Nemak (NEMAKA) Q2 2024 earnings summary

Executive summary

• EBITDA increased 6% year-over-year to $163 million in 2Q24, despite a 6.2% decline in volume and a 4.6%–5% drop in revenue, reflecting successful cost reduction, operational efficiencies, and commercial negotiation efforts.

• Net income rose to $45 million, up $25 million from Q2 2023, aided by deferred tax adjustments and stable FX.

• Awarded $165 million in new contracts year-to-date, with most ICE powertrain contracts requiring minimal investment.

• Innovation recognized with 2024 Automotive News PACE Award, PACEpilot Recognition, and industry-first lightweighting technologies.

• Sustainability progress includes certifying three more facilities under the Aluminum Stewardship Initiative, first in Mexico.

Financial highlights

• Revenue for Q2 2024 was $1.26–$1.3 billion, down 4.6%–5% year-over-year due to lower volumes and product mix.

• EBITDA reached $163 million, up 6% year-over-year, with EBITDA per equivalent unit rising to $15.9.

• Operating income was $57 million, impacted by a $13 million impairment of obsolete assets.

• Net debt increased to $1.75 billion, with a net debt to EBITDA ratio of 2.9x and interest coverage at 4.7x.

• CapEx for Q2 was $79 million, 40% lower year-over-year.

Outlook and guidance

• Ongoing commercial negotiations on inflation recovery and underutilized capacity expected to conclude in H2 2024.

• CapEx guidance for 2024 remains at $380–$395 million, with future investments contingent on electrification adoption rates.

• Free cash flow generation and deleveraging remain top priorities, with expectations to recover working capital in H2.

• Five-year business plan under review, with updated long-term guidance to be shared once customer demand clarifies.

• Management anticipates opportunities from hybrid demand and extended ICE life, focusing on operational excellence and innovation.