Return, the floor will be open for your questions. Let me now turn the floor over to Dr. Michael Büchsner.
Yeah, good morning, and welcome to our session today. You have Stefan Bauerreis, our CFO, Andreas Schröder, Investor Relations, and myself, Michael Büchsner, CEO of the Stabilus Group, on the call. The reason for this call is our guidance adjustment for the current year. We wanted to give you some more background information in that regard. Yesterday, we had several calls with investors already, and we want to give you an update and overview of the discussions we had. Here on this chart, you see some of the details which we've been outlining and discussing so far. As I said, this should be a summary of the discussions of the past hours and the past two days. The current forecast we're giving is EUR 1.3 billion up to EUR 1.35 billion for the year 2024.
It was before EUR 1.4 billion, up to EUR 1.5 billion. In terms of adjusted EBIT margin, our guidance is in terms of EBIT 11.7%, up to 12.3%. It used to be between 14% and 15%, as you know. So what was the reason for this adjustment? Over the course of the past couple of weeks, we saw on the automotive and commercial side, lower call-offs. This is something, if you remember, we talked about that in various discussions, also in meetings we had before. That typically the timeframe before the summer period of our OEMs, particularly the automotive OEMs, we get updated numbers, updated call-offs, and those reflect a reduction for June and up to the—for the rest of the year per month, in the range of totally EUR 75 million.
Two-thirds of that are in the range of EUR 50 million, means automotive related. About one-third, EUR 25 million, is in the range of commercial vehicles. For sure, you have read in the press that inventories at the OEMs are pretty high. They are mounting up to 70, 80, up to 100 days on some of the customers. And then also on the commercial vehicle side, which is a good indicator in terms of how businesses are developing, we see currently a very flat outlook. And this is something which materializes in our call-offs as we speak in our plants. So that's the reason for this EUR 75 million we see actually not coming in terms of call-offs, and this actually leads us to adjusting our guidance. It's not a structural topic. We track our business wins on a quarterly basis, as you know.
We are winning business in terms of covering the market shares we currently have, and a little beyond that. However, instead of a call-off of 10 parts, for example, we only receive a call-off of eight parts at this point in time. So at this point in time, a reduction, which, as I said, amounts up to EUR 75 million. This is affecting the regions of Asia-Pacific and North America predominantly, but also in Europe, we see some weakness these days. And as I said, it amounts up to EUR 75 million, two-thirds of that in the automotive space and one-third in the area of commercial vehicles. And this is basically across our main customers. So the main customers are affected with more or less reduced call-offs entering into the summer period.
I very well know that also there is the news out there that in the second half of the year, things will improve on the automotive side. However, the second half of the year for automotive and OEMs is typically until end of December. For us, the business year, as you know, ends in September. So from this business time, from now up to this September, we don't see a recovery. So apparently, the OEMs are pretty much pounding on October till December with these statements that the second half of the year will be on an relief level of increasing sales again. So what does this mean for EBIT margin? The EBIT margin actually is impacted by a fixed cost absorption topic. So this EUR 75 million typically lead with a drop-through rate of 30% to revenue reduction of EUR 23 million.
These EUR 23 million, if you do the mathematics and take it out of our previous guidance, lead then to the reduction, which at the end of the day, comes to a range of 11.7%-12.3% EBIT margin for this year. And again, this is something which is not a structural topic. It's pure mathematics, because major customers are affected. They're affected in Asia-Pacific, North America, and in Europe. And if you purely calculate with a drop-through rate of 30%, then you find this effect of EUR 23 million for the rest of the business year of the Stabilus Group. An important thing to know is, and this exactly goes into the overall strategy of Stabilus, we wanna strengthen our industrial business because we know that at the one or other point. The automotive business can be cyclical.
So it was the absolute right decision to invest in this takeover, and the industrial and the integration is on track. The expected half year two result in terms of sales is EUR 100 million, and also the EBIT margin is in range of 19%, so we are well on track in terms of integration. And as I said, in order to balance and more, build a more stable business on the Stabilus side, many years back, we already started to invest on the industrial side, and the step of investing in this takeover is absolutely vital and the right step at this point in time. So all these changes in the guidance lead then to a net leverage ratio as of September of 3.0 times.
The refinancing, by the way, is on track in terms of the bridge facilities, so there is no risk in that area. I would like, before we go into the Q&A session, again, point out it's a topic related to current call-off situations, because we track our performance in terms of getting order intakes in all businesses, and it's well on track beyond the current market shares we have. This seasonal weakness of the call-off situations affects us with EUR 75 million for the rest of this fiscal year for the Stabilus Group. Absolutely the right decision was this takeover, and we will for sure pursue the path of further strengthening our industrial business, because this is a vital thing to do to balance our business on the long run. With that, we're open for questions.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press nine and the star key on your telephone keypad. In case you wish to withdraw your question, please press nine and star again. Please press nine and star to register for a question. And the first question comes from Marc-René Tonn from Warburg Research. Over to you.
Yes, good morning, and thank you for taking my questions. First one would be on, let's say, your ability to, let's say, do even more on cost cutting and increasing efficiency than you had already done. You said the same, and this is fully understandable, that most of the issues are not very short term, just reduce call-offs. However, is there anything you can do to, let's say, support the margin a bit more in terms of flexibilizing costs, improving efficiency in negotiations with customers as volumes are lower, compared to what you have already done?
The second question would be on the leverage ratio will probably increase a bit more with, let's say, the EBITDA now being a bit lower than hoped for. Perhaps you can give us an update on the deleveraging and whether you expect any impact from, let's say, now, the reduced outlook for the current year. And as you said, the OEMs being reluctant on... They're dependent on Q4. Is it something which you would share, which would then mean this is a rather good start to the next business year, or is it just too early to say what we could expect there, as things seem to be pretty volatile and very short-term adjustments being made to call-offs? Thank you.
Yeah, thank you for your questions. We'll split it in two. I'll take care of the first question when it comes to operational improvements, and then for sure, I'll hand over to Stefan for the net leverage ratio related questions. So first of all, you know, in terms of operational improvements, you can be ensured that we are taking the right measures to further improve our business and to react. Even if it's short term, we have levers like... And this is what we do in several of our plants now. There is an example in North America, right? The week of the Fourth of July, several of our customers extend their vacations and shut down production. You've heard that in the press from the one or other. We do actually the same.
So on short notice, in the effective plants, we will go on one week of vacation early in July in order to mitigate the cost position we have in our plants. This is something why we actually have this EBIT margin spread of 11.7%-12.3%. So there is, depending on the actions we are doing, some effect on this margin spread, so that we reach into the area of the upper section of this EBIT margin guidance or in order to further improve or to embed these improvements into our financials, and this is what we constantly work on.
So that's one activity which is really short term, because that's something which we are organizing now as we speak, in the next couple of weeks, to send complete plants on vacation on the, in the area where we see the biggest impacts of our customers. So that's one thing. Then, for sure, the structural improvements we are doing, they proceed. You know that we invested heavily in the automation frame, so that means automation, cobot system, robot system, fully automated line systems for assembling our Powerise systems. These are activities which are going on, which are progressing and which will, for sure, show its effects. Your second part of this question was also about the outlook.
You know, this whole thing of reduced orders was kind of hitting us over the course of the last two weeks, and it reaches out with a weak forecast for the next three months. This is typically the time frame you get from your customers for order behavior. The ordering behavior and the ordering visibility is June, July, August, max September... This is what makes it difficult to also look into the next year, answering your question, right? Because you ask, ask, how, what does it mean for the next year? We don't have the visibility at this point in time because the firm orders we are actually having, they reach out to August and September. However, one thing is for sure, as I said at the beginning, we did not lose a single contract. All the contracts are in the books.
We win business above and beyond our current market shares, and we see this as a current market weakness. Instead of 10 parts, only out of eight are sold, and this has the effect we currently see in our order intake. With that, I would hand over to Stefan to answer the second question in terms of net leverage ratio, please.
Thank you very much. So, thank you also for the question regarding the net leverage ratio. So first of all, before getting directly here in the concrete number, what I would like to, to really emphasize on and make clear, that Stabilus, in a standalone version, and but also Destaco, and therefore also joint Stabilus and Destaco together, these are two companies which are very strong cash flow generating entities. And also here, when we're now talking about a significant revenue reduction, these companies and the new Stabilus group will remain also in that more difficult environment, a strong cash flow generating entity. And, that is important in the very first step to know, and that will continue, and that is what we can rely on, but also what you can rely on.
So a nd that is also something, and you can imagine we are in very, very close contact with our banks, explaining the situation. And, in all the meetings that we have there, there is absolutely no uncertainty available. All our existing financing contracts are on a long-term basis. Our big loan agreement, we even some weeks ago, we were able to extend that even from 2028 end of the contract under 2029 with the same conditions. We also had here some possibilities to even improve some other options. So that will show you that our banks, and with the very good relationship we have with them, are really much close partner of Stabilus, and there is absolutely no risk.
Second point is also talking about the bridge financing. Also here, we were, let's say, proactive enough when we made this bridge financing, and perhaps we were a little bit conservative, if you wanna say, or not following exactly the rule, because bridge financing contracts normally only goes for a couple of months. Our bridge financing here, and to make that crystal clear, we can switch that off whenever we want, so we have all the flexibility. But on the other side, we also have the security that the bridge financing facility can be taken until end of October 2025, not 2024, 2025. So we are there in a very, let's say, comfortable situation in terms of duration of our facility agreements, even including the bridge financing. And also here, we do not see any risk.
And also we discussed that topic. We are in preparation. We discussed it also the other day in the last meeting. We are step by step preparing to realize that, let's say, after the summer break, and to go out and get the refinancing, and we do not see any risk that this could be not successful. Not at all. It will be successful, and that is gonna be assured, that is the feedback what we got. We will see for an immediate phase an increasing leverage ratio just by mathematics, because if it's the EBITDA now will not be at the same level that it was the corresponding month 12 months ago. Nevertheless, that is just mathematics.
The real and major question is: Are we able to generate positive, good, positive free cash flows? And that will continue in that way. And, and also here, all our contracts are also defined for those times, and we still have significant headroom, that there is no risk for the existing loans, and once again, no risk for the refinancing of the bridge, facility. Because at the end, yes, we are now reusing the EBITDA margin, the EBIT margin, but on the other side, if we have a look what comes with industrial, integrated industrial and automotive supplier, still in an EBIT range of 11.7%-12.3%, you will not find too many of them.
And that still shows the high quality that Stabilus has, and that is also the feedback that we got from all our banks, that they say, "There is no issue, we can do that.
Perfect. Thank you very much.
Awesome.
Next up is Stephen Reitman from Bernstein. The floor is yours.
Yes, thank you very much, and thank you very much for doing this call. Looking at the reduced call-offs on the automotive side, the EUR 50 million that you've identified, could you give me a bit more specific about how that's split between gas springs and Powerise? What I'm trying to find out is, has there been any decontenting from customers looking at trying to reduce the cost of their vehicles for consumers, you know, to try to make them more affordable, or is it just purely just a reduction in overall volume? Thank you.
Thank you for this question, Stephen. The topic is actually very clear to us. It's not a decontenting of products in the vehicles. The products we are currently talking about, they typically have a content per vehicle, which is very high, because actually we're talking now about top segment cars, like SUVs and top segment cars of the automotive in general. And these top segment cars, they're just reduced in terms of numbers produced. Yeah? So that means when it comes to the split between gas spring and the Powerise side, I would say in the range of 40%-45% is Powerise driven. In terms of sales, the remainder is then gas spring related.
So that means in overall terms, and it's kind of a mixed bag, because, you know, in some systems you have gas springs and Powerise systems combined. But at the end of the day, that leads to the clear assumption for us, and this is the same thing when I talk about the current produced numbers in conjunction with the high amounts of inventory on the yards of these particular vehicles in all regions. Then this leads to the clear conclusion that it's related to a reduced overall car production quantity for the next months, but not a decontenting. Because one thing is also unbroken, it's for sure that the trend of comfort in cars will continue.
We are actually in the planning phase for the coming years, and I just can tell you, the next big jump in comfort in cars will be door actuation systems. As you know, we won the biggest business out there with one of our main customers for all regions, actually, and this is something which materializes in 2026. The volumes are going up. Other customers, like Daimler, they are sourcing as we speak. And these are all indicators for us. The content per vehicle, safety and comfort in vehicles is absolutely a continuous trend, and the current weakness is purely driven by reduced production content. And why? Or reduced production volumes of the OEMs. And why can I tell you that?
It's, for example, in, as I said, in North America, and you see that also in Germany, by the way, in one of the bigger customers we have producing close to Brandenburg. It's currently going out of production for in the range of a week, up to 7 days, also around the Fourth of July in North America, for example, which is clearly a reduction of the production volumes out there of the OEMs. Also, an indicator for that is the high inventory levels we are currently talking about on the automotive side. You see inventory levels of up to 70, 80, 90, even 100 days for several manufacturers. And this is something where the OEMs typically, and this is not a new thing, use the period from now over the summer shutdown time to reduce inventories to a good level.
This is something which we currently see, that holidays are extended. The Fourth of July is used as a week of going vacation at the OEMs to reduce overall production volumes for the coming months.
Understood. Thank you very much.
Thank you. Thank you for your question.
The next question comes from Akshat Kacker from J.P. Morgan. Over to you.
Yes, thank you. Akshat from J.P. Morgan. Morning, everyone. Good morning, Stefan. Two questions, please.
Fine.
The first one on growth. So I just want to clarify the near-term performance. I think you mentioned some kind of weakness in China as well. Could you just give us more flavor in terms of what's happening in that market or what are you seeing in Q3? And the second linked question on growth is, I hear you when you say these are temporary impacts, and you're confident of the structural growth drivers. So on that point, could you just help us clarify a few points around Powerise opportunity in China? Do you still see a growing order book and a growing revenue potential in that market when you think about tailgate? But also, if you could give us some more flavor on door actuators, how is your order book developing there, and what is the revenue potential for, say, three, four, five years later?
That, that's the first question on growth. The second question is on margins. So when I think about 2024, and if I remove the Destaco from the financials and the midpoint of your guidance, you're basically talking about a flat revenue development, and there is incremental margin pressure on the business of around 100-150 basis points. So two questions within that. One, when do you expect the North American margins to recover? And second, do you still have a target, a specific timeline, to get back to the 15% margin corridor? Thank you.
Thank you very much, Akshat, for these questions. In terms of growth in China, the growth in China, at the end of the day, in terms of midterm, is unbroken. So we see that. Also, in our strategic planning, we, all main companies in the Western world, we started now with the planning process. We have the numbers on hand based on the vehicle platforms, on the vehicle outlooks of the customers and our current business wins. And in China, we win business similar to the other regions, so one-third of the market is ours, and with the current business win rates, we go even beyond that in China. The current weakness, and I just would like to point out again, the overall weakness on the automotive side is in the range of 50 million. It's spread between all three regions.
I also mentioned that big customers are using now the opportunity, Fourth of July in North America, to reduce the call-offs and also to reduce their production or to suspend the production for a week. This is a good indicator for you as well, that all regions are affected. That means North America and Asia will be similarly affected in terms of sales impact to us. A little less affected is the European region, and there, kind of, the statement is probably that some of these reductions we've seen in the European region already over the course of the past months. But the bigger part of these reductions are clearly seen now in China and in North America, and this is, as again, not a structural topic, not a topic of order intake in general terms, winning business.
It's a reduced volume for the months to come. So the structural growth drivers are in place. The structural growth drivers for now are still the fitment rates of our Powerise systems, which still increase, and going down in terms of lower segment cars even, and that means overall, the business growth plans for the years to come is- it's, it's intact. Yeah. Talking a bit about door actuation system . Door actuation system was a starting point in Asia, and we highlighted months ago that we actually achieved selling 110,000 systems in Asia, so predominantly with the customers we have on hand, like Geely and Hyundai, where we sell these products.
This is basically also a business which is performing very well, and now the Western world is jumping on to that in terms of awarding business, and as I said, the biggest businesses out there, we won. Currently, our win rates for the door actuation system is in the range of one-third of the market, which is similar to the growth rates or to the win rates we have on Powerise systems global scale. So also here, we see good development. For sure, in terms of revenue, that's in the early stages for now, but we always have this comparison, and this is easy mathematics. A door actuation system is anywhere in the range of 100-120 EUR per car, whereas a Powerise system is half of that. It's general content per vehicle.
If you assume the same growth rates than we saw with the POWERISE back then, there is absolutely a good, a very good market out there for the next five to 10 years to come. The big boost in terms of sales, we see in the range of 2026, 2027, because that's really when the higher volume car productions of also the Western world, big customers, start, right? As we said before, we're winning business with all big customers there. And, also the customers in terms of North America, they, at the end of the day, are, jumping on this technology as well. So this is will be, and this is for sure, another growth driver for the company.
You also mentioned the margin pressure, and for sure, also I'll hand over in a second to Stefan. The North American margin is, which was under pressure, and actually, the margin or the sales reduction lead to margin reduction in the space of Asia Pacific, but also in the space of North America. Predominantly, this is something which we will see in a linear way to the EUR 23 million we are taking out in terms of drop-through rate for the rest of the year. That's a given, because these two elements will lead to the 11.7%-12.3%. So this is majorly driven by these two regions, North America and China.
However, in terms of counterbalancing, as I said, particularly in the North American space, we are using the opportunity to go on vacation in our plant in the U.S., but also in Mexico, to take out labor, a complete week of labor minimum, depending on the call-offs in the various plants over the course of the coming weeks. In China, for sure, it's a little easier to flex capacities with the given personnel and temporary workers. There, we use rather the pure and sheer headcount as an ability to kind of flex our capacities, which at the end of the day, should help us also towards the end of the year. Stefan, anything to add from your side?
I just wanted to add, and perhaps to give additional flavor on two topics that you mentioned. First of all, when you're talking about how to flex our cost, I think Stabilus always also in the corona crisis showed that we are able to flexing costs, and that is what we've been doing the same way also in this situation. In that context, all automation activities and projects that shows us that we are absolutely on the right way going forward. They are already started. They are already prepared. We are in the execution phase here. For sure, when you go for automation, you cannot do that from one day to another because you need some machines, you need the cobots, you need all those technologies. But those projects are really much, started and already included in our set of numbers, because that is what we are working significantly.
Because all of you know that in the somehow, let's say, in the past, we're hitting labor market in Mexico with significant increases on the labor cost side. We were on the right path to start very early with those activities, and that also now will pay back because we will continue exactly those. And wherever we can even accelerate, we will do that. The other point is, and that is what I wanted to mention here once again, we are talking about a temporary, let's say, reduction now over the summer times.
We're not talking about a structural impact that we would see in the overall industries. And that shows us also, and for me, one of the best, let's say, indicator of that, is the win rate of new projects, and even win rates on the automotive side with our Chinese, local Chinese customers, where we are in a very good situation, winning all those topics that which are important for us. And therefore, that is the point. I just want to give this additional flavor on, Michael, what you already said, that all the cost optimization projects, including, and not only limiting on the cost of goods sold, but also including on overhead with hiring freeze, with all those activities, what we said in such a situation is required.
These are already in place, and we will follow that strictly until the end of this fiscal year.
Thank you so much.
Thank you much for your question, Akshat. I think we have time for a final question or for final questions, if there are any.
Yes, we have one questioner left, and it is Yasmin Steilen from Berenberg. Over to you.
Yeah. Thank you. Thanks for taking my question, and thanks for hosting the call today. So, coming back to the question about profitability duration in the second half, I'm still having some difficulty to square this. So the reduced guidance with the indications you provide for the stake implies only 1% decline in the second half, year over year, but almost 250 basis points margin reduction. So with sales almost set lower cost than automotive, this should then basically deploy imply mathematically an increased sales in the higher margin industrials business. And you have tailwinds from raw mats and energy costs. Obviously, on the other hand, headwinds from labor costs. So what are the reasons for the sharp margin situation? Could you bridge the development for us? That would be my first question.
Then second question, what amount of cost synergies are reflected in the guidance? Do you still expect some EUR 4 million cost synergies from the insurance contracts from DESTACO in the current fiscal year? Yeah, that's basically my, my question.
Mm-hmm. Thank you much for your questions. In terms of building the bridge of the profitability, for sure, you mentioned a lot of influencing factors there. However, it comes down to the point that the volumes which are affected now concern our top customers, the biggest customers out there, where we see the highest economies of scale for our products. We always talked also about our plants, which are dedicated to POWERISE, which is predominantly in China and in North America, that with this high dedication and focus on POWERISE, we have a good margin position there, and this also leads to a good margin position, particularly in the frame of China, in conjunction with these high economies of scale.
So this leads for sure to the point that exactly, if in that space, volume is missing, that the contribution margin, and this is why we said 30% drop-through rate on the revenue deduction. Exactly on this part of the business, we win a very high contribution margin, or we win high or make good profits. And this concerns particularly those two regions for this given set of products, which is, as I said at the beginning, in the range of 75% out of the EUR 50 million automotive, for sure, Powerise-related business. So this, at the end of the day, drives that compared to some other elements of the business, the business we are now losing in terms of volume reduction, again, volume reduction.
We have a disproportionately high margin or a little higher margin than for the remainder of the business, and this is why the drop-through rate for this part of the business is 30%. That's one point. And then you asked also the question in terms of the DESTACO business. Yes, the synergies are coming. Please keep in mind that the synergies are coming a little deferred due to the fact that the consolidation of the DESTACO into our business, into the Stabilus business, is also running a little late due to the fact that we could close the deal later than expected. So we are missing a few weeks, months there in order to execute these savings because there are some hurdles to be met in terms of timing of contract cancellations with insurance companies.
This kind of impacted a bit the synergy effectiveness in terms of timing. However, the values we stated would come, they're still valid. Stefan, anything to add from your side?
Yeah, perhaps starting, Yasmin, going back to the question to the margin. So all of us know, and what we published with the first half year results, then we said, "Okay, there is..." We said at that period of time, without knowing this significant reduction in those call-offs, then we said we will be on the lower end of the 24 guidance in terms of sales and in terms of profitability. Nevertheless, and that is, I think something which is very important, is that we said we will have the situation that results will be back and loaded, like yes, like last year's.
That is what we discussed also during the last meeting several times, and we are absolutely convinced that there still will be positive impacts in the second half of this year to come. Because we did not say, "Okay, let's start with the current margin we have," which is obviously, you know, that in the first half of the year not yet on the level of that of that guidance we proposed. There was or there is a way to go. All these projects will continue, all these activities will continue, and from that high level margin, which was our clear target to make, we now reduced based on this reduced call-offs.
That will not mean, and that is important, that we say now with reduced sales, "Oh, all the optimization programs, all the activities that we have planned for the second half of the year now disappear." No, they will. We will follow them up. We will do them. We will fight for each individual single euro and euro cent for profitability improvements, what we indicated as a target for the complete year 2024. But coming from them, now, this includes and that the this lower fixed cost absorption by missing those activities. That is something that we cannot, let's say, compensate on a structural way in addition, because it was quite a stretch or easy stretched activities. We are going for that, no question. But what we—what was our starting point?
And that is the reason why we said we have to take out this 30%, because these are indeed they are our all the variable costs, and even includes a portion of additional, of additional savings, what I explained, with hiring freeze, et cetera, et cetera. But we also have to be realistic to flex costs. It's you are in a very, very short-term period. You're also not open for all different measures with an immediate impact, so that also requires a certain period of time, and that's why we take the 30% drop-through rate for the end of the year.
But once again, all the optimization that we are running for until the end of the year, these positive impacts, which are back and loaded, they still will come. They will have to come to achieve this margin that we now propose.
Yeah, maybe I got a follow-up. So first of all, with regards to the insurance contract. So there are... The EUR 4 million will not come in the current fiscal year, so the 19% margin-
No, they will be postponed to next year.
Okay, so the nine-
They will postpone next year.
The 19% margin for this Destaco is ex any cost synergies?
Excluding.
Okay.
Excluding synergies and excluding integration costs.
Yes, and
So both sides.
Yeah. Okay, perfect. Oh, just and then another follow-up, I mean, just with regards to your mix. So I mean, in H2, the sales will be flattish. So basically, this implies that you have a higher proportion of industrials business in the mix-
Yes
... versus last year. Initially, my assumption was always that the industrial has a higher profitability than the automotive.
Which is the case.
Okay, and-
But it's not only automotive. The Commercial Vehicles is part of the Industrial Business. And, for that, what you said regarding your assumption on industrial also is valid for, let's say, for the whole industrial business, and therefore, it's a mixed bag between all of them.
Okay, and that was around two-thirds automotive related, one-third industrial related? Because I'm still wondering about-
Yeah, and on the industrial side, it's commercial vehicles, which is attached to the automotive business at the end of the day, right?
Yes. But within industrial, is commercial vehicle of higher profitability than the other industrial parts?
Marginally, but marginally, it's
Okay.
Not the bigger. Typically, on the commercial vehicle side, the OEMs, because majority of these commercial vehicles belong then to car manufacturers, they are negotiated with similar methods, similar terms. It's superior to automotive, but not to the extent and the complete industrial business of the Stabilus Group.
Yeah, that's the reason why I'm struggling to understand the 250 basis points margin reduction in the second half year-over-year. Because you have a higher portion of the industrials business in general, compared to the second half last year. And within industrials, the industrials business and commercial vehicle with a disproportionately lower profitability, is also coming down. So I'm a little bit surprised by the high fixed cost or operating leverage of the business.
I mean, actually, as I said, the commercial vehicle business, in terms of margin position, is marginally higher. And for sure, one thing to consider is if you talk about this fixed cost topic, some of the products are produced on similar lines, automotive and industrial businesses. Think about the industrial gas springs, for example. So this is why Stefan says it's kind of a mixed bag between the two.
Okay. Okay, thank you. I'll step back into the line.
Thank you for your question.
Yeah.
Thank you for your questions. At this point in time, there are no further questions.
Yes.
I'd like to thank you also at this point for all your questions, and again, this is a temporary reduction in terms of volume. We still stick to our strategy. Our strategic measures moving into the direction of Industrial Business is definitely the right thing to do. This talk was the right step. We're seeing for the months to come, a little softer volumes, which amount to EUR 75 million, with a Drop-through Rate of 30%. However, on the long run, we secure our business pipeline. We are winning business above and beyond the business win rates we had in the past. And at this point in time, we are doing all the measures you can imagine in terms of taking out costs and improving the margin position as we speak.
With that, thank you very much to all of you, and I wish you a successful week.
Thank you.
Thank you. Goodbye.