Release Date: February 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Forvia SE (FURCF, Financial) outperformed the market with sales reaching EUR27 billion, within the guidance range of EUR26.8 billion to EUR27.2 billion.
- The company achieved a significant improvement in its Seating and Clean Mobility business groups, with a net cash flow of EUR655 million, surpassing the guidance of EUR550 million.
- Forvia SE (FURCF) reduced its net debt by EUR400 million, achieving a net debt to adjusted EBITDA ratio below 2x, at 1.97.
- The company enjoyed a robust order intake of EUR31 billion, with significant contributions from Asia, particularly China, and new customer awards in electronics.
- Forvia SE (FURCF) made substantial progress in sustainability, achieving a 67% reduction in Scope 1 and 2 emissions compared to 2019, and improved ESG ratings across various agencies.
Negative Points
- The company faced a net loss of EUR185 million in 2024, attributed to increased restructuring costs and nonrecurring items.
- Operating margin was impacted by one-off extra costs in North America and lower volumes in H2, particularly in HELLA activities.
- Forvia SE (FURCF) experienced a decline in organic sales in China, affecting the Interiors business group, despite new customer growth.
- The company anticipates a challenging market environment in 2025, with expected declines in North America and Europe, impacting regional sales mix.
- Restructuring efforts, including headcount reductions, resulted in significant costs, with further restructuring expected to continue impacting financials in 2025.
Q & A Highlights
Q: Could you provide more details on the core portfolio and potential disposals?
A: Martin Fischer, Incoming CEO, mentioned that several disposal processes are ongoing, and a mid- to long-term strategy is being prepared. The focus is on deleveraging, and more details will be shared at a future Capital Market Day. Patrick Koller, CEO, added that these disposals are considered sizable.
Q: Can you elaborate on the free cash flow expectations for 2025, particularly regarding working capital and factoring?
A: Olivier Durand, CFO, explained that in 2024, working capital contributed EUR600 million, with inventories being a significant part. For 2025, a contribution of EUR200 million to EUR300 million from working capital is expected, mainly from inventory reductions. Factoring is capped at EUR1.3 billion and will remain so in 2025.
Q: How do you plan to achieve margin development in 2025, especially given the challenges in Europe?
A: Martin Fischer, Incoming CEO, emphasized the importance of operational excellence and initiatives like EU-FORWARD to improve margins. The focus is on countering market uncertainties and ensuring strong performance in the first semester.
Q: What are your plans for CapEx reduction and its impact on free cash flow?
A: Olivier Durand, CFO, stated that tangible CapEx and R&D capitalization will see further reductions in 2025, with an anticipated improvement of EUR100 million. Martin Fischer added that operational improvements, such as platform design and effective procurement, will contribute to CapEx reduction.
Q: Are there any easy wins in terms of disposals, particularly in the exhaust business or Lifecycle business?
A: Martin Fischer, Incoming CEO, noted that sizable disposals are being considered, and the hydrogen business is being adjusted to market readiness without over-investing. Olivier Durand mentioned that the company is going beyond small shareholdings and verticalized business disposals.
Q: Can you confirm the expected outperformance in China for 2025?
A: Martin Fischer, Incoming CEO, confirmed that new product launches in 2025, particularly in the second half, will lead to outperformance in China. Patrick Koller, CEO, added that negotiations with BYD and ramp-ups with Li Auto and Chery will benefit 2025 performance.
Q: How do you plan to address the balance sheet inefficiencies, particularly the high cash balance?
A: Martin Fischer, Incoming CEO, and Olivier Durand, CFO, acknowledged the need for better cash management. They plan to use cash to reduce gross debt and improve financial expenses, with significant reductions expected in 2025.
Q: Are there any significant costs associated with ongoing carve-outs?
A: Martin Fischer, Incoming CEO, stated that all running costs for carve-outs are included in the guidance, and there are no additional downsides expected from these activities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
