Saf-Holland Se

XETRA:SFQ

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Dear ladies and gentlemen, welcome to the SAF-HOLLAND SE Q1 2024 Results Call. Today's presenters are CEO, Alexander Geis; and CFO, Frank Lorenz-Dietz.

The presentation slides are available on the SAF-HOLLAND corporate website, and the presentation will be followed by a Q&A session. Please note, this conference call will be recorded and published on the corporate website of SAF-HOLLAND SE.

Everything spoken through the unmuted microphone will be processed during the online meeting and published on the website of SAF-HOLLAND SE.

If a participant does not wish to be recorded, they should refrain from participating in the Q&A session and keep the microphone muted. The Q&A session is exclusively for institutional investors and analysts. All other participants of the conference call are kindly asked to contact the Investor Relations team directly if they have any questions.

Mr. Geis, the floor is yours.

[Alexander Geis, executive]

Good morning, everyone. This is Alex Geis speaking, and welcome to our conference call on our Q1 '24 results. Let me start with the Q1 '24 highlights on Page 3, please.

So as forum started successfully into the year 2024. One highlight was the closing of the acquisition of our long-standing distribution partner IMS Corp in the Benelux. IMS has been part of the SAF-HOLLAND family since the beginning of the year and will enable us to be closer to our customers in the future. In addition, we were able to complete the acquisition of Tegma at the beginning of April, means Tegma will be fully consolidated from the second quarter onwards, but we were also successful in operational terms despite declining OE markets and an organic sales decline of 8.1% year-over-year.

Our sales increased solidly by 5.2% year-over-year due to the acquisition-related contribution of the full consolidation of Haldex, which has been part of the group since February 21 last year, but also to the additional sales from IMS. Despite the lower OE volumes, we were able to achieve a strong adjusted EBIT margin of 9.6%. A favorable regional and customer mix, in addition to a strict cost management contributed to the successful development in Q1. We also saw a seasonal increase in working capital, which negatively impacted the cash flow. Nevertheless, we were able to keep our leverage below 2x. And of course, we're working to come back to a normal net working capital level.

In a nutshell, the first quarter was a solid start into the year, and therefore, we confirm our 2024 guidance. So looking at Q1 2024 results in more detail on Page 4, please. So you can see compared to the prior year, all regions were able to show growth. EMEA was up by 2.3% year-over-year. Americas grew by 4.5% and APAC was even able to grow by more than 20% year-over-year in the first quarter of this year. In total, we achieved group sales of around EUR 505 million and a strong adjusted EBIT margin of 9.6%. Our net working capital ratio increased to 16.5% at the end of March, also driven by the acquisition of IMS.

Therefore, this led to an operating free cash flow of negative EUR 12.4 million, and we continue to work on improving our net working capital along the year, of course. In a nutshell, the figures for the first quarter of '24 has shown how robust our business model with a strong aftermarket businesses, even in a softer OE market environment. And let me continue with the group sales development on Page 5. In addition to the full consolidation of Haldex, the sales growth of plus 5.2% was also influenced by the first time consolidation of the IMS group. In total, the acquisition-related effects sell up to EUR 66.1 million. Organically, as expected due to the market environment in EMEA and Americas, we developed software compared to the prior year with negative minus 8.1%. In contrast, the APAC region again recorded solid sales growth.

Going on the next page, please, seeing the sales split between the region and the customer categories. So on a year-over-year comparison, SAF-HOLLAND sales split in the first quarter was influenced by 2 opposing effects. On the one hand, the weaker trailer and truck markets in EMEA and the Americas led to lower sales. On the other hand, however, additional sales were generated by Haldex and the IMS group. And as a result, this led to a lower share of the Americas region, which was affected by a weak trailer market in the first quarter. The continued solid development in APAC led to a share of total sales for this region of around 13% now. And the EMEA and Americas regions accounted for around 48% and 39% of total sales, respectively.

In addition, sales in the OE business fell by 7.6% and amounted to EUR 328 million. Thus, the trailer OEM business accounted for around 51%, down from 61% a year ago, while sales with truck OEM customers increased slightly to 13.6%. And you can see a strong increase in aftermarket sales of 41.6% year-over-year to now EUR 177.5 million, and this was, in particular, driven by Haldex in addition to the OE business growth in previous periods, which positively impacted the population of SAF-HOLLAND products. So it means it is the population of the last years in OE, which is now generating aftermarket business.

Moving to Page 7, which shows the group adjusted EBIT development. And you can see in Q1 '24, adjusted EBIT grew by 12% year-on-year to EUR 48.6 million, which equals a margin of 9.6%. And this slightly exceeds the through the cycle and 2027 target range of 9% to 9.5%. The favorable margin development despite the softer market environment was driven by several supportive levers like a significantly higher aftermarket share, the continued realization of cost synergies coming from the Haldex integration as well as the strict cost management.

Then let's turn to the development of the different regions and starting here with the EMEA region on Page 8. Sales during the first quarter grew slightly by 2.3% year-over-year including an organic decline of 7.3% year-over-year. However, the EUR 244 million sales marked new record level per quarter for EMEA. Hence, we were able to outperform the trailer and truck markets in that region to some extent. As I said before, despite a softer market environment in the oil business, the newly acquired IMS group, which contributed a consolidated mid-single-digit euro million amount to sales as well as Haldex meant that we saw a positive growth overall. The adjusted EBIT margin grew solidly by 5% to now EUR 19.8 million. And as a result, the margin amounted to 8.1% and were certainly supported by the higher aftermarket share, but also by continued synergies from the Haldex integration and as well as the strict management of costs, for example, via the adoption of production capacities.

Moving now to the Americas on Page 9, please. We can see that the sales during the first quarter grew by 4.5% year-over-year. Adjusted for FX and M&A effects, sales declined by 15.5%, which was, in particular, driven by the weaker demand for the trailer markets. In contrast, the truck market developed more robustly and showed only a slightly negative development. And looking at SAF-HOLLAND's top line growth in the aftermarket business more than compensated for the decline in the OE business. Based on the solid sales development as well as synergies from the Artic integration, the adjusted EBIT increased strongly by 11% to EUR 21 million and resulted in an improved margin of a solid 10.6% margin. Compared to Q4 '23, the adjusted EBIT margin was negatively influenced by lower volumes, whereas capacity adjustments as well as higher aftermarket share strongly supported our double-digit margin.

Then let's take a look on our last region, which is APAC, on Page 10, please. And we can see that the sales during the first quarter grew by 21.2% year-over-year and adjusted for FX and M&A effects, growth amounted to 14.8% year-over-year good development for that region. The softer demand from the U.S., which is slightly impacting the trailer production in Southeast Asia was compensated by an ongoing robust demand from the mining sector in Southeast Asia, Australia, in addition to healthy underlying demand in India and China. The adjusted EBIT benefited from the higher business volume as well as from positive earnings improvement in China. So we also now started earning money in China.

In total, the adjusted EBIT grew by 38.9% to now EUR 7.7 million and result in an adjusted EBIT margin of 12.1%. And with this, I hand over to Frank for the key financials.

[Frank Lorenz-Dietz, executive]

Okay. Thank you, Alex, and good morning to everybody on the line. As usual, let me start with a short overview on the EBIT to adjusted EBIT reconciliation for the group on Page 12. While we adjusted for restructuring costs of EUR 2.2 million in addition to PPA cost of EUR 2.3 million in the first quarter 2023. This year, we only adjusted PPA costs of, in total, EUR 5.2 million now, including Haldex. This is in line with our expectation of around EUR 20 million per year for depreciation and amortization from PPA as well as minor expenses for restructuring activities that can accrue. Overall, the reported and adjusted EBIT increased strongly during the first quarter of 2024.

Moving on to Page 13, where you see the bridge from EBIT to basic earnings per share. As said before, reported EBIT amounted to EUR 43.4 million for the first quarter and grew strongly by 11.8% compared to prior year, basically, as explained by Alex before. The finance side amounted to minus EUR 6.2 million and improved significantly by 39.3% from the minus EUR 10.2 million in the first quarter 2023. The change of EUR 4 million was solely impacted by FX valuation effects, mainly on IC loans at the closing rate. Nevertheless, the expected run rate for finance expenses going forward is unchanged and should amount to around EUR 9 billion per quarter, while finance income can fluctuate from quarter-to-quarter due to FX rate development. In addition, the tax rate of 28.8% for the first quarter is significantly below last year's level of 31.8% and was caused by lower non-capitalized deferred tax assets on loss carryforwards at some of our subsidiaries. For the full year, we are assuming a tax rate in the 30% to 32% range.

Overall, basic earnings per share was EUR 0.58 and adjusted earnings per share of EUR 0.69 grew significantly compared to prior year.

Moving to Page 14, we will see the development of the equity ratio. Compared to year-end 2023, equity improved by EUR 26.3 million to EUR 502.3 million, mainly supported by the high profit for the period. Since the balance sheet only grew slightly by 2.4%, predominantly due to the acquisition of the IMS Group, the equity ratio reached a level of 29.7%, which is near to our committed minimum level of at least 30%.

Moving on to Page 13. They will see the bridge from -- sorry, let me address the cash flow development on Page -- so no, I mean -- turning to Page 15. I would like to speak about the net working capital development. Net working capital increased by 17.7% to EUR 350.9 million compared to the end of 2023. Inventories rose by 5.1% compared to December '23 driven by the consolidation of IMS group. And in addition, due to a certain usual delay in adjusting inventories to the lower production level as well as taking into account the situation in the Suez Canal. In addition, an increase of 16.8% in trade receivables was recorded at the end of the first quarter, mainly due to the reporting date, respectively, earlier Easter holidays. As a result, the net working capital ratio of SAF-HOLLAND amounted to 16.5% of sales and is expected to improve as explained before, by elimination of those seasonal effects as well as by further improvement actions in the next months. Net working capital management is and remains the top priority for us.

Let me address the cash flow development on Page 16. The net cash flow from operating activities in the first quarter amounted to minus EUR 6.9 million and was slightly negative due to the additional cash outflow of EUR 21 million from capital tied up in net working capital. As described before, we saw a delay in adjusting inventories with the lower production volume in the first quarter as well as an increase in receivables due to the public holidays at the end of March. Besides the increase in net working capital, paid income taxes grew strongly compared to prior year due to higher earnings from previous periods. Investments in property, plant and equipment and intangible assets amounted to around EUR 7.4 million in the first quarter, reflecting 1.5% of sales. Overall CapEx focused on further automation of production processes in EMEA and the Americas region. In addition, SAF-HOLLAND received funds of EUR 1.9 million from the sale of property, plant and equipment. Hence, operating free cash flow amounted to minus EUR 12.4 million. For the next months, we expect, in addition to a solid EBITDA in line with our guidance, an improvement in net working capital with overall positive impact on our cash flow development.

Let's turn to Page 17 for the ROCE development. ROCE at the end of the first quarter 2024 amounted to 20.2% and underline strongly our value-creating business model. The reason of this slight reduction compared to December was driven by the integration of IMS and as already explained, seasonal net working capital development impacting financial liabilities as well as cash.

Last but not least, moving to an overview of the leverage development on Page 18. At the end of the first quarter, net debt-to-EBITDA ratio amounted to 1.9x only slightly up from the year-end level of 1.8x. This development was mainly due to the already explained free cash flow development in combination with a slight increase in long-term interest-bearing loans and bonds to finance the purchase price for IMS Group as well as net working capital.

However, we achieved once again the target of reducing the leverage ratio to a minimum -- to a maximum of 2x by the end of 2024. And I'd like to highlight as well the solid last 12 months EBIT development with almost now at the end of the first quarter 2024. Having said this, back to Alex, for the outlook and closing remarks.

[Alexander Geis, executive]

All right. Thank you, Frank. I'm on Page 20, showing the fiscal year 2024 forecast for trailer and truck markets. And since the commercial vehicle market in some areas developed weaker than expected from external research in this introduce, the full year forecasts were adjusted as a result. Based on these new estimates as well as the current order situation, SAF-HOLLAND now assumes that the European trailer market will decline by around 15% this year compared to '23. Also, a decline of around 15% is assumed for the European truck market. However, a recovery in the second half of this year is expected for both segments. In North America, both trailer and truck markets are predicted to further normalize after the strong previous years and are forecasted to decrease by around 23% for trailer and 10% for the truck market. For South America's most important commercial legal market Brazil, the market for trailer is expected to develop sideways, while truck markets are assumed to increase in the double digits in '24. China, Australia and truck markets are expected to continue to grow. Nevertheless, the weaker development in the first quarter led to a downgrade of the trailer market to just plus 5% with the truck market continuing to grow by around plus 10%. And as for India, posted a strong increase in fiscal year '23, which was also driven by ongoing public infrastructure investments, trailer production is expected to continue to grow with very solid growth of around 10% while truck production should decline by around 5%. And we expect further clarity on the future development of the Indian market after the elections in May.

Looking at our guidance for fiscal year '24 Page 21, please. You can see that the first quarter of '24 showed a really strong start into the year with solid sales growth, but especially a strong adjusted EBIT margin. And for the remainder of the year, we continue to stay conservative based on the uncertainties in the market as well as some additional project-related costs and wage increases, which were already known at the beginning of the year.

Accordingly, we confirm our 2024 guidance published in March on all metrics, which is around EUR 2 billion of sales. Adjusted EBIT margin of between 9% to 9.5% and CapEx ratio maximum up to 3%. Let me conclude the presentation with some key takeaways on the next page, please. So as I said, we started successfully in 2024 and have further strengthened our market position with the ongoing integration of Haldex, the acquisition of our long-standing partner, IMS and the acquisition of Tegma. Our resilient business model with a solid regional and customer diversification as well as strict cost management ensured an excellent margin of 9.6% in Q1 and despite the weaker market environment, we were able to perform well and expect the same for the coming months.

We, therefore, believe to be well set up for the current [ truck ] environment and confirm our 2024 guidance which reflects a strong first quarter and upcoming additional project costs as well as wage increases. So ladies and gentlemen, this concludes the presentation. I would like to thank everybody and we can now start with your questions.

[Operator]

[Operator Instructions]

The first question is coming from Mrs. Steilen from Berenberg.

[Yasmin Steilen, analyst]

I have a couple on working capital, please. So the first one, so working capital stood at 16.5%, so slightly up year-over-year. However, this reflects a higher level of factoring in the first quarter. So adjusted for this, it was at around [ 17% ] of sales in Q4 -- or Q1. Can you explain more detail the reasons for the sharper receivable move? So is it just related to the Easter effect? Or are there also extended payment terms here?

And could you also share some color on the working capital progression in the second quarter. So have you reduced inventory to adjust for the lower OE sales? And how have accounts receivable developed so far in the second quarter, also excluding financial engineering. And the last one, what is your working capital ratio target for the year-end.

[Frank Lorenz-Dietz, executive]

Thanks, Yasmin. Starting first with accounts receivable, we have no structural change in payment terms. It's basically when you have at the quarter end, this holidays, some customer causing some [indiscernible] fee delay, and then we have this impact on the accounts receivables. As we are already 4 weeks later, it's everything solved and recovered.

Talking about inventory, the topic that we have, and this is also usual in our industries, we have on the incoming side longer supply chains coming from India, China, 10, 12 weeks material in funded, the order reduction comes in faster. So we do need some time to adjust supply chain. This is currently our focus to consume the inventory with the business that is still running, and we assume to come back to normal levels latest end of the second quarter.

So this is a kind of a timing topic and nothing structural. So basically, I would say, usual in a, let's say, doctor market environment. The target for the group for net working capital is unchanged between 15% and 16%. If possible, we achieve lower numbers, we focus on to really to do all our best to reduce it as much as possible. And you will see coming in the upcoming quarters that we are back in normal levels having compensated this change in our OE volume development.

[Operator]

The next question is coming from Mr. Schmidt from DZ Bank.

[Holger Schmidt, analyst]

The first one is on your original equipment business. The revenues in the first quarter were down by around 12%. And how should we think about the further development of the OE business throughout the quarters in the current year? And when do you expect the OE business to bottom out? That's the first question.

[Alexander Geis, executive]

This is Alex Geis. Thanks for the question. Well, we expect second half of the year much better than the first half year of this year. If we see where the biggest decline was with 15.5%, it was the Americas, yet coming purely from North America, mainly from the U.S. trailer market is down. Some of the segments within the trailer markets are, let's say, even more down. When we talk the container [indiscernible] business, we have a higher share of those businesses. And Q1 was, I would say, the worst one. Q2 will be a little bit better, and then Q3 and Q4, it will let's say, a normal level. But please don't forget that 2023 in North America was the highest record year we ever had in trailer manufacturing, so it will come to a normal year, but not as steep of a decline as we just saw in Q1. So basically, to sum up, Q2 will be a little bit better than Q1, but Q3 and Q4 is estimated to be much better.

The second half will much better than our first half year. EMEA may decline as huge as in the Americas. Also here, Q1 was a little bit weaker. Q2 will be will be okay. But Q3 and Q4, that's a prediction that the standard business, for the standard [indiscernible] here is coming back also and then this will also will bring us more or less. And Asia is running well. Also India, we have, I would say, up chance once the election is done then the government will spend money also in infrastructure programs. Again, they don't do that 3, 4 months before the election and then there's another kit coming in. We already increased the sales in India, and we will be further increasing it with a good potential for the second half year.

[Holger Schmidt, analyst]

Okay. Understood. And could you give us an indication of the share of the original equipment business in the U.S. with regard to trailers?

[Alexander Geis, executive]

What do you mean with share?

[Holger Schmidt, analyst]

You mentioned the weakness in the U.S. trailer business, yes. And what is the share of revenues out of this market?

[Alexander Geis, executive]

We are not displaying single business units for truck aftermarket or trailer business. But well, basically, we are very strong in the truck market. So basically, the share -- we have a very high share in EMEA for trailer, lower share of total sales in truck. In the U.S., it looks a little bit different, but you can say, if you have OE business, it's like 50-50 roughly.

[Holger Schmidt, analyst]

Yes. Okay. My second question is with regard to the APAC development. There was continued strength and the margin was now a further 150 basis points up to 12.1%. To what extent is this sustainable? And could you give us more color on the development in China and India and their respective contributions?

[Alexander Geis, executive]

Well, I hope that we have shown the last couple of quarters that the development in margins are sustainable. We would like to keep that and even if possibly increase that. We have good market position in Australia and New Zealand, also in India, Southeast Asia with our hub in Singapore. Everything is running smoothly and the increase in margin is truly the amount of sales we are doing now. We have the #1 market position in India. India will further grow in the coming years. It's the subcontinent is with 1.4 billion people is the new China to come in the future. We have, as I said, the best market position with a market share of 55% to 60%.

So we are investing. We have the capacity. We have the right products, also now selling ads brake axles into the market. So that helps us with new regulations. And I'm happy with the China development. As you might recall, we were quite negative in the last couple of years. We turned the tide now. First quarter was positive last year, we achieved breakeven and also here with higher volumes coming in from local orders which we signed with a couple of customers who would like to increase sales and then also increase our profitability there to a, let's say, a minimum group level, but also double digit when it comes to APAC. And if we are going to achieve China portion, then also the overall APAC margin will be increasing further. This is the plan.

[Operator]

And the next question is coming from Nicolai Kempf from Deutsche Bank.

[Nicolai Kempf, analyst]

Nicolai Kempf from Deutsche Bank speaking. Congrats for the start to the year. Two questions. First of all, on EMEA. What kind of gives you confidence that H2 will be stronger than H1, we've heard last week from [ Dynatruck ] that so far, there are line bit of visibility that H2 will be indeed stronger than H1. And a follow-up on this is basically if you think that H2 will be stronger than H1, the full year guidance looks rather cautious.

[Alexander Geis, executive]

Well, Nicolai, you know that we are conservative guiding. We would like to keep doing this. And well, as I said before, our OE share in trucks in EMEA is by far not as high as we have it in North America. So main business is with like 85%, 90% of the trailer business. If Diamond truck is not expecting H2 to be better than H1. This is purely truck-related. We are here mainly in the trailer business. we see good signs coming from the markets. Fleets are investing. Freight volume is there. It's increasing. And the people that were very cautious in the first quarter to not invest in new equipment.

Now orders are coming in, we see some tenders coming up for July or August, this makes us really optimistic that the second half year for the trailer business, EMEA is getting better than it was in Q1 and will be in Q2.

[Operator]

[Operator Instructions]

And the next question is coming from Mr. Gonzalez from Hauck Aufhäuser Investment Banking.

[Jorge González Sadornil, analyst]

So Alex, Frank, I'm wondering, looking to the reaction of the market to the results that, in fact, I was expecting quite positive as the integration of Haldex and the aftermarket that are really -- so we know how the profile has changed to a more resilient, a more defensive company in this kind of trancycles. I was wondering if you can elaborate more on the market outlook slide. I think it's maybe misleading at this this figure of a 15% decline in EMEA. As I remember that in the previous call, you mentioned that you were not expecting that specific number for you. So can you elaborate a little bit how your exposure in EMEA is placing you in regards to this outlook, I mean, if it is outlook is your own number or if it's -- if you are also considering other estimates from the market that will be -- that is my first question, please.

[Alexander Geis, executive]

This is Alex speaking. First of all, I totally agree with what you just said that the market reaction, you cannot understand. I also cannot understand this. If I would have known that reaction upfront, I would have given a purchase order myself to buy more shares to be very honest. But I was too late this morning. Well, if we coming back to your question now with our minus 15%, this is the total trailer market in EMEA. Please don't forget that also here, we have like in the Americas, one of the main businesses, container shutties or dry vans in North America. We have 1 of the biggest portions of the trailer market in EMEA is the stale curtain sider, we have 2 biggest trailer manufacturers. They have their own axles, okay? So we only have a small share of supply to them for some specific axles, but they use their own axles for their standard curtain siders. So we don't have that share. If we talk about a minus 15% of the EMEA trailer market that includes also the standard curtainsider business, where we don't supply -- and for a long time, we didn't supply. So if we would have talked about our achievable trailer market, that would be, of course, much less than the 15% or better than 15%.

[Jorge González Sadornil, analyst]

Okay. So then, I mean, is there a worse situation compared to the previous call for the fourth quarter results. I mean, have you seen -- or what is your relevant market.

[Alexander Geis, executive]

I really did not get 100% what you are asking. Can you just say it again, I'll rephrase it.

[Technical Difficulty]

[Operator]

Mr. Gonzalez, please dial in again. So the next question is coming from Mr. Zuzak from JMS Invest.

[Miro Zuzak, analyst]

Okay. I was kicked out as well for some reason, I had to redial in just a couple of seconds ago, just for your information. I have a question, a bit the same like was said before. So you have a strong Q1. You say Q2 is going to be better than Q1. So more than the EUR 505 million, I guess, and you guide for a recovery and even stronger development in Q3 and Q4. What sense does it make to keep a guidance of EUR 2 billion sales or do you really see what we see in the forecast now that the market is basically really strongly declining. And it's now worsened in the last couple of months, and you'll say, okay, it's very hard to give a reliable outlook.

[Alexander Geis, executive]

Mr. Zuzak, I didn't say that our sales in Q2 will be higher than Q1. I mentioned it will be okay. But what I said is that the second half of the year looks that it will be better than the first half of the year. This is what I said. I didn't speak any -- about any numbers in Q2.

[Miro Zuzak, analyst]

Yes. But just [ 505 x 4 ] is already more than EUR 2 billion, and then you have an increase.

[Alexander Geis, executive]

Don't forget, you have August where the plants are closed for maintenance for 2 weeks, and you typically have 2 months of closure in December for the holidays and also for New Year's Eve. So you cannot really multiply by 12 months, you typically do like 11.2, 11.5. So it's a little bit -- yes, you can't have calculating [ with that ].

[Miro Zuzak, analyst]

In the last 4 years, your Q3 sales have always been much higher than Q1 sales. So I get your argument that you have some closure in August, but it's typically 3 million, 4 million in sales maximum the impact. If I just look at your history, you seem to be really cautious in giving such an outlook. I assume. Probably the market has expected that you would increase based on what you say [indiscernible] fair price reaction, right?

[Alexander Geis, executive]

Historically, we guide conservative. We would like to keep this -- we also did publish the guidance already 2 months ago in March. It didn't change anything. So yes, we would like to get a little bit more insight in Q2 and if we see that it's getting much better, then we will update. But at the moment, we would like to stick with our guidance as published.

[Miro Zuzak, analyst]

Okay. Cool. Then secondly, could you -- because I was kicked out because I think you've talked about the not addressable market in Europe of trailers, which is particularly weak, like a special market segment. So -- and you said your market segment would be much higher. Could you please explain again what's particularly weak in which you are not serving. I didn't understand.

[Alexander Geis, executive]

Yes. Absolutely. The trailer segment or the product segment of trailer, which is the weakest at the moment is the standard curtainsider okay? It's a standard trailer, [indiscernible] excellent configuration where we have the curtains right the left, we can move from the side. You have 2 market leaders, both based in Germany. They got a big hit in orders in Q1. We also know it continues into Q2 somehow, but we don't supply that many products of [indiscernible] axles really because they have their own axles for many, many years. So basically, if the increase or decrease, we don't get a hit, except for some other products we are selling to them, but not our excellence. So if this product group goes up or down, it has rather a very low impact into our sales. All the other product groups like you have tippers, you. coolers, you have flat beds that our construction equipment trailers, this is okay. We have got a high share across Europe or EMEA, and this is also expected to get slightly better in the months to come. Specifically in Q3, Q4, we can see this. But the standard trailer market for curtain siders remains weak at the moment.

[Miro Zuzak, analyst]

And could you explain before you said your addressable market is much better than what your wording, what does that mean? Is it like minus 5%? Or are we talking about positive numbers?

[Alexander Geis, executive]

I'm not -- cannot display at this moment, those numbers. The overall trailer market is at minus 15, and this is mainly triggered by the standard container the standard [indiscernible].

[Miro Zuzak, analyst]

Okay. And 1 last question for the moment, if I may. Cope effect this year, including IMS. Could you please remind me how much it will be like the Haldex months that we have and IMS together, what will be the combined contribution in 2024.

[Alexander Geis, executive]

Maybe I did not get the question, what did you mean? Which effect you mean?

[Miro Zuzak, analyst]

Change of scope effects of basically how much nonorganic sales are you going to book in 2024?

[Frank Lorenz-Dietz, executive]

Yes. as IMS Group has been already our distributor in the consolidation. You don't see a big improvement in sales because before we sold it to IMS and IMS was selling to our customers. Now we sell directly to customers. So basically, we consolidate in addition to margin and the overhead expense or the overall margin of the IMS Group is in total, not a significant amount. But if you see the first 7 weeks of last year missing in Haldex sales, plus now the contribution coming from the IMS group. This is around -- it was in the presentation, EUR 66 million whereas IMS was in the ballpark of a mid-single-digit million amount, so around EUR 5 million to EUR 6 million.

[Miro Zuzak, analyst]

So we can expect the same EUR 5 million to EUR 6 million for the remaining 3 quarters, basically from IMS roughly.

[Alexander Geis, executive]

Yes.

[Miro Zuzak, analyst]

Okay. So in total, it's going to be like EUR 80 million. That answers my question.

[Operator]

And the next question is from Mr. Könen from Value Holdings.

[Roland Könen, analyst]

First of all, congrats to the very good figures in this environment. My first question is on your guidance, where you're talking about upcoming projects or upcoming project costs that could influence the full year guidance, which is conservative. Could you played a bit about this upcoming project?

And my second question is on the synergies of Haldex. In the Capital Markets Day, you had some nice charts, which synergies in which year you're expecting, and you talked in 2023 about much better synergies than you planned for how could you please give us a short update on these synergies you're expecting also for this year and the next year?

[Alexander Geis, executive]

Yes, let me start with your first question, talking about seasonality of the expenses. I give you 1 example, we are implementing SAP S/4 HANA, the first go-live of the first Haldex plant will be by end of this year. And usually, then the cost distribution is [indiscernible] more towards this go live phase. So that's why we said we do have some seasonality. But also to give you a feeling, overall, we expect an average to spend EUR 5 million per year for the project. So then in the first quarter, we have not so many expense, but it will then talk quarter a little bit increase during the year.

So this is, I think, the most significant or relevant project to explain this seasonality, and that's why we mentioned this position. The second part, the synergies we published last year on the Capital Markets Day, the synergy potential for 2023 as well as for 2027. We have been really successful in implementing the synergies last year.

What you could see -- could have seen also in the margin development last year. So we delivered at minimum, this EUR 10 million to EUR 12 million. We promised the synergy potential until 2027. Gross potential is EUR 50 million, including some risk adjustment, it's EUR 25 million to EUR 35 million, and we are in a really good way to deliver this as promised.

[Operator]

[Operator Instructions]

There is another question or, I think, the continued question of Mr. Gonzalez.

[Jorge González Sadornil, analyst]

Sorry, apologies. I had some issues with the line. So I imagined that you answered to the question, but basically, my follow-up was taking into account that you are not that exposed to the content siders. So in comparison with the previous presentation, would you offer the guidance, if there is a worsening of your perspective for the year? Or this is basically largely in line with your view on how the volumes are going to work for you during the year.

[Alexander Geis, executive]

I did not say that we are not supplying to the curtain side. I did say that there are 2 big trailer manufacturers located in Germany, which has the highest impact, the highest drop of orders for this segment and we are one of the smaller suppliers to them since they are for the standard curtainsiders their own axles, okay? Of course, there are other trailer manufacturers across Europe which also do the current side. They also see the impact that this specific segment of curtain siders is down, that was the case in Q1, but also will be the case in Q2 most likely. And this then was the main reason why we said that the overall markets, including all the trailer manufacturers producing the currentsiders will be down by 15% for the full year of 2024.

[Jorge González Sadornil, analyst]

Okay. Understood. And a follow-up on this, if I'm not wrong, we have already seen at least 4 quarters of quite soft demand for curtain siders of demand in general in Germany. I was wondering if you see OE is returning to investment anytime soon? Or what is not working here, taking into account the conditions for the -- in general for logistics are not bad in Europe at this point.

[Alexander Geis, executive]

This is a very difficult question. What we see some fleets, they're investing, some others that are waiting -- specifically the big ones, they are waiting a little bit. Maybe they are waiting for interest rates to drop soon. If they go down, they will invest immediately. The -- some of the fleets I talked to, they said they already expected the European several banks to drop the interest rates in March, they didn't do it. So they want to wait until there is a further drop. Some others say, yes, the freight is there, but the equipment we bought last year and the year before. Don't forget '22 was the record year in EMEA, '23 was also a very solid year. They said, yes, our company is still okay. but we wait a little bit until we place new big orders. But this is, as I said, mainly due for the product group [indiscernible]. All the other product groups like coolers, flat beds, tippers, it is okay, not as good as it was in '22 or '23, but the drop in volumes was not as huge as in that specific current sider segment.

[Operator]

Since there are no further questions left, I give the floor back to Mr. Lorenz-Dietz.

[Frank Lorenz-Dietz, executive]

Okay. Then thank you, everyone, for your questions. Our Investor Relations team is available in case you have any follow-up questions. And we will be on the road and attending conferences in the coming weeks and look forward to seeing you there. Have a good day. Bye-bye.

[Alexander Geis, executive]

Thank you.