Half Year 2022 Stellantis NV Earnings Call

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Hello, and welcome to Salon to first half 2022 results I'll now hand over to our host Andrea Bandinelli head of Investor Relations to begin today's conference. Thank you.

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Before we begin.

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Good morning.

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Bob.

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We know that you are.

People and therefore, we value all the time and we thank you for your interest in 17.

Let's get started.

Is an understatement to say that.

The automotive industry has been operating in a chaotic environments for some yourself.

But we should say today that we are moving from back of Yatzik world to a fragmented.

A lot of wild World.

In this context.

Most important thing that I would like to do this afternoon.

Before we look at any single number.

Yes to express my sincere appreciation my warm thanks to all.

Each employee all seventies.

We'd like to extend that depreciation to our Union partners.

To our management team.

The record results we are presenting this afternoon.

Represents their work and their success, therefore, I would like to express to all of them again by warm congratulations my warm thanks.

Done a stellar job.

You know very while fragment that doesn't pay you Arctic environment.

This is demonstrating that.

Yes.

Yep.

All weather.

Electric side.

Automotive company.

That's that stopped and now with some of the numbers that we are going to come back to you with a rich set of Stifel.

A whole lot of record.

Operating income margin of 14, 1% with.

With five regions, posting double digit margins, which demonstrates that the full business.

This footprint of the company is now solved and highly profitable generating a $5 3 billion euros of positive industrial free cash flow.

Includes no less than $3 1 billion euros of Smith cash synergies.

Which is to say that we are well in advance.

Our committed plan in terms of delivering the synergies that that'd been committed.

When we made the merger between FCA Psa.

More important we are now demonstrating that our electrification strategy.

That's up to you in July 2021.

He brings very strong results.

All over the world.

D V sales rates.

Now growing significantly the growth rate off of <unk> sales is now nearly 50% year over year.

50% BV sales growth rate is demonstrating that our electrification strategy is working.

The example of Europe is showing we are now breathing in the Nick of our most respected competitors we are.

Fighting for the top spot.

From soft.

Sales in European market, demonstrating that the all products are competitive that our technologies are well appreciated by our customers. So we are in the leading pack of the European market right now.

Else demonstrate them much better market share than the total market share of the company, which means that.

The trial off the markets will come all the way to support the success of selling things in the future.

Also the number three in the U S for the L. B B cells and you will soon see in the U S.

Same success as the one we can demonstrate to you today for the European market.

We're also very proud to continue to tweak that.

Commercial vehicle market.

We need by far almost 15 points of gap in market share in Europe with such a 3%.

I mean, that's an American with 37% market share.

Importantly, when we up 33%.

Market share in Europe .

Subtle those commercial vehicle sales.

Market share is 50%.

So inside of the commercial vehicle sales, we have a 50% market share on the pure BV cells, which again demonstrates the competitiveness of our technology and the acceptance of our products from the European customers and this is me.

Competitiveness that we can expand and deploy all over the world. We are now strengthening our lithium supply.

We understand we need to control and we want to control our supply chain in a deeper way.

Learning from the disruptions that we have been victim off.

And we have increased our shareholding you know we've got to make sure that all each of them is stinker, if not secured will continue.

Strategic decisions on this matter under you'll know moral that.

Very soon.

At least we are now.

We have now completed the shutting all acquisition.

That was completed in July .

We are now the number one new service provider.

In the in Europe are with free tool, which is now controlling shut now and we entered in our lives.

Off this lossmaking entity talk.

<unk> continues to be.

Strong either with approximately 50% to 60% market share.

Black numbers in terms of profitability those are some of the highlights I would like to share with you.

Moving out to that rich.

It is fair to start with the most profitable region.

<unk> piece, which is North America, North America delivered.

Our record profitability with 18, 1%.

White margins that you cannot compare to our peers in North America. This demonstrates a very high level of efficiency and effectiveness and I would like to send to our North America teammates are very warm hug for these results. They are outstanding because they are combined with a market share increase.

So profit up market share up which is a very clear demonstration of value creation, great job done in North America with the increase in the average transaction price, which is now the highest.

Our peers in terms of driving the net revenue up we also have a very good results in they'll leave yourself, you've got number three in the U S and Grand Cherokee Ph University is now going to help us to expand this performance across the North American market as we are launching this week.

Product.

The all new Vac on ear and glad back on your or also without being delivered.

By the end of this year and they will continue to help us to extend our profitable business in our white label segments.

If we continue.

He also concluded that we would introduce in Canada, The Windsor Assembly.

70 plants.

Our first application itself the sell a large platform and this will happen from 2024.

As you know still a large platform is one of them fall for BV didn't get their platforms.

That's been engineered in North America, specifically in Auburn Hills, the great job that is being done right now by our engineers with a very competitive platform to take a strong position in the North American electrified market. That's for North America, let's move now to Europe .

In Europe , we are picky.

King of.

All the BV cells ex.

I explained to you our market share in the L. A market is 19, 2% getting very very close from a total market share in Europe , which is 21, 2%.

Our goal is to have an LNG market share that is as soon as possible above the total market share that we have in this market.

I was explaining to you in terms of pure B V. Sales. We are now the leading back a few thousands away from the number one competitor in the competing we got the number one competitor for the top spot we have done this job while improving our profitability as we are now in a wide margin of 10 points.

4%, which compares to last year's margin of nine two so profitability is improved in Europe and electrification electric electrified sales are picking off with an improved market share on the LTV sells at 19, 2%. We have some very good examples that demonstrate that.

But if you've noticed the appeal.

<unk>.

Why the acceptance of our products, we see that the Fiat 500 E is the number one BV selling car in Italy.

I would say that's normal.

But you would not anticipate the fact that the Fiat 500 E is number one b V sales in Germany also.

This is demonstrating the competitiveness of this product at the same time, our electric version of the peripheral to our weight is also the number one in France. So this again demonstrates that our easy technology is totally competitive.

In the European market, we have five vehicles.

The top 10 selling vehicles in the market, which demonstrates again the competitiveness of our brands the competitiveness of our technology and the appealing.

Our models, we have the potential to await the Opel corsa.

Three the Fiat Panda N type assets within the top 10 selling models.

In Europe last but not least we continuously improve.

The technology that we have developed and we will soon introduce by the end of this year in our plants and by the end by the beginning of next year in our showrooms are B segment, Hatchbacks and Suvs with a larger range above 400 kilometers W. LTP.

Which then that will demonstrate the full competitiveness of our technology. This continuous improvement will continue to improve the acceptance of our bundles.

It's a future a great technology and we see that this is not working and this is tops. The major message for today is that we are all over the world at 50% growth rates on the V cells, which I think is one of the best if not the best.

While golf peers, and we see that the European market performance is not demonstrating the competitiveness of our technology, let's move from Europe to the rest of the world.

To express the fact that we have a very strong profitability.

All of our what we call the overseas regions.

Starting with them on the Middle Eastern Africa, again, a strong improvement on profitability at 15, 5%.

Percent of margin up against last year's significantly and we have at the same time and improvement of market share.

Although the region by 0.2 points.

Our leading position in Algeria, Egypt, and the France, French overseas territories and in Turkey.

Important that we recognize that the profit up.

Market share of value.

About your creation.

If he can't leading position in some key markets in this region. So big potential to continue to grow in this region in South America same think Stu.

<unk> leadership.

In the region.

In some very important markets like ours.

17 of Brazil, and Chile.

This group is leading the pack and the Fiat brand is leading the brands. So we are number one in the old those metrics. Most probably also number one in terms of profitability with no less than 13, 9% of all your white modules.

As you can see Jeep is the number one selling SUV brand in Brazil, and see it as the number one selling brand all over the region. So a very strong performance with less overall than the 23, 5% market share in the region. So strong leadership.

In South America and strong profitability.

You can see improved against last year on the first six months in South America, we have delivered more profit.

And then in the full year of 2021, which is an amazing results and congratulations to our Latin American teammates.

In Asia, China and in the Asia Pacific also a very strong profitability with $13 four and some very exciting.

New events.

All linked to the launch of the Citron <unk> three and the launch of the Jeep, where we can model in.

India.

We are now leveraging the footprint.

With sprint we have this big market and we believe that we have the right products at the right setup to generate profitable growth you need yet it's starting now.

So we are shipping all Citron C C suite to the dealerships right now so it's a very nice cornerstone for our business development in China.

We recognize that the binding Mou that we had with our partner <unk>.

Could not be implemented by our partner, but which that means that our thrust is not there and we decided to unwind that JV, which was lossmaking JV and therefore, we are fixing the red ink and we are moving forward with a very significant change in our strategy which comes with.

Yes, that's right.

Strategy that was presented to you back in March when we presented that therefore 2030 plan and we now focus on CPU sells highly profitable we clean the red ink.

And we just recognize that the binding Mou that happiness signed by our partner was not implemented us it's what's committed and therefore, we think the conclusion from that event.

Calm orderly, but clear way, we go C. B U with the National sales company and we are going to make a profit also off to a very profitable he be you.

Our sales with Jeep after a meal and the other brands. This is what we can say about the overseas regions, let's now look at the brands.

Nothing with Jeep.

Global SUV brands of certainty.

But we have a very strong success with Jeep on the deployments of the full by E ph UV technology.

From next year early 2023 Jeep goes electric.

And purely electric each will start next year.

From the from Europe early 'twenty three.

And this is going to be a cornerstone of Jeep.

<unk> is the global number one electrified brand in the market.

We start now.

This is going to be a cornerstone and some very interesting prospects for the future of the pricing is fine wrangler is still the number one selling ph D V. In the U S, which says a lot about the competitiveness of the full by eat technology campus and renegade.

Number one number two selling out the unions in Italy, which is showing that this jeep rent positioning is outstanding and accepted all over the world.

The Grand Cherokee is doing fine with a significant global sales performance the best the best thing.

2000, and we see also that the Gladiator is not being expanded globally, finding new areas for profitable growth in Brazil, China, Japan, and South Africa. So great achievements also in profit for one of the big computers off the profitability of the company.

<unk> now going electric means we have the brand.

Global SUV brand that will be the number one E P.

You'll see these very soon and she will start next year.

If we move to the other American brands, we can see that Chrysler is a very strong number two selling ph in the U S pricing powers fine we have now.

We finalized the concept that will represent the rebound of the Chrysler brand.

In terms of design and positioning is now decided we move into the execution of this new concept, which is inspired by our Chrysler airflow.

Sites concepts, we moved from there and we are now ready for preparing the final step off the rebound of this American brands.

Robert is a big success with the highest U S average transaction price for the 1500.

A very successful model and brands with this transaction price pricing is always fine.

We are now also seeing that the probe aster.

Is creating a significant.

Results for the brand.

With a very nice segment share of 18.2% growing.

We will introduce from next year as you know well the probe master easy version.

That's we will sell two very important customers like <unk> like Amazon.

We are preparing right now for the world.

The fuel cell version of this pro Buster.

Both for the U S and for Europe , So big potential and we see that the demand is very strong and we will soon adjust the capacity to meet that demand.

Make sure that we can grow profitably this very important business for wrap great results from Brown and congratulations to the U S seems on that matter.

If you look at Dodge data continues to be.

Be a very strong niche.

Brands are best ever U S average transaction prices for challenger and a charger a very profitable findings on the pricing power.

Record challenger and charge offs sure.

With our U S full size sedan segment share of 52, 9%, so a very nice niche business.

That is now being prepared for full electrification.

There's some amazing innovations that will bring even more passion from the fans of this brand in the near future.

Let's move now to the upper upper mainstream brands.

And that we can see that the electrification is now gaining momentum.

Those brands Opel is delivering fantastic results with a corsa Opel corsa.

The number one selling car.

In Germany for the <unk> segment.

But overall the best selling car in the U K.

Which means that the Opel corsa.

Scott that was launched after the acquisition of Opel Vauxhall Company from Jim is now a big success and we see that the BV sells off Opal are up 52%.

Which then represents also the power of our technology and the power of our sales and marketing teams pricing always find among the best in the region.

<unk>, Australia is already a big success with a significant order book.

We are ramping up the production will be the second shifts.

We're supposed to have plants and we see that this is going to be also.

Very important.

The profitable Peter for the brand we will launch next year. The BV version. After we launched the Phe V. Once very soon.

On the digital side, but there's also a waste is the number one.

Selling vehicle in the European market.

Which is a absolutely.

Awarding performance for the central team and congratulations to the team.

We are we push all the number one L E grants in France, It's important Anza patrol is the number one brand.

In France for each one so peripheral is taking a leading position not only on the LTV in France, but all sorts of brands and as a Basel IV the tool weights all over the European market, which is a significant achievement.

The market share is up in South America, the pricing power is just fine.

And we just unveiled the yoga four O eight.

Concept somewhere between a sedan and a crossover which will start deliveries late 2022, So as you see Brazil was the strongest.

Model brand portfolio in Europe significant potential to grow and significant potential to meet in the pure B V sales as we have many models, which are not going to be pure evs in this in this breadth.

Let me now move to the core.

Brands with the affordable and aspirational brands.

He started with Citral and with our market share up in South America.

We see that.

Then you see three production out and I'll start with India and Brazil.

Which is a very important.

Step in the right direction.

Fourth.

Affordable.

Mobility for the middle classes of the World.

And with this product we believe that we have a very nice very nice proposal.

World, That's possibly we'll see an economic slowdown.

The future of this product will bring a lot of performance a lot of functionality for a very reasonable price and production as all sources from India and from Brazil, which means we are on the right path on the right timing to address their mobility needs of the middle classes the pricing power is fine.

That's what version of the Sichuan Sephora.

Demonstrating its full potential by being the number three selling C hatch BV in the Europe , which then again means that we see that our technology and our iconic brands are doing the job.

On the fee side, it's even more exciting is the market leader in Brazil, sockets, either Italy democracy in Turkey.

Number one brand in Latin America.

We see that.

The brand has a lot of potential and we can continue to unleash the potential of the brand as I said, the Fiat 500 E is the number one selling card in Germany and Italy.

There is even more potential across the European market will continue to leverage that potential and we will bring at what point in time, the 508 to the U S market as we believe that there is also potential over there to make profitable sales in some specific states the pricing power is fine.

Rather it is number one in Brazil. The Kronos is number one in Argentina, so lots of potential coming we will have next year.

Two new.

<unk> products to unveil and that means that the product planning of Fiat is now all the way.

We have put the right resources with the right fashion and the Reits weaker in terms of executing high quality.

Affordable fits it's going to represent the right offer in many markets starting with Europe on the right timing as we see some clouds coming on the overall economic context. So that's for the core brands. Let me now go for the commercial vehicles.

As you see we are leading.

Europe , and South America, with respectively, 32.2% market share in 77% market share.

In the BV sales, we have a 50% nearly 50% market share in Europe , which again means that we are dominating the BV LCD market in this in this.

Region, we I've done the best ever market share in Middle East and Africa.

There is a significant potential to grow LTV share profitable share in this region and I should add also in Latin America.

The other is doing a stellar job with a record H one Ram brand sales outside North America, which means the Ram brand and our pickup trucks of a user acceptance outside of North America, which represents opportunities to grow profitably. This brand across the world starting with Latin America.

Africa, Middle East and Asia Pacific.

We have done that signed a partnership with Engie, the French energy company to demonstrate that we can sell fuel cell Vance as you know our midsize van azar fuel cell virtual as much other EV version and we can sell those fuel cell versions in combination with charging stations to demonstrate.

Our convenience and fuel cells than usage can be and we are doing this in a partnership with N. G. I think it's a very nice way to demonstrate to corporations that they can have a fuel cell.

L. C V fleet that comes to the garage everyday to be charged by one single.

The hydrogen stations.

We are also accelerating all synergies by bringing the fee itself Cvs through the same platform as the rest of that is much more profitable than in the past with the right quality and high functionality, so giving fee it even more power to progress in our different markets.

If we move to the premium.

The best way to express it is that we are gaining momentum.

Comparing the sentences groups to other groups, we see that the potential to increase the share of profitable less revenues off the premium brands against the total of the company that potential is very big.

And I would like to start by emphasizing a very simple facts.

Even before we.

We launched successfully the neutron Ali.

And you all promo finale.

Turnaround of the offer of meal business model was completed concluded.

And we have now.

In Alfa Romeo.

Every profitable brand with per unit margins, which are exactly the ones, who we expect from our premium brands. So the turnaround of Alfa Romeo in terms of profitability is now at cheap.

And the job has been done even before we launched the tonality that enel is going to come on top of a highly profitable business model as it should be for a premium brand and we are now going to grow the brand from there.

By electrifying all the off road meal bundles to come in as you see we will have a 1% bogey portfolio from 2027, we are putting the best of our technology in this iconic brand and we are very confident that the profitable growth as the premium brand the unique.

These premium brand presence all over the world present in the U S presence in Europe and presence in China will continue to deliver its full potential last year is now preparing for its own future.

Fantastic sales performance with the Epsilon, which is the number one selling vehicle in Italy for the <unk> segment.

And that's a remarkable sales performance pricing power is demonstrating that we have a lot of potential to improve we will be electrified from 'twenty to 'twenty four as we launch the next bubble for the rebound of Lancashire. It is already decided it hasn't been a frozen it's in terms of design.

It's under execution for the engineering and for the manufacturing and it's going to be I believe a very big success, yes.

Yes. It's also the system will be the big success as we have not only market share growth.

Unit mobs.

Margin growth.

So profitability growth so our market share up total profit up because its margins up.

Perfect description of value creation, we are moving to full electric we already have a very strong.

Market share in.

The ph UV and deal if you will.

The D. L E sales mix is above 30% we are growing fast electrification, we are protecting the profitability and we see that we are creating real value with this unique sophisticated premium French brands.

Let's now move to luxury last but not least.

Alright, Fantastic Maserati brand with a strong run.

<unk> equity.

The OE margin is growing by the day.

Could bring it to six 6% on each one.

There is much more potential than this we believe that ultimately give us it should be and will be somewhere between 15, and 20% NOI margin that's the potential there.

The market share is up except in China with the lockdown the impact, but it's up all over the world.

We see the pricing is always just fine against the benchmark than U S. C 20, CLO does not need any comment just enjoy this.

Fantastic appealing model that you have on the screen the old New Greek Hollie was finally launched after we postpone the launch until we are sure that the quality was meeting are very demanding standards.

It has to be done successfully the cars are now in the dealerships and the profitability is coming because the car is highly profitable and will contribute to delivering hopefully this year of double digits a wide margin for this brand.

We also bringing back Maserati, it with small sports, which.

Not only next year, but I say that we'll be attending the formula E.

Electric single seater worldwide Championship.

As a brand, but we will also bring back the Maserati to the G T World.

The GT to racing version of empty in 'twenty that will attend.

The relevant championships, mostly European so we bring back Maserati to its iconic motorsports routes.

And we support the profitable growth of this fantastic brand, while we put a very significant pressure on quality quality comes always first all over certainties and specifically in maths it ought to let me now move to the affiliates.

A very big profitable business growing by the day, we are on track to deliver our U S. Captive thin coal that is going to be a very important tool for our profitable development in <unk>.

In the U S market, we are on track.

Or a pure dedicated liens or is also on track to be like next year. We are already number one in France with a frito movies are number one in Italy with the disease.

But we want to ultimately to become the number one in Europe and then we will do we'll go live with a dedicated organization by next year.

The profitability on sales finance is quite stellar and hopefully on track to beat the record profitability in 2022.

Luckily economy model.

Business model has been set.

The leadership team is in place we see growth on the reman thoughts we continue to make acquisitions on the dedicated companies for the reconditioning of used vehicles.

We will soon most probably in September and now where we are going to position our European circular economy hub.

And then we'll make the same decision for North America and communicated to you.

On the pure because the business model is very solid siggi significant profit our affiliates a remiss.

Is it still growing profitably with the acquisition of online cars, we continued to grasp opportunities here at North Korean Marcus theatres that we could control to refurbish our used vehicles. So this is a very exciting growing and profitably growing.

Yet we also have the opportunity to expand our pre owned vehicle dedicated brand called spotty car.

Step by step we are deploying that are unique brands across the regions and across the different brands of tenants.

Let me now conclude the spot by showing you an overview on one single slide of our electrification strategy.

I just have to remind you that.

Our global BV cells.

We're up nearly 50% on each one so.

So we are going fast on the BV self.

Absolutely in line with what we presented to you back in July 2021, we.

We are breathing in the neck of our biggest competitor on the D V sales in Europe by a few thousands.

In the European market, we are bringing in their next it's going to be an exciting race.

And we are number three in U S for the Aliffi cells, and we'll continue to expand as fast as we can our full by technology for Jeep.

We will introduce next year the pro Master easy and then from 2024 are still at large electrified platform that will support many many new models in the in the U S market. So I would like just to tell you that.

As I speak.

<unk> has 20 dv models on sale.

And by the end of.

24.

We will have no less than 48 models the models on sale.

That means half.

Of the total model portfolio of the company.

So we are on our way.

When you are on the right face as it has been committed under therefore 2030 plan you can see the different components of the strategy. The five giga factories have been confirmed to in Europe .

One in France, one in Germany, one in Italy.

Which is three side in October three in Europe , One, France, Germany, Italy, two in North America.

One with Samsung and the other with L. G L G in Canada, and some swings in the U S.

Also we are now starting a very impressive manufacturing golf electric motors in France, without Ebola or JV.

We are now also.

Lengthening our supply of raw materials, starting with lithium.

But we will take care of a few other materials very soon and make the appropriate announcements.

Oh, so electrified argue a clutch transmissions, which will start in production for next year to support so I would say the middle class affordable.

Vehicles on mild hybrids that will come to the market by early next year. So all of this is just demonstrating that our electrification strategy is delivering results.

And we are very impatient to unleash the full potential of the company to himself electrified technology in other markets than just U P. N. One starting with the U S from here I would like to hand over to our CFO Richard Palmer for the detailed financial results Richard the floor is yours. Thank you very much Carlos.

Good day to everybody.

So moving forward.

Just the usual.

Highlight one presentation, where we're still comparing the 'twenty two numbers to 'twenty one pro forma.

Because of the merger happening in the middle of January last year. This.

This should be the penultimate time, we have to tell you about that so then moving to page 18.

As Carlos mentioned very strong operating performance.

With 14.1% margins and that was despite the fact that our consolidated shipments were down 7% for the half.

That is split between 12% down in Q1, and 3% down in Q2, So we're seeing some improve.

The improvement in the trend.

As a result of that is that all net revenues.

For the half despite the minus 7% on shipments was up plus 17% improvement to 88 billion.

Commercial and mixed performance on revenues drove.

The adjusted operating income up 44%.

That also clearly translated into a very strong performance on industrial free cash flows as mentioned to plus $5 3 billion.

And that took our industrial available liquidity to just short of 60 billion euros. Despite.

Despite the fact that we repaid a $6 3 billion facility for.

Foreign Taser in January and paid our dividend.

So moving on to page 19.

Yes.

Can see the rest of the P&L so from the 44% growth in ally you can see a 37% growth in operating income off the unusual charges, we have three items and not a 2.1 billion charge for the half which was up from $1 1 billion last year.

They were restructuring charges was 0.8 billion campaign costs for the extension of the campaign on Takata airbags into some new geographies.

And that should be a completion of that activity and that was a four 0.6 billion.

And then.

An adjustment to the cafe penalty rates flaw U S business following.

Following the new regulations during H, one, which will finalize and that amounted to 0.7 billion for the half of net financial expenses were up 200 million and driven by the macro environment due.

Due to hyperinflation in Turkey, and hedging and devaluation costs in Argentina.

And then in the equity method.

These profit despite a strong performance from the thing goes as mentioned we had a negative impact of just short of 0.3 billion for the impairment of the equity and shareholder loans that we had.

One being with God, because Atlantis JV following the announcements we made recently.

And then lastly tax rate slightly down from 24% last time to 20% at this time.

To the non repeat of a deferred tax asset adjustments as a result of the merger and H one last year so that.

The result of all of those items took us to a net profit for H, one of 8 billion up 34% compared to last year.

Moving to page 20.

You can see it here the walk across from our net revenues 21, the net revenues 22 up 17% as I mentioned earlier to 88 billion.

And you can see the volume and market mix was negative for 2 billion as a result of the 7% reduction in shipments, but that was more than offset by $8 8 billion of positive impact from net.

Net pricing content and vehicle line mix for a total amount of about 12% of revenues, which which drove the growth for the half plus a positive impact of FX translation, principally due to the U S dollar strengthening against the Euro in Q in Q2 for $4 6 million and then the <unk>.

Other items is mainly driven by a reduction in sales with buybacks in our European region to fleet customers are driving the one 3 billion that so a very strong performance.

On the revenue line.

And that drove on page 21.

The.

Improvement in our a oi of 44% up to 14.1% of our.

Importantly, driven by the increase in the revenue line as you can see from $5 8 billion of vehicle in that mix and content and 0.7 billion of vehicle line mix and that more than offset the <unk>.

Negative impact on industrial costs, driven mainly by raw material inflation and other inflation.

Offsetting some productivity and synergy savings for minus three 8 billion and total impact.

We had a positive impact on SG&A, which was largely due to synergy activities in.

In our structural costs proposal stage 0.5 billion.

And then you can see on the on the far right change in dealer stock. So this is a clean number there was last year a reduction in our dealer stock, which was an important number for 320000 unit.

As a result of the shutdowns for Covid.

For semiconductors scarcity, but we did have selling out to dealer stock, which kept our sales up.

This year, our sales and our.

Shipments are at the same level. So we don't have a repeat of that reduction in dealer stock in that brings a positive impact year over year.

Strong.

Performance in terms of Iowa, moving to page 12.

'twenty two.

To the regions, we can start with North America, So as mentioned $18, 1% margins accounting for around 60% of our group.

We were up in terms of shipments in North America, which was less affected by semiconductor constraints.

And also benefited from the launches of the new Wagoneer and Grand Wagoneer and.

And refreshes of Jeep Compass, and the new Grand Cherokee L as well so strong.

Demand up 10% in terms of shipments that drove together with a strong pricing and vehicle line mix net.

Net revenues up 31%.

And all of our ally.

Hi.

Up to $7 7 billion up 44, 47%.

Again on the walk across you can see it's the same story as for the group driven by strong price and mix offset by raw materials impacts on.

Some positive synergies in the industrial number but also impacted by inflation or other cost categories. And then you can see the change in dealer stock again, which was the mainly impacting North America, which basically.

Gold is too.

A flat number in terms of shipments and sales.

$7 7 billion performance.

Yeah.

Next page page 23, you can see in large Europe , Hey, we hit double digit margins for <unk> for the half at 10, 4% up 15%, despite our shipments being down 18%.

Due to unfilled semiconductor orders impacting more the European region.

And so we were down 300000 units from last year.

Revenues, despite that was slightly up by 2% and again with positive pricing and mix for around 8% of revenues.

Offsetting raw materials impact for $1 2 billion of the $1 5 billion negative industrial costs, we had positive finishes again in SG&A.

And overall a strong performance.

In terms of shipments in terms of sales helped us to offset.

Offset last year's would you use in reduction in inventory and get us to 10.4% margins for the half.

Moving to the Middle East and Africa on page 24, we can see here a very strong performance in AI.

Basically doubling the E O I up 91% to $472 million.

Despite the fact that shipments were flat we had positive impacts in demand with new vehicles like the Grand Cherokee L. The Sichuan seafood, Oakland marker or 3000, and 208, but they were offset by continued problems with semiconductor orders, particularly for the European region from which a number of these vehicles are sourced.

That meant that we.

We had.

A flat shipments performance, but revenues were up 19%, which was a very strong performance given also the devaluation of the Turkish lira.

The team managed to price for that and also improve the price positions for an overall impact of a 700 million euros offsetting the negative impact on exchange on the far right of the walk across.

Moving to page 24.

South America, So South America had a threefold increase in its performance in H, one going from 326 two.

Millions of over 1 billion.

And that means that and in the first half of the year.

South America business has already exceeded its results for the full year last year and that was despite shipments being down 5%, but we have strong demand from some new products like the pulse on that.

Two eight and Jeep compass refresh and those allowed us to increase our revenues through strong pricing.

And mix of over 1 billion euros.

By 47%.

272 billion.

That offset.

Negative industrial costs because of raw materials inflation, so just short of half a billion euro.

Yes.

Moving to.

The last page on the regions and Maserati, So China and Asia Pacific.

<unk> had some impacts of the Lockdowns in China, which impacted the business notwithstanding that we still had shipments were flat at about 62000 units revenues were up 14%, which was a result of strong pricing on Jeep.

Mix from a high of around 1500 sales, particularly in India, and Asia Pacific and that allows that allowed us to increase the adjusted operating margin by 40%.

With margins, reaching $13 12 per cent for the half.

And then Maserati as mentioned is on the move with margins up to six 6% from three 3% last year and that was despite the fact that shipments were slightly down due to shipments to China being down by over 2000 units offset partially by improved shipments for the news.

Launching.

Okay. They model.

Moving to page 27, you can see our industrial free cash flow, which was up six and a half billion compared to last year.

And it was driven strokes largely by the very strong operating performance, where you can see the the EBITDA number was 17, 6% margins.

And that was up over two points compared to last year.

Offset I'm, sorry that was nearly 4 billion higher year over year.

And that drove the improvement together with a slightly lower level of Capex and R&D last year were $4 4 billion, which was 900 million lower than last year also as a as a result of the strong synergies for the half, which reached $3 1 billion and about 2 billion of that number relates to lower Capex and R&D.

D through the synergies achievement working capital was negative.

Because of lower factory and higher inventories due to price inflation for raw materials and other components and some higher safety stock also to protect put perfect production.

You can see 400 million negative for restructuring cash in the half and financial charges and taxes reached 2 billion higher than last year by 900 million, mainly due to timing of a tax.

Tax payments.

Moving to page 28.

You can see that our dealer inventory was up 704000 units at the end of June which compares to 695000 at the end of December so for the half were up just 9000, so going back to the comment on the Delta stock would there was basically no restocking.

In the half and that impact on a Oh I was just a non repeat of last year's destocking within the increase we had some increase in North America up 20000 units, but Europe was was down offsetting most of that.

And then moving to page 29.

The final page for me.

In terms of the industry outlook, you can see that we've revised North America and in large Europe based.

Based on H one numbers.

North America was down 17% for each one.

Each one was a little stronger last year than the run rate cool. So age two of last year. So we're basically projecting into the second half of year, a similar level of of market overall activity.

And that will mean that we'll have a stable age two and a total year number of about minus 8% down and this is largely driven by semiconductor availability and lack of visibility to a significant increase in the half.

Similar logic foreign large Europe , where the first half we were down 20% of which EUR 30 was down 15. So we expect a stable situation in the second half compared to the first half, which means that that number becomes minus 12 for the year. So we're looking at a stable second half market.

Look and therefore.

Do you think based on the very strong H one performance that we had.

Both in terms of I O I imagine on the industrial free cash flows that we're confirming our guidance for the full year.

And with that I'll hand back to Carlos Thank you.

Thank you. Thank you of each other so.

We are finalizing this presentation what are the takeaways.

The takeaways are quite simple number one selling piece is our resilience.

All weather company.

She is now totally focused on the EV leadership.

That's the major takeaway, we have three key pillars here to support this.

First on any possible metric our long term strategic plan, therefore, 2030 seems to be the.

Appropriate.

And relevant plan.

In the current environment in which we are operating so therefore this is the right plan. So we are totally focused in the execution the rigorous execution of this plan.

Number two.

Our company is profitable it is.

As a sustainable company, we have committed to you that we would keep the breakeven point to below 50%.

Actually.

We the H one numbers the breakeven point of sell antiques is 40%.

Which means we have a very sound situation, we have a clear strategy.

We have iconic brands.

Well developing and Ivar even more.

Competitive technology, and we are improving by the day.

Which means we are sustainable we have a very low breakeven point that 40% will keep it below 50 and that is going to give us a significant sustainability to face any unpredictable crisis that we would be.

Facing in the near future.

We see that we are gaining momentum on the BV sales business, we see that in Europe . We are now in the leading pack we.

Some.

Leading models in the different markets, we are bringing the EV technology to the U S and the U S represents for us in terms of developing our EP technologies, a very significant drop.

Profitable opportunity.

We see also that through the next few months, we are going to have some significant electrification events that will reinforce.

Our EV momentum.

As you can see we already have 20 evs on sales by the end of 'twenty. Four we will have 48, b visa on sale, which means roughly half of our total model portfolio for the company worldwide.

Represents a very significant push a very significant presence, that's we intend to leverage to improve the earnings of our company.

What are the three major events coming up one for Dutch.

That will be Hell.

Held in August 16th and 17th.

A very important event for the Jeep full by E day in September .

All about how fast we deploy therefore by E technology, not only on ph D V, which is ongoing but also the pure EV technology are of Jeep, which is going to start from next year and Jeep is the <unk>.

Most electrified off road SUV brand in the World.

And last but not least we will have in November a very important.

Ram event, which we called Revolution.

Where you will have the opportunity to see.

Our exciting.

<unk> truck pickup truck.

And you will be able to appreciate tweaks extent this pick up truck is competitive as we have been spending hours and days improving the product to make it.

Fully competitive and actually totally exciting so are our free brand Ceos Tim.

Tim can escape for Dutch play some in year four Jeep.

And my cobalt for Ram will have the pleasure and privilege to present to you all the exciting things we have been preparing we are very very confident for the future. We think we have all the right attributes from a sustainability standpoint from a technology standpoint, and from a fashion standpoint to drive selling.

These to a successful outcome and.

And we consider the unpredictable events in the crisis as opportunities to be even better and of course to keep on being competitive as you know our DNA is to be racing. This is arguing hey, I would like to stop here and hand over to you for the Q&A. Thank you for your attention.

If you would like to ask a question or make a contribution hi, todays call. Please press star one on your telephone keypad.

Mind, you that star one on your telephone keypad, if you have a question.

So our first question comes from the line of Patrick Hummel from UBS, you will know when Michelle. Please go ahead.

Yes. Thank you good afternoon everybody.

My first question goes to Richard very simply for the for the short term.

A double digit margin after having achieved 14 and first half doesn't seem very challenging. So I would appreciate if you can just give an update on the puts and takes in the second half of the year ever.

I remember from the last earnings call or for the Q on revenues call. You said basically you think the net of pricing versus commodities is going to remain a positive driver throughout the year.

I'm wondering whether that means that our the H two margin should be at.

At least roughly line with H one.

And my second question, probably goes to Carlos.

If if I do extrapolate the H one performance it basically means your stock trades at two times earnings. So basically what this is telling US is nobody believes in the sustainability of the profits that still aren't as currently generates and I guess the worry is less on the volume side. The worry is that pricing would just start to collapse.

From going from under supply to oversupply with all the negative implications on margins. So I'm just curious in a scenario where macro does get worse in North America and Europe next year.

How do you think about profitability would you would you confirm to us that even in a recession environment. This company will generate a double digit margin also in 2023 or any other additional color you may have regarding the outlook for next year. Thank you.

We're accepting questions and to your second question is quite challenging I will leave the first one to reach out if you will stop that will give me more time to answer to your challenging question later reshuffling things.

So I pay for time.

No it just unnecessarily.

Okay.

Patrick look I mean honestly some pause was clearly very strong and you know absent any.

No degradation in trading conditions compared to where we are today, which obviously includes a lot of volatility and in in the business and in the macro but as you say, but I think yeah. We don't have any specific reasons why our margins should deteriorate.

Anh to apart from the fact that everyone's working very hard within the business to obviously execute on on.

The top line and continue to make.

Make our cost structure more efficient. So you know there's a lot of moving parts and a lot of a lot of activity.

Activities to get to 14.1% I think the team will continue to to to apply itself in the same way and absent any shocks I think we have a good chance of having a similar performance in H two.

Thank you Richard.

Your second question is really a great one.

I think that's what your question is demonstrating first.

Is that in.

There is a significant.

Opportunity for investors.

To.

Consider the fact that currently.

Third antisense is very cheap.

And that is absolutely correct.

Given what we have in our plan.

Given our execution capability given our focus.

Given the support that we have from our employees to.

This merger, which is a very strong bottom up support.

It is fair to.

To say that our market is a market cap is very cheap and that's all stock is very cheap so for.

Investors that would be willing to invest in the old whether company.

That has demonstrated the strong resilience.

It is now demonstrating its strong competitiveness on the electrification in the past.

There is indeed, a big opportunity.

As you know we used to make the difference.

With a transparent strategy that we presented to you we used to make the difference in the execution.

That's where we make the difference.

Our team has been demonstrating a stronger.

The efficiency and effectiveness, especially in turmoil.

The more challenging the conditions are.

The better we express our competitive execution capability compared to our peers. So at the end of the day then it's up to you.

You believe while you don't believe you wanted to invest or you don't want to invest what.

What we can offer is what we can do.

What we can offer us more agility.

More focus more execution capability with a sound strategy that is delivering results.

Through that.

There is a big opportunity now because the stock is very cheap and therefore, there is upside.

As you know we are not very good at making predictions.

But we are reasonably okay to extract from the market conditions, the best that anybody could extract for the market and I think the H. One results are demonstrating exactly that's the.

The fact that you know very volatile.

Volatile environment on pricing on raw materials on semiconductors on energy you name it.

We are extracting from the market, possibly one of the best values that we can imagine with the north of 5 billion euros of positive free cash flow and north of 14% off highway margin. This is a quite unique combination.

The automotive industry right now and the numbers are there and you know what the numbers better than I do that's what I can answer to you.

Hopefully you will not be the only one to believe that there is opportunity, but hopefully you will be one of them. Thank you. Thank you for your great question, let's move on.

Our next question comes from the line of Martino deemed bouchey from acquisition that you were now and Michelle. Please go ahead.

Thank you and good evening.

Good morning, good afternoon, everybody.

My first question is on the free cash flow.

I don't know if you agree with me, but the net working capital was better than expected. So if you could elaborate on these.

Explain it.

As a significant impact the factoring.

Industrial Capex are lower than what I had expected.

Just to understand what could be the projection I understand it 900 million of synergies, but what's the expectation for the 40 Act.

Connecting to the previous question. So you will have a huge amount of cash and you recognize.

You want them, they're valued them why not buying back some shares which the buyback as a part of your business plan.

And she used to be the right moment.

And I have a follow up on.

On another issue.

So you have three questions here.

I will leave the working cap working cap question for Richard to answer.

We will answer on the Capex and the first element on buyback and then back to do we should also.

On the Capex, it's quite simple.

What you see.

Is that are we are confirming.

Everyday what we told you in the indeed, therefore presentational thing, which is we believe we have a 30%.

Efficiency and effectiveness edge.

Against our peers in the way we spend our money.

This is something that we check.

Once we have all the results in every time again, we consider and we conclude that we have a 30% efficiency edge effectiveness as against our competitors. So it's it's noble.

On a recurrent basis, you you see capex numbers, which may be much lower than some of our competitors and as you know it is not in our skills.

Ooh throw capex headline numbers at the media, we prefer to use our money in a wise and very demanding and frugal way so that your money.

Is being taken care of in the most efficient and effective way. So we confirm that we have a 30% hedge.

Positive hedge against our competitors in that on that front.

On the buyback as you know we already said in our dividend policy presentation.

Therefore plan that we have a 5% captisol buyback potential that could be eventually use we have already communicated to you that there may be an opportunity with the we don't for motors and we'll see if that opportunity materializes.

But the hotels on working cap in the buyback I would like to hand over to Richard Thank.

Thank you Carlos so on working capital I mean, we were negative $3 2 billion. Latino. So you know I think.

It wasn't particularly positive performance are very similar to last year and despite that you know we got to $5 3 billion of cash flow within that number.

It was a lower factoring as I said.

Partly because factoring is becoming more expensive and partly because the thing that you know Bob on normalization of working capital and reduce the level of factoring overtime as we talked about you know therefore, what plan and then higher inventory, partly because of the cost of inventory and the inflation impact.

And also somehow.

Some higher safety stock levels, given the volatility in the supply chain.

Which maybe is not hum.

Permanent impact, but will be for the for the for the short term. So you know what I would say.

Inc. A it was a particularly positive performance I think going into the second half normally you would expect working capital to improve slightly on.

That will depend a lot obviously on on shipment conditions and supply conditions.

I don't I don't think there was anything particularly.

Pricing from a positive point of view and then working capital on the buyback as Carlos mentioned, you know don't Fang has three 1% of all shares. So now we have this arrangement with them whereby.

We should be able to.

Work together with them to ensure that if and when they decided to put itself. Other tranches that doesn't continue to be an overhang on our stock price. So I think that's a good step forward and then we'll see for the rest of the 5% that we mentioned in the death of what's that.

Thank you Richard next question please.

Our next question comes from the line of Thomas Besson from Kepler Cheuvreux. Please go ahead.

Yeah.

Thank you very much.

I have three questions. Please.

I'd like to come back to it.

Okay, I'm, just going to look like with shelf life.

Thanks Ben.

Critical to you Keith.

It's been true for what I'm sorry.

Christiansen physically.

I think maybe we need to be more details.

You've mentioned the.

The breakeven point today.

Oh, you Karen Williams can you maybe help us understanding all giving us more granularity.

On the dinner Eto for modern decline, depending on the volume decline in the different regions.

I think the market is worried.

Your North American margins, which are up to the Olympics.

Single digits.

Okay.

Question.

The second one if you could.

Hum.

Relative resilience.

Can you talk about the P&L.

Discussion that is you mentioned $3 1 billion cash.

How much were the P&L.

So Paul.

Right.

Who are you do you believe over the next 18 months.

So European.

European and not them.

Totals.

And lastly.

On the buyback.

Is it fair to say that you would control shows you where to buy them, we really it's doing single from someone else.

It is also fair to say that we.

We used 60 billion liquidity, you're faced with somebody like looks quite solid given the undervaluation of the shelf, but you expressed I think it would be in my view would be useful to investors. If they don't use which has a very wise way excusing its money was being Israel's but it would be.

Thank you very much.

Those are great questions. Thank you.

And I will try to answer a few I will hand over to reach out for.

For the opportunity on the share.

Also about the buyback.

And the cash synergies versus the P&L changes that we'd like to comment on the margins in the U S. That's a very important comment that you made.

And one of the things I would like to say is if our margins.

At 18 point to 8.1% if my memory is correct, 18.1% NOI margin in the North American market scene.

At risk.

We of course recognize that 18.1 is very high.

Stellar results then what should we say.

About our American peers.

Where we see where their margins are.

So if you if you are looking at the North American market.

And you say well guys still antes are great job and you have 18, so it's a big risk because it can go down.

Pops, yes, perhaps not we'll see but.

In a related.

Competitive term.

If we compare our north American margins.

While peers in North America, I think we would conclude the two of US that we are in a much better position.

Whatever the outcome of external factors may be.

Our position is in any case much better than our peers and that should play to our benefit and not to our detriment.

That's what I would say of course, you know as well and you I'm sure you.

You will probably trust us and the fact that we will fight that as much as we can to protect those margins but of course external factors are external factors, but we are starting from a point, which is much more robust than any of our peers, which means the level of protection of our earnings through the North American business, it's much higher.

And I was telling you that our potential in terms of bringing the technology to the G brand.

<unk> already ongoing on an accelerated deployment toward the full by technology and what we are going to bring in terms of electrification to our fantastic run B V pickup truck.

All of this should give us the midterm visibility that we are going to gain profitable share.

Those product sets, we are now fine tuning so I'm not at all afraid of what May happen in North America, because I know that our agility, our creativity in North America.

Obviously through the numbers stronger than some of our biggest competitors and therefore.

You can do a proper job to support all of our investors.

In the buyback.

Just one point I would like to highlight.

Answer your question and it is.

It's something that we should be mindful off.

We need to make sure that we keep.

I would say.

<unk> com.

And peaceful.

Social environment.

As you know well right now in the Western World There is a risk of social unrest.

As you know well as a consequence of inflation and the way we are mitigating the inflation interest rate hike and what that may bring to that.

The cost of living of people.

It is important that we keep that in mind because.

While this big and highly sustainable company to be.

Seamlessly operating in a proper way for the big benefit of our stakeholders starting with investors.

We need to protect this stable environment.

And of course buy back shares is something that has a sensitivity in terms of social perception that is not Neil.

And then we will have also to take that into consideration to protect your interest as an investor and keep our company us.

Smooth as focused as possible. So that's just a general comment I would like to share with you in full transparency because I think it's important that we understand.

The societies and the communities in which we are operating in the continuous improvement of the company needs. The strong support of every single employee at the company. Thank you, let me handover to reach out for the other questions. Thanks, Colin so on the synergies.

The $3 1 billion of cash synergies translates into about 1.1 billion of P&L synergies because the other 2 billion, our capex R&D, which is basically all or capitalize though will come through.

The P&L as those projects go into production.

So that's the splits in the $1 1 billion and the payout was about.

50% in industrial costs.

From from purchasing and manufacturing and 50% in the SG&A category.

And then yes, if we if oh I hope when when we purchase.

Sure.

As dongfeng sells on its stock when that when they decided to we would we would cancel those shares obviously.

That's a clear answer thank you Richard and thank you for their kids to go to the next question.

Next question comes from Michael Schrum.

From Ontario, you'll now have research. Please go ahead.

Yes, hi, everybody to fully expertise.

He described the company was always there.

It was a breakeven point, which is even more.

Now you have a rubbish photo booths, you got more synergies to come so based on this what could drive margins back to single digit next year.

In 2024.

These macroeconomic.

19 origination for instance, Europe .

Okay.

And then second question on school openings inflation comments that you're that you believe that you just highlighted.

It could be the impact in terms of wages.

In 2023.

Or would you absorbed that.

Okay.

Those are two great questions. Thank you for asking.

As you know in the therefore 2030 plan.

We have committed to you that we would keep the company on a double digit a wide margin.

And that we would double.

The net revenue of the company from 152.

Two or 300.

In euros by 2013 by.

By the way the steps that we are seeing on the first half of 2022, it's quite consistent.

We've got a we got roadmap so.

So we stick to our commitment this is how we work.

You don't always considered that our commitments are bold enough.

Which is your view, which we respect, but generally speaking we stick to our commitments and the we make sure that we deliver.

This is in our DNA.

You have a management team are at your service that delivers.

Its commitments so we stick to the double digits now many things can happen of course, and the disruptions crisis unrest.

They are crisis that of course would represent a major.

A major risk for the company.

I don't even want to mention those words here I don't want to scare anybody, but we can't imagine all of us what could happen in Europe , we can't imagine if the U S society wants to be to be broken, but we can imagine that a lot of black scenarios.

There are some Blackstone I was that of course are difficult to manage but I would say reasonably normal operations with I would say reasonable crisis.

If that has any sense to you.

We can commit on double digits. So we do not consider.

That it is a credible scenarios to think that we would be below double digits in 2024.

We think it's unlikely.

With a breakeven point at 40%.

There is enough room.

Protection to the sustainability of the company to keep it above above 10%, that's where we are then you were.

Talking about the wages the best way to protect.

The stability the social stability of our company.

Is to make sure that every year.

The performance bonus.

In the different forms of the performance bonus that are viable against the different countries, where we are operating that we keep.

Some return for the employees, which is totally linked to the performance of the company.

Which means we align the interest of the shareholders with the interest of the employees.

And that means that if our results improve.

Their returns and your returns need to improve at the same time.

What we see across the difference here is that we have the capability to have.

And overall policy where.

Investors and employees when at the same time in some cases in former PSA in the same magnitude.

And our employees and our Union partners.

They started from a position a few years ago, where they only want it base salary.

Because they didn't trust that's the recurrent profit would happen.

So they want to only want it base salary increases now.

Now they understand that's through the level of demand and the way we are managing the company they are recurring profits.

And they stopped trusting that performance bonus.

As good money.

As a pure base salary increases.

And of course, we have to take into consideration what is going on in the inflation right now and.

There will be there some wage increase most probably.

The most efficient.

Efficient way the safest.

Way to keep the balance keep social stability in the company is to make sure that the performance bonus policy.

<unk> is bringing to the employees.

Our fair share of our success.

As much as it should bring to our investors the right return that you're expecting from us. So I trust that we will be able to keep this balance. This is also the reason why I was starting this presentation by expressing bye.

Depreciation and warm thanks to our employees and to our Union partners, causing the biggest number of cases.

They are very limited exceptions.

They have been behaving in a stellar way.

And hats.

To that maturity hats off for their understanding of the environment in which we are they also understand that it's better to be on the same side of the line to protect the sustainability of the company because most of the risks that we're facing right now.

External risks there are not risks, which had generated from inside.

There are risks, which are coming at us from outside and therefore, there is a much more natural alignment between their position in hours, which is let's protect the company, let's continue to generate wealth that then we can redistribute.

With some arguments, but first let's create the wealth and then less redistribute I think we have a proper bonus performance scheme that protects that balance and that we intend to continue to refine.

That that scheme to make sure that in every country, we have specific allocation rules that protect.

The fairness of the allocation of those performance bonus and I think we have a specific skills with our HR teams on that matter.

Richard do you want to add something to this.

Nothing else for me Okay.

Another question. Please we still have a few minutes.

Our next question comes from the line of Charles <unk> from Brad Daniel now in research. Please go ahead.

Hi, Thanks for taking my question guys I've got two please firstly on the inventory so new vehicle inventories up slightly to 850000 units.

Do you still think in a steady state the inventory of about 1 billion units just the right level for Lantus and given the economic backdrop do you expect or do you intend to keep it lower than that for maybe the next few years.

Then my second question was going to be on the China plan. So as you mentioned, obviously, there's been a change in in the joint venture that for cheap. So does that alter your 2030 goal of 20 billion euros of revenue at 8% margin in China or is that still achievable.

I guess more broadly given the difficulties you've had in China do you still think it is important to just Atlanta snap impression stuff. Thank you.

Those are two great questions and.

As a matter of respect to my peers.

Peers from Volkswagen I would like to finish this Q&A session with this question because I know that their earnings session is going to start very soon so let me.

And so these are two great questions I considered that the 1 million Mark on the total inventory.

Is <unk>.

The Red line for our internal management to understand that there is a moment, where we don't want to consider anymore.

Any kind of supply shortage talk.

And what we are.

That's where our management is that as soon as we are at 1 million.

We considered that we should manage the business with the very dynamic flow.

Off the product.

We've got 1 million inventory.

That is going to be enough for us to make the right earnings so internally.

We consider the 1 million is the right number to stop talking.

About supply shortage.

She is as soon as you are about 1 million supply is fine.

We have seen in the past that the companies could operate with much more than 1 million.

Which then is creating another vulnerability, which is what happens if you have a significant higher number than $1 million and some at sometimes there is a downturn.

What happens is that it costs you a lot of money to get rid of your inventory.

A lot of viable marketing expenses. So there is no interest in a very volatile environment 12, a very high level of inventory because in terms of sales expenses. It becomes immediately very costly.

To reduce our inventory if you are caught.

With a high inventory and a downturn in the market.

So we will try to keep our inventory, possibly between 1 million and one point too.

In that kind of range, which I think is the right. The right range 1 million is an internal line, where we say stop bragging about supply.

Focus on the flows focus on the dynamics of the distribution focus on the efficiency of distribution and possibly because.

We have a very diverse our business footprint, you can have ups and downs and we'd be we can be at one point in time, one point too.

1.2 million, which would be okay from my perspective, so that's how we see it it's not rocket science. It's more the result of our experience in this automotive World. Then you were talking about China, China is interesting thing and I would like to close this session with my understanding of what's going on in China.

What I have experienced over the last five years.

That's when discussing with my business partners in China.

The political.

Influence.

On business.

In China has been growing over the last five years.

Which means the more I discuss with my business partners. The more I was seeing over the last five years that the political pressure the political influence on their own physicians was impactful.

This has been growing.

Over the last five years.

On the specific case of gas, we had a binding mou.

That's our partner decided not to execute.

As a consequence, we just said well then if you don't execute to the binding Mou then we consider that there is a breach of trust.

And therefore, we are going to unwind.

Because we cannot work with a partner that is not delivering on a binding commitment of course.

That's what we are doing and that's the right thing to do because we are cleaning the red ink.

Immediately so we cleaned the red ink, we are going to improve the earnings of the company.

Which means short term, it's a good news.

On mid long term. The your question about the 20 billion is that the right one but I don't think this is going to have a major impact because.

In fact, we're the highest profitability is is on the CPU.

Business, that's where we make huge money is on the CPU business and we have already reorganized our national sales company to group.

The National sales company make sure that we address the CPU business in a very profitable way and we're going to focus there.

And therefore I'm not sure. This will have a strong impact but that will still have to check in details.

This recent news and I will come back to you at the next opportunity to to give you my feedback and how have you assessed the situation. So far we are just cleaning the red ink and strategically speaking please remember that when we presented therefore plan for China. The title was asset light.

Strategy.

And this is a meaningful title.

Why do I think we should be assets like because.

With geopolitical tensions each.

Each time, you have the risk of cross sanctions.

You have to choose you have to choose between one of the two contenders and of course in our case, we are a western company, leading Latin America strong press.

Presence in North America and number two in Europe , we are a western company. So if we were in a cross sanction environment.

I believe we will at one point in time, we would be very exposed if we had an asset heavy strategy in China, Hence the fact that having an asset light strategy in China. I think is the right strategy for the next few years in terms of protecting us against geopolitical Cross section.

But we have learned this.

With the Iran, and we have run this week with Russia.

I think that you will see that some of our competitors being very vulnerable.

To the Chinese operations will be somewhere challenge in the near future because of this growing geopolitical tensions. Thank you again for your great questions. Your thoughtful questions. They are always exciting because they make us think better.

I hope that we could clarify everything you need this from US today and wish you a very good day for all of you. Thank you Joseph.

Yeah.

Thank you for joining today's call you may now disconnect your lines.

Yes.

Yeah.

Yeah.