Q3 2022 Stellantis NV Corporate Sales Call
[music].
Okay.
Sure.
Hello, and welcome to the East of Lantus third quarter 2022 revenue.
My name is <unk> and I'll be your coordinator for today's event.
Today's call is being recorded.
I would now like to hand, you over to your host Mr. Andrea Bandinelli head of Investor Relations. Please go ahead.
Thank you Ken and welcome to everyone. Joining us today is where do you still anticipate revenues for third quarter 2022, well yesterday the presentation material used during the school along with the related press release was supposed to be under the investors section.
The Atlantis group's website.
Today, our call is hosted by Richard Palmer, The company's Chief Financial Officer.
After this presentation, Mr problem that would be available to answer questions from the analysts 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.
In the Safe Harbor statement included on page two of today's presentation.
As customary the call will be governed by that language now I would like to hand over to Richard Palmer CFO of Synopsys.
Thank you Andre.
Good day to everybody.
To be with you all.
As you know we are reporting our shipments revenues and commercial performance today as we do for all our Q3 than in.
So moving to <unk>.
Four we presented.
Highlights for the quarter. So all revenues in the quarter reached $42 1 billion euros up 29% year over year, and reflecting a 13% increase.
Consolidated shipments.
With continued strong net pricing performance.
We also benefited from positive FX translation, mainly due to the devaluation of the euro against the U S dollar.
Well address the drivers for our revenue performance in more details on the next pages.
For the quarter, we have again achieved the highest U S AGP across our portfolio.
As a direct peers with an average transaction price of 53000 euros per unit for the quarter.
In North America, a market that was down 20 basis points and 10.
10, 8% with the 70 basis points drop in the U S more than offsetting market share gains in Canada of 250 basis points in Mexico of 40 basis points.
American voted brands continued to show great sales performance versus Q3, 2021 with the success of models such as the Dodge Durango upset 9% in the charger up 23% as well as the Chrysler Pacifica up 42%.
I'm, probably most up more than 50%. However, the Jeep brand was down 17% year over year, mainly due to the discontinuation of production of the prior generation Grand Cherokee in Q1 of this year and the continued production ramp up at Jefferson North Assembly, where we are now producing the nextgen to Glen Grand Cherokee along.
Syed the adult or anchor Durango, complementing the new generation two and.
The phe versions already being produced at Assembly.
In South America, we maintained our leadership in the region with a 22, 6% market share despite 150 basis points drop versus the prior year with our closest competitors are lagging by nearly 10 percentage points.
Also maintained market leadership in Brazil, and Argentina.
Our total sales were up 5% thanks to the solid performances of the Fiat Strada, which remains the number one selling vehicle in Brazil.
And also the new Fiat pulse and deep command as well as the fed Kronos and pleasure to us too.
Right, which are the number one and number two selling vehicles in Argentina.
Any <unk>, our total sales were down 7% while.
We were down 2%, we suffered continued production disruptions from unfilled semiconductor orders as well as outbound logistics challenges due to railcar truck and driver shortages as well as ship availability as a result, our market share decreased 90 basis points to 19, 2%.
We that nonetheless continued to capitalize on a very successful lineup.
In the commercial vehicles business, we continue to be the market leader in both South America, and EU started with 38% in 2009, 2% market shares respectively.
We're continuing to execute on our Diouf over 2030 of electrification roadmap evidenced by our strong year over year improvement in global EV sales.
Sales were up 41% year over year to 68000 units, mainly driven by strong demand for the Fiat 508, Peugeot E <unk> and the <unk>.
Paul market.
Life sales reached a total of 112000 units up 21000 units versus the same period last year also highlighting the success of <unk>.
Our basketball product strategy is continuing to gain momentum in September the Jeep brand announced its plans to become the global leader in SUV electrification, starting with the launches of for all new beds in North America and Europe by 2025. The first of these is the all new Jeep adventure.
Was unveiled at the Paris Auto show with pre bookings for the first physician opening the same day.
In September we also announced that all maybe I forgot already complex in Italy will be home to our new electrified transmissions Assembly facility with our joint venture partner Punch powertrain to increase production of the future generation electrified dual clutch transmissions with Atlantis hybrid and plug in hybrid vehicles.
This facility is expected to open in the second half of 2024 and will complement the existing capacity in midst fronts.
It's a matter of Fiat complex will also be home to offer a circular economy hub, which will open in 2023 and ensure sustainable manufacturing and consumption models.
These two major initiatives will power efforts to become a sustainable mobility Tech company and support our therefore in 2013 strategic plan.
Next moving to page five we focus a little bit on the all new Jeep Avenger.
As commented before the Avenger as the brand's first fully electric SUV.
B available in Europe at the end of Q1 2023.
We're thrilled to bring such a great product to the market as it fully embodies the Jeep brand DNA, all within compact dimension and zero emissions.
The range of 400 kilometers in W. LTP equivalent to $5 50 in the oven cycles. We believe the all electric Avenger will be successful and one of the most competitive industry segments.
Michigan is simple to become the best selling model within the brands portfolio in Europe by 2024 and show consumers at the leading SUV brand in the World believes that full by eight is a new floor by floor.
You, then avenger, which will be produced and ought to keep plant in Poland will be equipped with the first electric motor to be launched by E Motors, our joint venture with <unk>.
Finally, we have no doubt this vehicle will strengthen an already very competitive lineup as Atlantis furthering our electrification plans.
On page six we show the shipments and revenues for the group for the quarter as commented before our consolidated shipments were up 13% in Q3 to $1 3 million units.
<unk> for the improvement in the semiconductor order fulfillment versus the same period last year, which was significantly impacted by specific issues in the supply chain in Malaysia due to Covid outbreaks.
Our net revenues grew by 29% to $42 1 billion supported by the increased volumes by strong net pricing favorable mix and positive FX translation.
Regarding the semiconductors third quarter 2020, 'twenty two showed some incremental improvements. However, we continue to see volatility in the supply chain.
We're implementing various short medium and long term actions to better protect supply.
Looking ahead, we believe that we will continue to see sequential improvements, but we don't expect the situation to be back to normal before the end of next year.
Next on page seven we show the walk from Q3, 'twenty, one revenues Q3 'twenty two.
All segments posted positive year over year growth in revenues were the main contributors being North America, and large Europe , and South America up, 36%, 16% and 56% respectively.
Volume and mix contributed 3 billion euros with North America on the large Europe growing at a similar pace with volumes up 47000 units in North America, and 68000 units in last year's Q2.
Regions Wells are the biggest contributors for vehicle net price and.
Content, adding an aggregate of $2 5 billion euros versus prior year.
Pricing actions were also strong in middle East and Africa, and South America.
North America accounted for more than half of the positive impact coming from vehicle line mix with South America contributed zinger.
Additional $200 million.
FX translation effect was also very strong contributor in the quarter were $3 4 billion positive impact.
Moving to page eight.
We review the segments.
Starting with North America.
As mentioned our market share decreased by 20 basis points to 10 eight in a market that was down 1%.
Total sales reached 445000 units down 4% with shipments of 441000 units up 12%.
This led to a minor reduction in our dealer stock levels, which finished the quarter at 300000 units.
Our company inventory increased by $10000.
Shipment growth was driven by Durango campus, Cherokee Wagoneer and around 1500 Grand Cherokee down due to the discontinuation of the prior generation has already mentioned.
Revenues were up 36% or $5 5 billion with higher volumes as well as <unk>.
Favorable net price and vehicle mix or contributing as our new products continue to sustain the region's ongoing strong performance.
Ex translation due to the stronger U S. Dollar also impacted very positively our Q3 revenues.
Moving to a large Europe the industry was down 10% year over year for the quarter, mostly due to the impacts of the war in Ukraine on Russian and Ukrainian markets.
The EU 30 market was down slightly at 2%.
Our total sales in the large Europe were 591000 units down seven 5%, but exceeding our total shipments of 538000 units.
As a result, our dealer inventories were down 38000 units from June .
This reduction was despite year over year improvement in production levels and was caused by logistics challenges, which are impacting the industry as a whole in Europe shipments, who set up 14% mainly due to increased volumes of the Fiat 500, and pleasure two eight and $3 eight and such.
<unk> III.
Shipments were also up due to strong demand for our beds such as the new 500 in the open market.
Revenues were up 16% to $13 5 billion euros.
Primarily due to the higher volumes positive net pricing and improvements in vehicle mix on new car revenues, which were driven by recently launched vehicles and increased volumes.
Regarding middle East and Africa, our market share was up 100 basis points to 11, 1% and an industry down 4% total sales were up 5000 units in the region with our improved performance in Turkey more than offsetting the volumes also in Egypt due to import restrictions and logistics delays.
Consolidated shipments were up 6% year over year to 52000 units driven by increased volumes of Opel marker Peugeot Arista unfair to Gaslog.
Partially offset by less projects in 2008, and Jeep Wrangler in Grand Cherokee due to ice ocean freight and logistics challenges.
Revenues reached $1 3 billion euros up 27% driven by strong pricing actions, which more than compensated for the Turkish lira devaluation.
Moving to page nine and starting with South America, our market share was down 150 basis points to 22, 6% in the market up 13%. We can highlight the strong performance of the old <unk> pulse and Strada, selling 17000 37000 units respectively.
Those two models along with the all new Jeep commander, and Sichuan, <unk>, III, and partially offset by reduced volumes of Toto and renegade drove a 15% increase in shipments in the region.
Revenues were up a very strong 56% to 4 billion euros supported by higher volumes as mentioned, coupled with favorable net pricing and mix and positive FX translation.
Regarding China, and India, and Asia Pacific Consolidated shipments were up 11% to 30000 units. Thanks to the recent launches of the all new Sichuan <unk>, three and <unk> Meridian in India.
<unk> recorded higher volumes in the region for the Peugeot 2008, and 3008 as well as around 1500 more than offsetting the drop in volumes for the Jeep Compass and renegade.
Revenues increased by 20% year over year to $1 1 billion and similar to other regions benefited from positive effects coming from higher volumes from the India launches, partially offset by negative market mix strong net pricing and favorable vehicle mix and positive translation.
Finally, Maserati shipments were up 14% to $6 6000 units. This was mainly driven by the recent launch of the all new <unk>, which country contributed around 3000 units in the quarter as well as higher volumes of EMC, 'twenty, partially offset by less levante and ghibli volumes, particularly in China.
And India and Asia Pacific.
Here again higher volumes positive net pricing and favorable FX more than offset the impact of a higher mix of the all new <unk>, which has a lower average price points and the rest of the portfolio has led to a 23% growth in revenues.
On page 10, we present the stages of our new vehicle inventory when comparing against the end of June our daily inventories declined from 704000 units to 651000 units at the end of the quarter due to seasonal declines in most regions, but mainly an enlarged Europe down 38.
As in units.
This compares to a decline in Q3 last year, a 231000 units, which was abnormally high due to significant production interruptions as a result of Malaysia, and COVID-19 outbreak impacting semiconductor supply chain.
Company owned inventory increased by 134000 units since June this was due to a combination of increased production in Q3, reaching $1 4 million units up 19% year over year and outbound logistics challenges, mainly in Europe with the region accounting for approximately 90000 of the 134000 unit increase.
Our teams are working on a daily basis to easy challenges and bring alternative solutions to smooth deliveries of vehicles to our dealers and final customers and we expect company owned inventory such as a substantially reduce by year end.
Finally on page 11, we review, our full year outlook and guidance.
Looking ahead, we have maintained the outlook, we provided during our H $1 22 goals.
At the end of July for all regions with the exception of China, where we have increased our forecast from stable to plus 5%.
We continue to see North America down around 8% and a large Europe down around 12% due mainly to supply chain and logistics challenges and also allowing us to meet demand, which last year was met in H, one by the strong reduction in dealer inventories.
We see South America, and Middle East and Africa remaining stable, while India and Asia Pacific will increase plus 5% for the year.
On the back of our strong performance for the first nine months, we confirm our full year 2022 guidance of double digit adjusted operating income margin and positive industrial free cash flows.
Coming into the last quarter of the year. The successful launches we have had at the end of last year and earlier. This year, we will continue to bring further benefits to our already competitive lineup.
We're on track to achieve another successful year.
Lastly, but very importantly, I want to reiterate the ramp downs announcements of a couple of days ago. We look forward to welcoming welcoming you to the Ram Revolution electrification and technology event at CES in Las Vegas in early January with around 1500 Revolution that concept will make its worldwide W.
Thanks to all of you for attending this call. If we can now move to Q&A.
Thank you, ladies and gentlemen to ask a question today. Please take it by pressing star one on your telephone keypad.
<unk> for your question.
Our first questioner is Scott.
Goldman Sachs. Please go ahead.
Okay.
Hi, Hi, Richard Thank you for taking my questions.
The first question I had was just on the price mix.
Quench Lee if we went to kind of factor out the FX.
Did you see the price mix continued to improve sequentially in the third quarter versus the first half and is there any reason why it would be.
<unk> in Q4, yet.
Year to date run rate.
And then the second question I had was just with respect to what Youre seeing in the end markets.
Could you, perhaps just elaborate on why your greatest concerned life to date and from a timing perspective.
When do you think that that deterioration what you're seeing in the macro it's my slightly start to impact your financials. Given the order book is at the start of next year is at midpoint of next year or would it be later than that thank you.
Thanks George.
In terms of price mix as we continue to see.
Strong performance across across the portfolio.
You saw about 7% on price couple of percent of mix year over year and also sequentially, we continue to see improvements.
So I think.
<unk>.
We'll continue to see.
Strong positive performance also in Q4.
On price mix.
In terms of end market concerns.
It's a bit of an ongoing debate and we will have I think is where is demand.
Given that it's somewhat.
Sales by the supply challenges that we have.
So if.
If we look up.
Main markets, we continue to see very strong demand in North America I would say.
And we're also having.
More challenges on semiconductors, and North America at the moment in our portfolio and we're having.
In Europe so.
<unk>.
The factors that are.
Vehicles, attaining very fast on dealer lots.
In the U S.
And.
The real constraint at the moment continues to be soft.
<unk> due to semiconductors, but also due to some logistics challenges both for us and for our suppliers.
And in the North America market.
But I think so far we're not seeing any.
Particular concerns in terms of the demand function given.
Very fast turn that we're seeing on dealer lots.
And in Europe .
Obviously, the macro in Europe is more challenging.
Which gives me pause personally.
At the moment, we continue to see good demand and also.
Vehicles training fast on the locks and in Europe at the moment.
Our semiconductor challenges compared to last year.
Less evident production was up I think 26% in Q3 in Europe . So a good strong improvement, but you didn't see that.
Going into the shipments number because we're having a lot of challenges with outbound logistics. So we only got 14% improvement in shipments despite the 26 to the improvement.
Production.
We can say that demand issue at the moment.
Our ability to fulfill orders, we have a strong order book, which gets us wanting to.
Q2 of next year, So I think.
At the minute.
Yeah.
If I were to tell you I have a concern it would be more Europe than anywhere else.
Based on the macro.
But we do have a strong order book today.
Which gets us well into.
The middle of next year.
And then it comes down at the moment in the shorter term, it's more of a challenge of us fulfilling orders and.
Shipping units to dealers and customers.
Understood. So it sounds like you're in a similar position I guess to the rest of us in terms of the supply constraints make it.
Difficult to forecast at the moment.
When you will actually see that kind of matching of supply versus demand.
Yes.
At the moment, we can't build enough cost.
And the ones, we can build in Europe at the moment struggling to get them to the point of sale. So I think those are the two biggest challenges we have.
<unk> continued to be a big focus.
I think it's true to say that.
The European context.
Is looking pretty tough from a macro point of view. So clearly we continue to focus very much on.
Maintaining a very healthy.
Breakeven point across.
Thus our business globally.
With that we're ready for any eventual.
Softness in demand.
That's not the primary concern frankly.
Understood. Thank you very much.
Thanks.
Thank you we now move onto our next questionnaire, which is silly.
Jeffrey Please go ahead.
Yes. Good afternoon. Thanks, Good afternoon, Richard I've got two questions.
The first one.
On single now you're building a cynical right now in the U S. You don't have one in Europe , as a CFO or would you rather be.
And the composition of not having to deal with <unk> for the next 18 to 24 months.
Or would you rather have this thing already.
Operating despite the risks that are accumulating them real that use or funding costs.
I think pretty balanced way I'd, rather have a well run finger I think.
I think through the cycle, it's an asset I mean, obviously, you can pick and choose your moment, so having southern assets in the portfolio, but that's obviously not real estate so.
Because it gets us closer to our customers in the loyalty part of the equation.
And as we go into.
Some changes in the way people are buying mobility I think of the bingo becomes even more strategic potentially so.
I'd, rather have one of them I think were.
We're making good progress.
On the U S.
Franco following the acquisition.
It's proceeding very well in terms of launching products into the marketplace and we expect to see a pickup in activity as those products become material in the market.
2023.
But I understand your point, but.
And I think a well run fin co with the appropriate.
Separation from.
Between the <unk> management, and the management of the sales and marketing function in the cargo which is obviously.
Something that everybody who does that.
I think it's an asset.
Okay, and thank you and can I ask about.
Youll, China set up now so if I understand correctly for jeep or Maserati yield going to be next quarter.
And you're going to continue operating joint ventures, and a network with the social and Sichuan brands.
Any.
Any convergence of these I mean are you able to leverage.
Your relationship with them, saying or did you go network to have the appropriate presence for the Jeep and not as rocky brands or.
You kind of locked into relatively niche position.
<unk>.
What's your thinking there.
I think we like keeping them separate.
The Jeep brand has a network.
The Maserati brand has its network I think is an asset to have a dedicated network given.
The fact that those brands.
We have a very distinct.
Customer target.
In terms of the export model that we're looking at liquidity, we need to have.
A very clear focus on certain parts of.
The Chinese market, because we're not going to be a volte.
Volume player, we're going to be somewhat of a niche player with.
Very attractive products going in to satisfy certain types of customer demand, but I don't see any benefit in.
Putting together networks, where today, we have you know we have separation and separation is normally something.
Helpful.
Distinguish therefore.
For those types of brands.
Okay. Thank you very much.
Thank you.
Next we have Tom Narayan of RBC. Please go ahead.
Hi, Yes, Tom Narayan RBC, Thanks for taking the question Richard.
So my first question has to do with slide 10.
I think you said the company owned inventory will come down significantly by year end just wondering how this might translate into Q4 in terms of shipman.
Shipments and unit sales.
And then the second question.
Just curious as to your specific.
Italy production exposure as it might relate to Nat gas, obviously, Italy is another country that has a significant.
Russian Nat gas exposure.
So.
Yeah in terms of page 10, clearly we have as I mentioned.
A higher level of company inventories and.
Than we've had in the past.
And you can see that by looking at the page, but probably about 100000 units long compared to where we would want to be.
And we expect that number to come down.
Think.
Q4.
Shipments last.
Last year, we were around one 6 million units.
As I said I think.
And the H one call.
I think I think the type of volume. We're looking is probably a similar level to last year. So I.
I don't have any reason to change that and.
The biggest challenge we have there is two.
Resolve the challenges we're having in Europe .
In terms of.
Italy exposure and Nat gas I think and I think the good thing about.
But our footprint is that we are diversified so yes, we have exposure.
And most of the main European jurisdictions.
May or may not have more or less exposure to Russia and gas, but I think we have a fair amount of flexibility and the footprint to be able to build cars.
Obviously in.
In France, Germany, Spain, Italy, Czech.
Czech Republic Poland.
So we have a lot we have a lot of.
A flexibility so I'm not particularly concerned about.
Anyone jurisdiction any more than any other frankly.
Not visible, we're probably going to rise.
Do we do have compensating.
Factories.
We continue to produce in SME.
The main message.
Okay. Thanks.
Thank you.
We now take a question from Thomas Besson Kepler please.
Please go ahead.
Thank you.
A couple of questions.
We should.
This is the price.
Price mix trends.
We didnt shipping to be.
Let's just leveling in Q4.
Is it reasonable to believe that the second possibly you.
Could look like.
Yeah.
So assuming you manage to do so so what was the distribution issues logistics issues in Europe .
Yes, I think Thats a fair.
Yes Fair description I think the biggest challenge we have well we have.
Two challenges one is not new to you that is semiconductors, because semiconductors at the moment is impacting more on North American business, which obviously from a profitability point of view is a big contributor so.
We're managing through that.
And then in.
In Europe as well.
Logistics is the biggest challenge.
Which we.
We are very focused on but.
But those those issues.
Sure.
We think we can manage them through the through the H two.
Performance and I don't see any significant way.
And why we should be.
Significantly different than in H, two compared to each one in terms of.
Are margins.
In terms of cash flow, we will be slightly different because obviously with all the different seasonality.
And.
We expect more capex, R&D and H two compared to each one.
And some other activity on the restructuring et cetera, So I would expect our cash flow to be lower than each one not significantly but slightly lower.
Each one was very strong at over $5 billion.
But overall I think it's two numbers should.
It should be quite comparable.
Thank you.
One on Maserati.
Youre just bumping up.
Great Kelly.
And you have.
A lot of new products.
Can you give us some qualitative comments on the.
Turning point.
We are seeing in that business do you manage this time around too.
Make it seems.
Some things that's gotten lost.
The woman both of those we have seen in the bus.
What do you think that you can tell us.
At this point.
Yeah. He's strike strike my call when he talked to me about the boom and bust in Missouri.
But you're right has been that's been our past pattern and I'm pretty confident personally that we can break that pattern.
With.
The new team and the product line we have.
I think we have a good.
Levels.
Stability in the product plan the frequency of launches is a big focus which I think in the past has been our biggest issue because we noticed a vehicle and then we sort of left.
And excessive gaps to the next new vehicle and it's just how the portfolio.
So I think the important thing for US now is to have a good.
Frequency of launches to maintain.
Yeah.
That's one.
All of the value in the lineup and to continue to refresh it.
I think the.
The team in Maserati is doing a great job.
That starting with the <unk> I think my colleague will be our first important step and then we have <unk> and then we have other vehicles that you know about coming.
Which will help the brand and get to the types of margins you would expect from a from a luxury carmaker. So I'm very positive about it until now.
Great. Thank you and one for Joe.
Thank you.
From UBS, we have J Coleman without next question. Please go ahead.
Yes. Thank you good afternoon, Richard My first question is.
It's simply about the supplier cost situations. Some of your competitors had pretty steep increases their supplier cost also some retroactive payments. So I'm just curious.
What's the situation that's Atlantis in that regard and if you can already some initial expectations for next year as far as the total supplier and commodity cost complex is concerned that'd be my first question.
Yes, Hi, Patrick Yeah. So.
Yes, we are definitely having similar impacts.
Sure.
That's sort of normal type of productivity, we would expect from our purchasing function without getting it being.
Totally offset by.
The need to support our suppliers through some of that.
Cost increases due to.
Challenges on the supply chain, so we are saying that.
It's sort of baked into our numbers and also.
We did move very fast on the price function.
And I think.
We continue to see positive price mix, which is offsetting.
Both raw material inflation.
Other types of inflation on logistics.
And energy and also claims and suppliers.
The challenges on the cost base, so all those things youll seeing at all.
You saw some of that in our H one numbers youll see more of a you know I used to numbers, but you'll also see continued benefits from from from the commercial organization on pricing and mix, which which offset those impacts so.
Price will continue to be positive.
Inflation may be high on other vitamins or the Costco, but there are other lower entity compared to all materials this year and what materials will be done.
Compared to this year in terms of impact so.
I think we're relatively confident we can continue to see.
Strong earnings.
Supported by.
Price mix offsetting the cost challenges.
Mmm.
And my my second question is just in terms of potential action that might help the share price over and beyond just good execution of the of the operational business you.
You.
Must have by now a pretty strong visibility on second half cash flow and I'm I'm. Just curious if you have any updated thoughts on capitol location and and to be part of that question is also when it comes to the put for you.
Seen that portion is listed very successfully in the market muzzle Rottie you talked about in a fairly upbeat manner with a with a more stable high margin business and in the years ahead is is that something you would be revisiting as a as a potential standalone company anytime soon.
Oh well.
I I think.
I can respond and tons of anytime soon anytime soon I think the answer is no.
Because clearly we need to continue the the launch of the brand with the products that are that are coming and I'm very optimistic and confident that we can build a very interesting luxury car business with a maserati.
Grand and.
Eventually at some point in time that may that may be an interesting asset that can stand stand in the market on its own because you know clearly as.
A very strong brand as its own network.
Actually you know.
Very very independent type of business, even in the way we run it.
So I think that's a possibility, but no decisions have been taken in at the moment, we're very much focused on on the execution of the plan.
To make Materazzi, a very you know very sustainable luxury brand strong performance.
In terms of the <unk>.
Capital allocation I I don't have anything new to say I think.
You know cash flow as a strong we're going to execute 2022 numbers here, we do have.
Think.
As a primary focus of the execution.
Think execution is under appreciated in this context and so you know I think investors are very focused on the execution, they're gonna see that we can send you to performed very strongly.
In in in in despite the challenges facing the industry I think we have a very strong and diversified brand and business both failure.
And I think that has to be the primary.
Focus for us regarding the the stock price.
And then secondly egg Lady.
The technology part of the equation is also key.
You know, we're gonna be talking about.
The Ram <unk> truck in January of next year.
At C S, which we think is.
Really a very important.
Uhm point, where we can we can underline the progress we're making towards the the the the.
Launching a about an extra if I pick up in North America.
Which will be very competitive and very technically mm mm.
Fast and I think you know we've seen that the Jeep vehicle that we talked about today. They have engineering, Europe , which I think is really important and just sort of start to.
For the incrementally change because you can see with views of Jeep following on from the P. G V that we have in the market today is being you know a technical and and a green brand I think all those things are really key Ah Ah Ah no.
The dividend is also going to be an important part of capital on vacation I think I was also there will be strong Ah.
Percentage will give give shareholders unimportant dividend pad or anyone else being equal as we go through the rest of this year.
And then we'll continue to look at all the other option, but for the moment I don't have anything more to say on capital allocation.
Understood and as you mentioned the truck do you expect it to be eligible to the fully be tax credit, including the the battery park from the beginning.
Well, obviously, we're launching Ah battery.
It is in North America in 24, 25, so there'll be some level of transition as it goes through that launch process. So immediately we haven't we haven't announced and I think in terms of energy, but I think we are in a similar place to our competition wherever they were transitioning.
Into electrification and there's a lot of lot of ongoing activity on the supply chain. So it will be more specific about that as we get closer to the Lord.
Thank you Richard.
Thank you.
Thank you and we now move on to Jose as of Monday off J P. Morgan. Please go ahead.
Thank you very much advertise.
Couple of days the first one.
Can you come in from the <unk> following up for my account, which which key variables with Netflix or you're looking.
Be strong.
Probably some follow up maybe when it comes to a production or <unk>.
Second can you come in on a P. C D ROM pop on how the the applications are running.
Three piece on walking probably close to the second half how should we think about that.
Thank you.
Hi, Jose Thanks for the questions are in North America pricing.
[noise] overseas to manage.
The product portfolio I think we have some great products in the market for Ram the Jeep up a dodge we need some new products cries and that's coming I think I'll try I'll portfolio has never been better and he's extremely competitive and that's the primary reason why we're confident about being able to maintain.
Strong price positions secondly, as you mention inventory, we're not gonna grow inventory significantly beyond where we believe is the right level. You know we've we've seen some level of an increase in inventory, but in reality at the moment. The the vehicles turned very fast on.
<unk>, we have a lot of in transit inventory more than we would normally expect to have because of supply chain challenges and because of.
And because of logistics challenges. So you know I think.
The numbers taken at face value don't tell the full story so for the minute you know.
The imagery is not a problem. The real problem is is is meeting demand and then getting.
Stable supply function, both on the supply build and iPhone transportation point of view.
You know, we're very focused on the execution and I think we're quite confident in terms of pricing because of the speed of of of.
Units turning on dealer lots cause I mentioned.
The the romp of ACC is on target, we continue to execute with our partners.
With Mercedes Benz and which hotel soft.
Nothing.
Untoward in terms of the of the of the <unk>.
Trajectory. So we're excited by by that joint venture I think it gives us a lot of.
A lot more autonomy than than fuelled by them more autonomy frankly, then.
And fuel Jeebies with with with the battery manufacturers I think it's an interesting.
Allow us to you know become more and more competent in battery so a manufacturing.
The the Verticalization of a supply chain so is performing.
On track working capital H, two really depends a lot honestly how far we can would you saw company inventory levels that I talked about earlier and Nicole in terms of new Union inventory.
We would normally expect.
Working capital to be slightly positive in age too.
And so you know that that would still be my my.
Nation, although compared to a more stable industrial environment, we do have the challenge on on logistics, both inbound and <unk> and we're holding more inventory as a result to try and buffer against supply shocks. So I don't think working capital will be us.
Strong cashed generate during the second half I think he's gonna.
Okay ma'am.
Thank you.
Okay. Next question now comes from <unk>. Please go ahead.
Hi, Thanks for taking my questions in the U S. It looks like incentives on some still lantus models are a bit high then peers. So I think for example, the average incentive on a on a round pick up is significantly higher than the silverado or an F. 150, I think it sets is quite high the wife in the air as well yeah, but at the same.
Time as you mentioned.
The ton of vehicles I did a lot. So it's probably a quick and Ah you're reporting it really high Atp's High then you can pass. This so can you maybe square this up a little bit for US. Yeah are you happy with the tactical incentives in the U S could they come down a bit more yeah that would be my first question.
Yep. Thank you all so I think on the essentials. It it depends a lot on a on a monthly basis, you know people make moves people don't make moves and so I think.
As you say, if you look at our a T PS being higher than direct competition and you look <unk> being high then I'll direct competition I think that is a good indication of the fact that that price physicians, a very competitive and I think we're very happy with.
That price positions and the job that the.
The sales teams in the Browns are doing in North America to get full value.
Competitive potent lineup so.
I think it's.
Maybe some of the data you look at it depends on the month it depends on the vehicle line. So you know overall I think we've got a very.
Very strong price position compared to a competition and we frankly improved it over the last two years Ah from where we were we were we had some level of discount too Ford and G M and pick up and now we done. So I think that's that's just been a very positive.
Trends of the North American team is.
Implemented.
On your second question, which is not forgotten Oh I haven't actually my my second question Yeah.
Second question was gonna be all currency can you talk a little bit about how we should expect the impact of car and stay on your bottom line given you know the.
The breakdown of your cough any hedging policy she got.
Yeah well.
Our biggest exposure exposure.
[noise] exposures from my point of view from a transactional phone interview.
Really Canadian dollar.
British pound.
So you know both of those there's been some some weakening on the currency we do have.
Aging a different percentage is going I.
On average up to three years.
So we do have some level of hedging, which insulate us from the.
Initial news in this bull spot effects. So you know I don't I don't think that's gonna be a big issue.
In the short term or in the medium term honestly.
We we don't have a significant.
<unk>.
<unk> exposure to U S dollar euro either way because we do is we we have some level of.
Transaction exposure on the commercial side, but it's also offset by transaction exposure on the commodity by the way.
So the biggest thing that we have is translation of the.
U S. All the results are.
Reality resolve the Turkish lira devaluation and you know.
<unk> peso devaluation those things.
It says.
Argentina, Hudson and all financial charges because the diva.
And Turkish does the same.
Cause of hyperinflation. So you can see them in the piano will see you at the date. So don't expect any significant changes in those going forward you already seen.
And the teams are doing a pretty good job pricing for those.
So far as I've mentioned on the number of occasions on these calls.
America team in the N B a T.
So overall I think the the big impact on currencies.
Amendment he's really.
Translation and.
Alien.
British pound.
Right. Thank you.
Thanks.
Okay and next we have <unk>. Please go ahead.
Yes, Thank you Hi, Richard I T Hi, Andrea sorry, I died in the late into the cool, but the the day spike with a lot of competing events.
Back to the pricing question.
Like I get your name your that just <unk> pricing might begin to fade micros worsening and you won't be it will just simply upset consultation into twenty-three, albeit with a different mix. Let's go much more labor probably more energy inflation, how do you address that kind of pushback.
The.
The question is would you be able to state right now that you would expect any price reversal in two.
223.
I don't expect any fries with us or not.
[laughter] I think we need to be very disciplined on pricing.
Now obviously.
The fact is that that that that has a lot of assumptions statement has it all the assumptions based on what the market bomb is gonna look like.
But I think we've shown that we have.
Sort of industry leading.
Discipline on pricing, so if we're suffering than others suffering mill that's my view.
I'm not body because we have.
The vessel these as good as anybody's Brian portfolio. So the fact that we have you know a.
Very specific focus on brands in specific segments.
Think is a definite plus in terms of all but is he to find the best opportunities from pricing point of view I think all product portfolio is extremely competitive in in all of our jurisdictions and and our team is doing a great job of continuing to maintain a very strong protocols out yet so.
So I think we we have a good story to tell based also on you know the last two years of performance and even prior performance.
From from the management team so.
Cool, but I sort of tried to articulate that it's true that what you say is true the raw material inflation next year will.
Probably be.
Well, we'll be lower than than the impact we had an issue and we'll materials.
Just on what we see and.
Market conditions.
And or the other.
Another cost areas will probably be higher inflation, but those coast areas generally have a low overall by levels and everyone materials. So I would expect that the overall inflation impact next year with nobody at the same site this year.
I'm not giving you guidance for twenty-three yet because we're still working on it but I've accidentally that's.
I'm looking at it at the moment.
And you will you are fully considered to be able to upset.
It was foreseeable inflation, though you won't you won't fight that'd be state you're visiting.
Yeah, I mean like I said I think it's a relative game right. Yeah, I think relatively we very disciplined on pricing and target is to continue to.
All set the inflation with very disciplined pricey.
Okay. One last time, then <unk> if I may you refer to if I understood you correctly Richards and access company inventory, that's 100 K.
Third quarter and will that completely unwind in the fourth quarter with just a fraction of that number. Thanks, well I didn't give you a number I expect this substantially I'm winder, yes. Thank you for.
Thanks, so much.
You too and thank.
Now moving I'm, telling last question for today, which comes from Martino <unk>. Please correct.
[noise]. Thank you good afternoon, Richard deem question on <unk> I remember you guys at four O. One medium you'll need is the ideal level of inventory.
And when do you plan to achieve it and could you speak to the idea of level for North America and Europe .
And the second question is on the price, but from another perspective.
<unk>, two and a half billion positive pricing content in the <unk>.
The different <unk>.
Just a follow up on the roadmap. Okay next theater Weebelow would I remember the last indication you provided for 22 was that 6 billion was just pull <unk> and probably didn't change it.
But what are the other inflation costs on 22.
Yeah, how 'bout mancino, yeah, so in terms of.
A rural mass I mean, we we haven't given a number on other inflation inbox. So I'm focused I think we were pretty confident we can all set them into the second half.
Maintain a strong double digit margins. That's that's all I wanted to go into at the moment I thinking.
Terms of looking into.
23, as I said, you know the overall impact.
Raw materials I think he's gonna be he is going to be significantly down from the 6 billion he's not going to be zero.
So and obviously that makes these changing between steel, which was a big drive of the negative impact this year.
And moving more towards you know battery missiles, and particularly lithium.
Helping at all.
That's gonna be more significant impact.
In fact.
But you know as I said, we're all in terms of.
Nation I think the important important thing is is that we continue to offset with with price makes and as you. Your question on on pricing you know the two and a half billion of net price.
I think you know three quarters of that is coming from.
North America, and in Europe , and probably three quarters of that is.
Is north America, so the American confused it'd be a big drive of supposedly pricing, but we're seeing frankly.
Strong pricing across all the regions.
From a percentage point of view everybody is a similar level, then you'll seeing around 7% to 8%.
Every year, and we're getting that type of impact across all the regions.
Cause and some of them are much higher because you know a middle East Africa needs to offset inflation.
These are the deep the devaluation of the Turkish Lira, South America is upsetting big challenges on inflation currency.
So.
It's very much a broad based effort on the pricing.
Thank you N D inventory.
Well, yeah, I mean inventory.
Yeah, I I don't I I think we were high on company inventory at the moment.
As I mentioned on dealer inventory, we actually went down partly because you know we couldn't ship enough, causing to inventory in Europe . So that was the main reason why we were down I think you know you mentioned the median union. So I you know, we talked about a million to a million to type area as being maybe.
The sweet spot.
Sort of current decides market, but but it also you know you need to go beyond the sort of face number and into the fact that at the moment the Big challenge, we're having a lot of the inventories.
Is is not on the deed of loss. So even if it says data inventory that includes in transit inventory to the dealer, particularly in North America, because basically as soon as we get the vehicle arrived at the plant and.
Transportation It becomes do this dog and that'd be the stock needs to get to the dealer and what we're saying is it very fast.
Times once the once the vehicles or at the theater, but we're having some struggles of getting the vehicles now as fast as we used to particularly from.
From Mexico into North America, H I into the U S and across the U S as well because of.
Well man issues, but also road haulage as well so.
Logistics is hurting us on and off and that May mean that the number cause my face face number goes up but the reality is that we need to hold them more England treason.
He voted in a in an efficient scenario because of the challenges on on the on the extended supply chain.
I'm not worried about the level of inventory that absolute sense I think the problem. We have is the image was not in the right places and you can see that from the company inventory, but even within the dealing with me that it's been a challenge but.
And that's why why we need to continue to improve the fulfillment D.
Hello customer oldest.
So am I right in assuming the normal level will not be achieved until the second half of next year.
I honestly.
Normal I I I like I say, the big focus is to get the get the inventory onto the D doesn't lots and into the hands of the customers at the moment.
Being a bit of a struggle. So I don't think the actual numbers the phone is breaking.
Okay. Thank you.
Yeah.
Okay, we have no further questions in the queue.
Well I'd like to thank everybody for joining the cool and spending time looking at Saddam Hussein Q3 numbers of fluids is talking to you all again soon.
Have a good day.
Mmk would that conclude today's call. Thank you for your participation you may now disconnect.