MAHLE Metal Leve (LEVE3) Q2 2024 earnings summary

Executive summary

• Second quarter 2024 revenues reached BRL 2.1 billion, down 2% year-over-year, with operating profit and gross profit margins remaining stable and slightly above previous years despite the revenue decline.

• Sales declined 8.8% year-over-year to €6,011 million, mainly due to lower volumes, negative currency effects, and divestitures.

• EBITDA rose to €489 million (margin 8.1%), up from €400 million (margin 6.1%) in H1 2023, driven by productivity gains and price adjustments.

• Net income reached €16 million, reversing a net loss of €111 million in the prior year period.

• Strategic minority acquisition of one-third of Arco Climatização aims to strengthen presence in thermal management and bus air conditioning solutions, pending antitrust approval.

Financial highlights

• Net revenues dropped 2.5% in the first half and 4.6% in Q2 year-over-year, mainly due to declines in Argentina and export markets.

• EBIT increased to €224 million (margin 3.7%) from €90 million (margin 1.4%) year-over-year.

• Gross profit margin held steady at about 30%, with cost of goods sold at 69%-70% of revenues.

• Net finance income for H1 2024 was BRL 38 million, down from BRL 44.2 million in H1 2023, impacted by exchange rate movements and loan costs.

• Net debt decreased by €73 million to €1,278 million, mainly due to divestiture proceeds and positive net income.

Outlook and guidance

• Expectation for vehicle sales growth in Brazil and Argentina combined is 4%-6% for 2024, with heavy vehicles projected to grow 5%-7%.

• Light vehicle production in Brazil and Argentina expected to close the year stable with 2023, while heavy vehicle production in Brazil is projected to grow 32.1%.

• Moody’s upgraded the outlook on MAHLE’s Ba2 rating to stable in April 2024; S&P assigned a BB rating with stable outlook.

• Export markets, especially for heavy vehicles, are expected to see a weaker second half, while domestic markets may improve.

• Margins are expected to remain stable, with macroeconomic factors and exchange rates as key variables.