Q1 2022 Stellantis NV Corporate Sales Call
Hum.
Yes.
[music].
Hello, and welcome to the Atlantic Q1, 2022 reps in each call. My name is Josh and I will be your coordinator for today's event.
Please note that this conference is being recorded and so the duration of the call Youll find.
It will be on listen only however, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question.
If you require assistance at any point, Please press star zero and she will be connected to an upright.
I'll now hand, you over to your host dry up and Denali to begin.
Great.
Thank you, Josh and welcome to everyone joining us today as we ever used Atlantis as revenues for first quarter of 2022 earlier today. The presentation material used during this call along with the related press release was supposed to under the investors section of <unk> group website.
Our call is allstate's by Richard Palmer, the group's CFO . After his presentation, Mr partner will be available to answer questions from.
Before we begin I want to point out that 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 two of today's presentation.
As customary the call will be governed by this language now you would like to hand, the call over to Richard Palmer CFO Scott.
Thank you Andre and good day to everybody, it's good to be here.
So starting on page three.
What do you use your explanation of the fact that we continue to compare.
Performance to pro forma numbers for Q1 2021.
Given that the merger happened halfway through January 21.
Is that in the numbers as if it had happened on the first of January .
January 2020.
It's 22 actuals for Q1 compared to the pro forma Q1 'twenty one.
We are going to be looking at net revenue performance for the quarter.
Going to page four.
A quick summary of some of the highlights.
Back off.
Last year's record financials, we're full speed ahead on the execution of our long term strategic plan, therefore, with 20, <unk>, which we announced at the beginning of March until the quarter, we posted strong.
<unk>.
Q1 revenues with.
$41 5 billion euros, and a 12% increase over the prior year, despite a consolidated shipments being down 12% year over year. So just short of $1 4 million units.
We'll discuss the drivers of that performance in the next few pages.
From a market share point of view, we also had a strong quarter in South America, we strengthened our leadership position with a 23, 6% market share up 150 basis points and we were overall market leader in Argentina, Brazil and Chile.
The North America market share improved 30 basis points to 11, 7% driven by demand for a reason vehicle launches. The Jeep brand was a clear winner with an 80 basis point improvement and it is North America, driven by the two and three row versions of the all new Jeep Grand Cherokee as well as the new Wagoneer and Grand Wagoneer.
Our market share in the large Europe was negatively impacted by product availability.
Semiconductor shortages hit this harvest in that region I will say it was down 190 basis points.
From 29% in Q1, 21% to 19% in this quarter, although Q1 'twenty one was a particularly high performance. If you look back at the sequential quarters and you use that we maintained our leading position in commercial vehicles, achieving a 34% share in the quarter.
Globally, our bed sales were up 55% to 60000 units.
That's really driven by and large Europe sales up more than 50% year over year.
And as we progress in the execution about the forward plan, we've entered into strategic partnerships with Amazon and Fox gone as part of the software strategy. We also executed partnerships with LG LNG solution and automotive sales company, securing additional battery cell capacity in Canada.
And in Italy as outlined in our strategic plan and two days ago, We announced our mobility brand for you to move will become the European leader in the mobility business through the acquisition of Shan now extending its operations to cover 16 major European cities in five U S.
Cities with more than 5 million users.
I'd like to highlight also the last week, we paid out one one euro and full cent.
Ordinary dividend to our shareholders, which was approved at our AGM on the 13th of April in total distributions of $3 3 billion.
Moving to page five we show the shipments and revenues for the group the increase in revenues of 12% to $41 5 billion for the quarter shows the strength of our business to weather. The recent headwinds caused by volatile macroeconomic conditions as well as the continued negative impact of unfilled semiconductor orders, which continue to constrain our volte.
<unk>.
We continue to take prompt commercial actions in all segments to protect our revenues and profitability.
These drove significant contributions from positive net pricing unveil vehicle mix in the quarter facilitated by important product launches that I mentioned mentioned earlier.
Moving to page six we show the walk from the pro forma revenues for Q1, 'twenty one to the Q1 'twenty two revenues at a segment level. The revenue growth was driven by North America, plus 30% and South America, plus 40% more than offsetting extended Europe down 9% extended Europe was the main reason for the.
Volume and market mix with shipments down, 24% or 201000 units, partially offset by North America, plus 6% or 29000 units.
The main drivers of group shipments being down 193000 units or 12%.
The main driver was the semiconductor shortages were experiencing which I'll cover in more concentrated in a handful of large suppliers with extended Europe in particular, but also in EMEA and South America more affected than last year, while North America was less affected describe a positive regional mix impact our group level, which helps.
Set around half the impact of reduced volume as shown in the walk in the volume and market mix bucket.
Net price and content and vehicle mix added four and a half billion euros with all regions showing strong year over year improvement.
North America accounted for around 50% of the vehicle net price in vehicle line mix improvement and extended Europe for 25%, South America, and Middle East and Africa had the largest percentage improvements each at over 30% due to pricing to offset inflation and FX translation respectively.
FX translation was positive at $1 6 billion due to stronger USD versus euro and real versus euro offset by negative Turkish lira.
And the other bucket of 0.6 billion positive was driven by lower levels of fleet volumes, particularly in extended Europe , and so less less buyback sales as well as improved performance in parts and service.
Next on page seven.
The segments.
Starting with North America as I said previously Telemarket psoriasis market share improved by 30 basis points to 11, 7% in a market that was down 15% sharing.
Sure improvement was driven by the Jeep brand up 80 basis points and partially offsetting indulge brand due to the discontinued grand caravan in journeys.
Total sales reached 462000 units down 13% with shipments up 480000 up 6% and so there was some minimal replenishment of dealer stock levels, which finished at just short of 300000 units.
Shipment growth was driven by Jeep.
50000 units due to the great Jeep Grand Cherokee Al and Wagoneer, and Grand Wagoneer with Ram down 14000 units due to reduced shipments of 1500 and per Mazda.
Revenues were up 30% or nearly 5 billion euros with volume and market mix price vehicle mix and FX all contributing as the new products gave a further boost to the region's continued strong performance.
Moving to extended Europe . This was the region most impacted by semiconductor shortages in the quarter as I mentioned any use 30, the market was down 12% with some key markets down more such as Italy down 23, Spain down 16 in France down 90 of our 190 basis points reduction in share 30 basis points was due to <unk>.
Market mix.
Dealer stock levels were down in the quarter with sales of 678000 units exceeding shipments of 622000.
Shipments were therefore down 24% despite the benefit of strong demand for new launches such as open market Scooter and Fiat 500 the.
The impact on revenues was mitigated by improved pricing across all brands and positive vehicle mix due to the run out of the <unk> segment C. One in 108 vehicles as well as increased LTV mix.
Regarding middle East and Africa.
Market share was down 40 basis points to 11, 2% despite being up in a number of the main markets in the region.
This was due to market mix as Turkey, where I'll share is around 30% was down 24%, whereas the overall region was down 7%.
<unk> shipments were down 4% to 67000 units due to shortages of vehicles, mainly from European plants revenues were up 7% as the team took strong pricing actions over and above those needed to manage cost inflation offset significant FX impacts in Turkey in particular.
Moving to page eight.
South America had a strong quarter further consolidated its market leadership.
As driven by Peugeot and Citron with Opel Jeep and Ram also all positive offsetting some share loss by fit due to semiconductor shortages.
<unk> reached 184000 units down, 5% and an industry that was down 11% shipments were down 8% due to increased semiconductor losses versus prior period, especially impacting the Fiat brand.
Revenues were up a strong 40% or 0.8 billion euros, driven by strong positive pricing in all markets positive vehicle mix due to fear pulse Vietnam, who now in Jeep commander and positive FX Q2 real appreciation.
China, and India, and Asia Pacific Consolidated volumes were down, 7% Jeep Grand Cherokee and Wrangler up in China, as Rajiv campus, and Peugeot 3008 in India, and Asia Pacific, but these were more than offset by shortages on other products positive mix positive pricing was driven by actions in Japan and Korea.
And contact makes us drive driven by the Alfa Romeo Giulia, GTA and that'll be over last year.
Maserati shipments were down 20%, mainly as a result of reduced volumes in China.
Revenues were down just 5% due to better pricing on model year, 'twenty, two vehicles and positive vehicle mix due to MSC 'twenty shipments. The brand is now very focused on the upcoming launch of the old <unk>.
Call it at the end of Q2.
On page nine we show the status of our inventory compared to last March total inventories are down 35% to 807000 units.
Compared to December inventory, we are basically flat, but dealer inventory is down 10% of offset by an increase in company inventory compared to the seasonally low level at year end as the plants go down for year end shutdown the.
The sequential reduction in dealer inventory was driven by semiconductor shortages and extended Europe , taking dealer inventory to 217000 units the lowest quarter point, we have had whereas North America was actually up again for the second quarter in a row, just short of 300000 units compared to the low point at the end of Q3 2021.
The other shipment the other segments due to inventory levels were also slightly will slightly down compared to year end levels.
Moving to page 10, we review our full year outlook.
We've reduced our 2022 industry outlook in North America from up 3%. So stable and then allows Europe from up 3% to down 2% as a result of the slower start in those markets do you may need to supply chain shortages driving reduced product availability, but also due to economic uncertainties, which are impacting trading conditions.
Particularly in Europe .
Nonetheless based on our strong revenue performance in the quarter, we confirm our full year 'twenty two guidance of double digit Oi margins and positive industrial free cash flows.
We have some key new products in market, which will support our performance for the rest of the year such as the Jeep Grand Cherokee and commander Wagoneer, and Grand Wagoneer Pulse Opel Masker pleasure three O eight DS four and Maserati empty 'twenty and we will have further important product launches in the rest of 'twenty, two including the Maserati Cotter Opel Astra.
And also a Mayo tonality.
We should note that full year volume forecasting continues to be challenging due to the continued shortages of semiconductors and we continue to have limited visibility as to when volumes might significantly improve.
We believe that any sequential improvement in 2022 is likely to be modular and weighted towards the end of the year. Even if Q3 is expected to be better than last year due to the significant impact of Malaysia in that quarter.
H one volumes will continue to be challenging, but we're confident that we can continue to deliver on our financial commitments for the year.
Thank you all for attending this call and now we can move to Q&A.
Thank you very much if you would like to ask a question or make a contribution on the call. Today. Please press star one on your telephone keep haps now. Please. Please ensure your line is unmated locally and then you'll be introduced.
That's a star one on your telephone keypad now place.
Our first question comes from the line of Patrick Hummel from UBS. Please go ahead.
Yeah. Thank you good afternoon, Richard I'd like to ask you two questions.
The first one is on the dynamics around pricing versus raw materials. You. Obviously, you had a very very strong.
This mix positive contribution in the first quarter and I guess are you.
I mean, you have disclosed it but probably the year over year increase enrollments was less than the $2 6 billion that you were able to book in.
And the revenue bridge on price and content.
So for how long do you think.
You can't sustain price mix, increasing more than the raw mats and if you can give any updated view on how big the enrollments headwinds will be for the remainder of the year, obviously the market is thinking.
That that margins will at some point get squeezed that's what the valuations at least are telling us. So I'm just curious to hear your thoughts about your pricing strength in the coming quarters versus raw materials increase.
And the second one is on order intake I mean, clearly inventories are low.
I'm just curious we heard from a competitor of yours that order intake.
Somewhat softer year over year, but there.
There is a big or a bank to execute on so if you can just share.
Your latest data point as far as order intake is concerned that would be much appreciated. Thank you.
Thank you Patrick.
So in terms of price versus raw materials.
<unk>.
And clearly we had.
Another strong quarter in terms of pricing as you mentioned.
Which if you look at a group level is something like 7% up.
Year over year.
And in line with continued increasing in price levels and I think we're very confident that we can continue to offset.
Raw material inflation.
Headwinds.
With pricing.
The number we gave you for the full year for raw mats was about $4 billion.
Switch.
Honestly I think might be a little shy of where we will end up for the full year frankly, given the most recent movements in the market, but 4 billion on something.
Something that's something like two 5% of <unk>.
I'll run rate revenues based on Q1, so two and a half compared to seven.
We're well ahead of the curve in terms of.
Offsetting.
Several impacts obviously, there are other inflationary impacts as well in our cost base.
But they are of a.
Much lower.
Well much of that quantum the raw material impact so I think.
We've been ahead of the curve.
And pricing I think the fact that our.
Product lineup continues to be very competitive and we have a lot of important launches that we just made and further launches coming across our brands.
I think also augurs well for us to be able to continue to.
Price with a competitive product we have.
In terms of order intake.
Yeah, we have a very strong backlog of orders and the order bank.
For the regions in general and.
I think at the minute.
Our concern is more about.
Supply.
Our on demand.
It's difficult to tell.
To some extent the mix of those two impacts on.
The market place and demand I think we're seeing a continued strong demand in North America.
And.
The overall Saar is sort of coming coming back slowly.
Months by months that we've seen in the last few months.
From a relatively low start and.
Our product lineup is.
It's really strong in North America. So.
As we got a bit more production year over year, you can see the share count.
Going up despite the fact that we don't have very much volume or total fleet.
Amen.
Europe is a bit more complex I think because.
Year over year, our comparison to Q1 of last year as impacted in terms of share by a very strong Q1 last year, but if you look at the sort of sequential share performance.
It's quite in line.
From a quarterly point of view.
The level of inventory, we have in Europe like I said is at its lowest level.
Quarter point.
Since we've been in the last Atlantis, which we're convinced there is impacting our ability to.
You have to move quickly in the marketplace and be competitive from a share point of view. So that's definitely an impact but it is clearly also.
A lot of volatility.
Concerns from consumers given the overall macro situation in Europe , So I think yes.
You could say that.
It's a supply issue, but I'm sure there's an element of demand as well in Europe , but having having said that I think I'll say it was relatively healthy it was impacted by supply.
Work on that aspect.
But the vehicle lineup is strong we continue to launch vehicles, we're launching.
The market is doing very well for April the 300, <unk> very well for <unk>.
<unk>.
The Fiat 500 <unk>.
Other bets.
We're up over 50% year over year, which is good.
Ali.
And we have some interesting launches coming so I think it's important that we continue to be competitive on the product side.
And you know.
Be more competitive than the competition.
Yes.
And if I can just follow up Richard on those 4 billion or a little more raw mats headwinds does that also factor in that.
Players are facing a lot of inflationary pressures and.
Honestly there.
We're under pressure to also renegotiate terms with the Oems or was that comment purely related to the higher commodities.
That makes you say, it's going to be a little bit more than $4 billion maybe.
Why is that the full billions of commodities as the raw materials impact.
<unk>, our exposure to raw materials through indexation and also with supplier.
Supply contracts, but it's really specific to <unk>. There are other impacts as well like I said on an energy on labor on transportation, which would increase that number but not of the same size as well.
Right.
Understood. Thank you very much Richard.
<unk>.
Thank you very much. Our next question comes from the line of Thomas Besson from Kepler Chevre. Please go ahead.
Thank you very much.
I'll have two questions as well please.
I know, it's a revenue goal.
The other one point I'd like to come back on which is not directly related to new facilities.
<unk> been on that you.
We buy back shares.
I'd like to know if there's something you could share with us on that.
On the timeline.
Possibility.
Please proceed.
Way back up to some shows you've mentioned on that first.
The first question.
Second question.
Can you say a bit more about the.
The acquisition that has just been announced.
Making you.
The undisputed market leader in mobility services.
Some stuff.
Any visible impact on your accounts.
Yeah.
Going to be.
Visible on your comps.
Thank you.
Yes Hello.
So on the share buyback as we mentioned.
This is something.
That we put into use.
Use of capital going forward I don't have anything to announce as of today, but it is clearly.
A part of our capital allocation.
We are looking at and you know when we have something to say, we will update you bill for the May not any particular news on on where we are on that process other than saying that we have capital allocated.
We move forward.
On non mobility segment, we haven't closed the deal yet so when we close we will give you a bit more information on.
The impact from a financial point of view.
I think.
Very excited about the fact that we can move into.
A much larger position in mobility as an extension of our ability to provide.
Mobility services.
To to our customers.
Beyond the sale of the vehicles so.
I think.
We're very pleased with that and.
We see a big opportunity that as we outlined in our <unk>.
Therefore, we plan.
But I think we'll give you a bit more information on the impacts from a financial point of view when we closed.
Okay.
It opened up loss.
Historically, but he seems to have made much Monday, we'll start kind of businesses so effectively.
You are confident you are going to be able to do much better than the previous owners of this operation.
Yeah, we don't intend to lose money tomorrow, that's not what I know.
It's quite a bit.
Thanks, Mike.
On the success or not and managing the asset we think the asset is an interesting opportunity for us.
Obviously, we need to execute on that but I think.
You as you followed sell antiques and the management the management is very focused on profitability.
And also as we showed and therefore, we're focused on.
Extending.
Our product offering into the marketplace and we know this is.
Very interesting asset with a with an interesting footprint and we feel we can manage it profitably. So as we as we close the transaction, we will give you a bit more information about that.
The whys and wherefores of that but.
It's quite exciting.
Thank you very much.
Thank you.
Our next question comes from the line of George Kelly from Goldman Sachs.
Please go ahead.
Yes. Thank you for taking my question Rick.
Richard just when we look at the revenue bridge, we obviously keep very strong performance from pricing and from mix line items, which typically have a fairly healthy drop through to the EBIT line.
Where any one quarter Ed.
Is it fair to conclude that development should make for a strong margin performance relative to the same period last year.
Or in addition to the raw materials and favorable inflationary pressures you've already mentioned is there a substantial fixed cost desktop that we should bear in mind.
And then the second question I had was whether you have any insights into the U S consumer sensitivity to higher interest rates.
That could mean potentially.
Mix when you ask consumers looking to spec that large pickup trucks.
Thank you.
Thanks Jos.
The first question is yes.
So as you say.
Yes.
Sure.
Obviously, a large part of the price and.
Smaller but significant.
<unk> come through to the bottom line.
So I think.
First half margin performance.
Should be healthy.
And.
And we continue to focus on.
On double digit.
For the year.
In the first half looks like.
We are going in.
Very positive direction.
In terms of.
U S consumer.
I think the U S consumer is always focus on certain sorts of vehicles. So.
To your point the question is.
The level of equipment and versions that they that they purchase.
Interest rates.
<unk> move up I think the usual level of financing and the competitiveness in the market at the moment.
Type of increases we're seeing on.
Creating any significant impact on on the consumer demand, but it's fair to say, obviously if rates start to take off then given the high level of finance sales that would be an impact.
Sure.
Frankly, I don't think that's a short term issue.
I think the.
The bigger risk potentially is.
As used car values yeah.
And if supply comes back.
When supply comes back, but again as we talked about the.
Current supply continues to be constrained and were seeing.
Very strong pricing environment and I think.
Based on what we see today.
We expect that to continue.
For 2022.
And then well then we'll see.
Medium term what happens again, it all goes down I think to us.
What we can control and then we have a very strong product lineup, we're very focused on our cost base.
And therefore, our profitability you've seen our profitability.
In North America relative to our competition is.
Is very strong.
And I think you know.
Bodes well for us continuing to be.
Successful in that region, so not particularly concerned about rates in the U S.
Great. Thank you.
Q.
Thank you very much. Our next question comes from the line of Stephen Volkmann from Sussex Generale. Please go ahead.
Good afternoon rich thank you.
Question.
Focusing on North America, clearly very strong performance there.
As a bit more about the performance of the groundwork in hand, the wagoneer and Grand Cherokee L.
What are you seeing in terms of the mix.
Hi trim levels and the pricing.
Are you getting the vehicles and so they have $100000 level for the current market.
The physicians as well.
And also can ramp you'll see all of those vehicles.
Yeah.
Yes Stephen.
<unk>.
We are we are definitely pricing.
And this other segments you are talking about on the Grand Wagoneer.
It's as you know.
Not uncommon for newly launched vehicles to have positive.
And high mix at the beginning of their life.
I think the.
Jeep.
Brand going into this new segment.
With.
With two very competitive vehicles.
Is doing is doing very well on the high end.
I think.
Probably.
While we have been a bit less competitive is on the lower end, because we havent fully launched all of diversions.
Actually on the wagon yet so that is.
In progress, so I think our volumes and overall profitability.
Through those two vehicles will continue to improve.
We shifts.
Yeah.
Something like 15000 units in the first quarter.
So.
We have.
A lot of scope to continue to improve our overall.
<unk> clearly it's a.
So it's up.
Yes.
Exclusive vehicles, so were not pushing volume, we're making sure the price position as the driver and then the demand is really dictated by.
The quality of the vehicle and the offering that we're giving the customer, but so far the indications.
Both vehicles all vary.
Very strong in the price points are very very high.
In terms of the Grand Cherokee similar story.
We had something like 100000 units of total Grand Cherokee in.
The quarter, which is a mix of the old W. K version and the new WL version.
We're now in the process and Jane up of <unk>.
Transitioning to the WL two hours as well.
That's.
Got to have some level of impact on Q2, but nothing given the constraints we have on semiconductor is nothing significant.
It's quite exciting as we continue to ramp up volumes of the WL, you'll see the full.
The full opportunity the new WL gives us in the marketplace.
With both both James both of the plants and the Detroit.
Complex building the new vehicle.
So I think.
Jeep continues to be very strong in the high end.
More challenging thing has always been setting jeep.
The smaller SUV segments.
WNS continues to show the strength of the brand and the higher price points, we're actually seeing quite good performance also from the Jeep Compass in North America at the moment.
She has been revamped and is performing quite well.
Which is also very positive because that's where we want to create demand and loyalty to the brand in the lower end, because frankly as we get up to the larger vehicles. The brand has always been very strong.
Thank you.
<unk>.
Thank you very much. Our next question comes from the line of SMN.
As a mandate from J P. Morgan. Please go ahead.
And so a lot of meat.
Can you hear me now.
Hello.
Yes, we can hear you now Jose Thomas Allen.
Yeah. Thank.
Thank you.
Great.
Please.
First one.
If you could comment please on.
The weeks of approaches competencies you had in the first quarter or maybe how many units of production you lost.
Maybe can you help us put this into context into the trends into Q2, so getting worse it could get even better.
The second.
I know you don't talk about profitability by Brian , but can you help us understand a bit better what have you been doing in terms of fixed cost reduction or product launches with you Brian .
LCD your passenger car.
And.
So essentially the profitability so far.
And then.
I look at your share price.
And clearly doesn't reflect.
The level of execution you are you're I think you're what you're delivering you went towards the first half.
Well I think a very strong set of results, which one.
And then I look at your peers and the best in class.
Your best in Class report quarterly earnings.
Something you could consider or something you have discussed.
I think it will help a lot the market to understand better.
Your high level of execution.
Yeah.
I'm doing it now.
Thank you Jose I'm going to have to ask you to repeat the first question because I didn't get it.
Volume weeks of production disruption Q1.
Good day.
Thank you.
So.
Yeah last year, we gave you sort of losses compared to patent protection, but given the planned production includes losses.
<unk>.
I don't think its a fair compares.
Comparison to do so we're not giving you the sort of impact of semiconductors.
And I think.
The the level of view of Q2 is going to be.
Positive compared to Q1, it normally is from a seasonal point of view.
As we ramp up.
April May June going into summer selling season, and obviously January is always a short short months because of restarting the plant so.
Yeah.
I would normally expect Q2 to be better.
It's true that semiconductors.
Unpredictable.
But I think.
From a financial point of view I'm not concerned because.
We're performing very well.
In terms of our margins.
As you can see from the from the revenue walk I think.
And so.
The Big challenge is to manage the supply chain.
And when you do expect to see improvements through the year, although it's going to be step by step.
The starting point here with minus 12% I mean last year Q1, we said it was down 11.
The semiconductors.
And Q4 was down 20, so if you look at sort of stupid math, you could say that were down in a similar level probably.
Q4, so sort of flat.
Hopefully, we'll see some improvement in the second half of the year, but I'm not expecting a huge improvement in Q2 frankly.
In terms of.
Profitability by brand.
Yeah I think.
We don't report the numbers by brand, but I think we're seeing.
Positive trends in profitability.
Across.
Across the brands you mentioned in Europe on the FCA side.
Both because of <unk>.
Pricing.
Discipline on the on the mix.
And also as.
As we look at new products coming up I think we're being more efficient.
On.
On the spending of capital, which is going to help our margins as well because.
A lot of the synergies that we talked about last year, and which obviously worked.
Continuing to work on.
3 billion plus last year, a lot of that was related to.
Lower levels of capital expenditure on the <unk> side as we.
Get the synergy benefits of the merger.
I think from a fixed cost point of view definitely more efficient that's driving better margins long term and in the short term pricing actions are helping obviously.
Purchasing also will start to kick in more from a structural point of view as we start to launch vehicles on.
The common platforms, which will start.
In the next 12 months.
So launch vehicles in Europe on common platforms.
With the PSA vehicles.
In terms of the share price.
It was simple as doing quarterly earnings I, suppose I'll do them.
It seemed to be a reasonable investment of time.
Honestly I think we need to continue to execute.
The level, we're doing there is clearly a disparity between our performance and the share price.
But.
I think our view as we need to manage the business and timing as a resource that we need to think about carefully.
And so giving giving a.
An update on a quarterly basis is not something that we are considering at the moment for the full financials, but you know.
I think what's important is that we continue to execute and.
People are going to realize that this is a sustainable level.
Profitability and that we can.
We can keep this.
Client moving.
Further debt therefore would plan that we.
So we presented them.
Obviously.
Gonna be ups and downs as we go forward, but I think the.
The management team has a lot of credibility.
All saw clearly.
There for everyone to see.
I suppose I and some of us need to do a.
Better job of making sure that people pay attention to that.
I'm happy to discuss with you the relative benefits of quarterly earnings.
But I think you know what.
I can say is that so far we're very very pleased with the results were not very pleased with this enterprise is something that we need to work.
Okay. Thank.
Thank you Richard Thank you. Thank you. Thank you.
Thank you very much. The next question comes from the line of Capri Attila from Citi. Please go ahead.
Hi, Richard Thanks for taking my question.
First I want to come back from Shanghai acquisition, because I just wanted to understand maybe a bit.
Back to the mechanism.
Since you can improve the profitability of this business.
Because that's very clear.
All participants profitably because they require very high utilization.
Yes.
The scan of Atlanta some competition.
Are you planning to meaningfully change Helane.
Rich.
And then my second question is on North America.
On the market share gains in North America do you expect the 603, yes.
The new products you've already discussed.
You've made most of the paragraphs now already come from market share gains.
Thank you.
So in terms of profitability.
Yes, I think I think we're.
Our double digit margins.
12 months ago. So no one expected car companies to operate double digit margins now it was operating at double digit margins.
Okay.
It's normal I think for us and.
And if you look at the history of PSA.
Especially but also FCA I think margin has always been the primary driver of our manager.
Measuring the health of the business.
And its ability to.
To generate value through the cycle.
And so.
We we.
We have some.
Yeah, leavers that we manage on a daily basis.
In terms of.
Making sure that the.
Margins are robust.
<unk> robust across all our business units.
And that we don't have any any stragglers that.
And the rate for any period of time, because it's just not.
So conducive to this type of industry, where capital, we're very capital intensive and there.
There is there is cyclicality so.
We need to manage the.
The health of that of that business through the cycle.
We also I think given the merger I think we have.
We still have a lot of opportunity to improve our efficiency.
On the on the investments, we're making in the new products that will be coming out on the colon platforms I think.
It will be a very interesting opt.
Opportunity for us to continue to improve the robustness of our profitability.
And.
And if you consider the pricing at the moment is has some level of.
Anomalous.
Nature because of.
Scarcity of product.
Zinc.
Our view is that we will continue to be very focused on price and getting fair value for the product that we put into the market, obviously the product needs to be competitive and innovative.
And as we do that then.
We also have.
A significant.
Volume base that if we can manage that properly.
Locally regionally and beyond.
And we should we should be able to have.
Yeah.
In the top quartile or beyond the top quartile level of competitiveness on cost.
We've shown in terms of Capex and R&D were best in class in terms of efficiency.
We're managing all the levers.
Plus we're also looking at new business areas as we talked about earlier with mobility.
The fee income in North America, which is a huge opportunity for us in terms of profitability. If you look at us compared to the competition.
That's somewhere where there's a lot of money being made.
Our comp competitors, P&L, and we need to get our fair share.
So I think we have we have mass.
Royalty, which isn't pulling its weight today, but has product coming and should start to make money and we have opportunities in EMEA IAP.
In China. So I think we have clear areas, where we can continue to improve our overall.
Overall profitability, but.
We need to be.
Very careful managing.
Managing the cost base on the market share in North America.
No we don't.
Our primary target is not market share just to be clear.
Going back to your first question I'll primary target margin.
Profitability and cash flow.
And so.
Well priced products at a level that.
Make the financials work properly.
And then we need to attract consumers through the competitiveness of the product and it would appear that with some of our brands in North America.
Well most of them actually so far.
<unk> performed very well in their respective segments and I think.
We have different brands in different segments very focused.
Very clear to the consumer what they do what they don't do it.
It is a big advantage for us.
<unk> has.
The clear mission in the muscle car segments and does a great job that makes very good margins and it's very competitive.
Rams growth has created a everybody over the last 10 years in terms of share profitability mix price play.
Everything.
Jeep is clearly moving.
To move forward.
Chrysler is going to be very interesting opportunities I think that will give you more information on that as we work through the positioning of the brand.
<unk>.
So I think you know.
Market share in North America, ultimately should go up but it will go up because we will be focused on product.
Great. Thank you very much.
Thank you.
Thank you very much.
Our next question comes from the line of Phillip Hotshots from Jefferies. Please go ahead.
Yes, Thank you and good morning.
Sure.
I had a few questions for me the first one is on.
On the ROM beds.
So you will unveil the product in the fall of 'twenty. Two just wondering if you kind of take orders or no I would ask you. What are you going to tell us that would defeat the purpose.
But I was just wondering if some of the feedback you're getting from dealers.
Are they upset with you that you don't have a and electric pickup and and Ford and GM are ahead of you or is just not really part of the main discussion of feedback you're getting from the dealers.
That'll be my first question.
The second one was on raw material headwind. So we knew you were going to probably raised 4 billion. You had initially given us but you haven't really quantified. It are we talking 10% or 50% I mean 40 G M pretty much doubled up the headwind.
And you can kind of clarify that that would help and then also what we heard from Ford and GM, It's mostly that Ford will just basically offset with price.
And Jim will offset with price and we will also maybe delay some spending on EV so the future.
Clearly the market doesn't like it because its reception that Don just staying with price is not sustainable and it's not your management, especially if the market is giving us that opportunity. So just trying to gauge how much cost opportunities you still have in North America in terms of synergies. We can also see the synergies on the European side in other parts of the business in North America, it's a bit more.
So are you confident that there will be cost because eventually when prices normalize.
If you worked on the costs you will retain the margins better than if you're just what's on the pricing safety, because let's say fight that unless points somebody on the finkel.
When you build a single is all the earnings going to be purely accretive to earnings or is there a bit of a tradeoff that some of the earnings that you get today not having one will basically disappear no question in terms of provisioning or discounts or type of commercial activity or should we think that anything you'd get out of the syncrude was going to be accretive to your earnings.
<unk>.
Okay. Felipe. Thanks. Good question, so on the round bad I'm not around Brian Guy So it's not one job too.
They make any announcements early so I think as we said we will be making announcements on it I mean, when when there's a when might cobalt is ready he will he will do so.
To my knowledge, we're not getting any.
Pressure from the dealer body regarding.
Regarding electric pickups today.
Frankly, we're doing very well with Ram in the marketplace.
Well, we'll definitely.
We're very focused on their own bedroom will get get get you an informed as soon as we're ready.
In terms of.
The.
Raw materials.
My opinion.
We'll give you a better view in each one, but it's going to be probably up to 50% higher the impact right.
So that's the sort of yeah.
Rough rough number.
Which if you look at like I said, if you look at it on a run.
Run rate revenue point of view is like three three.
And three quarters of percent of revenue.
And you know you saw 7% price in the quarter. So.
I think we are ahead.
Ahead of the curve.
But the.
The raw material impact will be more than 4 billion, we talked about.
We are managing appropriately and to your other point there are.
Cost opportunities in our North America business because of synergies.
And also frankly, because we have a much.
Greater focus on on.
On the plants and the efficiencies in the plants.
It's also true yes in this current environment with stop go.
On semiconductors, and other components frankly semiconductors.
It'll be tough to run the plants.
Highest level of efficiency.
And we've been doing a lot of benchmarking internally to look at our transformation cost and.
Sure.
Total cost of product.
Across the North America region, and comparing to the rest of solar.
Atlantis and I think there are significant opportunities to improve our cost level. So it's not just a pricing game.
The way we look at offsetting.
The impacts of inflation. It's also a cost a cost game and we're very focused on that.
No I'm not concerned about our ability to offset the raw material impact.
From what I've seen so far.
<unk>.
In terms of the fin co.
They will basically be accrued accretive because we don't in North America, we get very little.
Economic benefit.
From the revenue and the income generated by our financing partners.
I don't have anything like that sort of arrangement, we have with our JV partners.
In Europe , where we get 50%.
In North America.
So.
Clearly, we need to put capital into the bank goes in as they build.
The portfolio.
At the beginning there will be some level of provisioning that will need to ramp up as well as you know we would think of as grow.
The initial provisioning does.
Does dilute their earnings but.
Things that we will get it will be accretive and then as the portfolio stabilizes.
It looked like everybody else in terms of the generation, which will be positive to our business.
And I think also importantly.
Loyalty the loyalty that the.
The fact that we will control the customer and customer interface a lot more directly is really important in the overall equation of the fin co plus the fact that we will be offering.
A more complete service to the customers.
The team is really excited the team from.
Uh huh.
First financial is really on it.
You know, we're starting to put products into the marketplace on a pilot level, then ramping up through the second half of the year.
Okay. Thank you very much for sure.
Thank you.
Thank you very much. The next question comes from the line of Charles <unk> from Redburn. Please go ahead.
Hi, Thanks for taking my questions.
I've got a couple please so firstly.
Inventories have a radio restocked as you mentioned that's still around.
<unk> thousand units do you have an idea of what you think is an ideal amount of inventory that you would like to have assuming a normal market environment.
And then secondly on.
Cash and your long term strategy presentation back in March you talked about using cash to pay down long term debt and also to reduce the negative net working capital position.
And also at some stage to fund the U S pension.
To what extent should we expect action on each of those uses of cash in 2022.
Or are they things for further down the line and actually if I can squeeze in a final one there's been a lot of talk from.
Some of your peers recently about splitting that business sits between ice and <unk> portfolios.
It's a hot topic could you share your view on the merits of such a proposal. Thank you.
Okay, Charles Thanks for the questions. So.
Inventories.
Yeah, obviously it depends on the market conditions, what the absolute number is but.
I think I think if you look back.
Sort of 12 to 18 months at a combined inventory of the two businesses.
Well north of a million.
Yeah.
We're not going back to that level.
Because I think we had too much.
You know.
We manage it we manage the inventory that we manage the cost base of the Moe.
It's a little bit on the low side, but we won't be going back to the levels that we looked at before and I would just say that.
Low 1 million sort of number would make sense couple of hundred thousand more maybe.
<unk>.
By that much.
Strong position.
To give our customers.
Faster delivery.
But I don't think we're looking at anything like the sort of historic levels.
In terms of cash.
I think where the.
The cost to pay long term debt is obviously that full JV. So.
I don't think there's going to be any significant impact in 2020 twos we.
We sort of look at gross debt net debt.
Yes.
It's more of a medium term activity net working capital.
We might be you might see some marginal impact in 2022, but it's not going to be take us.
A few years to work on and it's also going to be.
A gradual process. So I don't think it's going to.
Drive any.
Big one off impacts on cash.
In the U S pension I don't believe we'll make any significant contributions this year.
Also because I think we need to.
You get a more stable view on interest rates.
As we decide how much we need to put into the pension.
Clearly.
Uh huh.
Well, one benefit of inventory rates actually going up is a deficit going down.
And so we need to look at it look at it carefully the type of funding that we need to put into the pension and a rising interest rate environment. So I think I don't think we'll be doing anything this year.
In terms of the split.
I'm talking about ice Bev et cetera.
It's a opinion.
I know.
Yes.
So I don't honestly.
See huge benefits to doing that.
I think we.
We need to manage the company.
And the assets we have.
Through this transition and there are benefits to having.
The cash flow being generated by.
The internal combustion business to drive.
The technology investments that we need to make.
And the.
The overall.
Stakeholders in this company, we need to manage them all including the employees and I think this is a team effort to get it.
Through this transition and I didn't I think.
We are definitely looking at a number of.
New business areas and being faster and more agile in the way we manage those businesses as we talked about.
Therefore with presentation.
So we're definitely not averse to looking at the structure of the group to drive.
Speed and more entrepreneurial behavior when necessary.
But I think.
We are.
Anticipating any.
Big changes to the structure of the group because I think you know we're in this.
To manage the assets that we have through the transition and the benefits of.
And the synergies that we get through the merger we need to realize that.
That means.
Managing the assets.
As a whole.
My view.
Okay. Thank you very much.
Last question comes from the line of Harald <unk> from Morgan Stanley . Please go ahead.
Yeah, Hi, Richard Thanks, So much for taking my question two quick questions. Please.
The relative performance of the U S business versus Europe was was pretty astounding right.
And obviously pushing them more and more towards the more profitable North American market just wanted to ask you.
Is any of that.
Tragic strategy as opposed to underlying conditions I E. Even if you were able or allowed with the supply chain to take back the volume in Europe do you actually want that volume, which is obviously lower.
And lower profitability and then the second question.
Just on that financial services question, you had earlier just kind of clarify that.
Arrangement between you and your finance companies in the U S.
Relative to residual value gains my.
My understanding was without the financial services business, you were not benefiting from those residual value guidance.
But can you confirm that for me. Thank you.
Yeah. So on the second question substantially that is true.
We have different partners at slightly different arrangements today, but yes substantially we don't get any.
It's been.
Okay improvement directly from residual value gains, obviously, we get indirectly through the value of our.
Consumers are trading when they buy new cars, but we don't I don't get the residual value impact on the portfolio.
So your first question is escaping me now.
Europe Europe versus the U S was really extreme wasn't that and I'm. Just wondering whether you are actually managing that specifically.
Thank you.
Our European business May 10% margins so.
It's a profitable business.
Very.
You know very competitive amongst its peers.
Obviously, the best performance in Europe .
Everybody reports.
Our regional results, but.
Absolutely very important to us.
One of you know one of the two key engines of off.
Uh huh.
Covered financial performance. So we absolutely want more volume in Europe , there is no doubt.
We're not we're definitely not moving away from European volume, we frankly got impacted by.
A handful of supply issues.
Of disproportionately impacted our European.
Products.
There is some level of <unk>.
Commonality between the products on either sides of the Atlantic, but not that much. So in reality just specific issues hitting the European.
<unk> products and.
Conditioning, our ability to to build cars in the quarter.
Perfect Alright, thank you.
Thank you Hal.
Thank you very much I'll now turn it back over to your house.
Okay, guys well.
Thank you very much for everybody for attending the call.
Have a good day.
Thank you very much for joining today's call you may now disconnect your handsets.