Iveco Group Stock

Good day, ladies and gentlemen, and welcome to today's Iveco Group 2025 Fourth Quarter and Full Year Results Conference Call and Webcast. We would like to remind you that today's conference is being recorded. [Operator Instructions]

At this time, I would like to turn the call over to Federico Donati, Head of Investor Relations. Please go ahead, sir.

Thank you, Razia. Good morning, everyone. I would like to welcome you to this webcast and conference call for Iveco Group fourth quarter and full year financial results for the period ending 31st December 2025.

This call is being broadcast live on our website and is copyrighted by Iveco Group. I'm sure you appreciate that any other use, recording or transmission of any portion of this broadcast without the consent of Iveco Group is not allowed.

Hosting today's call are Iveco Group CEO, Olof Persson; and our CFO, Anna Tanganelli. Please note that any forward-looking statements we make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation material.

Additional information relating to factors that could cause actual results to differ from forecast and expectation is contained in the company's most recent annual report as well as other recent reports and filings with the authorities in the Netherlands and Italy.

The company presentation may include certain non-IFRS financial measures. Additional information, including reconciliation to the most directly comparable IFRS financial measure is included in the presentation material.

Furthermore, on the 30th of July 2025, Iveco Group announced the signing of a definitive agreement to sell its Defence business, IDV and ASTRA brands to Leonardo S.p.A. The transaction is expected to be complete no later than the 31st March of 2026, subject to customary regulatory approvals and carve-out completion.

In accordance with IFRS 5, noncurrent assets held for sale and discontinued operation as the sale became highly probable in July, the Defence business meets the criteria to be classified as a disposal group held for sale.

It also meets the criteria to be classified as discontinued operations. In accordance with applicable accounting standards, the figures in the income statement and the statement of cash flows for 2024 comparative periods have been recast consistently.

Additionally, in 2024, the Firefighting business was classified as discontinued operations. Its sales was complete on the 3rd of January 2025. As a consequence, 2025 and 2024 financial data shown in this presentation refer to continuing operations only, unless otherwise stated.

Finally, please note that subject to the applicable disclosure requirements pending the publication of the final offer document, we will not comment on the tender offer by Tata Motors.

As per the joint press release on the 3rd of July announcing the entering into the merger agreement and the press release by Tata on the 19th of August, announcing the filing of the document with CONSOB, anyone interested is invited to refer to the offer or notice published on the 3rd of July 2025, which indicates the legal basis, rationale, condition, terms and key elements of the tender offer.

All the aforementioned materials and announcements are available on Iveco Group corporate website, where any additional relevant information will be published in due time.

We'll not comment on the sale of the Defence business to Leonardo either. The rationale, terms and condition of the sale with the details as currently available were disclosed on the 30th of July. As announced, the transaction is expected to be completed in Q1 2026, subject to customary regulatory approvals and carve-out completion.

I confirm the activities to this end are going and on track. Consistent with the agreement reached with Tata, Iveco Group will distribute the net proceeds of the transaction, based on the enterprise value agreed with the purchaser via an extraordinary dividend estimated at EUR 5.5 to EUR 6 per common share to be paid out to the company shareholders before the tender offer is settled.

With those points covered, I'd like to turn things over to our CEO, Olof.

Thank you very much, Federico. And let me add my own welcome to everyone joining our call today. And I'll start with Slide 3, outlining the main highlights from our full year performance, excluding Defence.

2025 for Iveco Group was a challenging year, with declining market in Europe for both light-duty trucks and heavy-duty trucks. And in addition, we had challenges in ramping up our bus deliveries in the later part of the year.

These factors affected the volumes and profitability of both our truck and bus units. They also impacted our full-year free cash flow performance relative to our most recently updated financial guidance.

Our teams moved quickly to tighten inventory levels, manage costs diligently and remained on course to deliver our multiyear efficiency program, which was accelerated in 2025 and again in the current year.

We concentrated on balancing pricing with market share in our Truck business unit and carefully managing channel inventory, lowering it substantially in Europe to counterbalance higher dealer inventory in South America.

We also protected our leadership position in the LCV Chassis Cab subsegment and maintained strict pricing discipline in Medium & Heavy in support of the final phase of the introduction of our model year 2024 across European countries.

I'd like to break down our performance a little bit by business unit. So in Truck, industry demand in Europe remained particularly low throughout the year across ranges, particularly in the Chassis Cab subsegment, impacting profitability that we partially offset with strict cost control measures.

European deliveries for the full year dropped year-over-year, especially in light commercial vehicles, which were down 23% versus last year.

At the end, 2025 worldwide Truck book-to-bill came in just slightly below 1.0, up 27 basis points compared to last year.

In our Bus business unit, profitability improvements were tempered by additional costs associated with the delay in the production ramp-up in our Annonay plant in France and supply delays.

Consequently, the free cash flow generation was negatively impacted by EUR 200 million. Unfinished products that remained in our inventory at the end of the year will be deployed in 2026.

Despite these constraints, our order book in Bus remains strong, providing us with clear long-term visibility through full year of 2026.

In Powertrain, the progressive sign of recovery in third-party engine volumes that started in Q3 2025 helped support profitability improvements in the second half of 2025, along with a positive mix and pricing. Powertrain also continued diligent cost control and operational efficiency.

Moving now to financial highlights for the full year. Consolidated net revenues were EUR 13.4 billion at the end of 2025, down 7% compared to previous year. Consolidated adjusted EBIT margin at 4.8%, was down from 6.2% last year, and Industrial Activities net revenues stood at EUR 13.1 billion, down 17% (sic) [ 7% ] versus last year and slightly below the updated guidance provided at the beginning of November, which excluded Defence.

Industrial Activities adjusted EBIT was also slightly below the updated guidance, closing the year at EUR 528 million compared to EUR 761 million last year.

Finally, free cash flow was negative EUR 109 million for continuing operations only. The deviations compared to guidance are mainly explained by the delay in production ramp-up of buses.

For reference only, we have also included the unaudited full year 2025 consolidated financial results, including discontinued operations.

As you can see, if we exclude the one-off higher inventory level in Bus, free cash flow would have been positive EUR 260 million at consolidated level and positive EUR 91 million for continuing operations.

Going forward, we remain focused on quality and operations, maintaining tight control on production levels and inventory management and continuing to deliver the goals of our efficiency program.

Moving then to Slide 4 and outlining our indicative time line for the first half of 2026, with the sale of our Defence business and the tender offer for Iveco Group progressing in parallel.

Regulatory filings for both transactions, including those required by the European Union are currently underway and subject to final approvals.

As you've probably already seen from the press release issued on the 23rd of January, the transactions are progressing as planned and the expected dividend for the Defence separation remains at between EUR 5.5 and EUR 6 per share.

Payment is currently anticipated in April 2026 after contractual closing adjustments are finalized, in line with the standard ex-dividend date of the 20th of April of the Italian Stock Exchange calendar.

Furthermore, the extraordinary general meetings for Defence and the Tata Motors tender offer are expected to be held in the second half of March and early May 2026, respectively.

As announced in July, if the sales to Leonardo S.p.A. is not completed prior to or on the 31st of March 2026, the company is taking all actions necessary to complete the spinoff of the Defence business through a statutory demerger, which would transfer the business into a newly incorporated company under Dutch law.

The common and special voting share of this new company would be proportionally allotted to those Iveco Group shareholders existing at the time of the demerger, with common shares listed and traded at Euronext Milan.

The Defence Extraordinary General Meeting will be asked to vote on demerger proposal as a precautionary measure as per our press release issued yesterday.

With these important developments covered, let me now discuss the performance of our business and industry dynamics during the fourth quarter.

Moving on to Slide 6 and the Truck segment. Throughout the last quarter, we maintained tight control on both inventory levels and pricing discipline, as mentioned earlier.

Our channel inventory in Europe, both in LCV and Medium and Heavy Trucks ended the year at a healthy level, giving us a solid platform for 2026.

In the fourth quarter, European industry volumes decreased by 12% year-over-year in light commercial vehicles with the Professional Chassis Cab segment down 14%. This drop was partly offset by a more dynamic Caravan subsegment, where Iveco has only limited exposure.

In Medium and Heavy Trucks, European industry was slightly up at 2% in the quarter. Our market share reached 7.9%, up 80 basis points versus the same period last year with Heavy Trucks accounting for 7%, up 60 basis points compared to last year.

We maintained pricing discipline throughout the quarter as we entered into the final phase of introducing our Model Year 2024 across the remaining European countries.

In an environment that continues to present challenges, we were able to preserve pricing integrity and manage inventory effectively, reflecting both the strengths of our commercial execution and the strategic clarity of our Truck business.

On Slide 7, our worldwide truck book-to-bill ratio reached 0.91 at the end of the quarter, registering a 22 basis improvement year-over-year.

In light commercial vehicles, our European order intake rose by a very healthy 58% compared to Q4 2024 with a book-to-bill ratio at 0.9.

This increase is a welcome sign of recovery, coming on the heels of a prolonged period of production coverage below last year's level. Also, January's order intake confirms such trends with a solid 15% up year-over-year and signs of recovery across retail, key accounts and international key accounts.

That said, order intake was down 16% in South America versus last year, but this came after 3 consecutive quarters of solid order increases. The book-to-bill ratio in South America stood at 1.03 at the end of the fourth quarter 2025.

In Medium and Heavy Trucks, our European order intake was up 14% year-over-year with a book-to-bill ratio of 1. South America saw a pronounced contraction of 48% with a book-to-bill ratio of 0.81. The backlog in Europe remained stable at 8 weeks of production coverage in Heavy and 12 weeks in Medium.

Then moving on to Slide #9 with Bus industry volumes and market shares. During the quarter, Iveco Bus continued to command a strong competitive position across Europe.

In the Intercity segment, our leadership was confirmed with a 58.2% market share in Q4 2025, representing a 9 percentage point increase year-over-year, supported by the first deliveries of our Crossway normal flow electric buses, which began in December.

In the European city bus segment, our market share stood at 11% in Q4, a figure penalized by unfinished products and the related delay in deliveries. In 2026, we will deploy the deliveries that was not completed at year-end.

Despite the negative impact on our city bus market share, the overall Iveco Bus maintained its consolidated #2 position in the European market, registering a 22% market share in the fourth quarter.

Moving on to Slide 10. In Q4 2025, our Bus order intake was up 28% due to good performance in the second half of the year in South America and AMEA, which led to a worldwide full year 2025 order intake that came in 13% higher year-over-year.

Deliveries rose 1% on a worldwide basis compared to Q4 2024 on the back of the solid performance in the rest of the world, partially compensated by lower deliveries in South America and the European deliveries were up 3% year-over-year. The book-to-bill ratio stood at 1.11 at the quarter end and 1.09 on a full year basis.

Summing up, we have a solid plan to deliver the delayed buses in 2026 and maintain good long-term visibility for intercity and city bus with coverage extending through the full year of 2026.

Moving then on, on Slide 12 and looking at the Powertrain business unit. Engine volumes were up almost 11% versus Q4 2024, with increasingly positive signs of recovery in third-party customer, a process that began in Q3 2025 and expected to continue in 2026, although at a slower pace compared to the fourth quarter.

During Q4, Powertrain strengthened its #1 position in the European agriculture sector, supplying N67 engines for the new Deutz-Fahr 8 series Tractor.

Operational discipline remains central to our business strategy. Powertrain continues to manage costs very carefully and implement the ongoing efficiency program. These efforts are helping to protect margins and ensure sustainable delivery as the volumes recover.

Another important demonstration of Powertrain's technology leadership came at the Dakar 2026, an extreme test of speed, navigation and durability across the Arabian Desert. After 2 grueling weeks, FPT achieved an historic one-two podium, which is Cursor 13 engine in the Truck category. The performance and reliability of our engines is what it takes to succeed in the world's toughest off-road race.

Looking into Slide 14. And on my final opening remarks slide looks at our electric vehicle portfolio, where year-to-date delivery volumes continue to grow across the business unit despite softened market demand.

As I said in our previous earnings call, this clearly shows the competitiveness of our product lineup and our unique positioning in the truck where Iveco is the only truck manufacturer to offer a complete fully electrical product line-up ranging from 2.5 up to plus 16 tonnes.

Competitiveness at this level will be strengthened even more by the initial distribution of the Iveco eSuperJolly in the second quarter of this year and the Iveco eJolly in June. These new all-electric LCVs are being produced through a partnership with Stellantis Pro One.

With that, I finish my opening remarks, and I will now hand the call over to Anna.

Thank you, Olof. Let's now take a look at the highlights of our full year 2025 financial results on Slide 16. Again, all figures provided in the presentation refer to continuing operations only, excluding Defence, if not otherwise stated.

Full year 2025 closed with EUR 13.4 billion in consolidated net revenues and EUR 13.1 billion in net revenues of industrial activities, contracting 6.9% and 6.6%, respectively, on a year-over-year basis, mainly due to lower volumes in Europe for Truck and Powertrain and the negative FX translation effect, primarily in Brazil and Turkey.

Group adjusted EBIT closed at EUR 645 million with a 4.8% margin and adjusted EBIT of Industrial Activities reached EUR 528 million with a 4% margin. Both contracted by 140 basis points versus full year 2024.

Net financial expenses were EUR 222 million in the year compared to EUR 192 million in 2024, which had been positively impacted by last year's Argentinian hyperinflation accounting methodology.

Reported income tax expenses totaled EUR 82 million with an adjusted effective tax rate of 26%. This resulted in an adjusted net income for continuing operations of EUR 312 million, down EUR 208 million versus last year and with an adjusted diluted EPS for continuing operations of EUR 1.16.

Moving to our free cash flow performance. 2025 closed with EUR 109 million cash flow absorption, down almost EUR 150 million versus prior year if we exclude the negative EUR 200 million one-off effect related to the exceptionally high inventory levels within our Bus division at year-end. I will provide obviously further details on this later in the presentation.

Available liquidity closed solidly at EUR 4.7 billion on the 31st of December 2025 with EUR 1.9 billion of undrawn committed facilities.

Let's now focus on net revenues of Industrial Activities on Slide 17. As you can see from the chart on the right-hand side of this slide, all regions contracted compared to prior year, excluding South America, which was broadly flat versus 2024.

Looking at our net revenues evolution by business unit, Bus was up double digit versus prior year at plus 15%, reaching EUR 2.9 billion, thanks to higher volumes and despite lower-than-forecasted deliveries in the fourth quarter.

Truck net revenues were EUR 8.9 billion, down 11% versus last year as a result of lower deliveries in light-duty trucks due to the continuously challenging Chassis Cab subsegment evolution in Europe and lower heavy-duty truck deliveries in Brazil in the fourth quarter in order to start realigning channel inventory levels.

Additionally, the Truck top line was negatively affected by an adverse year-over-year foreign exchange rate trend, mainly in Brazil and in Turkey.

Powertrain net revenues were down 6% versus previous year at EUR 3.3 billion due to lower volumes in the first half of the year, only partially compensated by a solid recovery in the second half. Sales to external customers accounted for 47% in 2025, in line with prior year.

Turning to Slide 18. Let me briefly comment on the main drivers underlying the year-over-year performance in our adjusted EBIT margin of Industrial Activities.

Volume and mix contributed negatively for EUR 244 million in the period, mainly due to lower trucks, especially LCV and Powertrain volumes in Europe. Net pricing also contributed negatively during the year for EUR 20 million, mainly due to normalization of pricing in light-duty trucks.

Production costs were negative EUR 33 million year-over-year, mainly driven by ramp-up costs at our Annonay plant in Bus, partially offset by solid positive performance in Powertrain.

Finally, the year-over-year improvement in SG&A costs, totaling EUR 48 million in the year is a result of the acceleration of the efficiency actions announced and launched at the beginning of 2025.

Let's now take a look at the adjusted EBIT margin performance for each industrial business unit on Slide 19. Truck posted a 3.7% adjusted EBIT margin in the year, down 190 basis points compared to 2024 as a result of lower volumes predominantly in Europe and the negative mix linked to the continuously challenging Chassis Cab subsegment evolution in the region.

The lower year-over-year fixed cost absorption resulting from contracted production levels was only partially compensated by all the cost containment actions implemented throughout the year.

2025 adjusted EBIT margin of our Bus business unit closed at 4.9%, down 60 basis points versus prior year with higher volumes and positive price realization, offset by the higher ramp-up costs at our Annonay plant.

Finally, Powertrain adjusted EBIT margin closed at 6.7% in the year, thanks to continued and diligent cost control, operational efficiencies as well as an increase in engine volumes in the second half of the year.

Let's now have a look at the performance of our Financial Services business unit during the year on Slide 20. 2025 adjusted EBIT closed at EUR 170 million with a managed portfolio, including unconsolidated JVs of EUR 8.1 billion at the end of the period, of which retail accounted for 42% and wholesale 58%. This figure is down EUR 242 million compared to the 31st of December 2024 as a result of lower Industrial Activities sales volumes.

Stock of receivables past due by more than 30 days as a percentage of the overall on-book portfolio was at 1.9%, in line with last year. Return on assets remained solid at 1.9%.

Let's now move to our free cash flow and net industrial cash evolution on Slide 21. As said, 2025 free cash flow closed with an absorption of EUR 109 million. Adjusted for the one-off negative impact of our Bus business unit exceptional inventory levels at year-end, 2025 free cash flow would have been positive at EUR 90 million.

We already commented on our profitability, on our financial charges and on the taxes performance in the year. So let's move to working capital.

Working capital contributed positively for EUR 41 million in 2025, EUR 169 million improvement versus previous year, thanks to a strong inventory reduction in our Truck business unit in Europe, only partially countered by higher inventory levels in Bus.

The negative year-over-year change in provisions was mainly driven by lower sales volumes in our Truck business unit, which resulted in reduced commercial and warranty provisions.

Investments totaled EUR 789 million in 2025, down EUR 118 million versus last year and in line with the already mentioned acceleration of our efficiency program and the related reprioritization of some of our less strategic investments.

The last point I would like to mention here is that, as you can see from the chart at the bottom end of the slide, despite the EUR 200 million negative one-off effect, Q4 2025 cash flow performance was substantial at above EUR 1.1 billion and EUR 70 million better than last year.

Moving now to Slide 22. As of the 31st of December 2025, our available liquidity for continuing operations stood solidly at EUR 4.7 billion, with almost EUR 3 billion in cash and cash equivalents and EUR 1.9 billion of undrawn committed facilities.

Looking at our debt maturity profile, the majority of our debt will mature from 2027 onwards and our cash and cash equivalent levels continue to more than cover all the cash maturities foreseen for the coming years.

Moving now to my last slide for today, Slide 24. Let's take a look at the performance of our discontinued operations, i.e., our Defence business unit. 2025 Defence net revenues reached EUR 1.4 billion, up 19.1% compared to prior year, thanks to higher volumes and the positive mix.

Adjusted EBIT was EUR 156 million, compared to EUR 91 million in 2024, driven by higher volumes, a positive mix and production efficiencies.

Adjusted EBIT margin was 11.4%, up 350 basis points compared to prior year. The Defence funded order book reached EUR 5.7 billion at December end, up close to EUR 400 million from the end of September 2025.

Thank you. I will now turn the call back to Olof for his final remarks.

Thank you very much, Anna. And I'll end this presentation by providing some takeaway messages based on what you have heard today. But before I do that, I'd like to inform you that pending the ongoing extraordinary transactions, we will not provide any financial guidance for 2026.

That said, on Slide 26, you can see a preliminary industrial outlook for this year. So here are my takeaway messages from today's call.

First, our fourth quarter free cash flow performance was impacted by delays in production ramp-up experienced at our Annonay plant. And there is where we produce our entire city bus range.

These constraints were amplified by supply delays in delivering material, circumstances that were not foreseen when we provided updated guidance in November last year. As a result, a number of products remained unfinished and undelivered at the year-end, resulting in a one-off negative cash flow impact of EUR 200 million.

We have, as I said before, a solid plan to deliver delayed buses in 2026 and thereby recovering the negative impact. And additionally, the cost of the ramp-up at the facility we progressively reduced during H1 2026.

Second, in Q4, European truck order intake was solid, especially in LCV, where weeks of production already sold remained stable at 7 weeks and order intake in January continued to be up double digit, compared to the same period last year.

We maintained diligent inventory management throughout the year, including the last quarter, which enabled us to enter 2026 with a healthy channel inventory level in Europe, that is in line with the preliminary industry demand forecast.

In heavy-duty trucks, we continue to maintain strict pricing discipline in support of our model year 2024, ensuring that the quality, performance and full potential of the product is realized.

In Powertrain, new third-party customer contracts with leading brands such as Deutz underscore our #1 leadership position in the European agriculture market. Engine deliveries to third-party customers are expected to continue at pace in 2026, although slightly slower compared to Q4 2025.

Third, in Europe, our preliminary Truck industry outlook, both for LCV and Medium and Heavy will be flat or slightly up versus full year 2025.

In South America, our preliminary expectations for the year is characterized by uncertain demand, resulting in an industry down 10% versus the previous year in both LCV and Medium and Heavy.

Order intake in South America, predominantly in Brazil in the fourth quarter of 2025 validated this assumption, declining by double digits year-over-year. This was mainly driven by market slowdown and company effort to lower dealer inventory.

Fourth, we will continue to maintain disciplined cost control and operational efficiency across all business units and keep accelerating our efficiency program as planned to deliver additional full year OpEx savings.

Finally, as I mentioned in my opening remarks, we are on track to complete the sale of our Defence business to Leonardo as per our original communication. The tender offer by Tata is also expected to be completed within the first half of 2026 as announced.

In conclusion, we have just closed a very challenging year, both in terms of market demand for our Truck business unit and the need to handle delays in the production ramp-up at our Annonay plant.

Having said that, I'm really proud of how the team of the Iveco Group performed and adapted to respond to the challenges, while also progressing our 2 extraordinary transactions in line with the time lines previously communicated.

I look ahead with confidence as we remain focused on quality, operational execution and acceleration of our efficiency program. Across all business units, we remain committed to delivering long-term value for our stakeholders.

And with that, thank you so much, and I will now hand it back to Federico.

That concludes our prepared remarks. I've been informed that no one has registered to make any questions. So I would wish you a good day and thank you for your participation. Thank you.

Thank you. That will conclude today's conference call. Thank you all for participating. Ladies and gentlemen, you may now disconnect.

Good day, ladies and gentlemen, and welcome to today's Iveco Group Third Quarter 2025 Results Conference Call and Webcast.

We would like to remind you that today's call is being recorded.

[Operator Instructions]

At this time, I would like to turn the call over to Federico Donati, Head of Investor Relations. Please go ahead, sir.

Thank you, Razia. Good morning, everyone. I would like to welcome you to this webcast and conference call for Iveco Group Third Quarter Financial Results for the period ending 30th September 2025.

This call is being broadcast live on our website and is copyrighted by Iveco Group. I'm sure you appreciate that any other use, recording, or transmission of any portion of this broadcast without the consent of Iveco Group is not allowed.

Hosting today's call are Iveco Group CEO, Olof Persson, and me, Federico Donati, Head of Investor Relations, standing in for the financial section usually covered by our CFO, as Anna Tanganelli could not be present today.

Please note that any forward-looking statements we make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included in the presentation material.

Additional information relating to factors that could cause actual results to differ from forecast and expectation is contained in the company's most recent annual report, as well as other recent reports and filings with the authorities in the Netherlands and Italy.

The company presentation may include certain non-IFRS financial measures. Additional information, including reconciliation to the most directly comparable IFRS financial measures, is included in the presentation material.

Furthermore, on the 30th of July 2025, Iveco Group announced the signing of a definitive agreement to sell its defense business, IDV, and Astra brands to Leonardo S.p.A. The transaction is expected to be completed no later than 31st March 2026, subject to the customary regulatory approvals and carve-out completion.

In accordance with IFRS 5, noncurrent assets held for sale and discontinued operations, as the sale became highly probable in July, the Defense business meets the criteria to be classified as a disposal group held for sale.

It also meets the criteria to be classified as a discontinued operation. In accordance with applicable accounting standards, the figures in the income statement and the statement of cash flow for the 2024 comparative periods have been recast consistently.

Additionally, in 2024, the firefighting business was classified as a discontinued operation. Its sales were completely on the 3rd of January 2025. As a consequence, the 2025 and 2024 financial data shown in this presentation refer to the continuing operation only unless otherwise stated.

Finally, please note that, subject to applicable disclosure requirements pending the publication of the final offer document, we will not comment on the tender offer.

As per the joint press release on July 30, announcing the entering into the merger agreement and the press release by Tata on August 19, announcing the filing of the document with Conso, anyone interested is invited to refer to the offer notice published on July 30, 2025, which indicates the legal basis, rationale, condition, terms and key elements of the tender offer.

All the aforementioned material and announcements are available on the Iveco Group corporate website, where any additional relevant information will be published in due time.

We will not comment on the sale of the defense business to Leonardo either. The rationale, terms, and conditions of the sale, with the details as currently available, were disclosed on July 30.

As announced, the transaction is expected to be completed in Q1 2026, subject to customary regulatory approvals and carve-out completion.

Consistent with the agreement reached with Tata, Iveco Group will distribute the net proceeds of the transaction based on the enterprise value agreed with the purchaser via an extraordinary dividend estimated at EUR 5.56 per common share to be paid out to the company's shareholders before the tender offer is settled.

With those points covered, I'd like to turn things over to our CEO, Olof.

Thank you very much, Federico. And let me add my own warm welcome to everyone joining our call today.

I'll start with Slide 3, outlining the main highlights from our third quarter performance, excluding defense. Throughout the quarter, we maintained a high focus on our long-term vision and maintained discipline in the execution of measures that will help achieve it.

These include tight control on inventory levels, diligent cost management, and the ongoing commitment to our multiyear efficiency program, as well as its acceleration for the current year, which is proceeding as planned.

We have also identified additional areas of improvement, which will deliver further full-year savings. In our Truck business unit, we concentrated on balancing pricing and market share.

The focus was on protecting our leadership position in the LCV chassis cap subsegment, where pricing dynamics were more challenging and maintaining a very strict pricing discipline in medium and heavy in support of the final phase of the introduction of our model year 2024 across European countries, and thereby ensuring the quality, performance, and the full potential of the product.

I'd now like to break down our performance by business units. In the truck industry, demand in Europe remained particularly low in the chassis cab subsegment, which affected profitability in the quarter, which was only partially offset by strict cost control measures.

European deliveries in the period were down year-over-year, particularly for light commercial vehicles, which were down 27% versus last year. At the end of the quarter, worldwide book-to-bill for trucks came in at 1.0, up 25 basis points versus the same period last year.

In Powertrain, we began to see the first sign of a sustainable recovery in engine volumes as had been expected, supporting profitability improvements.

In our bus business unit, profitability was impacted by costs associated with the ramp-up of production in our NNA plant in France. But despite this, our order book remains strong, providing us with a clear long-term visibility.

Free cash flow absorption in the third quarter of 2025 was at EUR 513 million, broadly in line with last year's performance, when we exclude from last year the positive effect of the deployment of the higher inventory levels that we registered at the end of June 2024.

You will recall that this was linked to the phase-in and phase-out of the new model year in trucks. Going forward, we will continue to remain very focused on quality and operations in line with our long-term pathway, maintaining tight control on production levels and inventory management, and on delivering our efficiency program.

Slide 4 outlines our indicative timeline for the first half of 2026, with the sale of our defense business and the tender of the Veeco Group progressing in parallel.

Regulatory filings for both transactions, including those required by the European Union, are currently underway and subject to final approvals. Both the sale of the defense business to Leonardo and the subsequent distribution of the net sale proceeds through an external ordinary dividend and the tender of [Bertata] are on track for completion within the first half of 2026, as we stated previously.

If we're then moving on to Slide 6 and the Truck segment. We maintained pricing discipline and tight inventory control throughout Q3 in 2025.

European industry volumes increased by 5% year-over-year for both light commercial vehicles and medium and heavy trucks. Iveco's third-quarter LCV market share was 11.7%, of which 29.7% was in the Chassis Cab subsegment and 65.8% was in the upper end of the segment.

Industry growth overall was largely driven by the camper subsegment, where Iveco has limited exposure. Chassis Cab volumes, on the other hand, remained under pressure, yet we managed to protect our leadership position.

In medium and heavy trucks, our market share reached 7.2% with heavy trucks accounting for 6.4%. In this segment, we implemented a selective sales mix strategy throughout the quarter to optimize channel profitability and support the final phase of the introduction of our model year 2024 across European countries and thereby ensuring the quality, performance, and full potential of the product.

Our ability to adapt to segment dynamics while preserving pricing integrity and managing inventory effectively reflects the strength of our commercial execution and the strategic clarity of our truck business.

Moving on to Slide 7. Our worldwide truck book-to-bill ratio reached 1.0 at the end of the quarter, registering a 25 basis point improvement year-over-year.

This reflects balanced commercial performance across geographies and product categories. In light commercial vehicles, our European order intake rose by 17% compared to Q3 2024, supported by a book-to-bill ratio of 1.05.

This increase, we believe, is a welcome first sign of a recovery coming on the heels of a prolonged period of production coverage well below last year's level, 7 weeks this year versus 12 weeks last year.

And South America experienced even stronger growth with order intake up 37% and a book-to-bill ratio of 1.11. In medium and heavy trucks, European order intake declined by 3% year-over-year with a book-to-bill ratio of 0.82.

South America saw a more pronounced contraction of 21% with a book-to-bill ratio of 0.94. While these figures reflect a softer demand environment, the backlog remains stable at 7 weeks of production coverage.

Let's move to the next slide, #9, with bus industry volumes and market shares. Iveco Bus during the quarter continued to demonstrate strong competitive positioning across Europe.

In the intercity segment, our leadership was reaffirmed with a 55.1% market share in Q3, representing a 5% point increase year-over-year. This gain can be attributed to the successful introduction of electric models, which are contributing positively to both volumes and brand perception.

In the European city buses segment, our market share stood at 15.1% in Q3. We expect an acceleration in deliveries during Q4, consistent with the seasonal patterns and supported by backlog conversion.

Overall, Iveco Bus maintained its consolidated #2 position in the European market with a 21.3% market share year-to-date. Moving on to Slide 10. In Q3 2025, our bus order intake declined by 17% following the strong momentum we enjoyed in the first half of the year.

This front-loaded demand contributed to a 6% year-to-date increase as of September. Deliveries rose 20% compared to Q3 2024, demonstrating robust execution and sustained customer demand.

The book-to-bill ratio stood at 0.77 at the quarter's end, a figure impacted by the scheduling of orders early in the year. Importantly, year-to-date order intake remained higher than in 2024 at 1.08, demonstrating the segment's resilience.

On the 29th of October, Iveco Bus signed a framework agreement with Ildefrance Mobility, a leading public transport authority managing one of Europe's largest and most complex transit networks.

Iveco Bus will supply Ildefrans Mobility with up to 4,000 low and zero-emission buses and coaches between 2026 and 2032. This is in line with the brand's long-term strategy to build on zero-emission and electromobility solutions.

In conclusion, we maintained a solid long-term visibility for intercity and city bus with coverage now extending well into the second half of 2026. On Slide 12, we have the delivery performance for our powertrain business unit. And after nearly 2 years of consecutive year-over-year decline, engine volumes increased by 1% compared to Q3 2024.

While modest, this improvement reflects the recovery we predicted last quarter. During the period, new third-party customer contracts were signed between Lindner and JCB. Production for these orders will begin in 2026.

These contracts position FBT Industrial as one of the main references in the agriculture industry and are in line with our long-term strategy to grow the number of third-party clients.

Operational discipline remains central to our approach. We continue to manage costs diligently and remain committed to our efficiency program. These efforts are helping us to protect margins and ensure sustainable delivery as volumes recover.

Looking ahead, we expect the recovery in deliveries to third-party customers to continue throughout Q4 and beyond, supporting profitability improvements.

Going to Slide 14, look at our electric vehicle portfolio, where year-to-date delivery volumes continue to grow across the business units despite the challenging market demand scenario.

This clearly shows the competitiveness of our product lineup and our unique positioning in LCV, where Iveco is the only truck maker to offer a complete fully electric product lineup ranging from 2.5 to 7 tons.

With that, I finish my opening remarks, and I will now hand over the call to Federico.

Thank you, Olof. Let's now take a look at the highlights of our third quarter 2025 financial results on Slide 16.

Again, all figures provided in the presentation refer to continuing operation only, excluding defense, if not otherwise stated. Q3 2025 closed with EUR 3.1 billion in consolidated net revenues and EUR 3 billion in net revenues of industrial activities.

These figures reflect a contraction of 3.6% and 3%, respectively, on a year-over-year basis, mainly due to lower volumes in Europe for trucks and a negative ForEx translation effect, primarily in Brazil and in Turkey.

The group adjusted EBIT closed at EUR 111 million with a 3.6% margin, and the adjusted EBIT of industrial activities reached EUR 76 million with a 2.5% margin, both contracted by 210 basis points versus Q3 2024.

The net financial expenses amounted to EUR 58 million in the third quarter this year, in line with the same quarter last year. Reported income tax expenses come to EUR 17 million in Q3 2025 with an adjusted effective tax rate of 25%.

This resulted in adjusted net income for continuing operations at EUR 40 million, down EUR 54 million versus last year, with an adjusted diluted EPS of EUR 0.15.

Moving to our free cash flow performance in the quarter. Q3 2025 closed with a EUR 513 million cash outflow absorption, which was broadly in line with last year's performance, when we excluded from last year the positive effect of the deployment of the higher inventory level that we registered at the end of June 2024, as Olof said in his opening remarks. I will provide more details further in the presentation.

Finally, available liquidity, including undrawn committed credit lines, closed solidly at EUR 4 billion on the 30th of September, of which EUR 1.9 billion was in undrawn committed facilities.

Let's now focus on the net revenue of industrial activities on Slide 17. As you can see from the chart on the right-hand side of this slide, all regions contracted compared to the prior year, excluding South America, which was flat versus Q3 2024.

Looking at our net revenues evolution by business unit, Bus was solidly up versus the prior year at plus 31%. Powertrain was flat, and the truck contracted 11% versus Q3 2024.

More in detail, truck net revenues totaled EUR 2 billion in this quarter, down 11% versus the prior year, primarily as a consequence of 2 factors: First, a lower delivery rate in light-duty trucks due to the continuing challenging environment in the chassis subsegment.

Second, a selective sales mix strategy throughout the quarter in heavy-duty trucks in order to optimize channel profitability and support the final phase of the introduction of our model year 2024 across European countries.

Additionally, the top line was affected by an adverse year-over-year foreign exchange rate trend, mainly in Brazil and Turkey. Our bus net revenues were up 31.4% in Q3 2025, reaching EUR 719 million, thanks to higher volumes.

And finally, our Powertrain net revenues were broadly in line year-over-year at EUR 745 million with higher volumes offset by an adverse foreign exchange rate impact.

Sales to external customers accounted for 49%, in line with Q3 2024. Turning to Slide 18. Let me briefly comment on the main drivers underlying the year-over-year performance in our adjusted EBIT margin of Industrial activities.

Volume and mix contributed negatively, EUR 67 million in the period, mainly due to lower truck volumes in Europe. The decrease in deliveries of light-duty vehicles particularly impacted the overall truck profitability.

The year-over-year net pricing contributed positively for EUR 15 million at the Industrial Activities level and was positive across business units.

Production costs were negative EUR 7 million year-over-year, with negative performance in Truck and Bus, partially offset by solid positive performance in powertrain.

Finally, the year-over-year improvement in SG&A costs totaling EUR 17 million in this quarter and EUR 50 million to date is again a result of the acceleration of the efficiency action announced and launched at the beginning of this year.

Let's now take a look at the adjusted EBIT margin performance for each industrial business unit on Slide 19. Truck closed the quarter with a 2.9% adjusted EBIT margin.

As already mentioned, this was a result of lower volumes and negative mix, mainly due to the continuing challenging environment in the chassis subsegment, which experienced lower volumes in Europe.

The negative absorption due to the lower production level was only partially compensated by the cost containment action implemented in the period.

Truck pricing in Europe was positive year-over-year, confirming our tight price discipline. The Q3 2025 adjusted EBIT margin for our bus business unit closed at 4%, down 110 basis points versus the prior year, with higher volumes and positive price realization offset by higher costs associated with the ramp-up of production in our Annonay plant.

Finally, the Powertrain adjusted EBIT margin closed at 5.1% in the third quarter, resulting from continued and diligent cost control and operational efficiency as well as a slight increase in engine volumes.

Let's now have a look at the performance of our Financial Services business unit during the quarter on Slide 20. The Q3 2025 adjusted EBIT for Financial Services closed at EUR 35 million with a managed portfolio, including unconsolidated joint ventures of EUR 7.5 billion at the end of the period, of which retail accounted for 45% and wholesale 55%.

This figure is down EUR 106 million compared to the 30th of September 2024. Stock of receivable past due by more than 30 days as a percentage of the overall own book portfolio was at 2.1%, which is slightly up versus last year.

The return on assets remained solid at 2.1%. Let's move to our free cash flow and net industrial cash evolution on Slide 21. As said previously, the Q3 2025 free cash flow absorption came in at EUR 513 million, which is broadly in line with last year's performance when we exclude the positive effect of the initial deployment of the higher inventory level that we registered at the end of June 2024.

The lower adjusted EBITDA was offset by positive year-over-year swings in financial charges and taxes, the positive delta in working capital, and lower investments.

The negative year-over-year swing in provision was driven by lower sales volume in our truck business unit. Lastly, investment totaled EUR 150 million in Q3 2025, down EUR 39 million versus the same period last year. This is in line with the already disclosed acceleration of our efficiency program and the reprioritization of some of our less strategic investments.

Moving now to Slide 22. As of the 30th of September 2025, our available liquidity for continuing operations, excluding defense, stood solidly at EUR 4 billion with EUR 2.3 billion in cash and cash equivalents and EUR 1.9 billion of undrawn committed facilities.

Looking at our debt maturity profile, the majority of our debt will mature from 2027 onwards, and our cash and cash equivalent levels will continue to more than cover all the cash maturities foreseen for the coming years.

Moving now to my last slide for today, # 24, with the discontinued operational performance of our Defense business unit. The net revenues for Defense came in at EUR 293 million, up 9.7% compared to Q3 2024, driven by higher volumes.

The adjusted EBIT was EUR 25 million compared to EUR 23 million in Q3 2024, resulting from production efficiency, partially offset by higher R&D costs.

The adjusted EBIT margin was at 8.5%, down 10 basis points compared to Q3 2024. The funded order book level at the end of September 2025 reached almost EUR 5.3 billion, up close to EUR 300 million from the end of June 2025. Thank you. I will now turn the call back to Olof for his final remarks.

Thank you very much, Federico. And I'd like to conclude this presentation by looking at both the outlook for the industry and our own financial guidance.

I will also, as usual, provide some takeaway messages from what you have heard today. We confirm our total industry outlook for the current year across the segments and regions.

Specifically, we expect demand to remain low in the chassis cab subsegment and South America to continue to be negatively impacted by reduced consumer confidence and less willingness to invest in heavy-duty trucks, given the increase in interest rates in Brazil since the beginning of the year.

The next slide has our full-year 2025 updated financial guidance, also expressed as continuing operations, which means excluding defense. Our full-year 2025 financial guidance has been revised across all key performance metrics, except for the industrial activities net revenue, which remains unchanged.

This update reflects the year-to-date performance negatively affected by 2 main circumstances. Firstly, a slower-than-expected recovery in light commercial vehicles during the second half of 2025, particularly in the chassis cab subsegment, which has negatively affected our truck business units' year-to-date profitability.

Secondly, we have allowed for extra costs associated with the ramp-up of production in our NMA plant, which negatively impacted our bus business unit's profitability in the third quarter.

Implied in our updated guidance is increased Q4 profitability year-over-year across business units and an additional positive effect from the acceleration of our efficiency program compared to the initial EUR 150 million CapEx and OpEx.

Based on these premises, the updated guidance for our full year 2025 is as follows: at the consolidated level, including Defense, group adjusted EBIT is now between EUR 830 million and EUR 880 million. And for Industrial Activities, net revenues, including currency effect, confirmed to be down between 3% and 5% year-over-year.

Adjusted EBIT from industrial activities at between EUR 700 million and EUR 750 million, and industrial free cash flow is between EUR 250 million and EUR 350 million.

On the slide, we have also shown what this guidance implies for continuing operations only. The free cash flow forecast, excluding Defense, is not included due to ongoing activities related to the separation that could affect some balance sheet accounts.

We will continue to manage production levels for trucks in Europe in line with the retail demand, while at the same time, maintaining diligent cost management and leveraging the benefits of our efficiency program across business units.

And now to Slide 28. Let me provide you with some takeaway messages from today's call. First, as I said, implied in our revised guidance is increased Q4 profitability year-over-year across business units.

And if we break that down by business unit, in trucks, our LCV and medium and heavy vehicles are sold out, covering the remaining 2 months of the year. This, combined with strict control on pricing and cost management, will positively contribute to higher profitability compared to the fourth quarter of last year.

In the bus, ramp-up costs are now behind us, and we expect higher volumes to contribute positively to the year-over-year performance. And lastly, in Powertrain, as mentioned earlier, third-party client volumes are expected to continue their year-over-year growth, supporting progressively profitable improvements.

The increase in third-quarter order intake for light commercial vehicles is an encouraging early sign that the worst is behind us. In heavy-duty trucks, we will continue to maintain strict pricing discipline to support our model year 2024, ensuring the quality, performance, and full potential of the product.

In Powertrain, new third-party customer contracts were signed, among which are Lindner and JCB, with production for these orders beginning in 2026.

Our robust order book remains strong, providing solid visibility well into the second half of 2026, and the funded order book for our Defense business unit reached almost SEK 5.3 billion at the end of September 2025, demonstrating continued momentum in the industry.

Thirdly, we are proceeding at pace with the acceleration of our efficiency program and reprioritization of certain investments, confirming the expected EUR 150 million in savings in CapEx and OpEx for the current year, as well as additional areas of improvement, which will deliver further full-year savings.

And finally, we are on track to complete the sale of our defense business to Leonardo as per our original combination, and the tender offer by Tata is expected to be completed within the first half of 2026.

In conclusion, as always, we are focused on our commitment to operational excellence. Each business unit remains laser-focused on its short- and long-term objectives, working to deliver lasting value for all our stakeholders.

With that, I would like to thank you and hand it back to Federico.

That concludes our prepared remarks, and we can now open it up for questions. To be mindful of the time, we kindly ask that you hold off on any detailed modeling and accounting questions. For this, you can follow up directly with me and the Investor Relations team after the call.

In addition, as already pointed out, pending the publication of the formal offer document on the tender offer by Tata, we will not comment on the legal basis, rationale, condition, terms, and key elements of the tender offer.

In this respect, for the time being, you are kindly invited to refer to the materials already published in the ad hoc section of the company website. As for the sale of the defense business to Leonardo, the activities are ongoing and on track, consistent with the timeline commented during the presentation.

The company will strictly comply with applicable disclosure requirements, but for the time being, it has nothing to add vis-à-vis what has already been announced. Operator, please go ahead.

[Operator Instructions]

We are now going to take our first question, and the questions come from the line of Akshat Kacker from JPMorgan.

A couple of questions, please. The first one is on the truck and LCV business. Obviously, the trends this year have been difficult to forecast and understand, given the pre-buy last year and also the changeover in the product family.

Could you just help us understand how you're looking at the business going forward, probably into Q4, but also any early signs on how you expect the LCV business to develop going into 2026?

And if you could just add some color regionally as well, between Europe and Brazil. We have heard from a few of your peers that inventories are high in the Brazilian and LatAm markets, and overall, there is some pricing pressure. So some details there would be helpful.

The second question is on the powertrain business. You talked about a slight increase in engine volumes, the first signs of recovery. Could you just give us some more details in terms of where these green shoots are emerging from? And we now expect volumes to turn positive going into the fourth quarter, please?

Okay. So on the LCV market, I mean, as we said, the indications we're getting now, and also you saw on the book-to-bill and the increase in our order intake, give us confidence, and we believe that the worst is behind us, and we will see a gradual uptake.

We see that also in the activity levels in the market. And as we said, we are sold out now for this year and going into next year. So I think it's always difficult to really judge where this is going, coming from such a long period of a lower market.

But I feel the LCV side, I think we have the worst behind us. And exactly how that will pan out coming into 2026, we will have to see. We need a couple of more weeks or months to see that coming into it.

But I would say so far, so good, and it's really good and encouraging to see that this is opening up. And that is, of course, then moving also in our key segments on the cabover and both in the medium and the upper side of it.

On the LatAm, I didn't really -- LatAm pricing.

No, I was referring to the inventory level, if I understood correctly. correct?

Yes, that's right.

Some of your peers talk about the weakness in that market, specifically in the medium and...

Yes, when it comes to the inventory, both our own inventory, the dealer inventory and the whole chain, we manage that very carefully, as you know, and we do that also in LatAm when we see the order volumes going down we, of course, adjust production, and we do that rather quickly in LatAm because it's a simple one factory system where we can really manage that in a good way.

So I don't have any concerns about the inventory levels in LatAm going forward, even though, of course, on the heavy-duty side, there is, as we said, a decline in the market and the order intake.

Then the final question was around Engines. So the green shoots for the engine. I would say that there are a couple of things. One is, of course, that we are getting third-party business.

The team in Powertrain has done a great job in actually capturing more third-party business, which is good. We also see, of course, and we have said that before, it's around the stock level of engines out there in the market and the time it has taken to destock that given the downturn that we've seen over the last basically 2 years.

And that also gives you confidence that this is covering up for the destocking coming to an end, and thereby, the volumes are coming back up again. So it's a combination of that plus the fact that we actually are successful in getting third-party business.

That's giving me confidence going forward in the Powertrain side.

We will now proceed with our next question, and the next questions come from the line of Martino De Ambroggi from Equita.

The first question is still on the LCV. Olof, I understood your qualitative comments on LCV for next year.

But could you provide what your feeling is in terms of Europe and South America if in '26, the market overall is able to have at least a small single-digit rebound in terms of volumes?

And the second question is specifically on the defense business because you are providing guidance with and without defense. I was wondering if in implying what the defense EBIT and revenues, is it correct to take EUR 150 million of adjusted EBIT and probably close to EUR 1.3 billion sales, or there are intercompanies or other items that could affect these figures?

And I clearly understand you are not providing any updated guidance without a defense on free cash flow. But could you comment on what is the normalized free cash flow or cash conversion for this business? What was in the past?

Okay. If I start with the LCV market, I think I need to stay a little bit on top and give you the feeling I have right now because we need a couple of, I would say, weeks or at least a month to really see where the activities are going to start with in 2026.

I mean, we now have visibility for the rest of the year, sold out, and then we need to see how the activity is going. But as I said, so far, so good. I mean, the activity levels that we see from our customers, the tender activities we see are coming.

We do see, as you've seen, an increase in the order intake coming from very low levels in Q2 and so on and so forth. So the indications are good. But let's see when we have got that all together, and we will come back to that with a more detailed market development on that one.

On the other 2 questions, I'll leave it to you.

Yes. On the defense side, I think, Martino, on the EBIT side, yes, you can be rounded to the number you have mentioned, as well as on the top line.

And in terms of the free cash flow of defense, as you know, we have never disclosed it by business unit. The only thing I can say is a cash-generative business, but on a full-year basis. I hope this helps.

We are now going to take our next question, and the next questions come from the line of Nicolai Kempf from Deutsche Bank.

It's Nicolai from Deutsche Bank. Also 2. Maybe coming back on your full year guidance, it does imply a significant step-up in Q4 of around EUR 250 million in Q4 earnings versus EUR 300 million in the first 9 months.

I mean, you mentioned that all segments will be stronger in Q4, but can you just give a bit more color on which segment should drive that? And it's probably going to be the light trucks, but any help would be appreciated here.

And the second one, if I look at the EU heavy truck market share, came in at 6.4%. I think historically, you were closer to 9% or 10%. And that is despite the fact that you have launched a new model here. Should we expect that next year, you will have a higher market share?

Or why is it below the historic run rate despite having a rather new product in the market?

So on the Q4, I think I gave the guidance that -- I mean, I can give at this point in time. The basis for the improvements that we see is there in the truck side is, of course, good to see that we sold out.

That means that we can improve. If you look at the backup of the slide, you can also see that the inventory with our dealers has gone down. We have managed the dealer inventory together with the dealers and our own dealer very well.

So we're having a system set up for an increase on that side, which I think is promising and stable in that respect. Then, as I said, powertrain bus, increased volumes, the profitability, we have the cost behind us on the ramp-up in Annonay.

And just a comment on that, it was absolutely necessary to make sure that we create a very stable, efficient Annonay plant in terms of quality, volume, and efficiency, and we have that behind us, and we are pushing forward now.

And then, of course, on the powertrain side. On top of that, as I mentioned and has been mentioned a couple of times, an efficiency program. Don't forget the efficiency program, that's never a linear coming in the profit and loss.

It's actually an accelerating program. It's always those programs that are very often. And of course, the majority or a big chunk of that program will now start to come in fully with all the activities we have done, not only on the SEK 150 million that we talked about, but also the activities that we have seen.

So those are the things that are actually going to drive the Q4 in coming back and making the result up to the guidance we have. On the EU market side, I think we specified we are now entering into the final phase of the launch, and we have been in a market situation that has been really focusing on keeping the price level on this new vehicle, because I truly believe that we're going to live on this product for many, many years.

And we need to make sure that it is in the market in the right way. We have had a very stringent price discipline. We will continue to have a price discipline to really ensure, as I said, all the different aspects of the product.

So I definitely see this product going forward in the mid and the long term being a product that definitely has a potential for more market share than it has today. That's for sure.

We will now take one final question. And our final question today comes from the line of Alex Jones from Bank of America.

Two from my side as well, please. Could you talk a little bit about the medium and heavy-duty outlook that you see in terms of order trends also into 2026?

I know you talked a bit more positively about LCV, but medium and heavy orders were down 3% year-on-year in Europe. So your thoughts would be interesting.

And then the second question on defense. Can you be more specific at all on the mix factors that weighed on margins this quarter, at least sequentially, and whether you expect those to continue going forward, Q4, and into next year?

Well, on the medium and LCV, that was the feeling going forward into the fourth quarter and into next year.

And again, I repeat what I said. On the LCV side, I have a good feeling about the activity level. Also, I would say, on the medium-heavy. And as we progress with our final implementation and launch of the model year '24, we're going to see impacts there as well, not only in terms of market, but also in terms of market share over time.

And we're going to continue to keep a strict, selective approach, making sure that we get the pricing. So I would say we come back in the beginning next year, as we normally do, to have a view on the market and where the market is going for heavy and medium.

But we're well-positioned in both of these markets. And I think, as I said, I feel comfortable that once we are really fully launched this product now, we're going to see the positive impacts coming, full confidence in that.

It is a very, very good product in terms of all the different aspects. And I'll leave it to you, Federico, on the...

On the Defense, sorry, you were talking and referring to the mix, if I take your question correctly, correct, Alex?

Yes, please.

Yes. But I think, in defense is more generally speaking, you need to consider that we have a very long and solid order book that just needs to be deployed.

And so, probably looking at the defense just on a quarterly basis, it is much better to look at it on a full-year basis, and the marginality also. So this is just a question of looking at it on a yearly basis, and the mix can also change by region and by country, and by product itself.

So as Olof said at the beginning, we are expecting the performance of each single business unit up year-over-year, and that will be the case for the Defense as well in Q4. That is what I can share with you.

Thank you. That concludes the question-and-answer session. I will now turn the call back to Mr. Frederico Donati for any additional or closing remarks.

Thank you all, and have a nice rest of the day. Thank you. Bye.

That concludes today's conference call. Thank you all for your participation. Ladies and gentlemen, you may now disconnect your lines.