Q1 2021 Stellantis NV Corporate Sales Call
Hello, and welcome to the Salon, just first quarter 2021 was all.
During the call you will be on listen only however, you will have the opportunity to ask questions. Later on in the call. This can be done by pressing star one on your telephone keypad to register your question at any time.
But at any point you require assistance. Please press star zero and you will be connected to an operator and I'm now handing you over to your host Mr. Andre up on Denali responsible for Investor relations of the Lantus.
Please go ahead. Thank you.
Thank you Courtney and welcome to everyone joining us today as we review cell antigen as a result for first quarter of 2021 earlier today. The presentation material used during this call along with the related earnings press release was posted under the investors section of <unk> corporate website.
Our call is hosted by Richard Palmer the group's CFO. After this presentation from Mr. Palmer will be available to answer questions from the analysts before we begin I want to point out that any forward looking statements. We may we might make during today's call are subject to the risks and uncertainties. It is managed.
From the in the Safe Harbor statement included on page two of today's presentation and it's customary the call will be governed by that language now I would like to hand, the call over to Richard Palmer CFO Atlantis.
Thank you Andrea and good.
Good morning, or afternoon to everybody on the call. So I'm very happy to be here talking about the non emphasis first first quarter.
In absolute terms and for our 2021, and we'll start by moving to page three.
Hum.
Our numbers, obviously I just want to make sure that everyone understands the basis that we're using here to compare our performance year over year.
Obviously, the merger of PSA and FCA was completed on January 16.
2021.
And so.
In addition, a PSA was decided from an accounting point of view as the acquirer of FCA given that from an accounting point of view, we need to have an acquirer.
And the accounting of the transaction.
So as a result of this for accounting purposes that <unk> results are included in the financial statements of scientists from the first day following the closure of the merger, which would be John 17, 2021, and only the results of continuing operations of PSA are included in the accounts.
Accounting for find it for the financial statements from Q1 of 2020 from a comparative so in order to aid comparability. We have we are presenting here pro forma figures for both Q1 'twenty one 'twenty one out in Q1 'twenty in order to show more meaningful results with Atlantic.
Year over year, so the pro forma figures.
Presented as if the merger had occurred on Jan one 2020.
So therefore, the Q1 'twenty one pro forma figures.
Include the results for FCA, including the period, John wanted to John 16, thus, representing a full quarter of activity for the group in 2021, and the Q1 'twenty pro forma figures include the results for both the FCA and the continuing operations of P. S. A so my comments are.
Day will be focused.
On the pro forma results as we explain the business performance.
So I'm moving on.
Please to the highlights page on page four.
If you move to page four please.
So as you saw in our press release today, we posted.
Very strong in Q1, 2021 revenues and.
And shipments with revenues up 14% and up 21% at constant.
Foreign exchange rates and well get into the drivers of.
The performance on the following pages.
Regarding.
The global semiconductor crisis.
Which is where all the way he was having an impact across the entire industry. Our teams have been monitoring the situation very closely and taking quick and decisive actions to minimize the impact on our production volumes and results.
In Q1, 'twenty, one we managed to eliminate the impact of approximately 11% of our planned production or 190000 units.
And clearly this is a competitive game and we are focused on executing to reduce to manage the impact better than our competition as much as possible.
So we do have limited visibility on what the full year impact might be but we do anticipate that the Q2 impact will be more significant in Q1.
And we do however, foresee improvements in the second half of 2021, the improvements will come as a result of the normalization in the supply chain. Following a stop go volume is in the last year in the automotive sector and as a result of resolution of some serious supply interruptions, which were.
The result of.
Manufacturing interruptions in key.
Part of the supply chain in North America in Texas in particular and in Japan, due to a fire and what other key suppliers. So those those have exacerbated the impact in Q2.
We expect those now to be.
Result for Q3, we are also obviously, taking many actions to optimize the solutions in our supply chain.
<unk> increase.
Increase our flexibility and ability to react to the volatility in supply that we've seen and going forward, we expect to see less of an impact in the second half.
Having said that.
And and overall context of positive demand in the industry.
We saw a very positive commercial performance in all key markets.
In Europe 30, we were overall market leaders and combined passenger got hot passenger cars plus light commercial vehicles with a market share of 23, 6% up 150 basis points year over year in the U S are real.
Retail of retail share was up 20 basis points to 11, 5%.
With our U S retail sales up 24% year over year.
And we will also market leader in South America for passenger cars, plus ltvs with market share of 20 to 22, 2% up 530 basis points.
Oh product launches continue on time, a key launch in Q2 Q1 was the Opel marker in Europe.
Which returned to the market after being discontinued in 2019.
And we are looking forward to key launches in North North America for the Jeep brand with the commercial launch of the all new Grand Cherokee.
L. Three row in late Q2, and the Grand Cherokee to a production starting in Q3 as well as the start of production of the Grand Wagoneer and wagon in Q2.
And just to remind you that we have announced that we will be holding an electrification day on July th July the eighth and which we will provide them.
A holistic view of our electrification strategy.
Moving to page five.
We show the shipment and revenue performance.
For the group so as mentioned revenues were up 14% year over year to 37 billion euros with an 11% increase in consolidated shipments to nearly $1 6 million.
We had increased shipments across all segments, except North America, which was down 4% as demand outstripped production also due to the impact of the semiconductor shortages and some products were discontinued.
The underlying business performance was actually stronger than these numbers imply as I mentioned, given the negative FX translation impacts due to the weakening year over year, both U S dollar and the Brazilian real.
All segments contributed.
Positively to the revenue growth, which is a testament to the strong consumer demand.
For our diverse brand portfolio.
Moving on to page six.
We show the walk from pro forma Q1 2020 revenues of.
$32 4 billion to prove pro forma Q1, 'twenty, one revenues of 37 billion up 14% as I mentioned or 21% at constant FX.
This increase was driven by strong commercial performance across volume pricing and mix.
Was driven principally by.
<unk> extended Europe, and South America in particular, and all regions were positive except for North America net price was very strong in North America, our spending was reduced on incentives, resulting also in from stock adjustments on our incentive positions provisions and in South America as well.
EMEA and extended Europe.
Vehicle line mix was also especially strong in North America and extended Europe.
And as I mentioned FX translation was negative for the U S dollar and the BRL.
The other category was positive two driven by lower sales with buybacks.
Extended Europe, principally due to lower rental car customer volumes and higher parts and service revenues as well as higher revenues from our own dealer businesses.
Moving to page seven.
We have an overview of performance.
By region.
North America had a very strong Q1 performance with revenues up 9% despite shipments down 4% due to the discontinued Dodge Grand caravan in journey and semiconductor impacts.
A constant FX revenues were actually up 19% with strong pricing and mix achieved sales.
Sales were up 5% to 532000 units with U S retail plus 25 per cent and U S fleet down 37% as channel mix channel mix was optimized.
D O stock was therefore down and represented 53 days of sales down from 60 at December.
From a sales were up 14% and Jeep sales were up 10%.
Moving to South America.
Which also had an excellent quarter with revenues up 31 per cent or 68% at constant FX.
This was driven by shipments up 49% with the Fiat brand up 54 per cent due to the new Strada, which was the number one selling vehicle in Brazil in Q1, and the Jeep brand up 59%.
Sales were up 32% year over year in a flat south American market and despite positive pricing actions to offset negative FX impacts.
In Brazil fit reached 55% share in the pickup segment for it because of the strong performance of the strata in the total and it was the clear market leader.
Deep reached 23% share in the SUV segments also market leader.
Any large Europe revenues were up 15% with shipments and sales up 11%, but share was our highest growth brand in the top 15 in the market up 17%, while CIT Citron increased 10% free at 12% and <unk> 32 per cent and extended Europe. The group is also the lead.
Other than the LTV market with a 34 per cent a share and sales were up <unk> 25 per cent in line with the market.
Vehicle line mix was positive driven by the Bev and ph evs across the product range.
And also by LTV growth.
On page page eight we continue with the other other segments.
Middle East and Africa showed consolidated shipments up 32% with positive contributions from the old New Opel Corsa Peugeot two O eight in 2008, and Citron C. Three combined shipments were plus 49% due to the Turkey G JV growth in the Fiat Tipo and Ltvs.
EMEA industry sales were up 14% and stellar antoeci performed with sales up 46% with the Peugeot brand plus 56% and free up plus 57 per cent.
Revenue growth was 20 per cent of 30% at constant FX.
China, and India, and Asia Pacific posted consolidated shipments up 9000 units or 45% driven by Jeep Wrangler, and new Peugeot 2008, and two alright.
Bryan also drove the growth in our JV volumes.
Revenues were up due to the increased consolidated volumes.
Excuse me Maserati shipments were up 74 per cent due to the launch of the refresh lineup sales were also up 53 per cent and volume was a line to shipments of 5300 units.
Revenue growth was in line with volume growth with some positive mix due to increased China volumes offsetting the negative FX.
Moving to page nine.
We say our inventory status.
The three levels remain healthy overall with significant reductions in both group and dealer inventories over the last 12 months due to the impacts of COVID-19 and the semiconductors combined with positive commercial performance.
Compared to December 2020 dealer inventory was down 124000 units, mainly due to North America down 80000 units and 53 days supply in U S retail despite volume being prioritized away from the fleet business.
These lower than historic levels of stock are part of the reason for the strong pricing performance in North America as actions to cover raw material inflation and manage channel mix are more quickly transmits it translated into the market.
Group grouping inventories up to 273000 from year end, mainly due to normal seasonality as plants come up after the year end shut down and the stock is built to manage the sales increase and the early summer period, we expect the group inventory to reduce by in June.
Lastly, we can move to page 10.
We confirm our full year guidance margin range at $5 five to seven five per cent and despite impacts of the semiconductor charts shortages are market outlooks for all three main markets are unchanged.
As mentioned, we do expect Q2 to be impacted more than Q1 by loss of production from the semiconductor shortages, but through disciplined cost management and positive pricing in commercial mix as we've seen in Q1, we expect our margin performance to be sustained.
We expect that the impact of lower volumes will likely cause our H, one cash flow to be negative due to the due to the impact of working capital even if operating cash flow ex working capital will be positive.
As regards full year cash flow, we expect that to be a strong positive performance as the volumes recover in the second half.
Overall, the business fundamentals are performing very well to close just before we go to the DNA today marks just over 100 days of Atlantis.
While we are still ramping up a new company, we are already posting very very encouraging results as you can see.
The organization is in place and the team is getting into the rest of them. There is new governance processes. The.
The progress on the synergies is very encouraging and confirm the numbers, we have set ourselves for 2021 and beyond.
Clearly the semiconductor ratios the challenge for the whole industry, but with the opportunities created by the merger. We are still convinced that 2021 will be a strong year for the company.
And now I'll hand over to the operator for Q&A. Thank you.
Thank you as a reminder, if you would like to ask a question or make a contribution on todays call. Please press star one on your telephone keypad to withdraw your question. Please press star two and she will be advised when you ask your question.
The first question comes from the line of Thomas Besson, calling from Kepler Chaparral. Please go ahead Thomas.
Thank you very much it's a it's still just want to get them. So I have two questions. Please.
Richard I think you've been quoted are in.
And you think expenses after the one other goods that you have some control on the some initial stage, which I think is a reassuring specially compared with work with Ford was thing last week can you quantify that a bit more can you explain if.
You have some ability to CIT exited equals builds if there is any risk on the new products.
And with other U S foods in Q2 can.
It can be higher than in Q1, that's the first question those sudden shortage control.
And the second I mean, you indicated yesterday.
Tony.
From a stimulus it would no longer use dislike credits for Europe.
Which I think is a great signal.
Can you give us an indication on the impact it has and I guess you don't have any more to pay this level, but I assume that you have some cost because you need to raise the share of Fedex Besides equals a on the European.
Europe insight too upset.
So could you give us an indication of the net impact.
In fact other this law decision. Thank you.
Yeah.
Thank you Tomas so.
On the first question.
Obviously, our target is to be better in terms of volumes in Q2 to Q2 than Q1 seasonally that would be the case, but as I said the.
In fact, all semiconductors is likely to be higher.
In Q2 than Q1, so, we'll obviously be be targeting to minimize that I think in terms of.
Comparison to competition.
The 11% impact we had in <unk>.
In Q1 was was better than some of our competition.
And so and I think you know some other guidance given by some of our peers.
I think our impacting Q2, we would expect to be of a different magnitude frankly and lower than they are targeting them, but.
Obviously, it's a.
It's a moving target and.
We are.
We are open to give you as much transparency as possible I think.
Q2, as I said will still be a <unk>.
Good quarter for the for the group in terms of performance commercially and financially and the only real.
Negative impact is going to likely be on working capital given that the volumes Oh.
Are going to be at.
At a lower level than they were in Q4 of 'twenty and as a result, when we're likely to have a negative working capital impact.
But as I said again I think.
That will reverse.
Robust through the second half of the year so.
I wouldn't.
Worry about that too much and as I said, the operating cash flow.
Excluding working capital will still be very positive.
In terms of the.
The credits in the EU et cetera.
Our performance on.
In terms of profitability as we sell lower emission vehicles. So P. J T V's.
And that's so far has been relatively good and not significantly.
Impacting our overall mix so.
The level of.
Impact of increasing.
The penetration.
He's not a problem and I don't think where we're really doing anything unnatural in the market place I think demand for these types of vehicles.
We have seen is increasing across the board Hum and we have a strong portfolio in Europe of nameplates that have either ph D V or bev offerings, I think it's around 25, including passenger cars and light commercial vehicles.
And we have a further six launches.
This year in Europe also and so I think you know it's really.
A question of launching good competitive vehicles into the marketplace.
And and competing to.
To achieve good share and the LTV pas of of the market because clearly that is.
Where where volume is moving over overtime.
So I don't see that as a negative I see as a positive and frankly, the fact that we won't have the cost of credits in Europe.
Is it just a net positive for the European business.
Great. Thank you I want free.
Total.
Thank you.
The next question comes from the line of George Kelly is calling from Goldman Sachs. George. Please go ahead.
Thank you and thank you for taking my questions. The first question I had was just from the revenue guide Richard I think that the flu yet you said something between 150 and 160 billion of revenue the best yet obviously, the semi conductor is impacting volumes, but you seem to be seeing positive.
Yeah.
Price and positive mix.
Does that 150 160 range still seem reasonable to you at this point.
Yes, George it doesn't seem unreasonable to me at all.
Obviously subject to the caveats of the level of visibility we have on semiconductors, but I think.
You know we.
We've seen the business performing very well frankly across all the regions.
The way we are prioritizing.
Deliveries too.
No final customer orders.
And primarily than secondary to dealers, where we have lower levels of the stock on car lines and and then obviously managing after that profitability and channel mix.
It's all.
An interesting learning curve.
For the organization, because I think it's showing us that we can operate with.
Lower levels of stock.
Be more nimble in the marketplace.
And still give our loyal customers and other vehicles that they want to purchase them and at the same time.
It's allowing us to.
To improve our profitability.
And to therefore offset.
Some of the impacts of both inflation on the cost side in particular on the raw material side.
On and the impacts of COVID-19.
The lower volume. So all told I think the revenue range you mentioned is not unreasonable style.
Great. Thank you and then the second question I had and I. Appreciate this isn't Tonight, and it's cool, but wanted to ask based Ford and GM reported North American margins in excess of 12% for the first quarter and from the outside it doesn't seem to be any obvious reasons why profitability first atlantis shouldn't be assets similar level.
So it's that fat or the other factors we should consider.
Well, we are in a very similar place to them in the second half of last year and I don't see any reason why we shouldn't be.
In the first half of this year frankly, so I don't think it's unreasonable at all.
Thank you and then the final question just following on from Tom asked this question on the pooling at the full year results. You mentioned 300 million in terms of what you paid Tesla lost yet.
And he said you expected a similar number for 2021.
In light of the fact that you simply don't need to pool with Tesla in Europe is it fair to assume that 300 million.
Is incremental to this year versus what was expected at the start with it yet.
But the 300 wasn't all related to Tesla.
But around two thirds of it probably was and yeah that would be the type of benefit will likely get by by no.
Participating in the pooling agreement for for extended Europe.
Great. Thank you very much.
Thank you.
The next question comes in from the line of Jose Mundy, calling from JP Morgan Jose. Please go ahead.
Thanks, very much Jose.
Sure.
Just a couple of questions. Please.
I'll, just maybe small piece from the sandy and subsequent till the second quarter Thanksgiving because even for Q1.
In terms of your assumptions for Q2 should we think about.
You know doubling up the little disruption.
That would that be a fair statement, though would that be too.
7022.
Paresh.
Simple powerful Q2.
Second question can you comment a little bit around that.
Obviously, a very important vehicle for.
Well, it's a whole group, especially in Europe can you comment a little bit of around day. There that makes all this car on a new architecture.
And maybe you can just relax a little bit what was the second vessel sales profit have any people for these vehicles, which I think is very important.
I'm aware that this is a revenue calls, but if you could kind of calling things or just in general on synergies.
How are you progressing very interest income.
You can keep on leveraging engine families across brands or leveraging the purchasing across the brands. How quickly are you able to tackle these topics. Thank you.
Thanks, Jose could you just repeat the first question because I couldn't hear you very well I apologize yes.
Yes on the semi sub.
And for the first quarter, you housekeeping I was supposed to be a disruption.
For Q2 should we expect to double that number so that's from quarter.
Total consumption.
Is there a number or is that you know two two when they got this.
Okay. Thanks.
The base assumption I don't think is an unreasonable obviously, we're trying to do better than that.
But that's the sort of ballpark.
Is potentially going to be the impact in Q2.
In the second half as I said, we expect it to.
To improve and we're managing this on a on a monthly basis and then like I said there are I think some objective reasons why it should improve given the.
The disruption caused by the storms in Texas, the fire in Japan et cetera.
Should abate in terms of the marker.
You know I think it's a really important vehicle for the Apple brand.
And we'll definitely be.
Margin accretive to the Opel brand into to to the to the European business, So that obviously benefits from.
A lot of industrial.
Sharing on the platform side and the other thing you know, we'll we'll obviously.
Keeping a very close eye on it but the initial indications are very strong hum on the synergies.
You know I think where we're clearly focusing on all believers regarding the execution on the synergies and.
For 2021 U.
You clearly understand that.
There are some of some of the synergies will be faster to hit the ground than others and we're obviously aligning our supply base to best price.
Where we're bundling.
Those those areas such as media purchases and other indirect purchases, where we can.
I think there's some opportunities on logistics integration that we talked about.
And and were saying also.
Good opportunities in terms of.
R&D spending on Capex spending as we as we start to scope out and improve product programs on on common architectures and with a common philosophy in terms of the industrial investments so.
I think as we get more into the detail and Ah.
Basically solidified the product plan and the convergence on a global basis.
We're more and more confident that the synergies that we had talked about are eminently.
Doable and in the timeframe, we've written down.
Thank you very much that's it thank.
Thank you your other.
The next question comes in from the line of Martino Danbury, calling from Macquarie. Please go ahead.
Thank you good morning, good EBITDA grew and good afternoon everybody.
The first question is on the price mix and if you could elaborate on the trend for the rest of the year.
And Oh with them on price and mix and I assume the bulk of it comes from North America, but if you could elaborate on a day geographical a split of these two items are it would be really appreciated. The the second question is on D. C O two credits.
Just to clarify.
Is there anything included in your full year guidance, a four day EBIT ER and if so what.
To what extent.
The second portion of the question is always on these but.
These are savings on the C. O. Two credits are included in your 5 billion target that'll get that synergies are or should be taken are on top of these.
Okay, so starting with our price mix.
It's fair to say that.
If you look at the.
2 billion of mix about three quarters of that is coming from.
From North America, and another another good pieces coming from from South America North America.
Is saying overseas from.
Production incentives across the industry I don't think we've seen that from some of our competition as they've reported and and I think the marketplace is clearly.
It was a very healthy demand function, we are managing our mix.
<unk>.
As we give priority to retail to ensure that we can try and service the customer demand the demand that we're seeing from our customer base across the portfolio and at the same time clearly we have.
As I mentioned, some cost inflation that we we clearly need to recover in the in the marketplace.
As being relatively supportive in that regard. So I think you know North America showed very positive price and EMEA and.
And incentive impact for the quarter some of that obviously was related to adjustments of provisions.
I mentioned, so we'll see that flowing through in terms of spending them in the next 50 days or so obviously as I mentioned I'll start levels around 50 days and dealers and then.
South America is also showing some very.
Positive pricing, because we need to offset that.
The raw material impacts and even more importantly, the impacts of exchange, which is rendered the cost base more expensive as the real has weakened by about 30% year over year and also the peso has weakened so I think the main drivers of the vehicle net price.
North America, and South America, but we've also seen positive price.
In Europe and in the Middle East in Africa.
And then in terms of the mix equation.
Positive mix also in North America as I mentioned.
Because of more retail Leslie because of product line mix into a pick up.
And the larger jeeps.
As we as we manage the.
The supply and demand and frankly the demand is clearly also very strong in those segments of the market as we as we have seen and then also we're seeing good mix in Europe and some of that is being driven by a higher penetration of P. A T v's and baths.
Which.
What was the higher revenue function than there are equivalents and we are seeing positive mix.
From also from lower rent a car volumes so.
But again.
Also South America showed a positive mix.
So I think.
Really all areas of the business are contributing.
And different ways to the positive pricing and the.
On the positive mix.
Yeah.
In terms of.
Synergies and our credits where they include it all up.
You know there are lots of moving parts as we move forward here.
I think the credit.
Transaction was a very positive one and it's gonna clearly contribute positively to our to our ability to realize the synergy targets quicker and we're not going to stop just because we get some positive outcomes on individuals.
Individual transactions.
But I think it's important that we are realized as quickly as we can.
All of the benefits of the merger and clearly one other key benefits of the merger.
So the businesses that we are compliant.
Compliance and and the extended Europe and E U.
With without any need to resort to the use of credits or of pooling arrangements. So I think that's the key.
It's just a good place to be and obviously, it's important that we continue to grow.
The penetration of our low emission vehicle business.
So I I interpret it.
<unk>, probably additional but that's my sort of interpretation.
Yeah.
Last question I think it's not as I said.
We're doing well on the synergies I think what's even more important as overall, we're seeing good traction across the board on the synergies, but I'm not going to I'm looking at getting Nickeled and Dimed on every everything we do whether it was included or not.
Okay, and very last on the Capex issue.
Can provide an update on a footing for the current year.
I think capex is proceeding as we had talked about on our last call. So I'll target.
Our target in the sort of medium term is to get the business down to around 8% of revenues.
You know historically.
The other sort of aggregate spending of.
The two.
The two legacy businesses like PSA and FCA.
Oh, it was around 9% and so I think we'll be in that 8% to 9% range, but pushing to get towards the eight per cent targa as quickly as we can obviously you also have this percentage obviously it depends a little bit on how.
How are revenues performed.
Given the pressure on on volumes that we're seeing so I don't think we want to put ourselves in a box, where we're managing capex to a percentage and and then we have issues on timing of some of the key programs that we need to execute on to realize synergies and to be.
Competitive in the marketplace. So you know I think the 8% to 9% range is that a good a good approximation for the moment.
Thank you Richard.
Thank you Martina.
The next question comes in from the line of Horst Schneider from Bank of America. Please go ahead.
Yes. Thank you for taking my question necessarily associate from Bank of America, and the first question that I have that relates.
To the to the volume patch, which we're going from here. So in Q1 and of course, I mean, you have to be soft therefore wholesale it's probably below retail sales than you would say that you cannot catch the shortfall in edge to our business H. One does it means that on a full year basis we.
They'd be equivalent to hold sales.
And then looking more full but already into next year or maybe the next few years you you expect the weird a restocking effect to happen only in 2022 and to which extent did you go back to the previous inventory levels that we had to be now talk really about the new normal.
A sustainably lower inventories also in the long run.
That's question number one question number two given all the statements that you've made on <unk>.
And then switching to catch it protects et cetera, I still struggle to understand it's now in terms of profitability. For example, it's H <unk> going to be stronger than each one given that the volumes most likely an etch tool maybe also higher than each one but I have problems to reconcile the price impact doesn't see volume impact. So we can pick this up.
Strong on an H two or have you got basically now already peak margins and be declines thereafter or is it more the opposite that each tool even can be stronger and and and the last question is about special items are just an update what we should expect for the group.
Thank you.
Thank you.
So in terms of it's a good question what is the optimum level of stocks I think to some extent.
It's very healthy.
To have.
Obviously, a relatively lean.
Inventory picture it makes our business more nimble it makes the the efficiencies.
In the supply chain, all the way through the distribution channel easier to execute on and and I saw and I think I'm, we're seeing some of that with with the.
With the profitability commercially that we're realizing.
And all of the markets so.
I don't think.
That we would push to necessarily build stocks significantly from here I would there are some areas of the business, where it would be better to have slightly higher stock levels and we're currently at and not probably is largely.
North America and.
That will I think start to.
That'd be visible in the back half of this year, hopefully depending on supply and demand, obviously, but I don't think we will be pushing to.
Necessarily go back to the same levels of stock we had in the past because I think.
There's definitely a benefit to managing.
Our lean distribution channel. So, we'll we will see some restocking, but I don't think it will be necessary, but I don't think we will arbitrarily decided to take it back to the levels. We were at in the past them. The other day without unhealthy frankly, but I think the organization is sort of learning to to function.
With lower level of stock and seeing the benefits and that's I think a good thing.
In terms of.
H one versus 82.
I think I don't see any reason why.
H two should be worse in H, one frankly, NAV clearly the volume should improve as I mentioned.
So we expect to be I think.
Strong in terms of margin performance through the whole, yeah, and we will maximize our margins as best we can.
I think the five and a half to seven and a half.
<unk> was.
Was predicated on you know some level of risks related to raw materials.
And two in the semi conductor challenges.
And clearly Oh, so COVID-19 I think COVID-19, we're seeing.
And it seems to be on the wane in most jurisdictions.
And demand is good.
And consumers are returning to the marketplace.
I think in terms of raw materials, those continue to be a headwind.
And potentially a larger headwind than we had initially envisaged but at the same time I think the market in terms of price.
Price mix, we're also executing very well on that so we don't see any any concern in being able to manage.
Manage them the raw material.
Inflation for the year and to hit the numbers, we've talked about so you know, we'll obviously give you a better update on margin performance for.
In the first half cool, but.
But I didn't see any reason why.
We should see.
A significant difference in performance from from the first half the second frankly, and you know we had a very strong second half of 2020.
Which obviously have various benefits in it that one or carry over into 'twenty. One from a cost point of view, but I think we're seeing the business performing very well and other similar way that it did in Q2 of so in H two of 2020, and we our target is to continue to execute.
At similar levels, notwithstanding the the headwind related to.
To the semiconductors.
And special items.
I'll give you an update and Ah in July on the special items I don't think there's going to be anything unusual compared to what you've seen in the past from PSA in terms of restructuring charges.
We saw them through the year, but nothing out of the ordinary and you know it.
I don't think we'll have anything else, obviously, we're going through our planning process and so you know that's that's a nice them, though I think I can give you a better update on in July.
Alright, that's great thanks very much.
Thank you.
The next question comes from the line of Stephen Reitman, calling from Societe Generale. Please go ahead Steven.
Thank you good afternoon. Richard My question is about how I'm still it is being controlled at the moment.
Are you kind of running still where the money from the system from PSA and management system from FCA.
What progress you're making in integrating that line.
Moving onto the sub regional level.
So that you'll be reporting them through the course of the year.
It's a good question Steven I'm sure. Some of my team would like to answer you directly I think.
What we're doing it very efficiently and quickly is moving the business too.
One set of Kpis.
Which I think is obviously critical for the management team to be able to focus on a common set of kpis. So that we get to a common.
Set of of of decision drivers.
Which which may seem.
But all but it's clearly challenging in an organization of 300000 people. So.
I think it was very important to get the organization in place quickly, which we have done a sort of you know the first of all out of the organization. The second level the third level and we're working all the way down into the organization, but.
Typically that is in place now the governance process.
Is very clearly defined.
You know that sort of delegation of of of decision, making is clearly defined.
And so that together with a clear set of Kpis to measure performance.
Of the of the various business areas, both from a functional point of view and from a regional point of view and from a brand point of view. Obviously this is a matrix of all those things need to be clear.
Clear to people unclear to the team I think has made we made an awful lot of process progress frankly.
Better than I had expected so.
We are acting as one team now it is true clarity that the kpis are aligned the some other systems and processes by which those kpis are produced and managed or not.
So there was a more of a sort of a slightly longer term project, where we need to make the.
Processes, converge, and where where efficient all sorts of systems. So that we can be faster and less labor intensive.
On the on the reporting process and get more people involved in our value added activity on the front end of the business, but those are things that all businesses need to confront I think frankly, the merger gives us an opportunity.
To clean up the house on both sides.
And there's a lot of energy from the team the team is.
Contributing across the board.
With a lot of energy and creativity.
And I think the dynamics are great.
A diverse team, which makes life interesting and rewarding them and clearly we want to Atlanta has to be a place.
Where people want to work as well and I think that is a key part of the story and I think the the progress. We've made so far is very it's very pause.
Dave and augurs well for the future.
Thank you and just a follow up.
Pretty well that you've been in your numbers I think it's not just sales would you say copper production to favor Suvs and pickup trucks in North America.
Any scope for doing that on a global scale as.
As well with the organization using some of the.
Yes.
There is some scope for us anyway, it really depends on the individual PA individual vehicle.
So where we can.
Do that we're doing it I think going forward. There's also an opportunity and this is part of the synergy process that was already sort of map that was a target, but it's obviously become even more clearly necessary because of this semi.
Semiconductor issue is.
Moved towards.
More standardized parts moving to change your ability between vehicle lines on the same platform and between different platforms. So I think that's clearly something that we are very focused on but we do have some level of interchange ability not always to the level, where you would like.
Frankly.
Thank you very much.
Thank you.
The next question comes in from the line of Colin from UBS. Patrick. Please go ahead.
Hi, everybody and Patrick from UBS.
Good afternoon, Richard 11, let me start by saying that Ah I think I am many of US looking forward to this class the Q1 and Q3 EBIT again with you.
Two distant future. So I hope that once you've concluded all the internal cleanup work, that's going to be part of our conversation going forward again.
Two questions.
For me remaining.
The first one is are you are drawing any any structural conclusions from this current semi shortage situation. There's a lot of talk in the industry about how are they going to be.
We produce and where they're gonna be produced and how they're gonna be sourced by the OEM. So are you are you planning to get more directly involved in the sourcing of 17 and would that potentially come with additional financial commitments by still assets. That's my first question.
Well.
It's a good one I think.
Hum.
My view.
So they would be.
From a financial commitment point of view I don't think we're going to get into producing the parts. So I would I would.
The the any impact from a financial point of view would be minimal I think it is it's possible that there's a possibility that we need to look at how we manage the supply chain. So we have more visibility.
Of you know what's happening.
And the various tiers of the supply chain, so that our intelligence is.
Is more immediate and we can we can move faster.
You know, we we are we have a supply chain and purchasing teams working on that and they already putting some of those things interaction as we manage through the crisis of the parts. So I think yeah theres some things that were changing the way we manage that process.
And it's really all about.
Getting more visibility on the one side and then in the medium term some other things that I just mentioned was reasonably.
Stephen's question on incur.
Increasing the interchange ability and the standardization of the of the components.
So that's really how I would say today overseas as a developing area and also to some extent I think.
As we as we as we develop our strategic plan, which we've talked about and which we will bring back to yourselves.
Late this year early in 2022.
I think you know.
The way we manage it.
The supply chain is gonna be a part of that which we would address.
Okay, Great and my second question relates to your strategy I know, there's a event coming in July you, probably don't want to front run that but I'm. Just curious are you already gave a glimpse of what's going to happen at the AGM I'm talking about the next generation platforms.
Just wondering.
How that will affect your Capex plan.
You you said you stick to the 8% of revenue target.
It seems like what what what you have in the cards is going to require additional investments and other Oems are also talking about.
A higher degree of vertical integration and doing more in house, even to the extent that Oems commit money to manufacturing battery cells.
I'm just curious in your thought process on that front.
Is there going to be much much more capex on the ETF side than what you had factored in but that all said some of those hedges.
Well I think that's a good question Patrick I think to your point I don't want to front run the EV event without that far right. So I think.
Oh I'll punt the question to some extent to then I think what's positive is obviously, we have a large part of our synergies coming from the Capex and R&D spend where clearly there was some duplication between the two companies as we put them together.
There are important opportunities to.
Be more efficient in their I think both.
Both companies in the past have been been relatively capital efficient and I think we need to continue to be very capital efficient and not create.
You know.
Very large programs that maybe we're not in the best place to manage from a.
Core competency point of view.
And so I think we're going to be judicious in our use of capital and judicious in assessing what we should do in house and what we should do with partners and what we should buy but I think all of that will be a.
Part of the of the July eight presentation. So I will leave it until then to give you more information on that Patrick alright. Thanks.
Thanks Richard.
Thank you.
The final question comes in from the line of Charles Cold, calling from Redburn. Charles Please go ahead.
Hey, Thanks for taking my questions I, just had two final ones, especially coming back to pricing.
How much of the pricing uplift that you're enjoying at the moment do you think is sort of the temporary results of the chip shortage.
And you know if the industry can sort of time and day uprights on leaner inventories like you said, you're aiming to them.
And do you think the net pricing has structurally improved.
And the second one on the used car market stays really strong right now and you still own 70 per cent of the online used car market business around the sorts out.
And they've said that they're exploring an IPO. This year. So can you provide any details on that maybe probability time line.
Whether you intend to reduce your stake in it.
Yeah sure. Thanks, Thanks for the question on pricing I think.
If we look over the.
Last few years on X P. S. A R X FCA, we've seen margins improving steadily through the period and a large part of that has been and improvement in <unk>.
Average transaction prices and price positions.
And so.
I I think you know we are seeing.
A benign pricing environment at the moment, I'm, particularly probably in North America and so.
Maybe there is some level of.
Of our per a perfect.
A perfect market position, where you have some level of scarcity.
Customers coming back into the market post COVID-19 the economies as is.
It is ramping up and so you know that there is some.
Positive context around that but I also think that in general the industry has got more much more focused on.
Profitability tee them on pricing and I think X P S and X FCA and.
Hello.
Being quite successful day, improving their price positions.
Over the long term and I think that will continue to be a focus so.
Could I would I would prefer that this is not.
Overall, a temporary trend I think it's been a long term trend.
That investors.
And analysts who've been a little bit skeptical about and maybe we're getting a bit of a boost at the moment and particularly in North America, but in general I think that trend.
<unk> has been a steady and I think in our particular case it will continue to be an absolute focus.
Because clearly.
We need we need to we need to make a decent levels of profitability across the whole portfolio. We.
We need to justify the capital that we're deploying and and to do that we need to make sure that.
Our price positions are good and obviously price is a function of brand quality and product offering in all of those things.
Need to be managed very carefully but I think.
With our portfolio and our diverse.
Rand weak diversity of brands, we can actually be very effective in positioning ourselves.
Well in the marketplace. So I think I think it's a long term trend is continuing.
In terms of army Scioto in the used car business I think I always thought it was an interesting.
Asset that we have and it needs to be developed and that's why.
It's looking.
The possibility of raising some capital.
And as we.
As we get them.
As we studied the market and look at the opportunity we will update you.
Things get clearer, but I think it's definitely a knee in an interesting position some of its.
Patches of oversea.
<unk> raised capital in the market successfully and needs to invest to grow this business.
And so the question is before we have we have the business around and capital to allocate and if if if we see it as a positive for the business to raise some capital so it can.
Investing activities unconstrained manner that I think it would be a good thing for our Miss and good thing for us so.
We will keep you updated on that.
And with that I think we're done thank you Charles.
Thank you to everybody for attending the call and as I said I think.
And we had a we had a strong quarter, we're ramping up Atlantis.
100 day, then and.
We're excited to continue this journey and we appreciate your time, thanks very much.
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