Nemak SAB de CV Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Alfonso Salazar - Scotiabank GBM - Analyst : Yes. Thank you, Armanda, Alberto, and Denise. I have a number of questions, but I will restrain myself to three only. The first one is if you can provide some color on the market for hybrids. We understand that as EVs slow down, demand for hybrids is going to increase. So if you can give us more color on what to expect in the second half and maybe, more interestingly, in 2025 regarding hybrids demand. And the second has to do with the imposition of provisional duties in Europe for Chinese EVs. I've seen a lot of mixed comments regarding this that it's not going to be very useful. Some people think that they are necessary. So I just want to see what is your take on these provisional duties and how they can help -- or what are the implications for Nemak in the European region? And the final one has to do with combustion cars being produced in China that are now being sold abroad, especially in three regions, in Russia, in Mexico, and Brazil. Probably, Russia is not a big issue for you. But Mexico, it is, and also in Brazil. We saw that your business in the rest of the world, volumes were stronger than -- were strong. And I was expecting to start to see some pressure because of all these cars that, years ago, were sold in China and now they are selling abroad. This could lead to some competition and market share loss of some of your clients. So I just want to see what you think about that and any comments that you may have. And that's it for me.

Question: Alejandro Azar - GBM Casa de Bolsa - Analyst : Hi. Alberto, Armando, good morning. Just two quick ones. The first one is on your income statement. There are some interest expenses. I thought they were a bit high, closer to $43 million, during the quarter, when usually, you guys have around $90 million, $80 million a year. And the other one is there is a $20 million other financing income. I was wondering if you could explain those $20 million. Where do they come from? And my other question is on free cash flow. And I think, Alberto, you already mentioned this in your remarks, but I just wanted to ask again. So there are like $200 million impact on working capital. Are you still targeting to have a stable working capital or working capital gains during the year?

Question: Alejandro Azar - GBM Casa de Bolsa - Analyst : And one more, if I may, related to the second one, Alberto. So the claims that you mentioned that had an impact or a benefit on the income statement, we did not see that as a cash entry during the quarter. Is that correct?

Question: Alejandro Azar - GBM Casa de Bolsa - Analyst : Okay. Excellent. Thank you very much, Alberto.

Question: Alejandro Azar - GBM Casa de Bolsa - Analyst : Hi again, Alberto, Armando. I just wanted to pick your brains on a piece of news that was recently on Saudi Aramco buying a 10% stake in Horse Powertrain. Horse Powertrain is a powertrain company. I think they built around 3 million engines. The valuation was close to EUR7 billion. My question was that, first, Horse Shareholders are Renault; Geely, which are your clients. Just wondering if you have a relationship with that company and what are your views on the value of the powertrain now that we are seeing -- we're thinking that it's going to live a longer life.

Question: Alejandro Azar - GBM Casa de Bolsa - Analyst : Thank you, Armando. And one more, if I may. The way my brain thinks is if you have a sudden shift in what companies are doing, let's say putting a lot of money on electrification and forgetting about the powertrain business, wouldn't that cause the powertrain assets to -- or the utilization to tight now that everyone is moving back to those -- to that technology? What are you seeing on that front in terms of industry, in terms of Nemak? And if you think that in the short-term, you can get on the negotiations that you are doing on powertrain, you can get a more piece price, let's say like that, because the industry is tight and nobody new wants to invest in that asset and you have a leading position on that technology.

Question: Alejandro Azar - GBM Casa de Bolsa - Analyst : Okay, thank you. Thank you again, Armando.

Question: Alfonso Salazar - Scotiabank GBM - Analyst : Sorry, I was on mute. This is more than a question; it's more probably a suggestion. But given the big changes that we have seen in the -- and the delays on the adoption curve, maybe it would be interesting to see if Nemak can provide some long-term guidance review. I remember that a few years ago, you provided a very useful long-term guidance on what to expect. And I don't know if you have some comments on what could it look like. Or maybe by the end of the year, you can provide a new update on your long-term outlook. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 17, 2024 / 5:00PM, NEMAKA.MX - Q2 2024 Nemak SAB de CV Earnings Call

Question: Alfonso Salazar - Scotiabank GBM - Analyst : That will be fantastic. Thank you.