Morning, ladies and gentlemen, and welcome to the analyst and investor web conference regarding the Stabilus results in the second quarter of fiscal 2025. 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. Please go ahead.
Yeah, hello and welcome to our quarter three call today. You have Andreas Schröder, our Investor Relations Vice President, online, and for sure also myself, Michael Büchsner, being the CEO of the Stabilus Group. To summarize the presentation, we are holding course in a soft market environment. I would say that summarizes the current situation. We are stabilizing our profits. We are at 11.1% EBIT margin year to date. This is basically the same ballpark as last year in terms of the nine months view. For sure, there are some impacting factors we'll talk about today. Current market environment, that's not a secret, is rather soft in all industries. We see a secondary impact by the global tariff conflicts, which at the end of the day materialize in terms of softer sales around the globe, but predominantly in North America and also Asia Pacific.
On top of that, for sure, driven by the strong Euro, there are some negative effects around the globe, particularly in North America and also in China. Revenues in the third quarter are softer by almost 10%, with EUR 316 million sales. Basically driven by a soft FX rate of, as I said, a down of almost 5%. Half of that is driven by FX this time around, really a few. Also, a big share is driven by the secondary impacts of the tariff conflicts. If you would add that back in terms of sales on the North America side and China side, then we would be in the range and ballpark also in the third quarter of last year. However, these tariff conflicts for sure leave their marks along the line. That is something in terms of our cost measures we are constantly working on.
To maintain this EBIT margin of 11.1% for the full year, we actually intensified our cost-cutting measures. We've been taking all areas cost measures. We are on the PPV side, so purchasing savings, the VAVE side, on the overhead side. Also in our plants, we are tailoring our operations to this new normal in the industry, which we also see for the next quarter to come. Very positive news is, and we'll talk about that in a bit, our covenant headroom, which was increased. We did close our financing, our refinancing for a term loan, which is due next year, already very much ahead of time. With that, we also increased our covenant to 4.0 until September 2026. That is something we'll talk about. However, also remarkable is that for the rest of the year, we basically are stabilizing and continue to stabilize things.
We are narrowing down our guidance within the original guidance corridor. We expect to be right on the lower end with EUR 1.3 billion sales, 11% EBIT margin, and then a free cash flow of EUR 105 million, which, by the way, leaves us with a very good ratio. The free cash flow ratio, the cash flow ratio is in the range of 50% and beyond. I think that's a very good sign for stability in the company in these basically are soft days in the industry. With that, we would right away jump onto the next page where we see our refinancing activities. As you all know, there is a term loan due next year of EUR 83 million. We basically took on a new long-term loan facility, which basically leads us to June 2029, with its maturity, it's up to EUR 150 million.
At the end of the day, big success story due to the fact that our banks came back to us and even granted us in the range of EUR 200 million, which we did cut back to EUR 150 million. It was substantial performance and big trust amongst the investors' community on the bank side, given over the course of the last weeks. Also, because we did do that in a record time within the last two months, we said, let's take the chance and go for in earlier days already into securing our payback for the term loan of EUR 83 million, which reaches its maturity already next year in March. Very much ahead of time, we could close this deal with our banks. It's the syndicated banks we have in the portfolio anyways. We took on a EUR 150 million term loan, which matures in June 2029.
Along with that, we at the end of the day increased our covenant from 3.5 up to 4.0, which also is a good sign of stability in the company because the banks did grant that to us without any obstacle, hurdle, or whatnot. At the end of the day, the covenant is increased to 4.0, and we go back and return to 3.5 by September 2026 then. This is a good sign of stability in this basically bumpy road times we see in terms of soft sales. All good. We already achieved closing with all bank signatures, we were done last week. We actually will pay back now this loan of EUR 83 million, and we will also pay back a bigger amount of our revolving credits we have out there. A big success story on the bank side in uncertain times.
On the next page, we at the end of the day talk a bit about the current tariff situations. I've been talking about that on the first page already. There are two impacts. There is the primary impact for sure. That means what does this cost us in terms of EBIT margin? The secondary impact is rather what we actually see currently coming up. Primary impact is not that big for the Stabilus Group. We live up for local for local, right? Yes, the current situation impacts and disrupts the global supply chains. That's clear. The visibility out there in the business is very volatile because you, at the end of the day, don't know which tariffs come up over the course of the weekend sometime. However, we have the right mitigation actions in place.
We are local for local, which guarantees at the end of the day that we are strong in terms of minimizing the impact on our business firsthand. Whatever's left over then as a real impact at the end of the day reaches out and gets compensated by our customers because we are along the line in all these discussions with our customers. In many cases, we already closed these discussions. We're good off. We could basically settle with the customers. In a nutshell, that means for our business that over the course of the year, this year, we will have an impact on our P&L of way less than EUR 2 million. It's rather in the range of below EUR 1 million on a short term.
You remember back when we talked about that in the last quarter that we still said, and you see that also on this page, that we'll be in the low single-digit million amount. We could narrow that down and we could tailor that down. At the end of the day, we achieved that the impact on our business is rather minimal from the direct impact. With USMCA still being in place, our stringent measures local for local and also charging back to the customer, the final amount on our P&L will be less than EUR 1 million. This is also what we see for the current year, but also for the next year to come in case the actual tariffs stay like they are. The secondary impact is rather something which is impacting our business.
We see that there is, in terms of consumer sentiment, the ambition to spend money is going down on the automotive side and also on the industrial side in all sectors. People are hesitant to spend money. We see that predominantly in North America, but also in China. In North America, it affects majority of the automotive industry, but also the industry itself. In China, it's both auto and industrial sectors. Why is that? Because, you know, in good times with lower impact of tariffs, the U.S. industry orders more equipment in China. Some of them build their lines in China and import them to the U.S. With tariffs increasing, basically, the consumer sentiment or the buyer's sentiment of companies to invest in machine and equipment coming from China is reduced.
This is something which we actually see in all of our industrial sectors, that in China, the China equipment asked for from the side of the U.S. is reduced. That's something which we see as a secondary impact. The first impact is the direct stuff, which impacts on our P&L, minimal, not a big deal, less than EUR 1 million for the year, and also for next year, well under control. The secondary impact is something which, at the end of the day, leads to softer sales. You'll see that in the presentation, predominantly in North America, but also in China. Here you see that on the quarter three for the year 2025, in terms of revenues and earnings, we, at the end of the day, are in a revenue of EUR 316 million. I did point that out already.
There is an organic impact by 5%, but also a very strong FX impact because the Euro is very strong compared to renminbi and also compared to, at the end of the day, a side of the renminbi to the U.S. dollar. These two are basically impacting our business currently. In terms of EBIT margin, EUR 33 million EBIT margin is on our books in quarter three. The profitability is on EUR 10.1 million, 3.2%, and the free cash flow is on EUR 33 million at all. The next page, you see the nine months view of that numbers. Also here in revenue, a little impact because the first two quarters were stronger than the third one for sure. We're in the ballpark with all these numbers in the range of last year. EUR 980 million in terms of sales is somewhat in line with last year and year to date.
The EBIT margin is in the range of 11.1%. This is pretty much the same ballpark than last year. You see we are basically fighting all these effects on our business in terms of offsetting some of these volume losses, but also in terms of margin, we are holding the course. Here the FX for the years, again, it's - 3%, predominantly driven by the third quarter. After all, the EBIT margin is in the range of 11.1%. This is something which is pretty much on a similar level than last year. Profitability is on 35.6%. Also, the free cash flow is in the range of EUR 60 million. Yes, a little lower than last year, but there are quarter-to-quarter variances in our business.
We are confident that towards the end of the year, we'll be in the range of EUR 105 million with our free cash flow, which is an outstanding result. It's a cash ratio of 50% and beyond, a very healthy business proposition. On the next page, we talk a little bit about the regions. I did talk about that beforehand already, that Americas, but also Asia, are not keeping up with last year in the third quarter. Americas basically is down 12%. Asia Pacific is 21% down. Europe is holding course. As I said, these two factors are basically driving our complete set of numbers because Americas, we see the automotive sector being softer.
In Asia Pacific, we see the industry and automotive sector being softer than in the years before, driven by the tariff impacts, which at the end of the day go throughout the numbers down to the bottom in our case because the Americas and Asia Pacific numbers, we were pretty much impacted by the secondary impacts of the tariff situation with lower consumer sentiment in Americas and also in Asia Pacific, less sales when it comes to automotive and industry. Now focusing a bit on the details, Americas, as I said, - 3.9% by 116.7%. The organic area was - 3.9%, but the FX is the big driver here. It's 9% in the range of 9% driven by the strong Euro. This FX impact comes from the U.S. dollar and the Mexican peso this time around. This impacts our business for sure. Predominantly, the U.S.
dollar is way softer than the Euro these days, driven also to a certain share by the tariffs. That's something which impacts us on the revenue side as well as on the adjusted EBIT side. On the next page, we see EMEA. EMEA is, as I said, holding the course in difficult times. We see here similar sales to last year on the same level. Basically, also the adjusted EBIT margin is holding course. There are some slight FX impacts, yes, but the big majority or the overarching picture is that we hold course in difficult times in the EMEA area. Last but not least, Asia Pacific for sure. Asia Pacific for us at Stabilus means it's China. In China, the revenues are down 21%. 17% is driven by consumer sentiment and thereby organic-driven sales situation, which we saw quarter over quarter, and 5% FX impact there.
It is both here in this region on the Asia Pacific side or China side. It is automotive and also the industrial business, which is rather soft for the last quarter. For sure, you see the similar impact on the EBIT margin. Talking about the different market segments we have, the good thing is, with our strategy, which is still on in terms of our strategic direction, we are moving towards 50/50 automotive to the industrial business. The automotive sector is now holding up for 54%, and you see these growing sectors on the sideline. The biggest one with 16% is for sure our automation equipment, which we did enforce with our Stako acquisition.
There is the area of distribution, independent aftermarket, and e-commerce, where we see still good business in there, particularly on the service side of our business because whenever the economy is rather on the low end, we see that the independent aftermarket is holding course due to the fact that when people do not invest in new cars, you actually see that on top of that, we, at the end of the day, see more impacts or better volumes in terms of the aftermarket and e-commerce. On the next page, we see our net leverage ratio. I said at the beginning of the meeting that there is a good level of covenant increase. That is something which came as a sideline and a surplus to our refinancing activities, which we did in the range of EUR 150 million.
Also, the banks offered us to increase the covenant because we very well know that the covenant in the discussions we had with our valued analysts and shareholders over the course of the last weeks were rather concerned. That is something which at the end of the day was granted without any issue by the banks to go for a covenant of 4 until September next year. Currently, we are at 3. As promised, we stay in the range of 3, and that is something which is important to us. We have enough headroom to our covenant. We had already enough headroom to our covenant before when we were at 3.5. However, with the new loans in place, the covenant is now for a year on 4.0, which gives an additional headroom and allows us also to pay back with this loan the EUR 83 million in March.
On top of that, we pay back some of the revolving credits, which are outstanding. At the end of the day, our goal remains unchanged, and we for sure reach this goal. In the next two to three years, we will be below 2. Our long-term goal is again to be in the range of one. Andreas, we can switch to the next page. Exactly, that's where we are. You see that not only on the margin and not only on the side of our complete business, we are carefully watching where we stand and constantly striving and further improving our business. We are also, in terms of net working capital, coming along very well. Our latest value is 19.3% net working capital, which is absolutely in the ballpark where we wanted to be, reflecting the current market situation. We're coming from beyond 20, now with 19.3.
We are in a very nice and good ballpark with our business and also driving and continue to drive predominantly the influencing factors of net working capital for us along the line, particularly towards the end of the year. That'll be of extreme importance, also reflecting our cash position. That's for sure. In terms of the investment, our investment, as you know, is in the range of 6% - 7% this year. Typically, it's between 5% and 6%. As I said in prior meetings, we, at the end of the day, are keeping our promise that we stay in this range of 6% - 7% this year with our investments in automation. We did do investments beforehand already in the first couple of quarters here in 2025. This is something which basically flattens out over the year.
You see here that we are rather on the upper end of the 6% - 7% with 6.8%. This is for sure driven by the impact of slightly lower sales this time around, but we are holding the course with EUR 80 million in the range of EUR 80 million. In terms of investments, we'll for sure over the course of the next years then slightly reduce that back as we've been impacted or kind of turning into life our automation equipment activities. That's something which, at the end of the day, is very healthy for us because in these days, for sure, we're preparing the company for lower sales. We are taking out costs not only on the supply side, VAVE activities, but also in our structure side and also in the different plants and continue to put a certain lever on the automation degree.
We invest in cobot and robot systems and in new technologies because one thing is extremely important these days is that we continue to hold course when it comes to these investments, making sure that as volume comes back, we harvest fruits of economies of scale and that we tailor our cost structure in the operation sites wherever we can. This is why we invested over the course of the last two quarters in industrial automation. This will gradually come down now. Our long-term KPI here is also between 5% and 6% in terms of investments. I did talk a bit about this page already. Towards the end of the year, we are narrowing down our guidance. We will be in the range of EUR 1.3 billion sales, 11% EBIT margin, and a wonderful EUR 105 million free cash flow.
The cash flow ratio is thereby beyond 50%. That is extremely healthy and also extremely healthy again. Nine months view, we stay course in terms of the EBIT margin development, even if the volumes are down 5% - 10%. This brings me to the summary and outlook page before we go into the Q&A session. We are impacted by the current market environment, but we are holding course. We are actually holding course in terms of EBIT margin year to date. We are holding course in terms of cash generation, and that is extremely important to us. Our impact to the tariffs is minimal in a direct way. We have been straightening that out, and over the course of the year, it will be less than EUR 1 million. On a long run, the point which is relevant for us is secondary impacts for China, but also the area of Americas.
For sure, the refinancing activities with our syndicated loan banks was a big success. We have been generating EUR 150 million in terms of loan, which matures in June 2029. Thereby, we can offset and pay back our short-term loan, which is at the end of the day due in March next year. We will do that right now to pay this money back and also some of the revolving credits we will pay back in order to have some headroom. We increased our covenant to four. I mentioned that already. This is where we currently stand with our business in the summary and outlook. At the end of the day, with our new guidance in place, we expect to be at EUR 1.3 billion roundabout and then 11% EBIT margin and EUR 105 million free cash flow. That would summarize the current situation.
As I said at the beginning, we are holding course in difficult times. We, at the end of the day, take the right measures to control costs in the operations, but also in the overhead side. This is something which we will continue to do over the course of the next quarters. We'll take the opportunity now to, at the end of the day, slim down our cost position on the material side, on the technical side, on the overhead side in order to basically be prepared for the next cycle, which we see in the industry where the volumes will for sure creep up over the course of the next year. With that, we would open for Q&As.
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 cancel your question, press three and the star key. Please press nine and the star key now to state your question. The first question goes to Akshat Kacker of JPMorgan. Please go ahead.
Good morning, Michael. Akshat from JPMorgan. I have three questions for you. The first one on the demand environment. Could you just give us more details on OEM call-offs within the automotive sector and also some ordering data trends across your different industrial businesses? Are you seeing any signs of stabilization, or are there areas within the business that are starting to do better? When I think about your Q4 guide, the implied Q4 guide, you're basically guiding for a sequentially flattish quarter in terms of revenues and adjusted EBIT. Any more color there would be helpful. That's the first question. The second question is on APAC POWERISE and China pricing. This is the third quarter where you're seeing organic revenues down 15% within APAC POWERISE. We have discussed customer mix before.
Could you just give us some details and your sense on when can we expect this to stabilize and when can we expect Stabilus to return to growth in that specific business segment? Obviously, a linked question. What does that mean for your pricing discussion with OEMs in that region? The last one, I did hear you talking a lot about cost actions, variable and structural in the near and long term. Are you in a position today to give us some numbers or quantify the total amount of cost actions that you're taking going into next year, please? Thank you so much.
Absolutely. Thank you, Akshat, for these questions. First of all, the demand on the OEM side and on the industrial industries. Actually, you were mentioning China. I'd rather take it on a global view, including the different regions. At the end of the day, I think in terms of what we see currently as a call-off from the customers is that we have been reaching the bottom. I think that now with the tariff situations around the globe, which impacts driven by the U.S., all the different regions, the consumer sentiment is now on a bottom. Everybody knows that the situation is kind of volatile. Everybody knows that a lot of these different negotiations, which ought to happen over the course of the last week, have been done. Also, the negotiations with the European Union. That is why I think this uncertainty is actually not in the market anymore.
That means things are stabilizing. From our economic indicators around the globe, we see that on the automotive side, we're basically reaching a bottom. There are some carryover effects to next year, I believe. We see some positive signs on the industrial areas for next year. On the industrial areas, we see that in the automation sector, which is also for us a frontrunner when it comes later to the automotive industry, because typically what happens is you see that people invest a bit more in equipment. This is an indicator that volumes will go up also on the automotive side because the investment in equipment is an indicator that people are planning to produce more cars. This is something which we see. Currently, we see the economy being on this low point in terms of demand, both automotive and industry.
We see the industry sector coming up next year, a couple of percentage points. Automotive is still being in a difficult spot, but from the automotive or from the industrial side, we see some positive signs in all the different regions next year. I think that due to the fact that all these discussions around tariffs did lead to plenty of agreements around the globe. Yes, some of them are not hammered in stone. As we know, they're kind of volatile, but I think people are adjusting to this volatility currently. Some of these deals have been made already in terms of tariffs. This, at least that's what we see in our next year's numbers, will basically lead to a more stable environment that we see it currently. On the industrial side, the automotive side is still a little shaky.
However, the industrial business from our side indicates that there is a light at the end of the tunnel, and people are investing in more equipment, which at the end of the day will have also an effect on the automotive industry down the road. That's your first question. The second question was Asia Pacific POWERISE in China, down double digits. Yes, that's right. We saw an organic softer business for us over the course of this complete year. You were mentioning, and that's absolutely right, the pricing topic. We saw some big competition with one of our main competitors, Engine, in China. We did announce that from the very beginning of the year that the prices will come down probably in the magnitude of 7%- 8% in China, which indeed happened. This was one driver.
Price was basically half of the percentage value you've been mentioning with 8% price down over the course of the year. The other 5 %- 8% were volume-driven. We see, and this reaches also out to the other regions, that currently, in terms of vehicle build, we're producing, or the world is producing, a range of 85 million- 88 million cars for the year. This is a little lower than the years before. On top, we see that rather the smaller segment cars are produced at the burden of the higher segment cars. There is kind of a mix shift between highly equipped cars, where we for sure benefit with POWERISE, to the lower equipped cars. This is something which we see in our numbers. For next year, what does this mean? This was part of your question too.
We see that the prices are going down another 3 %- 4%, which is a bit higher than the average. Typically, we calculate with 2 %- 3%. We expect 3 %- 4% next year. It means also in China, price levels basically reach more stability over the course of the next year due to the, at the end of the day, also our competition now is reaching a level with pricing where they don't want to go further down, particularly Engine. We see that there is some more stability. As I said, this will lead along with the volume distress also that Chinese OEMs have. Currently, this will lead to the point that the prices will probably go down another 3 %- 4% next year, but by far not to the magnitude that we've seen it. It will be rather on the stable side.
Yeah, in terms of cost measures, typically, you know, in terms of cost measures, we are reducing our bill of material costs by 2% - 3% every year with VAVE actions and also with actions on not only the technical side, but also in terms of discussions with our suppliers. If you remember back last year, we've been talking about that we've had a supplier conference. We did basically talk with all suppliers, and we had stringent measures to reduce supplier activities and to reduce supplier costs by 2%- 3%. This is something which we currently see in our bill of material. We've been able to reduce our costs on the material side 3% - 4%, which offsets a lot of this impact we see, particularly on China when it comes to the price reductions in the market or the sales price reductions in the market.
Half of that is set off. There is some impact on the margin, as you see, predominantly because of the lower volumes. That's what we've been striving for. Also, we started our cost-cutting initiatives in the indirect areas. As you know, we talked about that on the Capital Markets Day. At the end of the day, all these activities together will, for next year, get us about a percentage point in terms of margin. I hope that answers your question, Akshat.
Yes, it does. Thank you so much.
Thank you.
The next question goes to Marc- René Tonn of Warburg Research. Please go ahead.
Yes, good morning. Thank you for taking my question as well. First one, maybe coming back to Akshat's question regarding the visibility of improvement in industrial. I think particularly the stock weakness is probably something which was also weighing on the Sharp Eyes development today. I guess you could also assure us here that you are still sticking to your strategic growth targets for the business and that we may already see some of the recovery of postponed orders perhaps already in the fourth quarter this year or going into next year. That would be the first question. Second question is a bit, and it may be that I missed that, but with regards to the covenants, so there's basically no change to the terms and conditions. Now, between 3.5% leverage ratio and 4.0%, if I understood that. Is that correct? Or is there any change to your refinancing conditions?
The third question would be going a bit into next year. I appreciated that you already gave some details on that, what you are expecting in terms of growth. Talking now about the bottoming of the overall situation and the cost measures you are taking in terms of a bit better industrial business next year, would you also see perhaps the current margin level as some kind of the bottom now with some improvement potential going forward into next year? Thank you.
Yeah, thank you very much for your question, Marc- René. You were talking about visibility a bit in terms of the businesses. You were pointing out the Stako. That's a very valid point. On the Stako side, we saw in the last quarter softer sales by around about EUR 5 million, which has to do to the biggest majority with China. I've been pointing out that equipment was not sold to the U.S. by equipment producers in China. There nowadays is a lot of equipment which is produced in China and then sent over to the U.S. This was an effect which we saw in the third quarter that did cost us EUR 5 million in terms of sales, EUR 5 million- EUR 6 million. There were some bigger contracts involved, which were pushed out by quarter. We'll see that coming back.
Overall, in terms of the Stako, they are holding the course as expected. The margin is like in the past quarters between 18% and 20%, as always stated. In the third quarter, there was the secondary impact also visible in the Stako area. However, if you see the business at all in terms of willing business out there, we recently won a big contract on the Stako with a magnitude of EUR 100 million, even with very attractive margins. We are reviewing our gas-spraying business, POWERISE business, and the industrial business in terms of business wins. We are still winning business in the magnitude of our current market share or slightly beyond. It's just a point that instead of 10 parts, 9 parts are sold currently due to this softer economy out there.
In terms of the business model, all intact, the Stako is performing to what we've expected them to perform. Currently, as I said, this is the softness we see in the market. This is, as I said, something which should be, or we see some light at the end of the tunnel in the next year. Covenant, the current covenant which we have with our complete loans is 3.5. We very well recognize that there was concern in the market in terms of the 3.5. As we are approaching or did approach the 3, we're stable at 3 now and will further go down from the 3, but there is headroom already. We took the opportunity with these refinancing activities to also approach our banks with this concern.
The banks said, "Michael, if that's a topic, we as banks and the big basic syndicated banks involved stick to Stabilus like we did in the past. This business model is an extremely good one. The cash generation is excellent." We actually grant you 4.0 for the next quarters, and anyways, with our kind of deleveraging, which is the main priority we have. Deleveraging is the main priority, and paying back whatever cash we generate is the main priority as well. Deleveraging is the main priority. Nevertheless, our banks granted us, in conjunction with this new loan, to get on a complete loan to a covenant of 4.0, which gives more headroom, which gives more stability or the vision, the impression of more stability. However, we will not go beyond the 3.0 in terms of our net leverage ratio anyways.
It should also give the strong signal to the market that we as Stabilus Group are perceived by our syndicated loan banks as a very strong investment-grade company. This was a sign by our syndicated banks that we are in a strong position, which we for sure then took on and said, "That's a good deal." We have now a refinancing done of EUR 150 million. As I said, we very well could have gotten up to EUR 200 million in terms of loan. We did cut that back to EUR 150 million because we said we don't need more than that to pay back our loan for next year of the EUR 83 million, which is due in March. On top, paying back some of the revolving credits, this gives us some additional freedom.
It gives to our investors and stakeholders are also a good sign for stability because the banks, they trust in us, the banks believe in the business model, and they see which numbers we generate. This grants stability. Five banks are involved. That means it gives you also a certain spectrum, which is very valuable and guarantees the stability. Your third question, however, was in terms of 2026, do we see bottoming out? Bottoming out? Yes, definitely. In our industrial business, we see things coming back next year. In the automotive sector, as I said, it's still a little soft. The industrial business typically is a frontrunner. People invest in machinery to build cars and other consumer goods. If people invest in industrial machinery, if companies invest in industrial machinery, that's a good sign that also the industry comes up with basically typically a delay of three to six months.
This is what we expect for next year. You were talking about margin. Our expectations with these activities, which we've been driving in all areas, be it overhead, cost structure, bill of material, and whatnot, the margin expectation for this year is a bottom, and next year we'll see 1% to the upside. I hope that answers your questions, Marc- René.
Thank you very much. Yes, it does.
Thank you. Further questions?
Yes, we have another question, and it goes to Yasmin Steilen of Berenberg. Please go ahead.
Good morning. Many thanks for taking my question. I have four, if I may, and I will take them one by one. The first question, coming back to the Stako in Q3, we've seen a 15% organic sales decline. Does this number already reflect any sales synergies with Stabilus? What was the underlying profitability of this Stako in Q3? That's my first question.
The sales synergies for the year are in the range of EUR 10 million, as we always said. The synergies at this point in time are at EUR 6.5 million. Yes, the sales synergies are coming in very well. Sales synergies are always divided into two. The biggest shares go to the original Stabilus industrial business, and only one-third goes to the Stako due to the fact that with the sales synergies, it is two ways, right? We sell stuff to the customers of the Stako, and we sell stuff to the customers of Stabilus, vice versa. The overall number is EUR 6.6 million for the year. The biggest share was in the first half year. This is the nine-month view. In the last quarter, we saw around EUR 2 million. However, we are confident that the remaining gap of EUR 3.5 million for the rest of the year will close in the fourth quarter.
We are well on track with sales synergies. You are absolutely right. The last quarter in terms of the Stako was rather soft. We are talking about the margin, which is in the range of 17% -1 8% under the Stako side, which is equivalent to the sales impact of EUR 5 million- EUR 6 million under the Stako side, which at the end of the day, to the vast majority, was driven by China, where we typically would sell a couple of million more than we really did this year, this quarter. That was due to the fact that at the end of the day, for the complete industry of building machines in China, the machine builders' indices were coming down significantly, unfortunately, in China for the last quarter.
We see in the Stako good sales and on par in Europe, some decline also in North America, basically driven by the reduced consumer sentiment. The biggest point was China in terms of slightly softer sales under the Stako side. Also here, it's not that we would have lost any business. It's just that instead of 10 parts, currently 9 parts are sold.
Okay. On industrial automation, you mentioned some positive signs. We have, on the other hand, seen Duo recently reducing its order intake forecast in the midpoint by around 12%, implying a book-to-bill below 1 at 0.9. Given the Stako generates around 40% still in the automotive business or basically related to the automotive CapEx, how should we think about the sales and profitability evolution of the Stako in the coming, say, 12 to 18 months? Next year, should we see further declines in the first half and then a recovery in the second half? How should we think about it?
From our perspective, yes, there is a very valid point that over the course of the first quarter towards the end of the year. For us, the next two quarters are two quarters where we see a little softer sales in terms of the Stako . You mentioned Duo with -1 2%. I know that Duo is predominantly in the automotive space. Nowadays, the Stako is in the range of 45% automotive sales and 55% industrial sales in general terms. The industrial sales in general terms are doing still better, yeah, and they will continue to do better. As I said before, we also won a very promising contract over the course of the next four years with sales of EUR 100 million per for this kind of next four years. It means a surplus of another EUR 20 million.
From our perspective, you know, when we took on the Stako, it was in the range of EUR 190 million- EUR 195 million. We are at EUR 200 million, have been on EUR 200 million full-year sales. Now the last quarter was below that. Our kind of business forecast for the next year is that the Stako is staying flat to last year. That means in the range of EUR 195 million - EUR 200 million with margins in the range of 19% - 20% as we've seen it in the first 12 months consolidation. If you remember back to the first 12 months, consolidation of the Stako was in the range of 19%, 19.5% EBIT margin and in the range of EUR 190 million sales to EUR 200 million sales. This is what we see also for next year. They're rather stable in a difficult environment.
Okay, perfect. A question on the CapEx increase. Could you elaborate a little bit more detail the reasons for the CapEx increase ahead of your initial guidance? Does this also reflect CapEx requirements for the Stako , or is it only related to linear production in the automotive business?
In terms of the Stako, there is no significant CapEx in the Stako. I know that where this question is coming from, whenever we've been talking about the Stako and also that they've been owned by a U.S. company, one would think that they were underinvested. That's not the case with the Stako. The Stako is holding the course in terms of CapEx. Their CapEx request is in the range of 5%, so slightly lower than the average of the Stabilus Group. You know, with the pricing pressure we see on the POWERISE predominantly, we took the decision to invest in fully automated lines for the POWERISE assembly. That's one thing of the automation, right? Because dealing with this price situation is predominantly China. The only way to deal with it is to automize things. This is why we did automize our production of POWERISE systems in all regions now.
Needless to say that a fully automated line is more expensive than a manual line. At the end of the day, we drove particularly in Copeland's efficiency initiative. With this efficiency initiative, we did invest in a new fully automated loading and unloading of a gas spring line, which is another lever. The third anchor point is investment in new technology where we did invest over the course of the beginning of the year, particularly a lot in the door actuation. The door actuation is now invested in. There is no additional big investment coming into the door actuation areas. This, at the end of the day, led to the currently EUR 60 million investments we did. Due to the fact that the volume is now lower by, yeah, we mentioned it in absolute numbers, including the effects effect, 10% on the boat, 9.9%. Half is volumes, half is effects.
Nevertheless, the baseline of our sales line is lower. Due to that fact, the percentage is just 1% higher. We stick to the original 5 %- 6%. As I said, due to the fact that the sales are softer this quarter and subsequently over the first nine months, we see the percentage being higher. The absolute investment is still in the range of EUR 60 million. I hope that answers your third question, Yasmin.
Perfect. The last one, just again, coming back to the Stako. You stressed several times the Stako was developing in line with expectations despite the macroeconomic headwinds. Just to clarify, you see no risk of any kitchen sinking exercise with the new CFO coming in in November?
Oh, definitely not. That's a very good point. Our new CFO, as you know, Mr. Jaeger, is coming on board 1st of November . We are already now in good contact. It was very important to me that Mr. Jaeger, at the end of the day, is already onboarded in terms of knowing what's going on in our budgeting process for next year. There will be no kitchen sinking. Definitely not.
Okay, perfect. Thanks very much. Very clear. I'll step back into the line.
Thank you very much. Thank you, Yasmin.
Ladies and gentlemen, since we didn't receive any further questions, we will leave the line open a brief moment. If you want to state another question, please press nine and the star key on your telephone.
If there are no further questions, thank you again. Thank you for participating in today's call. Important to know is we are holding the course in soft quarters. We are holding the course with soft sales. We are taking the right initiatives in terms of cost cutting, in terms of overhead reductions. This is something which we continue to do. The most relevant thing for us is deleveraging. We pay back with whatever we generate in terms of cash flow. For sure, down the line, important for us is to prepare for the future with these efficiency measures. We are spot on with what our business requires. Thank you very much for your participation today. I wish you all the best and a good week. Thank you. Bye, everybody.