Ladies and gentlemen, welcome to the Q3 2023/24 results of Novem Group, which will be presented by the CEO, Markus Wittmann, and CFO, Dr. Johannes Burtscher. I'm Moritz, the call's call operator. I would like to remind you that all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. At this time, it's my pleasure to hand over to Markus Wittmann. Please go ahead.
Yeah, thank you. Good afternoon, ladies and gentlemen, and welcome to Novem's quarter three results presentation. In quarter three, we generated a revenue of EUR 138.7 million, and compared to last year's quarter three, we are falling short by -16.9%. As in previous quarters, the market and trading conditions remaining challenging across all regions, especially in Europe. European customer extended their plant holidays during the Christmas season, and in addition to that, the OEMs deploying short time work and cutting their production by reducing shifts. Besides these trading conditions, we achieved an adjusted EBIT of EUR 16.6 million, resulting in a margin of exactly 12.0%. Yeah, meanwhile, we closed our Italian facility in Bergamo successfully, without any noises or interruptions to our customers.
The production is completely relocated to our plant in Czech Republic and Slovenia. We are also affected from the crisis in the Red Sea, what means longer sea transport, and it ends finally in higher safety stock. Now, we are very pleased to announce that we got the second nomination from the Asian premium car maker, AVATR. After the sports car E12, where we deliver the wireless charging console in real wood, we won also the mid-size SUV, E15. In a forward view, we can inform you about a solid order intake, which will bring us to a midterm growth of 5%-6%. Yeah, so in this, going ahead with the financial highlights.
As already mentioned, revenue for quarter three, 138.7, compared to last year's 166.9, which ends for this year in 16.6 million EUR EBIT. What means a margin of 12% compared to last year's 11.4%. Free cash flow became shortly negative, with -EUR 3.9 million, compared to last year's 24.6 million EUR, and net leverage increased also from 1.3 to 1.7 points. Coming to the year-to-date figures, revenue-wise, we are at EUR 485.8 million, with an adjusted EBIT of 54.6 million EUR and an adjusted EBIT of 11.12%, which is more or less in line with last year's 11.5%.
Free cash flow, EUR 29.6, and net leverage, as already mentioned, 1.7% compared to last year's 1.3%. That's about the overview, and with that, I would like to hand over to Johannes, who will explain the result in details.
Thank you, Markus, and also from my side, a very warm welcome to everyone. Starting with our top line, as was already mentioned, revenue was badly hit by the weak market demand, driven by, as already said, extended customer plant holidays during the festive season. Now, this is not exceptional, but what was exceptional is the magnitude. So we had platforms being down for 3-3.5 weeks, and that is clearly also in comparison with historical patterns very different. And this, in particular, occurred in Europe. That's why the European business, and when we talk later about the segments, you will see that that negative impact specifically focused on Europe.
Now, as in the previous quarters, we faced a negative Forex impact. So in other words, if the Forex rates had remained stable, we would have seen higher revenue by EUR 3.4 million, the main driver being the US dollar with $2.5 million, and the Chinese renminbi with CNY 0.9 million, combining the EUR 3.4 million revenue impact. Now, as said, sales revenue was sluggish in this quarter, with EUR 138.7 million. We saw this across the board, particularly in Europe, and also with most of our platforms. Now, if someone looks at the market development overall in the automotive sector, we see actually the opposite, increasing car sales.
Light vehicle production grew quite nicely in this specific quarter by 10.8%, according to LMC. But here, once again, and this is our read and interpretation of our market intelligence, is that this is to a large extent driven by the volume sector and to a far lesser extent by the premium sector we are operating in. Apart from the series revenue, we saw also, compared to last year, a reduction in revenue tooling. Now, as you know, this is aperiodic in terms of recognition of revenue, but here, particularly, you know, driven by Americas, we saw a lower revenue recognition in Q3 compared to last year, and this resulted in the overall turnover of EUR 138.7 million.
With regards to bottom line, needless to say, the lower revenue had a clear impact on the bottom line, and this once again, especially in Europe. The first point we have to mention is the weak utilization of our operations in Europe, primarily Bergamo. This is for the last time, as we heard, the operation ceased now in this quarter, but also the main plants in the Czech Republic and Slovenia. We are talking about utilization rates of between 50%-60%. Yes, this is the main driver for inefficiencies and the low deployment rate of our operations, especially in Europe.
As already said, to some extent, this will be mitigated by the closure of Bergamo, but once again, in the scheme of things, this is a small operation for our Italian customer base, and therefore, this production capacity has now been absorbed by the main plants in the Czech Republic and in Slovenia. In terms of the KPIs, the number that stands out, if one also looks at the P&L and the cost ratios, it's clearly the personnel expenses, where we are at a personnel cost to revenue or operating performance ratio of 28.6%. Now, compared to last year, this is almost four percentage points higher, where we stood at 24.7%. So again, you can see this is the impact of this lower utilization of our operations.
Having said this, we have a number of other elements that also influenced the results, most importantly, products mix and also model changes. We will come to this later, as I will assign this also to the different segments, but this is one of the other drivers for the lower profitability. On the other hand, we made good progress in terms of material cost savings, purchasing savings, as well as freight expenses, both inbound and outbound freight expenses, and obviously, also, in view of the low utilization, reducing the leased workers across our operations. At the same time, we have very good quality performance ratios, scrap and rework at a very low level.
Nonetheless, the overwhelming issue that we see is the utilization, driven by the low call-offs from our customers. One impact that is important to mention is our efforts on the pricing side, which is still ongoing, so this has not changed. We are still in regular, constant discussions with basically all our OEMs in terms of compensation for higher costs. And in this quarter, as you know, this is an aperiodic phenomenon. Once again, it's not a regular issue that we see in our prices; it is that we got a compensation in Q3, and we could also, in this context, release a significant sales accrual that is relating to Americas.
I will come to this later, as this stands out when we look into the Americas region in particular. All in all, this resulted in a still solid adjusted EBIT margin of 12% in terms of revenue. Free cash flow, for similar reasons, was affected by the lower business. We had a negative free cash flow of EUR 3.39 million. The two most important drivers being reduced provisions. This comes actually from the release of this sales provision in Americas, which is, you know, reflected in the profitability, but obviously not as a cash relevant number, so it's negative reflected here.
The lower profit, compared to last year, and then also the development in our other liabilities, which is, to a large extent, driven by lower payments for tooling, from our customers to Novem. So this is, in both cases, aperiodic, that affected the free cash flow, which came down to -EUR 3.9 million in this particular quarter. Capital expenditure remained fairly stable compared to last year, EUR 4.6 million, and here again, as in previous quarters, the majority of our investments is relating to new products and to expansion, so projects that are in the launch phase and being prepared for SOP. But otherwise, it's a relatively stable sideways development of capital expenditure. Working capital increased to EUR 149.2 million.
Quite a considerable increase to last year, same quarter. The two most important items being the increase in tooling net. Once again, this is a positive signal. It signals that new business is to come and building up capitalized costs in projects that are in the preparation and engineering phase to be brought to the market at a later point in time. The movement that we see here from last year's quarter is from EUR 62.7 million to EUR 75 million, so a increase of EUR 12.3 million of capitalized in our working capital. The other second most important element is payables that reduced, that came down, and obviously also increased working capital for that reason, from EUR 50 million to EUR 35.8 million.
And yes, this is a function of the volume, so there is less payables in that sense, also regarding to the lower trading volume of the business in this particular quarter. In terms of the ratio, total working capital at 22.6% being slightly higher compared to last year on December 31, where we recorded 20% total working capital in % of revenue. We look obviously from an operating point of view on the days outstanding to steer and control the business. And yes, also here, we saw some movements, DIO being 4 days higher at 47 days.
Here we have some impacts also from the Red Sea situation here, but also in regards to some of the relocations that we currently do to optimize the utilization in and within our footprint. DPO 45, so this came down, deteriorated from 53, as I said, to a large extent, volume related, and DSO being relatively stable. Nonetheless, working capital, as always, is a key focal point of our attention, and this is also that we drive forward also towards the end of this financial year. The capital structure shows an increase of our net leverage position to 1.7x LTM EBITDA. When we look at the gross financial debt that increased to EUR 307.4 million.
Within we have a special item, and this is an increase of our lease liabilities, and this is relating to a renewal option that we recognized now, according to IFRS 16, that this extension of the lease contracts of our buildings in Querétaro, being our largest plant within our group, is now recognized. So it's obviously a non-cash element, but it increased the lease liabilities quite significantly due to this extension option that is now recognized. If we had not this element, the net leverage ratio would actually be down by 0.2 times adjusted EBITDA, so actually at 1.5. So that needs to be considered and taken into account when looking at the development of our net leverage situation.
Also as a function of the lower volume, we saw also the factoring come down in terms of volume. So this is another element that is to some extent driven by the trading development. And with this, I'd like to dig a little bit deeper into our operating results by segments. First, with regards to revenue, we mentioned already a couple of points here, and starting with Europe at a relatively weak note with a reduction of EUR 23.3 million compared to last year. And here we saw the biggest extent of the customer plant holidays, you know, also short-time work at customer end, and weak call-offs being very poor.
If you look at the platforms and, we also wanted to give you a flavor that, you know, this is relating to almost all platforms here in Europe. And also affecting some of the larger platforms like, the BMW 5 Series, which is in the EOP. You know, they contributed around EUR 10 million reduction, Mercedes-Benz E-Class, with EUR 4.4 million, S-Class, EUR 3.5 million, and GLC with EUR 1.8 million. So only these selection of obviously very significant premium platforms, they make almost up the whole deviation of EUR 23.3 million. And it also tells you that this is affecting also the higher end and actually the flagship models, like an S-Class Mercedes, being driven by these weak call-offs.
Of course, I don't want to not forget that we had also some platforms doing very well, also in Europe, like, the Volvo XC90, also SUV car, or the Mercedes-Benz G-Class, being manufactured at Magna, in Austria. So there is obviously always a plus and minus, but to a large extent, we see weak call-offs from our customers in Europe across the board. Americas, almost flat, with a strong business, almost at EUR 60 million, and you see equally with Europe. The small decline versus last year was only driven by tooling, because we had a large tooling revenue position last year. Excluding the tooling portion, Americas, again, continued to outperform and to grow.
Even despite the weaker U.S. dollar, which we heard before, amounting EUR 2.5 million as a Forex impact, and once again, very strongly, heavily driven by BMW X5, X6, X7, GLE, Audi Q5, so the major SUV platforms. Like what we said the previous quarters, we see this, two-world system, Europe being at a weak note and even weaker this time, and America's very buoyant, very strong, and being the pillar of our current business development. In Asia, we saw also a decline, EUR 3 million, versus last year.
In Asia, as we reported also the last time, this was, again, strongly driven by model changes, you know, SOP, EOP situations, in particular regarding the old and now the new Mercedes-Benz E-Class, and also the Chinese, local Chinese premium vehicles, you know, coming up, but not yet as, as strong as, as we and our customers expected. Nonetheless, as Markus already mentioned, we, we have some very good news of making further inroads into China and into this growing, upcoming premium customer base that we see in, in China. LTM, we are now at EUR 659.9 million, is an LTM revenue number over and across the three segments of our three regions. In terms of EBIT and profitability, we see here a reflection of the underlying business development and, and the revenue line.
With this very weak turnover in Europe, this actually puts the EBIT performance underlying into negative in Europe, with EUR 3.9 million. And this is clearly driven by the volume, which is the key driver and the resulting inefficiencies in our operations, most importantly in the Czech Republic and Slovenia, but actually also with the S-Class in Germany, also here leading to a relatively weak utilization. So that is the key driver, and in terms of cost or the cost performance, while we see a good trend with material costs, it's to a very large extent relating to labor costs being in a negative ratio development. In terms of Americas, also here, we see a sharp contrast, a very strong performance, exceptional with EUR 19.1 million.
This is more than the overall group that we see as a contribution from Americas. If one calculates the adjusted EBIT margin, it's at 31.8%. And yes, on this occasion, I have to point out that there is an exceptional impact from this release of a sales accrual. It's also mentioned here, as a part of the customer pricing discussion. We are not guiding on this number, but just to give you a flavor and certain indications, we talk about the mid-single-digit million EUR number that we could recognize here. And yes, from a segmental perspective, if one looks Americas, it stands out very clearly, and this is the reason why the profitability is such outstanding in the Americas region.
And in Asia, it's a relatively stable profit situation from 1.8 to 1.4, but also here we have a good contribution from tooling, and also improved input costs that we could recognize in Asia. But again, this is the situation with Europe and Americas being in so different situations and Asia, relatively stable. And that summarizes the outline on the results for the group and for the regions or segments. And with that, you know, we would like to hand over to you and take your questions. Thank you.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star, followed by one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star followed by two. Participants are requested to use only handsets while asking questions. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from Alexandre Raverdy from Kepler Cheuvreux. Please go ahead.
Yes, good afternoon. Thanks for taking the question and for the presentation. I have three main questions, please. The first one is on the order intake. So it's good to see that you keep on winning orders from Chinese automakers. Could you please remind us the share of your revenues and order intake that are now with the Chinese automakers specifically? So that's the first question. The second one is on the midterm targets. You reiterated the 5%-6% top-line growth for the midterm, on the back of a good order momentum, but you did not mention anything regarding the margin target. So, is there any message here, notably, as you mentioned, that volumes were sometimes not as high as expected on EVs?
So just wanted to know whether you confirmed as well, the midterm targets, and for margins, I mean. The final question is on European margins, specifically, they were quite disappointing in the previous quarter. Could you please confirm that Q3 was the low point for European margin, and that it should be back to positive margin again, in the next quarter? Or for any reasons, because of the flattening volumes plus sustained headwinds, it will remain difficult. Thank you.
Okay. So I will answer the first question to the order intake. So, I said we have a strong order intake in general, but we do not share it between Asia and the rest of world or US and Europe.
Well, Alexandre, with regards to the midterm target and guidance, we confirm both. So it's 5%-6% revenue line, and this is also the message we want to get across, while the current trading is challenging, this is our headline, as we already mentioned quite in detail. The prospect we see quite positive, and therefore we can and we do stand by with the midterm target, 5%-6% growth, and this goes hand in hand with the 14%-15% Adjusted EBIT margin. So the guidance, the midterm guidance is confirmed and unchanged.
With regards to your question, whether we have bottomed out our performance in Europe, I'm a little careful here, because we do actually not give a forecast. But obviously, as always, I'd like to give you some flavor, and the point is, the Q3 was very weak in terms of the top line. And yes, we had the turn of the year, we had the festive season, and this is a particular point of time of lower and fewer working days at the customer end, and this was to some extent also clearly, you know, used and levered on by the OEM. So with regards to Q4 and the quarters to come, we would assume that this is changing.
But of course, the overall situation that we have also today is still weak. We have call-offs that show the same pattern, but again, more working days. We have not this specific phenomenon of the year-end turn with the extended customer plant holidays, and therefore, you know, I would cautiously, you know, look positively into the next quarters to come. I think just from the mere numbers, you see top line development, it is a quite important and major impact that we saw in a comparison to last year, which was, from that point of view, quite extraordinary. So that is of what we see with the EBIT margin, but also sales development as still being a challenging environment. I hope that answers your three questions, Alexandre.
It does. Thank you very much.
The next question comes from Christian Glowa from Hauck & Aufhäuser investment bank. Please go ahead.
Yeah, hi, good afternoon. A couple of questions from my side. Let's do them one on one. My first question would be on current trading. We understand that Q3 was challenging to calendar Q4 because of seasonality on extended Christmas break. But how about current trading? How was Q4 doing so far? Are you about to return to growth in Q4? That would be my first question, and then I continue thereafter. Thank you.
Well, Christian, this is more or less the same question that we heard from Alexandre, just in other words. Yes, it was special in Q3, but the trading environment is not different today. So it has not changed, especially not in such short term. The headlines we also see in the automotive industry are not that positive, and therefore, you know, the call-offs will stay weak for the time being, especially here in Europe. At the same time, we can confirm that we see the same very buy-in situation in Americas. So this two worlds perspective is unchanged. But as I said before, we do not have this specific situation with the year-end turn. We have more working days.
That is decisive also for revenue at the customer end, but call-offs are structurally lower in Europe with the platforms I also mentioned. So if, as an example, we take again a platform like the Mercedes S-Class, it is not trading and called off by Mercedes-Benz as a year ago. And for the time being, and this is not a thing that changes overnight, we see, still see this ongoing as a pattern for at least the next month to come.
All right. And then my second question, you talked about utilization and understood that you talked about a utilization rate of 50%-60%. I guess that was meant to be on the plants in Europe, right? Or was that on group level?
No, no, that is absolutely allocated to Europe. You know, we have the very also very different utilization rates in Americas with Querétaro being our main plant, very well utilized, as we have the buy-on demand there. So also here, again, we have to differentiate very clearly, regionally we see these low utilization rates here in Europe. And yes, not to forget, we have a Bergamo plant still in there, no, not longer anymore. And some of the plants that have a particular impact, also from platforms that are exceptionally weak in terms of market demand. And if I may give you some flavor also here, then we talk also about e-vehicles, the electric vehicle architecture from Mercedes, as an example.
So also here, we do have specific situations in specific plants, depending also on the allocation of models and platforms to those plants. So that is driving the situation, and this is allocated and directed to Europe.
Okay. And then two further questions, if I may. My, my next one would be on your personal cost, which seem to be quite inflated at the moment... to remain flexible in your production set up, mainly in Europe. Is there any chance you can pass on also these personal costs to customers? So in other words, should we expect some compensation payments looking forward on personal expenses, to maintain your flexibility? As cost, as you said, basically, customer call-offs seem to remain volatile. Is there a chance to pass that to customers?
The answer is yes, Christian. We do, and it's always a question of magnitude. We cannot get a compensation in full, but as you said, I think you used the right words. It's inflated because we cannot actually adjust the personnel expenses and cost so well because of the volatility in the call-off. So we are actually carry a certain inefficiency in our operations because of these changes, and that makes it difficult, and that's exactly the point where we come in and talk and negotiate and bargain with our customers. That because of those fluctuations and volatilities, we want to have a compensation. But again, as we focused on material cost, material inflation in the past, it's now heavily focused on labor costs and this is to some extent attainable.
But we gonna don't get a full coverage. There's not anything like a pass-through mechanism or a possibility for us. But yes, it's part of these compensations that we also mentioned, and it's an important part also to protect the profit line that we also report to you.
Okay. That's very clear. Thank you very much. My last question would be on the new order win from the Chinese AVATR platform. Can you please provide roughly an indication what the content is per car for this new, customer? Because I think on average, you said the content should be around EUR 120 per vehicle. Is that slightly more or less than the average?
Yeah. This is... It's a low content. It's a single digit here and, as you know, AVATR is a startup customer. He started already, still and, yeah, it's not too much herein, but nevertheless, we see growth at AVATR, and there will come even more cars from them.
Okay, that's clear. Thank you very much.
As a reminder, anyone who wishes to ask a question may press star followed by one at this time. So there are no further questions at this time, and I would like to turn the conference back over to Markus Wittmann and Dr. Johannes Burtscher for any closing remarks.
Well, we have to say thank you for listening. Thanks for joining this call, and we are looking forward to our next results presentation, when we then present the preliminary results for the full year. Thank you.
Yeah. Thank you also from my side for joining, and see you hopefully in the next presentation. Thank you.
Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.