Nemak SAB de CV
BMV:NEMAKA
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Nemak SAB de CV
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Good morning, everyone, and welcome to Nemak's Second Quarter 2021 Earnings Webcast. Armando Tamez, Nemak's CEO; Alberto Sada, CFO; and Adrian Althoff, Investor Relations Officer, are here this morning to discuss the company's business performance and answer any questions that you may have. As a reminder, today's event is being recorded and will be available on the company's Investor Relations website.
I will now turn the call over to Adrian Althoff. Thank you, sir. You may begin.
Thank you, operator. Good morning, and welcome, everyone. We very much appreciate your participation. Armando Tamez, our CEO, will lead off today's call by running an overview of business and financial highlights in the quarter. Alberto Sada, our CFO, will then discuss our financial results in more detail. Afterwards, we will open up for a Q&A session.
Before we get started, let me remind you that information discussed on today's call may include forward-looking statements regarding the company's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially and the company cautions not to place undue reliance on these forward-looking statements. Nemak undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
I will now turn the call over to Armando Tamez.
Thank you, Adrian. Hello, everyone, and welcome to Nemak's second quarter 2021 earnings webcast. As you may already be aware, we saw substantial improvement in global industry conditions in the second quarter compared to the same period last year, which in turn provides support to customer light vehicle production and therefore, our results on a year-on-year basis. Moreover, if you look beyond these several comparison effects, our underlying business and financial performance continued to show resilience and strength. Notwithstanding effects of the global semiconductor shortage. In particular, we benefited from a richer product mix supported by our involvement in new electric vehicles of our customers, along with operational efficiencies, which we have maintained, thanks mainly to ongoing cost reduction initiatives.
Taken together, these factors enabled us to deliver an EBITDA per equivalent unit of $16.7, our second best figure for any second quarter in our history. The ramp-up of our e-mobility and structural applications business remains a key driver of our results, particularly in Europe and North America. The main highlights in this regard included continued contributions of battery housings for flowing hybrids as well as full electric vehicles of European and U.S.-based OEMs. I would also like to emphasize that the recovery we are seeing in our business has been made possible, thanks to our efforts to protect the health and safety of our people. In this period, we continue to promote and facilitate employee access to COVID-19 vaccines. We are committed to win our path to address effects of the pandemic with a focus on providing support for vaccination and maintaining health protocols at our facilities.
Moving on to our sales and marketing activities. For the second quarter, we won new contracts worth a total of approximately $240 million annually. Comprised primarily of business to supply cylinder heads and engine blocks as well as pass for e-mobility and structural applications in Europe and North America. Approximately 80% of this amount represented replacement business.
I am also pleased to share that for the 17th time in the history of this award, Nemak has been recognized as a supplier of the year by General Motors. This award is granted to global suppliers that distinguish themselves by exceeding GM's requirements. Also, we received the Overdrive Award from General Motors in recognition of our implementation of what they described as focus initiatives and cutting edge culture. We would like to reiterate our gratitude and appreciation throughout the entire team for making it possible to announce these awards through ongoing efforts to improve our operations, to drive innovation and strengthen customer ties.
I would now like to move on to several corporate developments over the last quarter that we would like to present to you in greater detail. As you may already know, we successfully placed 2 sustainability-linked bonds in recent weeks in the international markets. The first offering was a $500 million issuance of a 10-year senior notes at a coupon of 3.625%. We are using the proceeds from this issuance to redeem our 4.75% 2025 notes.
The second offering consisted of an issuance of EUR 500 million, 7-year senior notes with a coupon of 2.25%. We have allocated the proceeds to refinance our 3.25% 2024 notes. This outstanding balance is also EUR 500 million.
These back-to-back issuances have helped us to decrease our cost of financing and extend over maturity on the standard investment-grade structure. We estimate that these issuances will enable us to reduce our financing costs by a total of around $11 million annually, putting us in an even better position to create value in our business.
These transactions also underscored our commitment to contribute to efforts to address climate change in the automotive industry as they are linked to Nemak's achieving certain sustainability targets. On the tens of these notes, we will seek to reduce Scope 1 and 2, the in-house gas emissions by 18% by 2026, relative to a 2019 baseline. This target is aligned with our plans to achieve a 28% reduction by 2030, which were approved by the science-based targets initiative in March 2021.
I would also like to highlight our upcoming general extraordinary shareholders meeting, which we will be holding on July 29. We would like to encourage Nemak and control our Nemak shareholders to exercise the right to vote on the matters we will be discussing, particularly the proposal to merge Controladora Nemak in to Nemak. We believe that this proposed transaction represents a key step towards enhancing our profile as a publicly traded company and potentially improving our share liquidity and performance. As you may recall, Controladora Nemak is the owner of the shares that Alpha previously held in Nemak. Under this proposal, we will merge Controladora Nemak into Nemak, leaving Nemak as the sole listed entity. Controladora Nemak will cease to exist and its shares will be exchanged for an equivalent number of existing Nemak shares. The number of outstanding shares in Nemak will remain unchanged.
With that, I would like to hand the call over to Alberto.
Thank you, Armando, and good morning, everyone. I will share additional context on industry trends as well as drivers of our business and financial performance during the second quarter.
As you're probably aware, this quarter compares on a year-over-year basis against the period characterized by extraordinary COVID-related customer production reductions, which at the time resulted in production stoppages across our global operations lasting approximately 8 consecutive weeks with the exception of China.
During the second quarter of this year, light vehicle sales increased substantially year-over-year in all regions as pent-up demand and better market conditions supported continued industry recovery globally. North America and Europe, our main markets showed improvement in the period due primarily to a combination of better general economic conditions, government stimulus programs and disposable income driven demand.
Annualized light vehicle sales were 17 million units and 16.9 million units in the U.S. and Europe, respectively. It's also worth mentioning that these figures reflects stronger industry fundamentals in the U.S. than we had expected going into the year. To illustrate this point, for the purpose of our guidance issued this past February, we had assumed full year 2021 light vehicle sales of 15.5 million units and 17.2 million units for the U.S. and Europe, respectively. Light vehicle production also showed a substantial year-over-year increase in these same regions, reaching 3.3 million and 4.3 million units in North America and Europe, respectively.
However, the picture was mixed on a sequential basis, with North America seeing more pronounced effects of the global semiconductor shortage compared to other regions. As you may already know, semiconductor supply and demand dynamics have been challenging for the automotive industry in recent months as worldwide demand for semiconductors has accelerated faster than many had expected at the outset of the pandemic.
Moreover, based on consultations with industry experts, we understand that certain extraordinary events in the first half of the year, in particular, a fire at a major semiconductor manufacturer in Japan and extreme winter weather in the Southern U.S. had a disproportionate impact on cheap supply to U.S.-based OEMs throughout the second quarter.
At the same time, we would like to emphasize that historically low light vehicle inventory levels, combined with positive light vehicle sales trends in recent months could potentially have positive implication for light vehicle production in North America in particular, going forward.
At the end of the second quarter, light vehicle inventories in the U.S. stood at an average of 25 days supply, which compares to 94 days at the end of the first quarter of '20. We expect that the normalization of semiconductor production will allow OEMs to accelerate efforts to rebuild the inventories and keep up with end consumer demand in the region throughout year-end and into 2022.
Moving on to the rest of the world. Light vehicle sales and production remained relatively stable, decreasing 3% and 5% in China compared to the same period last year, when China was practically the only country worldwide with normal auto industry operations. Meanwhile, in Brazil, light vehicle sales and production reached 2.1 million and 500,000 units, respectively, much higher than the previous year on base effects of a similar magnitude to those experienced in North America and Europe.
Nemak's total volume was 9 million equivalent units during the second quarter, moving higher year-on-year on increased overall customer demand as well as new product launches across the regions, particularly in our e-mobility and structural applications segment. On a year-to-date basis, volume stands at 19.6 million equivalent units, putting us on track to meet the full year guidance we published in February. Notwithstanding the effects, we saw the semiconductor shortage on customer light vehicle production and therefore, demand for parts in the second quarter.
On a year-over-year basis, volume together with aluminum prices and depreciation of the euro against the U.S. dollar, drove revenue up to $955 million in the quarter. At the same time, we maintain a variety of initiatives to control manufacturing and administrative expenses, which help us to preserve a significant portion of the operating efficiencies we achieved last year. EBITDA in this quarter amounted to $150 million, which was significantly higher than the same period last year, mainly due to volume effects associated with the continued industry recovery we have experienced since last year's shutdowns, along with a combination of ongoing cost reduction efforts and a more favorable product mix, including in our e-mobility and structural applications segments. This enabled us to deliver a unitary EBITDA of $16.7, the second highest such figure we have ever reported in any second quarter.
Nemak's operating income was $69 million due mainly to the same factors that benefited EBITDA. Net income was $44 million, which compares to the $125 million net loss reported in the second quarter of 2020. This result was due mainly to the same factors supporting operating income, along with the positive noncash currency effects.
We remain on track with our investment plans for the year, recording a CapEx of $72 million for the period. Keep in mind that we expect most of our CapEx to be concentrated in the second half of the year due to our schedule of new product launches. I would also like to reiterate our focus on investment in e-mobility and structural applications. For the full year, we continue to expect to allocate more than half of our CapEx related to new product launches and other strategic initiatives to this business segment.
As of June 30, net debt was $1.35 billion, about 10% higher than at the close of the first quarter, mainly due to the seasonal working capital requirements. We also continued our deleveraging efforts during the quarter bringing our net debt to EBITDA and interest coverage ratios to 2.1x and 8.5x, respectively, reaching prepandemic levels.
As part of our efforts to strengthen our financial position, and as indicated by Armando earlier, we took important steps towards our financial strategy, placing approximately $1.1 billion in 2 sustainability-linked bonds. The oversubscription, achieving both transactions, allowed us to price them very competitively under an investment-grade structure. Furthermore, it reaffirms investors' confidence in our business prospects and sustainability goals. The proceeds of the bond will be used to refinance existing debt, extending our debt maturity profile from 3.95 years at the end of the first quarter of 2021 to 7.34 years while achieving a significant reduction in interest expense.
As you may already know, Fitch, Moody's and Standard & Poor's have issued announcements confirming that for the purpose of these issuances, our credit ratings remain at BBB, PA1 and BB+, respectively, with a stable outlook.
Most important, we have made our financial position more flexible, which will help us to drive our strategic agenda going forward.
Moving on to the regional results in the quarter. North America volume amounted to 4.5 million equivalent units. More favorable industry conditions supported volume on a year-over-year basis. At the same time, as mentioned previously, effects of the semiconductor shortage weighted on light vehicle production and therefore, volume in the region to a great extent than in the first quarter. In turn, year-over-year revenue reflected higher volume and to a lesser extent, aluminum prices.
EBITDA was $74 million, supported by volume along with product mix and operational efficiencies. It's worth noting that we delivered a solid performance in North America despite the semiconductor shortfall, finishing with a higher unitary EBITDA than the first quarter of this year. Europe volume reached 3.4 million units, driven by a combination of market factors, including general economic recovery, pent top and consumer demand for light vehicles and increased customer light vehicle exports to Asia together with favorable developments in our business, particularly new product launches.
Revenue was $381 million due mainly to volume and aluminum prices. In turn, EBITDA amounted to $68 million on a higher volume and richer product mix, supported by the continued ramp-up of our e-mobility and structural applications business, a leaner cost structure and to a less extent, a more favorable euro exchange rate.
Rest of the world volume was 1.1 million equivalent units as our sales continue growing on a combination of new product launches and better market conditions. As a result, we recorded $112 million in revenue, which combined with operational efficiencies and an improved product mix resulted in an EBITDA of $8 million.
With that, I will hand the call back to Armando for closing remarks.
Thank you, Alberto. I would like to conclude our presentation by sharing additional color on our outlook for the rest of the year.
Notwithstanding continued effects of the global semiconductor shortage and customer light vehicle production, particularly in North America, our results in the first half of the year came in substantially stronger than we will have expected at the time of the communication of our guidance this past February, supported mainly by our going efforts to tap into a richer product mix as well as efficiencies to drive margins higher.
Given the progress we have made to date in this regard, together with our expectation for a gradual improvement in the overall semiconductor supply situation in our industry for the second half of the year, we believe that we are in a good position to provide an update on our full year estimates. Our revised 2021 guidance is as follows: volume of 39.5 million equivalent units, revenue of $3.9 billion, EBITDA of $600 million and CapEx $380 million.
With that, we conclude our presentation, and I will hand the call back to Adrian.
Thank you, Armando. We will now move on to open the call for Q&A. Operator, can you please instruct the participants on how to place their questions.
[Operator Instructions] Our first question comes from the line of Luis Yance with Compass.
Armando, Alberto, Adrian, congratulations on the great quarter, more so on updating the guidance. That's quite impressive after a challenging second quarter as from the semi shortages. So just have 2 questions for you guys. And maybe the first one is if you could give us a little bit more color on the impact you had from the semi shortage. Whether that impact was kind of even throughout the quarter or actually started wars and perhaps June ended up better. And maybe give us some color on how normalized third quarter has started so far. So that will be my first question.
And then the second question is on your margins and your EBITDA per unit. Since the bottom of second quarter last year, I mean, we've seen consistently higher margins in that front. And your -- and even in the last 2 quarters, $16, $16.7, as you said. Is it possible to think that a normalized margin above 16 is sustainable? I understand there are some costs that are coming back as volume ramps up, but then you're going to have more scale and more fixed cost dilution. So just wondering when we put all that in that equation, whether you're comfortable with this new higher level of profitability.
Yes, thank you, Luis. This is Armando. I will answer the first part of your question and Alberto will answer the second one. The impact that we have seen already related to the semiconductor shortage has affected our customers globally at approximately 4.5 million vehicles so far this year. That translates into Nemak losing approximately 1 million equivalent units over the first 2 quarters. And the bigger impact was in the second part of the year, mainly in North America. We saw major effect in North America, a little bit less in Europe. And of course, in China, very little or no effect at all. We're expecting that the industry will recover globally, as I indicated. We are not expecting that this -- this problem is already solved, and it's going to take a few quarters for the industry to fully recover from the shortages. However, some of our customers are already taking some actions to improve. We have positive news, one of the facilities that unfortunately had a fire in Japan last year is already at almost 90% production recovery. And our customers are expecting that there will be full capacity over the next few months. In addition to that, some additional capacity has already been installed in Europe to support our customers. And certainly, some of the actions that our customers are taking, we are seeing that step by step, they will solve this issue gradually.
Luis, this is Alberto. Related to your EBITDA margin question. I think as you can see, we have been very successful in achieving cost reduction improvements and also being able to enjoy the benefits of a better product mix, which is driving our overall margin improvements that we have seen in recent quarters. So ever since our -- the effect of the pandemic last year, we have consistently been higher than average on our margins. So we expect to continue with that trend going forward. To say if the $16 per piece that we have achieved is that sustainable, certainly, that's our aim going forward. We need to also take into consideration that normally, we have seasonality in our margins during the year. So certainly, the effect is going to be slightly lower for the second half of the year, but certainly aiming towards improving our overall margin going forward. As we see more, let's say, of the new products into our mix as well as we continue sustaining our cost reduction efficiencies, which would gradually be getting, let's say, to higher margins than we have had historically.
My last question, if I may. With your leverage ratios back to kind of where you wanted a 2x, around there, the merger between the 2 entities that should happen, not that far in the future. Does that mean you're ready to discuss dividends? Can we expect something this year? How does a buyback play into the equation as the combination of the 2 entities will result in a stock with much higher liquidity? And the stock despite the recent rise still remains quite cheap. So just wondering what are your thoughts on capital allocation in that portion.
Yes. Thank you, Luis, for the question. Definitely, our priority after the pandemic was to deleverage the company. And we made a significant effort on cost reduction as well as prepaying some of the line of credits that we took last year. And once we reach stability in the company and we see, let's say, volumes more stable, absolutely. We will come back and make a proposal to our Board of Directors for a potential dividend. And of course, that will need to be approved by our shareholders. We believe that once we merge the 2 entities into Nemak, we will be in a better position. And if things continue at the same pace that we are seeing, we estimate that eventually, we will propose to our Board and also our shareholders a dividend.
And how about a buyback? Is that -- does that come later? Or are you still concerned about the liquidity?
As we indicated, I think our first priority was to deleverage the company to reach levels in the range of precrisis. Remember that we were more than 6 years below 2x leverage, and we would like to reach that level. We are not that far, and we believe that pretty soon, we will be in a better position to make a decision and certainly propose that to our Board of Directors and then move that to our shareholders.
Our next question comes from the line of Alejandro Azar with GBM.
Congratulations on the results. I have 2 quick ones. The first is on -- you mentioned working capital lead. We've seen strong investments on inventory. Do you see recovering those outflows seen in the first half or the second half, Alberto? And how should we think about the working capital account for the full year? Should we see it as an outflow?
And the second one is on your order book of $900 million for e-mobility applications. You just mentioned $25 million in replacement. Would you be kind to share with us how much of those contracts have you replaced?
Alex, yes, this is Alberto. Answering the first question you asked related to working capital. For sure, this has increased on this quarter, and that's particularly because of 2 reasons. On one side, we have the traditional seasonality that normally we see on the working capital cycle as production increases at the OEMs factories. We also are seeing on the inventory side, a little bit of an effect of the aluminum prices. As you may be aware, aluminum has been increasing in the last -- ever since the pandemic took effect last year. So that has an effect on the valuation of the inventory. And last but not least, we have the -- let's say, we build up a little bit more inventory, particularly to be prepared for the recovery of the industry that we're going to -- of the production of the OEMs that we're expecting to happen on the second half. So ultimately, we will see that inventory amounts reduced going forward as we're going to be using part of that inventory to supply our customers' production schedules. And ultimately, we will see a more stable working capital for the end of the year. There's probably at the end of the year, a little bit of an outflow on a net basis versus last year as the business overall has been increasing in volumes.
Alejandro, related to your question about EV and structural components. We have today, as we have indicated before, $900 million of new business on this electric side as well as structural components. A portion that we indicated in this report was replacement business on the same product lines. And I'm happy to tell you that we have been very successful to replace 100% what we have already gained. That's a statement that we can make that our customers really trust us and they have awarded those 100% replacement. As we speak, we have a little bit more than $1 billion worth of potential additional business that we see very attractive. And we are confident that during the second half of the year, we will have good news that we will report later on, on new products that we will be winning contracts, especially on the EV side. As we speak today, we have a lot of opportunities, and we're working very closely with some European as well as North American OEMs that we believe that will bring a lot of good potential to our company.
Our next question comes from the line of Alejandra Obregon with Morgan Stanley.
I have actually 2. The first one is a follow-up on your supply chains. But this time, if we put aside the semiconductor issue, I was wondering if you could give us some color on your supply chains. Have they changed? Have you seen any capacity constraints in your North America operations? Or maybe in the space overall, have you heard anything from OEMs or participants regarding this issue? And then my second question would be regarding the restructuring. Now that Nemak has been spun off successfully, and particularly given your exposure to the U.S., is the full listing in the U.S. or a U.S. ADR is something that you would be thinking about or you could be considering at some point? These are my questions.
Yes. Thank you, Alejandra. Related to the supply change. Certainly, our team has been working very closely with suppliers as well as Tier 2, Tier 3 suppliers and making sure that everybody is running in good order. We have made some changes. Of course, during the pandemic, some of our small suppliers had some issues. So we had to find another source. But fortunately, we have not been so far creating any issues to our customers. We have been performing at 100% levels in terms of deliveries, in terms of quality. We made, as we have indicated before, in our opinion, a great job in reducing our fixed costs during the pandemic, but at the same time, making sure to protect our customers 100% in terms of quality, in terms of deliveries, in terms of performance. So I can tell you that our people in the purchasing are doing a fantastic job in making sure that our entire supplier base is aligned to support us 100% to our customer requirements.
And as Alberto indicated, we made on purpose a little bit more inventory than normal to protect our customers and making sure that once they solved this semiconductor issue, we will be ready to support them at 100% level in terms of requirements.
And Alejandra, related to your second question on the -- on potential listings in the U.S. or ADR. At this point, I think we need first to conclude the steps that are pending for the merger between Controladora and Nemak, as was highlighted on the call, which is scheduled to be presented for approval or our next shareholder assembly meeting at the end of July, the 29th. So once after that, I mean, we'll think about potential enhancement opportunity. But for now, we don't have any plans whatsoever for issuing in the U.S. or establishing an ADR program in the U.S.
That's very clear. And maybe a follow-up, if I may. On the first question, you mentioned some changes with small suppliers. Could these changes be related to maybe the internal content requirements from USMCA or maybe a relocation of supply chains globally or any other issue related to U.S. and China trade tensions.
No. Basically, those were related to some of our small suppliers, unfortunately, didn't make it through the pandemic, and we have to find replacement for the suppliers. We have for certain services and products that we buy, multiple choices that we produce. And of course, our team was following very closely to them. And in some instances, we have to make some relocation of some of the services and things that we are buying. But so far, we have not been affecting any of the customers in terms of delivery of our products.
Our next question comes from the line of Alfonso Salazar with Scotiabank.
Yes. One, they have to do with the transition to electric vehicles and the implications of the new emissions tools in Europe, especially for your core business. The first question is if you anticipate these new rules to affect the future development of new combustion engines with your clients and to what extent? We heard that some OEMs are already -- have already decided not to develop new combustion engines.
The second question is, well, over the next decade, the big auto markets like Europe and China and the U.S. seem to be accelerating the transition to EV. And the concern is that buyers, auto buyers will face the decision to go for the electric vehicle or probably they will decide is still to consider either hybrid auto or a combustion engine vehicle. But thinking that is the old technology maybe not willing to pay for the new car and prepared to buy a used car, and that would affect new auto sales. So just want to hear your thoughts on what -- how Nemak is tackling all these issues. And how do you see the market for your core business yet and block and transmissions over the next few years, if you can give us some points to consider.
Yes. Thank you, Alfonso. Related to your comment or question related to this recent proposal that was established in Europe. It was not a surprise at all for us because we are following that very, very closely, and we were expecting that eventually, the European will make the proposal. This proposal has not been approved yet. It's going to take at least 2 years to our knowledge, and that needs to be approved by the 27 countries that are part of the European Union. We're expecting that eventually, there will be certain debate and most likely, they will come with a proposal to continue reducing CO2 emissions that is the trend in Europe. And as we have been indicating before, Nemak is, since several years ago, preparing for this shift in the industry in which more electric vehicles will be part of the new world. And we will see what we're expecting is that certainly, Europe will take the lead in terms of penetration of electric vehicles over the next maybe 15 years. China, also, I think will follow that. In North America, our estimates according to some of the analysts, probably it would be less. And certainly, we are looking at how we can diversify our product portfolio as quickly as possible, again, looking for projects that are reasonable in terms of strategy as well as economics, and we are seeing already the results of some of the decisions that we have made to take some of these new products on the electric side as well as structural components.
I think it's very difficult to anticipate how the market will take this. But we are seeing that the penetration of electric vehicles certainly is following regulations. Regulations are playing an important role. If you take a look -- and also incentives, incentives behind that. We are seeing, for instance, especially in China, when the government put incentives on the electric vehicles, immediately, sales was up. And when they withdraw incentives, sales were down dramatically. And in Europe, I think it's the same. There are certain incentives that the European Union is giving to new owners of electric vehicles. And of course, our customers, in order to comply with the new regulations, are also providing with certain incentives. I think it's a little bit too early to tell how the industry will move in that regard. But as I indicated, we, as a company, our entire management team is aligned to make this transition. And we are confident that eventually we will be switching and gradually increase our penetration of electric vehicles as well as interesting structural [ pallet ] that we're gaining.
Just to clarify, do you think there is -- well, I mean -- there is a scenario in which the application of all these rules can be delayed because if I'm not mistaken, by 2025, the goal is to reduce emissions by 55% by 2025, which looks quite aggressive, quite frankly. So could we anticipate that?
And second, and I don't know if you can give some comment on this idea of more use of cars or sales rather than new car sales over some period of time in this decade?
Yes. Certainly, our understanding related to regulations is that these rules apply for 2030. And eventually, what they will be, again, putting, of course, more pressure on OEMs to switch a little bit faster. But remember that this needs to be approved by the entire European Union. This is a proposal that came and needs to grow for a debate and then approval by the 27 countries that represent the European Union. I think some of them will be totally in favor. Of course, there will be some countries that probably they will be more affected, but potentially, they could say that they would like to change that. And also, I think our customers will play an important role in loading for this.
I think one of the main concerns that the OEMs will have is that potentially the loss of jobs. It has been already stated by CEOs of some of the large German OEMs that eventually, when they switch to more electric vehicles, there will be a lot of jobs that will be lost due to less content on the vehicle. That also, I think it will be debated in the European Union. But so far, as I indicated, I think Nemak is preparing itself for the future. And I think we are embracing this. And I think as we have demonstrated, the new products that we're getting on the structural as well as electric vehicles are coming with better margins. So for us, we're embracing this change.
You can see that margins are increasingly more structural in electric vehicles.
Our next question comes from the line of Marcelo Motta with JPMorgan.
Two questions here. The first, regarding the new guidance. I mean, the implied EBITDA margin for the full year is around 15.5%, 15.4%, if I'm not mistaken, which represents a contraction compared to what the company has been reported which has averaged around 16%. So just wondering if volumes are improving towards the third quarter and the second half as the semiconductor shortage should be somehow normalized. I mean, why is EBITDA margin trending down with potentially higher volumes? So I don't know if we are missing something here.
And the second question is regarding the merger between Controladora Nemak and Nemak, I mean, the voting will happen by the end of the month on the 29th of July. So after the voting, if the outcome is positive, if the shareholders allow the merge, how long it should take for the company to have just one share -- one class of shares?
Marcelo, this is Alberto. Well, I think we need to -- you need to make sure to follow the margin in the right way. Remember that aluminum prices have been increasing recently. So when you see margins based as a percentage of EBITDA versus sales, that doesn't necessarily show you the actual profitability improvement. I think you need to look at it on a per unit basis. And if you see it on a per unit basis, that's where we're reflecting better margins than what we have achieved historically. That's how our margins have been steadily increasing on a quarter-by-quarter basis. And our guidance certainly reflects important improvements on an EBITDA per unit basis. And so I think if you take away the effect of aluminum fluctuations, which could have either a positive or negative effect on the percentage calculation. For that reason, I think it's better to use EBITDA per unit as a measure of profitability. And in that respect, our guidance reflects an improved profitability measurement.
And related to the merger, Marcelo, of Controladora Nemak into Nemak. Certainly, what we are expecting is on the 29th that we will have with shareholders' meeting this to be approved. And then it will take just a few weeks to go for the entire process. Certainly, we will need the approval from the CNBV and then delist Controladora Nemak shares. And we're expecting, again, if everything goes right that it will take a few weeks, maybe between 4 to 6 weeks to have one single entity. And then as I was already presenting, we see potential benefits for all the shareholders of Nemak and Controladora Nemak once we become a single entity.
[Operator Instructions] Our next question comes from the line of Luis Yance with Compass.
Just a follow-up on the previous comment on EV. Could you share what percentage of your second quarter sales are coming already from EV and structures? And I guess, more broader question is at some point, can we expect you to start disclosing more granularity in terms of, I don't know, volumes, EBITDA per unit, et cetera? And if so, is that something that could happen given the growth you've seen so far perhaps late this year, early next year? Any thoughts on timing of that?
Yes, Luis, thank you for your questions. What we are seeing is that for the entire year, we are projecting that our total revenue will be between $350 million to $370 million on the combined effects of structural gross EBIT. This is for the entire year. And once we have a little bit more maturity on this segment, absolutely, we will share and disclose what is the profitability volumes and so on.
Okay. Great. And one follow-up on the aluminum side. I know you mentioned the way to look at it is EBITDA per unit. But given the sharp increase, you're comfortable that, I guess, everything is fast...
We can't hear you, Luis.
Can you hear me now?
You sound too far away, Luis.
Okay. I'll follow up with you guys later on.
No, it's clear. It's clear now.
Okay. It's clear. Yes, just a follow-up on the aluminum question. I mean you're comfortable that with the contracts you have, the pasture will work despite the sharp increase we've seen in aluminum prices or on an EBITDA per unit that should not be a big issue in that front?
That is correct, Luis. The current -- the formulas we have with our customers to pass the aluminum price fluctuations work fairly well. So we will not see any effect in the EBITDA per unit basis. But it's different when you see EBITDA on a percentage of revenue basis as there, the base of revenue can increase or decrease just for aluminum prices, but that has no meaningful effect on the EBITDA in absolute terms. So on an EBITDA per unit basis, no effect due to aluminum price fluctuations.
Ladies and gentlemen, I would like to turn this call back over to Mr. Adrian Althoff for additional concluding remarks.
Thank you, operator. I would just like to thank everyone for participating in today's event. Please feel free to contact us if you have any follow-up questions or comments, and have a good day.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Enjoy the rest of your day.