Nemak (NEMAKA) Q3 2024 earnings summary

Executive summary

• Achieved 3% year-over-year EBITDA growth to $169 million in Q3 2024, despite a 9% decline in volume and a 4% decrease in revenue to $1.2 billion, mainly due to lower production and EV demand.

• Net income was $5 million, impacted by non-cash FX losses; adjusted net income would have been $33 million.

• Progressed on commercial negotiations, margin improvement initiatives, and cost containment, especially in ICE and hybrid segments, with labor inflation recovery and product repricing expected to conclude by 4Q.

• Awarded $220 million in new business YTD, with 60% linked to platforms offering both ICE and hybrid variants.

• Launched battery housing production for a leading European EV manufacturer and featured in five of Wards 10 Best Engines & Propulsion Systems awards.

Financial highlights

• EBITDA rose 3% year-over-year to $169 million, with EBITDA per equivalent unit up to $17.6 and margin improving to 14%.

• Revenue declined 4% year-over-year to $1.2 billion, mainly due to lower volumes and EV demand.

• Operating income fell 4% year-over-year to $73 million, impacted by higher depreciation and lower other income.

• Net debt increased to $1.77 billion; net debt to EBITDA ratio at 2.9x, with interest coverage ratio at 5.0x.

• Capital expenditures were $96 million, down 26% year-over-year, with a focus on asset optimization.

Outlook and guidance

• Updated 2024 EBITDA guidance to $640 million, above the previous $570–$600 million range, driven by recurring and one-time commercial negotiations.

• Expecting positive free cash flow for 2024, with further improvement in 2025 as CapEx is reduced and working capital is optimized.

• Anticipate net debt to EBITDA ratio to improve to 2.5x by year-end.

• Commercial negotiations and margin initiatives are expected to drive leverage reduction by year-end.

• Forecasts a modest recovery in light vehicle demand and production in North America, Europe, and China in 2025, supported by lower interest rates and improved vehicle availability.