Stabilus SE

XMUN:STM

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and welcome to the Stabilus SE Conference Call regarding the Stabilus Financial Results of the Third Quarter of the Fiscal Year 2023. [Operator Instructions]Let me now turn the floor over to your host, Dr. Michael Buchsner. Please go ahead.

[Michael Büchsner, executive]

Yes. Hello, and welcome to our quarter 3 earnings call. My name is Michael Buchsner, being the CEO of the Stabilus Group, and I'm here with our CFO, Stefan Bauerreis, to walk you through the numbers for the third quarter of our business year. It's a shared presentation, so I'll start with the operational highlights, and then I will hand over to Stefan.Let's turn it to the Page #5 in the deck, you see that we had really a good organic growth of 13.7% year-over-year in the quarter 3 '23 and a particularly strong performance in Powerise, 20% year-over-year, which was an outperformance of the automotive light vehicle production of being 15.5%, particularly strong out in Asia Pacific, 42%, and EMEA growth for Powerise is 27.5%. The organic growth of the Industrial business also was very good this past quarter to 7.3%, well above the global economy indicates a GDP. Also strong improvement of the EBIT margin. We did explain you over the course of the year that we are about to recover and reimburse cost inflation from our customers and also that towards the end of the year, our cost management initiatives will start hitting the ground. And this absolutely was the case. We turned out with 13.7% EBIT margin in the third quarter this year, just comparing that versus the first quarter this year, which was 11.2%. It's very good and deep improvement and also to compare it to quarter 2, which was 13.1%, still a good step upwards, and this path will continue as we, yes, executed the strict cost management, which we've been outlining, as well as getting into intensive discussions with our customers to reimburse inflation, which actually is the case and turns out to be very successful as we walk through the year.Also, I'd like to draw your attention on Page #6, 7 and 8 because they outline some major milestones for us in terms of improving our business in general terms. First of all, Page #6, we did further increase our automation in the plant in Koblenz. So we invested EUR 10 million in modernization, automation. Koblenz, the payback is around about 3 years. So we are dealing with state-of-the-art technologies and equipment and thereby also will be able to reduce our workforce 15% over the course of the coming 2 years, which actually will be done by, yes, kind of demographic change, people who are actually out of the years of the baby boomers, they're going for retirement. So it will be socially a very good thing also for employees because we will make kind of these changes in terms of head count in the way of doing or using demographic change. So there will be no layoffs or anything like that, there will be smooth transitions into the retirement phase of employees, particularly the baby boomer years are effected, thereby, which we do until the year '25. So no additional costs attached on the other side, and it will reduce gradually our workforce by 15% and increase our efficiencies of our equipment along the line in our operations.So that's it on the side of the operations belonging and also something significant over the course of the last days. We closed an additional deal with Cultraro. You remember that back in November '21, we acquired 32% of the Cultraro company. Actually, Cultraro deals with miniaturization components. It follows thereby absolutely a trend of adding product, stampening systems in a rotary way and linear way smaller. And we bought additional shares of 28%. So overall, we are now a majority stakeholder and shareholder with 60% of the Cultraro shares. They actually do small format motion control solutions, which definitely is part of our long-term strategy. We've been reaching out to them in the year '21 already, and thereby could now increase our share to 60%. The EBIT margin is very healthy, above 20%, which actually is really favorable for us. We have also synergies in the case of EUR 5 million in '25, which, at the end of the day, is a very accretive business opportunity for us, and that's why we executed the enhancement and additional shares to us. The business portfolio of Cultraro is pretty much in line with what we do at Stabilus. It's kind of equal share between Automotive and Industrial applications. It's also in terms of business, it's absolutely in line with our long-term strategy.On the next page, you see, for example, an application here at doors,, a seat system, a rear bench system of an OEM. And along with Cultraro, we already developed over the course of the past 2 years, successfully for the market additional dampening systems for the interior. You all know that with electromobility moving on, people get more and more sensitive in terms of interior. They need rotary and axial and linear damping systems, not only for automotive, but also for industrial things to get movements smoother on a smaller space and more convenient in the automotive as well in the industrial production.So coming back to the overall highlights, yes, we further increase and enhance our effectiveness in the plant in Koblenz with automation investment, EUR 10 million by making the transition of our employees. Some of our employees, the baby boomers and demographic change we used by that smooth into the retirement phase. And on the other hand, we increased our share with Cultraro, and thereby complete our portfolio along the line to make us more resilient and cost-effective and more stable in our business environment.With that, this very operational highlights, I will hand over to Stefan for the financials.

[Stefan Bauerreis, executive]

Thank you, Michael. So I would like to go to the next slide on Page 10. I will give you an overview about the financials of the third quarter. Obviously, those financials are not impacted by any issues of the Cultraro acquisition as this took place after the 30th of June, and therefore, it's an event of the fourth quarter. This having said, so the revenues are about EUR 306.5 million, which is, as Michael already mentioned that a quite good increase of 13.1% compared to last year or plus EUR 35.4 million. The acquisition effect, as already said, in that quarter still is 0, just Cultraro coming that on the next quarter in our financial topics. Organically, so if we take out the translation impact, the growth would even be at about 13.7%. So you see that here the FX impact currently is not to our favor. But I think we are on nevertheless, in good shape with the 13.7% EBIT margin on an adjusted level.In terms of profit, and I will come also later on to that perspective because the profit that has a significant different approach. So we are here with a profit of EUR 21.7 million compared to EUR 24.3 million. This is mainly impacted by FX valuation topics on our cash balances in foreign currencies, and therefore, have there a negative impact in the profit and loss statement in the financial result. The profit margin, it will be or is at that point of view, 7.1% after the 9% in last year. But that indicates, clearly, we had a quite good third quarter and the reduction in terms of profit, profit also in percent of sales, mainly is due to those impacts on the valuation side of those foreign currency topics.Adjusted free cash flow here is with EUR 48.3 million, a significant increase of 80.2%, which is really much on the one hand side, supported by a quite good result of the quarter, but on the other side, mainly by the working capital optimization. So the times where we increased working capital due to the corona crisis to optimize and support our supply chain is not any more necessary. So therefore, we have a very positive impact compared to the prior year on the working capital side. And also the tax refund where we made the postings on the P&L side in the last quarter, they were cash relevant now in this third quarter. And therefore, also we get out of that EUR 12.1 million additional payment from tax side due to that historical tax ruling that we got out of Germany.The net leverage ratio once again improving with now 0.3x to -- compared to the 0.4x that we had at the end of the last fiscal year and the 0.6x at the end of the third quarter. Obviously, this increase from year-end 2022 to the second quarter to, first of all, the beginning of the year was due to the dividend that has been paid and now getting back to the 0.3x. So I think here also, we are very good on track. Net financial debt, as I said, with EUR 56.9 million. Also there once again reduced compared to end of the last year and mainly also reduced compared to the Q3 numbers after last year, where we had still an amount of EUR 121.9 million as net financial debt on our hand.The outlook and Michael later also will come on that for the financial year '23 that we are now starting the fourth quarter. So we believe that on the sales side, we will be on the other level of our guidance with EUR 1.2 billion. On the other side, due to all those challenges coming across all those geopolitical issues and FX topics, we believe that our margin will be at this 13.0%. So it's in the guidance on the lower end compared to that, what we explained.Coming a little bit more in detail on the next page, where you can see once again the split and the graphs for revenue, profit, adjusted EBIT and free cash flow. Here, you also can see how the different regions are contributing to the revenues. So we have here on the -- compared to last year, one of the biggest growth or, let's say, all regions are growing. So I think that is a very good message. EMEA with EUR 129.9 million, still with 42.4% of the complete revenue still on an important level. Americas a little bit reducing in the weight, but nevertheless, still growing with 109.9%, but they go down from 36% to [ 35 point -- 9.8% ] or our sales quote. And once again, APAC despite of all the geopolitical, corona topics, that was what gave a significant hit on the APAC side still growing. And we could finalize the quarter with EUR 66.7 million in sales in APAC. Overall, a 13.1% increase compared to the third quarter last year.I think a very good development that you also can see here on the right side, despite the fact that the EBIT margin reduced from 14% to 13.7%, which is also with a quite important part driven by a negative development of the fixed situation compared to last year on the operational business. So we also will here able to increase significantly the results in EMEA after a critical year 2022. So all our improvements already are contributing and now paying back with good results in that quarter. Americas, it's a little bit lower, that also we will come later on that when I explained a little bit the situation of the regions. And APAC also slightly below prior year, but this -- due to those expectations and still remember that Q3 last year was driven in APAC is a tremendous growth in sales. And therefore, we had also a very good EBIT margin, still with EUR 11.2 million, I think, a very good contribution.So now coming to the profit. Profit is despite all this positive development in the overall numbers of our adjusted EBIT, we nevertheless made less profit than in the third quarter of last year. This mainly comes from negative impact on the revaluation of cash balances in foreign currencies. And that is the driver that is compensating the good development of the EBIT side, but it's only a valuation topic and not an operational issue.Free cash flow, I already talked about that, a tremendous increase of 80.2%. So that is really a big advance and a big success that we could see here. As I said, one part of that is mainly -- is driven by the tax ruling, which is more or less than the result of the hard work of the last years, but also the biggest portion is coming out of the optimization in the working capital compared to the third quarter of the last year.So if we now go to the next page to Page 12, we see the same development now for our 9-month figures. Also here, our revenue increasing by 14%. That is really much a significant increase, which is on the one side with EMEA growing 7.9%, Americas growing 23.3% and APAC is still growing 12% in the 9-month figures. So here, we can see EMEA still is on the good growing and even the third quarter was better than the 9 months in terms of growing, the same for APAC. Currently, Americas in the third quarter, good growing, but a little bit lower than in the first 2 quarters of this year.Coming to the EBIT adjusted number. EBIT adjusted is increasing in total numbers to -- by 8.3% from EUR 106 million to EUR 115.3 million on a 9-month period. And also the adjusted EBIT is after a 13.4% in last year now with a 12.7%. If we take into consideration that we are -- that we were last year, positively impacted by FX effect and this year negatively impacted by FX effect. So a good portion of that despite all these challenges around is driven by FX valuation impact on the transactional side, which brings us a little bit lower than on the 9-month figures of last year.Profit still here on the 9-month period, we are on a higher level. This is mainly driven by additional EBIT of around EUR 10 million plus the EUR 12 million on the tax side that I already explained. And then on the other side, we have some FX losses already explained in our Q3 numbers, which is then explaining the overall development of the 9-month figures of our profit line.Here, even in the 9-month figures, the percentage of our growth in terms of free cash flow is even higher, not only the 80%. This is now going up by more than 100% exactly 109.7%. So you can see this is not only a short-term window dressing impact of third quarter. This is a real positive development of our free cash flow, taking into consideration the optimization on the working capital side. And also, as I already explained, the positive impact on the tax ruling in Germany.So this having said about the overall situation of the group of the third quarter and the 9-month period, if I may I would like to continue with our operating segments and on Page 14, to continue with the region EMEA. So when you have a look at the region EMEA, so here we can see growth in revenue increase by 9.7%. So if you take on the -- and this is driven by all the different business units that we have, the light vehicle production, which is always -- at least for the automotive side, a good indicator was -- grew about 13.4% in Q3 compared to the Q3 of last year. So the EMEA revenues are up by EUR 11.5 million or 9.7%, also organically in eliminating all FX impacts on this translation topic, that still would be at 10.2%. And this is mainly driven, on the one side, by the Automotive Gas Spring revenue, which is growing, which grew about 7.1% and the Powerise business, which 27.5%. So also here, you can see that if we take those together, our Automotive business is clearly overachieving even in Europe, the development of the market and the light vehicle production that we can see.Mainly when we're talking about the Powerise system, so BMW Group is really much -- was a big success story, but also not only one customer. You can see here on the -- in the third bullet on the right side, a significant number of different customers, where we -- which are, at the end of the day, contributing to that very good development on the Powerise business. So at the end, in Europe, that is not only 1 or 2 customers, that is really going through all the different customers we have. So very good development on our Automotive business unit, but also on the Industrial revenues, they went up by 4.5% on the -- in the Q3, what I believe is, even when we're taking the organic growth with a 5.3% is a very good achievement, taking in mind all the economic downtrends that we can read all the day in the newspapers. So here to get an organic growth of 5%, I think it's a very good development. And this is mainly driven by the segment Mobility, which is on the other side, partly offset with a softer business in Health, Recreation & Furniture, you know that also from the last calls of the last quarters. So these are those areas, mainly Recreation & Furniture, we are focusing on the profitable business and therefore, not taking all the potential growth to maintain there on a good margin level.So the adjusted EBIT margin improved by 4.6 percentage points to 14.7% in Q3. So that is a very big step forward. And this is due to a very strong revenue growth that we were able to see, mainly driven by all the 3 business units, we have to say, but also significantly by Powerise. But also having in place a strict cost management, as well as the continuous effect of, we call that normalization of our purchase price for some raw materials, components and also energy. So that is, therefore, we can say a very good recovery in terms of growth and also profitable growth. And I think that is even more important to underline that in our still biggest region that we have in the region, EMEA.Moving then to the next page, on Page 15, Americas. So here, the situation is a little bit different. So here, we have a likely production of 13.6% growing. On the other side, our revenues are just growing about 12.6% or even organically, it just was a 8.3% when we take out all the translation impacts that we got. So here, a clear lower growth rate than what we could see on the light vehicle production. And here, we see that in the next bullet quite clear, that on the one side, the Automotive Gas Spring revenue went up by 15.9%. And this indicates clearly that we are also here on the Gas Spring side, able to overperform, to outperform the market. On the other side, the Powerise revenue just went up by 1.1% organically.So now you might ask the question, where does that come from and why this can happen? That on the one side, in EMEA, we see a very tremendous growth in Powerise, but here in the region Americas, it's just with a small value of 1.1%. In fact, it's a small value, 1.1%, but this comes on the one side by some individual customer decisions, that I explained that the last time already on Ford side that in 1 major platform model, they decided to switch from a double Powerise side to a single-side Powerise. But also we are currently impacted by some changes in models. So we can see that the current ones are going down continuously. And the new ones are still in the phase of development. So this is, we would say, a quite short-term activity where we just see those small growth rate on the Powerise side in Americas. Even now taking into consideration, we implemented and our expansion of our Powerise plant in Mexico and already -- and that is a clear indicator with all the new projects that we won that also Americas will come back for sure on the growth path as we can see that in Europe or even in Asia Pacific. That's why it's for us just a temporary impact.Industrial revenue increased 7.9%, which represented an organic growth even at 10.3%. So also here, I think a very good development, and this is mainly driven by the segment's energy with all our new products on the solar damper side, the construction, industrial machinery and automation, a really big growing area and also the distributors on the independent aftermarket. Also here, partly offset by lower revenues in the area of Recreation & Furniture. So that is a little bit the overall picture on the revenue side in America. So to summarize that, quite good, a very good development from our perspective in Automotive Gas Spring, a very good development on the Industrial revenue side as well, Powerise in an intermediate phase to recover then in the next quarters to come.Talking about the adjusted EBIT numbers. So here, we get a reduction from 15.3% to 10.6% adjusted EBIT margin. Here, we have to say that the region Americas is mainly driven compared to all other regions by those negative FX impacts that we -- that I already explained on the group level because the main impact is coming out of the relation between U.S. dollar and the Mexican pesos currently. We still see, let's say, a quite significant cost inflation on the personal side, mainly coming out of Mexico. This is related due to governmental increases of base salaries and also the reduction of working time. So also here, we are in the process of discussing that new structure with our customers to get compensation. But that is nothing that you get within 1 day. This takes some months to come. And so, we already started it, but normally, you need at least 3 months to then get the OEMs convinced about that and getting also the some of the compensation out of that. So that is a little bit the current structure that we see in Americas. So this is -- Americas is in an immediate phase in terms of revenue growth, some specific items on Mexican side, mainly with additional cost impact, but also that is under control and the measures to optimize that are clearly in place.Coming now to the -- to our last region, APAC for the third quarter. Here, we have also a light vehicle production at Asia Pacific, with it's about plus 17.3%. So overall, our APAC revenue went up by EUR 11.6 million or 21.1% to EUR 66.7 million in the last quarter. So that is a very good impact because even when we take out or we exclude the currency translation effect, which is negative in that perspective, we had an organic growth of 30.7% and therefore, also clearly outperforming the light vehicle production numbers we saw or we can see in the region, Asia Pacific. Where does that come from? That comes from both Automotive segments also here a big and good performance in the growth of our Automotive Gas Spring with plus 20.3%. So already this business unit also outperforming the growth of the light vehicle, but also having the Powerise with 42.2% outperforming in our revenues. That really explains us where these good growth rates are coming from. And that contributes to also a continuous improvement of our region APAC. That is not an exploding impact that we were able to see that in last year with growth rates of about 100% in 1 quarter. So that will not happen. But step by step also here, we will see a continuous improvement.Nevertheless, the adjusted EBIT margin is lower than last year. It's about 16.8% in the quarter compared to 20% in the last year. This is also driven by higher material and labor costs. This is also driven by all the operational improvements that we made to now step by step to improve. And also the last month of the quarter also, we were able to see better numbers even than the average of the 16.8%. So also here, we see a recovery, but still on a lower level compared to our budget.So if we then to summarize all that, what we've seen on the regional side, coming back to -- on the next page to the revenue by business unit. Once again, we had here a 13.1% growth overall from EUR 271.1 million up to EUR 306.5 million. So that is, from our perspective, a very good development. If we say operationally, this even would be a 13.7% as already explained. And then in the bar chart, you also can see which division, which business unit is contributing to the different areas. And you can see, once again, we have a good growth on the industry side compared to the economic development of the economies of the different entities where we do not see a 7.3% growth of the economies, but Stabilus is growing 7.3% on the Industrial side, still having and that is, at the end of the day, I think also a very good message going forward. Continuously having a very good outperformance in our Automotive business unit. Once again on the Powerise side, even if we take into consideration that on a short-term period, we are on a little bit lower level on the growth rate in Americas, but also that we will overcome that. And that is the message of this third quarter that we were seeing and getting quite good results in sales and also in revenues taking in mind that we will compare to last year also impacted significantly by negative FX impact.So this having said, I hand over back to Michael after all this amount of numbers. And Michael, up to you.

[Michael Büchsner, executive]

Thank you much, Stefan. We are actually on Page #18 now, so the Industrial revenue by market segment. Our Industrial revenue in general terms was at EUR 111 million, which is up 5.6% year-over-year. Main driver is construction, industrial machinery and automation. And I'd like to draw your attention on the pie chart on left-hand side, because here you see on a very visual way in which areas we are growing. We are growing in the part of industrial machinery and automation to the burden of actually furniture base that because we know that in terms of our position, actually, the area of industrial machinery and automation is better in terms of profitability, it's kind of technical playground, which we are strong in. And that's why we put our focus on that segment currently, and kind of are very selective in terms of furniture-related businesses also due to the fact that the margin profile is in a lower scale. So we continue to focus on the industrial application and Automation sector at Stabilus because we are kind of a technically-driven company, as you know, and we are really strong in that. And yes, that's better profit for us, and this is why we pursue that area.On the next page, which is then Page #19, I'd like to also draw your attention on the outlook, the detailed numbers on Page 20 then. So our detailed outlook for the rest of the year and here, we could be a bit more precise than in the past months because we have a clear vision of the coming months. We will end up in revenue of EUR 1.2 billion with an EBIT margin of 13%. This is, as you know, based on light vehicle production of 86 million in the year '23 versus 81.6 million, which actually were performed in the year '22.So with that, yes, we continue to pursue our path and strategic vision. We think the right steps concluding to this deck we're presenting today, we are recovering inflation from our customers and streamline our operational costs step by step like by increasing the automation in Koblenz and finding respective agreements with unions in order to allow our people, some of them to go into retirement, which actually will reduce our costs along the line. All these measures will kick in now improving our performance as we speak, but also they will be supportive for our future success.And with that, we would close the introduction and deck presentation and would open up for the Q&A session.

[Operator]

[Operator Instructions] And the first question comes from Akshat Kacker.

[Akshat Kacker, analyst]

Akshat from JPMorgan. Three questions from my side, please. The first one on growth and margin. Now, when I hear your presentation, there are constant mentions of strong organic growth and outperformance, and the linkage that has to profit, underlying profit. Now, when I summarize the discussion, I am seeing that your guidings for margins to be 100 basis points lower year-over-year despite more than 10% organic growth in the first 9 months. So I just want to understand the main factors behind this lower margin guidance. Is it mainly down to lower inflation recoveries in Europe and North America, and probably a weaker market recovery in China? Or are there any price mix issues in the business that you would also like to flag? That's the first question.The second question is on China. Can you just remind us of your capacity utilization at the Pinghu facility? And when do you expect the new Powerise capacity to come online?And the final one is on Industrial business. If you could just talk about the general lead indicators across your different end markets, probably just some general comments on order intake or overall demand numbers, please?

[Michael Büchsner, executive]

So thank you very much, Akshat, for your question. We'll actually share the questions between us. So Stefan will start talking a little bit about margins and growth perspective and the performance in that respect. And then I will talk about capacity at Pinghu and the plant to be loaded and order intake on the Industrial side. Stefan, please.

[Stefan Bauerreis, executive]

Okay. So first of all, in fact, yes, we -- if you just compare the numbers, the 14% and now the 13%, it's obviously that is a reduction in the profitability that we can see here. Why is that? And from our perspective, there are mainly -- for the full year 2023, there are mainly 2 main arguments or let's take 3 arguments. The first one is, you have to know that, mainly at the beginning and in the last quarters of our fiscal year, we had a tremendous downturn and a very critical situation in China with changing from all this restrictive COVID policy into then that everything is allowed with a 50% insurance rate on -- in all the industries, all of our -- all our competitors and all our customers. So that will mean we suffered mainly at the beginning of this calendar year quite negative results. What you can see in our -- mainly in our first quarter numbers and also slightly impacting our second quarter numbers, where we were significantly below prior year. So that is, if you would take these, I would call that external shock even or this external negative impacts out, we would have been significantly improved on a full-year perspective. So that is one issue that I say, okay, this is we already overcome that, we already changed that. And this is nothing which impacts once again our quarterly numbers.Now, what we have in addition to that is, mainly the FX impacts. So on the 9-month period, if we just say, we are impacted compared to the last year, you could take 0.5% profitability just due to the difference in the FX impacts we are impacted on the EBIT side. There is nothing else than that. So last year, all that was for us positive, now all that is negative. It's not tremendous, but nevertheless is 50 basis point out of that 100 is just relating to that FX impact. So that is the second point.And third, yes, for sure, with all the inflation that we had and that we -- that everybody has to live with, we also were in a situation that we had mainly significant increase on the labor cost in -- not too much in Germany, but also here with 5% it's significant, but nevertheless, it's lower compared on a percentage increase when we're talking about countries like Mexico or a country like Romania, which are important production locations for us where the labor cost inflation was more than -- was in between 10% and 15% compared to last year. And that the what you normally say is, okay, this was, you have to compensate by operational better improvement. So this is with a 15% of labor cost increase, significantly more difficult than if you just have a 5% labor cost inflation in that perspective. And also you can see at the end, the -- we're trying also to get best compensation possible with the customers, and we are there on good track. But these are mainly those points from my perspective. So a big hit in our P&L in the first quarter, and partially the beginning of the second quarter due to China, and this low business at the end of the last calendar year.Second, where we now went out and you see that also on our Q1 and Q2 results. Second, the significant inflation -- FX impact compared to last year, which is about half of the difference in the profitability compared to last year. And third, obviously, we still have some work to do, and are doing that for compensating more and more those labor cost increases due to that inflation. These are the main 3 issues. So operationally, I would not say that we have a structural problem. So we will overcome those topics. China will come back, this takes probably a little bit longer than the most positive voices had the prognosis that it will come. But nevertheless, China will come back. FX is something that you would never expect that continues all the year in the same situation. So that will mean all what is operationally driven is already not only addressed, but it's all in our way to get and to find more and more solutions. And when you have a look at the third quarter results, we are now with 13.7%, third quarter this year, and we were about 14% last year. And this 0.3%, this is coming out of FX. So that shows you that on an operational side, I would not say that this is a deterioration of margin.I hope this answers a little bit your first question.

[Michael Büchsner, executive]

Thank you very much, Stefan. Let's talk a bit about Pinghu capacities, Akshat, when we started the plant in 2020, we said that we would load the plant until 2025, and that's still the case. So we see a very good growth, particularly Asia Pacific region for Powerise systems. Fitment rates increase there steadily. Currently, actually, the plant is probably loaded to 2/3 to 70%, 75%, I would say. And the plan is to completely, yes, fill the plant until 2025. You see how successful we are, if you see also the growth rates over the past year, it's 40%-plus, which we just laid out in the presentation. Currently, we are selling 37 million per quarter, Powerise systems in China. Yes, for sure, as Stefan did lay out at the beginning of the year, due to the lockdowns, there was a dip, but we see that gradually coming back slowly, but coming back. And we are confident that until the year 2025, we will load the plant.By the way, there's still opportunities to expand the capacities in a gradual way. One example is that, we just lately launched and in a launch process of our automated assembly lines for the Powerise systems in the plant in China in Pinghu, which, on one hand side, will kind of compress the business in the plant. So there will be less square foot needed to produce the parts, which allows us to still increase the output a bit. On the other hand, this, for sure, impact in a positive way our cost position. And this is actually what we see when we talk about our business wins because we continued to win above and beyond our current market share in China, Powerise systems. And also to give you some insight, we always talk also about door actuation systems. We recently also won 2 significant contracts with a Korean customer on door actuation systems. So -- and this will be also products located in China subsequently. So we are on a very strong growth path. And we'll continue that path of success going forward. The other opportunity to further expand is that, we still have the option to process another piece of land right outside the building. And with that we can increase the capacity another 25%. This is our plan for the Pinghu plant.If you talk about in the Industrial side and the order intake, because that was your third question. Currently, the visibility we have is 8 weeks. And 8 weeks is kind of the industry standard for getting an outlook. And currently, we see, yes, some softening in the market as everybody else see that currently in the global market. It's a mixed bag between the regions, I would say, North America is still quite stable. In Europe, we saw some slowdown, but we are still on our expected numbers. And also we see in the Industrial sector, stability on the Asia Pacific side. So that's kind of where we stand currently with the Industrial performance and the Industrial outlook, as well as in terms of Pinghu capacities. Hope that answers your questions, Akshat?

[Operator]

And the next question comes from Yasmin Steilen.

[Yasmin Steilen, analyst]

I have 3 also, if I may. So the first one on your guidance, your specific guidance implies a sales decline in the last quarter of almost 9%. And if I would strip out the full consolidation of Cultraro, it might be even more, so in the ballpark of 10%. And an adjusted EBIT in the ballpark of EUR 41 million. So, implying something slightly shy of 14%. Could you shed some more color on your Q4 assumption, particular why you expect sales to slowdown, in which division do you see a slowdown? So you just mentioned that with a low visibility on Industrial. Is it still reason why you get a little bit more cautious on? And maybe if you could share or strip out the impacts of the full consolidation of Cultraro on your guidance? This would be also very helpful. That's the first question.Then the second one on Powerise. In Q3, you reported an organic sales growth of 21%, outperforming the underlying production volumes. And you already elaborated on the different regions. Could you also elaborate a little bit on the mix effect, so what was attributable to price increases and what was attributable to your volume growth?And the last one on the RFQ and Powerise. I mean, you mentioned already 2 significant contract wins from a Korean OEM for door actuator. Maybe you could shed more insight on the current dynamics for the new applications? What do you see overall with regards to demand? And yes, maybe any indications on your market share developments would be also highly appreciated.

[Michael Büchsner, executive]

Sure. Thank you for your questions. Also, in this case, we will kind of split the questions between Stefan and I. And Stefan will start with -- talk a bit more about the guidance and the guidance details. And I will take the question in Powerise, growth, mix effect, and then for sure the RFQs where we stand in terms of Powerise. So, Stefan, please.

[Stefan Bauerreis, executive]

Well, thank you very much. So starting with the guidance and the softening of the sales expectation for the fourth quarter. So here, you have to see that our fourth quarter or the summer months are included there, and therefore, we are on a realistic point of view also have to reflect that a little bit the overall, let's say, demand of our customers on orders to different business units will be on the summer months, July and August, there obviously. And also as Mike has said, yes, we have a visibility of around 8 weeks on the Industrial side, this is softening slightly, but at the end this is not the game changer in terms of -- with our fourth quarter will be better or lower. At the end, it's a very much seasonality impact due to these summer holiday impact that you -- that we are expecting in all the 3 quarters. In addition to that, we saw that some of our customers also driven already end of June and is still continuing a little bit in July that some of our automotive customer in Americas seems to have some shortages on electronic components. And therefore, it might be that there also is a slight delay of some of those sales. So overall, these are the reasons why this is -- we remain with our -- with the EUR 1.2 billion in terms of sales, and for the fourth quarter the remaining numbers that you mentioned.We have to -- and what is important as these -- the Cultraro acquisition was an acquisition, which took place when we signed just during the last day. So this is what I said at the beginning, the Q3 numbers are not reflected in that perspective, and also, and this is important for you, also our guidance and what we made are all pre-Cultraro. So Cultraro is not included there. And therefore, obviously, we'll have there a slight impact on those numbers. Taking in mind that the overall numbers of the companies are with the sales in the year 2022 of around EUR 60 million, full year sales, so you can imagine that the fourth quarter impact on sales for us and for the Stabilus Group will be quite minimum. And that is also the reason why, up to now, we did not made any adjustments or we did not include these small numbers in our guidance as an addition to that. So that is what you have to know. So the guidance in all those numbers due to the fact that these are small numbers are based on the Stabilus business without taking too much the Cultraro business into consideration.So that is more or less, on the same side when you say the full consolidation of Cultraro Group, what we're now doing is, for sure, we are now doing the purchase price allocation, but which is done on an EBIT adjusted impact not relevant because those impacts then will be adjusted remains then the good -- the 20% EBIT multiple with that sales that we get. So overall, this will create a slight increase of our margin. But hopefully, over the next years with all our sales synergies a little bit more, but for the fourth quarter not too significant impact we have to say.

[Michael Büchsner, executive]

Thank you very much, Stefan. And I would take the question in terms of Powerise, where do we stand currently when it comes to market shares, mix effect, and whatsoever. Then quarter 3, as you stated, we see a picture that we're still outperforming market growth. Market growth of 15%, we were at 21% as you said. It's kind of a mixed picture between the region, Asia Pacific coming back strongly. Europe being kind of on track, but also positively surprising compared to what we all read in the media over the course of the year in terms of softening out there. So we are -- with both regions quite happy. The topic is and this is what mentioned Stefan was that the point of North America is currently in a little bit more tricky situation. Just to explain you how automotive in that term handles the summer period. Typically, when you do shift and change modeling, model changes, in an automotive production, you do that in the summer time, right, because when your people go on to vacation, we typically ramp down the old models, and you do some maintenance activities on the line, you equip the line when the lines are shut down over the summer period. And then in the autumn, you ramp up the new models. And this is exactly what happened in North America. We have some bigger customer orders, and these bigger customer orders, they swipe in as we speak over the summer period. And this actually drives in these couple of months lower order intake, they order and they exhaust the materials they have on hand before they go on to summer shutdowns, and then typically they fill their inventories over the course of, yes, September and the subsequent months when they launch their new car models. That's one reason for the North American market. Stefan was touching on that, but just to give you some more background how the logistics works with the OEM.And you asked also how comes -- or what's the effect of pricing versus volume? The price effect, so inflation recovery in our business was the biggest on Gas Spring as we've been laying out, it was in the range of 4.5% to 5.5% over the course of the year. And on the Powerise side, it's in the range of 1% to 1.5%. Why is there such a difference on the Powerise side? Typically, the labor content on the components is less, and they are produced automatically at our supply base, so that means the impact on the inflation side was in the first place lower than on other products we have in the portfolio. And that means the price effect is between 1% and 1.5% on the Powerise side. The rest would be volume then out of the increase we did over the course of the year.Then also your point was in terms of RFQs, yes, as we've been mentioning some good business wins in terms of Korea. If you look to the presentation, there are good business wins in all regions. One thing which is very, very important to know is that, we are, with our products, independent from the drive line, so whether it be an combustion engine or an electric engine, and actually, electrification is even supporting us because those who buy electric cars, they don't want to operate their tailgates manually. They are really in favor of electromechanical devices and other gimmicks, and that's why you also see, particularly in Asia, in our growth rate list, which you basically see on the Page #16 that we have had good growth with local OEMs, particularly also on the electromobility side, Ioniq 5 to be mentioned, Ioniq 6, Kia EV6, K8, Niro, Tesla: Model 3, Li Xiang, Li Auto L7, so L9. So all these platforms, they are Asian platforms, including electromobility. And this is where we continue to win business. It's always to proof that you're competitive in the market if you currently win business in that magnitude. So our long-term pipeline is secured because the businesses we've been now -- we are now winning, they have development phase of roundabout 3 years, so they will kick in until the year '26, '27, and then subsequently they'll be in operation for another 4, 5 years. So we are talking now about timelines and visibility far beyond 2030 even and has a good visibility of our market share.And talking about market share, currently we are at 33%, 34% of market share. And our order intake is in the magnitude of 36% to 37%. So superior to what we have actually on hand in terms of business. And this is a very good point for us because on some businesses, we just kind of are selective, and also tell our customers to which price point we get, and where we kind of exit. And that's good, because we don't want to be the market price driver in the market. And on other projects, we kind of see them growing subsequently good scale like electromobility pounding on the future and the megatrends and this is then areas where we still can enter somewhat more aggressive because we have the advantage at our lines. And I mentioned that are now in the next generation fully automated. So our profitability position, and thereby our price position is very competitive. And on the other hand, yes, I also have been talking about future technologies door actuation. We've been winning in Korea some business, but also in Europe, we recently won a very, very high share of business on the door actuation system even including software, [ Sensoryx ] and the ECU production. So at this point in time, we have good business wins, good order intake to also pave the road to success far beyond '26, '27 reaching out beyond 2030 even.I hope that answers your question.

[Operator]

Okay. Since we received no further questions, let me hand back over to your host for some closing remarks.

[Michael Büchsner, executive]

Yes. Thank you very much for the session today. Comes back to the point that we are well-prepared for the future. We are in the here and now managing our costs very well, claiming back monies from our customer, winning business contracts, and also to perform and pursue our further improvements and pave the road for success in the future.So I would like to thank you for participating today. And if you any questions for sure at any time you can raise them also to Andreas Schroder, our VP for Investor Relations. You're more than welcome to do so. I wish you a successful rest of the day and a successful week. Thank you very much, everybody. Bye for now.

[Stefan Bauerreis, executive]

Bye-bye.