Dear ladies and gentlemen, welcome to the SAF-HOLLAND SE H1 2024 results call. Today's presenters are CEO, Alexander Geis, and CFO, Frank Lorenz- Dietz. The presentation slides are available on the SAF-HOLLAND corporate website. The presentation will be followed by a Q&A session. Please note, this conference call will be recorded and published on the corporate website of SAF-HOLLAND SE. Everything spoken through the unmuted microphone will be processed during the online meeting and published on the website of SAF-HOLLAND. If a participant does not wish to be recorded, they should refrain from participating in the Q&A session and keep the microphone muted. The Q&A session is exclusively for institutional investors and analysts. All other participants of the conference call are kindly asked to contact the investor relations team directly if they have any questions. Mr. Geis, the floor is yours.
Hello to everyone, and welcome to our conference call on our Q2 2024 results. Let me start with the recent strategic highlight on page three, please. Three weeks ago, we announced the acquisition of Assali Stefen , an Italian manufacturer of special axle and suspension systems. The closing already took place at the end of last month. Assali Stefen is a company known worldwide for the development, production, and sale of chassis-related components for trailers and semi-trailers, as well as other special applications. The company currently employs around 70 people and operates a development and production site in Verona, Italy, and is in close proximity to Tecma, a company we purchased some months ago, and our existing SAF-HOLLAND Italy site.
Moreover, the acquisition fits seamlessly into our recent acquisitions, which were focusing on special axle products like KLL in 2016 in Brazil, and this year's Tecma in Italy. We are expanding our product portfolio for standard and special applications, ranging from standard rigid axles to swivel and self-steering systems. In the course of the integration, synergies from bundling resources as well as cross-selling are expected to further drive the potential of the acquisition. Let me move on to the Q2 2024 highlights on page four, please. As already indicated with our ad hoc announcement mid-June, SAF-HOLLAND demonstrated the resilience of its business model in the first half of the year. Let me explain this with a couple of KPIs. Q2 sales ended 8.7% below last year's level.
Organically, sales decreased by 10.8% year-over-year, due to a weaker OE business, which was only partially offset by the continued robust aftermarket business. The acquisitions of IMS Group and Tecma added 1.8% to sales. Despite this overall decline, we delivered a strong adjusted EBIT margin of 10.7%, or 1.1 percentage points above last year's level, and was driven by a high share of the aftermarket business, on top to our strict focus on cost and early adjustments of production levels. Moreover, together with an improvement of the net working capital, our operating free cash flow came out strongly with EUR 56.8 million in Q2, and our leverage improved from 1.9x at the end of March to now 1.8x at the end of June.
In a nutshell, during the second quarter, the profitability momentum even accelerated compared to Q1, and therefore, we raised our adjusted EBIT margin outlook for 2024. Looking at Q2 2024 results in more detail on page five. Compared to prior year, all regions were impacted by a weaker market environment and showed declining growth rates. Americas was down by 14.5%, 14.4% year-over-year, EMEA down by 3.6, and APAC showed a decrease of 6.5% year-over-year in Q2 2024. Nevertheless, we achieved group sales of around EUR 507 million, paired with an outstanding adjusted EBIT margin of 10.7%.
Our net working capital ratio increased to 15.8% at the end of June, also due to the acquisitions, but was down compared to the end of the first quarter with 16.5%. As a result, we were able to translate this strong operational performance into a solid operating free cash flow of EUR 56.8 million. In a nutshell, the figures for the second quarter of 2024 have shown how resilient our business model can be, even in times of a weaker market environment. Let me continue with the group sales on the next page, please. Sales in the first half of 2024 was a bit lower due to the continued softer commercial vehicle market, especially in the trailer segment in EMEA and the U.S.
Accordingly, OE sales were 12.8% below the same period of the previous year, which ultimately resulted in organic decline of sales of 9.5% year-over-year. Hence, the second quarter declined by 8.7%. In organic terms, the group was down by 10.8% compared to Q2 2023. However, this decline was partially offset by the additional sale, sales of EUR 9.9 million from the acquisitions of IMS Group and Tecma. Moving on to the sales split by region and customer on the next page. So due to the acquisition of IMS Group and Tecma, the sales share of the EMEA region increased to 46%. The Americas region was affected by the weaker trailer markets and contributed 41.2% to group sales.
The APAC region slightly weakened in the second quarter, primarily due to the withheld investments in the wake of the elections in India, which took place from April to June. However, APAC share increased slightly to 12.8%. Now looking to the split by customer group, so three distinct business units. In total, sales of OE business decreased by 17.6% compared to the same period of the previous year, to now EUR 312 million, which was mainly due to the weaker commercial vehicle market in EMEA and North America. Accordingly, the trailer OE segment accounted for 48.5% of sales in the second quarter, which is a decline of 5.4%, while the truck segment also declined slightly to now 13.2%.
In contrast, you can see the aftermarket business grew significantly by 10.4% to now EUR 194.5 million, in particular because it benefited from the strong OE business in recent years. So we have a huge OE population. In addition, individual sales measures in EMEA and America also had a positive impact on the aftermarket business. As a result, the aftermarket business contributed 38% to sales. On the next page, you can see the Group Adjusted EBIT developments. So the Adjusted EBIT in the second quarter grew very solidly by 6.7% compared to the same period of the previous year, resulting in an adjusted EBIT margin of 10.7%.
The higher share of the aftermarket business had a positive impact, and we also benefited from the early cost adjustments that we introduced in response to the normalized markets, especially the EMEA and the Americas. In addition, the continued synergies from the Haldex integration also had a positive effect on our profitability. Accordingly, the adjusted EBIT grew by 9.1% to EUR 102.8 million in absolute numbers in the first half of 2024, resulting in a higher margin of 10.2% compared to the 9.1% a year ago. Let's jump into the different regions, starting with EMEA on the next page, please.
So you can see that top line development in the EMEA region was strongly influenced by the softer development of the trailer market that is expected to have declined between 15%-20% year-over-year. Hence, our sales fell organically by 8.1% in Q2. For the first half year, the change amounted to -7.7%. Although the region was able to outperform the important trailer market, sales declined due to the weaker demand in the OE segment. Despite that, the aftermarket business continued to develop very robustly, but also benefited from individual sales measures of older equipment, so we got rid of older equipment.
Moreover, IMS Group, which was acquired at the beginning of the year, and Tecma from Italy, which is fully consolidated since the beginning of April, contributed a total of EUR 9.9 million to the sales in the second quarter. Despite the lower top line development, we were able to increase our profitability in the second quarter based on the higher share of the aftermarket business, but also due to a very strict cost discipline and the adjustments of our production capacities. So adjusted EBIT grew by 13.8% year-over-year to now EUR 20.5 million in Q2, resulting in an adjusted EBIT margin of 8.8%. So this is going into the right direction. And in addition, the synergies from the Haldex integration also had a positive impact on our margins.
Moving to the second biggest region, which is Americas, on the next page. You can see that the Americas region, as in the first quarter, had a weaker momentum in the trailer U.S., market, and this continued also in Q2, resulting in an organic sales decline of 14.7% year-over-year. Despite that, the truck market continued to perform better than expected, and the aftermarket segment grew solidly and benefited from the increasing market penetration of SAF-HOLLAND systems in recent years. So also here, we pumped in a lot of OE business and created population, and now we are benefiting in the aftermarket. Accordingly, sales declined organically by 15.1% in the first half of the year.
Nevertheless, we were able to slightly improve the Adjusted EBIT in Q2, which due to the higher share of the aftermarket business, as well as our strict cost management. In addition, efficiency improvements in production, as well as a more favorable product mix for specialty application, contributed to the margin improvement. So the Adjusted EBIT margin amounted to 12.2% in Q2. Last but not least, coming to APAC. So as already said, due to the election in India during the second quarter, which held back government spending on infrastructure projects, the region was unable to continue the previous year's growth story. And in addition, the weaker momentum of the U.S. trailer market was negatively impacting trailer builders in Southeast Asia.
So these trailer manufacturers also export to the U.S. market, which is down at the moment a little bit, so we could not get the sales we were getting last year. Therefore, APAC top line declined organically by 6% to EUR 65 million in Q2, and accordingly, sales in the first half of 2024 amounted to EUR 128.7 million, and were 5.4% above the previous year, which corresponds to an organic growth of 2.9%. Looking at the bottom line, we were able to increase the Adjusted EBIT margin to now 12.6%, which is a good achievement. And here, too, the higher share of the aftermarket business led to a favorable mix effect, and in addition, the improvement of earnings in China also supported our profitability.
With this, I hand over to Frank for the key financials of Q2.
Okay, thank you, Alex, and hello to everybody on the line. As usual, let me start with a short overview on the EBIT to adjusted EBIT reconciliation for the group on page 13. Reported EBIT increased by 38.4% to EUR 46.3 million in the second quarter, 2024. The amount for depreciation and amortization from PPA slightly increased to EUR 6.5 million in the second quarter due to the latest acquisitions of IMS Benelux and Tecma. Therefore, we raised our expectation for the full year level to around EUR 25 million, which includes already a first assumption for Assali Stefen . We will update this as soon as we have finalized the PPA.
While we adjusted for restructuring costs in total of around EUR 8 million in the first half of 2023, including expenses for post-merger integration activities of Haldex, and as well, EUR 4 million for the cyber attack, you may remember, now in the first half 2024, adjustments amounted only to EUR 1.4 million, which considers acquisition and integration costs for IMS and Tecma, and some follow-up expenses related to Haldex PMI. Overall, as Alex already explained, reported and adjusted EBIT increased strongly during the second quarter 2024. Moving on to page 14, there you see the bridge from EBIT to basic earnings per share. As said before, reported EBIT amounts to EUR 46.3 million for the second quarter 2024, and grew strongly by 38.4% compared to prior year.
Finance result amounted to EUR -11.9 million and deteriorated by EUR 7 million compared to the second quarter, 2023. The difference versus previous year was driven by higher interest expenses in connection with interest-bearing loans and bonds, and in addition, by FX valuation effects, mainly on IC loans at the closing rate. These effects are subject to change up and down, depending on FX development, but without any cash outflow impact. Additionally, as information, the half year financial result is now at EUR 18 million, which confirms the expected run rate for going forward with around EUR 9 million per quarter, while finance income can fluctuate from quarter to quarter due to FX rate developments. The tax rate of 29.6% for the second quarter, 2024, is significantly below last year's level of 37.2%.
That was caused by lower non-capitalized deferred tax assets on loss carryforwards at some subsidiaries, as well as by reduction of losses for which no deferred tax assets were recognized. For the full year, we continue to assume a tax rate between 30%-32%. Overall, basic earnings per share grew significantly compared to prior year due to the lower adjustments compared to the second quarter, 2023. The adjusted earnings per share declined by around 7% to EUR 0.69 for the quarter. But also for your information, for the half year period, also, adjusted earnings per share grew strongly by 7.5% from 1.28 EUR to EUR 1.38 . Moving to page 15, there you see the development of the equity ratio.
Compared to year-end 2023, equity improved by EUR 16.3 million or 3.4% to EUR 492.3 million, mainly supported by the high result for the period, including a negative impact from the dividend payment in June. Since the balance sheet total even grew higher by 3.9%, mainly due to the acquisition of the IMS Group as well as Tecma, equity ratio only reached a level of 28.7% and was slightly lower than the level at the year-end 2023. In a twelve-month view, we improved from 25.7% in June 2023 to 28.7% in June 2024, which proves our sustainable performance in terms of profitability. Turning to page 16, I would like to speak about net working capital development.
First of all, I'd like to report that we moved net working capital back into our target corridor, as promised in the last corridor, in the last call, and including the recent M&A, we managed net working capital down from EUR 350.9 million to EUR 332.4 million in the last three months. Compared to the end of 2023, net working capital still increased by 11.6%, to the EUR 332.4 million. Inventories rose by 1.4% compared to December, driven by the consolidation of IMS Group and Tecma. We were working on reducing our inventory to the lower production level during the second quarter. Nevertheless, please keep in mind that the higher aftermarket business comes with higher inventory needs, which leads to a general higher stock level.
In addition, an increase of 9.7% in trade receivables was recorded at the end of June, mainly due to the acquisitions. As a result, the net working capital ratio of SAF-HOLLAND amounted to 15.8% of sales. We are working on improving it further in the next months. Net working capital management is and remains a top priority for us. Now let me address the cash flow development on page 17. The net cash flow from operating activities in the second quarter amounted to EUR 69.5 million, and was especially driven by the cash inflow from an improved net working capital in the amount of EUR 21.5 million, as well as by the strong operating result.
As a result, the net cash flow from operating activities in the first half year amounted to EUR 62.6 million, an increase of 43.6% year-over-year. In addition, while paid income taxes were almost stable in the first six months compared to the prior year, the cash flow was burdened by several effects that predominantly refer to unrealized currency effects, as well as valuation effects from pensions and non-cash effective positions. Investments in property, plant, and equipment, and intangible assets amounted to EUR 20 million in the first half year, reflecting 2% of sales. Overall, CapEx focused on the further automation of production processes in the EMEA and Americas regions, as well as the preparation for further capacity expansions, for example, in Turkey and Americas. As published mid of July, we had our official plant opening for our new plant in Mexico on July 17th.
Finally, the operating free cash flow amounted to EUR 44.3 million for the first half year, 2024. Now, let's turn to page 18 for the ROCE development. ROCE, at the end of the second quarter, amounted to 22.6% and was mainly driven by the disproportionately high increase in adjusted EBIT in the last twelve months. With 22.6%, we once again demonstrated the efficient use of capital employed and thus our ability to sustainably increase the value of the company. Moving on to an overview of the leverage development on page 19. At the end of June, the net debt EBITDA ratio was unchanged compared to the end of December 2023, at 1.8x .
The increase in net financial debt by 9.4%, despite our strong position of cash and cash equivalents, was mainly due to the increase of interest-bearing loans and borrowings to finance the latest acquisitions, as well as the dividend payment. However, we achieved once again the target of reducing the leverage ratio to maximum of 2.0x by the end of 2024. In the upcoming months, we will also implement a new group-wide cash co-pooling program to achieve a further improvement in the use of free available cash. Having said this, back to you, Alex, for the outlook and closing remarks.
Yeah, thank you, Frank. I'm on page 21, showing the fiscal year 2024 forecast for the trailer and the truck markets. So in recent months, I can report that the commercial vehicle market moved more or less sideways in some markets, which was also due to the high interest rates, which led to investment hesitation by fleets, especially in the trailer market in Europe and the US. Based on these latest developments, SAF-HOLLAND now assumes that European trailer market will decline by around 20% this year compared to 2023, and those five percentage points lower than expected in May. For the European truck market, a decline of only now 12% is expected, compared to a decrease of 15% in May.
In North America, both trailer and truck markets are predicted to further soften after the strong previous years, and are forecasted to decrease by around 26% and 9% for the truck market. In China, both trailer and truck markets are expected to continue to grow. However, the truck market is expected to grow by around 5% this year, and those five percentage points lower than forecasted in May. Speaking of India, so as for India, following the conclusion of the elections, the government infrastructure projects are expected to continue now. Nevertheless, following the decline in production in the first half year of the year, SAF-HOLLAND expects the trailer production to stabilize at the 2023 level, also for this year as a whole, which also was a record year last year.
In the market for heavy trucks, which is less important for us in India, production figures are expected to decline by around 13%. 2024 will therefore be a subdued year for the commercial vehicle industry. However, we currently expect the North American and European market to recover by beginning of 2024 latest. Now on the next page, looking at the guidance for the fiscal year 2024. Although we are facing a market decline this year, we continue to improve our profitability in the second quarter, as described earlier. We raised our annual forecast for the Adjusted EBIT margin to around 10% from previously 9%-9.5% on June seventeenth of this year.
Moreover, the 2024 guidance on sales and CapEx remains unchanged, hence, based on the current order situation, the recent acquisitions and the market developments described before, we continue to forecast sales of around EUR 2 billion. This means that we do expect a slightly lower second half in terms of sales compared to the first half of 2024, which reflects the latest OE market expectations that include a lower truck and trailer market in North America and a continuing weaker European trailer market. Hence, we will continue with a strict cost management, of course, and in addition, we also expect to continue to benefit from a favorable customer group mix with a higher share of the aftermarket business, as well as from a continued realization of the synergies from the Haldex acquisition. So let me conclude on the next page, the presentation with some key takeaways.
Although we continue to face a weaker OE market environment, we have benefited from a strong aftermarket business recently, which is expected to remain robust in the coming months. Thanks to our diverse customer mix, we were able to further increase our profitability despite lower sales, but also through strict cost management. As a result, we raised our Adjusted EBIT margin guidance well before the end of the first half of the year, and our robust business model shows just how resilient SAF-HOLLAND is today. On the basis of this solid operational performance and the resulting solid cash generation, we will continue to work on improving our leverage, despite the bolt-on acquisitions. Ladies and gentlemen, this concludes the presentations. Thank you for listening to us, and I guess we can now start with your questions.
Ladies and gentlemen, if you would like to ask a question, please press nine followed by the star key on your telephone keypad. If you wish to cancel or withdraw your question, please press nine followed by the star key again. So please press nine one now to state to ask a question. Thank you. And the first question is coming from Yasmin Steilen from Berenberg.
Thanks for taking my question. I have two, if I may. So first on your aftermarket business. So in the second quarter, you have reported an impressive 38% aftermarket share sales. Could you elaborate a bit on the reasons behind the increase? So your sales campaign and what you expect for the second half. And the second question is on India trailer. So you mentioned during your call, the Q1 call, that OE tenders should return in the second quarter for July, August, providing some confidence in the H2 development. Could you please update on the current order pattern or any feedback you received from customer discussions? That would be highly appreciated. Thank you.
Absolutely. Thanks for asking the question, Mrs. Steilen. I would start with the aftermarket, of course. Second quarter was a very impressive aftermarket quarter for us, I have to say. Well, there are a couple of reasons. So first of all, we have a lot of years, recent years, with a high OE population, which we created. So we pumped a lot of OE products into the market, trailer, axles, suspensions, fifth wheels, and of course, they come in different years with aftermarket needs. So we were increasing the OE population, and we are now benefiting from that.
What we also did, we checked all our inventories in all the warehouses across the globe, so not only in Europe, but also in the Americas and also in Asia, did the ABC analysis, so slow-moving parts, and we said to the guys: "Hey, guys, we have a lot of slow-moving parts. Just sell it off, do some fire sales." And that worked out impressively, so we had a lot of millions, which we could turn in all areas of the world. That also helped. So this had two effects. First of all, higher increased aftermarket sales, but also a lower inventories of slow-moving parts. That was good. And we also increased our so-called A2 brand product line. The A2 product line is, for instance, for Europe, it's our Sauer product line. This is for older trailers and trucks.
So basically, when the trailers or trucks are, like, 10, 12 years old, we have customer groups, they are not willing to spend the money for OE aftermarket components. They would like to have a more cost-competitive product to replace their trailers or components on the trailers and trucks, and we also are pushing this, and further increase the sales. That, I think, is it, is it for the aftermarket. And the second question was related to the OE trailer production in Europe. Well, we thought it's getting a little bit better, so we are coming from a record year in 2022 and 2023. There was a clear hesitance, which we could see from the fleets to invest in Q1, but also now in Q2. We are getting orders in, the big tenders are still not there.
Here and there, they're increasing. The trailer manufacturers, and I spoke personally with a lot of them, just visited one this week on Tuesday, they're saying that they're increasing their production rate slightly, but not a lot, and they're waiting for more bigger orders coming from the big fleets, and also from the medium fleets. So we hope that the IAA, which is now taking place next month, and also the Automechanika for the aftermarket, will bring more momentum. But we do not expect that we then increase our capacity again within one month or two from, let's say, 30%-40%. This will not be happening. So, in a nutshell, fleets are still waiting, and the trailer manufacturers are ready.
They're increasing here slightly, a little bit, but not enough that we really could, let's say, do another shift or something like this. So we are waiting for the fleets to reorder in bigger scale. Does that help?
Yeah, perfect. Thanks very much. Very clear. I'll step back into the line.
The next question is coming from Nicolai Kempf from Deutsche Bank.
Yeah. Hi, good afternoon. Thank you for taking my question. I have two. First one's a bit on the seasonality you have, 'cause I think typically H1's a bit stronger with H2. Last year, that seasonality was not as pronounced because end markets were just pretty strong in the last year. So my question is around: Do you see the second half profitability be a touch weaker versus the one in the first half? Also given that you have stated that you have slight, potentially slightly lower sales in H2. And my second question is about the finance expenses. They have reached almost EUR 29 million in H1. Should we expect them to come down in H2?
I will take the first question with the expectation on the adjusted EBIT. Nicolai, we just raised the guidance a couple of weeks ago, so we are pretty sure you know us. We are conservative. We don't do stupid things. We are calculating in detail. We have just finished another round of forecasts around the globe. We are very, very confident that we will not touch our adjusted EBIT guidance for the remainder of the year. So in a nutshell, second half is expected to be as good as the first half. We are now in the first half, we are at 10.2%. Our guidance is around 10%, which is in the ballpark of 9.7%-10.3%.
We feel very, very confident that we will hit our adjusted EBIT guidance for 2024.
I will take your second question. I think you are referring to the finance result. Second quarter was EUR 11.9 million. As I explained, we do have some FX impacts and there's some radio noise.
Nikolai, I think you have, you are, c an you put yourself on mute just for a second, because you have some background noises?
Yeah, will do.
So we had EUR 11.9 million in the second quarter, and the first quarter finance result was about EUR 6 million. In total, it's eighteen, what is basically our also guidance for our finance result for the full year, if you take it times two, so EUR 9 million per quarter. What we do have and cannot really forecast, is the impact on our internal FX exposure coming from intercompany loans, that is always subject to new evaluations quarter by quarter. It was positive, impacting us in the first quarter with EUR 3 million.
Now it comes back with negative EUR 3 million in the second quarter. It's so for the half year, it's zero balance, but this is something we cannot forecast. The real important topic is the cash relevant part of the finance result. What is the interest payments? What is part of our guidance? We give EUR 9 million per quarter.
Okay, good. Thank you.
Thank you, Nicolai.
The next question is coming from [Oliver Harless], from Hauck Aufhäuser Investment Banking.
Hello, good afternoon, Alex and Frank. Thank you for taking my questions. The first one, following a little bit on the guidance and the market trends, and also taking into account that you are the leader now in Europe, I am wondering, reading between lines, what you have already commented to my colleagues, the production run rate that you have now look even conservative for the rest of the year, taking into account the conversations you're having with some OE's. So this means for you that the 20% maybe that the market for customers are providing for this year is a little bit negative?
Or why are you so successful, apart from this special campaign for the aftermarket, to really turn around now this negative development, to just achieve a wonderful result, no, of that is just a moderate decline, no, in EMEA? What is the magic that you are applying here?
Well, we speak with a lot of owners of the trailer manufacturers, basically, and you know that the majority of our OE business in Europe is coming from the trailer business, and the smaller portion is coming from the truck business. We get orders in, but I clearly also speak with bigger fleets, and they really hesitant, you know, we have this thing now going on in the Middle East, you know, don't know what is going on in the near future. And we also have elections in the U.S., so the people are a little bit in waiting mode. First of all, they would like to have the Middle East to be stabilized soon, as we all want it, of course, no new outbreak. Elections are coming in the U.S. in November.
And don't, don't get me wrong, even if the market is minus 15 or 20%, it's still an okay year. It's not a bad year. So, if we see the run rate of our export production and fifth wheel production, so we can clearly see what the truck manufacturers and trailer manufacturers are producing, it is okay. So I've seen many, many more worse years. But, you know, this very positive momentum at the moment, I cannot see when talking to trailer manufacturers and the fleets. They are a little bit in the waiting mode. Orders are coming in, our production is running, but it's not as good as the people would be fully investing. So what would clearly help is another decrease in interest rates in both areas, so Europe and by the Fed.
People, as I said, they are in a waiting mode, what's going to happen in the Middle East and also by the for the election in the US. In terms of. Yeah? Uh-huh.
Okay. Sorry, yeah, I interrupted you, sorry.
No, I just wanna say, in the aftermarket... Well, in the aftermarket, we will be further increasing our sales in the years to come. This is simply a mathematics due to our repopulation, which we created in the last five, six, seven years, in trailer and in truck, on both sides, of the big markets like Europe and North America. So we will be increasing. You see that the absolute sales, which we announced for H1 or the different quarters increased. And as I said before, to also Jasmin, when she was asking the question, what we did in Q2, we were going through all the warehouses in our subsidiaries, the production facilities for the dedicated for the aftermarket, and we simply got rid of all the material, and this also got another boost.
So we increased organically due to the old population, but made some special sales actions for older material, which is good for sales, but also to get rid of of old material, which reduces the inventory. But, there is still a decline in the trailer market in Europe and in North America, and we cannot fill that big gap because, the trailer market in the US accounts for roughly 50% of our OE sales, other 50% is truck. And here in Europe, it's like 90%-10%, 90% accounting for the trailer market, and we cannot simply compensate that. We gained another market share in Europe, but we cannot somehow compensate 15%-20% decline in the trailer market in Europe.
I see. Thank you for the comments. I was wondering, now it's more important, the, the slight recovery of the freight volumes in Europe, or, or the aftermarket is also supported by the aging fleet, the growing and the third time aging fleet? What is more important at, at this point for the, for the aftermarket in Europe?
Well, the transportation, of course, is also impacting the aftermarket sales, because the more the people use the trucks and trailers, the more they need spare parts after certain years. That's clear. But of course, the aging fleet is, in my point of view, a bigger factor which drives then the aftermarket sales.
Okay.
The older the fleet, aftermarket.
Okay, great. Thank you for the clarification. So, this trend, you see, do you see it continuing on as years, as you're commenting, now because the fleets have grown a lot, and there is no reason, no, with potential freight volumes to increase to see aftermarket turn into negative, no? I mean, this is a trend that should remain, no, positive in the.
Aftermarket business is really stable. If you go back to really bad years, like in 2009 and 2020, when we had the COVID year, the aftermarket only reduced by 5% overall in crisis years like that, where OE was down 30%-40%. OE is very, aftermarket is very stable. And to be honest, see, if the fleets are sitting on older trailers and trucks because they don't, they are hesitant to invest in new equipment, the more they have to buy aftermarket components, because at a certain point of time, they are not running anymore if you don't repair the brake or, you know, other, suspension or other, running gear. So for the aftermarket, I'm 100% sure, and you know, I'm coming from the aftermarket. I was leading our aftermarket for, like, a decade.
I'm still very much involved in the discussions and the strategy of the aftermarket, so be assured that our aftermarket is running like a big, big train.
I understand. Thank you. Thank you for the comments. Last two questions, one on APAC. These margins were really high, taking into account that India was not supporting the quarter as much as before. Is this sustainable, these levels of margins in APAC for the rest of the year and maybe in the future? And my last question on the CapEx for the year, do you have now a better view on how much it's going to be on relation to sales? M aybe narrow a little bit the number for us, please?
Yeah, absolutely. Well, I'm very happy to, with the development of APAC, while you are guiding us for many, many years now, you remember times when I had unfortunately report negative adjusted EBIT of 10% or 11% for the APAC region. Those times are over. I'm very, very convinced that this region will continue to be double-digit. Okay, I'm even forcing the team to go the next mile, and we are growing in all regions, and we have another big benefit, that was our weak China business. The last time I announced that it's getting better, so it's even getting better now.
So, one of the bullet points in the presentation showed that also, it's improving. China profitability is one of the cornerstones that we were able to further increase our profitability in all of APAC, overall APAC region. We are not there where we have to be, to be honest. So China for us is still dilutive, but they are now getting better and better. And once China will be there, where they have to be, that means also double digit. That is another kick for our APAC region. The team is there. They can easily add another EUR 100 million, EUR 200 million in the years to come, with the same team, so the HNA will stay, relatively the same. So I'm very, very convinced that our most profitable region, APAC, will continue to be our most profitable region.
Thank you, Alex. Congratulations again for the results.
Okay, and to your second question, [Oliver], for CapEx, our upper limit remains 3% of sales. This is a fixed limit. It will not change, and we also, and there's no reason to do different, we continue our initiatives for capacity increase, for improving our footprint in engineering, developing the products we need the next years, and as well, our IT activities. So it's all in line, under control, and the 3% is the maximum we have for the group, 3% of sales.
Thank you very much, Frank. I go back to the line.
Thank you.
The next question is coming from Holger Schmidt, from DZ BANK.
Hi, good afternoon, everyone. I have two questions. Yeah, we have seen a couple of acquisitions in the recent past, yes, past year. Are you finished now, or is there more to come? That's the first question. And the second one is, regarding the announcement of Krone Group at the end of June. As far as I can see, Krone Group has entered into a partnership with Schwarzmüller Group, and to what extent is this a risk or an opportunity for you? Thank you very much.
Okay, coming to your first nasty question, I have to say, to be honest, of course, we cannot say anything about further M&A. Well, we acquired IMS Group, which was an easy one because the IMS Group was our partner, distribution partner, for almost four and a half decades for the Benelux. So we know the people, people know us. That was a check mark. It's done. PMI is done. We are now growing the business also with the steering systems, which we didn't do before as a Holland group. The second one was the consolidation starting from April 1 of the Tecma group, Tecma, one company in Italy, Verona. Very good team, also very specialized in specialty products, so lower volumes, but profitable. We wanna increase this.
And also now, the recent acquisition, which is being consolidated, starting now from August 1, Assali Stefen, also good team, good products, also niche markets, good market shares in Scandinavia and Northern Africa, which we were not really good at as SAF-HOLLAND before, and also in, of course, in Italy and in New Zealand. And this is like a triangle, if you would like to take a look on the Italian map, Verona. So SAF-HOLLAND Italy, Tecma and Assali Stefen is just 15 minutes away from each other by car. So 15 one way or the other way, it doesn't matter. So of course, we are working on consolidation, and our teams already started with the PMI for Tecma, and they will be starting now next week.
And I also will be in Italy next week for three days, speaking with all the teams, driving the further consolidation. So some synergies is to be expected to come in this year and also next year, and also increased sales, of course, because then we can focus on niche markets and specialty products. But at the moment, for further M&A, of course, we cannot say everything, but what I can say is, I think for this quarter and the next quarter, we have a lot on our shoulders to manage with integrating the great people we have now in addition to our group, coming from Tecma and from Assali Stefen, to be part of the group and drive the business further. So nothing on the plate at the moment.
The other thing, you asked about the Krone commitment with Schwarzmüller, which is the biggest Austrian manufacturer of trailers, where we also have a high market share of axles. We have a running contract for years to come. I have to be honest, we also talk a lot of Krone because we are one, or basically we are the largest supplier to Krone when it comes to the air disc brakes for their own axles. Okay? We are in discussions to expanding that business. As far as I know, this deal is not done yet because the antitrust approval is still missing, and we had some talks that it will last until end of the year. Then we will see, of course, if it's happening. I think it's going to happen, of course, but it will take some time.
We have good relationships with both great trailer manufacturers, so Krone as one of the biggest ones in Europe, and of course, with Schwarzmüller as the biggest one in Austria, and we are in constant dialogues. I think even they are coming next week to us for some deeper talks. We'll see.
Okay, appreciate it. Thank you very much.
Thank you, Mr. Schmidt.
Ladies and gentlemen, if you have any further questions, please press nine followed by the star key now. Thank you. And the next question is coming from Miro Zuzak, from JMS Invest.
Yes, hi. Thank you for taking my questions. Can you hear me?
Yes, loud and clear.
Good afternoon. I like to take them one by one, and not many. The first one is, could you please remind me of the sales impact of scope changes in the upcoming quarters? So I know I've seen there were some EUR 9.9 million in Q2. Now, with the additional acquisitions done so far, what will be this number in Q3 and Q4 according to your planning at the moment?
Well, the impact from IMS and Tecma will continue the next two quarters, and in addition, with the announced Assali Stefen acquisition, we will add another approximately EUR 15 million.
Per quarter?
For the remainder of the year, yeah. As we consolidate them, starting in August. So from August till December, we will add EUR 15 million.
Okay, thank you. And the other two were around EUR 10 million, right?
Yeah, total.
Okay. Then secondly, I noticed your excellent gross profit margin, 22.7, 2.6% in H1-ending Q2. Was this primarily due to a mix effect in the favor of aftermarket sales, or was there any other effects impacting the gross profit margin?
It's a lot more effect. It's as Alex explained on the EBIT development. It's first of all, the ability to flex down costs to lower volumes in the OE segment, but it's really where we are strong in all the regions, in the Americas and in the EMEA. Secondly, it's we continue to leverage on the synergy from the Haldex transaction, and thirdly, for sure, the favorable product mix and the higher aftermarket share, but it's the three topics in combination.
Okay, so it's fair to assume that you're gonna keep this margin level going forward, as long as the aftermarket mix is basically staying the same? Because the other two effects, the Haldex synergies and the flexible cost structure, this is going to stay, right?
Yes. Yes.
Okay. Then, you basically updated your EBIT guidance 10%, obviously also due to the strong margins that you have posted now. You still have this mid-term guidance, with 9%-9.5% EBIT. Is this still valid, or would you say from today's perspective, that you would see a higher margin level for 2027 as realistic?
Yes, I think we mentioned this already in the Q1 call. We are updating our strategy, and we also have to build a new strategy for 2030. We are working in this process internally this year, and we'll finalize this by end of the year, and then we will come up, beginning next year, with the capital markets day to present you updated strategy with a new updated long-term guidance.
Okay. Thank you, gentlemen. Have a nice afternoon.
Thank you.
Mr. Dietz, there are no further questions.
Okay, then. Thank you everyone for your questions. The investor relations team is available in case you have any follow-up questions. We will be on the road again, attending conferences in the coming weeks, and look forward to seeing you there in person. Have a good day, and bye-bye.
Thank you, guys. Bye.