Good morning. This is the course call conference operator. Welcome, and thank you for joining the Sogefi Full Year 2024 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. Olivier Proust, Chief Financial Officer of Sogefi. Please go ahead, sir.
Hi, everybody, and thanks a lot for attending this call. I guess that you already had our presentation and our press release, so I will just make a quick introduction with regards to 2024 and our guidance for 2025, and then we will jump immediately to the Q&A. Regarding 2024, I would like to highlight three main events that you already know, but which are quite important for us. First of all, as you all know, in 2024, we had the disposal of the Filtration Business Unit. On May 31, 2024, Sogefi sold its Filtration Business Unit for an enterprise value of EUR 374 million and a cash consideration of EUR 327 million. The operation generated substantial value compared to the market value.
It reduced the poverty component in the group's portfolio, making Sogefi less exposed to risks related to a transition to immobility and allowed for a reduction in the group's complexity and diversification. The group now has a financial position that allows for greater investments in the EV market already identified. We can talk about later. On their way, considering that part of the financial resources from the sales were not distributed and the group's net debt at the end of 2024 is only EUR 55 million, including IFRS 16 impact. The second main event is clearly the Air and Cooling EV transition. The Air and Cooling Business Unit confirmed in 2024 its ability to serve the EV market, being awarded for a new EV platform, recently Ford C1 as an example. In recent years, Air and Cooling has developed products with innovative technologies for purely electric vehicles.
Today, the main challenge is to support the growth through the development of a business portfolio for electric vehicles, specifically in Europe, and we will become a significant player in that segment. Third, and very important also in our 2024 figures, the Suspension Business Unit recovered. The Suspension Business Unit has been impacted in recent years by the reduction in car production in Europe and the sharp increase in steel and energy costs. This business unit records negative results in the 2022 period, and since 2023, operational results have improved thanks to measures aimed at restoring product margin and reducing fixed costs, including concentration and production capacity. In 2024, despite the decline in volume, profitability improved, confirming the channel and trajectory that must continue in 2025, 2026 to achieve sustainable profitability. That's the three main points for 2024.
If we now talk about 2024 key figures, you've seen them in our press release and in our presentation. Sogefi sales growth, sorry, Sogefi sales show a decline of 1.7% in revenue compared to 2024. It's a 4.2% decline, excluding exchange rates and inflation effect in Argentina. Sogefi is slightly worse than the market due to its exposure to Europe, and more specifically, its exposure to one major European car maker. You will all read between the lines. Nevertheless, the operational results improved, EBITDA amounting to EUR 125 million, increased by 16% compared to 2023, with an EBITDA margin of 12.3%. EBIT amounting to EUR 46 million, roughly, grew compared to 2024, and the EBIT margin rose to 4.5% of revenue compared to 2.5% in 2023. We doubled our ratio. Net profit from continuing operation was EUR 18 million compared to EUR 6.4 million in 2023, so we tripled.
The free cash flow was positive at EUR 30.4 million compared to a cash absorption of EUR 7.2 million in 2023. I have to precise there that we benefited in 2024 from non-recurring positive flows for roughly EUR 13 million in 2024, and let's say that the normalized cash flow generation is more around EUR 15 million than EUR 30 million. The divested activity recorded a net result of EUR 126 million and a free cash flow of EUR 318 million. Overall, in 2024, the group reported a net profit of EUR 141 million and a free cash flow of EUR 348 million. Net debt at the end of December 2024 was EUR 55 million, EUR 9.5 million if we exclude the IFRS 16 impact, compared to a net debt of EUR 266 million at the end of December 2023 and after paying a dividend of EUR 133 million. 2025 will not be a surprise.
The visibility on the performance of the automotive market in the coming months is greatly penalized by the persistence of military conflicts, possible trade wars, tariffs coming from the U.S., and uncertainties about the evolution and impact of green deal rules in Europe. In this environment, I would say that Sogefi has been able in the past to demonstrate its ability to face crises and challenges. Sogefi team will focus on confirming the turnaround trajectory of suspensions and confirming the transition from ICE to EV for air and cooling with new products, which will start in production in 2025, but mainly in 2026 and after. Overall, managing trade-off between growth, cash generation, and investment for the structuring will be our main focus.
Considering the weight of Europe in our business portfolio, Sogefi expects a decline in its revenue in 2025, slightly higher than the market, more pronounced in the first months. Despite this forecast, we are always present compared to our peers and compared to IHS. We do not forecast an EBIT significantly different than 2024, excluding non-recurring charges and, of course, new event circumstances that can negatively impact the automotive market. That is our main message. We also propose a dividend of 15 shares per action to be paid in 2025. That is it on my side. Now, unless you want me to go through the detailed presentation, we can immediately jump to the Q&A.
Thank you, sir. This is the course call 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 phone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. The first question is from Monica Bosio of Intesa Sanpaolo.
Good morning, everyone, and thanks for taking my question. I have a few. The first is on the Suspension division. If I'm not wrong, in the fourth quarter of 2024, the Suspension business declined both sequentially and year on year. Can you give us more color on this side? Maybe it's because of Mexico, I don't know. What kind of improvement do you expect in Suspension margin for this year? This is my first question. The second one is on the revenues from China. Can you give us an indication of the weight of client Chinese on the revenues generated in China? The third one is still on the Suspension for the EV duty. The segment was finalized by the termination of contracts. What should we expect from now on in the segment, and what is the weight of the EV duty segment within the Suspension business?
Thank you.
Hi, Monica. About the margin of suspension, the margin of Q3 in suspension—sorry, the margin of Q4 2023 for suspension was highly impacted by a positive one-off, especially lump sum sales. The comparison Q4 2023, Q4 2024 is a bit misleading. Let's say that the margin of Q4 2024 is more consistent than the previous one, and we are still working on this margin to improve it via several industrial operations. Let's say that you should take the margin of suspension for the full year as a basis of our forecasted improvement, as a basis for the improvement that we will implement. With regards to EV duty, we had for sure some contract ending, but the main impact for 2024 is a drastic slowdown of the market.
Okay. Just to follow up on the margins for the Suspension Business Unit. 2024 margins for EBITDA ex no recovery were 9.8%. You're targeting an improvement, but is it more or less 1% or much lower than this indication? Because I remember that you guided in the past for a 1% improvement year on year. Maybe if you can give us some color on the Chinese clients within the revenues in China.
Yes, please.
Excuse me, we reconnected. Mr. Proust.
Hello? Yes.
Hello?
Sorry. Yes, sorry. I have been disconnected. Yes, let's go back to suspension. I don't know where I was interrupted, so I will go back a little bit in my previous explanation. In terms of EBITDA for suspension, we can expect an improvement by 1-2 points for 2025. I don't know if you heard me about the Heavy Duty segment, I was saying that we have a huge slowdown of the market in Europe, and we expect something going back to normal in 2025, a stabilization or a little growth. We have a huge industrial plan in Heavy Duty for restoring the margin in such an environment, and I think that we can say that we demonstrated in the past our ability for this kind of turnaround, so we are expecting an improvement on this.
With regards to the Chinese customer, Chinese suspension customers are around 30%. It will grow, that's for sure. Let's say that in terms of size of the Chinese customer, I would say, yes, 100 and yeah, I will confirm 30%, 30% of total sales. Sorry for the disconnection. It breaks my ear.
No, Olivier, it's all right. Thank you. Thank you. Now it's all clear. Thank you very much.
You're welcome, Monica.
The next question is from Martino de Ambrogio of Equita.
Good morning, everybody. The first question is on the duties. If you can summarize what is your direct exposure, if any, or significant, and eventually, if you have an idea of what could be the indirect exposure based on the assumption that we can do today because it's still unclear what will be the final outcome. The second is on the free cash flow, EUR 15 million adjusted in 2024. What should we expect in 2025, and based on what assumption in terms of CapEx and working capital?
I will first answer to the cash flow because it's the easy question. Our exposure, let's say that we are purchasing roughly EUR 80 million from the U.S. That's for what we purchase from the U.S. What we sell to the U.S., that's the business we have in Mexico and Canada, it's for the U.S. We don't know what will happen. It's extremely difficult to forecast the consequences of all the message we are receiving. I would say that anyhow, our customers need our product. They cannot change for such products. They cannot change supplier from one day to another. It's a one to two-year development if you want to move one of our productions to someone else. Everybody is a little bit stuck in this context. What I can say is that for our new products, our new portfolio, we will need to invest in NAFTA.
We have a bit of time in front of us to decide where to invest, on which side of the border. Free cash flow is the easy question. We will consider EUR 15 million as a target for 2025. As I said, despite a slight reduction in sales, we are expecting to maintain our profitability and therefore our cash flow.
Okay. Under which CapEx and working capital assumption, very roughly?
We do not expect a huge variation in our working cap. We already had at the end of 2024 the impact of the decrease of the sales. In terms of CapEx, the trend will be similar to 2024. It is a matter of reallocation from one geographical area to the other. Let's say roughly stable.
Yeah. Thank you. Very last question on the suspensions. Just to double-check, you mentioned the profitability will improve by 1 or 2 percentage points in 2025. Is it correct?
Yes. Yes, correct.
Okay. On the other division, so the Air and Cooling, should be stable or probably slightly lower? I don't know.
Roughly stable. Roughly stable. We have to manage higher costs for development. Let's say that, yeah, roughly stable or a little bit lower, yeah.
Okay. The overall slight improvement.
Improvement.
Just a little bit for the full year could be.
Exactly.
50 or more basis points on a full-year basis.
Our target is to maintain our EBIT with a slight decrease in sales.
Okay. If you increase the suspensions and you maintain air cooling, probably there is an upgrade in terms of?
Yes. By definition, if we reduce the sales, but we are able to maintain the EBIT, we have, at the end of the day, a slight improvement of our global margin. Yes.
Okay. Thank you.
As a reminder, if you wish to register for a question, please press star and one on your touch-tone telephone. For any further questions, please press star and one on your telephone. Mr. Proust, at this time, sir, there are no questions registered. Excuse me. We do have a follow-up question from Monica Bosio of Intesa Sanpaolo.
Yes. Sorry, Olivier.
Yes, Monica.
Just a quick follow-up, quick questions on the saturation rate and more in particular on the saturation rate of the plants. As for the Romanian plants, what are your expectations for the current year and the results the Romanian plants achieved in 2024? If you can give me an expectation.
In terms of situation, we still have room for new products and new developments, so no real capacity CapEx foreseen. Suspension really is part of the improvement plan of suspension. I will not enter into details, but we have room to improve there. We made some big improvements in the recent months and recent years, and we will continue.
Okay. Got it. Thanks, Olivier.
You're welcome.
Mr. Proust, at this time, there are no questions registered, sir.
Thank you very much. Thanks to all.