Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Sogefi Q1 2026 Results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there'll 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. Michele Cavigioli, Head of Finance. Please go ahead, sir.
Good morning, everybody. Thank you for joining. I will quickly go through the presentation we have posted on the website, and then I will open for questions. We are on page three, a quick overview, and then we'll comment more in depth on the usual items. Q1 was overall positive for Sogefi. We had the sales growing slightly at constant exchange rate, +0.7%, down -2.3% with the effect of currencies as expected. EBITDA and EBIT were slightly growing in absolute terms and therefore also in percentage. Thanks to the containment of fixed costs, thanks to a growing contribution margin and thanks to the adjusted level to lower non-recurring items. EBITDA was EUR 36 million, EBIT adjusted EUR 30.4 million.
Net income was also growing, EUR 11.7 million versus EUR 9.8 million. Free cash flow without IFRS 16 positive. We'll comment a bit more in detail here about the difference versus 2025, and also the difference with the IFRS 16 free cash flow, which is different due to IFRS 16 items that I will explain later. Net financial position without IFRS 16, EUR 4.8 million debt, so almost zero debt, and EUR 48.6 million, including the IFRS 16. The other remarkable piece of news in Q1 was the sale of the Precision Springs business unit, which happened as of the approval of the Q1 result last Friday. Precision Springs is a small unit within the Suspensions division.
It produces small springs for automotive, but also for other industries such as aerospace, construction. We are Tier 2 here, so we don't sell to OEMs, but we rather sell to Tier 1 producers of components. This unit has no synergies with the rest of the Suspensions business unit, as the customers are completely different, suppliers are different, and the production processes are also very separated from the rest of the Suspensions unit. Despite its small size, we're talking about EUR 28 million revenues in 2025. It's a rather complex organization, spread across three plants and with a lot of different production processes for different reference of products, which require a certain amount of management attention, while providing little impact on the overall group numbers.
Suspensions was always considered non-core. Since we recently received an offer by a company called Associated Spring, owned by the Falecchi Group, a competitor of our Precision Springs business unit, we decided to accept such offer, and we have signed a put option agreement, as we did for CIGRE, you know, in France. You first need to go through the consultation of unions, and you cannot sign a binding agreement until then. That's why we sign put option that we can exercise after the consultation process is over. We expect to close this transaction in June or July, probably, this year. So the...
If you would like to have an idea of the run rate of suspension without Precision Springs, you would have to subtract the EUR 25.8 million revenues and almost EUR 4 million EBITDA. I would rather now switch to page four and comment on sales. As said, sales are down 0.7% at constant exchange rate. If we look at the different geographies, we see that in Europe is +3.5% with a market production which has been shrinking by -1.2%. North America, we were positive +1% and market -2%. South America, the other way around, we were -1.9%, market was up 0.4%. In China, in line with market at -almost 10%. That's expected for Chinese one.
India very positive with a very buoyant market at +10%. If we switch to page five, we have the performance by business unit. Here again, like last time we had exchange rate performance +0.7%. Air & Cooling contributed with +3%, and Suspensions was -0.8%. Suspensions was stable in Europe, declining in South America, in China, in India, as we said, very positive. Air & Cooling was better than market, thanks mainly to Europe, where new projects were finally implemented and ramping up. We have now +10% in a shrinking market. In line with market in China and beat the market in North America. On page six, our customers.
No major change, just to note the very positive performance of Stellantis, which is our main customer, and likely decreasing German OEMs, GM, FIAT. On page seven, we have the usual page of EBIT performance. If we start from EBIT adjusted 2025, EUR 17.1 million, 7.6% of sales. In 2025, we have positive contribution from volume and contribution margin in percent. We have slightly negative contributions from net exposure, from restructuring, from D&A and from exchange rate. We get to higher EBIT in absolute value and in percent EUR 17 million and 6.9%. As I said before, the non-recurring items were negligible this quarter, whereas we had EUR 3 million last year. On page eight, you see the P&L.
Contribution margin up from 29.6% to 30.4%. We were implementing our budget actions in managing pricing and purchasing, and that was done effectively. Fixed cost stable, slightly down in absolute value. EBITDA adjusted growing in percent and value. Non-recurring items we commented, nothing to highlight in 2026. EBITDA, therefore, including non-recurring, is 36%, EUR 33.8 million. D&A is likely growing due to the new project, especially in Air & Cooling. You see EBIT and EBIT adjusted. We adjusted for the integration cost growing. Nothing major change in financial result and income tax. We have net income of operating activities EUR 11 million, 4.5%.
I can now comment page nine, free cash flow. We have a better free cash flow this year, which is without IFRS 16. We have EUR 14.3 million versus EUR 8.7 million. We have a higher contribution by operations. We have slightly worse working capital, also because we used less factoring than last year. Lower CapEx compared to Q1, although this is just a temporary effect, and we will catch up with our CapEx plan in Q2, Q3. As I said, if you look at the free cash flow with IFRS 16, there is a substantial, quite relevant, negative item related to the renewal of a contract, of a leasing contract in Canada.
That free cash flow including IFRS 16 is positive only EUR 7.7 million instead of EUR 14.3 million here. If we go to page ten, Suspensions. Suspensions, we already commented on the sale. It was about maybe adjusted. We had growth in absolute number and in margin, thanks to the contribution margin, which is up 1.5%, thanks, as I said, to active management of pricing actions and purchase. Fixed cost decreasing by 1%, and this all allows to have a positive performance at Suspensions Europe. Air & Cooling next page 11 . We have EBITDA here, slightly down 2% in absolute value, mainly due to a different product mix in NAFTA compared to last year.
Contribution margin was on the other hand a bit better, but those two projects have also a higher incidence in terms of fixed cost and monetization ratio. That's why you see the decline in EBITDA. Page 12 is just a reminder of our financial situation, which is very sound and with long-dated securities from the issue here. In terms of guidance, we can skip to page 17. We confirm that the visibility, as you might imagine, has been decreased after the start of the war. Nevertheless, Q1 was solid, as you've seen. In Q2, we don't expect major changes to happen for the time being. We see stable orders keeping up for the time being.
The impact of raw materials will probably be limited in Q2 because of the structure of our contracts. We have fixed prices in most raw material contracts until Q2. We have seen that energy increases in some locations, especially in Italy, a little bit in Germany, but in other countries, there's been so far a very limited impact in terms of electricity costs due to the structure of the power supply in those countries such as France and Spain. Yes, there will be a lot of volatility, but probably if there will be more remarkable effect on the sector, on the margins, that will probably be shifted to Q3 and beyond.
It's very, of course, difficult as of the time being to assess what the impact will be because the situation is changing rapidly. We don't know what the petrol prices will be at the end of Q2 and Q3, so very little visibility. So far we can only confirm the guidance that we have given for 2026 with low- to mid-single-digit revenue decline and adjusted EBIT margin substantially lower. I will stop here and open for questions.
Thank you, sir. This is the Chorus 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 touchtone telephone. To remove your question, please press star and two. Please pick up the receiver when asking questions. The first question comes from Monica Bosio of Intesa Sanpaolo.
Good morning, everyone, and thanks for taking my questions. I have four. The first is on the increase of raw material cost. Can you please tell us the percentage of the cost of plastics on your revenues, and the percentage of the energy costs? The second question is still related to the raw materials. I was wondering how much of the cost increase is the company able to pass through customers through the negotiations with customers? How long does this take? I know that the first half maybe will not be impacted, but going forward, I think that the company, as the rest of the suppliers, will have to renegotiate the cost increase with the final customers.
Another question is, if in the light of the cost of the increase in the cost of plastics, what are your expectations in terms of the EBITDA margin by year-end for the air and cooling? Conversely, for suspension, I've seen that the group marked a significant improvement in profitability in the first quarter. I'm wondering what are your expectation for suspensions by year-end, let's take apart the disposal of the springs. Thank you.
Okay. Raw material pass-through, as you know, we have a very scattered situation across many customers. We have some customers with the indexation on raw materials.
The indexation in those cases is not the perfect indexation in the sense that we are linked to the base raw materials, so metal scrap or metal wire, metal rod, flat products. This is the basic steel products that come out of the steel plant. In fact, we don't buy those products. We buy already semi-finished product. We buy tubes, we buy bars, we buy wire to make coils. In between those indexes and us, there is a sub-supplier which works for us, and it provides us what we need.
Those suppliers, we also have in some cases index contracts on raw material, but then they usually start asking for other inflation components such as energy, typically, so that we maybe if scrap goes up by 5%, then they might have 7%-8% due to electricity cost increase. The raw material components that we can transfer easily to those customers where we have an index contract. It's a one-to-one transfer. The electricity component is normally subject to negotiation both ends, on the supplier end and on customer end.
The adjustment process takes a few months, but we have made some experience now in 2022, especially, so we know that we need to move early and we also need how to negotiate in the individual cases based on the contract, so that we have gained some experience, and we hope to be quicker and more effective than in 2022. 2022 quite some time to readjust the profitability. In the end, usually we go back to a similar level of profitability. That's the history we have. Part of the orders, or part of the contract is a hard fight, so it's not even, but we know how to do it, so we'll move accordingly. Cost of plastics is,
Plastic is around, considering a 60% of average raw material on sales, the plastic is around 25% on sales.
Only for.
No, this is everything.
Sorry.
Uh-
60% of cost of sales and plastic at 25% cost of sales. Is it correct?
Yes. Just raw material including.
Okay.
With that, back to the margins, so far we don't have reasons to assume that we don't reach the budget. The guidance we gave at the end of 2025 of maintaining EBITDA adjusted figures for both business units should be retained, with Suspensions a bit better, and then Air & Cooling temporarily down because due to mix effect that we expect to recover later on. Of course, this is based on a situation which is, for the time being, still stable, but that could be unstable or most probably would be unstable over the next few quarters. We don't have any indication of how big shocks could be and how long it would take to recover.
Okay. Very clear. Thank you. Thank you very much.
The next question is from Martino De Ambroggi of Equita.
Thank you. Good morning, everybody. On Precision Springs, could you share with us what was the performance in Q1? Well, I suppose it's a small portion of your business, but we assume stability for this year, maybe growth, just to have an idea of what could be your assumption in the full year guidance contribution. In terms of volume, so strictly referring to volumes in Europe and North America, do you expect to outperform overall this year based on the new standard imports indication for volumes? Third is on the usual update on the Romanian plant, just to understand how the profitability is progressing in this big plant. Thank you.
On Precision Springs, we published the figures for 2025, reported EUR 4 million EBITDA. Reported if we go to adjust it's a bit better. Slightly above EUR 4 million EBITDA, and that's also something that we expect to be stable with this. This business is not volatile as automotive. It has been performing quite stable with few percentage point growth, not major swings in the annual revenues. That is the number that I would take for adjusting the group figures. A bit more than EUR 4 million EBITDA and EBIT about EUR 3 million. In North America and Europe, we outperformed in Q1.
In the mix of sales for [inaudible] in 2026. We still think that we can do a bit better than market here. But not probably for the whole year, same pace that we have seen here. Probably [inaudible] not a better than the market due to some new products that should kick in later. Europe was a bit of a surprise how much we overperformed, so maybe not this level over the course of the next quarters. Your last question was?
On the Romanian plant.
The Romanian plant is. We gave an update after the year call with the CEO of the Suspensions business u nit. The plant is now progressively being loaded.
It's now working with the set up processes that are now working. It's going to be the main plant for taking European programs going forward. We are now transferring part of the production. It's still not a full regime, so we still have spare capacity, and the economic performance is not yet at where we want it to be. That will happen maybe in a couple of years more when it will be fully loaded and working at full efficiency.
Thank you, Michele.
As a reminder if you wish to register for a question please press star and one on your touchstone telephone. For any further question please press star and one on your telephone. We have a follow-up question, sir, from Monica Bosio of Intesa Sanpaolo.
Yes, sorry to bother. Just a final question on the Suspensions for the Heavy Duty. I know that the company could be willing to dispose it. As it is non-core. I was just wondering what kind of margins should we figure out by year-end? What could be a sustainable margin for these operations, if you can help us? Thank you.
Well, the company Heavy Duty is separated from Passenger Cars. It's, I wouldn't call it non-core. It's not as non-core as Precision Springs. Precision Springs is completely different set of products. Heavy Duty is much more in line with production processes with the Passenger Cars. This is just a bigger product, but same production processes, similar suppliers, so it's not as detached from the rest. Having said that, yes, it's a separate business, separate customers, so the two businesses could be separated without the need of synergies. We're not planning anything. We don't have anything ongoing for sale of this business right now. The company was a top performer some time ago with EBITDA margins close to 20%.
Now it's the bottom of the performance scale within the business unit. It has gone through some very relevant market changes over the years. We had some very profitable products where Chinese competition entered and compressed the margins substantially. We had operational issues for the last three years in some of the plants, which weighed substantially on the performance. We have now a new management turnaround program, which is underway. We hope to be able to maybe not get very quickly back to the numbers we once had, but simply to restore a decent level of profitability.
For 2026, we hope to have it back in positive EBIT territory, although there is quite some work to do to get there. Also it very much depends on the market. As you know, the cycles in the Heavy Duty market are very short. There are cancellations of orders very quickly and then start the production as quickly. In this situation where we have due to the conflict and other disruptions, we have impact on the supply chain. There might be temporary drops in demand for trucks, which of course we cannot foresee for the time being.
High volatility turnaround ongoing. We should be back in positive territory end of the year, hopefully, or beginning of next year.
Thank you very much.
Once again, for any final questions, please press star and one on your telephone. Mr. Cavigioli, there are no questions registered at this time, sir.
Thank you very much, everybody, and see you too at the next conference call. Goodbye.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.