Earnings Call: Q1 2018

Apr 24, 2018

Morning. This is the conference operator. Welcome and thank you for joining the Sogeti First Quarter 2019 Results Conference Call. As a reminder, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask questions. At this time, I would like to turn the conference over to Mr. Laurent Herbenstein, CEO of Sodetti. Please go ahead, sir. Thank you very much. Hello. Here is Laurent Hennessrest for the Q1 2018 results conference call. Together with me this morning, we have Stefano Cano, Investors Relations Jan Albrun, Chief Financial Officer and myself, Florent and Steph, Chief Executive Officer. So welcome to all of you. The presentation has been put online, so I invite you to look at the Page 2 of the presentation, which are the highlights of the Q1 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 Q1. EBITDA at €53,100,000 was up 5.1% at constant exchange rate and reached 12.6% on sales EBIT at €25,600,000 up 7.5% at constant exchange rate, which is 6.1 percent on sales and net results reached €2,000,000 versus €10,500,000 in the Q1 of 2017. Free cash flow generation continues to be robust at €9,300,000 versus €6,900,000 in the Q1 2017. And therefore, the net debt at €254,300,000 is down €9,700,000 versus December of last year and is reducing by €37,100,000 versus March 31, 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 Q1 are for the first time presented according to the new IFRS 15. This is the case for all companies working with IFRS. This is not specific to Sogessy. Nevertheless, in Annex, Jan Aldrin has prepared for you some more detail on how we apply IFRS 15 at SOGESI. The other key element for the Q1, 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 the Sur La Cie, whether it is U. S. Dollars, whether it is the Brazilian real or the Argentinean peso or the Chinese yuan or the Indian OP, which is also important for us. Moving on to the next page, on Page 3, we have the split of our sales, 2017 sales. Suspensions reached 36% of total sales, €607,000,000 Filtration has €56,000,000 34 percent of sales and NN Cooling 504,000,000 at 30% of total Surgetti. I would like now to go to Page 4 concerning the evolution of the sales by customer to give you some more detailed information on the variations. As far as forward is concerned, if we look at constant exchange rates, these are numbers at constant percent range, 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 have announced we started discussion for Cafe Inter Garcione 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 Q1 and the reduction will be a bit more important in the Q2 for the activities we serve 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 Volkswagen Audi, it is Audi. You see that for the first time, Audi is crossing the 5% line. So this is consistent with our orientation for SoGESI to provide higher technology and to grow with premium car manufacturers in the future. Moving on to Page 5, coming back to the growth by business unit. If we look at Air and Cooling, Air and Cooling is impacted by the foreign exchange. You see that the reported change is a reduction of minus 7.9%. Actually, at constant exchange rate, the variation is minus 3.1%. And this is linked at concentration rates to 2 factors, which I've already mentioned. 1 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 and Cooling, the sales of Air and Cooling are in line with the market. So there is no worry as far as Air and Cooling activity. What we see in the minus 3.1%, all in all, the plus and the minus is only linked with the tooling phasing between Q1 'seventeen and Q1 'eighteen. The filtration activity is showing a reported decline of minus 3.7 percent at constant exchange rate 3.3%, which is outperforming the world market significantly. And 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 Kjell Chrysler, where we supply the stabilizer bars, which is one of the growth factors for the suspension as this quarter, again, we have been growing with set Chrysler in suspensions, but as well with other customers from the suspensions. Moving on to the sales by geography. On Page 6 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 minus 1.1%. And at constant exchange rate, we were at 0.1%, so almost flat, so comparable with the market. Due to the exchange rate, of course, the weight of Europe is increasing now to up to 63.7%. North America, In North America, we report a decline of minus 10.5%. This is mostly due to exchange rate. At constant exchange rate, we are at small growth of 0.4% versus a market North America, which was at minus 2.7%. And within this minus 2.7%, the U. S. And Canada, which are our main markets, we're actually declining more than that. So we are outperforming the market in North America. In South America, reported change, minus 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 it's picking up in Argentina as we have crossed the 25% inflation rate in Argentina last month. So this is to be taken into account in order to evaluate our performance. And in Asia, we report 0.4% growth. But at constant exchange rate, we are growing 8.5%, which is a significant outperformance compared with the market, which declined minus 0.9%, mainly due to China, which where the production of cars reduced in the Q1 of 2018 versus the Q1 of last year. So in total, for a market which has been declining worldwide at minus 0.7%, close to 1% decline, At constant exchange rates, we outperformed the market by more than 3 points as we show a growth of 2.8% at constant exchange rate. I would like now to hand over to Jan Albrun to comment on the profitability evolution. Thank you, Laurent. So on top of the strong euro, which Laurent fairly commented, the 2 other significant impacts are IFRS 15 and the evolution of SKILTRIZE, IFRS 15. So the results we present to Page 7. For 2017, that we restated. Originally, we had an EBITDA at 10.3%, now up by 42 points. You can see that despite an adverse steel price impact of €3,000,000 over the quarter, EBITDA is still improving by 0.3. 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. So point 3 point of improvement Q1 'seventeen to Q1 'eighteen. 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 horizon 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 €1,000,000 write off of deferred tax assets. It's nonrecurring, and this explains a significant part of the tax reduction between Q1 'seventeen and Q1 'eighteen. As a result of which, net income increases from 2.4% in Q1 'seventeen to 2.9% percent in 2018. If you move on to more detailed P and L on Slide 8. So Laurent mentioned the top line goes down by 2.7% as historical, plus 2.8 percent at constant. The EBITDA going up by 0.3 points, same for the EBIT. The financial expense is slightly higher, but it's more an accounting matter. It's more an adverse fair value impact between 'seventeen 'eighteen. It has no cash impact for the time being. And as I mentioned before, a significant improvement on taxes, which go down from €7,400,000 in Q1 'seventeen to €5,800,000 in 'eighteen. If we move to Slide 9, which is the free cash flow. The operating cash flow is still increasing from €15,500,000 last year to €17,000,000 despite more CapEx. If you remember what we mentioned in earlier calls, last year, we spent on a full year basis €68,000,000 of CapEx. This year, we are shooting for something in the region of 80. And so this explains the increase in CapEx on Q1, which increased from €8,700,000 in Q1 of last year to €10,600,000 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 nonordinary items. Interest adverse impact, but it's a noncash impact actually. It's a variation of the net financial position due to the update of the fair value of some derivatives. And so as a result of all this, free cash flow increases from €6,900,000 in Q1 2017 to €9,300,000 in Q1 of 2018, representing 2.2% of total sales. As a result of which, our net financial position is improving by €9,800,000 versus December and year on year by €37,100,000 Laurent, do you want to take the Sure. On the profitability improvement plan? Yes. Thank you, Ian. So 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 five performance drivers you have on Page 10. If we go to Page 11, I'm pleased to confirm that the suspension 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. And 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. Moving on to the operational performance on Page 12. I must say that I'm relatively satisfied with the operational indicators. 1st 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 rates, less customer line return, less supplier return, less scrap, same on the delivery, less misdeliveries to our customers from our suppliers. One thing which is a bit seasonal, we had very cold winter. We had absenteeism higher in some of our plants. We are working on correcting this quickly. And on productivity, it 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 have Chrysler. We have some more we have 2 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 Q3 while installing the first line, training the personnel and getting ready for a start in the Q3. On Page 14, we've highlighted R and D. We have not mentioned that, but in the Q1, we've increased our R and D expenses, which is in line with technology presentation, which I made last year in November, indicating that Surjeet is going for higher technology, for more premium cars and car manufacturers. I'm glad to say that in the 2017 scoreboard, which was done by published by Sol Leventi Quattrore. Sol Leventi is number 14 as far as total R and D investment in Italy, within the top 300 in Europe and within the top 1500 in the world, Which makes the link with the next page, Page 15. We are very pleased with the success we had with Renault Nissan for completely new technology, which I had announced the potential business in November, which is battery pack cooling manifold for battery electric vehicle, which is basically a set of plastic parts, which are distributing the coolants to have a high performance cooling of the battery pack. Start of production is 2021. We are in OEM business, so we know something for the next quarter. But this is very important in positioning us as a key player for the battery thermal management as this market is fast growing and accelerating and all the manufacturers are working on the electrification. And one of the key factor of the electrification is not just the cooling itself, it's the packaging of the cooling that means being able to have an efficient cooling solution 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. So that shows also the quality of the cooperation we have with vehicle manufacturers, research and development as this is not just a standard request for course for parts which has been existing for many years. It is really starts from the innovations proposed by Solelysee to the car manufacturer. And it shows also that Sogeti is seen by Renault Nissan, which the alliance Renault Nissan need to be chief one of the leaders in the battery electric vehicle worldwide, is a trusted partner from the concept phase to the mass production. So 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 Q1 of 2018, the group confirms the expectation to moderately outperform the market at constant exchange rate and to achieve higher results. Couple of comments on this statement. On the views on the market today, some people are more optimistic. 1 of the influential provider of data has come up with 1 point more for the market this year. This is not the hypothesis on which Surgic is working. We are working on the somewhat more conservative hypothesis for the market, which enables us to keep a good control on our costs as you have seen in the Q1. And you've seen that we have more than moderately outperformed the market in the Q1. The outlook for the Q2 is fine. What we are carefully looking at is what will happen in the 3rd and the 4th quarter. As you know, there is a change in the rules for 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. This was what we wanted to tell you, and we'd be happy to take questions for now. Excuse me. This is Victoria with Goldman Sachs' operator. We will now begin the question and answer The first question is from Marcelo De Ambroggi with EBITDA. Please go ahead. Thank you. Good morning, everybody. Two questions on raw materials and free cash flow. You last year, you suffered €13,000,000 of negative raw material impact, mainly from steel. You are indicating another additional €3,000,000 in Q1. So my question is the €60,000,000 combined effect could be, I don't know at what extent, recovered during the rest of the year. So what is your view on this issue, first? 2nd, on the free cash flow, you are generating €9,000,000 in 1 quarter. What is the guidance for the full year? And just an update on the factoring level in Q1. Thank you, Martineau. Laurence speaking. On the raw materials, the €13,000,000 as you recall, were mostly on the second half of the year. We had very limited impact of the steel. So €13,000,000 was the impact of the on 2 quarters. So if we consider that more or less even €6,500,000 per quarter, you see that this quarter the impact was less, significantly less within the quarter. Still, as we speak, is still increasing. Our target is to recover most of this within this year. So we are, I would say, raising the level of our discussion with some manufacturers. We have 3 categories of car manufacturers. 1 category of car manufacturers has recognized the full impact of steel. Then we have 1 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 product Surgic is using, we had contracts with indexes. But these contracts did not provide for what was above the index. And finally, we have a couple of customers where at this stage, we still have not been able to recover the steel impact at all. So 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. Can we say much more than 50% if what you expect to recover? Yes, more than 50%. Okay. If we go to free cash flow and then I will let Jan add to this as much as he did, 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. So this is a major factor. If we take out this element, which is a 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 Jan, you want to on the factoring? On factoring, so end of Q1 2018 factoring stood at €112,000,000 It was at €107,700,000 last year. Okay. And just on free cash flow, you are guiding for at least €32,000,000 as it was last year, more or less? More or less. So before any investment in our India company, We are choosing for a similar one. Okay. Very 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? Well, it's difficult to elaborate on that because it's beyond Surgessi'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 real obligation of the cars according to the new cycles. And as the customers 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. And 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 doesn't change the underlying demand. So it's more of a phasing effect. If for some reasons the production is either increasing at some manufacturers or decreasing in some specific models, this will recover over time. So I don't expect this to be, I would say, substantial as far as the level of it doesn't change the development. I don't know if I'm clear in my answer, but No, no, very clear. Thank you. Next question is from Monica Bosio with Banca INI INTELS OF SAULO. Please go ahead. Good morning, everyone. I'm referring to your cash assistance 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%. And you are telling us that you are working for a more conservative sense. Just to check, are you working for growth below 1% of the market? And you are still convinced that you are going to outperform this growth. So just your personal view on what the market on the performance of the overall market for year end. My view, my belief is that it will be definitely below 1%. And 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 Q1 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. And 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% 1% as far as growth at world level. And therefore, it's always better to work out on the lower scenario rather than shooting for the higher points. I mean, some of our peers are communicating on a market growing 2%. At Surgesti, 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. But there is still the unknown still of how much and when we will 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 Q2. And then for the rest of the year, it will depend on how fast we settle on the steel model. On the tax rate, Jan? 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. Your next question is from Lelo De La Razone with Intermulce. 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 Air Cooling division. I was wondering if you were expecting these to come at a different with a different timing, meaning a different split between quarters. And so it's just a temporary switching effect that will actually be beneficial for the coming quarters. And then going instead on the margin, I see you mentioned $3,000,000 of steel impact during this quarter. If I check at the new updated gross margin definition, the effect there should be 70 basis points, while it's lower. So I was wondering there what you are doing in order to reduce this effect, the impact that we saw gross margin level. And going to set down, you mentioned lower restructuring costs and neutral non ordinary write off. I can see from the restructuring, which is aligned in your P and L. I was wondering if going down to the other neutral cost, this actually gave you some 70 bps 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 1 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 Airline Cooling. Airline Cooling at face value is declining. So of course, it is for these questions. And the answer is this is truly. As far as the next quarters, the air and cooling activities will have a slowdown due to product which is end of life in New Mexico, But this is not a big product for the whole of Airline Cooling. So we expect Airline 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. So it's difficult to give you a firm information quarter by quarter on this, knowing that it's also depending on the timing of customers' programs. Sometimes they want to accelerate, sometimes they want to slow down. So we have no direct control on the timing of the drilling. As far as the margin, we are tracking in very detail, of course, still 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. So yes, still it's not the whole story, but 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 and L, maybe Jan, if you have some comments. So we did set up a control of fixed costs. And nonetheless, as Laurent pointed out, we increased R and D expense by 9.6% at constant rate. We are still investing. I think it shows through our cash flow. It shows through our P and L, R and D expense. So despite the fact that we want to increase our profitability, we are investing for the future. What about restructuring and other non ordinary costs? So especially on the restructuring because the other one probably are tough to forecast. But on restructuring, these new you posted 1.1 compared to 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 next year. We are shooting for something in the region of €10,000,000 restructuring on a full year basis. I believe it will be a maximum this year. So 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. I got two questions. 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 Q1 this year has been around 17.8%. And second question is your calculation 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. 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 variable cost margin, whether this is indirect cost on sales, has had 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. So this is the reason why we are not communicating on this. What I can tell you, as Jan said, is as far as indirect costs are concerned, other than the increase in R and D, which I 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 indirect people, but we have no sales. So that impacts our indirect costs. Other than this, we continue our efforts to rationalize our indirect costs. On cooling, it's a quite complex question. If you've had the chance to look at the exhibit we've put in the presentation, you will see that tooling has so it's Page 20 of the presentation. Tooling has a significant P and 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 4 years. So 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 fix the set and therefore to D and A. So we do not anticipate such big horizons 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. The next question is from Niccolo Baldelli with BNP Paribas. Please go ahead. Yes, good morning to everybody and thanks for taking my question. Just a follow-up on these IFRS 15 and 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 fifteen, we corrected another thing. That's to say, before, when we did tooling for ourselves, we capitalized it. And when we did a specific tooling for a client, it went through P and L via cost of sales. So 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. And so we now capitalize the time and money we spent in order to generate production on behalf of our clients. And we had to make a position on the period over which we split that revenue. And we have decided to take to adopt a position which is similar to the one we had on R and D more generally, let's just say, to spread it over a period of 4 years, which is not the exact time of the program. Usually, it lasts slightly longer. But that's to say, our accounting methodologies have been aligned at 48 months after start of production. Okay. So there would be D and A in the coming 4 years related to this? Sure. What went through contribution margin via Castel State previously will now go through DNA. Okay, perfect. Thank you very much. Michele, what is important to understand is that this has no cash impact, as to say. It's an accounting matter. We are going to keep on pressing to cash in as soon as possible. The next question is from Gabriele Gamarova with Banca Akro. Please go ahead. Yes, good morning and thanks for taking my questions. The first one is on product. You mentioned this jump in Audi's sales. So I was wondering if you can give me some more details on this, what kind of product it is and what are the perspectives. And 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. So 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. And another question on the Ramon Nissan contract. I'm not asking you the size of the contract because I guess it's impossible to assess at this moment. But I would like to know if the value per unit in this regarding this contract is similar or higher visavis the usual air intake manifolds you supply nowadays? Thanks. Thank you very much. So concerning the growth with Audi, there are 2 effects. 1 is in two main effects. 1 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 Audi Group, but due to the size of the engine, it's mostly Audi, which is using those engines. And it's actually ramping up The new Audi, which was presented in Geneva and which will be launched in September, will be mostly using these new engines. So we see an increase. It's often the case with the new engines. The ramp up of the engines much lower than the ramp ups of the cars. So it takes time for the volumes to come up. The other factor with Audi is growth in the air and cooling activities with Audi. So these are the 2 main factors for the growth with Audi. Concerning Mexico, we are currently supplying Fiat Chrysler. One of the important start this year for the bars in Mexico will be the making mostly the X Series there. BMW this year is opening also a plant in Mexico. And I was in BMW purchasing for chassis this week. And they confirmed to us that they're very happy with the location of Surje C in Itaures as they consider this plant to be strategically located between their US plant and their Mexican plants, notwithstanding the discussions on North American Free Trade Agreement. So we confirm that is a good location. And they have made several audits of our readiness to start with the new production in Mexico, and they are quite happy with that. So if we 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 20s of battery electric vehicles in 2021 because or 2022, because 2021 is the start of production. There is a considerable spread of forecast on the volume. As far as the value, to answer specifically your question, the unit value is higher for this coolant battery coolant manifold than an intake manifold. It is a more complex part, and therefore, it is more expensive. It's also the fact that Inspire incorporates a fair amount of research and development, much more than I would say, to pay this manifold, we should be doing for years. So yes, it is higher value. Okay. And 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 €10,000,000 of restructuring. I was wondering what could be the other non operating expenses. Well, the other big one we are faced with and which are difficult to predict are exchange differences. As Laurent mentioned, starting with on this presentation, we are facing significant exchange impacts in 2018, and they have an impact on our P and L. So 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. But reversing 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 Ronn Kornan with Value Holdings. Please go ahead. Yes. Good morning from my side. Only one question is left. Sorry coming back to the IFRS 15 issue. There's a question on your midterm guidance as you're predicting 30% EBITDA, I guess this new guidance for the mid term would be roughly 15% or slightly above. This is a newer IFRS 15 rules, isn't it? It is a good question. So we do not think we have achieved 2 of the 3 points of the ForeSee improvement. So our new targets will be roughly 2 points higher than it used to be as you correctly guessed. Okay. Very thanks. Mr. Hebenstein, gentlemen, there are no more questions registered at this time. Okay. I would like to thank all participants to this conference call. And we look forward to our next conference call for the Q2 results. Thank you very much for your participation.