhaust gas recirculation, which was a one-off in our product line and was not a core product. We had decided that this was not a future orientation for Sogefi. It's mostly the end of life of this project, which explains the decrease, and in some regions, we find that FCA sales have reduced, but we are in very positive commercial dynamics. We are pleased with our growth with Daimler. You know that growing with Daimler and with BMW is part of our customer strategy of capturing higher value. More to come in terms of communication on these subjects in the next months. Let's turn now to the outlook.
According to different sources, IHS and others, we expect production in 2019 to be in line with that of 2018, with a decline in the first half, mainly due to China, and a recovery in the second half of the year. We need to insist on the lack of visibility at present as to how the year will evolve and the very high level of volatility in the market. Uncertainty also remains as to how the prices of raw materials will evolve. Two months ago, we anticipated some important increases in steel and plastics. Now with the slowdown in China, the picture could evolve during the year. We are still confronted with increases in steel and plastics in the short term. Remains to be seen how this evolves over the next months. In such environment, Sogefi expects revenues to evolve in line with the market.
We're always careful in the guidance. We always start the year in saying that we are in line with the market, but you've seen last year that we outperformed the market actually. We are committed to recover profitability, particularly in the suspension sector. You clearly understood that in 2018, okay, filtration could have done a bit better and cooling did okay. The real issue has been suspension and our ability to pass steel increases to our customers. This was the presentation we had prepared for today. Thank you for participating in the call, and we'll be happy to take questions.
Excuse me. 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 one on your touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Monica Bosio with Banca IMI. Please go ahead.
Good afternoon, everyone, and thanks for taking the questions. The first one is on raw materials. I'm perfectly aware that visibility is quite low and the evolution of the raw materials is quite uncertain to estimate. If you have a preliminary estimate of the impact in terms of raw materials cost increase in 2019, because in 2018 it was EUR 12, and I can imagine that could be higher. Also because it would be very difficult to transfer the raw material price increases to the final prices given the tougher scenario ahead. The second question is on the aftermarket. Can you give us some more color on the aftermarket trend of Sogefi in 2018, and what are you expecting for 2019? Given the scenario, I can imagine that the auto suppliers will need to face some further restructurings in order to cut costs and recover profitability.
Are you going to face further restructuring? If yes, if you can give us an indication of the amount. Very last is on the IFRS 16. Is the IFRS 16 going to impact 2019 and going forward, fundamentals for the group? Thank you.
Hello, Monica. Laurent speaking. Thank you for your questions. On the raw materials impact, we are in intensive discussions both on steel and on plastics, mostly polyamide. I would say that now after two years of steel increases, because 2018 was the second year. The customers start to recognize the reality of the issue. Some customers have played fair. With some customers, we are still in intense discussions. On the raw materials, on the plastics, it's really concentrated on the polyamide. As far as the total impact for the year, I would say that we are doing everything to be lower than the EUR 12 million, all included.
Okay. Including the renegotiation?
Yes, including steel, plastics.
Okay.
It's still ongoing.
Okay.
It's the end of the year to give you precise numbers.
Okay.
On the aftermarket, it was your other question. There are two effects here. You know that in aftermarket, Sogefi is mainly focused on two types of markets. One is the premium market, with the Purflux brand and the Fram brand, and one is a private label market. What is happening in the aftermarket is we have had a good activity for the Purflux brand in France. You know that in France, on the Purflux brand, Sogefi has around 60% market share for all the filtration market for passenger cars. The market has been actually quite good for Sogefi in France. This is one element. The other element was we were quite successful in our private label strategy, which consists of supplying filters under different brands from customers. We've gained market share actually on this segment.
Overall, as we said in the press release, not only were we relatively happy with our sales evolution, but also from the margin side, this evolves in the right direction. Of course, the situation is very different country by country. Because aftermarket, as you know, is really local, and each country has its own basic dynamics with brands which are differently positioned by country.
Okay.
On the restructuring, we are continuing our efforts. You've seen that we have reduced the site costs. We continue with this step- by- step without big announcements or big closures, we are definitely focusing on higher performance in terms of cost reduction. Of course, with the volume evolution, we are looking at more efforts in this direction. I think it is a bit early to promise you numbers about restructuring and they want to vote some numbers .
For the time being, we have not included in the budget for 2019 any plant closure, we factor restructuring in the region of EUR 10 million.
Thank you, Yann.
Regarding your last question, Monica, on IFRS 16, we'll report a lot more in Q1 results. Of course, this will impact Sogefi because, as you know, IFRS 16 will impact our net financial position, especially when we have renewal of long-term leases, we are going to sign such a lease over a period of 15 years in the coming weeks, this will have a significant impact. We are redoing the numbers for the time being, this will force us to disclose the new net financial position and the same number with the old principles in order to make it easier to understand.
Yes.
Like in 2019.
You will release a pro forma 2018 in order to do it in comparison.
We'll share with you pro forma numbers in order to share with you like for like numbers.
Okay, thank you.
The next question is from Martino De Ambroggi with Equita. Please go ahead.
Thank you. Good afternoon, everybody. The first is a follow-up on the raw materials, because if I remember correctly, the negative impact of raw materials, mainly steel, was EUR 13 million in 2017, and you mentioned EUR 12 million in 2018. Considering that now are more or less stable, let's say, both steel and plastic, maybe a little bit less. You mentioned in your answer that you're expecting an impact positive for the current year as the things currently stand, but less than EUR 12 million, which seems to me quite low compared to the -EUR 25 million combined effect you had in the last two, three years.
Thank you, Martino, for your question. Hello. Let me clarify the point. When we look at our Q1 results for 2018, we will compare with Q1 2019. Sorry, we should compare with Q1 of 2018. In between Q1 2018 and 2019, steel has gone up. You are right to say that in some categories of steel, there is some decrease. In some other categories of steel, there are still some increases, which means that when you look at the full year-over-year, the question of Monica Bosio, as I understood it, was compared with the 12 weeks, should we expect more negative impact or the same or less negative impact? My answer was that the negative impact will be less than 12. Of course, we are looking forward at recuperating some of those EUR 25 million, but I do not expect a net positive impact this year.
We are confronted with very real impacts for polyamide, which is not the case for all automotive products. This is really the polyamide that enables to have a good behavior at high temperature. You should find it in some Filtration and cooling-off products. Therefore, we need polyamide in some cases. There is currently a shortage in polyamide, and therefore, the increase is very real. For sure, we expect the steel increase, which will be less than last year-over-year. On the contrary, we had very limited plastics increase impact in 2018, whereas we see already now in 2019 an increase in our purchase prices for polyamide. Of course, in both categories, we are having interesting discussions with our customers on them recognizing the reality of the economics. But I would not bet now on a positive impact.
It's more likely to be a negative impact, but of a smaller magnitude than the 12. Pierre?
Okay. One specific question on the Suspensions. You mentioned in the press release that you expect a significant improvement. Should we expect it above EBITDA for the current year?
What we say in the press release is that as suspension was a priority, it is natural that our focus on improvement is on the suspension. The percentage which you are mentioning will also depend on how the volumes evolve. You've seen that in Q4, suspension was more impacted than the other business units. It's a bit early to give you a guidance on the suspension.
Okay. Only the trend, without asking for specific figures, the trend in the other two divisions for the current year?
Well, what we can say is the two other divisions, as you see, they have the raw materials, the plastics raw materials issue. Each of them has its own dynamics. In Filtration, we expect to continue having some success in the aftermarket, which helps when we are successful. In the end, cooling, we have started production of some new products, this is rather at the end of the year. Here again, it's early to give you a guidance by division.
Even the trend, it's difficult to be indicated?
I think the trend depends both on the top line, on the raw materials, our ability to pass it on, and these are different by business units.
Okay. The last is on the tax rate was unusually high this year, 2018. When it will become normal. If I remember correctly, it was at 52%, the normalized tax rate that you had in mind.
It's a fair question. As I said, none in 2019 because, in 2019, we still shall have the ramp-up of Morocco, and we'll have the start of Eastern Europe, which is a new investment. Till we have the new plant up and running, we'll be very cautious with regard to deferred tax effects. The other issue I alluded to is that, in the Sogefi environment, we still have some subsidiaries which are running at a loss. Till we fix it, we shall have a high facial tax rate. One of our top priorities is to erase these losses. It might take longer than 2019.
Okay. Thank you.
The next question is from Thomas Besson with Kepler Cheuvreux. Please go ahead.
Thank you very much. It's Thomas Besson, Kepler Cheuvreux. I have a couple of questions, please. First, on your balance sheet CapEx and free cash flow. Can you just give us at least an indication of your leverage ratio post IFRS 16, and therefore give us an idea of what you intend to spend in terms of CapEx in 2019, and whether you believe that working capital will be neutral, positive, or negative on free cash flow in 2019. A second question. We've seen your margins logically deeply affected by the simultaneous downturn in China and Europe in the second half last year. Do you expect the first half 2019 margins to be better or lower than the second half of 2018?
A few points. Yann will comment. As far as working cap is concerned, in 2018 we continued to improve. That means we reduced our inventory as we continue improving the performance of the operations. We are still on to improve in terms of inventory. In terms of CapEx, Yann will also comment.
In terms of CapEx, we closed 2017 at EUR 68 million, 2018 at EUR 58 million. We currently are shooting for EUR 78 million in 2019, of which roughly EUR 10 million from for the new Eastern Europe plant. This is a preliminary figure because based on the environment, we might decide to cut on CapEx in 2019 as well.
Yann, one question on the balance sheet, or is that okay?
Yeah, I had another question. Can you give us an indication of your leverage post IFRS 16? You said you had 1.4 pre IFRS 16. Where are we going to end up, boldly speaking, once you've moved to the 2019 accounting rules?
If you don't mind, we are not going to provide guidance today. We are redoing the numbers, and we are very cautious with this new accounting rule, but we'll provide it probably in the coming month or month and a half.
Okay. Thank you. My other question was on whether profitability for the group would be better in H1 2019 than in H2 2018 or lower.
As you have read in the guidance, we say that basically the market is expected to go down in the first half. Car sales have been down 16% in China in January. Nobody knows what it's going to be in February and in March. For sure, this has a major impact not only on Sogefi but also on the macroeconomics of the world. Therefore, I would not venture to give you numbers, but these trends are negative in terms of impact. This is why we are looking at additional efforts in terms of fixed costs to continue and amplify what we have done in 2018.
Okay. Maybe let me ask the question differently. The stock market obviously believes that we have seen the worst. Some of your larger competitors, for instance, Valeo, suggest that we have seen no further deterioration in the last 6 weeks, for instance, in China, and that prompts a great level of optimism. Do you share that view, or do you believe that it's still too early to be able to say definitely that the second derivative has improved and we have seen the low point in terms of vehicle production in Q4 2018?
Being an engineer, a second derivative is something which I'm quite happy with. In that case, we really do not have positive signals right now. For sure, the first wave of measures which was implemented was not enough to spark a market recovery and stop the downturn. You remember 2008, 2009, and the amount of support which was injected in order to restart the automobile market. The situation in China is new. It's the first time in 30 years that we have such a drop. Therefore, it's certainly too early to predict, and we keep on working on a scenario with a negative trend also.
For the time being, market consensus is more towards a reduction of production over the first half of the year and maybe an increase in the second half.
Okay. I ask the last one and then I stop bothering you. If we assume that the decline in vehicle production is exactly the same in the first half of 2019 as in the second half of 2018, would your margins be higher or lower?
First of all, you are not bothering us. We are happy to be with you in this conference call and for you to raise questions. It depends on the mix and directions for Sogefi as well as for other companies in the market due to the poor dynamics and the good positioning in terms of margin, it has a positive contribution. For sure, the continuation of a downward trend in China has a negative impact on margins. That's for sure.
Thank you very much.
Thank you very much.
As a reminder, if you wish to register for a question, please press star one on your telephone. Once again, if you wish to ask a question, please press star one on your telephone. The next question is a follow-up from Martino De Ambroggi with Equita . Please go ahead.
Yeah. One quantitative question on the financial costs, where we should be this year. The second question is on the acquisitions. I know it's not maybe the right moment to expect big deals, when you presented your environment and technological evolution more than one year and a half ago, you mentioned that you were looking for small acquisitions, maybe entering new segments. Nothing happened so far. Now that you don't have any more risk for the Jambo defective legal issue, defective products, should we expect anything on this issue, or you are totally out of the game?
Thank you, Martino, for the question. I will let Yann answer on the financial cost after. Let me just start with your question. We are actively engaged in some number of opportunities. There was one where we did more than look at. We're actively involved. The reason we decided not to pursue this specific opportunity was that it was concentrated on one customer, and it is a customer where Sogefi doesn't have currently a significant market share, and with the technology where we consider that although this technology is a good technology, for now, it might not be the winning technology for the future in terms of performance, price positioning. We are actively looking at different opportunities. The good news is with the evolution of valuation. It is more of a buyer's market than a seller's market.
We are looking, and if there is a good opportunity which we believe is a booster for Sogefi's strategy, we certainly look at it more. Unfortunately, I have nothing practical, nothing immediate to report to you. This is not at all off the table.
Going on to your first question in terms of interest. What we see in 2019 is a level of interest likely going down towards 2018 and towards the number without the hedging costs and without the fair value of India, because this is going to be non-recurring.
That means roughly EUR 21 million-EUR 22 million.
Should be closer to EUR 21 million in 2019.
Okay. Thank you.
The next question is a follow-up from Monica Bosio with Banca IMI . Please go ahead.
Yes. Sorry. Just, I got lost with the questions on the CapEx. Can you please repeat me your guidance for the expected CapEx in 2019?
Thanks, Monica. I just remind the numbers, EUR 68 in 2017, EUR 58 in 2018. For the time being, the initial budget was EUR 78 i n 2019, of which roughly EUR 10 million for Eastern Europe.
Okay, perfect. Thank you very well. Thank you.
As pointed out previously, if need be, we cut on that amount, as we have in the second half of 2018.
Okay. Thank you.
The next question is from [Gabriela Gamboa] with [Banco] . Please go ahead.
Yes. Good afternoon to everybody. Just a quick question on the Morocco plant start. Can you remind me what would be, let's say, the contribution in terms of top line this year?
Sure. Hello, Gabriele. Thanks for joining this call and asking this question. We have started actually in Morocco of the first feature for Renault, which is generating sales of approximately EUR 1 million per month. We are looking at the start of production in Q2 of a second feature for Renault, which really ramps up during Q2. Therefore, it will be a half year. On this product, at full speed, we expect this year to be around EUR 10 million.
EUR 10 million as annual run rate?
Yes.
Okay. Regarding Sorry.
That means that we will see growth starting in Q2, Q3, Q4, then these two products are planned to be full speed the following year.
Okay. The full speed revenues, remind me what would be there.
With the products we have now, we are looking at around EUR 30 million, as we have announced in the press release initially. We are also looking at the opportunity to have other products here as we move forward with our trusted products.
Okay. Regarding the Eastern European plant, is there any news at the margin?
Yes. We are actually right now preparing a new press release concerning this plant in Eastern Europe. It is a bit early to share the information with you, but as we did previously with Morocco, we give you a full pack of information with number of employees, surface, CapEx, target dates, et cetera. This is being prepared. It should come out when we are ready.
Okay. Just a very last question from my side. On the Fraize plant, do you expect to put a machine? Is there an idea of what could be the, let's say, the put a machine in this case?
You're talking of the amounts and the timing?
Yeah.
If everything goes according to plan, we should cash in the second quarter. For the amounts, I will ask our CFO to venture some numbers.
Sorry, I didn't get the amounts.
The amount will be between EUR 8 million and EUR 9 million.
Eight and nine. Okay. Thank you very much.
If you wish to register for a question, please press star and one on your cell phone. For answer the questions, please press star and one on your telephone. Gentlemen, there are no questions registered at this time.
Well.
I'm sorry, there is a follow-up question from Martino De Ambroggi with Equita. Please go ahead.
Yeah, very last on the free cash flow. Excluding the IFRS 16, we will see what will be the impact. In terms of debt-to-EBITDA or free cash flow, I know it's premature to talk about precise indications, precise guidance, but could you just give us an idea where you believe the full year will be in terms of free cash flow to EBITDA?
Martino, I appreciate your question. It's a bit early. You saw the relativity of the cash flow of Sogefi in the third and the fourth quarter. Really, I understand the importance of the question. I appreciate it's very important here, but it's really too early given the many uncertainties both on EBITDA and on cash flow timing, because we imagine that as we generated more than EUR 35 million in Q4, that means it's a relatively high speed of cash generation, and therefore, I would like to maybe give you some more information on next call on how things are going.
Okay. Thank you.
Thank you very much.
Gentlemen, there are no more questions registered at this time.
Well, thank you very much to everybody for attending this conference call, and we look forward to be again online with you for the next one. Thank you very much.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.