Good morning. This is the conference call conference operator. Welcome, and thank you for joining the Sogefi first quarter 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, please 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 of Sogefi. Please go ahead, sir.
Thank you very much. Hello, here is Laurent Hebenstreit for the first quarter 2018 results conference call. Together with me this morning, we have Stefano Canu, Investor Relations, Yann Albrand, Chief Financial Officer, and myself, Laurent Hebenstreit, Chief Executive Officer. Welcome to all of you. The presentation has been put online, so I invite you to look at the page two of the presentation, which are the highlights of the first quarter 2018. First of all, the revenues at constant exchange rates are up by 2.8%, outperforming the market as the world market was slightly declining in the first quarter. EBITDA at EUR 63.1 million was up 5.1% at constant exchange rate and reached 12.6% on sales. EBIT at EUR 25.6 million, up 7.5% at constant exchange rate, which is 6.1% on sales. Net results reached EUR 2 million versus EUR 10.5 million in the first quarter of 2017.
Free cash flow generation continues to be robust at EUR 9.3 million versus EUR 6.9 million in the first quarter of 2017. Therefore, the net debt at EUR 264.3 million is down EUR 9.7 million versus December of last year and is reducing by EUR 37.1 million versus March 31st, 2017. Therefore, the debt on EBITDA ratio continues to improve at 1.26. It's important to underline the fact that those results for the first quarter are for the first time presented according to the new IFRS 16. This is the case for all companies working with IFRS. This is not specific to Sogefi. Nevertheless, in annex, Yann Albrand has prepared for you some more detail on how we apply IFRS 16 at Sogefi.
The other key element for the first quarter, which I would like to underline, is the effect of the currencies as the numbers at current exchange rate are quite different from the numbers at constant exchange rate. As euro value has increased versus all currencies which are relevant to Sogefi, whether it is US dollars, whether it is the Brazilian real or the Argentinian peso or the Chinese yuan or the Indian rupee, which is also important for us. Moving on to the next page, on page three, we have the split of our sales, 2017 sales. Suspensions reaches 36% of total sales, EUR 607 million. Filtration has EUR 566 million, 34% of sales. Then Air & Cooling, EUR 504 million at 30% of total Sogefi. I would like now to go to page four concerning the evolution of the sales by customer to give you some more detailed informations on the variations.
As far as Ford is concerned, if we look at constant exchange rates, these are numbers at constant exchange rate. The reduction we see at Ford is mainly due to the reduction of production of cars in U.S. and Canada, which is delivered out of our plant of Canada, which is showing a reduction in sales. If we look now at the reduction at Fiat Chrysler. At Fiat Chrysler, the main factor in reduction is reduction of our sales from our plant in Italy, in Sant'Antonino. We started discussion for Cassa Integrazione with our representatives of the unions in this plant due to the reduction of activity of one of the products which is manufactured in this plant. We have a reduction in the first quarter, and the reduction will be a bit more important in the second quarter for the activities with Fiat Chrysler in Filtration in Italy.
Looking now at the other customer which is declining, which is BMW. All the reduction is linked with the difference in tooling. We have sold last year more tooling to BMW than this year. This is just a phasing of the tooling. This is not linked with the activity as we will see later. This was for the reduction. As far as the growth, we are satisfied with the growth with Daimler and with Audi, because in the box for Volkswagen, Audi, it is Audi. You see that for the first time, Audi is crossing the 5% line. This is in consistent with our orientation for Sogefi to provide higher technology and to grow with premium car manufacturers in the future. Moving on to page five, coming back to the growth by business unit.
If we look at Air & Cooling, Air & Cooling is impacted by the foreign exchange. You see that the reported change is a reduction of -7.9%. Actually, at constant exchange rate, the variation is -3.1%, and this is linked at constant exchange rates to two factors, which I've already mentioned. One with Ford, which is linked with the volumes in USA and Canada, and one is the tooling with BMW. If we neutralize the tooling effect for Air & Cooling, the sales of Air & Cooling are in line with the market. There is no worry as far as the Air & Cooling activity. What we see in the -3.1%, all in all, the plus and the minus, is only linked with the tooling phasing between first quarter 2017 and first quarter 2018. The Filtration activity is showing a reported decline at -3.7%.
At constant exchange rate, 3.3%, which is outperforming the world market significantly. Last but not least, Suspensions, 2.5% at current exchange rate, plus 7.2% at constant exchange rate. We are continuing to grow in Suspensions. One of the growth factors we indicated before, but which is continuing, is the success of the Jeep Compass from Fiat Chrysler, where we supply the stabilizer bar, which is one of the growth factors for the Suspension as this quarter, again, we have been growing with Fiat Chrysler in Suspensions, but as well with other customers from the Suspensions. Moving on to the sales by geography, on page six of the presentation. At constant exchange rate, we see different pictures depending on the regions. Europe, which is our largest market, we are very close to the variations of the market.
You see that the reference market of production went down -1.1%, and at constant exchange rate, we were at 0.1%, almost flat, comparable with the market. Due to the exchange rate, of course, the weight of Europe is increasing now up to 63.7%. In North America, we report a decline of -10.5%. This is mostly due to exchange rate. At constant exchange rate, we are at small growth of 0.4% versus the market, North America, which was at -2.7%. Within this -2.7%, the U.S. and Canada, which are our main markets, were actually declining more than that. We are outperforming the market in North America. In South America, reported change -9.3%, at constant 16.3%. The reference market is growing at 11.9%. Two comments on South America.
The first one is we need to take into account inflation, of course, especially for the aftermarket activities. Inflation has been slowing down in Brazil, below 5% now, but is picking up in Argentina as we have crossed the 25% inflation rate in Argentina last month. This is to be taken into account in order to evaluate our performance. In Asia, we report a 0.4% growth, but at constant exchange rate, we are growing 8.5%, which is a significant outperformance compared with the market, which declined -0.9%, mainly due to China, where the production of cars reduced in the first quarter of 2018 versus the first quarter of last year.
In total, for a market which has been declining worldwide at -0.7%, close to 1% decline, at constant exchange rate, we outperformed the market by more than three points as we show a growth of 2.8% at constant exchange rate. I would like now to hand over to Yann Albrand to comment on the profitability evolution.
Thank you, Laurent. On top of a strong EUR, which Laurent fairly commented, the two other significant impacts are IFRS 15 and the evolution of steel price. IFRS 15, the results we present to you, page seven, from 2017, they've been restated. Originally, we had an EBITDA at 10.3%, now up by roughly two points. You can see that despite an adverse steel price impact of EUR 3 million over the quarter, EBITDA is still improving by 0.3 points, which is a good performance. In the quarter, we had less necessity than in last year to spend on restructuring. Last year, we did an operation of restructuring in Brazil, which is no longer necessary for the time being, and this has helped us increase the EBITDA. From three points of improvement, Q1 2017 to Q1 2018. Same impact at EBIT level.
We have nothing significant to report in terms of non-ordinary or write-offs, which explains why we have that same variation positive, plus 0.3 points. Net income increasing by 0.5 points. A significant impact of this improvement is due to the fact that we have less taxes. As we mentioned in previous calls, we are now going to a tax rate in the region of 30%. Last year, we had in the first quarter to book a EUR 1 million write-off of deferred tax assets. It is non-recurring, and this explains a significant part of the tax reduction between Q1 2017 and Q1 2018. As a result of which, net income increases from 2.4% in Q1 2017 to 2.9% in 2018. If you move on to monthly P&L on slide eight. Laurent mentioned the top line going down by 2.7% at historical, plus 2.8% at constant.
EBITDA going up by 0.3 points, same for the EBIT. The financial expense is slightly higher, but it is more an accounting matter. It is more a net versus fair value impact between 2017 and 2018. It has no cash impact for the time being. As I mentioned before, a significant improvement on taxes, which go down from EUR 7.4 million in Q1 2017 to EUR 5.8 million in 2018. If we move to slide nine, which is the free cash flow. The operating cash flow is still increasing from EUR 15.5 million last year to EUR 17 million, despite more CapEx. If you remember what we mentioned in earlier calls, last year, we spent, on a full year basis, EUR 68 million of CapEx. This year, we are shooting for something in the region of EUR 80 million.
This explains the increase in CapEx on Q1, which increased from EUR 8.7 million in Q1 of last year to EUR 10.6 million. We are used to spending less at the beginning of the year, but this is a trend which will keep on during the following quarters. As I mentioned before, no significant non-ordinary items. Interest adverse impact, but it is a non-cash impact, actually. It is a variation of the net financial position due to the update of the fair value of some derivatives. As a result of all this, free cash flow increases from EUR 6.9 million in Q1 2017 to EUR 9.3 million in Q1 of 2018, representing 2.2% of total sales. As a result of which, our net financial position is improving by EUR 9.8 million versus December and year-on-year by EUR 37.1 million. Laurent, you want to take over-
Sure
on the profitability improvement plan?
Yes. Thank you, Yann. On the profitability improvement plan, what I would like to highlight is the point number 5, the competitive footprint. We continue working, of course, on the 5 performance drivers you have on page 10. If we go to page 11, I'm pleased to confirm that the Suspensions Europe, Middle East, Africa project is ongoing. We are in the final phase of the site selection and looking at the opportunities for grants for investments. We are coming closer to the possibility to announce officially this project, which will be an important step forward in reinforcing strategically the cost competitive footprint of the Suspensions business unit. Moving on to the operational performance on page 12. I must say that I'm relatively satisfied with the operational indicators.
First and foremost is accident frequency rate, which is always a good indicator of the control of the plant, which is in reduction of close to 40%. On quality, as you see, all indicators are pointing in the right direction. Less customer claim rate, less customer line return, less supplier return, less scrap. Same on the delivery. Less missed deliveries to our customers from our suppliers. One thing which is a bit seasonal, we had a very cold winter. We had absenteeism higher in some of our plants. We are working on correcting this quickly. On productivity, goes in the right direction. Direct worker efficiency improving by 4%, yield rate of equipment by 15%, and the numbers of days of production inventory has reduced by 11%. Moving on to page 13, Mexico. We are ramping up the sales in Mexico. As the new activity is Suspensions there mostly.
Within the quarter in Suspensions in Mexico, we've continued to increase our deliveries to Fiat Chrysler. We have two more start production this year in Suspensions for Mexico. In Morocco, the project is proceeding as far as the timing is concerned according to plan, and we confirm the start of production in the first quarter. We are installing the first line, training the personnel, and getting ready for a start in the third quarter. On page 14, we've highlighted R&D. We have not mentioned that, but in the first quarter, we increased our R&D expenses, which is in line with the technology presentation which I made last year in November, indicating that Sogefi is going for higher technology, for more premium cars and car manufacturers.
I'm glad to say that in the 2017 scoreboard, which was published by Il Sole 24 Ore, Sogefi is number 14 as far as total R&D investment in Italy, within the top 300 in Europe and within the top 1,500 in the world. Which makes the link with the next page 15. We are very pleased with the success we had with Renault Nissan for a completely new technology, which I had announced the potential business in November, which is a battery pack cooling manifold for battery electric vehicles, which is basically a set of plastic parts which are distributing the coolant to have a high-performance cooling of the battery pack. Start of production is 2021. Now we are in OEM business, so it's not something for the next quarter.
This is very important in positioning us as a key player for the battery thermal management as this market starts growing and accelerating and all car manufacturers are working on the electrification. One of the key factors of electrification is not just the cooling itself, it is the packaging of the cooling. That means being able to have an efficient cooling distribution in an optimized volume, because due to the volumes of the batteries themselves, the more space we can save through the design of our parts, the better it is for the design of the electric powertrains and the design of the cars themselves. That shows also the quality of the cooperation we have with the vehicle manufacturers' research and development. This is not just a standard request for quotes for a part which has been existing for many years.
It really starts from the innovations proposed by Sogefi to the car manufacturer. It shows also that Sogefi is seen by Renault-Nissan, which the Renault-Nissan-Mitsubishi Alliance is one of the leaders in the battery electric vehicle worldwide, is a trusted partner from the concept phase to the mass production. This is an important milestone for us. Now, coming to the conclusion as far as the outlook is concerned on page 16 of the presentation. Despite the weak performance of the global automotive market in the first quarter of 2018, the group confirms the expectation to moderately outperform the market at constant exchange rate and to achieve higher reserves. Couple of comments on this statement. On the views on the markets today, some people are more optimistic. One of the influential provider of data has come up with one point more for the market this year.
This is not the hypothesis on which Sogefi is working. We are working on a somewhat more conservative hypothesis for the market, which enables us to keep a good control on our costs, as you have seen in the first quarter. You've seen that we have more than moderately outperformed the market in the first quarter. The outlook for the second quarter is fine. What we are carefully looking at is what will happen in the third and the fourth quarter. As you know, there is a change in the rules for the testing of the cars, and some car manufacturers are manufacturing cars and piling them up in inventory. That could have an effect on the second half, and that's why we keep on with our moderation for the view for the whole year.
Voilà, this was what we wanted to tell you, and we'd be happy to take questions for now.
Excuse me. This is Victoria, conference operator. We will 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 the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Martino Tamburini with Equita. Please go ahead.
Thank you. Good morning, everybody. Two questions on raw materials and free cash flow. Last year, you suffered EUR 13 million of negative raw material impact, mainly from steel. You are indicating an additional EUR 3 million in Q1. My question is, the EUR 16 million combined effect could be I don't know at what extent recovered during the rest of the year. What is your view on this issue, first? Second, on the free cash flow, you are generating EUR 9 million in one quarter. What is the guidance for the full year? Just an update on the factoring level in Q1.
Thank you, Martino. Laurent speaking. On the raw materials, the EUR 13 million, as you recall, were mostly on the second half of the year. We had very limited impact of the steel. EUR 13 million was the impact on two quarters. If we consider that more or less even, EUR 6.5 million per quarter, you see that this quarter, the impact was significantly less within a quarter. Steel, as we speak, is still increasing. Our target is to recover most of this within this year. We are, I would say, raising the level of our discussion with some car manufacturers. We have three categories of car manufacturers. One category of car manufacturers has recognized the full impact of steel.
We have one category of car manufacturers who has recognized the variation of the index, but not the market variation, which is above the index, because you know that in steel, the products Sogefi is using, we had contracts with indexes, but these contracts did not provide for what was above the index. Finally, we have a couple of customers where at this date, we still have not been able to recover the steel impact at all. These two groups are our focus and my focus, and I confirm to you that our target is to recover most of this within this year.
Excuse me, Laurent, can we say much more than 50% is what you expect to recover?
Yes, more than 50%, yeah.
Okay.
If we go to free cash flow, then I will let Yann add to this as much as needed. The generation of free cash flow is continuing. As we said, the major event as cash is concerned is the put option which has been exercised by our partner in India for Filtration. This is a major factor. If we take out this element, which is one-time, I see no reason which would make the free cash flow generation substantially different from what it was. We are continuing to work on the improvement of our working cap going forward. Maybe Yann, you want to On the factoring and-
On factoring, end of Q1 2018, factoring stood at EUR 112 million. It was at EUR 107.7 million last year.
Just on free cash flow, you are guiding for at least EUR 32 million as it was last year, more or less?
More or less. Before any investment in our India company, we are shooting for a similar.
Thank you. The last question on the second half cautious message you provided. Could you elaborate more on this issue and try to have an idea of what could be the impact in quantitative terms?
It's difficult to elaborate on that because it's beyond Sogefi's control, and it's a factor for the whole market. You know that the regulation for measurements of emissions is changing to the new cycles. This takes a re-homologation of the cars according to the new cycles. As the cars, model by model, have different results with the old cycle and the new cycle, the car manufacturers have different strategies on how to position themselves. We see already some car manufacturers which are basically a little bit slowing down their production. Others are increasing their inventory in preparation for this. This is for Europe, so this is not for the whole world, which is significant. We will see what the impact will be. In any way, there will be a transitory situation, and then it will be recovered because it does not change the underlying demand.
It's more of a phasing effect. If, for some reasons, the production is either increasing at some car manufacturers or decreasing in some specific models, this will recover over time. I don't expect this to be, I would say, substantial as far as the level of demand. I don't know if I'm clear in my answer.
No, very clear. Thank you.
Next question is from Monica Bosio with Banca Intesa Sanpaolo. Please go ahead.
Good morning, everyone. I'm referring to your cautious stance for the second half and to your guidance or, let's say, to the provider's guidance for the market. At the end of 2017, the providers pointed to a growth of the overall market of 1.5%. Now they see something slightly above 1%. You are telling us that you are working for a more conservative stance. Just to check, are you working for growth below 1% of the market? You are still convinced that you are going to outperform this growth? Just your personal view on the performance of the overall market for year-end. My view, my belief is that it will be definitely below 1%. The second question is on the EBITDA and EBIT margin according to the new rules. The EBITDA margins in the first quarter of 2017 was 12.3%.
In the first quarter of 2018, you did 12.6%. I'm wondering if you are confident to keep this trend for the rest of the year, if you can give us a feedback on this. The last question is on the tax rate, which was definitely better than the last year, roughly 30%. Are you going to confirm this level for the rest of the year? Thank you very much.
Thank you, Monica. As far as the market is concerned, my personal view is that the market could be between 0% and 1% as far as growth at world level. Therefore, it's always better to work out on a lower scenario rather than shooting for the higher points. Some of our peers are communicating on a market growing 2%. At Sogefi, we prefer to work on some more conservative hypothesis.
As far as the EBITDA margin, there are two factors. I would say they are the underlying efforts of our profitability improvement plan, which is on track, as I indicate. There is still the unknown of steel, of how much and when we'll be able to recuperate. Overall, we see a second quarter which is coming fine. We should be roughly, as far as the trend, going in the same direction for the second quarter.
Yeah.
For the rest of the year, it will depend on how-
On the steel
We settle on the steel matters.
Okay.
On the tax rate, Yann.
On the tax rate, as we mentioned in previous calls, we are now at a normalized tax rate, so we are shooting for something in the region of 30% on a full-year basis.
Okay. Thank you very much. Thank you.
The next question is from Lello Della Ragione with Intermonte. Please go ahead.
Hi, good morning. Thank you for taking my questions. A couple from my side. The first one is on organic growth and the tooling effect that you mentioned before in the Air & Cooling division. So it's just a temporary switching effect that will actually be beneficial for the coming quarters. Then, going instead on margin. You mentioned EUR 3 million of steel impact during this quarter. If I check at the new updated gross margin definition, the effect there should be 70 basis points is lower. I was wondering there, what you are doing in order to reduce this effect impact at least a gross margin 11%. Going instead down, you mentioned lower restructuring costs and neutral non-recurring write-off.
I can see from the restructuring, which is a line in your P&L. I was wondering if going down to the other neutral cost, this actually gave you some 70 basis points in terms of margin, if you compare year-over-year. If there are some other effect playing a role or this low level is the new level that we have to forecast going forward into the year. Thank you.
Thank you very much. The tooling phasing is really linked with the customers' activities, the development activities for new projects. As we go, I expect fluctuations from one quarter to the other as the business is evolving. What is important for me is to be transparent with investors as far as what is going on at the Air & Cooling. Air & Cooling at face value is declining, of course, this raises questions, and the answer is this is tooling. As far as the next quarters, the Air & Cooling activities will have a slowdown due to a product which is at end of life in Mexico. This is not a big product for the whole of Air & Cooling. We expect Air & Cooling to continue on the comparable trend.
As far as the tooling, we have a sequencing of the tooling, which is linked with the timing of the project. It's difficult to give you a firm information quarter by quarter on this, knowing that it's also depending on the timing of the customer's programs. Sometimes they want to accelerate, sometimes they want to slow down. We have no direct control on the timing of the tooling. As far as the margin, we are tracking in every detail, of course, the steel because it's a negative variance. As you pointed out, we have also some positives. There are some other areas where we are improving our performance as far as purchasing, in some cases as far as productivity. Yes, steel is not the whole story, it is the main factor, and that's why we thought it was important to outline this one.
On the other lines in the P&L, maybe Yann, if you have some comments.
We did set up a control of fixed cost. Nonetheless, as Laurent pointed out, we increased R&D expense by 9.6% at constant rates. We are still investing. I think it shows through our cash flow. It shows through our P&L via R&D expense. Despite the fact that we want to increase our profitability, we are investing for the future.
What about restructuring and other non-ordinary costs? Especially on the restructuring, because the other one probably are tough to forecast, but on restructuring, you posted EUR 1.1 compared to EUR 4.6 last year. Is that the new level that we have to forecast in the coming quarters, or was some exceptional event on this quarter? Because you mentioned Brazil, I'm wondering if that will have to delay this from the coming quarter. That's why.
Thank you for your question. It's true it's a significant variance towards Q1 of last year. We are shooting for something in the region of EUR 10 million of restructuring on a full year basis. I believe it will be a maximum this year. We want to keep in our projections the ability to restructure when need be, but we have less need this year than we used to have.
Okay. Thank you.
The next question is from Filippo Pini with Kepler Cheuvreux. Please go ahead.
Yes. Good morning. Got two question. The first one is on direct cost. I see that you didn't put this indication in your presentation, but could you please confirm if weight of indirect costs on revenues in the first quarter this year has been around 17.8%? Second question is recalculation on revenues, gross margin, EBITDA and EBIT based on new IFRS 15. If you can please provide today the calculation on a full year basis. Thank you.
Okay. Thank you for the question, Filippo. As far as the ratio of cost, the things have changed with the IFRS. Due to the recognition of the revenues, the different ratio, whether this is a variable cost margin, whether this is indirect cost on sales, have been fluctuating quite a bit. This is why in this presentation, we have not given you details, because we still need to work out how to interpret the data with the new IFRS information. This is the reason why we are not communicating on this.
What I can tell you, as Yann said, is as far as indirect costs are concerned, other than the increase in R&D, which Yann mentioned, and the startup of the plants in Mexico, which is not yet at full volume, and the cost of the plant in Morocco, because today now we have almost a full team of direct and indirect people, but we have no sales. That impacts our indirect costs. Other than this, we continue our efforts to rationalize our indirect costs.
On tooling, it is a quite complex question. If you've had a chance to look at the exhibit we've put in the presentation, you will see that tooling has It is page 20 of the presentation. Tooling has a significant P&L impact, because roughly on full year basis, when we restated 2017, it generated an improvement of 2.3 points of 2017 EBITDA. One important factor is to understand the impact on sales. Impact on sales, in a way, is diluted because we now book and amortize the tooling sales, and then we amortize them over a period of 48 months after start of production. Which means that any impact of new tooling sales will be split over a period of four years. There won't be as big an impact on the top line.
What is very significant, on the contrary, is the fact that we now have 100% margin at EBITDA level because the cost of tooling goes to fixed assets, therefore to D&A. We do not anticipate such big variations in terms of the top line, and we are expecting a steady improvement of the EBITDA in the region of the restatement, which we did on 2017. That's to say, an improvement by 2.3 points.
Okay, thank you.
As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Michele Valdeli with BNP Paribas. Please go ahead.
Yes, good morning to everybody, and thanks for taking my question. Just a follow-up on this IFRS 15, just to get a better feeling about this treatment of the tooling. Is it right to think about tooling accounting as the capitalized development costs?
Michele, thank you for your question. Actually, through IFRS 15, we corrected an anomaly. That is to say, before, when we did tooling for ourselves, we capitalized it. When we did a specific tooling for a client, it went through P&L via cost of sales. I believe the IFRS 15 correction gives a better picture of the fixed assets which are used by the company in order to generate its production. We now capitalize the time and money we spent in order to generate production on behalf of our clients. We had to make a position on the period over which we split that revenue, and we have decided to adopt a position which is similar to the one we had on R&D, more generally, that is to say, to spread it over a period of four years, which is not the exact time of a program.
Usually, it lasts slightly longer. That is to say, our accounting methodologies have been aligned at 48 months after start of production.
Okay, there would be D&A in the coming four years related to these toolings.
Sure. What went through contribution margin via cost of sale previously will now go through D&A.
Okay, perfect. Thank you very much.
Michele, what is important to understand is that this has no cash impact.
I know. Sure.
It's an accounting matter. We are going to keep on pressing to cash in as soon as possible.
Yeah. Thank you very much.
The next question is from Gabriele Gambarova with Banca IMI. Please go ahead.
Yes, good morning. Thanks for taking my questions. The first one is on product. You mentioned this jump in Audi's sales. I was wondering if you can give me some more details on this, what kind of product it is, and what are the perspectives. The same applies with FCA. You said the Compass is helping you in Mexico. The group is due to launch another couple of very important products. I was wondering if these product launches are going to benefit your operations in Mexico, I guess, or in the U.S., I don't know. Another question on the Renault-Nissan contract.
I'm not asking you the size of the contract because I guess it's impossible to assess at this moment, I would like to know if the value per unit regarding this contract is similar or higher vis-à-vis the usual air intake manifolds you supply nowadays. Thanks.
Thank you very much. Concerning the growth with Audi, there are two effects. One is in Filtration, is the ramp-up of an oil filter, which started in production in 2016 on the V6, V8 engines of Audi. This is a common engine for the whole Volkswagen Group, but due to the size of the engine, it's mostly Audi which is using those engines. It's actually ramping up the new Audi, which was presented in Geneva and which will be launched in September, will be mostly using this new engine. We see an increase.
It's often the case with the new engines. The ramp-up of the engines are much lower than the ramp-ups of the cars, it takes time for the volumes to come up. The other factor with Audi is growth in the Air & Cooling activities with Audi. These are the two main factors for the growth with Audi. Concerning Mexico, we are currently supplying Fiat Chrysler. One of the important starts this year for the stabilizer bars in Mexico will be the start of production for BMW. You know that BMW has a large plant in the U.S., making mostly the X Series there.
BMW this year is opening also a plant in Mexico, I was in BMW purchasing for chassis this week, they confirmed to us that they're very happy with the location of Sogefi in Monterrey, as they consider this plant to be strategically located between their U.S. plant and their Mexican plant, notwithstanding the discussions on the North American Free Trade Agreement. We confirm that it is a good location, they have made several audits of our readiness to start with new production in Mexico, and they are quite happy with that. It will go in the right direction and continuing our drive to go to more premium cars and premium car manufacturers. On the contract, you are right, it's very difficult to speak about quantities of battery electric vehicles in 2021 or 2022, because 2021 is the start of production.
There is a considerable spread of forecasts on the volume. As far as the value, to answer specifically your question, the unit value is higher for this battery coolant manifold than an air intake manifold. It is a more complex part, therefore it is more expensive. It's also the fact that this part incorporates a fair amount of Research and Development much more than, I would say, a basic manifold which we've been doing for years. Yes, it is higher value.
Last question on the other non-operating expenses item. There was this nice drop also in connection with IFRS 15. I was wondering if you can give me an indication for the whole 2018. You mentioned EUR 10 million of restructuring. I was wondering what could be the other non-operating expenses.
Well, the other big one we are faced with, which are difficult to predict, are exchange differences. As Laurent mentioned, starting with on this presentation, we are facing significant exchange impacts in 2018. They have an impact on our P&L. I'm not going to tell you what the impact is going to be on a full year basis, because it's really difficult to predict. Reverting to what we said earlier, the key factor is restructuring, which should be far lower than it used to be.
Okay, thanks.
Thank you.
The next question is from Roman Kerman with Value Holdings. Please go ahead.
Yes, good morning from my side. Only one question is left. Sorry for coming back to the IFRS 15 issue. We have a question on your midterm guidance as you're predicting 30% EBITDA. I guess this new guidance from a midterm would be roughly 15% or slightly above. This is a new IFRS 15 rule, isn't it?
It is a good question. We do not think we have achieved two of the three points of the foreseen improvement, as our new targets will be roughly two points higher than it used to be, as you correctly guessed.
Okay, many thanks.
Mr. Hebenstreit, gentlemen, there are no more questions registered at this time.
I would like to thank all participants to this conference call. We look forward to our next conference call for the second quarter results. Thank you very much for your participation.
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.