Half Year 2025 Stellantis NV Preliminary Earnings Call
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Unknown Executive: Hello and welcome to the Stellantis H125 pre-release of Preliminary Financial Information Call.
Speaker Change: Hello, and welcome to the still anticipate 125 pre release of preliminary financial information call, you'll have the opportunity to ask questions at the end of the call basically nothing star one on your telephone keypad. Please do not exceed one question and if necessary and additional ones.
Unknown Executive: You will have the opportunity to ask questions at the end of the call by signalling star one on your telephone keypad. Please do not exceed one question per person and, if necessary, an additional one.
Edward Ditmire: I now give the floor to Mr. Edward Ditmire, Head of Investor Relations, to begin this conference. Sir, the floor is yours.
Speaker Change: And I'll give the floor to Mr added my head of Investor Relations to begin this conference Sir the floor is yours.
Edward Ditmire: Hello, everyone, and thank you for joining us today on short notice as we review preliminary financial figures for the first half of 2025. Earlier today, the company posted a press release covering these disclosures, as well as the publication of consolidated shipment volumes for the second quarter of 2025. This press release is available on the Stellantis Investor Relations website.
Speaker Change: Hello, everyone and thank you for joining us today on short notice as we review preliminary financial figures for the first half of 2025 earlier today. The company posted a press release covering these disclosures as well as the publication of consolidated shipment volumes for the second quarter of 2025. This press.
Speaker Change: Please is available on <unk> Investor Relations website, our call today is hosted by Douglas <unk>, Chief Financial Officer at Stone and after our prepared remarks, he will be available to answer questions from 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 mentioned in the safe Harbor.
Edward Ditmire: Our call today is hosted by Doug Ostermann, Chief Financial Officer at Stellantis, and after prepared remarks, he will be available to answer questions from 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 mentioned in the safe harbor statement. As customary, the call will be governed by that language.
Speaker Change: As customary the call will be governed by that language now I'll hand, the call over to Doug.
Douglas Ostermann: Now, I'll hand the call over to Doug. All right, thank you, Ed. And to everyone who's joined us today, we very much appreciate you participating on the call.
Speaker Change: Alright, Thank you Ed.
Speaker Change: To everyone, who has joined US today, we very much appreciate you participating on the call.
Douglas Ostermann: Let me discuss briefly why the company took the step of releasing preliminary H1 2025 results today and is holding this call with the investment community.
Speaker Change: Let me discuss briefly why the company took the step of releasing preliminary H. One 2025 results today and it's holding this call with the investment community on April 29th I presented the Companys Q1, 2025 revenue and shipments update.
Douglas Ostermann: On April 29, I presented the company's Q1 2025 revenue and shipments update. And we made the decision to suspend current year financial guidance really due to the uncertainties related to U.S. tariff policy, the potential impacts on the automotive market and the evolving Solantis tariff response plan. I've mentioned previously how the year was evolving, including disclosing an initial estimate of the net tariff impacts for 2025 of $1 to $1.5 billion for the full year and enumerating several other headwinds that had emerged, including forex changes, lower volumes in certain products and customer segments and the like. As we finished the second quarter and during the financial closing process, it became clear that our preliminary financial results, while generally in line with expectations in the market in terms of volumes and revenues, diverged from analyst consensus in terms of profitability and cash flow.
Speaker Change: We made the decision to suspend current year financial guidance are really due to the uncertainties related to U S tariff policy and the potential impacts on the automotive market and the evolving so at this tariff response plan.
Speaker Change: Mentioned previously how the year was evolving including disclosing an initial estimate of the net tariff impacts for 2025 of one to one 5 billion for the full year.
Speaker Change: And enumerating several other headwinds that have emerged including foreign exchange is lower volumes in certain products and customer segments and alike.
Speaker Change: As we finished the second quarter and during the financial closing process. It became clear that our preliminary financial results while generally in line.
With expectations in the market in terms of volumes and revenues diverged from analysts consensus in terms of profitability and cash flow.
Douglas Ostermann: And as a result, we felt it was important, given that we do not currently have guidance in place, to update the investment community. We decided to sync the publication, therefore, of our quarterly consolidated shipment volumes with the disclosure of the preliminary results, which we released this morning to make things as simple as possible.
Speaker Change: And as a result, we felt that was important.
Speaker Change: We do not currently have guidance in place to update the investment community.
Speaker Change: We decided to.
Speaker Change: The publication, therefore of our quarterly consolidated shipment volumes with the disclosure of the preliminary results, which we released this morning to make things as simple as possible.
Douglas Ostermann: So now let's turn to the results themselves. So for the first half of 2025, the preliminary figures we've disclosed today are net revenues of approximately 74.3 billion euros. Adjusted operating income of approximately €540 million. AOI, consistent with the company's definition, excludes the impact of approximately €3.3 billion of net charges from our IFRS figures. A bottom line net loss of approximately €2.3 billion, inclusive of those unusual items. And on industrial free cash flow, a €3 billion outflow. Now, let me run through some of the specifics on key items that impacted the first half in significant ways.
Speaker Change: So now let's turn to the results.
Speaker Change: Themselves.
Speaker Change: So for the first half of 2025, the preliminary figures we've disclosed today, our net revenues of approximately $74 3 billion euros.
Speaker Change: Adjusted operating income of approximately 540 million euros.
Speaker Change: Consistent with the company's definition excludes the impact of approximately $3 3 billion euros of net charges from our <unk> figures.
Speaker Change: Bottom line net loss of approximately $2 3 billion euros inclusive of those unusual items.
Speaker Change: And on industrial free cash flow of 3 billion Euro outflow.
Speaker Change: Now, let me run through some of the specifics on key items that impacted the first half in significant ways.
Douglas Ostermann: First, if we turn to AOI, there were really four things that shifted the AOI level below the kind of low single digit H1 expectations I discussed back in February when we set our initial full year 2025 financial guidance. And of course, before that guidance was suspended in April due to the tariff related uncertainties. So the first was lower than expected volumes, where we've noted in prior updates, the sluggish European LCV market. And on the passenger car side, where we suffered from a lower production ramp up of certain newly launched products. In North America, our fleet sales remain low relative to the market, dragging on our share, even as the retail side showed some encouraging improvement.
Speaker Change: First if we turn to.
Speaker Change: There were really four things that shifted the OE level below.
Speaker Change: The kind of low single digit H, one expectations I discussed back in February when we set our initial full year 2025 financial guidance and of course before that guidance was suspended in April due to the tariff related uncertainties.
Speaker Change: So the first was lower than expected volumes, where we've noted in prior updates the sluggish European LCB market.
Speaker Change: And on the passenger car side, where we suffered from a lower production ramp up of certain newly launched products.
Speaker Change: In North America, our fleet sales remain low relative to the market dragging on our share even as the retail side showed some encouraging improvement.
Douglas Ostermann: Shipments were also impacted in the first half due to some downtime that we took in the initial period of the tariff announcements, particularly in our products that are produced in Europe, in Canada, in Mexico, until we had some clarity on the policy itself. The second impact was really higher industrial costs, including the impact of higher fixed acid absorption, due to lower volumes, of course, and higher warranty costs. The third was foreign exchange, with an impact of just under 1 billion euros year over year. That was primarily related to the Turkish Lira, you know, strengthening the euro against the US dollar and Brazilian Rei.
Speaker Change: Shipments were also impacted in the first half.
Speaker Change: Due to some downtime that we took in.
Speaker Change: In the initial period.
Speaker Change: The tariff announcements.
Speaker Change: Particularly in our products that are produced in.
Speaker Change: In Europe.
Speaker Change: Canada in Mexico.
Speaker Change: Until we had some some clarity on the policy itself.
Speaker Change: The second.
Speaker Change: The impact was really higher industrial costs.
Including the impact of higher fixed asset absorption.
Speaker Change: Due to lower volumes of course and higher warranty costs.
Speaker Change: The third was foreign exchange.
Speaker Change: With an impact of just under 1 billion euros year over year.
Speaker Change: That was primarily related to the Turkish lira.
Speaker Change: And the euro against the U S dollar.
Speaker Change: In Brazilian Reais.
Douglas Ostermann: And last was tariffs of approximately €330 million net impact that was felt in the first half. And that's really consistent with the disclosed estimate that I made of €1.15 billion in net tariff impact, as we'll see more impact in the second half. Next, let's move to the net total of approximately 3.3 billion euros of adjustments to AOI, and I'll provide you some detail on that figure. First, approximately 2 billion euros is related to management taking some decisive and tough decisions on product programs where we really couldn't see sufficient returns. This included our hydrogen fuel cell LTV efforts.
Speaker Change: And the last was tariffs of approximately 330 million euros net impact that was felt in the first half and that's really consistent with the disclosed estimate that I made of one 5 billion in net tariff impact as we will see more impact in the second half.
Speaker Change: Next let's move to the net total of approximately $3 3 billion euros of adjustments to <unk>.
Speaker Change: And I'll provide you some detail on that figure.
Speaker Change: First approximately 2 billion euros is related to management, taking some decisive and tough decisions on product programs, where we really couldnt see sufficient returns.
Speaker Change: Included our hydrogen fuel cell television efforts.
Douglas Ostermann: As we announced to the markets last week, which resulted in approximately 700 million euro charge of that 2 billion I mentioned, certain product cancellations and related supplier payments, as well as restructuring charges mostly related to the European headcount reductions. Second, about 700 million euros across two non-cash items. The majority of this was related to impairments of certain Maserati vehicle platforms that really reflects the reality of the current sales pace that we see on those vehicles. Third, there was a net expense of roughly 300 million euros associated with several items related to the change in U.S.
Speaker Change: As we announced to the market last week, which resulted in approximately 700 million euro charge of that $2 billion I mentioned.
Speaker Change: Certain product cancellations and related supplier payments as well as restructuring charges, mostly related to the European head count reductions.
Speaker Change: Second about 700 million euros across two noncash items. The majority of this was related to impairments of certain mazo variety vehicle platforms really.
Speaker Change: It reflects.
Speaker Change: The reality of the current sales pace that.
Speaker Change: That we see on those vehicles.
Speaker Change: Third there was a net expense of roughly $300 million euros associated with several items related to the change.
Douglas Ostermann: penalty rates going to zero with the passage of major U.S. Congressional legislation, the One Big Beautiful Bill, including a write-down of the CAFE credits and a provision for purchase commitments netted against the release of the majority of our CAFE compliance cost provisions. Last, approximately 300 million euros relates to about two-thirds of an expansion of the Takata airbag recall campaign in Europe, with the rest split between miscellaneous items. In total, about half of the approximately $3.3 billion of net charges relates to future period expected cash flows, and the other half are all non-cash in nature. And so that was really the major contributor to the negative industrial free cash flow that we reported for the HAP.
Speaker Change: In U S cafe penalty rates going to zero.
Speaker Change: With the passage of <unk>.
Speaker Change: Major U S congressional legislation, the one big beautiful bill including.
Speaker Change: A write down of the cafe credits and a provision for purchase commitments netted against the release of the majority of our cafe compliance cost provision.
Speaker Change: Last approximately 300 million euros relates to.
Speaker Change: About two thirds of an expansion of the Takata airbag recall campaign in Europe.
Speaker Change: The rest split between miscellaneous items.
Speaker Change: In total about half of the approximately $3 3 billion of net charges relates to future period expected cash flows and the other half.
Speaker Change: Are all non cash in nature.
Speaker Change: Turning to our industrial free cash flow, we had said in February that we gave our.
Speaker Change: When we gave our first half outlook for 'twenty five that we expected positive flows only to come really in the second half of the year.
Speaker Change: Of course that that turns out to be the case.
Speaker Change: The marginal AOE generation in the first half was insufficient.
Speaker Change: To cover our Capex and R&D spending as we continue to invest in the business.
Speaker Change: And so that was really the major competitor contributor to that negative industrial free cash flow that we reported for the half.
Douglas Ostermann: Lastly, a quick comment on inventories, total vehicle inventories at the end of the first half of 2025 were unchanged, roughly in line with the prior six months where we ended the year last year. The OEM inventories figure were up about 60,000 units while the dealer inventories were down about 60,000 units. So overall, total inventories globally, roughly in line.
Speaker Change: Lastly, a quick comment on inventories.
Speaker Change: It'll vehicle inventories at the end of the first half of 2025 were unchanged at roughly in line.
Speaker Change: With the prior.
Speaker Change: Six months, where we ended the year last year.
Speaker Change: The OEM inventories figure were up about 60000 units, while the dealer inventories were down about 60000 units. So overall.
Speaker Change: Total inventories globally roughly in line.
Douglas Ostermann: Really, when I look at the at the first half results, of course, they are far below our potential, even taking into account the strong industry headwinds that characterize the first half of the year. And this is because we still have really a lot of work to do in terms of progressing our commercial recovery. At the same time, directionally, there was sequential improvement from the second half of 2024. If I look at the half, specifically our volumes and revenues increased in the first half versus where we ran second half last year, and our AOI margin improved, and cash flow outflows, while there were still outflows, were cut roughly in half.
Speaker Change: Really when I look at the first half results.
Speaker Change: Of course.
Speaker Change: We are far below our potential even taking into account the <unk>.
Speaker Change: <unk> industry headwinds that characterized the first half of the year.
Speaker Change: And this is because we still have really a lot of work to do in terms of progressing our commercial recovery.
Speaker Change: At the same time Directionally there was sequential improvement from the second half of 2024, if I look at the half specifically our volumes and revenues increased in the first half versus where we ran second half last year and our <unk>.
Speaker Change: Margin improved and cash flow outflows, while they were still outflows were.
Speaker Change: Cut roughly in half.
Douglas Ostermann: So we have seen progress, sequential progress, but certainly the management team is not happy with where we're at and we're going to continue to progress in the second half. Progress on product was a big part of the story in the first half. You know, we did launch a lot of products late in 2024 and early 2025, including five new B and C segment entries in Europe. And those closed temporary product gaps in our portfolio that were extremely important to execute, as well as the very well-received refresh of our RAM, medium and heavy duty pickups. And of course, we have more to come in the second half.
Speaker Change: So we have seen progress sequential progress, but certainly the management team is not happy.
Speaker Change: With where we're at and we're going to continue to progress in the second half.
Speaker Change: Progress on product was a big part of the story in the first half.
Speaker Change: We did launch a lot of products late in 2024, and early 2025, including five new B and C segment entries.
Speaker Change: In Europe.
Speaker Change: And those closed temporary.
Speaker Change: Product gaps in our portfolio that were extremely important to execute as well as the very well received refresh of our Ram medium and heavy duty pickups and of course, we have more to come in the second half, we expect continuation of the product wave, including significant remaining ramp up of the new.
Douglas Ostermann: We expect continuation of the product wave, including significant remaining ramp up of the new B segment cars and the approaching launches of three all new Stella medium nameplates in Europe, as well as the return of the Jeep Cherokee to North America to help drive improvement in the second half results this year.
Speaker Change: <unk> segment cars.
Speaker Change: And the approaching launches of three all new.
Speaker Change: Stella medium nameplates in Europe, as well as the return of the Jeep Cherokee to North America to help drive.
Speaker Change: Improvement in the second half results this year.
Douglas Ostermann: We plan to reestablish current period financial guidance that encapsulates that improvement on the H1 2025 update call that will be held on July 29th, which will be hosted by our new CEO, Antonio Filosa, and of course, myself.
Speaker Change: We plan to reestablish current period.
Speaker Change: Actual guidance that encapsulates that improvement.
Speaker Change: On the <unk> 2025 update call.
Speaker Change: It will be held on July 29th.
Speaker Change: Which will be hosted by our new CEO Antonio closer and of course myself.
Douglas Ostermann: And really, that concludes my prepared remarks.
Speaker Change: And really that concludes my prepared remarks. So operator, please open the line for any questions that we have.
Unknown Executive: So, operator, please open the line for any questions that we have. Thank you. And as a reminder, to ask a question, please signal by pressing star one.
Speaker Change: And as a reminder to ask a question please signal by pressing star one.
Thomas Besson: Our first question is from Thomas Besson from Kepler Shuffle. Please go ahead. Thank you very much. I'll start with a question about your continued share losses both in the US and Europe. I think the timing of your product launches was suggesting that your market share was going to stabilise in Europe first, then in the US. But at this stage, we're still seeing no real share gains in Europe. So could you talk about that, explain how much of the ramp up for the smart platform has been an issue, and whether eventually you'll have to take some industrial action as you announce capacity expansion in Morocco, while your volumes continue to decline.
Thomas: First question is from Thomas <unk> from Kepler. Please go ahead.
Speaker Change: Thank you very much.
Speaker Change: I'll start with a question about your continued share losses.
Speaker Change: In the U S and Europe.
Speaker Change: Timing of your launches will suggesting that your market share will go interest only loans in Europe and the U S.
Speaker Change: At this stage, we are still seeing no real.
Speaker Change: Gains in Europe.
Speaker Change: You talk about also explain the whole lot. So the ramp up hold the spark platform has been an issue and whether you would have to take some industrial action.
Speaker Change: <unk>.
Speaker Change: Our capacity expansion.
Speaker Change: Local.
Speaker Change: While your volumes continued to decline.
Douglas Ostermann: Yeah, Thomas, good question. Really, when I look at, you know, our progress in Europe, you know, our share is up in the first half, if you compare it to where we ran second half last year, you know, we're up about 130 basis points in that comparison. That, of course, is related to the fact that we've launched a lot of, you know, exciting new products. But the ramp up of those products, to your point, has been relatively slower than we expected.
Speaker Change: Yes.
Speaker Change: Thomas Good question really.
Speaker Change: Look at.
Speaker Change: Our progress in Europe.
Speaker Change: Our share is up in the first half if you compare it to where we ran second half lap.
Speaker Change: Last year, we're up about 130 basis points.
Speaker Change: In that comparison that that of course is related to the fact that we've launched.
Speaker Change: A lot of.
Speaker Change: Exciting new new products, but the ramp up of those products to your point has been relatively.
Speaker Change: A relatively slower.
Speaker Change: Lower than we expected.
Douglas Ostermann: And, of course, we really haven't gone off the ground yet with what I consider to be one of the most exciting of our B-segment products, the Fiat Grandepanda, which, you know, we'll have kind of a big launch event in September for that vehicle. And I'm excited to see the reaction of the public when they really get a chance to drive it and experience the car. Of course, the other headwind that I mentioned, you know, in my script was LCVs. You know, if you look at the LCV market in Europe, it's down about 13% year to date.
Speaker Change: And of course, we really haven't gotten off the ground yet with what I consider to be one of the most exciting of our beef segment products. The Fiat brand upon which we will have a kind of a big launch event in September for that vehicle and.
Speaker Change: And I am excited to see the reaction of the public when they really get a chance to drive it and experienced the card of course, the other headwind that I mentioned in my script was <unk>.
Speaker Change: <unk>.
Speaker Change: If you look at the LTV market in Europe.
Speaker Change: It's down about 13% year to date and that has a unique impact on us because we're we're about 30%.
Douglas Ostermann: And that has a unique impact on us because we're about 30% of that market. We have a very strong share there. It also is a very big profit contributor for us. And so that, of course, has had an impact on us. My own view, and I think, you know, what we hear from clients is that, you know, there's a lot of uncertainty in the environment today, both economic uncertainty and a lot of regulatory uncertainty. And in the face of that, a lot of our commercial customers are hanging on to their fleets for longer and are kind of taking a wait and see approach before they renew those vehicles.
Speaker Change: That market, we have a very strong share there. It also is a very big profit contributor for us.
Speaker Change: And so so that of course has had an impact on us.
Speaker Change: My own view.
Speaker Change: What we hear from clients is that.
Speaker Change: There is a lot of uncertainty in the environment today, both economic uncertainty and a lot of regulatory uncertainty and the pace of that a lot of our commercial customers are hanging on to their fleets for longer.
Speaker Change: Kind of taking a wait and see approach before they renew those vehicles, obviously, we're having.
Douglas Ostermann: Obviously, we're having discussions with them and trying to come up with programs that can help them get over the hump on that. But that has had an impact on us in Europe as well. So I don't know if that covers all your question, but...
Speaker Change: Discussions with them and trying to come up with programs that can help them get over the hump on that but but.
Speaker Change: That has had an impact on us.
Speaker Change: Europe as well.
Speaker Change: So I don't know if that covers all your question but.
Thomas Besson: Yes, thank you very much.
Speaker Change: Yes, thank you very much.
Thomas Besson: Can I ask a follow up on a more positive note? I think you've managed to report very strong gains, both in Middle East, Africa and in LATAM that have been very positive. Thank you.
Speaker Change: Can I ask a follow up on the more positive.
Speaker Change: Thank you.
Speaker Change: To report these strong gains boosted.
Speaker Change: Middle East Africa, and Latam have been.
Douglas Ostermann: from the Giulietti forum. Yeah, I mean, thanks for noting that, Thomas.
Speaker Change: Strong contributors to last.
Speaker Change: Last year.
Speaker Change: We expect that you'll get some.
Speaker Change: Traction in terms of operating leverage and therefore higher margins in these regions and each one or what does it look.
Speaker Change: As soon as it goes.
Speaker Change: Yes.
Speaker Change: Al.
Douglas Ostermann: And I'll note, you know, I'll save that kind of regional detail for the call on the 29th. But you're right, we continue to have a very strong business in the Middle East, we have a very good leadership team there. And, and there's, as you know, a very young and growing level of influence in that part of the world, a lot of population growth, and our brands have been very well received. I think we're very well positioned there. So it is an exciting part of our business for sure. But thanks for the question, Thomas.
Speaker Change: Thanks for noting that Thomas and I will now.
Speaker Change: I'll save that kind of regional detail for the call on the 29th.
Speaker Change: But youre right. We continue to have a very strong business in the middle East we have a very good leadership team there and.
Speaker Change: And as you know are very young.
Speaker Change: And growing level of fluency in that part of the world a lot of population growth and our brands have been very well received I think we're very well positioned there. So it is an exciting part of our business for sure but thanks for the question Thomas.
Speaker Change: Thank you Luke.
Philippe Houchois: Our next question is from Philippe Houchois from Jefferies. Yes, good morning. Good afternoon. Two questions, if I can. The first one, can you comment on the gap between operating cash flow and free cash flow? Because the implied capex is very, very low. So it's just a very kind of cash-saving first-half spend, or is there some other factors that might explain it?
Speaker Change: Our next question is from Phillip.
Speaker Change: <unk> from Jefferies. Please go ahead.
Speaker Change: Yes, good morning, good afternoon.
Speaker Change: Two questions if I.
Speaker Change: The first one can you comment on the gap between operating cash flow and free cash flow because the implied capex is very very low. So we just it's just a very kind.
Speaker Change: Cash saving first half spend or is there some other factors that might explain it.
Douglas Ostermann: Yeah, I mean, I think we're comparing a little bit apples and oranges there because the perimeter is very different. So when you look at the negative 2.3 from cash flows from operating activities, right? You're looking at our perimeter there that includes the financial services business. And we had an increase in use of capital within our financial services business, I think of over $4 billion. And really, you know, we're growing that business pretty rapidly, as we've discussed, you know, particularly in North America, where, you know, we, you know, bought a subprime lending activity and have built been building out the full portfolio of prime and leasing and wholesale floor plan and the like.
Speaker Change: Yes.
Speaker Change: I think we're comparing a little bit apples and oranges, there because the perimeter is very different so.
Speaker Change: When you look at.
Speaker Change: <unk>.
Speaker Change: Negative.
Speaker Change: 2.3 from cash flows from operating activities right Youre looking at R. R.
Speaker Change: Our perimeter there that includes the financial services business and we had.
Speaker Change: Increase in use of capital within our financial services business, So I think of over $4 billion.
Speaker Change: And really we're growing that business pretty rapidly as we have discussed.
Speaker Change: Particularly in North America.
Speaker Change: We.
Speaker Change: What a subprime lending activity and have built that building out.
Speaker Change: The full portfolio of prime at leasing and wholesale floor plan and the like and so that ramp up is actually ahead of schedule and so that has taken some level of capital than when you look at that.
Douglas Ostermann: And so that that ramp up is actually ahead of schedule. And so that has taken some level of capital.
Douglas Ostermann: Then when you look at the number below that on the press release, the industrial free cash flow, that is just the industrial perimeter, right? And that's where, you know, of course, when we when we look at the half a billion of AOI, you know, that clearly was not enough to cover our investing activities when we look at our, you know, levels of R&D and CapEx. And that's how we get to kind of an industrial negative free cash flow. So I hope that answers your question, but happy if you, you know, if you have a follow up, Philippe.
Speaker Change: The number below that on the press release, the industrial free cash flow that is just the industrial perimeter right and Thats where.
Of course, when we when we look at the <unk>.
Speaker Change: $5 billion of Oi that clearly was not enough.
Speaker Change: To cover our investing activities when we look at our levels of R&D and Capex and Thats, how we get to kind of an industrial negative free cash flow. So.
Speaker Change: I hope that answers your question, but happy if you if you have a follow up affiliate.
Philippe Houchois: Okay, well, actually, I have a follow up.
Speaker Change: Okay.
Philippe Houchois: Actually, before I get to my follow up, I guess if I had a I have a long wish list of what I wish to hear from Stellantis, you can imagine, and one of which would be, I'm sure. One thing I think is high time that you start splitting industrial cash flow and financing cash flow for a group the size of Stellantis. It doesn't make to combine the two. I think it works for Ferrari, it works for Porsche, but this is no longer adequate, in my view, for the disclosure of Stellantis.
Speaker Change: Actually I have a follow up.
Speaker Change: Before I get to my follow up I guess, if I had a wish list of what I wish to share from Synaptics you can imagine.
Speaker Change: Okay.
Speaker Change: Yes sure.
Speaker Change: One thing I think it's high time did you start speeding industrial cash flow and financing cash flow.
Speaker Change: For the size of scale at this it doesn't make sense to combine the two I think it works it works for corporate but this is no longer.
Speaker Change: In my view for the disclosure of cylinders and the.
Philippe Houchois: And but my second question would be, you said a few times that no, you see the improvement in retail, you don't see the fleet. So what are you doing to regain market share in fleet? Something is specifically on the RAM, you've lost a lot of share. RAM used to be a big pickup for commercial buyers and fleets. What are you doing to regain that share?
Speaker Change: My second question would be yes.
Speaker Change: You said a few times that you see the improvement in retail you don't see the fleet.
Speaker Change: So what are you doing to regain market share in fleet something specifically on the ROM you've lost a little share.
Rami: Rami you see a big pick up full commercial.
Rami: <unk> what are you doing to regain that share.
Rami: Yeah.
Douglas Ostermann: Hello, have I lost connection? Whoops.
Rami: And it will have a less connection here.
Douglas Ostermann: So I don't know if you heard all that, but we do provide more detail on your first comment on the flows related to the financial services business in the 6K.
Rami: But.
Rami: So.
Rami: I don't know if you heard all of that but but we do provide more detail on your on your first comment.
Rami: On the the flows related to the financial services business in the 6K in so maybe offline we can get together and work through some of that for you but to your point I mean, you make a good point and at some point, we continue to monitor kind of the size of our financial services activity.
Douglas Ostermann: And so maybe offline, we can get together and walk through some of that for you. But to your point, I mean, you make a good point. At some point, we continue to monitor kind of the size of our financial services activity and, you know, try to provide more and more transparency there, you know, for the investment community. So it's something that we are thinking about, for sure, to your point, Philippe.
Rami: And you know.
Rami: Try to provide more and more transparency there.
Rami: For the investment community. So it's it's something that we are thinking about for sure to your point.
Douglas Ostermann: But your second question was on RAM, which is a very important part of our business. And you asked, what are we doing there? And the first most important thing we did was to bring Tim Kuniskis back to head RAM. But what's more important is all the great ideas that he's come up with. The first and most important is that we are reintroducing the V8 into the RAM pickup truck. You know, we've seen marketing data that shows that as much as 40 percent of the market won't consider you unless you have a V8. can imagine it's pretty important that we get back into that part of the market.
Speaker Change: Felipe but your second question was on Ram.
Speaker Change: Which is a very important part of our business and you asked what are we doing there.
Speaker Change: The first most important thing we did was to bring <unk> back to head Ram but.
Speaker Change: What's more important is all the great ideas that he has come up with the first and most important is that.
Speaker Change: We have reached our reintroducing the V eight.
Speaker Change: Into the Ram pickup truck.
Speaker Change: We've seen marketing data that shows that as much as 40% of the market won't consider you unless you have it.
Speaker Change: You can imagine it's pretty.
Speaker Change: Important that we get back into that part of the market.
Douglas Ostermann: In addition, as I've mentioned, when we ran out the old DS truck, we had positioned the new truck, which we refer to as the DT platform, at the upper end to not play in that lower end of the segment because we had the DS truck. And so we now are coming back with a truck in that price tier that we've announced called the Express. And that's going to allow us to address that lower end of the market that we've been absent from. So that's a big key. We also are doing some things to improve the production numbers on the Ram truck so that we can get back into the fleet piece that has really been missing for us.
Speaker Change: In addition, as I've mentioned when we when we ran out the old <unk> truck.
Speaker Change: We had positioned the new truck, which we referred to as the <unk> platform.
Speaker Change: At the upper end to not play in that lower end of the segment because we have the DS truck and so we now are coming back with that.
Speaker Change: In that price tier that we've announced called the express.
Speaker Change: And that's going to allow us to address that lower end of the market that we've been absent from so that's a big key.
Speaker Change: We also are doing some things to improve the production numbers on the Ram trucks. So that we can get back into the fleet piece that has really been missing.
Speaker Change: For us.
Douglas Ostermann: On the excitement side, you know, we may have seen we announced we've gotten the Ram truck back into NASCAR. So there's a lot of And so we are expecting significantly better, you know, results in the second half out of the RAM brand, which is so important to us, you know, from a customer standpoint for profitability standpoint and the like. So it's a great question, Philip. Thanks.
Speaker Change: On the excitement side, we may have seen we announced we've gotten the Ram truck back into NASCAR, So theres a lot.
Speaker Change: And so we are expecting significantly better.
Speaker Change: Results in the second half out of the Ram brand, which is so important to us.
Speaker Change: From a customer.
Speaker Change: Standpoint from a profitability standpoint, and the likes so it's a great question Phil.
Philippe Houchois: Thank you very much.
Speaker Change: Great. Thank you very much.
Herst Snyder: And our next question is from Herst Snyder from Bank of America. Yes, good morning, or good afternoon. Thanks for taking my questions.
Horst Schneider: Our next question is from Horst Schneider from Bank of America. Please go ahead.
Horst Schneider: Yes, good morning, Oh, good afternoon, thanks for taking my questions.
Herst Snyder: I'm not sure if you mentioned that in the beginning, but if yes, maybe you can repeat that. Can you give any indication what was the margin, euro? One just continuation of the H2 24 trend. So North America, more significantly loss making, but Europe remained positive. Can you confirm?
Horst Schneider: I'm not sure if you mentioned it in the beginning but if you.
Horst Schneider: Yes, maybe you can repeat that can you give any indication, but we'll see margin euro.
Horst Schneider: One just continuation of the $800 thousand for trend.
Horst Schneider: North America, most significantly loss, making but Europe remained positive can you confirm that.
Douglas Ostermann: Well, you know, I'd really prefer to keep the details of the region by region for the call on the 29th. You know, that way we can kind of lay it all out for you and give you clarity on the numbers there, you know, rather than trying to quote individual numbers without, you know, detail and explanation. But we'll cover all that on the 29th for you, rest assured. And also, of course, you'll get the benefit of the commentary from our CEO as well.
Horst Schneider: Well I'd.
Horst Schneider: I'd really.
Horst Schneider: Prefer to keep the details of the region by region for the call and the 2009.
Horst Schneider: That way, we can kind of lay it all out for you and give you clarity on the numbers there.
Horst Schneider: Rather than trying to quote individual numbers without detailed explanation.
Horst Schneider: We'll cover all of that on the 29th for you.
Speaker Change: Rest assured and also of course, you'll get the benefit of the commentary from our from our CEO as well. Yeah. Then I wanted to follow up is another one and that is.
Herst Snyder: Yeah, then I want to follow up with another one. And that is, I mean, we just had last week kind of warning from Renault, which was saying basically that there's increased competitive pressure in Europe. That just happened in June.
Speaker Change: We just we just had last week kind of warning from renewal, which was saying basically is that there is increased competitive pressure in Europe that just happened in June. So maybe you can comment on that specifically in Europe. If you will see something like that too and if you can share any further detail on that.
Douglas Ostermann: So maybe you can comment on this specifically in Europe, if you see something like that too, and if you can share any further detail. Yeah, I mean, Europe is a very competitive environment. I won't disagree with, you know, our counterparts at Renault, I think we're very fortunate in that we have some fantastic new products, right? You know, they're coming out, but for us that the, you know, there's a number of headwinds that we are combating in Europe. I talked a little bit about the sluggish LCV market. Of course, you know, the race to be compliant on the CO2 side with increased BEV penetration, we increased our BEV penetration in Europe in the first half to 13%, and our BEVs have been very well received.
Speaker Change: Yes, I mean, Europe is a very competitive environment.
Speaker Change: Disagree with.
Speaker Change: Our counterparts at Renault I think we're very fortunate in that we have some fantastic.
Speaker Change: New products right.
Speaker Change: They are coming out but for us that.
Speaker Change: Sure.
Speaker Change: There's a number of headwinds.
Speaker Change: That we are combating in Europe, I talked a little bit about the sluggish LCD market.
Speaker Change: Of course.
Speaker Change: The.
Speaker Change: The race to be compliant on the Cotwo side.
Speaker Change: With increased <unk> penetration, we increased our bev penetration.
Speaker Change: In Europe in the first half to 13% and our bags have been.
Speaker Change: Very well received.
Douglas Ostermann: You know, our new B-segment BEVs are based on very affordable LP technology. They have really nice ranges. I think the pricing is very attractive, and we make money on them. But it is a profitability headwind, of course, because we don't make as much money on a BEV in most cases as we do on the ICE counterparts. But, yeah, Europe's a tough environment. I give our team and the new products a lot of credit for being able to increase our market share sequentially, second half 24 to 25 by 130 basis points, despite a 13% decline in the area where we have basically one of our strongest market shares at 30% in LCV.
Speaker Change: Our <unk> segment are.
Speaker Change: Or based on very affordable L. Pic technology to have really nice ranges I think that the pricing is very attractive and we make money on them but.
Speaker Change: It is a profitability headwind of course, because we don't make as much money on a bev in most cases as we do on the ice counterparts, but.
Speaker Change: But it's a tough market as everybody tries to get up that scale to the levels that are going to be required for <unk>.
Speaker Change: Compliance now Luckily.
Speaker Change: Because of the change in regulations, we all have three years.
Speaker Change: To be compliant right. So there shouldnt be a panic at the end of the year, which we had all kind of.
Speaker Change: But yes, Europe's tough environment, given our credit our team and our new products a lot of credit for being able to.
Speaker Change: Increase our market share sequentially second half 'twenty four 'twenty five by 130 basis points. Despite.
Speaker Change: 13% decline in the area, where we have basically one of our strongest market share is at 30% LTV. So I think it's <unk>.
Douglas Ostermann: So I think it's – you know, given the environment, as you said, which is pretty tough, I think it's quite a good accomplishment for the team. And certainly not where we want to be. We want to continue to strive for more. But, yeah, there are a lot of headwinds in Europe. You are correct on that.
Speaker Change: Given the environment as you said, which is pretty tough.
Speaker Change: I think it's.
Speaker Change: Quite a good accomplishment for the team and certainly not where we want to be we want to continue to strive for more.
Speaker Change: But yes, there are a lot of headwinds in Europe. You are correct on that then maybe the last one since my first question.
Herst Snyder: Okay. Then maybe the last one, since my first question you couldn't answer. On tariffs, when you talk about the 300 million euro headwind in Q1, that was a very kind of peak number, or it's just a partial impact and tariff peak especially in Q3, and then mitigation effects basically coming to force, which would lower the pain again towards the end of the year? No, I mean, that the tariffs only came in partway through the half. So that certainly is, is, you know, not representative of what we expect for the second half. Remember that I, I kind of got it to one to one and a half billion euros in total.
Speaker Change: On tariffs.
Speaker Change: When you talk about that 300 million euro headwind in Q1 that was already capped off.
Speaker Change: Peak number or it's just partially impacted tenants because basically in Q3.
Speaker Change: Then mitigation effect basically come into force, which would lower the pain again towards the end of the year.
Speaker Change: No I mean.
Speaker Change: Tariffs only came in part way through the half so it certainly.
Speaker Change: It is.
Speaker Change: Not representative of what we expect for the second half remember that I kind of guided to one to $1 5 billion euros in total so $3 30 in the first half.
Douglas Ostermann: So 330 in the first half, you know, that we'll see, we'll see significant more, significantly more in the second half. And less things change, you know, and frankly, you know, that the tariff front seems to evolve on a daily and weekly basis, right? Because the administration is still very much engaged with many countries around the world in negotiating deals. And so we'll have to see how that evolves.
Speaker Change: We'll see we'll see significant more significantly more in the second half.
Speaker Change: Unless things change and frankly.
Speaker Change: The tariff.
Speaker Change: Upfront seems to evolve on a daily and weekly basis right.
Speaker Change: Because the administration is still very much engaged.
Speaker Change: With many countries around the world in negotiating.
Speaker Change: Yields and so we'll have to see how that evolves, but I think given the given the current outlook.
Douglas Ostermann: But I think given the, given the current outlook, you know, I would expect to see that figure probably double in the second half or more. Okay, and that number was then before mitigation actions on price, for example. Yeah, and that's a great point. Because You know, I believe, you know, tariffs are, we all know, inherently inflationary. And a lot of us in the industry, I think, have been reluctant to raise price because the tariff policy has been changing so much. I think people have been slow to react because we're all kind of waiting to see how it all evolves.
Speaker Change: I would expect to see that figure probably double in the second half or more.
Speaker Change: Okay and that number wasn't before mitigation actions on price for example.
Speaker Change: Yes, that's a great point.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: I I believe tariffs are we all know inherently inflationary and a lot of us.
Speaker Change: In the industry I think have been reluctant to raise price because the tariff policy has been changing so much.
Speaker Change: I think.
Speaker Change: People have been slow.
Speaker Change: To react because we all kind of waiting to see how it all evolves.
Douglas Ostermann: And, of course, we, you know, most of the OEMs in North America anyway, you know, typically will run 60 to 90 days of inventory that wasn't subject to tariffs that you could, you know, kind of continue to sell down. I think we're coming to the end of that period. I think in the second half, you will see more reaction from various OEMs. And I think there will be some mitigation. But you know, we'll have to see how it evolves.
Speaker Change: And of course, we most of the Oems in North America any way.
Speaker Change: Typically will run 60 to 90 days of inventory.
Speaker Change: It wasn't subject to tariffs that you could kind of continue to sell down.
Speaker Change: I think we're coming to the end of that period I think in the second half you will see.
Speaker Change: More reaction from various Oems and I think there will be some mitigation.
Speaker Change: We'll have to see how it evolves okay. Thank you so much.
Herst Snyder: Okay.
Unknown Executive: Thank you so much.
Unknown Executive: Thank you.
Unknown Executive: And ladies and gentlemen, we have time for one last question today.
Speaker Change: Thank you and ladies and gentlemen, we have time for one last question today.
Jose Asumendi: Jose Asumendi, JP Morgan, please go ahead. Thank you very much. Thank you Doug for making the call today.
Speaker Change: <unk> Jpmorgan. Please go ahead.
Speaker Change: Thank you very much thank you Doug for making the call today.
Jose Asumendi: One final one, it will be great if you please comment on how you think about the liquidity of the business. Do you think about it on a cash basis, net cash basis, your refinancing needs? If you can just comment so we can get some comfort there from the equity and credit perspective. And if possible, I think the last time we left it in terms of cash generation, second half positive but not upsetting the cash currency in the first half. Is this how we're thinking about it or have we seen maybe some additional headwinds which could maybe mitigate this cash generation in the second half?
Speaker Change: One final one it will be great. If you. Please comment on how you think about the liquidity of the business do you think about it.
Speaker Change: Cash basis, net cash basis, Youll refinancing needs. If you can just comment so we can get some comfort from the equity and credit perspective, and if possible.
Speaker Change: The last time, we left it in terms of cash generation second half positive, but not offsetting the cash burn in the first half.
Speaker Change: How we're thinking about it or how do we see maybe some additional.
Speaker Change: Headwinds, which could maybe mitigate these cash generation in the second half. Thank you.
Jose Asumendi: Thank you.
Douglas Ostermann: Yeah, Jose, always nice to hear from you. And, and I appreciate you asking about liquidity and cash and all the things that are near and dear to ex treasurer's heart. So let me try and answer your question. Look, the way we think about, you know, having sufficient liquidity for the business, I think we've been pretty clear about and consistent, you know, in that we think we we really want to have liquidity that is roughly 25 to 30% of trailing, you know, 12 months revenues. And despite some some cash burn here in the first half, you know, we we will remain, when you see are the full financials, you'll see that we've remained in that in that range.
Speaker Change: Yes, I always nice to hear from you.
Speaker Change: And I appreciate you asking about liquidity and cash and all the things that are near and Dear to X treasures heart.
Speaker Change: So let me try and answer your question.
Speaker Change: Look the way we think about.
Speaker Change: Having.
Speaker Change: Sufficient liquidity for the business I think we've been pretty.
Speaker Change: Clear about and consistent.
Speaker Change: We think we really want to have liquidity that is roughly 25% to 30%.
Speaker Change: Trailing.
Speaker Change: 12 months revenues and.
Speaker Change: Despite some some cash burn here in the first half.
Speaker Change: We will remain when you see are the full financials youll see that we have remained in that in that range.
Douglas Ostermann: And so I feel like we have sufficient liquidity, as you, I'm sure probably know, Jose, we went in the first half, and issued debt, both in the US market and in the European market, to replace those maturities that are going to expire this year. And in fact, issued a bit more than what will expire this year, because the markets were pretty constructive. So I feel from a from a liquidity standpoint, we're still in very good shape, we have a very strong balance sheet. And we've worked hard to build up a fortress balance sheet. Because we know that this business can be can be volatile, and there will be periods, like we're experiencing right now when when, you know, cash is in the outflow position, and we need to continue to invest in the business.
Speaker Change: And so I feel like we have sufficient liquidity as you I'm sure probably no.
Speaker Change: We went in the first half and issue debt both in the U S market and in the European market.
Speaker Change: To replace those maturities that are going to expire this year.
Speaker Change: And in fact issued a bit more than what will expire this year.
Speaker Change: Because the markets were pretty constructive so I feel from a from a liquidity standpoint.
Speaker Change: We're still in very good shape, we have a very strong balance sheet and we've worked hard to build a fortress balance sheet.
Speaker Change: Because we know that this business can be can be volatile and there will be periods like we're experiencing right now win win.
Speaker Change: Cash is in the outflow position.
Speaker Change: We need to continue to invest in the business. So I think we're in pretty good shape on that front.
Douglas Ostermann: So I think we're in pretty good shape on that front.
Speaker Change: As you mentioned, though of course, we need to turn in the quarter.
Douglas Ostermann: As you mentioned, though, of course, we need to turn the corner and start generating positive, industrial free cash flow. And I will outline our expectations for that in the call on the 29th, where we plan to reestablish guidance. So I don't want to preempt all that. But but we'll get into that on the on the 29th call for sure. Jose. Appreciate the question. Thank you much.
Speaker Change: And start generating positive.
Speaker Change: Industrial free cash flow.
Speaker Change: We will outline our expectations for that in the call on the 29, where we plan to reestablish guidance. So I don't want to preempt all of that but we will get into that on the on the 29th call for sure Jose.
Speaker Change: Appreciate the question. Thank you very much.
Edward Ditmire: Thank you and with this I'd like to hand it back over to Ed for any additional So, I'd just like to say thank you to everyone for participating in the call today. We look forward to updating you on July 29th in more detail on both the H1 results and, importantly, how we see opportunities to improve the second half, as well as reestablishing guidance for you. So, look forward to speaking with you then. And, of course, I'll be joined by Antonio Pelosa during that call, and I'm sure we'll all look forward to his commentary as well.
Speaker Change: Thank you.
Speaker Change: With this I'd like to hand, the call back over to add.
Speaker Change: Or closing remarks over to you Sir.
Speaker Change: So I'd just like to say, thank you to everyone for participating the call today, we look forward to updating you on July 29th in more detail with on both the <unk> results.
Speaker Change: And importantly, how we see opportunities to improve the second half as well as re establishing guidance for you. So look forward to speaking with you then and of course I'll be joined by Antonio Carlos during that call and I am sure.
Speaker Change: Well I'll look forward to his commentary as well so thank you.
Unknown Executive: So, thank you.
Unknown Executive: This concludes today's conference call. Thank you for your participation.
Speaker Change: Thank you. This concludes today's conference call. Thank you for your participation you may now disconnect.