Good morning, ladies and gentlemen, and welcome to the Stabilus SE web conference regarding the results in first quarter of fiscal 2024. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Dr. Michael Büchsner.
Ladies and gentlemen, a warm welcome to the Stabilus Quarter One earnings call. We have Stefan Bauerreis, our CFO, and myself, Michael Büchsner, CEO of the Stabilus Group in the call. Also, in the light of our acquisition of DESTACO, we've been working on our presentation for today, so you will actually see a new format. Target is to become clear in our communication and also give some more details about our industrial business. And with that, I will jump directly into the key messages of today. The closing of our DESTACO acquisition is on track, and we expect it to be on track until end of February. So February, end of February is then basically our closing date. And I can tell you something, early the year, we had a lot of investor relations calls, already road shows and also conferences.
Our membership, that means our investors and also the analysts, are deeply impressed about the DESTACO acquisition, the closer they have a look into not only the portfolio, but also the financial position of this company and the financing we have on hand. All that is very robust, so some of our investors have been talking to former employees of DESTACO and had a deeper look into the technology, and also, for sure, we're exchanging comments in terms of financial, financial performance, and the financing. Comes down to the point that the product portfolio is very good, profound, and also a perfect addition to our business, the Stabilus Group. On the other hand, also the financial performance is very, very healthy.
Continues to be healthy, with good forecast on hand for the coming year, and last but not least, also in terms of the financing, the financing is secured, things are stable. And you will see that later also on our free cash flow generation and our net working capital development, that we have the right foundation for this acquisition, for sure. As you all know, we are in a challenging industrial environment, and despite of this challenging industrial development and environment, we've been growing again 5% year-over-year, which is outstanding. Especially in the area of Asia Pacific and EMEA, we've been growing a lot. So in Asia Pacific, almost 22% year-over-year, and 8%+ in EMEA. Particularly strong, not only automotive, but also the commercial vehicle sector, health and recreation, aerospace, marine and rail business.
These are all businesses where we have our focus on, and we want to become the leader in the industry, and we are on a very good path towards that. We also have a very strong free cash flow position and generation. Net working capital is reduced, so we are absolutely delivering on what we said. The new net leverage ratio thereby is 0.2, so also here, very strong performance. We invest where it really matters, not only in terms of our M&A activities, but also for our internal growth. We've been developing over the course of the past months and bringing to serial production our industrial Powerise as you know, and now we develop a step further our radar technology, which is extremely important for the door actuation business.
And here also, again, the point, the door actuation business is the next generation of comfort in cars. Started off in Asia Pacific, with us being the leader in the market for door actuations there. And also there have been very good business wins of door actuation in the Western world, particularly in Germany, in the last months, which actually indicate also that we have a very solid growth performance for the years to come. Talking a bit about the guidance for the year. We expect again, in 2024, to be back-en d loaded with our results, particularly in the light of ongoing discussions with our supply base. Our supply base actually benefits now from reduced material rates, and this is particularly what we want to harvest the fruits of in the year to come. And these discussions are ongoing. They just started.
We see first good developments there, and this actually will pave the success throughout the year, and we are enthusiastic about our guidance, which we for sure will deliver upon. And with that, I will hand over now to Stefan for some key message in financial terms and some details by region.
Thank you very much, Michael, for this key statements and the key takeaways. I now would like to guide you through a little bit the different KPIs and the development of Stabilus Group. Starting on the left side with revenues. As Michael already said, we were able to increase our revenues by 4.1% compared the first quarter of last fiscal year and the first quarter of this fiscal year. Which, what is, from our perspective, a significant contribution, because we have to have in mind all the challenges around us. But if we go a little bit deeper in this development of sales, I would like to share with you two, three additional information.
First, exchange rate effects were not supporting our growth, so even with a negative impact on EUR 8.1 million, growth rate, the operating growth rate even is exceeding the 5.1% that we were able to show you here as a nominal growth rate. On the other side, we also are happy that now in the first quarter, we also have here our new companies, Cultraro, where we made the acquisition of additional shares and started with full consolidation in August last year. So therefore, it's our first real quarter that we have them in. So EUR 4.3 million effect on the acquisition is supporting us. On the other side, EUR 8.1 million euro negative on a FX effect.
So the organic revenue, if we're eliminating as well, the acquisition effect, as well as the exchange rate, would even be higher with about 6.4%. And therefore, we have to say that mainly the Stabilus product portfolio was the main contributor to this increase of our revenue line. As you can see here, and Michael already mentioned that, the strongest region in the perspective in the first quarter have been, once again, APAC and in China, where we were able to achieve significant growth rate within China or in APAC, I have to say, more than 20%, 21.9%. And on the other side, also EMEA, with a growth rate all overall of 8.2%.
We can rely once again on our good performance on the automotive sector, but also our good diversification in different areas in market segment, in industry, contributes to that good development of revenue, where health, recreation, furniture, aerospace, and commercial vehicle together are the major basis for getting this growth in the revenue. Talking now a little bit more on the Adjusted EBIT, where you can see overall, we were able, in total amounts, we were able to increase the EBIT numbers from EUR 32.6 million to EUR 33.3 million. But on the other hand, we have to say that the adjusted EBIT margin went down from 11.2% to 10.9%. This is really much driven on the one side by the product mix that we realized in the first quarter.
So there is, it is obvious that we had significant challenges, especially in Americas. I just want to remember, and refresh our minds that we had significant impacts on the strike, where also, large volume models, car models are, were impacting us in the first quarter, and therefore, Americas was, for us, a very challenging regions. And if we take out the, the mix impact of those areas where we, where we grew more or less compared to last year, if we take out this, this mix impact, we would be significantly higher, but at least 11.6% margin year-over-year. So that shows us that overall, we are able, and we made our homework.
We were able to optimize our profitability, and we are continuously on the way to do that. And as Michael said, the main issues also will be the discussion with our suppliers, which then will be a longer period to come during the year. So therefore, also, the Adjusted EBIT will be back-loaded, obviously, once again, as you know that from the last fiscal year. Going to the profit of the company, so the profit of the year, that perspective. And there, you might ask the question, why we have so big reduction in the profit of the year? So the answer here is quite simple.
As we were adjusting, showing the adjusted EBIT, which shows really much the operational profitability of the Stabilus Group, and there we adjusted mainly the consultant fees related to the acquisition of DESTACO. This was not done on the profit line, because profit, that shows really much the profit that comes out at the end of the day in the P&L. So if you say we have around EUR 8.8 million costs in relation to the for consultants in relation to to get the deal closed. And therefore, if you would add that, even on the profit side, we would get a very positive development and would not show then a negative development as you can see it here.
So once again, profit is mainly driven by the specific additional costs for consultancy to close the DESTACO deal of about EUR 8.8 million. This having said, if we then have a look at the adjusted free cash flow of the company, here, once again, we are back on track. And not only back on track, we were really much able to increase significantly our free cash flow generation from 32.7 up to 36.2 million euro, which is a significant increase, and which shows exactly the good result that we are able to bring out of our new net working capital development. And also here we have to say that acquisition-related payments have been adjusted in a magnitude of around EUR 3.7 million.
So finally, to summarize the overall picture, very strong development of revenues despite challenging environment. Good generation of EBIT, knowing that there is still a way to go, and we are working on that based on all our defined projects that we have on hand. Profit, mainly impacted by consultant costs due to the deal of DESTACO, and very strong cash flow generation, although it's this in the first quarter of this fiscal year, 2024. If we then go on the next slide, please, having a look on the business development by region in the first quarter. So as I already said, and here I would like to start on the right side with Asia Pacific.
Asia Pacific, once again, is, let's call it our, our rising star in the development of, sales. We had a very, very strong, sales development in terms of revenues, and that shows us the very good footprint that we have in Asia, and the very good relation, not only with European or, or Western customers, but also with all, Chinese and Asian customers on the, on the automotive, but also more and more on the industrial side, to achieve this, increase in, in, in revenue. And that not only, with an, an, an significant increase in sales numbers, also on the EBIT-adjusted margin with 20.4%, we were able to realize a very, very good and solid and robust result.
Now coming to EMEA, and EMEA, also here, the numbers are not as spectacular as in Asia Pacific, obviously, but I think also for a region like Europe, an increase of our revenue year-over-year, where we also have to know that, that also last year was a very good and strong industrial business, a development and increase by 8.2%, is really much outstanding and shows us all the efforts with our customers, the efforts in, in, maintaining in a very good market position, leads to those positive results at the end of the day. Last but not least, and that is what we already mentioned at the beginning, Americas. Here we have a reduction in, in revenues by 9.2%, so that is obviously not that what we, what we would expect going forward.
But also here, we have to know that these region is mainly driven also by by individual topics due to industrial business, where we had a significant downward on industrial business. But have also to know that last year, the industrial business in Americas was the rising star, and Michael, obviously, then later on, when we go into the different market segments, can show you a little bit more details on that, how the different market segments develop. Also, here, the Adjusted EBIT margin 5.3%, so still a way to go. All those profitability improvement programs established, which is valid for all the different regions, what we would like to achieve. EMEA, very good on track, significantly improved compared to last year.
That is a very good dynamic and a very strong development. And once again, coming back to Asia Pacific, an Adjusted EBIT margin of 20.4% is, from our perspective, really much outstanding because we have to know and to refresh our minds, last year we were suffering also in all the development of last year, the corona pandemic topics, which we now overcome significantly, and we continue our very good and solid performance on a continuous way, not only in the sales development, but also on the development of our Adjusted EBIT margin. So if you then go further on, having a look in the different regions. So starting, first of all, Americas.
As I already said, revenues declining from EUR 109.2 million to EUR 99.1 million. So this is mainly driven by a softer development of our business on the industrial side, mainly driven by energy issues that we have in automation topics. Also reflecting a lower light vehicle production that we were faced in the first quarter. Just giving you an example here, so based on the US strike of the big US OEMs, one of our very big models, the Ford Explorer. Therefore, we lost, if you wanna say it like that, in the first quarter, about 75,000 parts due to the strike.
And our hope here clearly is to recover that step by step over the course of the year. So that shows us not only impacts on the market, but also strike-related impacts were the basis and the basis for suffering here on the revenue side. Because overall, and you saw that on the other regions, our dynamic and the customer demand still is very good, and there is where we continuing to grow. Adjusted EBIT margin, obviously also reduced significantly in Americas, so that is not the numbers that we want to continue to have. We have here a negative impact due to sales mix. We have to say that clearly by lower industry sales.
We established a significant sales program to regain a good portion of that, but also we are doing our homeworks here to optimize productivity, reduce material costs with very strict and continuous measures with our suppliers. And last but not least, also trying to get compensation from our customers for those increasing costs, which is mainly impacting us due to the overall, and last year, a little bit overheating situation in Mexico with significant labor cost increases last year. Also, this year, with new labor laws in Mexico, allowing and providing more holiday days for the people. So all this is impacting us currently, and we are on the way, and we defined all our projects to compensate that over the year. If we then go to the next slide, please, and there we can see EMEA.
EMEA is, despite all the still very much challenging environment that we see with the Ukraine war and all these, let's call it geopolitical unrest that we see, we were able to increase our sales significantly. What was the basis for that? The basis for that was obviously the automotive business. But in clear context, the automotive Powerise, but also the automotive gas spring business contributed to that good development. And if we have a look on the industry side, also here, the market segment health, recreation, and furniture, aerospace, marine, rail, and commercial vehicle were very strong compared to the first quarter last year, and helped us to overachieve the expectation in that case.
On the other side, we also have in some other areas some softer businesses that we will, that we will see mainly on the electric part, energy part, and also this is based on some seasonalities, but here we also will come back on track. The Adjusted EBIT in Europe increased significantly. If we have a look at the total numbers, we increased from EUR 5.2 million to about EUR 9.9 million, which is in total numbers an increase of 90%. So that is the basis of a very stringent cost management and clear efficiency plans, including all our activities in regarding energy consumption and reducing energy costs. And all these activities we already started, which are longer periods.
You remember that we wanna—we started our program to make our location, our plant here in Koblenz, fit for the future. All these initiatives are contributing to the very good development of the operative result and the Adjusted EBIT here in our region, EMEA, which is a very good, good sign this first quarter. If we then, last but not least, go onto the next slide, and come to the Asia Pacific. So here we have a very strong and also profitable growth of that region. So we were able, as I already said, to increase by 21.9% revenues, which is mainly obviously driven by the development, the very strong development of our automotive business, and here focused on the automotive Powerise systems. But also here, not only Powerise, only also gas spring contributed to the good development overall.
The EBIT margin went down by 0.9 percentage point. That is mainly driven due to the fact that we had a very, very strong first quarter in the last year. And also here, we are still suffering and are on the way of negotiating our material cost reduction on the one side, that we are negotiating and trying to implement our optimization in terms of new processes, different materials, without any implication for the product we sell to our customers. So all these activities are already started. There is a clear action plan to come back to that, and therefore, we see quite optimistic, also the future for the region, APAC. If we then go to the next slide, please.
Then, I want to hand over directly to Michael, once again, to show you a little bit more about the different market segments. Michael, the floor is yours.
Thank you, Stefan. Yeah, another new chart in our deck. As you know, we wanted to bring more C into our presentation. This is a chart which now shows the split between the different business units we have when it comes to our particularly industrial business. As you know, target of the Stabilus Group is to get equal shares between the automotive business and the industrial business. I would like to reiterate why that's so important. You know, the Stabilus Group came from the automotive space, so we know how to work cost effective, we know how to deliver best quality with our automated processes along the line for all of our products.
We are the right company, and the company of choice of our suppliers and customers, to bring this a step forward, investing in the technology of innovations on the industrial frame, because we are the company who can bring the low cost position, along with the highest quality position, into the product of industrial applications. This is very vital, particularly in difficult times in the industry. Because we can shift capacities between automotive and industry, because we have the economies of scale to do so, and to go the extra mile on the supply side with that, and we are preferred supplier on the industrial side, because driven by automotive, we are truly a global business partner. What you see here on this chart is basically, on the diagram to the left, how we are split between the businesses.
Nowadays, our share of automotive is still beyond 50%. This will have a change with the next presentation when this DESTACO kicks in, and throughout the quarters of the year, this will migrate to a more equal share between automotive and business for the Stabilus Group. We have particularly growth on the automotive side. That's what Stefan already discussed about, and I'd like to talk a bit about where we invested recently. For example, on the distributor and independent aftermarket area, we invested recently also in the development of our industrial Powerise, and also the industrial Powerise, in particularly when it comes to the aftermarket. So aftermarket of industrial Powerise, industrial Powerise itself, and the service parts for the automotive sector. These service parts are actually on the run and increasing in the business of Stabilus. Commercial vehicle.
At the end of the day, whatever has to do with transportation of people enjoys some growth these days. Corona times are over, aerospace business is growing, marine and rail business is growing, people enjoy transportation. Also, this has a positive impact on our commercial vehicle growth. Whenever it comes to buses and truck business, the side of aerospace, marine and rail, this enjoys good growth opportunities for us. And as I said, target is that we have equal shares between automotive and the industrial business. On the next slide, I would like to jump a little bit deeper into the net working capital, because also here, we did some relevant and very positive improvements. Do we see absolutely a right trend? Particularly, accounts receivable and accounts payable were driving these trends, which we've been managing very well.
At the end of the day, by this good management of these accounts, we came down to 17.6%, which is absolutely the right trend. Also, when it comes to our plans with DESTACO , because here, for sure, net working capital, particularly on the industrial side, is extremely important to be managed. All this despite of the investments we do. That's what you see on the next page, because also new in this deck is how we develop in terms of CapEx. Do you see a trend of increased CapEx versus prior year? This is the trend which we've been highlighting in all of our discussions, because we invest where it really matters. Not only that, we invest in the inorganic side, means DESTACO acquisition, but also we invest in equipment on a constant basis and in the development of new technologies.
To remember on the first page, we've been talking a bit about how we want to shape the future with door actuation systems, in particular, also, when it comes to radar technology, sensorics, and software. Aside from that, we've been investing in the industrial Powerise, which opens up a new dimension for us when it comes to growth opportunities with something we are perfect in. Powerise systems, highly automated, highest quality points, and this is something we do along the line, and there, we also invested in the engineering side and in the first line to produce the industrial Powerise. Moreover, and Stefan has been talking about that, we fight inflation. Labor inflation is a burning topic around the globe, not only now, but it was in the past two years, and it will be in the future.
And this is why not only we did acquire DESTACO to serve the world with this automation technology, we also have been investing on our end in automated processes. So starting this year, at the end of the day, a lot of our different products are produced on automated lines, including cobot systems, robot systems, and also systems which purely transfer materials throughout our factory. And all these are absolutely the right steps to prepare for the future, to prepare for another step in our success story. On the next page, you see our net leverage ratio of 0.2. Absolutely healthy. Benchmark in the industry, so to say, right? Came down to 0.2. 0.2 in our first quarter is absolutely the best number we ever had, and it paves the road for success and prepares us for the DESTACO acquisition.
As I said, end of February, there will be the closing, and then for sure, our net leverage ratio will change. But however, it's absolutely the right step. It will go into the direction of 2.5. If you remember, this was also our leading principle, that we don't pass the 2.5, because we want to have some stability on the upper end, some room to breathe. And 2.5, in terms of net leverage ratio after the acquisition of DESTACO, is absolutely the right value and the value to go. So this concludes the deck of information. I would like to spend some minutes on the guideline, and the guidance for the year. The guidance from the year for the year remains unchanged.
It's 1.4 to 1.5 billion in terms of revenues and 13%-14% EBIT margin. The assumptions are in the range of 2.7%-2.9% growth on the GDP side, and also light vehicle production growth of around about 1%. Important, in terms of inflation, we considered 5.2% in our complete doings here on the guidance side. So as I said, this concludes a new deck of information for you.
We will continue in that frame, giving you the information in a more transparent and a more detailed way, particularly having a focus on the industrial business, which will grow in the quarters to come substantially for us, because it's the right way, following our strategy of being the leader in intelligent motion control technologies on the globe. With that, we will open the floor for questions.
Ladies and gentlemen, we will now begin the question and answer session. So if you would like to ask a question using your telephone, please press nine, followed by the star key on your keypad. If you wish to cancel your question again, please press nine, followed by the star key again. So please press nine star now to state your question. So the first question comes from Mr. Akash Gupta, J.P. Morgan.
Good morning, Michael. Good morning, Stefan. Akash from JPM. I have three questions, please. The first one on the Powerise business, and specifically in APAC. It obviously continues to grow very strongly, and as you mentioned, last quarter was a record quarter in terms of revenues. Could you just share more details on what is driving this growth? Maybe specific products or specific customers that is driving this growth in the region. And what are your expectations for fiscal year 2024 and 2025 in terms of top line development for that business, please? The second one is on Americas.
I just want to take a step back and look at the profitability in this region, because despite the strong growth that you have shown in Americas over the last two years across both automotive and industrial business segments, I think the margin profile has continued to suffer, and it has now hit mid-single digit profitability. For me, it is difficult to argue that all of this is down to inflation. So could you please share more details on your pricing power in the region, and if you have seen any meaningful changes in product mix, generally, not just in this quarter specifically? The third one is on the industrial business.
If you could just talk about the overall demand environment across different business segments, and what does the overall order intake look like, and how does that indicate for organic growth as we think about the next quarter ahead, Q2? Thank you so much.
Thank you very much, Akash, for your questions. I will give it a starting point, particularly, talking about the Powerise business in Asia Pacific, and then for sure, we'll talk a bit about Americas and the industrial sector, before I hand over also to Stefan then. Yeah, the Powerise sector in APAC is for sure a success story. If you look back when we launched our plant in 2020, in the midst of Corona crisis, we knew that this would be coming, that the growth is extraordinary high, also for the years to come in Asia Pacific. So answering your question, there is not a particular platform where we see this growth. It's moreover, a very strong fundament of growth story with all the different vehicles in that bucket.
So we are particularly strong, not only for the Western world OEMs, but also for the Chinese locals. We measure on a quarterly basis our win rates, and these win rates also suggest for the year to come, for the years to come, we have a visibility of 5-6 years, we will have a very solid performance in that market. We are growing in the traditional sector of businesses related to combustion engines, but we are also growing a lot because the content is even higher on the electric sector all over the world, but particularly also in Asia Pacific.
This basically drives the growth across our platforms, and it has very good growth also on the door actuation system, because nowadays you go into a dealership and ask for a new SUV vehicle in China, almost 100% of these showcase vehicles in the dealerships are equipped with door actuation. So it's a very strong business ahead of us, which we also see nowadays, particularly in Asia, already growing a lot. So that's something or some detail about the Asia Pacific side. Your second question was in terms of America's profit? Absolutely. It's not all about the inflation. Inflation has the main portion of it, right?
There is some headwind we see on the exchange rates, so the FX impacts, but also on the material side, we see some headwind, because not only that inflation, in terms of particularly Mexico labor inflation, it has hit our way, but on the other hand, also the material inflation does it too, kind of impact our profitability. On the other hand, this massive growth has to do with investments, and these investments are investments in all areas. So it's investment in people, in investment in training phases. So this massive growth has led, over the course of the last months, also in extraordinary training efforts, which, per definition, is somewhat you could call it inefficiency, because you train the people, you make them or to prepare them for the growth you have in the entity.
Then in a cycle, like we see it now in the coming months, you harvest the fruits of it, of it, because you are on a higher sales level, and you can streamline your operation again. This is what we expect for the months to come. It's absolutely the right development. It puts you on a solid and, solid and profound basis. However, upfront investment, which we saw over the course of the last quarters, but this is where we harvest the fruits of in the quarters to come and prepare for good growth and a good growth position along the line. In terms of the industrial business, you've been talking about a very valid point for sure in the industry. Now there are clouds on the sky. Everybody knows that.
Despite of these clouds on the sky, of actually the machine builders index going down a bit, and also stagnation of some of businesses, you see that in our numbers. In our case, we've been nevertheless, despite of this difficult environment, growing by 5% year-over-year for the first quarter. However, this is something, which actually we need to closely watch in the same way that everybody else does, because for sure, I would say also when it comes to order outlook, the months to come, they are softer than, everybody basically expected. And our machine builders indicator actually suggests, however, that after the spring, springtime dip, business could eventually go up again. So we see this softer development in some sectors.
As I said, in this breakdown, it's particularly on the automotive-related parts, like commercial vehicles, transportation, like a truck, trailer, buses, airplane business, where we are still strong. However, if it comes to the industrialization aspects, we see some soft months to come, at least for the next 2-3 months. But Stefan, maybe you have also additional information to that aspect in question.
Yeah, sure. I still actually want to give you a little bit additional comments, at least regarding the development of the region Americas, which is obvious that we will, that we would work on that, on the development of our margins. But the main aspect, as Michael said, is on the one side, inflation-based, where we suffered significantly. But also what you have to have in mind when we see our production footprint, we have a strong production area in Mexico. So in that perspective, I think on a long-term perspective, we are very, very good positioned. But in Mexico last year, we really saw, due to more and more companies coming to Mexico, getting a labor shortages even in Mexico, there, because significant new companies came across.
That led to significant increases of salaries and wages, and then when we're talking there about increases, that is not like in US, 5-6%, or in Europe. It was about 13%-16% within a year. And that, obviously, is not doable to compensate these high rates in one year of the labor cost inflation. You need a little bit more time. What we take, what we are working on to achieve that, to compensate that. In addition, with that, high labor cost inflation went hand in hand also, and that is not nothing, which is particular for Stabilus. This is the whole country suffered from our perspective in Mexico, that we saw significant fluctuation of people changing from one company to the other company, which was obviously everywhere there.
This high fluctuation always is a very bad starting point to get more profitability in the company. As Michael said, we had to invest significant amount of money and time in training activities to bring back. The good message is, a significant portion of that overheating situation now seems to be, on a continuous basis, seems to be solved in a very good way. Now, still, we suffer a little bit with, you know, these new laws in Mexico, getting more holidays without impact on the, on the remuneration. So also that shows that we still have to recover additional, additional costs. And then going back to our, to our customer side. On the customer, we were quite successful, from my perspective, in asking for compensation in terms of this high material cost inflation, all of some, some logistical costs or energy.
But you, the more you get back from the individual, let's call it, ingredients of the product, and going into the personal expenses, the more difficult it is to really get here a clear compensation. So that is what we have to work, and what we're doing, and what we defined to compensate this high labor cost inflation, and this high fluctuation. A lot of measures already have been in place, and this will now continue going forward. So hopefully that brings a little bit more clarity about the development of Americas. And, I do not think that this is Stabilus specific.
This is in the market, but we have to work, and we work together with our local and regional management team on those topics, to bring there more efficiency, to bring there more productivity, to automate more processes. This is the way to go.
Understood. Thank you so much for the details.
Thank you. The next question comes from Yasmin Steilen by Berenberg.
Thanks for taking my question. So basically, I have three, if I may. So, first, one again, coming back to you, adjusted EBIT margin target. So, just to get some clarity on this one. So, again, we have, a soft, start into the year, and, you already mentioned about, the topics that hit the first quarter, so basically labor cost inflation. And, I mean, this is very difficult to pass on to your OEM, so I assume the discussions will be a little bit more difficult. So just confirm your comments earlier in the call. So, you also expect some tailwinds from improved, supply, chain conditions, but also, cost improvements, and also harvesting the fruits of the growth and investments, i.e., the training costs you have, in the first quarter.
So how should we think about the development? Will we see, rather, gradual improvement, or should we expect the effects basically to kick in, in the second quarter, with a high focus on the last quarter? Then the second question on the industrial segment. It's highly appreciated that you have provide more details on the end market split. Can you share some thoughts on the profitability levels in the sub-segments? So, looking at some 15% adjusted EBIT margin for the industrials as a whole, how should we think about the different sub-segments? Is it fair to assume that your own industrial automation segment, despite much smaller size, is also comparable to the levels of DESTACO? And are there any plans to phase out end markets in case there are segments with disproportionately lower profitability?
And the last one on automotive Powerise in the U.S. So, I mean, first of all, I completely understand your focus on industrials now, but in terms of transparency, I think the information you had in the last, or you had so far in your presentations, are very helpful with regards to the production volumes by regions, as a side comment. So looking at the Powerise development in the U.S., with a decline of 11%, the segment seems to underperform the light vehicle production significantly. Could you quantify the impact from the short-term call-off changes you have mentioned? So you mentioned Ford Explorer in particular, and are there any indications of the trend to reverse? Thanks very much.
I will give it again a start. Thank you very much, Yasmin, for your questions. There are a lot of questions in that statement, so I tried to make some notes in between, but please help us towards the end of our information session now, in case we did not give you all the information you were looking for. So I will give a starting point. EBIT margin. Soft start in the year, yes, driven by some labor cost effects, and how would that progress over the course of the year? And also here in conjunction, not only that it's labor-related, but also that it's related to material, and we claw something back now from the suppliers in order to increase our profitability along the line. You will see a similar trend than last year. Why is that?
You know, in the year before, the last two years, they were basically shaped by negotiations with customers. You need to discuss with customers about costs in terms of materials and energy. Now, it's certainly different, however, it has the same phasing, because we are in discussions with our suppliers, and we bring automation equipment on board.
For sure, we're taking a hard stand with our customers still. But let's talk about the inflation on the labor side and on the material side first. So on the labor side and the material side, we've been working a plan in terms of labor, means bringing on automation equipment. We have been launching automated assembly equipments for some of our products across the board, all regions. We've been introducing corporate systems and material handling systems. As you know, there are lead times to get these systems and to get them up and running. This is the upfront investment we are doing now, and this is also particularly what you've been seeing over the course of the last quarter. This is something which shows its success over the months to come, and thereby over quarter two, three, and four.
Similarly, on the supplier side, you know, there is two categories of suppliers. There are the ones who are true global suppliers, but you also have niche suppliers, that's for sure. The global suppliers, you basically have a strong and professional discussion point in terms of givebacks from the supplier when the material prices go down. On the ones which are more niche suppliers, you need to support them. Also, go into the plants, work with them on efficiency measures to do the same thing, to bring the impact of labor costs down, and to work with them on OEE plans, improvement plans, and this takes some time. And this time will lead to the point that we see gradually over the year, an improvement in the margin profile, which then, at the end of the day, leads us to fulfilling our guidance.
We've been proving over the course of the past years, that this actually front-loaded performance of inflation and thereby the loading of inflation recovery did work out in the past. And in the same way, we'll see that it works out this year when it comes to inflation, clawback from the supply base and also automation processes. So that's about your first question. As I said, I will then also lead in a second, and hand over to Stefan to give some more insights, because I'm not sure if I just touch all the points you have here. You were talking about the industrial sector and profitability. Actually, we cannot share the profitability per sector. Why is that?
Because many of these industrial sectors use similar lines, like we produce on the automotive side, industrial products, and do the same thing also in various of our plants. In order to allocate all these different points having an impact on the margin, the overheads, the costs, the cost allocation is not possible in an easy way. That's why we have a tracking by region in terms of profitability, which we outline, rather than showing that on each in each individual sector. Again, it's not that we would not be willing to do so. It's in terms of the data cut, purely not possible to allocate the costs in a way that you would also be able to work with these numbers.
And as we always state, the profitability is on a healthy level across our board, and for sure, you know the margin position out of our communications, which we did of the DESTACO side. So there, you should also have some underlying ability to basically also simulate some margin positions, particularly when it comes to the automation of our processes. Last but not least, in terms of our industrial business in general terms, when it comes to the different regions, actually, we see a good growth on the industrial side in all areas, particularly on the area of Europe, but also in Asia Pacific, we've been seeing good growth.
Yes, also here, particularly in the sector of industry, there was some headwind in the region of North America, which at the end of the day, we assume will go on for the next months to come, and I think that's a general industrial trend. Everybody sees that nowadays, and this is something we need to fight. We have some sales initiatives kicked off over the course of the past months, and we are, yeah, as I said, confident that we fulfill the guidance for the year. However, Stefan, and maybe you want to add, I'm sure there you made also some notes in terms of this comprehensive set of questions, and maybe you catch the one or other.
Sure. Thank you very much. So Yasmin, thank you for the, for the question. I just can, on the development of the EBIT margin, just confirm what, what Mike has said. So that will be a gradually, improvement towards end of the year. So there will be a continuous improvements to come, but it's not that we say, "Okay, first quarter was, not so, not in line with the average of our guidance," and all the other ones will be, will be exactly in that way. It will be a gradual improvement that we can see there. Also, we have to have in mind a certain, despite all different cost development, we also have to see a certain seasonality, in our business. Meaning that first quarter for us is always, impacted by Christmas.
Second quarter, there is Chinese New Year, so there are also big events where you have less working days and therefore, a little bit softening business. And also all the availability of all the people you need to get mainly on the supplier side currently, to get all your improvements to be done, and also on the customer side, it takes some time. So the clear answer is you will be on a linear basis, continuing, but not in one step, now improving in the second quarter. In terms of the industrial segments, here, I would like to add, because you understood your question a little bit in the way, saying: Okay, you are now have a bigger industrial business.
Are there any field of activities you wanna reduce or de-invest or do things like that? The answer on that perspective from my view is here obvious and clear. First of all, we always will have a look on our portfolio that we are managing on the automotive, but as well as on the industry side, and therefore, that is something we do on a continuous basis. So, we now are made in one very big step, that we now are close to get the closing done with DESTACO, where we said we wanna invest exactly there where it matters for us in the industrial automation area. So that is, for us, a very strong business to continue.
When you still have in mind the margin expectation that we announced there is obviously also a very good growing business with good margins. No question at all about that. But we will continuously have a look on all our portfolio, but that is nothing which will happen then in one day. That is a continuous process. We are focusing with clear targets, our CapEx, where to go, and there you know, and we said that already, having a look at specific application in furniture, for example, we said this is not the market we wanna be, because that is dominated by low-quality impacts, low-quality products coming from other regions, from other suppliers, which is not fulfilling, and it is not matching to the perception of our brands.
Therefore, we are going there, reducing a part of those segments. But finally, and that is important to know, when we have a reminder of our Stabilus strategy 2030. So the very, very top line, what we say is: We want to be the leading partner of all industry in everything, in every question, what is motion control? So therefore, yes, we are active, and we are providing our knowledge in a lot of different industrial sectors, but that is also part of our DNA, to provide those specific solution to our customer bases there. That's why we will obviously continue with that broad range of different markets.
Also, that is the reason why we are focusing on those different markets with clearly defining our market segments, but still using our competence for providing this specific solution for control of everything what is in motion. So, therefore, it will remain also a lot of application also in future in the industrial business, because that is the basis of the business we wanna drive and going forward. So last but not least, the third question you had is regarding the automotive Powerise business, where you said it's an underperformance. Here, you have to see in Americas that there are two major impacts, which are currently impacting us.
First of all, the strike in U.S. was not driving the full range of all products and not all car manufacture in the same way. So there are ones who were more lucky than others. So we have to say that as then starting a certain point, the production of the Ford Explorer, what is for us, obviously, a very important, a very important, car and very important platform. So there we lost, but we think the customer still wants the product. That is important, and therefore, we believe that there will be a recovery of those parts, which are several million dollars, if you wanna say, or euro, in terms of sales missing in the first quarter, when you just know that about 75,000 parts were then delayed and postponed to the next quarters to come.
So that is impacting us directly in the first quarter. Then the second point is, and also that was impacting us significantly on the Powerise side. Our OEMs made also, and some years they're doing it a little bit more, some years they're doing it a little bit less. This year, unfortunately, they made it more. This kind of also window dressing with their own inventories they have on hand. So when they closed their plant, the last days in December, we had clear information due to the EDI information, that they will take so many parts over, that we are able then to ship them still before December thirty-first, and invoice before December thirty-first. And that was also-
$several million of products, they then come in the last days and say, "No, we will not take, we just will come in January." And this all together, if you take that together, that is the major part why we currently we're suffering here. But in the next quarters to come, we have also very good and nice new product launches to come in Mexico. Just talking about now the change Tesla from one side to the double size, Powerise, where we get a significant increase in volume to be expected.
So, I would not say, and I absolutely convinced, that we, with our good, Powerise team in America, we will be able to recover that, because that have been specific situation in that, in that quarter, and also perhaps end of last year, where we were a little bit lower than in other regions, but that is now to recover in the next months to come.
Thank you very much for your question. Are there further questions?
Thank you very much, Yasmin. We will continue. The next question comes from Stephen Reitman of Société Générale. Please go ahead.
Yes, thank you very much. Good morning. Going back to your comments, to the last answer, would you be able to quantify the impact of the UAW Unifor strike in terms of lost revenue and maybe drop through the impact on that in the in your first quarter, please? If you could comment about your CapEx outlook for 2024. And also, I was intrigued by the increasing automation of your production processes, and could you comment on how the DESTACO acquisition will also help maybe accelerate that process as well? Thank you.
For sure. Thank you very much, Stefan, for your questions. Again, 3 questions to be answered. I will give you the starting point, and then particularly on the CapEx question for 2024, I'll hand over to Stefan. Quantifying the impact for the North American strike activities, that's indeed something which the industry is basically having discussions about a lot. Why is that? Because the strike impact, as a matter of fact, is really driven by so many different customers and plants, that after the fact, nobody can really give you precise details on what really happened as a reduction just because of the strike, or eventually that electromobiles or electromobility had some impacts for the last quarter in the year.
But, in the range of our business, the impact was around about 100,000 vehicles impacted by the strike, yeah? Which were either not built or built with a lower content per vehicle than we're used to. Why I'm saying the lower content per vehicle than we're used to? Because whenever there is a strike, they have less people available on their shop floors, on the OEMs. So in many cases, they decontent the vehicles so that they still can produce them. So that's why they take out the Powerise and rather have low fitment parts in there, like a gas spring.
They generally decontent also a lot of the electronics in that time period, because they just wanna make sure that they're on the belt at the OEMs, some of the base version cars instead of the fully blown high-end vehicles. So as a matter of fact, 100,000 cars were impacted. However, some of them has been canceled, some of them has been just fitted with a gas spring instead of the Powerise. And this is basically an aspect which was hitting us, particularly the short notice order cancellations. In terms of CapEx, and I think the second and third question is somewhat linked. CapEx, we had a fantastic first quarter in terms of we've been really investing what we wanted to, in terms of automation, yeah?
And also, Stefan will give you some outlook for the running year 2024. However, our CapEx investment rate is in a range of 5%, and this is pretty stable over the course of the past years. Past years, we've been investing more on the gas spring side. Now, we invested last year, and you see that in the performance, more on the automation of our Powerise equipment, and now we are in a phase where we take a complete automation wave along the line in our plants to make us more competitive for the future. And this is something which, at the end of the day, for sure, has an impact on the CapEx. However, the overall CapEx we are investing in our business is quite stable with the 5%.
Because we shift the buckets, and before we invested a lot in the gas spring side, now we are basically prepared for producing 100 million vehicles in the industry on gas spring side. And as the industry will most likely not reach this 100 million for the years to come, we actually fill this sector with basically investing into our automation technologies. And this brings us to the last point or last question you had: How will the area of DESTACO impact that automation technology? See, automation technology is serving the mega trends, and this is why DESTACO also helping our automation attempts around the globe, 'cause it follows the mega trend of reshoring, which bringing back workload from Asia or low-cost country in general terms to the Western world in this political unrest situation.
It also counterbalances a lot of the labor inflation you see around the globe, and this is indeed the base of our doings. So if you see, however, the integration roadmap we are having, we at this point in time work a lot of on automation already. We will assess how this Destaco basically fits into this whole concept, and this is what we started already. However, the biggest point, and you see that also with our presentation we had in on the signing day. The biggest portion we'll take care of in the months to come is grasping the synergies. So that's where the real focus for us is for the months to come, rather than picking some of the elements and putting it into our own equipment.
Because we want to invest the money where it really, it really matters, and generating sales to the outside world, at the end of the day, is more or brings more value to us, than assessing all the different nitty-gritty details and bring it from the DESTACO with their equipment into our automation processes. So the main priority in the integration phase is to focus on the synergies we see when it comes to the cost side, but also on the sales side. Stefan, I would hand over to you if you have some more details in terms of the investment we are having above and beyond the 5%, which I've been just mentioning.
Thank you very much. So regarding the CapEx, I think we have to distinguish between our two major part of the CapEx. When you have a look at the balance sheet at the end of the day. There is, on the one side, all what is machinery, tooling, all this kind of stuff, that is what Michael said around this 5%, sometimes a little bit higher, but in that range, and that also will continue in that way. Why that? Because we are really much focused on our strategic development of our company, and therefore, following long-term ways and path and projects in optimizing our production cost development, in automating things, as we made it with the production of the gas spring.
We're doing the same in the production of Powerise, with full automated lines that we send, that we build up with our own machine construction area. And this is a way that continuously go on, but there's no reason to really say there is a big jump up or going down. That will continue in that, in the phases around this 5%, and that is what we will continue, and also what you will see then around for the full year 2024. Once again, always, because that is the only values we can provide you currently, or we are allowed to provide you. Also, these are Stabilus values. So these forecasts is not an integrated one with DESTACO.
This is following the numbers that you can currently see. They are Stabilus. There, we believe, continue with the good, with the 5%. The other point is in terms of, intellectual property that we're building up, in terms of R&D projects that we're doing. Also here, we are following a continuous path in long-term developing, our IP. And also here, we are about EUR 20 million, in more or less in that range of capitalizing those internal development costs. So last but not least, overall, you can count on about EUR 90 million overall, that we probably will have on a year-over-year perspective in total CapEx, that you can then see in the balance sheet.
Once again, the increase in automation, as Michael said, the clear focus now is, after closing on the integration, on the synergies to get them. But obviously, for sure, we also will be happy then, one day to host the first parts of DESTACO or more parts, because we're already using DESTACO, no question at all, but to host more parts also in our machines, and then happy to do that. But, as you know, the clear focus is not providing us with automation, but providing the full market with automation and, bringing all those synergies, down the road. We also will increase also the usage of those DESTACO products, and we are happy having them in short-term basis in our group.
Thank you. Could I suggest that, once your process, once you've had the closing, and once you've gone through all the process of the full assessment of all the synergies and all the opportunities you find with this acquisition, you consider maybe then doing a kind of deep dive for investment analysts on the new company, on the structure and the opportunities that you see with Stabilus DESTACO? I think there'd be quite a lot of interest in that. We also talk about back and forth, about a analyst day, for example, where we could give different data. That's what's, that's whatsoever. That's what we've been discussing also in the past.... At this point in time, the feedback we rather get from the investors community, that we have individual roadshows, individual discussions.
I think also here, Andreas Schröder does a perfect job in order to provide the right necessity of detailed information. However, we will take your point and make a suggestion that too.
Thank you very much.
Thank you.
Thank you. So the next questions comes from Marc-René Tonn of Warburg Research.
Hello, and thank you for taking my questions. Maybe two left, and try to keep them short. First one would be on profitability in the EMEA region. And as you said rightly, compared to the previous years, Q1, the profitability has improved quite a bit. However, compared to the fourth quarter, and actually I understand seasonality, it is down rather significantly. So my question is just, is there any, let's say, special impact from this inflation compensation payment that you were able to pay, particularly in Germany, to the labor side? Or is it just purely, let's say, the sequential decrease due to seasonality and let's say the cost inflation you have now again, on that side?
Second question would be again, on the door trade, if you really would give us some indication on your revenue expectation. When do you expect significant volumes and contribution from that, and perhaps also some indication by region, let's say, perhaps a split between APAC and then Europe would be helpful. Yeah. Thank you.
Absolutely. Again, I'll give you the starting point. The line was sometimes a little soft, so I'm not sure if I got the rest of the question right. But I think the first question was in terms of evaluating repeated profitability, particularly in EMEA, that it was increasing quarter-over-quarter, and which impacts we saw there. So in terms of EMEA, you know, it's not too far away, but nevertheless, we tend to not think about it anymore. But if you compare quarter-by-quarter, also an impact in the first quarter of the past year was this massive energy inflation, right? And this massive energy inflation had at that time, October, November, December in 2022, which is our first quarter 2023, had an impact on our P&L.
Some of the effects are coming from, now being in a better position in terms of, buying energy on a different price point. However, a different and other aspect is the big improvements we did, particularly with the investments we're actually rolling out in the German plants, particularly in Koblenz, right? Because here we announced, a year ago that we would, further work on the, on, with investments, work on the efficiency of the plant, and this is showing first fruits, and this is the path we will actually proceed upon. If I take now your second question, it's in terms of the door actuation business. You know, this is, at the end of the day, a progression like we saw years back with Powerise or electromechanical devices on trunk applications.
Nowadays, when we talk about door actuation systems, it started off in Asia, unlike the trunk applications. So this time around, it seems that Asia is front-runner in technology. And here we see a path of anywhere between a fitment rate of 10%-20%, 30% on the vehicles. We selected customers like Hyundai or Geely. In Europe, particularly with the OEMs in the German area, we see here growth rates and growth curves, including fitment rates, all in the same magnitude, in the range of 5%, 10%, 15%, 20%. The SOPs of these technologies are anywhere between the year 2026 and 2027, based on the platforms. So the main message is that, yes, all the big OEMs in the Western world, in Europe particularly, jump on this new technology.
The SOPs are in the range of 26-27, so in 2-3 years from now. First impressions are given in terms of how the curves would develop, and they are pretty similar to the growth rates we've been seeing on the Powerise side, years back in the early 2000s. So this should give you, if you look back into the growth numbers of the Powerise of the past two decades, a good impression how eventually the curve of the door actuation systems can develop in the industry. Maybe you have some additions, Stefan, also in when it comes to profitability in EMEA?
Yeah, thank you very much. And I just wanna emphasize one or two sentences in terms of the change between Q4 and the first quarter of this new fiscal year. Where obviously we're not able to achieve exactly the same profitability margin in Europe than we were able to achieve in the last quarter of last fiscal year. The main reason is, and you gave that answer yourself by, in, during the question already. The main reason, obviously, is the seasonality impact, because December, with all Christmas holidays, impacting significantly and therefore I believe that in terms of profit-wise, December always is the lowest profitability in a month of the whole year in Europe.
So that is also valid for Stabilus, like, I would say, for almost all other, industrial companies in Europe. So that is the major part of the answer. But obviously, if you have a look at the development of the quarters, during the last fiscal year of the Stabilus group, where we were quite back-end loaded, also getting in the third and in the fourth quarter, additional one, one-offs, as compensation. So also this was impacting, Europe in the fourth quarter of the last fiscal year. So therefore, it's a little bit mixed of both, but the major impact is seasonality.
All right. Thank you.
Thank you.
Thank you very much, also from my side. As there are no further questions in the Q&A session, of now, I would hand over back to the host.
Yeah, thank you very much also from our side for today's session. It was quite intensive this time around, which we perceive is very good because it shows the strong interest in the Stabilus Group. 5% growth year-over-year in challenging times is really good achievement. We pave the future for success, and we really invest where it matters, not only on the organic, but also on the inorganic side, and we're looking forward to our next conversations we'll have. Thank you very much, everybody, and enjoy the day. Have a good week!