Good evening, and thank you very much to all of you for taking the time to attend Gestamp's first half 2024 results presentation. I am Ana Fuentes, IR Director, and before proceeding, let me refer you to the disclaimer of the slide number 2 of this presentation, that has been posted in our website, and will set out the legal framework under 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. At the end of the conference call, we will open up for our Q&A session, as usual. Now, please let me turn the call to our Executive Chairman.
Okay. Thank you, and good afternoon, and thanks for attending this call, in which, we will be presenting our H1 financial results. During the first part of the year, our group has performed well in a difficult environment, with lower volumes than expected, and with a quite substantial inflation impact. In terms of our revenues, we are reporting EUR 6,140 million sales, which means 2% less than in H1 2023, but outperforming the market by 6.4% in the second quarter. During H1, we have generated EUR 654 million EBITDA, excluding Phoenix Plan impact, and in Q2 2024, we have been able to improve our margin from Q1 to reach 11%.
In terms of free cash flow, we have generated, in the second quarter 2024, EUR 77 million free cash flow, offsetting a big part of the negative free cash flow we generated in the first quarter. So overall, the company is now fully focused in achieving our full-year target. In terms of the auto manufacturing in Gestamp footprint, the volume has been rather similar to the one of the H1 2023, and below the ones of H2 2023, and with a slight increase of light vehicle production in Asia, mainly in China and also in North America, and a reduction in areas like Western Europe and Mercosur.
If we move to slide number 6, in the case of Gestamp, our auto business revenues, excluding Gescrap, have been reduced by 1.7% compared with the H1 2023. But, of course, we need to assume that in H1 2023, our sales were very strong, with a clear outperformance of the market. Also, we have been impacted in this first half of the year with some negative FX, so FX, and also we have been able to continue with a sound growth, outperforming the market and improving quarter-on-quarter in 2024. As mentioned, Gestamp has been able to outperform the market at FX constant by 4.6% in the first half of the year.
A solid outperforming in Asia, with our sales, when our sales have grown by 12.6%, while the market has grown only by 1.1%. I think it's a quite remarkable figure in a challenging market. Also, we had a solid outperforming in Eastern Europe, Mercosur, and in North America. Only in Western Europe, our sales have performed worse than the market, impacted by some specific programs in Germany and in Spain. In terms of our Phoenix Plan, I need to again, clearly state that it's an absolute priority for Gestamp, because it's a key lever in order to improve our group's profitability for the next years to come. The plan is running on track. We have a fully dedicated team in place, which are helping to improve and to stabilize all our operations in North America.
Already we have achieved a margin improvement quarter-on-quarter in 2024, with a better Q2. For the first half of the year, we have already been showing a EUR 12 million impact in our profit and loss account, which means 40% of the expected impact for the full year. A part of our auto business, Gescrap , is also performing very well. With the scrap prices going down comparing with the ones in H1 2023, Gescrap has reduced their sales by 10% in H1 2024. But in terms of profitability, we have been able to increase our EBIT margin from 6.2%- 7%, and in absolute figure, we have increased our EBIT by EUR 500,000.
It's a business which is profitable, resilient, and very strategic, business for Gestamp overall. Now with this, I hand it over to Ignacio Mosquera.
Thank you, Paco, and good evening to everyone. Moving to slide 11, we can now have a closer look to our financial performance in the first half of 2024. As Paco has already explained, Phoenix Plan, aimed at restructuring our North operation, has had a EUR 12 million impact in our P&L. For the first half of 2024, we have reached revenues of EUR 6.14 billion, which entails a 2.1% decrease when compared to the EUR 6.273 billion from the first half of 2023. Revenues for the auto business, excluding Gescrap , at FX constant, have grown by 5.1% year-on-year, as FX has negatively impacted our result by EUR 401 million.
In terms of EBITDA, we have generated EUR 642 million in H1 2024, meaning a 10.5% EBITDA margin. If we exclude the impact from Phoenix, EBITDA, in absolute terms, would amount to EUR 654 million, with an EBITDA margin of 10.6%. We should highlight our sequential improvement in the second quarter, where excluding the Phoenix impact, we have had a reported EBITDA margin of 11% in the quarter. As a result of the EBITDA drop and slightly higher amortizations, reported EBIT has decreased by 22% year-on-year to EUR 285 million, with an EBIT margin of 4.6% or 4.8%, excluding Phoenix impact. Net income in the first half has been EUR 106 million.
That compares to the 162 reported in the same period last year, mainly due to a lower year-on-year EBITDA in absolute terms, increase of depreciation and amortization levels compared to last year, which was extraordinarily low, and higher minority interests, partially compensated by less financial expense. Net debt has decreased by almost EUR 33 million to EUR 2,191,000 ,000 as we will later detail. To sum up, good set of results with a difficult year-on-year comparable due to the extraordinary first half of 2023, and considering that traditionally, our business has a weaker first half in relative terms, that improves quarter-on-quarter throughout the year, as we have already seen in the second quarter of 2024. If we now turn to page 12, 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 11.6% year-over-year in the first half to around EUR 2.2 billion. Performance in the region has been affected by the tough comparison base. The first half of 2023 market growth was a record, thanks to the normalization of the semiconductor supply. Therefore, regionally, this region is mainly affected by the global market decline, revenue mix in specific programs, and to a lesser extent, the fall in raw material prices in the first half. In terms of EBITDA, it reached almost EUR 239 million, and the EBITDA margin stood at 10.9% in the period, down from the 11.4% reported in the first half of 2023, given market volumes drop in the period.
In Eastern Europe, the performance in the first half of 2024 has been solid, proving again our strong positioning in the region, particularly in markets such as Turkey or Romania. On a reported basis, during the first half of 2024, revenues have grown year-on-year by 9.1%, up to levels of EUR 948 million, although EBITDA levels have decreased by 6.8% to EUR 118 million, partially impacted by currency fluctuations. EBITDA margin of 12.4% is below the 14.6% reported last year, due to the inflationary pressures and project mix volatility. In NAFTA, not too much to add to what Paco has previously explained. Phoenix Plan is already showing signs of improvements in the underlying operations, with higher EBITDA margin quarter-on-quarter in 2024.
Our revenues have increased by 7.3% year-on-year, while EBITDA has decreased by 8.1% if we exclude Phoenix impact of EUR 12 million in the first half of 2024. This lower EBITDA in absolute terms leads to an EBITDA margin of 6.6%. As we have seen during the first half, profitability would evolve from minus to plus, reaching, at the end of the year, similar levels to the full year 2023, excluding Phoenix Plan impact. As you all know, turning around the operations in NAFTA to improve our market positioning and profitability is at the top of our priorities. In Mercosur, our results have been strongly impacted by Forex in Argentina and floods in Brazil during May.
That has led to revenues and EBITDA decreasing in the quarter by 10.7% and 25.8% year-on-year, respectively. EBITDA margin in the period has decreased versus last year to the levels of 10.7%. In Asia, our performance continues to evolve extraordinarily good. In the first half, reported revenues in this region have seen a strong growth, reaching almost EUR 955 million, with an outperformance in a complex and very competitive market. 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.
As a result, EBITDA grew by almost 26% compared to the first half 2023, with EBITDA margin improving to 14.5% in the period, showing an extraordinary operational execution of our projects and becoming the region with the best profitability levels in the first half. We keep on working to gain positioning in this region, mainly in China, as we have been doing over the last few years, with a strong organic and profitable growth and a clear EV strategy. This market continues to be a great opportunity for us. Finally, the scrap has seen revenues decreasing by 9.7% year-on-year to EUR 317 million as a result of the decrease in the scrap prices, as Paco mentioned before.
Nevertheless, well-managed operations have allowed for EBITDA to increase by 2.9% year-on-year, leading to a strong margin improvement from 7.4% to 8.4% in the first half of 2024. Overall, we have seen that our geographic diversification has supported a solid performance in the first half. Turning to slide 13, we see that as we already mentioned in our Q1 results call, we're back to positive free cash flow generation. As shown on the slide, excluding extraordinary Phoenix costs in Q2 2024, we have generated EUR 77 million of positive free cash flow, despite revenue and EBITDA fall. During the quarter, we have executed the acquisition of Mitsui's stake in North America with a cash outflow of EUR 23 million.
As a result, during the first half of the year, the company has generated a negative free cash flow of EUR 54 million due to negative free cash flow generated in Q1, in line with the typical business seasonality. Turning to slide number 14. As a result of this, we see that we continue preserving our financial strength, and we remain disciplined over leverage in absolute and relative terms. We have ended June 2024 with a net debt of EUR 2,191 million, EUR 33 million lower than last year's same period, which implies a net debt to EBITDA ratio of 1.7 x, maintaining a similar leverage as of Q1 2024, despite the seasonality impact. We are succeeding in our debt reduction strategy, as we have reported the lowest net debt figure in a first half since the IFRS 16 implementation.
This strong net debt reduction since 2020 is due to our strategy of disciplined and selective CapEx approach, a good delivery on results, and a well-managed balance sheet to preserve our financial discipline. Thank you all, and now I hand over the presentation back to Paco for the outlook and closing remarks.
Thank you, Nacho. According to the latest report by S&P, there is a clear deterioration of auto manufacturing volumes expected now for the second half of 2024. They are expecting a 2% decrease of full year volumes compared with the ones of 2023. This forecast has been deteriorated very sharply in the last two months, and the main areas impacted are Asia, with almost 1 million vehicle less, and Western Europe, which has fallen again this year and with volumes clearly below the ones of 2019.
Moving to slide 17 for 2024 and considering this new forecast, now we see in all regions, but in North America, clearly the auto manufacturing will go down from the 2023 figures, being Western Europe with -7.4%, the most impacted area. For following years until 2027, S&P is now considering a moderate growth of 2.3%, the CAGR, finally reaching in 2027 the volumes already manufactured in 2017, so 10 years later. In slide 18, basically the message from our side is that Gestamp has a clear and well-defined strategy in order to secure our long-term positioning with our customers. Now, the market is in a transition phase, with volumes not growing as expected, especially in Western Europe.
With a transition to EVs, which seems to happen more slowly everywhere, except in China, and with inflationary pressures, we're still impacting our costs, especially in the labor costs. In this context, Gestamp now is clearly focused in preserving profitability, implementing different initiatives in order to be able to improve our efficiency, to enhance our flexibility of our operations, to be able to respond to initial fluctuations of demand, and of course, to be able to execute properly on our backlog. Of course, in terms of profitability, our key priority is North America and Phoenix Plan. A part of preserving profitability, we also want to preserve our financial strength with a much more selective CapEx strategy, trying to minimize risk of volumes. All in all, profitability and financial strength are clearly our priorities in this market context.
So even if now we see a deterioration of the market, our group is fully focused on achieving our full year targets in terms of revenues, EBITDA margin, free cash flow generation, and of course, preserving our leverage below 1.5 x EBITDA to debt. Many actions are already in place in order to be able to achieve our targets, even if the market conditions are worsening. Moving to slide 20. Due to all the challenges, our group is very focused in operations, but we remain also very committed on fulfilling the different targets included in our ESG plan. All these efforts have been recognized with improvement of our rating in EcoVadis, where we have achieved a status of gold medal, and also in Sustainalytics, and also in FTSE Russell Index.
So all in all, as a summary, H1 2024 has not been easy, but we are delivering on our commitments with a solid set of results in H1, committed with our guidance, with the effort of the whole group, and improving day by day on our ESG targets, and a very specific and key target related to the full implementation of our Phoenix Plan in North America. So thank you, and that's all from my side, and now we are 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 Paribas. Please go ahead.
Hello, good afternoon. I have three questions, if I may. The first one is on your guidance for for the year. I mean, you have reached a margin that, implicitly, in order to reach to last year, targeting at the end of the year means that you should do in the second half a margin close to 12%. I mean, could, could you give us an idea on how you will reach that that level? If you could be a little more specific on geography, especially on Western Europe. The second question is on on minorities. We have seen a a big increase on the P&L of the minorities, moving from, I think, up to EUR 40 million or something like that at H1.
Could you give us an idea of what is it for? Taking also into account that you have bought some minorities to Mitsui. And last, but not least, in the P&L in the cash flow statement, it records a CapEx, which is slightly higher than last year. I don't know if you could give us some idea of what is gonna be the CapEx for the rest of the year. Thank you.
Okay, thank you for the questions. I'm taking the first one. Yeah, it's true that we have a challenging second half of the year, and we are working on that. It's also clear that in the second quarter, we have already achieved some kind of improvement, reaching 11%. And now what we are implementing very quickly are different cost actions in order to be able to flex on our CapEx. I think it's important to mention that the decrease in terms of volumes, especially in Europe, in this quarter, has been quite quick.
I would say that some operations in Germany and in other countries in Europe have deteriorated in terms of volumes, and we have not been able to flex because our customers, they have been trying and intending to in their programs to reach the original levels. So it has not been easy for us to flex, but now clearly we are acting, and we are taking all the necessary measures in order to implement all the flexibility, and we are working on that. It's true that we should have also some specific improvements. For instance, in the case of our North American operations, last year, we performed worse in the second half of the year, and this year we are expecting to do better, and the Phoenix Plan is giving us some light around that.
And also we have some important program for us where we have a good profitability and a good content in terms of EBITDA to sales and sales per program, that we are expecting them to ramp up in the second half of the year. So with these measures and all kind of another kind of measures, we are now we are still working on a plan in order to be able to come back to this level, which is not 12%, but close to 12% margin expected for the second half of the year. So then your question on minorities, on CapEx.
Yes, I can take those ones, Paco.
On in terms of minority, I think that first of all, I'd like to reflect that the minority levels that we had for 2023 in the first half were extraordinarily low. So the comparison base, it's actually relevant. But also in the case of minorities, you reflected on the acquisition, and we've done the acquisition of Mitsui, but that was with the effect of the end of May. So actually, for two months out of the or for five months out of the six of the half, you have the impact of the minorities from the United States. And also on a separate basis, what we've had is extraordinary levels of minorities in terms of Turkey, due to the hyperinflation effect.
So the profitability that we had in terms of hyperinflation in our PNL has been reflected partly in a minority level, which is pretty high this half in comparison to last year. In terms of CapEx, as mentioned in prior calls, we're not providing a specific guidance on CapEx, more focused on profitable growth. But obviously, we're taking active measures and having a selective CapEx strategy, as we have reflected in the presentation today. And obviously, we're looking at active measures in terms of on key levers to reduce our CapEx, for example, on current CapEx this year. I hope that answers your question.
Yeah, Ignacio, sorry. So as a way of modeling, minorities last year were EUR 40 million, because already the EUR 40 million in H1, so what we should expect for the rest of the year?
It's a little bit too early to comment, because at the end, it's depending a lot on the fluctuation of the currency in, specifically, in Turkey. So it's a little bit early to comment on what's gonna be the impact, but obviously what you can infer is that with the acquisition that we have done of the minority of Mitsui in the US, we will have obviously a pickup of minorities in the rest of the year.
Okay. Thank you.
Ladies and gentlemen, please be reminded that in order to ask a question, you may press star five on your telephone keypad. Our next question comes from the line of Christoph Laskawi from Deutsche Bank. Please go ahead.
Good evening. Thank you for taking my questions. I have a couple. The first one will be just on the supply chain situation. Obviously, we had Porsche warning about sourcing problems for aluminum. Just wanted to check if your supply chain is basically intact, or do you face any issues currently in sourcing material that you need for the products? Then the second question would be on the Western Europe underperformance in Q2. You already alluded to that some programs in Germany and Spain have been volatile and probably below expectations, but the underperformance about 10 points versus production looks pretty high. Could you comment further, how much of that was steel? How much of that was really single programs that came in below budget?
Where do you track in terms of Q3 indications of the customer so far? And then one question on NAFTA, if I may, just confirming that the Q2 run rate and the sequential improvement remains on track for Q3, and we will continue to see probably not as big of a step up, but further improvements in, in second, in the third quarter. And then just one housekeeping question, if you could comment on the FX, FX impact for the group in Q3. Thank you.
Okay, thank you for your questions. I'll try to answer some of them. In related to this issue of the supply chain and the incident you mentioned with Porsche around the aluminum, we are not impacted in this case. This is impacting aluminum in terms of coils, and it's some specific suppliers. We do have some exposure to coils, but in most of the programs we have for these coils these are done in a kind of a resale program with our customers. And the main programs are in South Carolina and also in Slovakia, and we are not suffering. And if we are suffering, we are not suffering because it's not our direct fault. So everything is more or less, let's say, under control.
And then in regard to the underperforming in Western Europe, I agree with you that this, we are underperforming, and this is quite substantially. So I think also we need to consider that for instance, we had some important program for us for an European OEM, for an EV program. Last year, volumes in the first half of the year were very, very high. Even they were even more than we expected. And this year, this half, in some cases, have been 50% of the volumes we achieved the previous year. So that's why, in this case, this kind of underperforming is related to some specific programs, some of them are EVs. So it's true that it's a big impact.
We believe that, for the second half of the year, this comparison with the second half of 2023 is not gonna be the same, because already this decrease happened in the second half of 2023. So we are not gonna see this kind of underperformance in Western Europe in our sales in the third quarter. In terms of North America, I think we have already mentioned that the Phoenix Plan is on track. I think we are doing a very good job with all the teams and the different plans involved in that. We are doing a very good turnaround on some specific operations. We are also doing well in purchasing. We are doing well in the negotiation with the different customers, but we want to go step by step.
But what is important is not just to improve, but also to stabilize for the future. So we are in the good direction, I would say. And regarding the FX-
The FX impact in Q3, it's a very good question, but so far we have the exposure, and we have been mostly impacted by our exposure to operations in Turkey and in Argentina. And I mean, obviously, it's speculating, because we don't know how the FX is gonna move in the next few months, but we could I think that we can infer that it's gonna be more or less flat impact versus last year. So the same impact as we have experienced in the first half or the first two quarters.
Sorry, just to come back on that. So you're saying the effect should be about the same level or that we've seen in H1, or it should be basically zero and flat year-over-year?
It should be, it should be similar in Q3, not in Q4.
Understood. Thank you.
Our next question comes from the line of Álvaro Lenze, from Alantra Equities. Please go ahead.
Hi, thanks for taking my questions. The first one is on the... If you could give us some more detail on the underlying performance in Eastern Europe and in Mercosur, because I think that the top-line performance may be distorted by the hyperinflation in Turkey and Argentina. I see that EBITDA is declining, so just to get a sense of how things are going there on a local basis, so to speak. And then, my second question would be on North America, in which I was positively surprised by the performance there. In fact, if I were to add up, add back the, the Phoenix costs, that would have been probably one of the best quarters in absolute terms, in terms of EBITDA for Nafta since you went public, and which is quite surprising.
I don't know if there is some sort of one-off, because I would be very surprised if the impact of the restructuring comes so early. And then my last question would be on the guidance for cash flow. In the last few years, you have delivered very strong cash flow generation from working capital. I still struggle to understand whether you can continue to receive financing from clients from working capital going forward, or if we should expect some stabilization or normalization here in the future. Thank you.
Okay, thank you for your questions, and I'll try to answer. Yeah, it's true that it's sometimes not so easy to identify the real impact in Eastern Europe and Mercosur, because both areas are impacted by the countries impacted by hyperinflation. But if we go in detail, in the case of Mercosur, we had operations in Brazil which were impacted, especially due to the flood that happened basically in the month of May. So sales overall in Brazil have been below our expectations and below the sales we had in 2023. Operations are running okay. We are launching different programs, so we feel quite confident that as far as volumes are coming back, we are gonna be back to the levels of profitability we have the previous year.
In the case of Argentina, it's a little bit more difficult. In the beginning of the year, we had some programs with some specific customers in our plant in Buenos Aires, that they were almost stopped. So we do have, we did have some problems over there. Now, these volumes are coming back, and but Argentina should not be the main, the most important part for us, because the most important part of our operations are our core base in Brazil, and we have quite a much better expectation for the second half of the year. And in the case of Eastern Europe, Turkey is impacting due to hyperinflation, but Turkey is really growing. We have a good plans in terms of growth in Turkey with the different programs that we have been launching.
And the rest of the East Europe area is also growing. We are doing quite well in all the different areas, for instance, in Poland, and in other countries. So in the case of Turkey, we have been impacted by the hyperinflation, and also in terms of the increases of cost. We have always a system with our customers of pass-through, but there is always some delay in terms of this pass-through to the prices to the customers. So overall, we don't see any problem right now in Turkey. It's difficult to understand because of the inflation impact, but operations are running okay. We are growing also in Romania, where is also we have something that we are also doing with a joint venture with our partner in Turkey.
So all these regions are doing well. In the case of North America, it's true that we have been able to improve in the second quarter, and but we feel comfortable with this growth, and that this growth is gonna be a steady improvement for the rest of the year. There is no any one-off, and of course we are still fighting with customers and suppliers and with our operations in order to improve. So still, we have a lot of room to improve, in order to be able to achieve EBITDA margins at the level of the ones of the rest of the group. So we—there is no, no one specific one-off at all. And regarding the guidance of the free cash flow?
Yes, I think that it's fair to say that I think that working capital is not yet at normalized levels. I think we can still improve. So, we already stated that a quarter back or a couple of quarters back when we said that more factoring could be achieved despite this. For example, this quarter, we have kept it at very similar levels. But also we've got opportunities to improve further on inventory. As sales decrease, for example, we would be improving further inventory in the next quarter. So I think that there is still some further room for improvement in terms of working capital and cash flow.
Nevertheless, I think that we are fully focused on achieving our EUR 200 million free cash flow target for the year, and not only we will do it on all of the levers, both EBITDA, financing expense, taxes, and CapEx.
Okay, thank you.
There are no further questions at this time. I'll hand the conference back to you.
Thank you all for having attended our call today, and we wish you all a very good summer, and we hope to see you again at the latest in our Q3 release. Thank you.
Okay, thank you.
Thank you.