Good afternoon, and thank you all very much for attending Gestamp's first key results presentation in this probably very busy afternoon for you. I'm Ana Fuentes, IR Director, and before proceeding, let me refer you to the disclaimer, slide number two of this presentation, that has been posted on our website, and we set out the legal framework and in which this presentation must be considered. The conference call will be led by our Executive Chairman, Mr. Francisco Riberas, and our CFO, Mr. Ignacio Mosquera. As usual, at the end of the conference, we will open up for a Q&A session. Now, let me please turn the call to our Executive Chairman, Mr. Francisco Riberas.
Good afternoon, and thanks for attending this call, in which we will be presenting the Gestamp first quarter results. I'm starting in slide number four. We had a quite good performance of the team during this first quarter, and we have been able to achieve a very good set of results. In terms of revenues, our group has had the revenues of EUR 3,049 million. That means an outperformance of 3.9 percentage points if we don't consider the impact of FX and scrap. In terms of EBITDA, we have generated EUR 315 million, and of course, excluding the EUR 4 million, which are coming from the Phoenix Plan cost in the first quarter.
I would like to say also that we are on track in the Phoenix Plan, which is a very relevant topic of Gestamp and what we need to do during the 2024, 2025, and 2026. Moving to slide number five, I think we have had, in terms of revenues, also a very good set of results because comparable over the previous year was challenging. In fact, the market in terms of light vehicle production in our footprint has decreased from 19.4 million in the first quarter 2023 to 19.3, so a minus 0.4% evolution. If we compare this first quarter 2024, we are still 12% behind the numbers in the market in the first quarter 2017.
This year, even though the global decrease has been minus 0.4%, it's been more impacted to Western Europe, with a decrease comparing with the first quarter 2023, or minus 4.7%, a little bit compensated with better volumes in China. In slide six, basically, we are stating that even though in terms of a reported basis, our auto sales has decreased by 2.9%, what is true is that we were comparing against or versus a tough comparable figure from the first quarter 2023, and of course, also impacted by seasonality due to Easter holidays.
In any case, if we see here in the chart, just comparing with our sales per vehicle manufacture in the first quarter 2018, we have been able to move from EUR 94 per vehicle in first quarter 2018, to EUR 150 per vehicle in the first quarter 2024. Just referring in slide number seven to our organic growth, we have been able to have an organic growth in our auto business division of EUR 104 million, which is representing 3.5% increase. And of course, this organic growth has been partially offset by a slight decrease in scrap and also for the impact of the effects, basically coming from currencies in China, Turkey, and Argentina.
In terms of market outperformance in Q1, in slide number eight, we have been able to outperform the market in our auto business at FX constant by 9.9 percentage points. We have done it. We have grown by 3.5%. We have had a very good outperformance in areas like Mercosur and Eastern Europe, and especially in Asia, that the market has decreased in some extent, and we have been able to grow our turnover by 17.5%, and also, we have been doing that with a quite solid profitability, and considering that it's a very challenging market.
In the bad part of the story, we have done not such a good performance in Western Europe, basically considering the difference in the steel prices from first quarter 2023 to first quarter 2024, and also in NAFTA, because of our less exposure to the American customers. In slide number nine, we refer to the impact of the Phoenix, which and the impact of the Phoenix during this first quarter has been EUR 4.4 million. So that means that our reported EBITDA, in terms of our auto division, has so far, has been reported 298, and without the impact of this EUR 4.4 million, it could have been 303 million.
What is important to say is that we have already incurred 13.3% of all the expenses that we have considered in the beginning. We are on track in the execution of the plan, and even though still we don't see a significant improvement in our results, but it's clearly a clear improvement in our underlying operations. So we are quite optimistic about what is going on around the Phoenix Plan. Moving to slide 10, we wanted to basically outline here that our NAFTA division has been, in some extent, a part of the poor performance compared with the previous year in terms of EBITDA. So that means that if we just see what is excluded in Phoenix, in our auto business division, without...
Without considering the NAFTA, without considering NAFTA, we could have been able to get EBITDA margin of 12%, while in the first quarter of 2023, we could have get 11.7%. Just to remind you, in the reported basis, we last year, in the first quarter, we did 10.8%, and this year we had 10.5%. In slide number 11, just a few words around scrap. Even though the scrap markets and the prices have been going down in Europe, in U.S., and also in China, that is impacting in some extent our revenues from first quarter 2023 to first quarter 2024.
We have been able to react, and in terms of profitability, the company has been able to generate, in terms of EBIT, EUR 19.9 per ton, which is representing an increase in our EBIT margin from 6.8% in first quarter 2023 to first quarter 2024. So now I hand it over to Ignacio Mosquera.
Thank you, Paco, and good afternoon to everyone. Moving on to slide number 13. We can have a closer look at our financial performance in the first quarter of 2024. As Paco has already explained, Phoenix Plan, aimed at restructuring our NAFTA operations, has had a EUR 4.4 million impact in our Q1 2024 P&L at EBITDA level. For the first quarter of 2024, we have reached revenues of EUR 3,049 million, which entails a 3% decrease when compared to the EUR 3,144 million from Q1 2023. Revenues for the auto business, excluding the scrap and at FX constant, have grown by 3.5% year-on-year in Q1 2024, as FX has negatively impacted our result by -EUR 190 million.
In terms of EBITDA, we have generated EUR 311 million in Q1 2024, meaning a 10.2% margin. If we exclude the impact from Phoenix, EBITDA, in absolute terms, would amount to EUR 350 million, with an EBITDA margin of 10.3%, or 10.5% if you exclude scrap, aligned with the Q1 margin of last year. As Paco has mentioned earlier, our profitability this year has been dragged by our NAFTA business, the typical business seasonality, and persistent inflationary pressures. Reported EBIT has decreased by 22% year-on-year to EUR 135 million, with an EBIT margin of 4.4% or 4.6%, excluding Phoenix impact. As a result of the decrease in EBITDA, together with higher depreciation and amortization year-on-year, net income in Q1 has been EUR 55 million.
That compares to the EUR 80 million reported in the same period last year, mainly due to lower year-on-year EBITDA in absolute terms. Increase of D&A levels compared to last year, which was extraordinarily low, and slightly higher financial costs since the peak of interest rates was reached by mid-2023. Net debt has increased by almost EUR 175 million to EUR 2,233 million, as we will explain later. To sum up, a good set of results with a difficult year-on-year comparable due to the extraordinary Q1 2023, and taking into account that traditionally, our business has a weaker fourth quarter in relative terms that improves quarter-on-quarter throughout the year. If we now move to slide number 14, we can see the performance by region on a year-on-year basis.
Looking at each region in detail, revenues in Western Europe have decreased by 9% year-on-year in the quarter to around EUR 1.1 billion. Performance in the region has been affected by the tough comparison base. Q1 2023 market growth was a record, thanks to the normalization of semiconductors supply. Also, for Gestamp specifically, the fall in raw material prices affects this region in this particular quarter. In terms of EBITDA, it reached almost EUR 120 million, and EBITDA margin stood at 10.4% in the period, down from the 10.9% reported in Q1 2023, given the lack of operating leverage due to the seasonality and lack of market volume.
In Eastern Europe, the performance in Q1 2024 has been solid, proving again our strong positioning in the region, particularly in markets such as Turkey, Romania, and Czech Republic. On a reported basis, during Q1 2024, revenues and EBITDA have grown year-on-year by 4% and 1.2% to EUR 468 million and EUR 61 million, respectively. Solid EBITDA margin of 13.1% is below the 13.4% reported last year due to the inflationary pressure. In NAFTA, not much to add to what Paco has already explained. We have started with the execution of Phoenix Plan, which is already showing signs of improvements in the underlying operations, but not fully translated to a P&L, as we will have to wait some time to see these improvements reflected in our profitability.
Our revenues have decreased by almost 2% year-on-year, while EBITDA has decreased by 50%, leading to an EBITDA margin of 3.8%. If we exclude Phoenix impact, EBITDA margin reaches 4.5% in the region. This should be a year from minus to plus. We should see a better performance in the second half. As deeply explained during our full year 2023 results presentation, turning around the operations in NAFTA to improve our market positioning and profitability is at the top of our priorities and will take some time. In Mercosur, our results have been strongly impacted by Forex in Argentina. That has led to revenues and EBITDA decreasing in the quarter by 12% and 6% year-on-year, respectively. The EBITDA margin in the period has improved versus last year to healthy levels of 11.4%.
In Asia, our performance continues to benefit from our strategy to grow in electric vehicle, mainly in China, and we continue to see this market as an opportunity for us. Our approach of focusing on premium products with differential technologies is allowing us to gain good quality market share in a very competitive EV world in China. In the first quarter, revenues in this region have seen the strongest growth at 10.8% and have reached almost EUR 490 million, with a strong outperformance in a complex and very competitive market, thanks to our value-added EV products. As a result, EBITDA grew by almost 31% compared to Q1 2023, with an EBITDA margin improving to 15% in the period, showing an extraordinary operational execution of our projects in the region.
We continue working to gain positioning in this region, as we have been doing over the last few years, with a strong, organic, and profitable growth. Finally, Scrap has seen revenues decreasing by 5.8% year-on-year to EUR 154 million as a result of the decrease in scrap prices. Nevertheless, well-managed operations have allowed for EBITDA to decrease by only 3% year-on-year, leading to a slight margin improvement from 8.1% - 8.3% in the first quarter of 2024. Overall, we have seen that our geographic diversification has supported a solid performance in the quarter, in line with our expectation to meet the guidance for the full year. As we move to slide 15, we see that the continued focus in reinforcing our balance sheet profile and the leverage.
We have ended March 2024 with a net debt of EUR 2.233 billion, which implies a net debt to EBITDA ratio of 1.7, lowest leverage ratio for the first quarter since the IPO. If we look at the debt in absolute terms, we see that we are succeeding in our debt reduction strategy, as we have reported the lowest gross and net debt figure in a, in a first quarter since the IFRS 16 implementation. Net debt in Q1 2024 is EUR 175 million, above the EUR 2.058 billion reported in December 2023, which includes dividend payment of EUR 40 million and zero point five million equity contributions from minorities.
In terms of free cash flow and in line with the business seasonality for a Q1, we have generated negative free cash flow of EUR 135 million, including EUR 4.4 million expenses related to Phoenix. This negative free cash flow generation is due to the normal seasonality, negative working capital in the quarter, CapEx investments to continue reinforcing our growth strategy and pushing the EV transition and diversifying our footprint and a lower EBITDA in absolute terms. However, we are firmly committed on reaching our target of generating positive free cash flow in the range of EUR 200 million for the full year, and we should expect a change of trend already in Q2. Turning to slide 16. In fact, our financial strength through reinforcing our balance sheet and our deleverage strategy is being recognized.
On March 14th, the credit rating agency, Moody's, upgraded our corporate rating by one notch to Ba2, with a stable outlook following last year's Standard and Poor's upgrade. As indicated by Moody's, this upgrade is the result of our continued strong organic growth above the market, with an adequate balance sheet structure leading to the deleverage path demonstrated in the last few years, and the ability to maintain a stable profitability on a context of uncertainty and volatility at both sector and macro levels. This represents great news for Gestamp as a proof of the market, acknowledging our efforts to keep a disciplined financial strategy, which was one of the key pillars for the long-term strategy provided during our Capital Markets Day in June 2023. Thank you all, and now I hand over the presentation to Paco for the outlook and closing remarks.
Thank you, Nacho. I'm just referring in the slide, number 18, that, assuming the latest, the forecast by the IHS, in this case, we continue to see the market this year to be flat, with basically 90.3 million units to be produced during 2024. In this scenario, probably, Asia is gonna do a little bit better and Western Europe, a little bit worse. And for the next years to come, for 2025 to 2026, we see basically a slight growth of a CAGR of around 1.7%, assuming the forecast by IHS, and being able to reach at the global manufacturing, amount of 95.1 million units by 2027, which is exactly the same amount which was achieved 10 years before in 2017.
In slide 19, basically, following our first quarter, we have a good visibility for the rest of the year, and that's why we reiterate the guidance we provided for the year 2024. In terms of revenues in our auto business, we will be able to do a market outperformance in the low single-digit range. In the case of scrap, very similar revenues to what we had in 2023. In terms of EBITDA in our auto business, we intend to increase our EBITDA margin by being around flat to a slight increase during the 2024, with a scrap EBITDA margin very similar to the one we had in 2023.
We are convinced that we will generate a positive free cash flow in the range of EUR 200 million, and we should be able to preserve our leverage, as stated in the Capital Markets Day, and to have our net debt to EBITDA between 1-1.5 range. And just to conclude, clear message: we consider our set of results for the first quarter 2024 as a very positive ones, but that means that we feel comfortable and we have a good visibility in order to be able to deliver on our guidance. And of course, in terms of the Phoenix Plan, we are doing a very, very strong work in all what we are doing. Still, we don't have the visibility, but we are already improving our facilities over there.
With this now, we are basically open to your questions.
Thank you. Ladies and gentlemen, we will now begin the Q&A session. If you'd like to ask the question, please press star five on your telephone keypad. If you change your mind, please press star five again. Please ensure that your device is unmuted locally before proceeding with your question. Our first question comes from the line of Francisco Ruiz from BNP. Please go ahead.
Hello, good afternoon. I have some questions. The first one is if you give us an idea of how Phoenix Plan will impact the performance in the region in terms of the market. Now, we have seen some underperformance, and if you expect that this situation will continue during the year or not. The second question is if you could give us an idea of how much the raw material has impacted in the quarter, because the comment that in Europe has been negative, but I don't see any reference when you quote on the performance overall, the market, versus market. And also, I would like to know how sustainable the 15% EBIT margin from Asia, in principle is m aybe you could...
If we could set EBIT margin to keep in the coming quarters. Thank you.
Okay. Thanks for your questions, and let's start with the Phoenix Plan. The Phoenix Plan in this quarter, we have been able to really move forward in what we were expecting. We are on track of what we are expecting to do, and still the visibility we have in this first quarter is very limited. It's the final result in terms of EBITDA is a little bit more aligned with the kind of EBITDA we generated in the second half of 2023, but we are expecting in the second half of 2024 to do better than the one that what we had already in the second half of 2023.
Because we are still, we see that some of the results of the Phoenix Plan will start to pay in the second half of the year. So overall, in the year, it's not gonna be such a big impact, but what we are working quite hard is in all the underlying things around increasing the profitability in our North American operations in a quite sustainable way. In this, referring to your second questions about the raw material, it's not easy to provide you with a figure because the real decrease in the price of the steel happened during the year, but they had different impacts in the different quarters.
But it's true that if we compare with first quarter to first quarter, we had already accumulated basically different decreases in the price of steel, mainly in Europe, because we have seen now a kind of decoupling between the steel prices between Europe and Asia. So I cannot provide to you right now a clear amount per ton, but it's been some decrease, which basically justify a little bit of this kind of gap between the performance in terms of sales in Europe and not performance sales, sales in Europe. And coming back to your last question about how sustainable is our EBITDA in Asia, you know that everything is moving very fast in Asia. We had a very good set of results and EBITDA and growth over there. A lot of it is coming from EVs, as was mentioned by Ignacio Mosquera.
But what is true is that the market is moving very fast, and we do have a position with some customers. Our operations are running very well in Asia with a high level of performance. So what we will see what is gonna happen in the second quarter, but the visibility we have right now is positive for the whole year. Thank you.
No, thank you very much, Paco.
Our next question comes from the line of Álvaro Lenze from Alantra Equities. Please go ahead.
Hi, thanks for taking my questions. I have three. The first one would be if you could help us understand the evolution on, in terms of organic growth, especially in Mercosur and Eastern Europe, and how much is this potentially distorted by the hyperinflation accounting in Argentina and Turkey? So if you could provide us some information, some detail on what's the actual volume performance there and how that compares to local production levels. The second question would be on... Well, the next two questions on the U.S. market. We saw news recently of Volkswagen's Chattanooga facility having a union win. So the plant is now going to be unionized. I understand that this is potentially one of the problems that the company has been facing, right?
The labor market in the U.S.. So how do you read this, and how does this change your views on the different alternatives that you had on the Phoenix Plan? And the third question, also regarding North America, is if I look at the evolution of EBIT, the margin, it has declined very significantly, excluding the what you have labeled as the restructuring cost of Phoenix. So what kind of performance can we expect from this region until the restructuring plan is completed? Or why don't you allocate more costs to the Phoenix program? Thank you.
Thank you, Álvaro. With regards to your first question on organic growth and hyperinflation, it is factually correct that those two regions are impacted by hyperinflation. Nevertheless, in the case of Argentina, I think that there has been an impact on volumes on the one side, but in the case of Eastern Europe, the organic growth has been positive versus the production.
Okay. No, no, I, I can, I can do that. In terms of the Chattanooga plant, it's true that we have received this news, this news around the, that the union has been able to, let's say, to win this battle around Chattanooga. To be honest, right now, even if this has happened, the pressure and the agreement that Volkswagen has already reached before this being, this plant being unionized, has been already in line with the kind of agreements which have been done in Michigan with the American customers. So we don't see that there's gonna be a an impact in terms of extra cost, in terms of wages, just due for that.
In any case, what is clear is that, in our Phoenix Plan, we have different levers in order to be able to increase our profitability. Of course, there are some part of these levers are related to prices. Prices for new programs that are coming with, new prices, which are good, and some discussions with customers. But the really important levers are coming from the improvement of the operations and also for the improvement in terms of our purchasing activity. So I think these are coming, and of course, we are not concerned about the, the success of our Phoenix Plan due to this kind of decision about the union of, of the plant in Chattanooga for Volkswagen.
And in terms of what is happening in terms of with the declining of the EBITDA in the U.S. or in North America, I think I explained that if we compare with the first quarter, 2023, it's true that there is a decline. It's true that there are some specific factors in this quarter. For instance, some strikes that happened in Mexico in one of our customer plants, and there were some specific topics. But the visibility we have right now in terms of the EBITDA that we should be able to generate in the full year 2024, we are expecting EBITDA, EBITDA to be in line with the EBITDA that we had in 2023, and that means that we should be able to improve a lot already for the next years to come.
I need to reiterate that we had a lot of data around the performance of our operations in the U.S., which is already improving, and we are expecting to have a much better news in the next quarters to come.
Okay, thank you very much.
Just to add one additional point with regards to the Phoenix cost and the allocation of Phoenix cost. As we mentioned at the beginning of the year when we presented the Phoenix Plan, we have an allocated budget to Phoenix, which relates specifically to the restructuring plan. So it's not a matter of allocating more or less cost to it, just to give you a better understanding of which costs are related there.
Thank you. Ladies and gentlemen, as a reminder, we will now... To ask the question, please press star five on your telephone keypad. And our next question comes from the line from Enrique Yáguez from Bestinver. Please go ahead.
Hey, good afternoon. I have two questions. The first one is also regarding the market outperformance. It has been weaker than the market in NAFTA and Western Europe, and the question is: what do you think is the reason for this underperformance in this material? Is your higher exposure to EVs, or is the declining exposure of three new European OEMs? And the second question is regarding CapEx. I know that you prefer not to disclose the figure expected for this year, but I would like to know if at least you foresee the need to slow down your investments for this year? Because such an important competitor has recently announced their decision to slow down its investment in battery enclosure. So I don't know if you agree with this view or not.
What are your plans on this front? Thank you very much.
Okay. Thank you for your questions. I can take the first one. In terms of market outperformance, it's true that we have done a little bit worse in North America and Western Europe. In the case of Western Europe, part of it is coming from, of course, this decrease in the steel prices, as mentioned. It's true that in some extent, if we compare ourselves in the first quarter 2023 to 2024, it's true that in the first quarter 2023, we have an extraordinary level of sales around EVs, especially in Germany. This year, first quarter sales in the EV market in Germany have decreased.
And it's not just a matter of a mix of customers, it's just a decrease in terms of sales of EV during first quarter, comparing with this, the same period in the previous year with subsidies. In the case of North America, it's true that, as far as you know, we are a little bit more positioned ourselves. In, let's say, European-based customers, in the last years, I will say the performance of these customers maybe are, is a little bit worse than the ones by the American players, including Tesla, and this is basically why we have this different performance.
Well, in any case, what we have right now is that we are improving or increasing our exposure to American players, and in the next years to come, we are planning, of course, to increase our market share over there. So we feel comfortable, and that was already expected from our side. Maybe in terms of CapEx, Nacho?
Sure. Just in, I'll refer to our guidance with regards to leverage some free cash flow, where we have a firm commitment to keeping our leverage below 1.5 x and generating EUR 200 million of free cash flow in the year. Because of that, and that is a key item in relation to our CapEx investments for the year, but we also need to balance and keep reinforcing our strategy and commitment to grow with our customers. So long story short, we are firmly committed on our leverage target and free cash flow while keeping investments for our clients.
Thank you.
Our next question comes from the line of Robert Jackson from Banco Santander. Please go ahead.
Hi. Good evening, gentlemen. The first question is related to your comments regarding the visibility and growth in Asia and your exposure to the EV segment, which you say is growing well. But over the last few... well, last year or so, or especially over the last few months, the talk of a slowdown in the EV segment has been increasing. So my question is: Your guidance, does—how does that consider, or what's your outlook in terms of the EV exposure and the slowdown expected for this year? And the second question is related to your Phoenix Plan.
What, what do you see as the main challenges or hurdles for, at least for the short to midterm, which could derail some of your, your targets? Thank you.
Thank you for your questions. Just the first one, it will refer to how stable is the market and ourselves in Asia. We feel quite comfortable. I think we have the right exposure to very good programs. I was visiting our operations there one month ago, and what we see is that our operations are running quite well, and the volumes are still very solid. Right now in Europe or in U.S., we see some doubts and concerns about the evolution of the sales of electric vehicles, but we don't see this kind of doubts in Asia, in China.
The data that we have is that the first quarter and also the previous year, around 2/3 of the EV, of the electrical vehicles produced in the world and sold in the world are happening in China, and the amount of new vehicles in EV is very high. And also in terms of penetration and the decision by the people and by the final customers to buy EVs is not a problem in China. So I would say that there is no any concern in China about the evolution of EVs, and we are well positioned in some of these products. Of course, it's a very dynamic market and everything could happen, but we have a strong team with a very good operation, so we feel comfortable about Asia.
It's not easy because we see some of the, let's say, foreign players not performing so well in such a competitive market. In the terms of the challenges we see for Phoenix, of course, there are challenges because North America has been a problem for us for years. But we have a very structured plan in place, and we feel comfortable in all the different levels. We have already gaining a lot of traction in some plants. It's true that we don't see it because some of the plants which were performing well, the volumes are now a little bit weaker, but we are expecting them to recover. So that means that this is gonna pay some credit in the second half of the year.
And also, we are doing a very good, let's say, performance in terms of negotiation with customers and with suppliers. So I think, right now, even though, of course, it's tough, we have a very good implication by our corporate team together with the NAFTA team, and also together with the expert plants which are supporting these problematic plants that we have in the U.S.. In each of the cases of the three plants, there is a very strong team coming out from these expert plants. And, to be honest, I am surprised at how things are moving on in the right direction. So we expect things to really come back and to see opportunities and good results in the second half already during this year.
Okay. And just following on from that, if I look at Magna's results that came out last week, one of the comments they made was that they're still seeing cost inflation in on the labor side, in the U.S. , is that something you're still seeing as well?
Well, in terms of Magna, as you know, it's not easy to learn and to replicate the result of Magna because it's a kind of conglomerate with different divisions, and just one part of the divisions is related to what we are doing. But of course, it's true that it's been the impact of inflation in U.S. operations has been a little bit more substantial than the one we've seen in other places, in some other places. But of course, our customers know around it, and they want to be sure that the suppliers are healthy enough in order to be able to work with them and sustain the manufacturing. So to be honest, we are having constructive discussions over there, and we don't see, let's say, such a big problem.
Okay. Thank you very much.
Okay. Thank you.