Half Year 2021 Stellantis NV Earnings Call

And welcome to everyone joining us today as we review still on his first off 2021 results.

Most of the the presentation material for you on this call as well as related press release was posted under the investors section of the Lantus is group website.

Our call is hosted by Carlos Tavares the group.

Steve Executive offices, and the retail partner of the group's Chief Financial Officer.

After both Mr <unk> and.

And Mr. Pablo <unk> of our present, they would be available to answer questions. Before we begin I want to point out debt any forward looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statement included on page 2 of today's presentation and it's customary.

The call will be go up on by the the language now I would like to handover to Carlos Tavares CEO will still on this.

Ladies and gentlemen, welcome.

Welcome to this 2021 H 1 the talented financial results announcement session.

We are delighted the reach out bomber and myself to.

I'll be with you today and I would like to thank you for your time.

That you are highly busy people and we value your interest instead of <unk>.

I Trust that you and your families.

And please take care.

That's the get started.

It's the least we could say to say that the.

<unk> had a strong start on.

On the H, 1.2021 on the pro forma basis, we were able to achieve a record profitability of 11, 4% of adjusted operating income margin.

It is also clear that we have delivered.

The 6% improvement of our net revenues. So we are off.

The strong stock instead of <unk> since we closed at the beginning of this year, it's important to recognize that to us it is bringing a lot of additional.

Confidence on the additional energy to all teams. It is also very fair to.

You mentioned debt.

We did a stellar performance in North America with the no less than 16, 1% of adjusted operating income margin, which was very well supported by a very robust and large Europe with the 8.8% also.

The operating income margin so 2 strong engines.

North America, and Europe, putting the company forward to support the 11.4 record profitability that I highlighted in my initial comments is something that of course.

The regional teams are proud of and rightly so and I would like to also add to this excellent results of North America and Europe.

The leadership of our teams in the South America as we are clearly the market leader in Latin America with no less than 23, 6%.

Market share up 620 basis point year.

The over a year and we go through a very robust margin of 6.6%. So.

Strong leadership in Latin America.

And of course, the all of this has been.

The benefiting from a very strong tailwind, which is a very exciting start of the execution of our synergy plan.

It is really a differentiator of <unk>.

Sell antiques vs. Ivy its peers, we have the opportunity through the merger to bring synergies opportunities to the table and the least we could say is debt with no less than $1.3 billion euros of synergies net cash synergies in <unk> 'twenty 'twenty..1 we are off to a very strong start.

With the very significant additional amount of synergies on the bottom up perspective, which are brought to us by our people, which also means that they understand that this is still on peace New company is going to benefit from the merger of form of FCA in from a Psa.

And the everybody in the organization is now clearly understanding and supporting the smooth, which is also great news for all of US last but not least we are the.

Now racing on the electrification of it we are all in.

We already have currently on sale.

Low less than 11 pure bvs.

And within the next 24 months.

We will add to the existing 11 bvs, an additional 11, which means that within 24 months, we will have no less than 22 pure bvs on sale, which is demonstrating that we are executing our electrification journey as we presented to you in July this year.

Last but not least I would like also to say debt over the last 6 months. The first 6 months since we create the 17th we have set up a new.

Top executive team and new business governance way and I would like to share with you. The fact that these Gulf of men's is fully operative we are making all the decisions. We are preparing those decisions in a highly focused and professional way and I would like to share with you that you have in front of you a very.

Happy CEO.

Happy to see the the teams are now very much business driven business focus and the and.

And the doing their job at the very high level of synthesis, which given the size of the company is paramount to our success. So those are some of the highlights.

I wanted to share with you and now I will move to the region business highlights and the start with North America.

As I said no less than 16, 1% margin for the Ora North American operations. Despite the unfilled semiconductor orders with the strong pricing and mix improvement we know that we are now.

On the highest U S retail average transaction price carmaker.

In the June we were at $48000 per unit and we are the highest average transaction price the carmaker, excluding the premium carmakers. We also see that are old and new Jeep wrangler for by E. Technology is the number 1 selling ph.

In the U S retail market, which is the paying tribute to the attractiveness of our products.

This guy sees the Jeep wrangler flow by E with electrified technology in this iconic brand, which means the freedom our all new Grand Wagoneer production has started and we see that the market is a is the appreciating strongly this product appeal and we see that our sales of.

The orders are growing quite nicely moving forwards. We also know that we are now preparing for the all new Jeep Grand Cherokee too low that will be presented at the New York Auto show last but not least we are pleased to be now entering the top 50 diversity company group.

Which is something that pays tribute to the way the company is leveraging our diversity and welcoming all of diversity, which is of course something that we are proud of and the direction that we will keep.

Moving towards in the future.

I would like also to highlight the fact that the yes. So we have the.

Lost some market share of limited market share because we are managing the channel mix in a very thoughtful and business focus the weight, which is I think of a reasonable trade off to the excellent Oh wide margin debt, we have deliberate and the also that we have grown our market share in Mexico from.

The $5.96, 6%, which is also good results from our local operations, let's now move to the enlarged Europe region with a very robust profitability of 8.8 margin, which is better than the best ever result achieved by your former PSA which.

He is demonstrating that the turnaround of the former F. C of Euro corporations as now started it's a it's bringing.

The first results not everything that we need but the first results are there and you can see that the snow already visible in the 8.8% Oi margin number that you have here, we continue to grow our market share.

In Europe, and the we are we're able to grow our market share by 80 basis points up to 23, 1% versus H, 1 and 2020, which means not only that we are growing market share, but on top of debt. We are growing our profitability, which demonstrates that the Europe is creating value for the company and we.

We are doing this on a full compliance.

<unk>.

Regarding C O 2 no fines paid in Europe, we the enlarge our company with the sell on piece, we are able to be I would say naturally compliant in this uh huh.

The big markets. We have also fixed to the of the asthma bought future by bringing our knoll the BV product the E K 9 to our smart bolt to supply the U K market, but not on me on the LTV, but also on passenger vehicles MPV side of the Biz.

<unk>, which is I think of a very good the news and this will complement what has been done in terms of turning around the efficiency and right sizing the site to make it profitable for the future, which has now been done thanks to the commitment of our teams the support of the U K government and the great.

Chip, we hope with the local unions.

We are also expanding in Eurasia growing growing share.

And the delivering a better result by.

By growing our LCD business as it was planned as I was telling you over the last few years and now the results are coming on we are pleased to see that profit and market share are up.

The final point, which is possibly 1 of the most important is that in June 'twenty 'twenty 1.

We were able to sign no less than 10 performance agreements in Italy, Thanks to the excellent collaboration and constructive dialogue with all our Italian the Union partners. They completely understand what we are trying to do the completely understand the transition in which we are now the electrification.

<unk> journey, and we were able to sign those agreements. Thanks to the open mindset and the collaborative mindset that we right now have in Italy, which is a good sign for the future.

And the good foundation to build even more performance debt as we all know is the only thing that protects us.

The last but not least we announced that we are going to bring the third Giga factory of talent is to Italy. As we are now concluding our discussions with the Italian government and we intent to transform our powertrain turmoil the plants in a G gift factory in the future. So those are the highlights for the enlarged Europe.

Let me now move to the next 3.

And for regions.

Stopped doing in South America, South America is demonstrating a very strong leadership in terms of market share. The we could move from 17, 4% in the H, 1 and 2020 up to 23, 6%.

In the H, 1 and 2021, which.

As of now sending leadership.

We are at 31, 6% in Brazil on 27, 7% in Argentina, So market leaders in the region market leaders in macro sewer and the Fiat Strada is now the number 1 selling vehicle in Brazil, and we off as planned launch the lifecycle.

The lifecycle events in refreshments for the Fiat Toro and the Jeep Compass in April of 'twenty, 1 in the mill.

At the least in Africa, we are demonstrating a very strong profitability with 9.7%.

The margin and at the same time, we are growing share by 30 basis points to 11, 9% in H, 1 and 2021. This is demonstrating that this region is also creating profitable growth, which is of course, what we expect in terms of value creation. We were also please.

To see that now.

We finalized the ramp up of the production of the Citron Army, which is a very important mobility tool for downtown areas, where we expect 1 day, the IC products to be banned.

And this is now moving forward not only because of cost and quality are exactly where they should be but also because we have expanded this kind of product to web of cargo version that will be perfect for the last mile delivery in downtown areas.

In China, and Asia Pacific, India, and Asia Pacific, We also slightly growing share we had the very successful launch of Jeep Compass and Sichuan C fiber across the in India, and we are moving towards the very well in our new Chinese strategy.

We are still finalizing a few of discussions but they are moving very well, it's the very deep change in our of Chinese strategy and I will be pleased to see some of the OS events become public during the next few months and as I committed to you will have a brand new Chinese strategy by the end of this year.

Sure when we will present, the long term certainty strategic plan to the investors and to the public of just want to convey to you that we are moving quite well in this direction and you will soon see some of the bricks of this strategy to be made the public.

If we continue now and move to the <unk> brands I would like to give you. Some information about the Jeep brand our global SUV brand pricing power as you can see is better the benchmark. So we are somewhere of the market leaders in terms of pricing power, which is the attributes to the share.

<unk> positioning of the brand to the very disciplined way. This Randy is managed across the world and you have share the translation of this discipline and the is clear positioning on the pricing power as I said the wrangler is now.

At the record level of U S retail sales with the 115000 sales in H, 1 'twenty 'twenty..1 we also have thanks to the full by E technology of <unk>.

<unk> impressive LTV mix of sales in Europe of <unk>.

30% of this of the LTV mix of sales, which is exactly the right performance at the right timing. Thanks to the rights of decisions that were made in the past in former F. T E. On this brand and we also the having the best selling ph vs in Italy for Compass and renegade in their respect.

The segments.

As I said the south.

South America is the place for talent is leadership and specifically the Jeep leadership in the SUV segment with the $14, 9% market share in the segment and we also enjoying record sales in Japan, and Korea with the Wrangler and the renegade. So as you can see the very strong business for Jeep.

Very solid technology with the 4 by E electrification proposal and the very strong pricing power and the market shares in the segments. So very strong business moving forward and of course, there is more potential to come on.

On the American brands on the other American brands.

We see that the Chrysler is the steel we the Pacific of the number of 3 selling ph of in the U S.

We still have some homework in the pricing power, but I can share we do that we have been improving significantly the profitability of Chrysler and we are now preparing for the rebound of this of this brand and we'll tell you more by the end of this year, but the the <unk>.

<unk> are moving quite nicely to a very exciting proposal the.

Is going to be based on fresh product fresh technology, and most probably on innovative distribution model.

The ramp has been a big big success of Big success with the best ever H, 1 global and U S retail sales for the brand since it was created as a standalone brand in 2000 the 9.

<unk> power is at the benchmark level.

And we have achieved in the U S. A record average transaction price for the ramp 1500 with $49000 per unit, which is also a tribute to the appeal and the attractiveness of these products and the I think this the great achievement for the Rem Brent Dodge is also delivering.

Strong H won market share ever.

Is quite clear that the muscle car is still a sea of niche against highly profitable segment.

In the U S and each will remain so in the future with our electrified strategy as it has been presented to you on the EV day, we have of pricing power, which is much better than the benchmark, which means we are the benchmark in terms of pricing power and last but not least the Durango is achieved the best each 1 of the U S retail sales since 2.

2005, which is also demonstrating the strengths of this brand and the clear positioning of this breath.

Let's move to the upper mainstream part of our brands related to Opel and to Peru.

The book, So I've been now enjoying the an.

An improvement in their market share of.

Both in the European the 30, so Europe has been improving.

Up to 4.4% market share, but more importantly, the market share of Opel Vauxhall in Germany, and the UK has been improving respectively to 6.1 of the $6.6 market share that means that we are now back.

2 of market share profitable growth has you know Opel Vauxhall is highly profitable.

Since the turnaround that was implemented in 2017 and 2018 and the thanks to the new models of that we are bringing the Opel corsa, the Opel Moca and very soon the Opel Astra.

Profitable market share is now back and we are pleased to share. This with you because it has been of course, a very demanding periods over the last few years. We are now on the pricing benchmark, which is amazing knowing that a few years ago 4 years ago, we were 8 points behind the bench.

Mark.

And now we have to catch up with the benchmark, while increasing our market share in Europe, and while growing by 50% the overseas overseas sales growth.

Which demonstrates that the strategy that has been implemented for the Opel Vauxhall brands are now bearing fruits and of course, the assist to the merits of the Opel teams. We can also see that some of the Opel Corsa is now the number 1 in its own segment with the market share of 21, 3% in.

Many of an 18, 9%.

In the UK, so strong product strong team managing the business in a very focused way delivering very encouraging results and more to come.

On the peripheral side. The brand is now number 2 in Europe ahead of the usual competitors with the 7.1% market share.

In the more than 40 countries. The brand was able to beat the H 1 record of sales. Since 2015 are we are the of benchmark in terms of pricing and the we see debt. We are now enjoying the regional launches for the pick up the non track pick up which is a pure.

The peripheral pick up that is going to enter an open the white space for the brand and we are also now on the way to launch the new peripheral of 3 O 8 by the end of this year.

So again more to come and it is fair of so to say debt visuals. The range of electrification rate is now above 70%, which means we have more than 70 per cent of electrified models in the peripheral range. So again, we are moving on what we'd committed which is 2.

In 2025 at nearly 100% of electrified models in the in our brands if.

If I move to the core brands now of I would start with the Citron to highlight the fact that Citron as volumes and market share improvements in the in Europe with the no less than 4.8% market share in each 1 we are now as I said launching of the Sito and the army cargo version for the last mile delivery in downtown.

Areas.

And this has been very well received by the market and I think that there is the significant potential there for mobility tools in the downtown areas. The the pricing power is now above the benchmark and we are preparing to launch the flagship model of Sichuan wishes of the quite innovative concept by the end of 2020.

On the brand New C..5 ex that you see on this the photo on the Fiat side, great. Great results in terms of sales of marketing with the leadership in Brazil in Italy, and in Turkey and for the first time ever.

Leadership in South America for sales with the 14.8% market share in each 1 of 2021 due to the success of the Fiat Toro and the Fiat Strada. So a great sales performance with strong leadership in Latin America pricing power is now at the benchmark level the.

The Fiat 500 E is not the leader on the a segment for electrified vehicles, which is also a great achievement for this very compact.

<unk> refined the muddle electric model in fact and.

And we are on our way.

To bring by 2023, a mother B model more of a B segment profit.

The electrified and electric B segment models to the market based on common platforms as you may imagine.

Let me move now to the LCD business.

As you know well I'm still.

Still on pieces of the significant leader in terms of LCD business not only in Europe with 34, 4% market share, but also in South America with the 33 point for market share. So very strong leadership that we intend to expand outside of.

Europe and South America are in South America in large Europe Middle East and Africa, we have been growing our market share in each 1 as much as in the U S light and heavy duty pickup area. So strong market share improvement across the board with highly profitable sales.

As you already know we also of making sure that the electrified technology is now shared across the different regions, namely between Europe, and North America to make sure that we are leveraging the scale and the technology power of sell antiques to support a better business and the more electrified business.

In Europe, and North America, and this is exactly what we are now preparing for in the next generations by the end of this year.

In Europe.

All of our van portfolio will be electrified compact van <unk>.

Mid sized 1 large run the 3 of them will be electrified by the end of this of this year, but that's not enough. We will also brink by the end of this year are either Gen version of the midsize van.

Which is going to be the somewhere competing with the EV proposal on the same van So we'll have a lot of the insights in the comparison between the 2 technologies pure EV or either Jen on the same van <unk>.

Addressing b to b needs and fleet needs, it's going to be a very good.

The.

Possibility for us to learn about those different pros and cons and just would like to share with you that the the hydrogen mid size. Then we'll have a range of no less than 4 hundreds of kilometers.

And we will be able to charge the hydrogen and to refuel in less than 3 minutes, so more than 400 K less than 3 minutes that's.

Most property the part.

The shift for the LTV business and we are happy to bring those products to the market by the end of this year I think it's 1 of the strengths of <unk> in the LCD business, Let me now move to the premium brands.

To share with you that the 3 premium brands are on this very strong.

The electrification journey.

Alfa Romeo will be fully electrified in 2027 land share in 'twenty 4 and D. S. In 24 also so strong electrification journey.

In the offer of meal brand, we are now focusing on the preparing a better management of the residual values of this brand to make sure that we continuously improve our pricing power, even though we are already at the benchmark level in a few months period. We also are preparing for the future of <unk>.

The electrification of the launcher as you see we start with the huge gap in terms of pricing power vis vis the benchmark.

Which means that if we do things well, we have a significant potential to improve our profitability of the lunch sales I can tell you that we are preparing for a very exciting turnaround with the very exciting models that I have already seen can tell you gorgeous Gaza coming strong potential to <unk>.

2 of the pricing power and as you already know Epsilon is still the number 1 in the B segment in Italy still on team is the brand that has within the.

The still Auntie's brand portfolio of the highest LTV sales mix.

Close to 40% sales mix wishes of quite outstanding we are better than the benchmark, which means we are now the benchmark in terms of pricing and by the end of this year D. S will have a highly exciting.

Showroom with the flagship model E sedan. The D S 9 with the brand new the S..4 cross back the Dia 7 cross back on the DSV Cross back all of these models of Hyder purely the versions are and ph D version, so fully electrified.

Brand portfolio for the S with 4 exciting models in the true by the end of this year. So a very good opportunity to continue to grow profitably this premium brand.

Let me now move to our unique.

Sri brands are of Maserati brand with the.

Great News as the the brand is now in the Black which is absolutely great news because now it's going to give.

Another boost to the profitable sales of this brand we already have the.

Significant market share improvement in some key markets against the against last year the ne.

China, we are improving our business model and our residual value management in North American on I think it's going to improve quite soon and quite significantly, but we are introducing the first electrified technology on the advantage with the mild hybrid it was delivered.

Delivered from July we are now, bringing the M. C 20, <unk> to the market in September 21. After we are double checks that we have achieved the right level of validation maturity for the product, which we have now we are ready to start and launch the product and we are preparing to launch the all new great color.

By the end of this year again with a very strong focus on fit and finish on the quality and the robustness of of the validation. So more to come I think that Maserati as a significant potential to.

To grow profitably as the unique luxury brand of guarantees we have tons of ideas to make these brands, even more profitable and even more exciting the based on the iconic is 3 of the Brent.

In terms of mobility services, what we see both on the free to move side on the the leasing side is that the business is growing.

And it's growing very fast.

In the range of 50% to 100%, we see that both businesses are now profitable and they are growing quite fast we see that fee to move is now also moving the U S. A.

With the expanding car sharing activities in the.

The additional cities in the U S. We see that we are bringing more E solutions to our customers with the raw boxes, the home and Green energy in some public charging solutions not only on manufacturing, but also in terms of bringing those technologies to our operators on the leisure side is the <unk>.

The situation of very strong growth on the revenue side for the short medium and in term of rental rental subscriptions in the car sharing revenues, we see that we also have.

Some very good electrification solutions, which are provided the including property of tree network offer around the 1100 E banking locations.

The 555 leases mobility stores across Europe. So a lot of initiatives in terms of electrification strong revenue improvement on profitable service mobility operations, which is not so often that we can see mobility services growing fast and at the same time.

Being profitable so in a nutshell this is with the strengths of.

Elisa and free to move with the strengths of the Tech company are both combining the rigidity to enhance our crystal morbidity experience.

That's what is now ongoing and I think it's quite promising.

I would like also to bring to you an additional information based on the feedback I got from the EV day we're.

Some of you were saying that you wanted to know more of.

About the launch calendar for our electrified models. So it is over the next 24 months.

You can expect from <unk> no less than 11 pure b the launches those 11 additional pure BV launches in the next 24 months will add to the existing <unk>.

<unk> BV on sales, which means that by then it will have no less than 22 pure BV.

On sale.

Not even counting here of the ph vs. I'm just focusing on the bvs. This is to say that the.

We are now.

The racing we are now executing our plans. We are now extremely focused in delivering what I have committed to you which is the 1% electric.

Electrification by 2025, we are on our way I understand that you are very much interested by the bvs, which is the reason why I'm focusing on the bvs as 1 of the feedbacks from the EV day, but you can also see on this slide the ph UV proposals, which are working extremely well like for instance, the 4 by east.

Strategy on Jeep, which is bringing a lot of value and a lot of profitability true to the company. So this is 1 of the points I wanted to share with you.

The feedback from the EV day, and now I would like to hand over to our CFO, Richard Palmer, which is going to commit to you the detailed financial results, which of the floor is yours.

Thanks, Carlos Good day to everybody.

Moving to page 17.

I'll start by just spending of second on the.

The basis of presentation of the numbers today.

As previously discussed the merger of PSA and FCA was the legally completed on January 16.2021 on.

PSA was determined to be the accounting of acquire.

Therefore, the PPA is the purchase price allocation exercise was performed as of the date on Fca's assets on liabilities on the results of FCA are included in the results of scientists from John 17, 2021from <unk>.

The financial statement purposes.

Only the results of PSA Standalone no included an H, 1 'twenty 'twenty accounting comparative for all of our S. So to aid comparability today, we will show pro forma figures for both of which 121 on an H 120, which are presented as if the merger had occurred on Jan 1.2020.

Therefore, H 1.2021pro forma results will include the results of the FCA for the full period, including the period from Jan 1 the Jan 16, 2021 on the comparative period of H, 1 and 2020 includes the results of both PSA and FCA. So all of my comments today will be respect.

With respect to those performance.

Moving to page 18, we start with key numbers. So as mentioned by Carlos consolidated shipments increased 44 per cent.

On to nearly $3.2 million vehicles, despite production of losses of around 20% of planned production or 700000 units in the first half.

The all regions and Maserati, you up with South America up 128% extended Europe, plus 41, North America, plus 25, all brands showed significant improvements except for <unk> due to the end of production of journey on going kind of of on last year.

Revenues were up 54% before negative FX effects and alloy reached $8.6 billion with margins at 11, 4% of record level compared to both PSA and FCA price performance.

Industrial free cash flow was negative in line with the expectations that we mentioned in our Q1 revenue coal and this was due to the negative working capital on provision impacts of lower production volumes achieved the.

The end of the of the off compared to the end of 2020 due purely to the summary semiconductor shortages, excluding working capital on provisions impact the cash flow would have been positive for the half billion euros.

Industrial net financial position was 11 and a half billion of net cash down from the aggregate of $17.8 billion at the end of of 2020 due to extraordinary dividends paid as part of the merger closing of $4.2 billion euros $1.7 billion of fair value adjustments as a result of purchase accounting valuation of the debt and the <unk>.

P a exercise and the $1.2 billion of negative H, 1 cash flow offset by over 200 million of proceeds from the IPO of the IRA misused Cob business and 0.4 billion of FX effects.

Industrial liquidity with over 51 billion euros at the end of June of which 41 billion was cash and debt.

<unk> 6 billion for the reasons stated above plus the expiry of of 3 billion facility a credit line in the period, which was offset by $3.8 billion of debt issuance in first half.

Yeah.

On page 19, we show the rest of the P&L H..1 included $1.1 billion of unusual charges of which half of billion related to inventory fair value adjustments for purchase price allocation on.

Any sort of a $7 billion related to restructuring costs offset by 0.2 billion of gains on the resolution of tax matters in South America.

Finance charges were 229 million and included around $150 million of gains on discontinued derivatives positive FX impacts on mark to market of investments toxic.

Tax expense was $1.8 billion euros with an effective tax rate of around 24%. The prior year tax rate included DTA write offs.

Income from investments held under equity method was 405 million euros on include clearly $338 million from the frame co joint ventures, the year over year improvement was mainly due to the reduced impact of losses from China JV.

On the result net.

In the period was $5.9 billion compared to a 0.8 billion net loss in H, 1 and 2020.

On a full year basis, we expect finance charges to be around $800 million on the effective tax rate to be around 24%.

Moving to page 20, we show the drivers of the revenue growth of 46% year over year.

On 54%, excluding negative FX impacts mainly due to the weakening of the U S dollar the Brazilian real on the Turkish lira.

<unk> was up nearly a million units, resulting in a 44% increase as mentioned, which translated into a 33 per cent increase in revenues due to the negative mix impact of higher relative growth in South America, and extended Europe compared to North America, as well as low a growth and no new vehicle revenues.

Strong net price was driven by increases in all regions and in particular in North America, South America extended Europe, and Middle East and Africa, with North America, representing 60% of the group impact vehicle line mix was also very positive mainly due to North America, which was <unk> 70 per cent of the group impact on.

On the last Europe, representing 25% of the group level.

The other business lines also presents the positive for $1.3 billion, mainly due to increases in parts and service activities across most regions.

Next we move to page 21, we review the walk to the $8.6 billion adjusted operating income.

In terms of volumes as we mentioned all regions increased due to the much reduced impact of COVID-19 interruptions on despite the negative impact of semiconductor shortages. In addition, the strong retail demand coupled with supply constraints allowed us to focus on net price on vehicle mix improvements, particularly strong in North America in fact in North America.

Counted for around 60% of ally with of lost Europe at 33%, While South America, Middle East Africa, China, and India and Asia Pacific.

On Maserati all show significant year over year improvements evidence in the future potential of the segments.

On the cost side, the increase due to a resumption of more normal activity levels compared to H, 1 'twenty and raw material inflation was contained by cost cost reduction initiatives in all regions raw material.

On an H, 1 or 0.7 by the 0.7.5 billion driven particularly by North America on South America, and offset by purchasing efficiencies led by enlarge Europe and reduce compliance costs.

The SG&A increase related mainly to the marketing spend on non repeat of Covid related furlough schemes in some countries.

R&D increase in North America, and in large Europe of spending normalized versus 2020.

Finally, a comment on the impact of the purchase price allocation fair value adjustments and the accounting policy adjustments to the a O I imagine at the group level the impact of reduced DNA net of lower than prior levels of R&D capitalization results on a margin improvement of around 1.4 percentage points in the half.

Now we look on the performance by region, starting on page 22, with North America, which had a record performance with AOE margin, reaching $16.1 per cent.

Industry volumes were up 29% with U S retail plus 34% on U S fleet, plus 7% our sales were up 17% to nearly $1.1 million units with retail up 26% and fleet down 15% as mix was optimized.

Market share of as a result was down 1 percentage point to 10.9% due to the supply constraints.

Shipments were up 25% with the Jeep up 20% despite constrained supply on compass Renegade and Cherokee on Ram was up 56% Dodge Dodge was down 23% due to the discontinued journey and Grand caravan.

Revenues were up 42% with strong net price and mix improvements.

This increase in volumes together with the substantial improvement in the revenue performance drove a 6 fold increase in the adjusted operating income.

The industrial industrial cost side of the business was well contained despite the significant increase in volumes with raw material inflation on the industrial inefficiencies due to due largely to the semiconductor shortages, partially offset by purchasing savings savings and lower warranty accruals.

SG&A increased was due to marketing expenses, while G&A was flat on R&D respond spending returned to more normal levels.

The FX impact was negative partly offset by improved alloy in parts and service.

On page 23, we review all of South America business, which achieved excellent commercial results in H..1 as mentioned in an industry that was up 40% science of sales were up 19% with sales in Brazil, doubling to 320000 units on Argentina up 50%.

Shipments were up 128% as all of South America business was less impacted by semiconductor shortages than the U S on Europe.

Net revenues were up 125% with negative FX impacts offset by 12% of positive price stroke mix, mainly in Brazil and Argentina.

This positive price mix allowed the business to offset raw material and labor cost inflation and industrial costs and SG&A as a result margin strongly improved to $6.7 per cent for 326 million of ally.

Next we review enlarged Europe on page 24.

The industry in EU 30 was up 29% on stat on tests achieved of share of 23, 1% an increase of 80 basis points on the number 2 position in the market with sales up 34% driven by all key brands with Peugeot Citron Opel and Vauxhall, all being up over 30% and therefore growth.

The respective market shares.

Shipments were up 41% with new models, such as the Citron C for the Opel marker on the fear of 500 day supporting the increase.

Revenues were also up 41% with vehicle volumes pricing and mix all positive as well as increases in parts and service unused cause revenues.

The strong revenue performance was supported by nearly half a billion of industrial efficiencies and purchasing manufacturing and supply chain as well as reduced compliance costs more than offsetting raw material inflation.

SG&A increased due to marketing expenses and the non recurrence of short work subsidies available in a true on 'twenty.

Yeah, Oh, Consequently increased significantly to 2 per 8 billion euros with margin of 8.8% of very strong result for the first 6 months of the chest substantially changed region post merger.

On page 25, we see middle East and Africa, which closed the half with AOE AOE margins of nearly 10% for a total of 247 million euros. The.

The industry was up 43% in EMEA sales were up 48% to 210000 units led by the pushout of brand of up 55 per cent and Fiat brand up 53 per cent.

Net revenues increased by 43%.

Driven by the volumes as well as pricing actions in Turkey to offset the devaluation impacts of the Turkish lira.

Improved vehicle line mix was driven by more Jeep wrangler volumes, highlighting the potential for Jeep in some parts of this region.

On page 26, we show the remaining 3 segments, China, sorry, 2 segments, China, and India and Asia Pacific Consolidated shipments were up 69% driven by Jeep Wrangler Jeep Compass in India on the Peugeot 2 of late 2008 on 3008.

These volumes of imported vehicles relate mainly to India and Asia Pacific with only 10% in China since the joint venture volumes on not consolidated here.

The news were up 57% and together with better net pricing in Japan, Korea, and Australia. This drove margins to improve to 10, 9% for the half.

Turning to Maserati sales were up 63 per cent with sales up in all markets on shipments were up 112% due to the launch of refreshed versions of the of all of the lineup net.

The net pricing of these new versions of was also improved and offset increased marketing spend to sustain the launch of the Levante M. S. G V.

The result margins were positive for the half.

On page 27, we show the industrial free cash flow for each 1 as mentioned cash flow was negative 1.2 billion euros due to $5.7 billion of negative working capital and provisions impacts of the semiconductor shortages impacted volumes.

This volume impact.

The cash flow would have been positive $4.5 billion looking at the elements of the cash flow.

Before depreciation and amortization reached 15, 3% margins on H, 1 of 11.4 billion euros.

Capex spend was $5.3 billion, adding also of the $1.4 billion of R&D expense in the operating result, the overall spend on peony and R&D was $6.7 billion euros for the quarter, sorry for the half equivalent to 8.9% of revenues.

This is at the high end of our 8% to 9% target range due to the constrained volumes impacting revenues.

The negative working capital and provisions was driven by around 230000 units of lower production in May June compared to November December 2020.

Also a reduction in dealer inventories of around 300000 units as well as reduce accrual levels for incentives drove the change in provisions of $2.4 billion negative.

Looking forward to H to cash flow, we expect volumes.

The shipment volumes to be flat to positive versus H, 1, particularly in Q4, and therefore see no repeat of the balance sheet negative items. We saw here in H, 1 with some season of positive impact on inventory as planned shutdown for the holiday period Capex spend rate will be comparable to H, 1 as will the restructuring spending with finance charges.

On cost on taxes, increasing by around 1 point for $1.5 billion euros due to payment timing.

The result, we expect full year industrial free cash flow to be positive.

On page 28, we review the status of our new vehicle inventories.

Inventories reduced further from March levels with dealer inventories down 189000 units of which North America was 2 thirds of the reduction.

Dealer inventory levels are of historic lows, and we and our dealer partners are improving dealer turn times to manage the the distribution more efficiently. This is also supporting pricing discipline and facilitating actions on pricing and channel mix to be more quickly transmitted into the marketplace.

The region with the most significant dealer stock reduction has been North America, where day sales coverage of U S. Retail sales are about 50 days at the end of June.

Group inventory was also reduces work continues to create the more efficient flow of vehicles, the ddos and final customers.

Moving to the last page of the financial section on page 29.

Our industry outlooks by region remains substantially unchanged from our Q1 update with the exception of North America wherever you updated the full year outlook from plus 8 the plus 10% due to strength in the U S retail demand in particular.

As regards our full full year adjusted operating income margin guidance also the strong performance on H..1 we are raising our guidance to around 10% per the year. This guidance now includes the impact of purchase accounting on changes in accounting policies that I mentioned earlier the sky.

This also assumes no further deterioration in semiconductor supply of no further significant COVID-19 related lockdowns in Europe on the United States.

Now I will hand back to Carlos Thank you everybody.

Thank you Richard Thank you for this very you can focus the presentation before we move to the Q&A I would like to share with you. Some of the outputs debt is coming from our top executive team.

In 70 says as you know the this company is the 7 months old.

On the Baby company and we have been working with the top leadership team to clarify for our people what is the no bulk purpose of our company and the what should be the values.

<unk> of our company. This is still under evaluation with the with our with our people, but I would like to share with you at this stage, we have come up with the very simple.

<unk> purpose, which is to say debt.

Our biodiversity, we lead the way the world moves.

Which means that we really bring energy strong energy to our business.

Powered means the talk.

<unk> energy means passion and we are passionate about what we do in the automotive industry and we are powered by out of the adversity, it's the diversity of our people.

While the most diverse and tea.

Car company in the World, we have the ies diversity, that's quite obvious when you compare ourselves.

To our peers, we believe that the diversity of our workforce is the strength.

And we also have the diversity of our brand portfolio with the 14 iconic brands. So we bring the energy we bring the passion.

On the our business and we use the diversity of our people and diversity of our iconic brands to perform.

And we want to lead the way not because we.

We want to be arrogant, but just because we believe that we have now of the scale.

To avoid being a follower.

We don't like to be a follower, we don't want to be cornered in the legacy car company, we will move fast and strong towards more of a technology driven company and this is what we are preparing for in dollar of long term strategic plan, we presented to you.

Which means that we recognize that thanks to our scale.

We cannot any more be a follower, we need to be leading and leading what while leading the way the world moves. The world is moving very fast we recognize that we recognize that we need to adapt continuously to our fast moving world, which is very darwinian, we recognize that our mission is to bring safe clean.

And the affordable mobility to support freedom of mobility because of the world is moving.

So we feel quite comfortable.

With this snowball purpose, which is powered by our diversity, we lead the way the world moves. This is what our top of leadership team has come up with and this is what I have the privilege.

To present to you today.

We are also selected for a major values, which are we consider it as being aspirational.

Which means that we want to move and to reach that level of aspirational values for our company, which means that we recognize that we are of a lot to do to reach that point and we have selected for we are customer centric.

Because we recognize that if we don't take care of our customers in tomorrow in the more carrying way something will go wrong at 1 point in time, and we have been making significant progress.

Terms of quality, but it's not the only about product quality or even the service quality. It's also about the quality of the customer journey with the different touch points that the customer has with our organization.

We win together, which means we understand that we will not win in the <unk>.

Lowly position, we need to win collectively this is all about promoting the cross functional work. This is all about at team.

Spirited.

Work to have the pleasure to win as the team. So the towards go together, it's about winning because we are competitive people. It's about the winning together because we recognized that we can only win if we are working collectively in a cross functional way.

We are agile and innovative agile because if you are not agile than you will disappear because we are in the Darwinian world innovative because we recognize that we have a lot of additional.

Proposals to bring to our customers in terms of innovation, starting with the technology innovation, but not the only we should also think about the business model innovations that we may bring to the frontline of our business. So we want to be agile and innovative and the last but not least we care for the future.

Which means we care for the sustainability of our company, we care for the recurrent profit to support the investments that we need for the future we care for our employees we care for our.

Customers, we care for the planet.

So all of this is within this we care for the future. So those are the 4 values that I've been the selected by our top leadership team. This is the noble purpose that we are now submitting to our middle management to get their feedback and we will eventually adjust or modify what you have here, but I thought.

It was the good the opportunity today to share this with use of that you understand.

What is our mindset.

Where are we going and what do we think we should be doing over the next few years I would like to conclude this presentation by.

Sharing with you first of all of my confidence and I'm very confident that with the talented people that we have instant is this company will do great things I would like to take this opportunity to thank each and every employee of <unk> day I've been facing a tremendous pressure.

In each 1 of lot of headwinds.

A lot of the.

Things to be set up in terms of new organization, new business governance ways, new values Nunavut purposes of lot of challenges with semiconductors with raw materials.

With a lot of chaotic situations geopolitical chaos.

Health related chaos of regulatory chaos.

Chaos.

That we should and I must express to my people and to all the stakeholders my sincere appreciation my warm thanks for what the half done for this.

First half of <unk> I think it's it's the great achievements coming from them. The merits goes to our employees I would like to thank also.

Our board of the Certainties board for their trust and the autonomy that day off when giving us to implement all the things that we have been doing over the last 6 months. This is still a baby company only 6 months of and you can see the results and you can see the speed.

At which we are moving I would like also to thank you warmly for your support.

On your interest in our company.

We see that we have a very strong tailwind, which is all about the synergies it's strong it's helping and it's the bottom up.

And that's very that's very important for us to understand you see the financial performance I will not comment more you'll see that on top of the financial performance. The sales of marketing performance is also quite strong.

Lot of improvement in market share, which means that we are growing our market share, which means that when the market will be back hopefully.

The volumes will grow as the consequence of strong market share positions in some cases leadership positions you see that organization business governance way are now done.

We are executing and we are moving forward you see debt, but the teams are coming together quite nicely in the day appreciates the diversity of our company.

As it is a very strong differentiator factor.

To understand the world and the communities in which we are operating on I think that's the lasting long lasting positive factor for our company.

We are now setting up the.

Software the division and as you can see on the slides, we'll come back to you in full to tell you more about the software strategy, which is coming up as a very nice and very strong.

<unk> factor also for the company.

See that we are growing our mobility services.

On the revenue side, but also on the profitability side, which means. This is also perhaps the differentiator against some other companies we are able to grow significantly and at the same time make money out of new business lines, which is the good news and as you can see we are full speed on the electrification strategy we have.

Our all in.

And the number of BV offers to the market is growing by the quarter. So that's what I wanted to conclude and the from here I would like to hand over to you for your Q&A. Please.

Thank you the Q&A session will now begin the fully move to the first question I would like to advise that all call of steel.

The limit themselves to 1 question per day.

And our first question comes in from the line of Philip Choyce, calling from Jefferies. Please go ahead.

Yes, hi, good.

Good afternoon.

I'm sorry about it.

Yes, the question of habits more cash.

General on Europe.

We seek constraints on sales in the U S because of the lack of inventory.

The clear in Europe, I'm, just trying to get your sense of what the European recovery source of still running was 25% low 2019 levels.

And also in the context as well as you saw recently makes me cancel.

Cancel the.

The other contracts to renegotiate them.

What is your vision of what the Houston should look like posted on listing your kind of the U S maybe less.

True to chain.

Tell me the vision of how you see this evolving more direct selling what it meaningful profit of key.

Thank you.

Well. Thank you. Thank you for the 2 questions that you have raised the.

The first of all.

We are managing the company as a global company and therefore, we are perfectly able and doing so by the way to arbitrate the way, we break down the supply of semiconductors between the different regions.

This is something that we can do this is something that we have been doing which means that we can protect the best parts of our business if need be.

In the way we are managing this supply of shortage in the future. So Europe is not in the Standalone position Europe is part of the global seventies and Europe is managed in a coordinated way with the other reasons by the way there is a very spontaneous and proactive level of solidarity between the regional <unk>.

Owes the meat and they discuss together to see what is the best possible possible way to maximize their business opportunities and I'm keeping an eye on the the inventories of course the inventories on the OEM side are quite limited because we are absorbing.

The cars as they are produced in the dealer network, but as you have seen we have more than the 700000 cars in dealer inventories. So there is still a lot of cars to be resisted by our customers in the in the dealer inventory of course.

My people would like more and rightfully so and we have to improve and of course the visibility that we have on the semiconductor supply is not great.

I think that's all my peers have been telling you. This over the last few weeks that the visibility on the supply.

It's not the very good to say its bad but it is also fair to say that we do not expect it to get worse.

We expect Q3 to be difficult, but we expect to see some improvement from the from Q4. So overall as it was mentioned in the new guidance for 2021, we expect H to not to be worse than H, 1 and if that is the case then we are on the right path. The this is.

What we are seeing we have a lot of discussions now ongoing with the the many suppliers. We also have a great.

Great team debt.

I would like to praise here in front of you.

Working on the alternative solutions by the day, it's the 24.7 team.

Very strong engineers very strong per chasing managers working collaboratively.

To find out what are the alternatives that we should put on the table and validates to make sure that we avoid some of the shortages that we can foresee moving forward. So this is working quite well.

Better and better I must say and I think that we'll be able to support that moving forward, but the visibility that we have in the automotive industry on the semiconductor supply is still quite quite poor I think that that's what you can take away from all the comments from the carmaker Ceos that you have been hearing from over the last few weeks.

In terms of dealer contract it is quite clear that the electrification of.

The automotive industry is now, bringing new challenges and new opportunities.

And the it is fair to say debt, our dealers have been asking us for awhile to clarify.

What's the future will be.

I think it's the fair, it's a fair request and at the same time, our answer to them is well, let's discuss it and let's build the together.

It may be more direct sales it may be the new distribution model.

It is up to us to co construct to what that will be on.

Under the legal constraints in which we are operating Europe, the best way to trigger that kind of discussion was to give the pre notice to everybody.

By putting ourselves in the legal frame that we are expected to be in and then having a very open and constructive discussions with them the.

This is what is going on right now and I can tell you that the.

From the reports I get the discussions are very productive and very well intended.

I think that our dealers are very mature business people they completely understand that something needs to change that we are moving to a new world of different world in terms of distribution and the of course, there will be there will be of business for each of us moving forward, because we need to take care of our customers the.

The are asking us to protect their freedom of mobility. This is a big lesson learned out of the Lockdowns is that the value of the freedom of mobility has been increasing sharply.

By the way. This is the reason why our order book is growing by the day is that people understand that the automobile is the fantastic tool to protect your freedom of mobility and the our dealers are very mature people they understand that something needs to be adapted to this new reality. This is exactly what we are discussing right now so it can be direct sales.

It can be different ways of retailing the products, maybe a different distribution model. This is what we are discussing with them and so far regardless of the brand.

We see very positive feedback.

The back end very well intended the contribution from our data of associations and I would like to take this opportunity to thank them and the.

Congratulate them for the open minus flexible mind.

In this discussion I think it's in the best interest of all of us to find the most appropriate distribution models for the future and this legal constraint that we have is giving us the good opportunity in the appropriate timing to have this discussion. This is the reason why we did not hesitate to give this global pre.

Notice to all of them to open the way for this open minded discussion thats, where we are today.

At this stage only positive things are coming up and let's see how we can conclude this discussion in the next few Ah shall weeks.

Let's go to the net next question. Thank you.

The next question comes in from the line of George Kelly of credit from Goldman Sachs. Please go ahead.

Yes. Thank you for taking my question, so I really want to focus on the cash flow if I take the $4.5 billion you did in the first half.

Provisions in working capital as the percent of the operating income it is around 53 per ton.

When we think about the full year cash flow if we apply the same percentage to the implied EBIT net 10% margin.

Would suggest something from the reaching of 7.5 to $8.5 billion of free cash flow.

If we then deduct the incremental $1.5 billion, you mentioned the financial charges and taxes. It would leave us the $6 billion to $7 billion of free cash flow for the flu. Yeah. I know you don't have the free cash flow guide.

It's in the right ballpark and if yes, I realize we'll know more about your capital.

Occasion policy and thinking.

The empty next year, how should we think about the capital allocation.

Thank you.

Well, thank you George and I will give the floor to reach out for a more technical answer to your question of I would make just 2 comments first of all of you are an optimistic man and I'd like to discuss with optimistic people because I like to see the future as being better tomorrow than it is today. So welcome to the club that's point number.

The 1 point number 2 is that in terms of capital allocation.

Thank you you can keep in mind that we believe that we can be highly competitive.

By being around the 8% of turnover in terms of R&D and Capex.

Pending we believes that right now we have around 30% more efficiency and effectiveness in the way we are using our capital than our peers and we intend to keep this 30% efficiency and effectiveness premium.

Against our peers. This is related to the way we spend our money the rates. It's the way we manage our diversity complexity the rebid.

Related to the way we manage.

The product planning strategy of the company and we are going to continue to protect those 30% premium because we believe it's part of our DNA and it is completely consistent with the 8% R&D.

R&D and Capex spending against turnover and I think we can do debt while protecting the full competitiveness of the company mid and long term that we are working cap and free cash flow question I would like to hand over to Richard.

Thank you Carlos.

So in terms of your math, Georgia.

I think it sounds a little optimistic to me too so.

Obviously on the pessimists of the 2 but.

As part of the job so.

We expect second half to be very strong, obviously and that's why we get to a positive full year cash flow.

And the obviously the big unknown frankly is how does the out of the semiconductor profile work out through through the second half and I made out of the impact the the balance sheets. So.

I think we feel pretty good about the fact, the first half to second half semiconductors.

Should not get worse, although obviously, we need to cover the caveat that with the.

Of the lack of visibility frankly within the supply chain. So.

There were some discrete events in H, 1 of Malaysia continues to be a problem for us and others coming into the beginning of this quarter. So you know it's difficult to be very precise about what second half volumes will be so I think we're being a little bit prudent on the cash flow of saying, it's going to be positive it could be.

Better than better than positive, but I think for now we'll stick with that.

As regards capital allocation.

Carlos I think you know.

Part of the strategic planning exercise that we need to come back to you all with is how we think about capital allocation.

Clearly we have.

Our strong balance sheet, we of 50 billion of liquidity.

We have lots of places to spend money on in terms of of the technology challenges that are coming as we're all aware of.

I'm sure we will have a distribution policy from for our shareholders other girls dividends, which will be in line with sort of prior practice of the 2 companies and with the industry sort.

The standards. So I'm sure we'll have enough capital of about I believe the company will generate substantial cash flow once the volume impact of semiconductors is no longer with us.

And we stabilized that number so you know pretty confident about the cash flow going forward and on the dividend policy, but I don't want to.

Preempt discussions around on the strategic plan that we need to have with the board and then then with yourselves.

The question.

The next question comes on from the line of come off the phone calling from Kepler.

Please go ahead.

Thank you very much if some of the phone control.

I'd like to follow up on on more on the.

The possible.

You managed to reach record it.

On margins for the first months of your Baby company.

But a lot of companies appear to be reaching peak margins already in each 1 of them Shaw.

You don't want that to happen.

I'd like to check with a variety of reasons for us to believe the institution below of the niche 1.

With the synergies the probably rising.

On the very strong pricing environment.

On my right to believe as well.

Joined tension.

1 is to have the profile of the launches in terms of margins looking a bit like the 1 of the of Peru from your arrival to the moat of thank you.

Well.

As you pointed out the tomo are the big Gorilla in the room is the semiconductor supply.

That's the big Gorilla.

I told you that we are starting the very strong.

The synergies so that must be of tailwind.

The problem that we all have is that the.

The measurement of the magnitude of the headwind coming from the semiconductor is not great.

That's why we need to keep some of some kind of.

Of our attention to the to this topic, we are going to continue to be very disciplined.

And the way we run our operations discipline in terms of inventory discipline in terms of price empower the simply needs from software distribution costs. We are going to continue to put strong pressure on variable cost as much as on the on fixed costs. So we believe that the things that we can do.

The 2 continue to face headwinds now the speed at which all of those things will materialize.

We will see.

This is now a bigger company in the with a strong regions are strong.

Strong engine moving forward we.

We need to do all of this and at the same time.

The company of the possibility to breathe enjoy the autonomy debt each region needs to have to.

Enhance is on business. So that's what we are now going to do the tailwind is clearly the synergy amount which is a.

Starting to look quite good, but it's all about execution.

The only reporting to you what has been executed not the forecast and not work as planned just the executed part there is tailwind there are the <unk>.

<unk> of the of the headwind in the raw material cost inflation and in semiconductor or any additional lockdown is still very uncertain. As you may see you see that in terms of Lockdowns are there's a lot of hesitation going around in the world because of the Delta variant.

If I was able to predict the future.

The possibly with you doing something else, but I'm not I'm not able to predict the future. So the only thing I can do and this is exactly what we are doing with reach of this putting us met as many tailwind as we can.

In the motion to make sure that statistically we the tailwind that we put in motion we can overcome the headwinds that's where we are right now.

But it will be also possibly excessively prudent to.

Consider that the semiconductor would be worst in age to the niche..1. So we have made the decision on I have made the decision to consider debt.

The semiconductor.

Apply will not be worst in H 2.

And the reason why I'm, saying this because we have a great engineering team looking for alternative solutions.

As the risks are appearing in before sometimes they even materialize. We already have an alternative solution to go around this kind of a hurdle, but it's very tough and the C. I would like here to convey my sincere and warm appreciation to my to my people the employees of <unk>.

<unk> are really really working more than hot and the C. It's very interesting to notice and I'll keep that for later that nobody.

In the current environment being in Europe or in the United States. Nobody is taking care of the pressure on the stress that is imposed on the automobile automotive industry.

It's quite surprising.

We of 14 million people work in the automotive industry in Europe.

And nobody is carrying about the stress and the pressure that is put on all of those great people that are trying to bring safe clean and affordable mobility mobility solutions to our citizens and the pressure is growing by the day.

With the new objectives that we are expected to meet so this is also part of the things that we should be thinking stepping back a little bit and thinking debt. We have 14 million people working automotive industry in Europe, which possibly is the same number around the same number in North America.

A significant number in Latin America, and the all of this pressure is being put on the on this people with no consideration for the way they would feel and they would support and resist to this pressure and I think that we also need to think of all of that we should do that and the of course it is on.

So part of my role to make sure that we accommodate.

To this kind of situations that we protect our employees and protect our people and the cohesiveness.

Of our company so to answer your question, we will put in motion as many tailwind as we can.

And we are the few.

Expecting that things will not get worse on the semiconductor supply in H, 2 that's where we ought to the Thomas and sorry, I cannot give you more.

Thank you very much.

The next question comes from the line of the cross connect from from the financial Times. Please go ahead.

Hi, there thanks.

Thank you.

And I wanted to ask a question it kind of follows on from kind of falls.

Hi, Stan.

Sure.

Prioritizing kind of it.

Total range of cars and.

For the tip of supply that it does.

Some of income taxes.

Like Volkswagen.

Well very simply by looking at the per unit margins.

This is the this is what we are looking at on the of course, we are looking at.

The the compliance factor in terms of steel to ensure that the regions are compliant as they should be.

As compliance as they should be in the once we have of production planning that is protecting the compliance of the region. Then we look at the per unit margins and we tried to breakdown the supply in the most efficient way.

That's that's how we proceed right now so the number 1 is compliance and number 2 is per unit margins in the the potential.

To generate a profit profit in the.

On the March basis.

When we are allocating those the semiconductors, that's how we proceed.

Nothing there is no silver bullets is very basic and very simple.

Got you thanks a lot.

The next question comes on from the line of Jose asked the mandate kind of from Jpmorgan. Please go ahead.

Thanks, very much I'll say it anymore on the.

Carlos on Richard Congratulations on the <unk>.

Start of the.

The first 6 months of the year I wanted to come back to the to the to the cash flow.

If you could elaborate a bit on what are the levers to unleash the.

The cash machine right, you've got the Capex and DNA.

Representing quite a lot of the substantial outflow.

The here's some examples of how you what are the key levers to neutralize the capex DNA on the on.

On cash and also Carlos if you could give us some examples of how you're managing to make better use of the Italian of industrial footprint. Any details you can give around how many shifts you have taken out how youre managing to make better use of the of resources. Thank you.

Well. Thank you Jose I will answer the second question on Italy, and then I will hand over to Richard for the first 1 on the free cash flow, which is the.

The more technical 1.

On Italy.

The very good news as debt.

We have in Italy.

Found the proper way to discuss with our Union partners.

Which is showing them what is going to happen to your automotive industry.

In the near future and showing them that if we do not move if we try to protect the status quo then we put ourselves in the in big trouble.

And that's quite obvious for all of US. So we just had to explain this.

In the very simple of respectful way looking at what are the 2 objectives.

Looking at the fact that if we don't meet the Yosuke 2 objectives, we put ourselves in the in deep trouble.

And then if we go fast and strong in the electrification direction, then we come up with another problem, which is the cost of electrification, which we all know is around the 40% against conventional mobility and we have to absorb those 40% between now on 2025 as I explained to you.

On the Eve of day, so everybody understands that not moving on the Seo to means the.

We put the company in <unk>.

The meeting the 2 objectives is the most and that can only be done through the scientific decisions of the states in which we operate through the absorption of 40% of an additional total manufacturing cost coming from electrification, which then means a lot of contribution.

All sorts of directions, not only what we would call them on those who can redirection of but also the distribution direction.

And of course, we have a specific plan to do that and this is the reason why we committed.

In the EV day to be on double digits from 2026 in the <unk>.

Fully electrified environment and the buy just explaining respectfully and simply what is at stake and the what will happen if we don't.

Move if we just try to protect the status quo.

We could come up with the 10 performance agreements with our Union partners in Italy, which is now creating.

The positive motion in our Italian operations as you saw the 8.8%.

The margin of Europe is also demonstrating that we are now moving.

In Italy. In addition to the fact that now Opel Vauxhall is highly profitable and the of course bushels of twin deaths.

Is highly profitable so I think we are now.

Moving on the right direction and there is no static pool.

T Z because.

Not everybody has the supporting of such a fast change in the industry, but people understand that the the management of the company is just trying to do its best to protect the company, which is adapt the company to a new reality and if we don't do it then the company will be in trouble so the quality of the.

Dialogue with our Italian unions is quite high and the quality of our dialogue with the Italian government is also quite high. So we were able to have positive and constructive discussions by the way led by our Italian teams.

Which is to the merit and making sure that we also bring our fair share of solutions.

Which we have done through the announcement of the chicken factory and the there will be most probably some other announcements in the future, which hopefully will support this good understanding of what's going on in Europe. This is where we are today are on Italy Jose on the let me hand over to Richard for the free cash flow question.

Thanks Carlos.

Well as you know Jose.

Sure.

Cash flow for the half the the other significant impacts of the volume.

I think in general in terms of the cash levers 1 we are working very.

Clearly on the efficiency of of Capex on R&D and as Carlos mentioned, we are the most efficient OEM on that metric and we need to continue to be so.

Notwithstanding the challenges in terms of technology and then secondly.

That will be supported by.

The synergies execution you know.

Around 40% of lot of synergy execution comes from Capex and R&D through the through the 4 of 5 year plan, we have on the synergies and so that will support our ability to maintain that number on the on the low end of the industry.

And and then the other part of the synergies on the call on the cost side is clearly going to help us to continue to improve our margins.

Which fundamentally obviously leads the cash generation.

The.

Focus of across all parts of the business, so used cars parts and service new cars and on.

New business areas.

Which are very clearly improving their performance.

Insulin is even in the last 7 months.

And then I think the other part is clearly something that did hurt us a bit.

In the last year also is the inventory on the industrial side, because clearly with the stop go.

The process, which is caused by semiconductor supply.

Volatility that's hurt us in terms of inventory there. So I think we have opportunities to improve.

As the planning and execution on the industrial side goes back to a more stable.

The more stable process, we'll be able to improve our working capital there.

So I think we're working on all of these of them lost the distribution model.

The turnover, we've seen sorry, the turn rate that we're seeing in the dealers has improved significantly as we reduced our dealer stock, which obviously to some extent it's been caused by preferred COVID-19 on now.

No.

On the semiconductor shortages, but I think it's showing us the.

The way of managing the business, which is maybe.

Indicative of the high we'd like to go forward.

Because with this lean of distribution model clearly the cost of managing distribution, reducing and then as we talked about earlier. The next step is how do we look at distribution going forward.

And the go more.

Towards the other other parts of types of distribution in terms of direct sales of build to order versus build the stock et cetera. So all of those things are on the table, obviously to improve our cash conversion in the future.

Thank you Richard net.

Thank you Jose.

The next question kind of thing from the line of Martina damper, Okay on from equity. Please go ahead.

Thank you.

Good afternoon, and good morning, everybody.

The focus is on price is if I look at your slide 21, where you present the.

Adjusted operating income of a breach.

You present, the net price together with content.

So the first part of the question is on is for Richard.

Right in assuming at least the 80% of this block.

Comes from net price.

And the second part is for Carlos on how long do you believe is such a positive environment for the prices that we lost the.

Or from a different.

Moving to view of how much is due to your portfolio your ability regardless of the market environment.

The.

What do you expect.

When the market is back to the norm to normal life.

Do you expect the return to the usual price pressure that we used to see for several years in the sector.

Yes.

Well. Thank you. This is the 2 great questions, let me end of and over the.

To reach of the after you answer the second 1.

First of all I see a lot of inflation coming.

I believe that the there is inflation not only coming from raw material.

The raw material cost increases, but also from a certain number of <unk> and balance between supply on demand on a certain number of components. So I believe that there is inflation.

The we have a clear intention which is to make sure that through the appeal.

Of our products through the clarity of our brand positioning and market communications.

And through the discipline of our people, we will put our pricing power out of the best level of the industry.

Which means 2 things when we have the gap against the benchmark there is an opportunity to improve the per unit margins. When there is no no GAAP and we are ourselves of the benchmark then we will make sure that we we take into consideration all of the inflationary pressures and some of them.

We will be passed to the final consumer some others, we will be able to digest, but if we are setting the pricing of the market because we are the benchmark of the market. So the years so.

So it's not the case everywhere as you have seen through the presentation of some cases, we still have more room, but the good thing is that we are all submitted to the same inflationary inflationary pressures either coming from raw materials are from scarce components are from electrification.

So the real issue is going to be in a few years.

If the cost of mobility.

Is increasing then I see 2 measure of questions..1 is how are the citizens.

Going to react in of democracy, when the cost of individual and family mobility will increase.

The which is the consequence of the decisions made on the electrified technology.

How are they going to react as the citizens in of democracy.

That's not a question for me it's the <unk>.

<unk> for the politicians.

And the second question is if the cost of mobility increases.

Then.

We need to take care of the used car market and the we are doing so in a very efficient way because our volumes and our profitability on the used car business.

Our improving for our company and we are trying to leverage that and you have seen that the IPO of a remiss was also a very good very good IPO. So that business is growing and that business is profitable.

We need to be on the used car side of the business as we are to the young and growing in the direction. That's the reason why we have made the IPO is to support the growth of our remiss in AR and the way that would give them more breathing space, which we are happy with.

And of course, we also understand that if the mobility starts to be too expensive.

Then the size of the markets may be impacted and for that we have to manage the breakeven point of our company, which as you may imagine we are actively managing the breakeven point of the company and we we keep ourselves very very far from the limits to make sure that we can accommodate any volatility.

<unk> and right sizing from the market as the consequence of the fact that the freedom of mobility would become too expensive for a certain part of the middle class and that's that's the.

The problem for the lifestyle of our societies on our democracies as much us forest of business issue that we need to prepare for if that was too often but we are we are working actively on that on that front and I don't think debt will be surprised.

The other Oems before us will be eventually surprised by that move and the this is where we are today and I would like to hand over to Richard for your question on pricing.

Yes.

Have a precise number for you.

And 1 of the challenges of putting together the 2 large groups as all of these metrics on exactly the same on both sides of the house of we're working through some of these.

Sort of.

Lower kitchen activity, but I think your.

I'm confident the most of it is price, yes, whether its 80.70 other net.

But the vast majority is price.

Your point thank.

Thank you. Thank you thank.

Thank you. Thank you next question please.

The next question comes from the line of Patrick Hummel of credit from UBS. Please go ahead.

Thank you very much hi cars on Richard.

My question.

Relates to the guidance.

The synergies that you've reported for the first half of the year, you said, you've done $1.3 billion.

On the first half of just wanted to reconfirm is that like an annualized number or should we think about at least double that as the full year number and would that number have to be seen in the context of the more than 5 billion target, which you gave for year 4 after implementation of the merger so that sounds like a quite big number to me.

For the first half and I just wanted to make sure I get this right and maybe if you can be a bit more granular how much of the synergies relates to reduce the 2 compliance cost in that $1.3 billion and if I may just for the second half guidance can you share at least ballpark number as far as the raw mat headwinds are concerned.

For <unk>. Thank you.

Well. Thank you first of all of it before I hand over to Richard.

The just who'd like to to highlight the fact that your understanding is correct.

What we have committed to you is that we would bring 5 billion euros of synergies.

Most probably from the euro 5 and the.

The 80% of that from your 4.

And against that kind of commitment we are indeed, starting very strong.

And the 1.3 is the H 1 number on the but I'll, let Richard comment for what the E C.

For the full year Richard.

Yes, Thanks Carlos.

Thanks, Patrick the.

The like I said.

The 1.3 years each 1 of the 1.3 includes.

The cash impact.

Of 900 million of R&D and Capex on the rest is on the cost side. So it's in the.

The old going through the P&L, yet because of course, the R&D capex the cash benefit comes first.

Capitalized and then we put them into production of Mr. DNA, So that it doesn't all come through the P&L instantly.

And so the P&L impact is about 600.

Of the amount and then the full year number I wouldn't just double it because to the point.

On the Capex is lumpy. So I think we expect to continue to generate more synergies in the second half, but I wouldn't double it.

For the for the full year.

And then yes. The compliance costs are included in the synergy and the H 1 number it was about 130 million euros.

Thank you.

The raw mat headwinds for a true if you the mine.

Apologize yeah, the romance headwind. So we had the 750 million H 1.

I expect it to be double that H 2 so we expect of 1 point of margin.

Worsening potentially in H, 2 because of raw mats. So was it a part of.

The slightly lower the guidance, we're doing an H 2 as compared to H, 1 together with obviously the uncertainty around the semiconductors.

Thank you so much.

Thank you. Thank you next question please.

Thank you and the next and final question in the queue from the line of Charles <unk>.

From Redburn. Please go ahead.

Hi, Thanks for taking my question.

Wanted to ask on NAFTA.

Can you give us an idea of the impact you expect from the wagoneer.

In the Grand Wagoneer, maybe in terms of production units coming out of Bard once it's fully ramped up.

Maybe also on either of the level of profitability of those models relative to the margin Youre currently doing overall in NAFTA.

Before I hand over to reach out of what I can tell you is that the number 1 those products are highly profitable there.

Therefore, our somewhere there will be prioritized in the ore in the ramp up.

And of course at least.

Stage, it's still a little bit early to talk about the order book.

I think that we should wait a little bit of more a couple of months before we have a clear visibility on the other broke and of course, the ramp up to a certain extent will be adjusted to the order book, but what we can say is that is highly profitable.

It's of course, something that we are going to protect moving forward.

The I think that we lack a little bit of visibility of before we give you precise numbers on how many are we going to produce this year, but perhaps the reach other has a more precise view on this matter.

Yes in terms of the impactful of the year the.

Ramp up of it in Q3, we start to get more significant production in Q4. So it's.

For the year on I think will be around 20.30000 for the year and then we will ramp up through the first half of next year. So I don't want to create a target for the team on volumes were clearly focused on margins on that type of vehicles in the segment. It sits in.

But safe to say the the margins are very strong in that segment, we've seen the types of price positions that our competition holds and.

I think the.

There's definitely an accretive impact to our margins from those vehicles coming in together with the the 3 row of Grand Cherokee as well, which obviously, we're ramping up now and will also be.

A positive impact on second half volumes compared to first half of it was.

Assuming we can get the semiconductors.

Clearly.

Thank you each other.

I think this was the final question or did I misunderstand.

That was the final question from I'll hand, the aircraft's yourself for any concluding remarks.

Very good well. Thank you very much first of all I would like to thank you all for your thoughtful questions. As you know we are always trying to progress based on the the quality of your questions on it is for us always of rewarding moments to discuss with you.

I would like to thank you for not only our interest in certainties for your thoughtful questions and a force of course for your support.

To our company.

I would like you.

Just keep in mind that are still on Tc still of baby.

Debt, we are moving very fast debt our business governance way is now operating that.

Our people are expressing a great deal of enthusiasm with a lot of bottom of proposals.

And that we expect to continue to create more tailwind to face the headwinds of course, we have no crystal ball not better than our peers in terms of what will happen with the semiconductor supply. So we are just considering that it should not be worse in <unk> than it has been in H, 1 and from there.

We will do whatever we can to improve the efficiency and effectiveness of our company.

And of course, we are doing this in full respect of compliance quality and.

And our people. Thank you for all of you in the few very soon thank you very much.

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