Nemak (NEMAKA) Q2 2024 earnings summary

Executive summary

• EBITDA increased 6% year-over-year to $163 million despite a 6% volume decline and challenging conditions, driven by cost reduction initiatives, operational efficiencies, and commercial negotiations offsetting inflation and lower EV production.

• Revenue declined 5% year-over-year to $1.3 billion, mainly due to lower volume and product mix.

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

• Awarded $165 million in new contracts year-to-date, mainly fulfilled with existing ICE powertrain capacity, minimizing new investments.

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

Financial highlights

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

• EBITDA reached $163 million, up 6% year-over-year, with EBITDA per equivalent unit at $15.9, up 13.6%–14%.

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

• Net income totaled $45 million, aided by deferred tax adjustments and stable FX.

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

• CapEx was $79 million, 40% lower year-over-year, reflecting a streamlined investment approach.

Outlook and guidance

• Focus remains on margin recovery through cost structure improvements, commercial repricing, and addressing underutilized capacity.

• CapEx guidance for 2024 remains at $380–$395 million.

• Free cash flow generation is a top priority, with expectations to recover working capital in H2 2024.

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

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