Elringklinger AG

XETRA:ZIL2

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining the ElringKlinger Group Q1 2023 Earnings Call. At our customer's request, this conference is being recorded and all participants are in a listen only mode. After a short presentation by Dr. Stefan Wolf, CEO; and Mr. Thomas Jessulat, CFO. There will be a question-and-answer session. [Operator Instructions]And I would now like to turn the conference over to Dr. Stefan Bot, CEO. Please go ahead, sir.

[Stefan Wolf, executive]

Yes. Thank you very much. Hello, ladies and gentlemen. We warmly welcome you to our earnings call on the first quarter of 2023. Yes. We have some technical problems here. I hope you can hear it.As always, I will start with some headlines on the first three months. And then afterwards, Thomas Jessulat, my colleague and our CFO, is going to present the financial figures for the first quarter 2023. I will close with some remarks on the current year, and then you have, of course, the opportunity to ask questions, and we are more than happy to answer to answer those questions.Yes. To begin with, the first quarter of 2023 saw only tentative growth across the globe. The global economy remained somewhat fragile overall and was dampened by restrictive monetary policy. Just last week, the Fed and the ECB rose interest rates once again. Inflation was less dynamic in the first quarter of 2023, but it still is at a very high level. Inflation was also seen on raw materials.On the raw material side, procurement prices remained at a generally high level in the first 3 months of 2023. Prices across several raw materials such as aluminum and steel showed a slight downward trend compared to the last quarter of 2022, but remain at a persistently high level and were well up on those recorded in the first 3 months of the previous year, that means 2022.Also for other materials such as plastic, granules, and elastomers, the market situation held challenges ready for us. The market price is quite high. And also the materials, the availability is very much limited. So that also causes some problems.Global light vehicle production was able to catch up in the first quarter after an improvement in supply side bottlenecks and given last year's weak comparative base, vehicle production expanded quite significantly in some cases in Q1 2023. In the first quarter, the sales markets marketed an upturn to with the exception of China, it's the major automotive region.It showed clear signs of expansion. With our figures for the first quarter of 2023, we made a successful start into this year 2023 sales revenues, reached a quarterly record level of EUR 488 million. That is an increase of 12% compared to the first quarter of 2022. Given that global light vehicle production rose by 5.7% in the first quarter, we outperformed once again the market here with those figures.Adjusted EBIT came in at EUR 26.4 million. Adjusted EBIT margin for the group was at 5.4% in the first quarter of 2023. That is an improvement compared to the 3.5% in the Q1 of 2022. The strong sales growth also led to an elevated working capital level, while the net working capital to sales ratio remained nearly the same.As in the prior year, Q1, operating free cash flow was negative at minus EUR 20.3 million. with net financial debt of EUR 372 million, the ratio of net financial debt to EBITDA was 2%, and that's pretty good. That's basically our goal.Given this good start into the year, we confirm the outlook for fiscal year 2023 that was published with the annual report at the end of March, and we also explained that in our conference at Commerzbank at that time. And also, we confirm our midterm outlook. So there's no change. Yes.Now on Slide 3, you can see the recently received orders, all of which contribute to the transformation of ElringKlinger. Just last week, we reported a new order for our battery technology. The BMW Group has nominated us to supply the cell-contacting systems for the new series of electric models. It's called NEUE KLASSE. This order, which will start in 2025, is another milestone and underlines the competitiveness of our components in the new technologies.This year, another large-scale order for cell-contacting systems will also be launched. We supply the German plant of a global battery manufacturer, which manufactures battery systems for the series platform of the German premium vehicle manufacturer. This order has a volume in the triple-digit million-euro area. Both orders will start at our battery competence center in Neuffen, the new location that we have here close to our headquarter in Eningen.Not only in the field of batteries, also in fuel cell technology, we are successful with new orders. Last year, we reported on an order from a European car manufacturer for the development and supply of bipolar plates. In the first quarter of 2023, we issued an AdHoc announcement announcing a large scale order from another global manufacturer also for bipolar plates for their fuel cell stack.At the same time, we have received orders for stacks that include applications not only on road but also off-road and maritime applications. As you can see, fuel cell technology is also very successful and is contributing to the transformation of the group with many individual orders, but also with one large-scale production order.Yes. Those are the headlines for the first quarter 2023. And now I'm handing over to our CFO, Thomas Jessulat, to present the financial figures.

[Thomas Jessulat, executive]

Yes. Thank you, Dr. Wolf. Ladies and gentlemen, a warm welcome also from my side. Over the next couple of minutes, I would like to comment on the financial results of the first quarter, starting on Slide #5.Order intake of EUR 475 million was lower than in a particularly strong Q1 2022, but in line with the high level recorded in the preceding quarter. Currency effects on order intake were negligible with an amount of EUR 0.5 million. Order backlog stood at EUR 1.45 billion, nearly flat on the order backlog at fiscal year-end 2022. And compared with the first quarter of 2022, order backlog was around 5% lower. Here too, currency effects played a marginal role.Despite the general adversities, which have already been outlined by Dr. Wolf, ElringKlinger Group's revenue increased by a strong EUR 53.1 million or 12.2% in the first quarter. Given only slight tailwind from currency developments amounting to EUR 400,000, virtually all of the revenue growth was organic.In numbers, organic growth amounted to EUR 52.7 million or 12.1%. And meanwhile, global light vehicle production was up 5.7% in the first quarter. This means that we outperformed the market by 640 basis points.On Slide #6, we see the sales performance of the different segments and business units. In the period under review, the original equipment segment increased revenues by 10.1% compared to the first quarter of 2022, which represents growth above market level.Sales generated by the group's largest business unit Lightweighting/Elastomer Technology was up by a significant EUR 22.6 million or 17%. And while the business unit Metal Forming & Assembly Technology emulated sales performance on last year's first quarter, the Metal Sealing Systems and Drivetrain Components business unit generated noticeable sales growth of 8.1% in the first quarter of 2023. The E-Mobility business unit also saw a slight increase in revenue to EUR 6.2 million in the quarter under review.Coming now to Slide #7. When looking at the sales split by region, revenue from domestic as well as foreign sales increased in all regions in the first 3 months, except the Asia Pacific region. The rest of Europe being the region generating the highest revenue within the group recorded growth of 18.3%, which is visibly above the group average of 12.2%.Revenues in this region increased by EUR 24.6 million to total EUR 159.1 million. Adjusted for currency effects, this increase was even more pronounced at 19.9%. In Germany, revenues were up EUR 6.6 million, 7.3%. And in the Asia Pacific region, business was mainly driven by local car production.In terms of volume, light vehicle production figures remained largely unchanged year-on-year, with a marginal growth of 0.8%. In this region, revenues contracted by 5.2% to EUR 81.4 million compared to the prior year first quarter. Assuming constant currencies, sales in the Asia Pacific region were only 1.4% below the figure in Q1 of 2022.And in the region comprising North America, revenue grew by 23.1% to EUR 128 million in the first quarter of 2023. Revenue benefited from currency effects in the period under review. Adjusted for these factors, revenues still increased by a significant 18.1%.And in the region, South America and rest of the world, the group sales performance also outperformed the market with EUR 22.3 million, sales were up 11.5%. Here, too, revenue had a slight tailwind from foreign exchange rates, adjusted for currency effects, sales expanded by 9.5%.Let us now have a look at the earnings on Slide #8.To begin with, the strong sales growth in Q1 translated into visible earnings growth year-on-year. In terms of adjusted EBIT, the positive effect of operating leverage was EUR 10 million compared to Q1 of 2022. Regarding raw materials, as pointed out by the +12, raw material prices remained at a persistently high level in the first 3 months of 2023. And after several quarters with a negative influence of raw materials, we now see a positive net effect of raw materials on adjusted EBIT.As a reminder, the raw material impact listed here is a net position and also includes, for instance, compensation payments by customers. With a positive EUR 12 million impact, the price increase incurred in last year's Q1 could be compensated, and we are back on the level of 2021. Notwithstanding the raw material price level is still very high.Further, ramp-up costs in the strategic future area of fuel cell technology as well as a new plant in North America totaling EUR 6 million reduced the adjusted EBIT in the period under review. And in this context, EBITDA rose by EUR 10.8 million to EUR 53.6 million. The group recorded an adjusted EBIT of EUR 26.4 million after EUR 15 million in the previous year's first quarter.Adjusted EBIT in Q1 2023 included exceptional items of EUR 0.3 million related to restructuring. The adjusted EBIT margin was 5.4% after 3.5% in Q1 2022. Net finance costs in the quarter under review was minus EUR 9.4 million after minus EUR 3.3 million in the first quarter of 2022. Due to the general hike seen in the market interest rates, interest expenses were higher, resulting in a higher net interest expense.In addition, and contrary to Q1 2022, exchange rate developments produced a net foreign exchange loss in the quarter on the revenue. Taking net finance costs into account earnings before taxes for the first quarter of 2023 amounted to EUR 16.6 million.After deducting tax expenses, which amounted to EUR 12.2 million and taking into account known controlling interest, the share of net income attributable to our shareholders amounted to EUR 6.7 million. Therefore, earnings per share amounted to EUR 0.11.On Slide 10, we take a look at CapEx, net working capital, and operating free cash flow.At EUR 12.3 million, capital expenditure and property, plant and equipment was at a similar level as the prior year Q1. Among others, CapEx flows with directed and manufacturing facilities for new SOP ramp-ups planned within the global production network. Other focal points included projects aimed at aligning the product portfolio with the e-mobility market. The investment ratio stood at 2.5% in the first quarter of 2023, after 3% in the first quarter of the previous year.Given the strong sales growth in the period under review, accounts receivable expanded year-on-year. Also, inventory was under the influence of various factors in view of cost inflation as well as the 10 situations seen for some raw materials, inventory was adjusted accordingly. Irrespective of this, inventory levels also expanded in view of the group's sound order situation in total, up by EUR 47 million year-on-year to a carrying amount of EUR 436 million.Net working capital, which encompasses inventories and trade receivables less trade payables totaled EUR 518 million at the end of the first quarter. Expressed as a percentage of revenue for the 12 months period, its share was 28%, slightly up from 27.5% a year earlier. Regarding operating free cash flow, the substantial funds committed to net working capital resulted in a negative operating free cash flow of minus EUR 20.3 million.The group on Slide #11 can be seen was able to reduce net financial debt by 4% or EUR 15.1 million year-on-year to EUR 372 million despite the higher funding requirements for the group's operating business in terms of net working capital. The net debt-to-EBITDA ratio was 2.0 as of March 31, 2023, slightly reduced from 2.1 1 year earlier or year-end 2022 as well.Let me now turn to Slide #12, showing the performance of our segments. As I mentioned above, the original equipment segment was able to expand its revenue in terms of earnings, revenue growth within this segment coincided with material price levels that are still very high. Instruments like material price indexation have lifted the adjusted EBIT margin into positive territory when comparing to the first quarter of last year.In the aftermarket segment, revenue generated between January and March 2023 amounted to EUR 81.7 million, an increase of 30% compared to the same period last year. And from a high revenue base, this segment managed to expand earnings compared to the same quarter of the previous year. EBIT now totaled EUR 19.8 million, which was attributable in part to consistent cost discipline and a favorable product mix. Overall, the EBIT margin was 24.2% compared to 21.9% in the same quarter last year.The Engineered Plastics segment was able to increase its revenue year-on-year by 1.7% to EUR 35.9 million due to the broad sector mix and consistently strong demand within the area of project business. Revenue remained robust in the quarter under revenue.In terms of earnings, the hike and raw material costs, in particular, due to the persistently high level of prices for fluoropolymers as well as R&D activities impacted segment earnings. Overall, this segment generated EBIT of EUR 5.1 million, which corresponds to an EBIT margin of 14.2%.Having said this, I now turn back to Dr. Wolf.

[Stefan Wolf, executive]

Thank you very much, Mr. Jessulat. Ladies and gentlemen, I have already outlined in the current environment in my introductory remarks.The economy is in general and the sector specific conditions, in particular, continued to be influenced by geopolitical and macroeconomic factors. Markets are affected in those cases in which the availability of commodities and materials is restricted as a result of the war in the Ukraine, but also due to supply chain vulnerabilities. At the same time, price hikes are fueled by elevated energy prices and general cost inflation.Overall, markets continue to be exposed to heightened uncertainty and volatility, particularly as supply chains have yet to return to consistency, robust levels and commodity, and energy prices remain very high. According to the recent projections by Standard & Poor Global Mobility, the global light vehicle production is expected to grow by 3.8% in 2023. That means 85.5 million vehicles this year in total.Given the 89 million vehicles produced in 2019, this projection is still below the pre-covid volume of the auto industry. Regarding Europe and North America, visible growth of 7.5% or 5.2% is expected, respectively, while production in China is projected to remain on its 2022 level, which is high, but no further growth expected for China this year.If you look on Slide 15, -- we have here a little bit more detailed production forecast, what I just showed or explained. The data showed that the projections of light vehicle production growth for the remaining year are somewhat front loaded on the second quarter. This holds for the global figure, but also for the major auto markets, Europe, China, and North America.For the second half of the year, light vehicle production is projected to be almost flat on the level of the second half year in 2022.Coming to Slide #16. This last slide summarizes the outlook of the key indicators for both the fiscal year 2023 and the midterm perspectives. We confirm the fiscal year 2023 outlook summarized here in this slide.It is still based on the assumption that there are no unexpected developments impacting our macroeconomic or industry-specific activities as a result of geopolitical conflicts like, for instance, an unexpected further impact by the Russian Ukrainian war or by the tensions in the Far East and Middle East.Concerning sales, given our favorable auto situation as well as the forecast regarding the global demand for light vehicles, we expect organic sales to grow substantially above market level in fiscal year 2023. As shown on the previous slide, Standard & Poor Global Mobility expects global production to grow by 3.8%. In terms of earnings, ElringKlinger continues to anticipate an adjusted EBIT margin of around 5% for 2023.The outlook for the remaining key indicators is also confirmed as well as all the figures for the medium term or midterm targets.Yes. Finally, I will quickly point out the upcoming events. In exactly one week on May 16, we will host this year's Annual General Meeting, and this is going to be virtual so you can join, if you want to join, you have the possibility to do that virtually. And the next release of the quarterly figures will be on the 3rd of August that is going to be then Q2 2023.Yes. Well, ladies and gentlemen, I would like to conclude with a few personal words. I'm sure you all have read the press release of the 6th of April. The Supervisory Board and I have agreed to terminate my contract with effect from June 30, 2023. So today is my last conference call on the ElringKlinger business figures.After being with ElringKlinger for 26 years, 18 years on the board, 17 years as CEO. This is the last call that I'm doing today. I would like to thank you all for the many years of trustful cooperation and wish you all the best for the future, and I'm sure we're going to see the one or the other location again.So now Mr. Jessulat and I are ready to take your questions. Please go ahead.

[Operator]

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] The first question is from the line of Akshat Kacker with JPMorgan.

[Akshat Kacker, analyst]

Firstly, Dr. Wolf, thank you from my side for the great discussion and cooperation over the years. Always very insightful and I would like to wish you all the best for your future levers as well.Moving on to the questions – three questions from me, please. The first one on the auto OE margins. So you've hit breakeven in the first quarter. Could you just provide us some more details on how you expect the margin to evolve in the coming quarters from here? Do you expect a meaningfully stronger second half versus the first half as you negotiate different inflation elements with your customers? And if you could also provide some color on how these negotiations are actually progressing.The second question is on the aftermarket business division. Could you just elaborate the growth and earnings drivers in this business division in the quarter? Obviously, very strong results in Q1. Do you also expect some kind of normalization now in the coming quarters, given you had originally you talked about modest growth expectations for the full year in 2023.And the last question on working capital. Do you expect working capital to peak at current levels and you expect it to optimize from here in the coming quarters? Or does it mainly reflect the strong growth in sales, especially in aftermarket? Thank you.

[Thomas Jessulat, executive]

Yes. Thank you for your questions. I would start with question number one. OE margin in terms of future development.When we look at the compared period here in the last year, then certainly the most significant factor is the material compensation received by the customers that compares to a different situation in Q1 last year. On the other hand, there is from a compensation perspective, when we look at energy on the one side, but maybe more important, the labor cost increase, in particular in Germany, but also in other countries. Then this is rather backloaded in the year. So from a cost perspective, we see a little bit of increased cost base towards the second half of the year.Now on the other side, when we look at the revenue cycle of our new business units and new projects, expectation is that gradually in the second half, we'll see some more incremental growth to really forecast exactly how that's going to be playing out. Not sure. I'd say it's going to be a more or less balanced development here in terms of the OE margin from my side, what I would expect.Now to your third question, working capital, in particular, we see an increase here in this quarter in the aftermarket segment. And here, of course, we very much look at the service level. We see some impact here on the raw material and also on the inventory side.And it's like you say, expectation is we are somewhere in the peak area here on the one side from the amount of material that we have on hand, but maybe more importantly, from a cost side because cost is playing a very significant role in the run-up here of working capital.So yes, I think we are around peak, and we are working hard in order to improve this position here and expect with decreasing price levels here for the raw materials, that also from a pricing perspective, we see maybe a little bit a rundown of the inventory level here on the balance sheet.

[Stefan Wolf, executive]

Yes. With regard to the aftermarket, you had -- you saw it on Page 6 or Slide #6, that the aftermarket increased quite remarkably from -- compared to the first quarter of 2022. Now at EUR 81.7 million in the first 3 months, that's really a record. As you probably might remember, we have built up aftermarket business in China. We also have built up aftermarket business in the U.S. that really contributes now very nice to this growth in the aftermarket business. And the margins are really strong. We are talking about around about 20% margins here in the aftermarket business. And we expect that this is ongoing for the full year. So I'm pretty sure we see again a record at the end of this year in the aftermarket business.

[Operator]

Next question is from the line of Christoph Laskawi with Deutsche Bank.

[Christoph Laskawi, analyst]

First of all, first and foremost, Dr. Wolf, obviously, all the best for the future and future endeavors after leaving ElringKlinger after quite a time and leaving quite an impact.And then on the questions, this is really mostly related to the bridge when we think about the net price cost item that should come down as a positive, as you said, wages and energy costs kick in? Or should we expect the net positive to remain largely unchanged as you are negotiating the pass-throughs for the latter two items more towards H2?And then following on to that, the we margin actually ask it to some degree as well. But should we expect that to remain positive throughout 2023. And lastly, just on SOPs, -- are there additional SOPs in the coming quarters, which continue to support or even lift your outperformance over production? Or is essentially now what we see the level that you would target for the year?

[Thomas Jessulat, executive]

Okay. Mr. Laskawi, thank you for your question. On the bridge, we see that if we compare the bridge from this period here with the first quarter 2022, we see that the material cost side is pretty much addressed in a good way. But we see here energy, logistics is playing a little bit of negative role plus also labor cost as we have seen.So that means that there is more way coming in the second half, maybe not so much incrementally from an energy cost perspective, but certainly from a labor cost perspective. Now we are addressing this also in 2023 here with the customers, yes. But again, it remains to be seen because also last year, we had in Q4 compensations coming in.But in the early stages, so to say, in the earlier quarters, there was more an outweighing of cost, which gets me to your second question in terms of the OE margin that may result in some negative short-term development until that cost can be addressed. So I would not commit myself here to -- yes, every quarter is going to be positive. We may see upfront cost that is going to be addressed later. So I would not guarantee that wee margin stays positive in any case.When we look at SOPs, there is, what I said, additional increments from the OE segment project is cell-contacting system where we will see a run-up with initial qualities in the second half of the year and also expectations step-by-step, the new plant here in Texas is going to be producing some higher figures. We had a business interruption also in the U.K. with the plant, which led to the lower figures here in e-mobility, and there's also some catching up that we expect.So yes, there is the expectation that we'll have some operating leverage coming from that. Yes, that to your three questions.

[Christoph Laskawi, analyst]

Thank you. Thank you.

[Operator]

Next question is from the line of Marc-René Tonn with Warburg Research.

[Marc-Rene Tonn, analyst]

And also, of course, from my side of the world, all the best to you in the future and many things for the fruitful calls we had in the past.Coming to the question. Firstly, looking at minorities in the P&L, and you say quite a negative number there, which is then corrected an increasing net profit attributable to shareholders for the ElringKlinger Group. When we take these figures and consider, let's say, our 60% stake in KPO, should we consider this business being operationally, this would leave us let's say, mid-single-digit negative result for the first quarter?Would that be something which is, let's say, from a ballpark figure, what is realistic to assume as a rain on the operating results. And perhaps you could give us your expectation on how this will, let's say, proceed over the year, let's say, given the ramp-up you have had a view in this business with this bipolar plate order which we have won. That would be question number one.Secondly, on R&D. -- probably related to that. And probably the Engineered Plastics dividend. I think R&D was up quite substantially in the first quarter. Would you expect the R&D ratio to stay on this, let's say, a bit higher level than it had been in the previous year over the course of the year? Are you expecting that to reduce again later on in the year. That would be my two questions.

[Thomas Jessulat, executive]

Okay. Yes. Thank you for your question. On the estimation in your question #1, it's pretty accurate. What you said here to roughly mid-single negative figure in terms of the start-up loss situation here in the KPO is an approximation that is okay.And the outlook for the year, there is some uncertainties, I would call it, from a positive side. Not sure whether it will hit us this year or whether it will hit us next year. So I would not be too specific on the following three quarters, but expectation would be that...[Audio Gap][Technical Difficulty]

[Operator]

Please hold your lines while the speakers reconnect.Please continue.

[Stefan Wolf, executive]

Yes. Mr. Tonn still there?

[Marc-Rene Tonn, analyst]

Yes.

[Stefan Wolf, executive]

I was... Did you get the answers or for Mr. Jessulat because we were disconnected.

[Marc-Rene Tonn, analyst]

I think we had the part that we are expecting something potentially positive at EKPO, which you have probably not baked in already for this year, but there's some uncertainty about the timing issue that I think the last sentence I got.

[Thomas Jessulat, executive]

Baseline is if you take first quarter results, and you extrapolate over the next three quarters, that's more or less okay basis. And then eventually, there is going to be an upside, but I'm not sure if it hits us this year or next year.And on the R&D, your observation, same. Yes, there is more activity here. This will stay, and this will stay either from a capitalized development perspective or from an expense perspective. Yes? So those are to your questions.

[Marc-Rene Tonn, analyst]

Just one follow-up, if I may, with regard to an upfront, I think we talked about EKPO and then we look at the E-Mobility business, apart from EKPO are there also, let's say, major, let's say, burden to profitability in a similar magnitudes in the ramp-up for the cell-contacting contracts we should be well off in the first half? Or let's say, lower number.

[Thomas Jessulat, executive]

When we look at the business from a start-up perspective, there's the EKPO and also from a battery side. Now besides those two, we have start-up situations here in different locations in the group, but not with significant losses.

[Marc-Rene Tonn, analyst]

Thank you very much.

[Operator]

The next question is from the line of Frank Biller with LBBW.

[Frank Biller, analyst]

Also from my side, Mr. Wolf, all the best for you. Thanks a lot for all the years we have worked together and all the good discussions here.So my questions, I have actually two. The one is on the order intake side. So EUR 475 million in orders. Maybe you can elaborate a bit on what business fields were here addressed from these new orders? And maybe just a word on the margin calculation. Is it well above this 5%? Or should we expect to in the range of 8% to 10% EBIT margin here from these new orders here?And the second question is on the taxation here. Well, it's a 74% tax rate in the first quarter. Maybe you can give you a hint what we should expect for the whole year.

[Thomas Jessulat, executive]

Yes. Thanks also for your question. From an order intake perspective, we have quite some, how to say, variation here coming from the OE side from new plans with our existing customers that change schedules. This is one topic. And then from the other side, of course, what's reflected here is the order intake in regard to aftermarket.New orders from a calculation perspective, we've got quite some variation. Typically, they are in the target range, above 5%, and that's also required whereby we have two key items we look at, the one is EBIT margin and the other one is, of course, return on capital employed. And for the new projects, we have those in the target area. That means double-digit ROE typically and more than 5% EBIT.Tax rate, resulting from what I explained earlier, we have some losses in the group on the one side, but we have a very good earnings situation in some other areas on the other side. The accounting policy here on deferred taxes and the building or the booking of deferred tax assets on losses is pretty conservative.So the answer to your question is, yes, we have losses in the group that lead to a higher tax rate as we see. But we do not -- based on a conservative accounting approach here, we do not build active deferred tax assets on the asset side. And that leads to high tax rates.Is the expectation that this stays roughly the same for this year in some range, I would say, yes. And I expect also that when we come out here into the revenue cycle from a start-up situation and the revenue cycle that the tax rate in the group improves. But for this year, from a very short-term thinking, I do not expect a very positive swing. It's more like will continue in a certain bandwidth.

[Frank Biller, analyst]

Thanks a lot.

[Operator]

Next question is from the line of Michael Punzet of DZ Ban.

[Michael Punzet, analyst]

From my side, all the best for you, Dr. Wolf, for your step into -- for the next steps. I have two questions. One is regarding -- a follow-up on the tax rate. Is it fair to assume that we should expect -- could expect a tax rate of roughly 60% for the full year. Second question is on your financial results. You mentioned an interest result of EUR 4.8 million negative in Q1. Could we see that as a run rate for the full year? And the last question on your E-Mobility business. Could you give us a split between your customer base split between the Chinese local manufacturers and German manufacturers.

[Thomas Jessulat, executive]

Yes. Thanks for your question. On the tax rate, 60%, roughly speaking, could be an assumption for the year. When we look at the financial results of the first quarter, we have different items here. We have interest expense, interest income, which is pretty much in line here, what we have. We have in other, minus EUR 2.9 million. This is, I'd say, a cycle, an annual cycle situation, and that is coming from the hotel. My expectation would be that we do not see the minus EUR 2.9 million in that amount for the coming quarters, I would expect less than that.But when we look at the interest-related expenses here, then roughly speaking, I expect the same amount for the next quarters. We are pretty much when you look at foreign exchange hedging in terms of intercompany loans, then we are pretty much hedged with some exemptions. But on the U.S. dollar side, we are pretty much hedged also on the Swiss fan to a large extent. So I would not expect wild figures here from foreign exchange effects.

[Stefan Wolf, executive]

Yes. Yes. With regard to the e-mobility business, our projects that we have are mainly with the North American and European manufacturers. We have no projects so far with e-mobility with the manufacturer of electrical cars, pure electrical cars in China. So Chinese customers, we have a Chinese customer for cell-connecting systems. That's a battery manufacturer, Chinese special manufacturer that has also a production site here in Europe.So mainly our main customers are North American and European customers, but we are working on projects in China. We have founded a subsidiary of EKPO Fuel Cell Technologies in China last year. This company is located in Suzhou, where ElringKlinger has also a big factory. And we are working there with our salespeople on projects with pure Chinese, 100% Chinese car manufacturers that produce electrical cars. But so far, no order from them.

[Michael Punzet, analyst]

Okay, thank you.

[Operator]

As there are no further questions, I hand back to Dr. Stefan Boris for closing comments.

[Stefan Wolf, executive]

Yes. Once again, thank you very much. As I said before, it was quite a good time here ElringKlinger, I enjoyed it very much. And I think we also did a pretty good job. It's always a team. It's not a single person.And so I'm -- of course, I'm going to follow the company in the future very closely. And I hope to see the one or the other from you maybe on a conference or whatever. So all the best, and then next conference call is, as I said, August 3 with the Q2 figures. Yes. Thank you very much. Goodbye.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephones. Thank you very much for joining, and have a pleasant day. Goodbye.