Stabilus SE

XETRA:STM

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and welcome to the Analyst and Investor Web Conference regarding the Stabilus Results in the First Quarter of Fiscal 2025. [Operator Instructions]

Let me now turn the floor over to your host, Dr. Michael Buchsner. Please go ahead.

[Michael Büchsner, executive]

Thank you very much. Hello and welcome also from our side to our quarter 1 earnings call today. You have as always Stefan Bauerreis, our CFO; and myself, Michael Buchsner, being the CEO of the Stabilus Group in the call. A stable performance in rough economic environment, that's how I would summarize this quarter for us. Overall, it was a good outcome. So our revenue did increase 6.7% year-over-year for sure mainly driven by the Destaco acquisition and about the other impacting factors, which basically led to a decline on the revenues without consolidation of Destaco. That's what we'll talk about throughout the presentation. The EBIT adjusted was at 11.6% and thereby year-over-year increased significantly by 70 basis points.

And for sure with our long-term strategy and with the acquisition of Destaco, we further improve our portfolio and this improvement on the portfolio, predominantly in the area of automation technology, leads to further stabilization of our business and this is what we see now in the numbers. It was absolutely the right strategic approach along the line to stabilize our business further to further improve it and to make it sustainable even in such rough economic environment like we see them today. Our net leverage ratio, and we will see that throughout the presentation, is kind of stable at 2.8. The market environment will continue to be challenging. That means we expect our numbers to be somewhat loaded towards the end of the financial year for us again because, and you'll see that in the presentation, we are working on a lot of measures to continuously improve the position of our company.

Having said that, with the current guidance, we are very comfortable. Our guidance, and we published it on the 9th of December past year, is at EUR 1.3 billion to EUR 1.45 billion sales with an EBIT margin of 11% to 13%, including a free cash flow of EUR 90 million to EUR 140 million. And our quarter 1 result stable underlines this performance and it underlines the path to this performance to reach our guidance. So on the next page, we have review on Destaco. Destaco has solid revenues, EUR 45 million past quarter. EBIT margin is at 18.9%, which is extremely good I'd say comparing it to the past quarter 1 last year. We did not publish these numbers for sure because they were part of our due diligence. However, I can tell you this performance is even better than first quarter in the past business year for them.

And it also has a very good cash flow generation along the line considering along with the revenue that basically the first quarter for sure also in the industrial automation sector is impacted by a December, which only is 2 weeks long because of the holiday shutdowns in all kinds of industrial areas. So very good performance with close to 19%. We are absolutely on track with our yearly performance expectation with Destaco and also the integration is well on track. We could close all the work streams on the integration side. So going forward, there will be the one or other integration cost, but they will only be internal costs and this is why we'll not see a big impact on our numbers in the quarters to come. So very solid performance, good integration, very nice progression in terms of sales, cross-selling activities are running well.

For the year, we've been planning that our cross-selling activities would reach EUR 10 million annual sales -- end of this year annualized sales. We are currently in the range of EUR 2 million and this basically puts us right on top and on the spot in terms of our sales synergies we've been planning for. And also in terms of cost synergies, we are doing well. Our overall yearly cost benefits for the year in Destaco should be in the range of EUR 1 million and we are currently beyond EUR 0.5 million already. So that means we are well on track to reach also our cost position and cost synergies with the Destaco business on hand.

With that, we switch to the general overview in terms of revenue, profits and margins and I would hand over to Stefan to give you an overview on the focus of the regions as well.

[Stefan Bauerreis, executive]

Thank you very much, Michael, and also very warm welcome from my side to the call for the first quarter and our presentation. So I directly want to jump in the overview on the Stabilus Group level, including obviously also the Destaco Group in the first quarter of our fiscal year 2025. Having a look and starting with the revenue development with an increase of 6.7% and as here Michael already said, that was driven by the first consolidation and by this optimization, let's say, in the split of our different market segments we are working on and the increase of our industrial business due to the Destaco acquisition. Both organic, but also compared to last year on FX side, we have some negative impact to cover. So therefore, overall the organic growth was compared to prior year on the Stabilus business excluding Destaco negative and this also mainly focused on the known areas like automotive, but we will come to that later on.

The M&A effect once again with Destaco is about EUR 45 million in that quarter and Destaco now is coming also back to the growth part. And also here we are starting compared to the first quarter of last year where Destaco was not yet included in our consolidation, but also here started with the first growth activities. That will mean our main growth area are the Independent Aftermarket and the area of Industrial Automation, which obviously then offset the decline in the other major market segments like the Automotive area to be shown and to be seen in a later stage. Talking then about the adjusted EBIT number and here we are quite not only stable, but also we were able to increase our EBIT number in percent of sales coming from 10.9% to 11.6%, which is obviously all overall, an increase of 13.5%. So this having in mind that also here on an organic level we are, let's say, somehow under pressure, but the M&A activity is supporting us.

But here also what is showing is that overall, and that is what we also can see on a good development of our gross profit line, we see that all our measures in terms of cost flexing take the first fruit and despite of a reduction in terms of sales, we were able even to maintain on a good EBIT level. Once again here also impacted by the first consolidation of Destaco. Coming then to the profit and the profit increase by 17.2%. This is on the one side due to the increase in the operating activities, which is on the EBIT side already explained, which are offset by obviously higher finance costs and higher income tax rate. But also here some smaller valuation impacts are included here when we're talking about cash conversion here on that perspective. So overall, I think a good development on the total development of our profit.

Coming now in the last key performance indicator to our adjusted free cash flow and here we have to see that our free cash flow, our adjusted operating free cash flow is declining from the first quarter last year to the first quarter this year. Where does it come from? On the one side, it is positively impacted by Destaco Group for sure. That is clear. But as you know, we already -- we also said that some of our, let's say, liquidity aspects which were included in the fourth quarter of fiscal year 2024 also now are coming back and we'll find a certain reversal. So we have a big portion of that also now here in the first quarter here in there. So that is nothing from an operation perspective that we have to be careful on that. It's really much focusing on this quarter-by-quarter reversal that we have on that.

Also, we have a temporary higher net working capital. Also that was due because, as you know, there has been also some strikes expected in the U.S. harbors and we wanted to be sure to have a very comfortable supply chain, which now in the second quarter directly will reverse and therefore, we will see a significant improvement in the months to come. When we now go in the next slide going to the different region and I will first start with an overview of the different regions; our segments as you know with Americas, EMEA and Asia Pacific. So all overall, a revenue development which is very positive in Americas and EMEA. But here we have to clearly say that this is almost impacted by the very strong footprint of Destaco. And on the Asia Pacific side, we are lower also due to the fact that the major impact of Destaco also is referring to the regions Americas and EMEA and not so much on Asia side.

In terms of the adjusted EBIT margin, also here we can say an increase up to 8.5% in Americas, 8.9% in EMEA and a down trend, but still with a very comfortable margin of 19.4% in the region Asia Pacific, which is from my perspective really much outstanding what we have. Finally, the revenue increase in the regions Americas and EMEA is for sure driven also by the first consolidation of Destaco. Nevertheless, and I think as I already mentioned, our operational activities in terms of cost flexing and improving our structures are harvesting the first fruits. Now going in the next slide directly into the different details and I will start with the region Americas. Sales revenues increased as already said by 14.7% with an organic growth of minus 4.7%. This is mainly due to a reduction in revenues on the automotive side and also on some commercial vehicle.

So these are the 2 major areas where we have from an organic perspective downturns obviously then compensated by Destaco and the good performance in Industrial Automation, but also in the Independent Aftermarket where we are very successful in Americas. That leads us at the end to a very much improved adjusted EBIT number, which is now at 8.5% coming from the 5.3% in the first quarter of last year. And also here we have to say it is on the one side Destaco, but also we are now doing our homework and now improving operational perspective. As you know, Americas always was significantly impacted by high fluctuation in Mexico. And also here we see step-by-step more improvements and a stabilization of our business based on the initiatives that we took.

Going back to the next region and we will have an overview on EMEA. Also here with an increase in sales of 6.1%. But also here the same is true when we're talking about our organic growth, which is negative here and which is also mainly due to the fact that it is on automotive side, but also some other areas like aerospace which is obviously a small area, but here also some deliveries are postponed a little bit over the next quarters. So these are negative impacts positively also here our, let's say, star market segment with Independent Aftermarket Distribution and Industrial Automation. In terms of the adjusted EBIT, also here a very good increase from 8.4% to 8.9% and in total numbers from EUR 9.9 million to EUR 11.2 million. So also here a good performance and also once again our operational activities takes the first.

Last but not least in Asia Pacific and here, unfortunately, we were not able to maintain the good development of the revenue of the last -- of the first quarter of last year. So all overall, we saw there a quite significant organic decline, which also here is mainly due to the automotive area, which is only partially then offset by the good development in Industrial Automation with the business of Destaco now on hand. And the same, a slight decrease in the EBIT margin from 20.4% down to 19.4%. Also here having in mind that obviously 20.4% in the first quarter of last year was a very much outstanding and extraordinary margin. And still the 19.4% from our perspective is a really great achievement that we can be very proud about that.

This having said, we now come back to the market segment and I hand over back to Michael.

[Michael Büchsner, executive]

Thank you, Stefan, for this overview about the regions. And I'd like to talk a bit about the market segments for the past quarter. For sure the number which sticks out here is also the sales of the Gas Springs and the Powerise and this is basically driven by the Powerise where we see lower sales than in the past year quarter 1. Why is that? There's a few impacting factors here. First of all, the quarter 1 in the past year for sure was a very strong automotive sales picture still. So let's say that compared to this year first quarter, the vehicle build was there in the range, depending on the segment, 5% to 10%. So that's 1 aspect to this whole equation. The other aspect is that particularly on the top segments, we see some weakness in October, November, December last year.

So our customers decided to predominantly produce the lower segment cars and that's why you also see that the Gas Springs are better performing than the Powerise systems because the lower segment cars have been preferred in terms of production rather than producing the cars with Powerise systems. Then there is another impacting factor for the last quarter. You all know the unrest about the next steps in terms of electromobility and this uncertainty out there for the consumers basically drives that the electromobility sector was hit by a minus of around about 10% across the regions, right? In Europe and North America, that is basically clear because it's basically driven by our biggest customers, as you know, on the electrofleet side including Tesla for example. But on the other hand side, you see this also in the Asia Pacific region and why is that? There is BYD on hand.

BYD for sure grows faster than the market. However, BYD decided to produce their Powerise systems internally so the external sales to that is basically not possible. And this is basically the reason why also despite of electromobility being for sure a favorite in China, still the sales are basically flat and yes, to a vast majority on the electromobility even seeing a downward trend. So that means bottom line is for Stabilus, there is not a single loss in terms of contract. Contracts are all in place. It's just instead of 10, there are currently purchased 9 elements. So we see a 10%, 11% reduction versus the past quarter. This has to do in a nutshell, as I said, predominantly with the point that in the past year first quarter, still higher base level of cars sold and then this concentration of car production on lower segment cars and a little shift away from the electromobility.

What does this mean for the next quarters? Yes, for our customer base, we got at the end of the day the feedback that at least in the second half we should be seeing better numbers because as there is some clarity around the world in terms of electromobility and some improvements on the car sales sector, there should be a relief. However, this will be in the second half of our business year. That's about the Automotive side. In terms of Industrial Machinery and Automation, for sure overarching was the integration for us still of Destaco and one thing is for sure. The Destaco integration, which is nice sales on the automation side, helps a lot in these turbulent times because you see that also on the pie chart our sales in terms of industrial business is increasing and the sales in percent on the Automotive side slightly decreasing and this has a nice effect that we see.

Nevertheless, stable margins even improved versus the fourth quarter or the first quarter last year driven by more industrial sales and also the effect of Destaco. So that means in terms of our strategy, we are spot on because we said we want to shift away a bit from the automotive side in terms of percentage on this pie chart towards the areas of industrial business and this is what you see now. So this kind of shift, which we on purpose at Stabilus with our strategy are pushing, leads to success because our margins are stable in rough waters and our industrial share increases. Also very positive is our Distribution Independent Aftermarket. No wonder Independent Aftermarket in inflationary times like we've been seeing them over the course of the past 2 years, people basically stretch out a bit their investment in a new vehicle. This also leads to the point that Independent Aftermarket increases its sales.

We brought good products to the market. We are now also fully entering the Powerise segments for the aftermarket segment. This means higher content per vehicle on the aftermarket side where we sold a Gas spring before. We are now also selling not only the Gas Spring, but also the Powerise systems to the market and this is something which carries fruit in terms of Independent Aftermarket. I can tell you that the margins in that area are also pretty nice. For sure in terms of commercial vehicles, we still see the softness of the market. We took also a conscious decision about where to invest in terms of furniture. Furniture, and this is why this market segment is down 13%. We've been laying that out and displaying that over the course of the past year several times.

We want to put our efforts and dollars where it really matters and this is not necessarily the furniture market because it's dominated by Chinese suppliers who are basically yes in terms of cost performance top-notch. However, quality is still a point where many of our customers decide to go with Stabilus. This leads to the point that we at the end of the day are very selectively kind of taking our efforts in terms of where we put our money in capacities on the furniture side and this leads to the point that yes, margin quality increases. However, sales at the end of the day are softer. Energy & Construction is basically flat. A lot in terms of Energy depends now on the new government in the U.S. and how things will be ruled out in the future. And this is why people are at the end of the day cautious and at the end of the day are just waiting what's to come in the next months in terms of decision taking.

Aerospace, Marine & Rail, this is basically impacted by Boeing. We will throughout the year make up for that. However, as you all know and have heard in the media, Boeing had its challenges over the course of the past 6 months and certainly we see that in our numbers. It's only down 6%. Clearly Boeing would be even more a challenge. However, as we've been balancing nicely our portfolio between Boeing and also Airbus, we are now harvesting the fruits of better days for Airbus. And also in this segment, we are balancing our business portfolio. So bottom line is yes, on the automotive side, there is an impact on the electromobility. However, with our nice sales on the industrial side, we make up for it and we increase the margin quality, which leads to a sustainable margin in the first quarter on all the segments mainly driven by for sure industrial machinery and automation.

Now on the next slide, you see then the area of net debt ratio. 2.8 as I said in my introduction, very stable number for the time being. Currently, we have net debt of EUR 663 million, which leads to this 2.8 net leverage ratio and our plan is to reduce that well below 2 within the next 2, 3 years. And for sure midterm target remains 1.0 and this is something which we constantly work on. Talking about these efforts, I would like to jump to the next page here because these efforts we are currently doing in terms of net working capital has been one of the main drivers to basically stabilize our position in net leverage ratio was impacted in December, and Stefan mentioned that, by an extraordinary high inventory in the North American region. There were some strikes coming up.

We took the decision to invest here some money to ensure that we start the new year without any impact on the operations side and maintain our very efficient measures on the operations side. However, this did lead to an increase of inventories about EUR 15 million. So the impact of increased inventories was basically EUR 15 million. And this is at the end of the day, it's something which we'll continue to work on. We are at 20.4%. Our target is for sure well below 20%. And throughout the rest of the year, we started the inventory reduction program along the line because now as sales levels are flattening out and reaching its bottom, which we clearly see, we want to optimize and at the end of the day adjust our complete business model to that. And as I said, overarching is that's a very good development in terms of industrial business.

We are well on track in terms of stabilizing and continue to foster our strategies in terms of split between automotive and industry, which shows a lot of fruits. Currently on the inventory side, we want to reduce over the course of the next weeks and months EUR 15 million so that we should be well below the 20% in the quarters to come. As we know, that's the main driver for deleveraging our company and paying back debt. On the next page, you see at the end of the day our investments in new technologies. It's a little misleading here on this chart because a lot of these activities have been started last year and you see here the number going up. You for sure immediately come up with a question how comes that in such times the investment focus on CapEx is still high above 6%. This number will change as well due to the fact that over the course of the past quarter, we invested in technology and predominantly in automation in our company.

This basically eases out so the door actuation is fully developed. The investments in the new technology road maps of Destaco are coming to an end. Also, the investments we did on the automation side are basically easing and giving some relief here. So you will see in the next quarters that this number also comes down significantly due to the fact that many of these investments were done in the fourth quarter last year and they're just reaching out into our first quarter. But I can tell you for sure that with the innovations we did, we already invested this money in the past year so we'll see that coming down as promised for sure. So this leads me to the next page, which is for sure talking a bit about the forecast or guidance for the complete year. And as I said, again we are well on track in terms of reaching these numbers.

So our revenue is EUR 1.3 billion to EUR 1.45 billion in terms of the forecast or guidance for this year. Margin in terms of EBIT margin, 11% to 13%. Past quarter was 11.6%. It was better than the quarter before or the first quarter in 2024 for us by couple of points. And this basically leads to the assumption that we are well on track in terms of our forecast because we are improving year-over-year and at the end of the day are right in our guidance as we start in the new year. And we all know that the first quarter typically is the one which is impacted by lower sales driven by the summer -- the winter shutdowns and we adjusted our capacities well in terms of our efficiencies in the plant and this helps us a lot also to reach our adjusted free cash flow of EUR 90 million to EUR 140 million. Please also remember that we're kind of back-end loaded.

And some of these aspects, and I'm pretty sure we talk about that also in the Q&A session, will be for sure that we're increasing our efficiency in the plants. There's a stringent plan. We recently had a supplier convention where we did roll out with all the suppliers our cost cutting program, an improvement plan in terms of component pricing and also engineering-related changes to cut down on the sales side or on the purchase side of components. And this are actually fruits which we harvest throughout the year. So that's why throughout the year, there will be also some positive benefits on our P&L driven by that initiatives. So last not least, let's jump on to the page with the outlook here and the summary. Despite of a challenging market environment, we are doing stable. We are executing our business plans. We are executing on our strategy to put a focus and shift on the industrial side and this carries first fruits.

Margin was better than in the first quarter last year. We are stabilizing our business further even with this lower sales on the automotive side because of the shift towards the industrial area. So this is spot on. The diversification is thereby spot on. We started our net working capital projects to reduce CapEx where we think that we've been investing a lot in terms of automation technology in the past year and this is coming to an end for the coming quarters. And then for sure the Destaco integration, it's well on track. So just a couple of data points. Our production operations are stable. Cost situation in terms of cost synergies are well on track. Sales synergies are well on track. All the sales forces are trained and are selling the components of Destaco and Stabilus in the same pocket. And this is basically helping us in the past quarter and it will help us in the quarters to come. All the integration at the end of the day with external costs is done to a vast majority and for sure we confirm our guidance 2025.

So with that, I would turn it over to the auditorium for questions.

[Operator]

[Operator Instructions] And the first question goes to Marc-Rene Tonn of Warburg Research.

[Marc-Rene Tonn, analyst]

Basically 2 or 3 of them. First one would probably be on Powerise and thank you for elaborating on some of the reasons behind softer development in the first quarter. If you can give us some indication on whether you already see the mix improving again with higher demand from the customers plus also some inventory effects which may have played a role at your customers? And I think most importantly, when we should expect the business with the door actuation systems to increase and to finally bring Powerise back on the growth path? That would probably be my first question.

Second question would be, you mentioned Chinese competition in Gas Springs for furniture. Do you also see any kind of competition from that side from China coming into the Automotive Gas Spring business or any part of your industrial business where this may be an issue in the future and how you might have to react on that or whether the quality requirements there are still such high that you are very well protected still in these areas? And finally, just generally coming back to Powerise. I think in the past you mentioned that your order intake is ahead of your current market share. Whether this is something you could still confirm for now and going also into the future?

[Michael Büchsner, executive]

Thank you very much, Marc-Rene, for your questions. In terms of Powerise and the Powerise mix, we saw this effect of electromobility in higher segment cars in the past quarter and it at the end of the day impacted our sales and part of this is for sure cautiousness of the customers out there. In rough times and inflationary times, they rather concentrate on maintaining their cars and this for sure has an impact as well as sales for lower segment cars, which not necessarily help us, but support us only in the Gas Spring side. And this is why we've been seeing good sales in Gas Springs, but not on the Powerise side for the past quarter. This is something which at the end of the day basically kicks in for the here and now.

And I would like to combine it with your question 3, how are we doing in terms of market share? Currently, the Stabilus market share is still 33%. And over the course of the last year and in the same way the year before, we won business to the magnitude of 35%, even 36% out there. This is driving our position in a positive way. Why is that? First of all, we are very competitive in the different regions and this is why we continue to win business out there. By the way, in all regions you know that there are the traditional basically competitors we have. However, in China, there is Iljin and even against Iljin, we are winning business out there which makes us confident that we continue to have our shares in China. We don't see any point here. And our current market share, as I said, is 33%. We did not win -- we did not lose a single business. We were winning the business along the line and this is something which we see.

So however, for the here and now, our forecast which we get from the customers is in a fine-tuned way for the next 4 weeks and in a rough number for the next 3 months. And that's why I've been saying over the course of the second half of the year, we should see some relief as the customers are telling us that things are creeping up in the second half of the year. In the next quarter, we see basically a sidewards movement in terms of the customer demands here. Some might be an exhaust of excess inventories. But for sure the impacting factors of this uncertainty of electromobility out there in the market in conjunction with a reduced demand on upper segment cars to the favor of low segment cars will for sure lead us over the course of the next 1 to 3 months. That's what the current numbers suggest. It is bottoming out.

It might get slightly improved so we don't see further deterioration. But at the end of the day, we see the typical winter softness in the quarter to come. So that's one point. You also did combine it with door actuation. We sold in the range of EUR 20 million in terms of door actuation past year. Past year we sold 250,000 systems so in bottom line is EUR 20 million sales in that term. And this is gradually going up, our assumption for this year is EUR 30-plus million even despite of the headwinds. So the acceptance of this technology in the market increases. We know that all the German OEMs are actually sourcing along the line these products now. They are introducing that and we will introduce that as the first bigger volume OEM with 1,000 German OEM end of the year, starting next year. And thereby, the sales will go further up.

The fitment rates are from today's perspective creeping up and we see this positive trend going forward also because the biggest U.S.-based Detroit 3 producer for SUVs also is up for sourcing of these door actuation systems in the coming weeks. You also said and talked about furniture Gas Spring business. And here it's very clear to us the local competition in China is not up for getting any market share on the automotive side. Why is that? We also mentioned that our quality is superior, which is for sure the essential point. However, there is also another point in this equation, this is the global reach. We are the only one aside of SUSPA, who is our main competitor as you know, paving the road of success with Gas Springs along the line. Our market share is overall 75% globally and it's on a stable level currently for the last 2 years in Asia on all kinds of OEMs, including the local ones with 65%.

And this is something which also here with the latest business wins we underline. The latest business wins help us a lot in terms of to strengthen this position and even enforce it because whereas we had 65% market share in China with our Gas Springs for a number of years. Now we are even winning business up to 67% to 70%, which along the line with all the other products for sure give a good visibility of our market share over the course of the last 5, 6, 7 years because typically development time is about 2 years for a car and then you have the car model in your pocket for 5 years. So it means we have a good visibility that our market shares are even slightly increasing over the course of the coming years because we are winning more than our current market share is with these products. So I hope that answers your question, Marc-Rene. And I will hand over to our facilitator for the next question.

[Operator]

And the next question comes from Akshat Kacker of JPMorgan.

[Akshat Kacker, analyst]

Three questions from my side, please. I'm sorry to come back to the underperformance in Powerise as the first question. If I think about the business development in North America and APAC, it's clearly down double digit in organic terms and I completely heard you on all the comments that you have made. But when I think about how the market did in Q4 last year or basically your quarter 1, production in China even excluding BYD was up 5%. The market was up 12%. So that's a stark contrast to your own business development in Powerise in that business. And even in North America I'm just cognizant of the fact that Powerise in North America was down high single digit already in FY '24. And when I think about overall electric mobility trends, your product is powertrain agnostic. Tesla volumes were not down meaningfully in Q4. In fact they were up. So I'm just trying to understand why are you seeing that disproportionate impact from e-mobility trends. So just if you could clarify Powerise a little bit more for me. That will be super helpful.

And if you could just help us understand your overall full year expectations on automotive Powerise sales this year. Do you think overall global sales could be down mid-single digit? So that's the Powerise question, please. The second question on APAC margins and the pricing pressure in the region that you mentioned in your December call. So basically you've guided for 100 basis points to 200 basis points of margin contraction at both ends of your range. I'm just interested in understanding how has that situation evolved in the last couple of months? We've seen that in Q1 margins are down 100 basis points. Should we expect more pressure in the coming quarters or should we expect more improvement from this 100 basis point level as you focus on cost actions? And the last question is on Industrial Powerise. I think you mentioned you have started to sell Powerise into e-commerce and Independent Aftermarket. Could you just give us more examples of end market segments or applications that these products are going into, please?

[Michael Büchsner, executive]

Thank you very much, Akshat, for your questions. Starting with Powerise. You are absolutely right and you see that on the pure numbers also on the pie chart, Powerise is lagging behind and quarter-over-quarter, it was basically quarter 1 '24 to quarter 1 '25 11% as we did display. In this number, for sure you see a decent good performance in the first quarter last year. I agree with you for sure in terms of that the number of vehicle produced comparing these 2 quarters, quarter 1 '24 to quarter 1 '25, that there was not such a big deviation to these quarters. However, if you mirror back in the kind of at the end of the day October to December in '23 versus October to December in '24, there was a significant impact by still good numbers on the electromobility side. There was a significant impact by the numbers because still SUVs and the upper segment cars were running better.

So this is basically a shift within the portfolio of the customers. Why is that? And we saw that actually on the Gas Spring side. Because if you look on to our Gas Spring side, the Gas Springs is pretty fairly stable compared to Powerise. That means overall, the indication is stay with us, right, because we are in a situation where the cars get sold. However, it's rather the lower segment cars and the cars without a Powerise who get sold. And actually talking a bit about China. In terms of China, yes, the market was up at the end of the day. One, as I said, big driver is there that at the end of the day others are lagging behind -- in terms of OEMs lagging behind BYD. BYD is taking market share from the knowns like Geely, Great Wall, FAW and whatnot and this basically has an impact on to our number.

And in terms of the visibility we get from the customer, they're rather focusing on the second half of the year being kind of flat in terms of the second quarter when it comes to their prognosis. So then if you think about a bit on the APAC margin pressure, the margin pressure in general terms on the automotive industry goes back to the old normal, I would say, which we saw before the year of inflation, which was started at the end of the day with corona and the inflation basically led to the point that many suppliers also could gain back some pricing here. But before this crisis at the end of the day of corona, the typical price erosion you would see in the market was on a global scale 2% to 3%, 2.5%. Gas Spring less, right, because it's a mature product out there. However, on the Powerise side, all other components in the car, you see a deterioration of 2.5% around about the powergen average.

So this time around 2.5% -- 2%, 2.5% is a good number for North America and Europe and this is what we deal with currently. And the number in China is a little higher, it's in the range of rather 5% price deterioration because now it's an uncomfortable situation in China that volume is shrinking in general terms and thereby also the prices are going down in terms of margin. However, we expect that to further stabilize. Why is that? Because the automotive industry and so are we is used to 2%, 3% price deterioration and we make up for it with our technical changes to reduce the prices. The technical changes is in the same way then the demand for price reduction in China on the focus and that's why also technical changes kick in there faster. That means from today's perspective, yes, the price pressure will be happening mainly in our quarter 2, 3 and 4; but we are good off in terms of offsetting this price pressure.

And why will it start throughout the year? Typically, we do the same than many others try in the industry. We're pushing out negotiations as far as we can. Many of these price reductions on the customer side as well as on the purchasing side kick in starting 1st of January because typically they start with a new calendar year. Prices are going down on new calendar year. Also, our activities with our suppliers and I've been talking about our suppliers that they've been also in a meeting with us to reduce their prices on the supplier side. So we saw very good benefit here. We had a supplier convention in October and the new prices kick in as we speak in the first calendar quarter now and this offsets this price deterioration we see in the margin in the Powerise side. And therefore, we are confident that we can maintain the margin position.

However, as I said throughout the presentation, it will be probably loaded towards the end of the year as all these improvements are kicking in now. You negotiate early in the year with your customer base about prices, but also you negotiate about technical changes you can do in agreement with the customers. And this leads to the point that many of our technical changes kick in throughout the year. Some of them are long lead time items, which need to be changed over the course of the next month. So this is why I'm saying it's pretty much loaded towards the end of the year. Talking a bit about the industrial Powerise. We started selling it predominantly in the area of automation technology. So you find it for example in sectors of automation where we open and close doors automatically of machining centers of safety doors.

You will also find them down the road in the area of the kind of construction because we have customers who bring it into door actuation for some fire doors now. You find them also in the sector of health because adjustments of hospital beds is one area where we put them into. And then in the area of commercial vehicles and agricultural development because this where Powerise systems are used to adjust all kinds of technologies, wind spoilers on the truck business for energy efficiency of trucks, then there is kind of all kinds of agricultural equipment, which needs to be lifted from tractors and trailers. This is where you find them typically. So it's predominantly in the area of automation technology and industrial components. It's also in the area of health and recreation in the area of furniture thereby, it's in the area of commercial vehicles and construction. Stefan, from your side anything to add?

[Stefan Bauerreis, executive]

No, I think that was almost very good explained from my perspective. So as we said the APAC margin, we are in that range where we would be what we announced. So I think we understand the market and what is happening there very good. And therefore, whatever now comes in addition with the customer, the key message is to offset that also with good activities on the [ VIV ] on the [ PVV ] side as likely explained. So would I see now significant improvement? I would be careful. But would I see significant downturns? I also would not see that too much. So we are in that range where we are and I think that is a quite stable level.

[Michael Büchsner, executive]

Yes. And it will continue to stabilize further due to the fact that we are selling now, and I mentioned that in the presentation, more on the industrial side, right? We really invest our money where it matters. We have automation technology in there. We have the area of industrial Powerise, as you mentioned, Akshat. We have also the area of door actuation. And this is all market entrants into new fields along with service parts on the Powerise side and this guarantees good and stable margin positions also in the future. So thank you very much for your questions, Akshat. And I would hand over back to our moderator for today.

[Operator]

Okay. So at the moment, there seem to be no further questions. [Operator Instructions]

[Michael Büchsner, executive]

Good. Maybe before we eventually get another question, just to summarize from our side. Yes, we know along with other players in the industry very well, there is a headwind out there and that these days are kind of rough days, but we've been preparing for it. And we did prepare for it for a number of years now with a strong focus on the industrial side. So we always mentioned the Destaco acquisition, SI so the Industrial Powerise systems. But also if we look at the acquisition of Destaco from Coterra a couple of years ago, very solid performance out there, very nice margin development. And this is exactly the nice strategy, which helps us now to stabilize our business and also to have the right levers in our hands to shape our future. And there are, so to speak, a lot of different opportunities out there to continue to improve our business. So I ask a last time, are there further questions?

[Operator]

We didn't receive any further questions.

[Michael Büchsner, executive]

Very good. So then I would like to use the opportunity also to wish you a nice week, a successful week and all the best for the rest of this week. Thank you very much and have a good day.

[Stefan Bauerreis, executive]

Thank you.

[Michael Büchsner, executive]

Thank you. Bye everybody.