Tofas Turk Otomobil Fabrikasi AS

IST:TOASO.E

Earnings Call Transcript 2020-Q4

[Operator]

Ladies and gentlemen, thank you for standing by. I am Maria, your Chorus Call operator. Welcome, and thank you for joining the Tofas Türk Otomobil Fabrikasi A.S. conference call and live webcast to present and discuss the fourth quarter 2020 financial results.

At this time, I would like to turn the conference over to Mr. Cengiz Eroldu, CEO; Mr. Fabrizio Renzi, CFO; and Mr. Mehmet Agyüz, CFA, Investor Relations Manager.

Mr. Renzi, you may now proceed.

[Fabrizio Renzi, executive]

Good afternoon. Thank you, operator. Thank you all for joining our call today. We are pleased to present you the results we achieved in the quarter 4 and the full year 2020. I would like briefly to highlight the main achievement of the year. The financial structure of the company is solid, and the financial performance remains excellent, with a profit before tax up by 26%. That means a profit before tax margin of 7.8%, above our long-term guidance.

In the local markets, we consolidate our leadership position for the second year in a row, with a market share of 17.8% in Fiat brand and 18.4% when we had the promising performance of the Jeep brand and Alfa brand. Our AGM model remains by far the best-selling passenger car in Turkey with 92,000 cars registered in 2020, and we are very happy with the evolution of the Tipo AGM program.

In spite of the pandemic, we were able to bring the restarted model on the market on time and in line with expectation. In November, in Europe, in January in Turkey, we have launched the restarted version of Tipo there with a new body type, the Cross version. The first reaction of the market are very positive, and we are confident this new model will contribute to our performance in 2021.

In the LCV segment, we have increased our sales by 156%, in a market growing by 77%. Regarding the exports, in the second semester, we have seen an important recovery compared to the quarter 2, thanks also to the incentives introduced in the main European countries. About the exports, I would like to remark that our business model and export agreement is stable even in this unpredictable year 2020.

Last but not least, the COVID situation. The health and safety of our employees remain a top priority for us, and we are pleased to observe that the situation is improving in the last weeks and that we can follow our production plan without big problems.

Finally, Stellantis. As at Tofas, we are excited to be part of this new adventure, we are ready and keen to demonstrate our quality and our competitiveness. And we are sure that not only for FCA, but also for Tofas, this represent a great opportunity.

Thank you for attention. Now I would like to give the floor to Mehmet, who will deliver the presentation, and we are available for the question and answer after the presentation.

[Mehmet Agyüz, executive]

Hi. Good afternoon, and good morning, everybody. Overall, let's start with the production. In 2020, Turkish automotive sector production was down around 11% and reached to 1.3 million units. On the other hand, Tofas production was impacted less from the COVID-19 situation. And our share in the automotive sector production reached to 19.3%, which is 120 basis points higher compared to last year. And our strong production performance continued and accelerated in the fourth quarter. And it grew by 22%, reaching to north of 90,000 units. And overall, in the mix, PC production was up by 600 basis points, constituting 61% of our total production.

On our shipment, in parallel to our production, our shipment volumes for -- overall for the full year was down 4%, reaching to almost 260,000 units. In fourth quarter, we had quite a strong shipment figure, which is up by 20% and reaching to 92,000 units. The main enablers of this performance was the sustained strong performance in the domestic market as well as stabilization in our export volumes in the fourth quarter.

Within our business, the shipment mix was quite different, especially in the domestic side. Overall, the share of the LCV in our domestic business reached to 31% of our shipments, which was up more than 600 basis points compared to the previous year. This was more of as you -- most of you will recall that most of it is due to normalization because of the expiry of the incentive scheme.

Moving on to domestic markets. Overall, 2020 Turkish automotive markets experienced a strong rebound and grew by 61%, reaching to close to 800,000 units. And the performance was pretty much broadly in line across the segment, with 78% on the LCV side and 58% growth for the passenger car.

The evolution of the LV sales on a monthly basis was quite striking. In the first 2 months after the strong performance with the emergence of COVID cases in the second quarter, the product -- the shipment tempo has come down notably. But starting with June, it has begun to recover substantially. And this is due to 3 main reasons. One is the of the pent-up demand. And with combination with the ultra-low loan rate as well as growing e commerce penetration, which was -- which drove strong demand from cargo companies as well as retailers.

For Tofas, we outperformed the strong performance of the light vehicle market in 2020, and our shipments grew by 80%. On top of the growth we observed in 2019 as demand collapsed. So we reached 142,000 units for the full year. And our -- the growth in our LCV sites was stronger than the PC, more than doubling, reaching to 45,000 units. And more importantly, also, we maintained robust momentum on the PC side. You may recall, we had a substantial performance in 2019 and we were able to grow 63% the total volumes on the PC side, reaching to close to 100,000 units.

The monthly evolution of our shipment volumes was pretty much similar to the market evolution. As you can see strong start in the first 2 months and then the temporary halt for the following next 4 months and then a substantial recovery for the rest of the year.

Our market share was quite strong in 2020. And on the PC side, we were able to add additional 30 basis points and reaching to 15.1% market share on the PC side. It's important to note that this is on top of the 620 basis points improvement in -- which we observed in 2019, and the current market share stands well above our historical range. And this performance was enabled, of course, by our flagship product, Fiat Egea, which has been a market leader now for 5 years in a row.

Our light commercial vehicle market share improved more substantially, reaching to 27.6% in 2020, which is up almost 700 basis points. As we mentioned, this is more of a normalization, but also this level of market share still stands above our historical range. And this is -- 2 combinations played a role here. One is as a local producer, we were able to supply -- meet the demand in a much faster rate. And this enabled us to gain further market share. And also, of course, our cost competitiveness played an important role, despite our LCV portfolio is almost to the end of its current life cycle.

So overall, in total, we solidified our market leadership with 17.8% market share, which is up more than almost 200 basis points. And with Tofas, including the premium brands, the performance was similar, which was up 200 basis points, reaching to 18.4% market share.

In 2020, when we look at Stellantis, the combined market share of the whole brands has reached almost 1/3 of the market, and this has been an improving trend, and it suggests a 300 basis points higher market share compared to 2019.

Our export business. In 2020, PC market was down almost 24% in EU, whereas as LCV demand contraction was a bit milder at 18% due to the growing e-commerce activity. And as you can see, all of the major markets has experienced notable declines, but I would mention that the pace of the decline has decelerated notably in the second half, especially in the fourth quarter, with the introduction of scrap incentives at the main markets in -- towards the end of the third quarter of the year.

Our export shipments in 2020 was down 39%. Whereas the performance on the PC and LCV side was pretty much similar. I can say that the pace of the decline has improved notably, especially with our export shipments resumed growth in November, and we have a good base to build on for 2021.

The monthly evolution of our export volumes, as just a quick recap, we had a good start to the year and with COVID, we almost shipped negligible exports in the second quarter. And with the market recovery, our export volumes have started to recover. And as you can see in November and December, we were -- we shipped more volumes compared to the previous year.

The modern breakdown of our exports. This chart, 2 main changes, I would say. One is the share of the MENA region, which is now constituting more than 13% of our shipments compared to less than 7% previous year. And also North America, this is constituting around 10% of our shipments now, which is also 300 basis points higher compared to the previous year.

Our shipment models by volumes by the model. As you can see here is that on the export front, the sedan has performed quite strongly, which we shipped only 4,000 units less at around 19,000 units. And as I mentioned in the previous slide, this was due to the fact that the very strong performance of this vehicle in MENA regions. And the rest of the portfolio performed pretty much in line with the market.

On the domestic front, Egea, we shipped 90,000 units, which is up more than 70% on top of the very strong base of 2019. And the sedan model continues to perform well. But I would mention even though the numbers are relatively low, but the more than tripling of the HVAC model was quite encouraging for us.

For the LCV portfolio, despite relatively old age of the portfolio, the -- our performance there outperformed the market. And also, we almost doubled the imported vehicles volumes and which was mainly enabled by the strong performance of the Jeep brand. So overall, we shipped almost 12,000 less units, and our shipments were 260,000 units in 2020.

Moving on to financial performance. This is a recap of our 2020 performance. And 4% decline in our shipment volumes translated into 25% growth in the revenues. And this is mainly due to the pricing on the back of our discipline in domestic market as well as weaker lira for the export markets. And in line with the revenue growth, our EBITDA and the PBT grew by 22% and 26%, respectively, which are all record levels.

The breakdown of our revenue in stabilization in our export volumes, we had observed an acceleration in our revenue growth in the fourth quarter, which reached close to 70%. And domestic revenue growth was quite -- remains robust, albeit to a lesser degree compared to the third quarter, but still more than doubling, and we were able to grow exports revenues by more than 30% in the fourth quarter.

Here, it's the breakdown of our profitability. As you can observe, because of the quite challenging environment for the export business and our take-or-pay mechanism, the quarterly fluctuations of our profitability metrics was quite evident. But nevertheless, we were able to, on a yearly basis, expense our gross margin by 40 basis points, reaching to 13.6%. And our pricing discipline as well as the higher domestic mix were the main enablers for this gross margin performance.

On the operating line, in parallel to the improvement on the gross margin side, our operating margin grew by 50 basis points, reaching to 9.6%. And PBT margin, which is the main KPI, was also slightly better, up by 10 basis points at 7.8%, and this is well above -- remains well above our long-term PBT margin guidance of plus 7%.

On the net income side, in fourth quarter, our net profit grew by 42%, reaching to TRY 639 million, it's an all-time high quarterly level. Whereas on a full year basis, we reached TRY 1.8 billion with a net profit margin of 7.6%.

This is a snapshot of our P&L, and it shows the resilience of the business, whereas the growth in the top line flows to the bottom with improvement in margins across the board.

On the balance sheet, the most notable changes were observed in cash and cash equivalents, which grew by TRY 1.5 billion to TRY 4.2 billion, despite the dividend we distributed in the year of TRY 1.2 billion. And the most striking increases observed in the receivables, which more than doubled to TRY 5.5 billion. But I would suggest you should refer this looking in conjunction with the trade payables, which was also more -- almost doubled, reaching to TRY 7.5 billion. And as a result, our shareholder equity increased slightly to TRY 4.5 billion.

Our financial position as of year-end remains robust with a net loan almost EUR 50 million. And you can see here, the challenges we had experienced throughout the year in -- especially in the second quarter that you see the notable improvement as we highlighted, we expect a normalization in some of the spikes in net working capital due to the liquidity management of the FCA, and this has been normalizing in the second half of the year.

On the CapEx, we spent EUR 108 million in 2020, which is similar to the previous year. And as you can see, in line with our facelift program for our Egea family, this constitutes around 80% of our CapEx spending in 2020.

Finally, 2021 outlook for the light vehicle market, after a substantial recovery in 2020, we are expecting a slight retreat to 700,000 to 750,000 units on the back of tightening macro conditions. In this scenario, we are looking for Tofas shipments of 120,000 to 135,000 units, which is also slightly lower compared to the previous year.

On the export side, we are looking for 150,000 to 165,000 units, which suggests more than 35% growth in the mid-range. And this is on the back of the strong momentum we have and assuming the effective vaccinations in place throughout the year. And as a result, we are looking for a production volume growth of 265,000 to 290,000 units, which is suggesting additional 10% growth, and we should be helpful for -- in terms of efficiency in 2021.

For the CapEx, we are looking for EUR 100 million, which is also at similar level compared to the previous year.

This concludes my presentation. And with that, we would be happy to take your questions.

[Operator]

The first question comes from the line of Bespalov, Vladimir with VTB Capital.

[Vladimir Bespalov, analyst]

Congratulations on good results and good performance in 2020, and let's hope this year will also be great for you. I have several questions. My first is on the CapEx guidance that you provide. Is my understanding correct that this CapEx number doesn't take into account the potential contract for the new Doblo? And once you sign it, you'll adjust the number?

The second question, maybe you could share -- provide more color on the sales of Crossover? Because you started in December, but I didn't see anything in the 2020 numbers on unit sales. But maybe you can say how this go and what share in total sales you expect domestically and in extras, maybe some ranges, if not exact numbers?

And the third question will be on potential synergies that -- apart from the Doblo contract that you might expect from the completion of the merger from FCA and PSA. And in particular, at the domestic market, how do you expect, for example, like the distribution to the range following this merger, in particular, maybe you can take over distribution of Peugeot, Citroen, Opal?

And also on international markets, what opportunities do you see and maybe in the technology part of your business?

[Fabrizio Renzi, executive]

Vladimir, Fabrizio speaking. I will try to explain better the assumption behind the CapEx 2021. So the guidance is EUR 100 million to be spent in 2021. In this number, we have, as usual, the amount for the spending for the maintenance we have the residual part of the Tipo project. As you have seen in 2020, we spent around EUR 85 million. But as you can remind, the project is EUR 200 million. So we have spending EBITDA and order that will shift from 2020 to 2021.

So with this explanation, I want also to give you an explanation for the 2020, why we are below the guidance. So the amount that we are seeing in 2020 is the accounted amount. But what we follow generally, internally is the committed amount. So the real amount approved. So in 2020, we can consider that the real amount approved was around EUR 140 million.

Coming back to 2021, remember that we have approved also the prolongation of Doblo and prolongation of Fiorino. And 2021 will be visible also the spending -- the first spending for these 2 projects. When it comes to Doblo, yes, we have also an amount for Doblo because we continue to study and we continue to carry on this project. Of course, as we mentioned also in the previous conference call, the program slowed down in 2020 because FCA decided to give the priority to other projects and Tipo is one of the projects that we pushed -- we gave the priority in 2020, also because of the restriction and problem resulting from the COVID. But yes, we have also, in 2020, an amount for the continuation of the study for Doblo. So this is the first question related to CapEx. For the crossover.

[Cengiz Eroldu, executive]

Okay. I am going to respond, high revenue. So the Crossover -- so before the Crossover -- overall, MCA, since that is very well accepted in the Turkish market. We are not seeing yet in the figure of January because we started to production in the plant, 13th of January due to the maintenance work in the plant. Because you would remember, in August 2020, we reduced the closing period of our plant in order to respond to the local market demand, and we postponed at that time some maintenance activities from August 2020 to January 2021.

So for this reason, we have this additional week of closure in January and the -- and unfortunately, also, our passenger car stocks were very low at the end of the year because we succeed to solve all the availability in December. So for this season, in January, we had a problem of the availability from the production side. But now starting from February, we will see much better numbers in the local market.

Also, the Cross numbers will be very interesting. So the attention and the demand, what we are seeing is very high so we have a lot of orders that we are also trying to respond. So we are happy with the first reaction of the market regarding the -- not only to Cross, but also to MCA. That's also valid from the pricing point of view. Also, the new MCA prices are well expected in the market.

Similar attention, we are seeing also in European markets. But in Europe, as you know, there is a lot of market and still the commercial launches are ongoing. So to see the better numbers of the European demand, we will wait -- we should wait the finalization of all the commercial lines on all the markets in Europe.

Regarding the -- your third question, the potential synergies and the merge issue, of course, the establishment of the Stellantis is -- this happened a couple of weeks ago. So now we started to contact between new -- a new management because in the meantime, also all the managerial positions are changed. So we will need some period for the alignment also because now we will work with a new management and the -- so for this season to talk about the possible synergies in Turkey or in the global activities is early. But as soon as we will have some decision or some better visibility, we will share with you. Thank you.

[Operator]

The next question comes from the line of Kunter, Selim with AK Invest.

[Selim Kunter, analyst]

I have 2 questions, if I may. The first one is going to be on your guidance. I know January is not an indicative month for the year. But last month was nevertheless, exceptionally strong for passenger vehicles. First of all, what was the main driver of this performance? And I'm not only asking for your side, maybe on the sector as well. And how comfortable are you with your full year projection? I mean do you see any upside risks now? Or would you call this a one-off spike in demand for the previous year's models?

And my second question is related to your working capital. During the last 2 quarters, I see that your days receivables doubled and so did the payable days. So in that sense, this was a balanced trend. But how should we project your working capital going forward? In other words, is the new cycle sustainable? Or should we expect normalization?

[Cengiz Eroldu, executive]

Thank you for the questions. First of all, the guidance for local market. So our guidance for local market for 2021 is between 700,000 and 750,000 units. From the opening of the year, what we see, there is an upside potential. So as you know, at Tofas, we are always conservative on the market side because, unfortunately, Turkey is such a country that you should be optimistic, but also conservative. But I can say now I see upside potential in the local market.

As you said, January is not indicative because when I see the 4 big players in the market, all 4 in January lost market share, including us, okay? And the main part of those, sales are coming from the other players.

As you know, in Turkey, the model year impact is very important. So customers, they always want to buy new model year cars. Or if they are going to buy a year-before model year cars, they are asking more discounts and so on. So for this season the passage compared to Europe in Turkey is a different and is important. And in this exchange rate environment, what we are seeing all the importers, due to the -- they are going to import 2021 models with a better Turkish lira terms cost. They try to get it off from their stocks. For some of them, they use -- they had the orders from December, and now they are making the shipments in January.

But as I said, the -- this is not representing the total year because the total year will be different. And the 4 big players in the market will continue to dominate also the market in 2021. Regarding the working capital issue, so our targets on the working capital side to be it is 0 level. So also for the 2021, we will follow this direction. So for your estimation, you can use this neutral situation for Tofas side.

[Operator]

The next question comes from the line of Demirtas, Cemal with Ata Invest.

[Cemal Demirtas, analyst]

My question is again about the merger. I would like to ask about the timing of potential developments regarding Tofas, regarding this merger. In domestic side or international side or the planning side, could we see any signal in the first half of the year? Or it's very optimistic to think that some picture about Tofas within this new family will become clear in the first half? Or should we wait for a year or more for more clarification?

[Cengiz Eroldu, executive]

Thank you, Cemal, but I think not first half, I don't know, but this year, yes, because when you see our also range, so also for the passenger car line, we -- for a moment, it's planned that we are going to end this line in 2024. So we should be ready for 2025. This means that it's taking into consideration the time for the development of a new passenger car. So technically, we have time until the year-end of this year. So for this season, I think this year, we should be concluded also the future plans with Stellantis.

[Fabrizio Renzi, executive]

Okay. Maybe we can add that the strategic plan of Stellantis is expected to be officialized by the new CEO before the summer. So the expectation is to see -- to have better visibility, but not only for Turkey, but in general, for the FCA future allocation and PCA future allocation at the end of the second quarter. So at least this is my expectation.

In terms of information. The tangible effect, most probably, as Cengiz mentioned, maybe in the coming years, but the visibility, most probably and the strategic -- the first strategic plan of Stellantis as a combination of the FCA and PSA group will be -- might be visible at the end of the semester. This is our -- or my estimation, if you want.

[Operator]

The next question comes from the line of Kurbay, Berna with BGC Partners.

[Berna Kurbay, analyst]

I have also a couple of questions. The first one is about your export guidance. Do you see this year-on-year growth from almost 120,000 to over 150,000 coming from all the geographies you currently export to in a similar manner? Or is one geography ahead of others like the MENA region coming to the floor last year? That's my first question. So if there is any more growth in 1 region versus the other?

And my second question is about the strength of the domestic market last year and how -- whether it's meant that the solidarity rules kicked in for your take-or-pay arrangements in 2020.

Another question I have is on the semiconductor shortage that seems to be affecting the automotive industry globally. And I saw news that FCA and other global automakers see disruptions to their production. Is this an issue for Tofas as well?

And finally, just touching up on the remarks that you've made about Stellantis and how your investment plans will materialize going forward. Would it be correct to assume then that your more imminent projects as far as we know as the reliable of Doblo, but this announcement is more likely to come in the second half of the year? And is the prolongation of the current Doblo projects also a possibility?

[Fabrizio Renzi, executive]

Berna, Fabrizio speaking. Let me start from your first question, the export guidance. As we mentioned during the presentation, our guidance implies an increase of 35% compared to 2020. This is an important number, but we believe that is achievable. Also, if you consider that we have a very strong base effect, we cannot forget the second quarter 2020, basically the export was close to 0. We have exported in the second quarter 2020, 8,000 vehicle. So for sure, there is a base effect behind this estimation.

I would like to add a couple of also positive things that we are seeing. First of all, in Italy, for example, there is a prolongation of the incentives. So the incentive in Italy will be available till June. So the prolongation will last 1 semester. And government has refinanced also the incentives for the internal combustion engine. So not only incentive for the electric and hybrid solutions, but also for the traditional car, let me say. So -- and our people could enjoy this benefit in -- at least in Italy. And this is a good news for us.

Second good news is that we are monitoring also the stock level of FCA. And the stock level at the end of December is good. So means that it's very low. So as a sum of different positive things, we believe that this guidance is realistic, is achievable.

Last but not least, also the Cross version is having a good introduction in the European market. So let's see, but we believe that is a reachable and reliable guidance.

Second, your question is a bit technical. You mentioned solidarity. It's not easy to speak about solidarity in this conference call. But yes, we can say that this solidarity, in 2020, had an effect on the result. So I don't want to enter into the detail, but part of the solidarity mechanism is related to the fixed cost. And you have to take into consideration that the distribution of the volumes between export and local in 2020 was very different from the usual one in Tofas. You follow Tofas. So you know that usually, the split is 65% of the volume is for export and 35% of the volume is in -- for the local market.

Taking into consideration that this year, this percentage is completely different. So we have 55% for the local. So let me say the penetration is up 20%. And receivable 45% is related to exports. So I don't want to enter into detail. But yes, the distribution of the fixed cost had an effect in 2020, but it's not much -- so material, so it's not an important issue. Semiconductor...

[Cengiz Eroldu, executive]

For the semiconductor, I can explain. But regarding the export exploration. So this year, we are getting better numbers from Western Europe because also, we can see it in Mehmet's presentation, in 2020, the share of the non-European markets were increased in our exports and the low performance was coming from the -- mostly from European markets. And this year, we are waiting the improvement mainly on the Western European markets.

Regarding the semiconductor issue, is that -- it's difficult to answer. So actually, we have the visibility for February production, but for March, I am not sure. So because we are also following and weekly, but also on a daily basis, the situation. So still in Turkey on the -- for the automotive industry, we are not seeing the impact.

Last week, Renault made the declaration for the 1 week additional production stop in their Bursa plant, but they said for the less demand from the export market. So is a risk. We are trying to follow the issue and manage the situation. As you know, we are -- we have a good flexibility. We've shown this also in 2020. But overall, the semiconductors issue is a risk for this quarter and probably also for the next quarter.

Regarding the Doblo passenger car Stellantis issues, as I answered also to Cemal, so in this moment, we cannot make any disclosure, but so we started to talk with the new management. So also, we are also trying to understand each other for our needs, their needs. So we are at that situation. I hope soon, we will be able to talk also but thank you, Berna.

[Operator]

The next question comes from the line of Kilickiran, Hanzade with JPMorgan.

[Hanzade Kilickiran, analyst]

I have a follow-up question on the supply disruption. Fiat closed its production plant temporarily in Ontario and Mexico as far as I'm aware. And how is your stock level in Doblo at the moment? Do you think that if there's going to be any supply disruption, you will be able to meet the demand in the first 2 quarters? And is it Fiat who makes the agreement on the semiconductor side?

And the second question is about the pricing trend, particularly for the Turkish market. Do you see strong pricing in 2021, even though you expect some sort of slowdown in the market?

[Cengiz Eroldu, executive]

So regarding the stocks, unfortunately, we are not in a good level because as a company also, we are also trying to manage our business, our working capital with the lowest possible level of stocks, so for this reason. So if you have some issues regarding sensors, conductors and so on. So we will have the problem. So we don't have a huge number of cars in our network stock, neither in Tofas. So this is first issue.

Secondly, for the pricing, now, of course, with the 2021 model year passage, made the price increases. And after in the Turkish market, we are seeing revaluation of the Turkish lira starting from year-end. This is also creating a positive gap for the profitability in the local market.

So for this reason, I can say that it's at a good position and we -- as you know, we also closed 2 consecutive years as a leader in the local market. Last year, we sold around 140,000 units. And we want to realize it for the third time, and I think we can do it with better economics also.

[Hanzade Kilickiran, analyst]

Okay. So Cengiz, is it reasonable to assume that even though metal prices are increasing globally, I mean there's a raw material issue now for the industrial companies. In Turkey, you will be flexible to reflect the cost inflation on pricing on retail prices?

[Cengiz Eroldu, executive]

Yes.

[Operator]

We have a follow-up question from the line of Bespalov, Vladimir with VTB Capital.

[Vladimir Bespalov, analyst]

I would like to ask you about capital allocation. You have more than TRY 4 billion of cash right now. So the CapEx guidance that you provided for this year is not that huge, at least at the moment and probably could be easily financed by either debt or operating cash flows. So what kind of dividend do you expect to distribute? And to what -- in general, what are you planning to do with this cash, which is on your balance sheet right now?

[Cengiz Eroldu, executive]

Thank you, Vladimir. But in all this meeting in the last years, I always said that we have excess cash in the company, and our policy is to distribute what we can in a maximum level. So also this year, we will continue with this policy. But of course, I cannot disclose the number, but the policy is unchanged. So you also underline, we have excess cash in the company, and not huge investment in 2021. So you should not be worried about the distribution of the dividends.

[Operator]

At this time, we will move to the questions from our webcast participants. Our first question is from Unal, Cem with Goldman Sachs.

Could you please elaborate the reasons behind the significant net FX losses, especially on the financial line in 4Q '20?

[Cengiz Eroldu, executive]

But as you know, in Turkey, mainly in the last quarter, we had the important volatility on the exchange rate side. And so to manage the FX position was not easing the company. And on top of this, also, as you know, we have the hedge accounting application. And every month, we are passing some of hedged value to the P&L of the company. And on the peak months of the exchange rate, unfortunately, were October and November this year. So this application is improved our operative and EBITDA level, but we had some burdens on the financial side. That's the reason why you are seeing worsening numbers on the financial part of the P&L of last quarter.

[Operator]

The next question is from Isyar, Burak with ICBC.

Could you please explain the reason behind high FX loss in the quarter and whether we would see a similar trend in 1Q?

[Mehmet Agyüz, executive]

Yes. Thank you for the question. It seems to be the same, but maybe for the first quarter, bearing any volatility, we should not see a similar impact, but we are still at the beginning of the quarter.

[Operator]

The next question is from Kolesnikova, Maria from Millennium.

Could you please comment on the trends we are expected to observe in 2021 that would impact your gross margin, product mix, geographical mix?

[Fabrizio Renzi, executive]

Okay. If this is a kind of guidance for the result 2021, as you know. As usual, we prefer to guide you with PBT and not with the gross margin. So as you know, we believe that our sustainable level is profit before tax above 7%, and we confirm also for 2021 this level of profitability.

When it comes to the geographical distribution, I believe that we mentioned before, we believe that there will be a recovery on the export market. And in this moment, in our guidance for the local market, we remain prudent. But as Cengiz mentioned before, maybe in the coming months, there will be space for -- on upside. So if it is correct, we will see an increase in both export and local, and that's all.

[Operator]

The next question is from [indiscernible].

One, can you talk about possible models that can be produced by Tofas after Stellantis merger? Is there a possibility about electric vehicles or batteries? Is there a possibility for Tofas to produce PSA models?

Two, can you talk about dividend payment? What is your expectation about dividend payout ratio?

[Fabrizio Renzi, executive]

Okay. Maybe we are going to repeat something that we already touched in the previous answer. First of all -- okay. First of all, which is the tangible effect of the merger, it's too early to be more precise. As I mentioned before, this expectation is to see the first strategic plan of Stellantis at the end of this semester. So most probably, this will be also the right moment to evaluate the Tofas position.

For the second question, okay, it's basically, we don't have visibility for the future product allocation. And also, we don't have visibility on an electric vehicle, it could be an option.

Dividend payment, okay. We touched this point before. As usual, from a technical point of view and also from cash point of view, we don't have any problem to distribute dividends. So we -- no change in the policy of the company. So let's see what will be the amount proposed by the Board and approved by the general assembly.

About the penetration...

[Operator]

We have a question from Uçur, Özgür with QNB.

Congratulations on your 2020 performance. My question is how many Crossover units were estimated in your 2021 export guidance?

[Fabrizio Renzi, executive]

Okay. Fabrizio speaking. As we mentioned before, the first reaction of the market was very positive. But anyway, our estimation is that the Crossover could cover the 20% of the Tipo production. So this is our first target. And then let's see if we can improve this target or is a reliable and achievable target. For the moment, 20% of Tipo is expected to be in the future Cross version.

[Operator]

We have a question from Memisoglu, Osman with Ambrosia Capital.

Tofas was rated as one of the best plants in the FCA system. Is there any indication where it would rank in the combined system after the merger?

[Cengiz Eroldu, executive]

Osman, what I see from the first days that the PSA industrial footprint seems to be better than FCA, so for this reason, we are on the top of FCA footprint. But on the PSA side, also, we need -- I think we need to work harder in order to -- is the same position in Stellantis Group. This is a strategic important issue also for us. So we already started on this direction in order to improve also our -- the performance on the industrial area.

[Operator]

We have a follow-up question from Kilickiran, Hanzade with JPMorgan.

[Hanzade Kilickiran, analyst]

I do apologize for asking this question again, but I'm not very clear about the CapEx cycle on the guidance. You mentioned about that EUR 100 million is what you had -- you are guiding, but committed amount could be higher, right? I mean from a modeling perspective, is it reasonable to assume that we may end up with a higher CapEx spending in 2021? I mean, because EUR 100 million seems to be very low if someone assumes that you are going to start the investment on Doblo. What is your maintenance CapEx? I mean it should be probably close to these numbers, right?

I'm trying to understand the breakdown of this EUR 100 million. Sorry for asking this but if you can comment from a modeling perspective.

[Fabrizio Renzi, executive]

Yes, yes, yes. No, no, no, maybe my explanation -- no, sorry, maybe my explanation was not so clear. So let's restart from 2020 results, okay? We ended the year with EUR 108 million, okay, of spending. I try to underline that the real amount approved is higher than this EUR 108 million. So this was my comment related to 2020. So the real amount approved, but not in our accounting is around EUR 40 million that will be visible in 2021, okay?

So in the EUR 100 million that is the guidance of 2021. We have also this EUR 40 million of carryover, relating mainly to Tipo projects, okay? So if you want the real amount, 2021 is EUR 60 million plus a carryover EUR 40 million related to Tipo.

[Hanzade Kilickiran, analyst]

Okay. That's very clear, Fabrizio. But EUR 60 million, isn't it a very small amount for a plant in your size, I mean, for maintenance and also Doblo?

[Fabrizio Renzi, executive]

Okay. Doblo, I mentioned that it's not the full project Doblo, most probably -- I mentioned that it's only the continuation of the study, and we mentioned that we will have more visibility, most probably in the second semester. So you can...

[Hanzade Kilickiran, analyst]

So it will be upgraded.

[Fabrizio Renzi, executive]

Yes, yes. Most probably, we can upgrade. But you have to take into consideration that now the new model will come in 2023 because we have prolonged the actual Doblo till 2022. So the major part anyway -- the major part of the new spending will come in 2022, most probably.

[Operator]

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Renzi for any closing comments. Thank you.

[Fabrizio Renzi, executive]

Thank you, operator. I would like to take the opportunity to thank all the participant to this call and for the interest on Tofas. I wish you all a nice day and nice week.