Earnings call: Forvia reports robust 2023 results, sets ambitious 2025 goals

In a recent earnings call, Forvia's CEO, Patrick Koller, presented the company's 2023 results, showcasing significant achievements and setting forth ambitious targets for the coming years. Forvia met its Power25 targets, reported organic growth of 14%, and achieved a notable EUR31 billion in order intake.

The company also successfully reduced its net debt by almost EUR1 billion and emphasized its commitment to environmental, social, and governance (ESG) performance. Looking ahead, Forvia outlined its EU-Forward project, plans to increase synergies with HELLA, and a focus on digitalization and hydrogen activities. The company is confident in meeting its 2025 targets, including reaching sales of EUR30 billion and an operating margin above 7%.

Key Takeaways

• Forvia achieved a 14% organic growth and a 5.3% operating margin of sales.
• Net cash flow increased by 34% to EUR649 million, and net debt was reduced significantly.
• The company has set a goal to achieve carbon neutrality by 2045 and reduce Scope 3 CO2 emissions by 45% by 2030.
• Forvia launched the MATERI'ACT division to develop new materials using recycled and bio-sourced materials.
• HELLA was consolidated from February 2022, contributing to sales despite a negative Forex impact of close to EUR1.3 billion.
• Forvia reported a net income of EUR222 million, or EUR1.13 per share, and completed its disengagement from Russia on December 27.
• The company plans to reduce inventory and leverage, focusing on restructuring and disposal programs.
• Forvia aims for sales of EUR27.5-28.5 billion in 2024, with an operating margin of 5.6-6.4%.
• Investments in digitalization and artificial intelligence are planned to address European capacity challenges.

Company Outlook

• Forvia's EU-Forward project aims to enhance competitiveness in Europe, targeting a margin increase from 2.5% in 2023 to above 7% in 2028.
• The company is on track with its Power25 ambition, aiming for sales of EUR30 billion and an operating margin above 7% by 2025.
• Efficiency gains of 50% through AI in R&D and program management are expected.
• Government incentives for battery electric vehicles (BEVs) are considered important for growth.

Bearish Highlights

• The company faced challenges with inflation recovery and volume contributions.
• A negative Forex impact of close to EUR1.3 billion was reported.
• Overcapacity in traditional materials like Seating, Interiors, and Clean Mobility is being addressed through investments in standards and massification.

Bullish Highlights

• Sales level reached EUR27.2 billion with strong growth in business groups like Seating and Clean Mobility.
• Asia outperformed with an 11% margin, and collaboration with BYD (SZ:002594) resulted in sales exceeding EUR1 billion.
• The company is confident in its ability to continue organic growth outperformance in 2024, with a focus on BEV sales in Asia.

Misses

• Despite strong overall performance, the company acknowledged the negative impact of foreign exchange rates on its financials.

Q&A Highlights

• During the Q&A, organic growth outperformance, the impact of inflation, and the growth of BEVs in China were discussed.
• Insights on working capital, net debt to EBITDA guidance, and cash flow projections for 2024 and 2025 were provided.
• Plans for actively managing refinancing needs and expectations of a decrease in net financial expenses were outlined.

Forvia, with its ticker mentioned once in the context, has shown resilience and strategic planning in its operations. The company's focus on innovation, sustainability, and efficiency sets a strong foundation for its future endeavors. As Forvia progresses towards its 2025 targets, it remains committed to optimizing its operations and financial health while navigating the dynamic global market challenges.

InvestingPro Insights

As Forvia continues to navigate the competitive automotive landscape, its financial metrics and market performance provide valuable insights for investors. According to InvestingPro data, Forvia's market capitalization stands at $2.64 billion, reflecting the company's size and market presence within the Automobile Components industry. Despite the challenges faced, Forvia's net income is expected to grow this year, aligning with its positive outlook and strategic initiatives.

InvestingPro Tips highlight that Forvia's stock has experienced significant pressure, with the price having fallen considerably over the last three months. This could be an opportunity for investors, as the Relative Strength Index (RSI) suggests the stock is currently in oversold territory, potentially signaling a buying opportunity for those who believe in the company's long-term targets.

While Forvia does not pay a dividend to shareholders, the focus remains on growth and achieving an operating margin above 7% by 2025. The company's commitment to digitalization and hydrogen activities, as well as its EU-Forward project, are expected to contribute to its competitive edge and financial performance.

For those looking for more in-depth analysis and additional insights, InvestingPro offers more tips on Forvia. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access a total of 9 InvestingPro Tips that could help in making more informed investment decisions.

Full transcript - None (FURCF) Q4 2023:

Patrick Koller: So, ladies and gentlemen, good morning, and welcome to our 2023 Results Presentation. The agenda for today, we will start with the 2023 highlights, the '23 result review, which will be made by Olivier. We will speak about 2024 onwards, and especially focusing on a new project we have, which is EU-Forward. And then we will -- I will give you the guidance for 2024 and confirm 2025, our Power25 ambition. 2023 highlights. So the key achievements in '23, I think we were able to achieve our Power25 targets and the deleveraging is on track and you will see it in more details. We achieved on strong, selective and profitable order intake of EUR31 billion. We are going ahead with our integration and corresponding synergies ahead of our roadmap. And again, we will give you here more details. And we have an effective focus on ESG performances. And here, we will show you the concrete results we have. I suggest to go through now a video, which will summarize what we achieved in 2023. [Video Presentation] We are not used to look back, but I think that it makes sense to see what we did with the teams around the world. 2023 in three key figures, the first one, the growth, organic growth of 14%, an outperformance of 430 basis points, an operating margin at 5.3% of sales, plus 100 basis points versus last year, a net debt reduced by close to EUR1 billion. About [indiscernible] through and strong net cash flow of EUR649 million and the completion of our first EUR1 billion disposal program. Just as a reminder, we started in the second half of 2022. So I think it's a pretty good performance considering also the environment in which we are working. The net debt to adjusted EBITDA multiples reduced to 2.1 times, again improved by 100 basis points versus June 2022. In a nutshell, all 2023 guidance targets met on track with Power25 priorities and targets. Maybe to tell you here also one point, we have decided to be back on dividends with a dividend of EUR0.5. It's not in our -- the historical level. We will progressively go back to the historical level, but this is to show you our confidence in our capacity to deliver. But also, it is taking into account, the investments we will have to make to achieve euro -- EU-Forward. About our growth momentum, we achieved EUR31 billion of order intake. We did it being selective, so we could have done much more than that. And you see here some highlights. 25% of this amount was related to Electronics, 46% on Electric Vehicles. But I wanted to highlight that EV1 and EV2 are two pure electric customers, one of them being Chinese. And you have, in Asia, the 36% achieved more than EUR11 billion, the 36% is, you will see allowing us to get closer to our new international balance. Profitability consistent with our Power25 targets, in fact, even slightly above. And with a significant reduction of our upfront cost, we had targeted EUR1.6 billion, and we achieved EUR1.3 billion, so EUR300 million of upfront savings. Here just for information, a few vehicles we have launched in 2023. We have launched more than 330 programs last year. So you see the Jeep Avenger, European Car of the Year; the Peugeot (OTC:PUGOY) 5008; the Porsche Cayenne, the RAM 1500, the Ford (NYSE:F) Transit and the Mercedes E Class. This is for Europe and Americas. Let us have a look on Asia, the Nissan (OTC:NSANY) Ariya, the Changan Avatr, the Lotus Eletre, the BYD Tang and the Li Auto (NASDAQ:LI) X03. It's just a few samples. About our integration and the way we are working together with HELLA, we are pleased to tell you that we are considering an increase of our synergies. Previously we communicated above EUR300 million. We are now proposing above EUR350 million. And here, we have an -- net cost synergies, EUR190 million achieved in 2023 for an target, which was at EUR120 million. So it works. And we are probably not at the end of the story. We are continuing to work together. We have found new possibilities to achieve these synergies. And I will show you, in particular, for the Forvia Excellence System, how we are collaborating. We have completely rewritten our Forvia Excellence System. It's now really a system which is a combination of the strengths of both companies, HELLA and Faurecia. So this is a foundation to ensure a safe work environment, deliver total customer satisfaction, achieve Power25 objectives, and reach our Scope 1 and 2 carbon neutrality targets for 2025. In terms of the digitalization, more than 80 plants are today already Digital Model Plants. We want to add to these ones in 2024, 30 plants. We have five Lighthouse plants. What are Lighthouse plants? They are fully automated plants with a minimum of operators. And here, our target until 2025 will be to have one main -- one Lighthouse plant per main product line. So it means that we will add 10 Lighthouse plants until 2025. But the easiest or the best way is probably to show you with a video how we are dealing with this. [Video Presentation] So speeding up hydrogen activities, we have achieved about EUR500 million of order intake on hydrogen in 2023. And I think it's important because we have now put in place an industrial tool, which has scale 100,000 you see it in Allenjoie, 100,000 tanks per year is the capacity we have installed. We also have inaugurated Symbio's gigafactory, which is called SymphonHy with the capacity of 50,000 fuel cell systems by 2026. This with, Stellantis (NYSE:STLA), which entered into the capital of Symbio, we are now three shareholders at equal level. It was very important to have Symbio with us -- to have Stellantis, sorry, with us, because we need this knowledge about the use cases and all what is related to the vehicle use cycles. We are also starting in North America, and we will very soon communicate our new facility in North America, most probably in Mexico, in the weeks to come. By the way, I believe that America might be the region, which will take off. And this is because for the light trucks and the big SUVs, hydrogen is probably the right solution. You see it in the video, we are passionate about CO2 reduction. And during the CES, at the beginning of this year, it was really our main focus Scope 3, designed for Scope 3. We have six years in front of us and not more to achieve our target, which is to reduce by 45% until 2030, the Scope 3 CO2 related level. In order to do this, we have, in 2023, created and kicked off MATERI'ACT. So MATERI'ACT is a division, which is focusing on formulating new materials using recycled material, but also bio-sourced material for plastics, but also for foils, for surface materials. And you see here that we have worked and we have first results with strategic collaboration, several strategic collaborations, a joint venture which was signed in North America with PCR. We have more of 400 materials, which are formulated today, tested with artificial intelligence. And maybe more importantly, we have started with 12 automotive programs with awards, and we are confident to achieve EUR2 billion of sales by 2030. So it's something, which is of very high interest for our customers. We have discussions with most of them about how to deal with that. You need also traceability. You need to be able to calculate the CO2 savings, all of that is not easy. You need to have the feedstock in the right volumes for the automotive industry. But I think it's a very interesting business, we are currently developing. Related to this, we have, of course, our Net Zero target for 2045. Two intermediate steps, the carbon neutrality on Scope 1 and 2 in -- by 2025. And what I just said, the minus 45% on Scope 3 by 2030, through what we call internally, it's a project designed for Scope 3. What I can tell you is that all the business groups, all the business groups, and you will see it through some examples Olivier will demonstrate, will show. We have the means, we have the technologies, we have the solutions to make it happen. It's not only to reduce the CO2 level, but it's to do it without increasing the costs, which is really the challenge we have. We are doing whatever we can in order to compensate cost increases on materials through new solutions, less weight, less components, less energy to transform these materials. On Scope 1 and 2, we are one year ahead of schedule. So we are very confident to deliver this first intermediate target in 2025. When you compare our energy consumption in 2023 versus 2019, we saved 26%, and we invested in renewable means, solar and wind, and this will allow us to achieve up to 700-gigawatt capacity in 2024. To give you an order of magnitude, we are consuming a little bit less than 2,000 gigawatt hour worldwide. This is also, you know, demonstrated by the ratings. We have improved all our ratings with these four main agencies, we are working with and you see that on MSCI and on CDP, we are at the A level, and we have significantly improved with Moody's (NYSE:MCO) and Sustainalytics our ratings in 2023. So Olivier, I pass you the floor for the results.

Olivier Durand: Thank you, Patrick. Good morning, ladies and gentlemen. I will go through the '23 results in more details. And starting with this page, which is showing that your company FORVIA has progressed on all its financial metrics in '23. In revenues, strong sales increased 14% organically. We are at EUR27.2 billion. Operating margin plus one point, and we are at 5.3% of sales, and in absolute value EUR1.3 billion of operating margin. The net cash flow is up 34%, getting to EUR649 million, 2.4% of sales. This is not only 34% improvement year-on-year, but is double the level of two years ago. And the net debt has reduced by INR1 billion in one year, INR1.4 billion in 18 months and the leverage has gone down from 3.1 to 2.1, i.e., the majority of the improvement we are targeting in the context of Power25. One message before I go through further pages. The '22 numbers are reflecting the implementation of IFRS 5, which means that SAS is reported as a discontinued activity, so deconsolidated, in fact, retroactively from January 1st, '22. If we go first on the sales level. So sales level EUR27.2 billion, 14% organic growth, 430 basis points of outperformance. This is true, in fact, in all the business group. We'll go through that. You have two other elements to take into account. One is the Scope effect. In the Scope effect of 515, you have, first of all, the fact that HELLA was consolidated from the 1st of February '22. So in all the numbers that I'm showing you, you have 11 months of HELLA consolidation in '22 and, of course, 12 months in '23. You have a small negative of EUR100 million, which is related to the disposal of commercial vehicle exhaust systems sold early October to Cummins (NYSE:CMI), which is leading to this net EUR515 million. We had a significant negative Forex impact, close to EUR1.3 billion. The main contributor is, of course, the Chinese yuan. But you had also, in fact, contribution related to the hyperinflation and devaluation in Turkey and in Argentina. You remember that there was a major devaluation 15 of December in the country, and a little bit on the US dollar. So this evolution means that from a reported basis, we are close to 11% increase year-on-year. On the operating margin, we are improving by one point from 4.3% to 5.3% of sales. This is driven by the growth in volume. This is driven also by what Patrick mentioned, which is that we are in advance of our roadmap on synergies leading to a contribution of EUR139 million in the P&L of 2023. We had also the hands of our problematic contract in Michigan. We have, in fact, closed the plant in Highland Park, transferred the contract in agreement with our customer Stellantis at the end of October. So we had only EUR30 million loss in '23 versus EUR80 million a year before. You have the Forex impact inside this presentation, which is sizable and is sizable because of the devaluation of Argentina and Turkey, which represents EUR60 million inside this number. On the more negative side, two elements to mention. One is on the recovery of inflation. We are a bit lower compared to what we were targeting at the beginning of '23. We make sure that we are not taking deals that will be short-term, okay, but, in fact, unfavorable mid-term. So that's part of the element as well as, in fact, strong tension with customers. And the other one is that you see that the contribution of the volume is a bit of the low side, which is reflecting improvement in operation, but progressing during the year and partial. Now, if I go business group by business group. We are starting with Seating. Seating has improved performance. It has also recorded a strong growth in revenues. You see that it's 16% organically. This is on the back of a strong level of activity in China, not only with BYD, but also the growth in Li Auto. And, in fact, also the development with activity with a US EV car maker. So on the growth side, strong progress. We benefit from the development in China. Improvement of the profitability. 40% of this improvement, 110 basis points comes from the end of Highland Park contract. But it means that we have also progressed as well. But we have to recognize that we are below our potential, we are below our targets on this activity, and this is reflected headwinds in some JIT activities, but also structural overcapacities in Europe that we will address, and Patrick will comment further in the EU-Forward presentation this morning. On the Interior side, we are, in fact, having a gross which is at 11.5% organically, which is solid, but we have an operating margin that is between "only stable" so at 4.1%. So this is reflecting, in fact, that on top of the operating leverage, we had compensation from currencies. Interiors is sizable in Turkey, so has been impacted by the hyperinflation in the country, the level of inflation pass-through, and also similarly to Seating by some of our capacities in Europe and operational performance in the region, which is one of the topics we are talking about this morning. On Clean Mobility, we have two things to mention. First of all, this is an activity that is continuing to grow, and is actually growing above the market. So in a context of electrification, in a context of an activity that could be more on the decline, we can say that we have a strong activity with clean mobility, not only in volume, but also in profitability, you see 9% operating margin. If I exclude the investment, we are doing in hydrogen and solid cash flow performance, we are managing this activity clearly as a cash cow, as we said, we will do in the CMD in late '22. On Electronics, you see, of course, the growth -- organic growth of 14.8%. This is, in fact, not only in HELLA Electronics but also in the Clarion Electronics side. And we should mention also that the improvement in margin by 130 basis points to 5.3% is the reflection of both the strengths of the HELLA Electronics portfolio, but also the turnaround of Clarion Electronics, which is clearly positive in H2 and actually positive for the first -- for the full year on the back of the structural action that have been done on the industrial footprint, on the R&D activities in the different countries, and the start of strong growth, more than EUR200 million during '23. Lighting. Lighting is actually ahead of our Power25 ambition. We are already at the 5% that we targeted in the context of the CMD. This is on the back of solid growth, 15% organically. This is on operating leverage. This is also on synergies. Lighting is the business group benefiting the most of the common synergies, and you see it in the bottom line. And last but not least, we have Lifecycle Solutions. Lifecycle Solutions is, in fact, able to pass through the inflation completely to customers, to expand its revenues, and to have, in fact, 12.8% organic growth as well as an operating margin, improving significantly year-on-year, and getting to 12%, reflecting the strength of the B2C model that we have in this activity. Now, if I go to the region presentation, I will start from the right-hand side and I will go right to left. So first of all, Asia. So Asia, we have not only strong outperformance, 760 basis points of outperformance on the top of a growth of the market which is sizable, we have also improvement of the margin, which is going even further than the year before, to 11%. This is the Asia number. Meaning that, in fact, we are not only having a solid model in China, but we have a good development in the rest of the region, not only on the back of the growth with BYD, but also with other Chinese OEMs plus the development of our Japanese OEM activity. So this is very positive, very solid, and a good foundation to go further on this region. In Americas, we are -- in fact we are recording a selective growth, only 10.9%, which is also a reflection of the choices we have made, including, Highland Park. But at the bottom line, we have an improvement of 170 basis points getting to 4.3%, which reflects that the structural operational actions that have been taken are starting to bear fruit. Now we have Europe. On Europe, we have, in fact, a good growth in '23 on the back of a strong recovery of the volume market. We have improvement on the operating margin. However, we are getting only to 2.5% even on the back of the 90 basis points improvement year-on-year. So Europe is where, in fact, we have some of the elements that I mentioned before in Seating and Interiors. And this is also an area in which we have to address structurally our cost base in order to get back, in fact to the level of profitability we had in the region. And for information, we were at 6.6% pre-COVID in EMEA to give you a reference, so a different situation between the regions.

Patrick Koller: Yeah, I'd just like to make a comment here. You see that today we are dependent on what is happening in Asia/China. It would be stupid not to benefit from the growth in Asia. Asia will be the only growing region, remaining growing region. In a few years, Asia will produce about 60% of the world volumes, and out of these 60%, China will be at 60% of the Asian volumes. So it is absolutely critical for us to reduce our dependency, not reducing our profitable Chinese growth or Asian growth, but improving our European profitability. And I think that this is one of the key triggers for EU-Forward, I will speak about.

Olivier Durand: Thank you, Patrick. I will go to the operating margin and the full P&L. So one comment to make on this page is, in fact, we have the move from 11 months to 12 months of consolidation of HELLA, which impact all the lines. So in reality, you see that the R&D gross cost and the SG&A, in fact, is increasing less than what you are -- than what you see. 50% of this is related to this one-month consolidation. So the result is that in '23, we have been able to contain the costs on R&D and SG&A, so that it is impacting less the P&L by each of them 20 basis points. The good news is that we still have room for improvement, in particular, on the R&D, but also in some of the SG&A. And we will in fact be able to deal in an accelerated and more comprehensive manner about this in the context of the EU-Forward program. If I go to the net income, we are recording a net income, we are back to profit. This is one more element of the return to normal and the progress of the company in the last 12 months. The net income is at EUR222 million, EUR1.13 per share. And in fact, contrary to '22, has not been impacted by extraordinary negative impact. '22, we had, in fact, the impact of our disengagement from Russia, which is now completed since the 27th of December. We had one-off restructuring and we had the specific costs of the acquisition of HELLA. In '23, we have, in fact, only positive one-off, which is the contribution of the sale of our stake in Symbio, which means that we had a capital gain of EUR158 million, and the other operations have been basically not whole. The good news is that the net income without those capital gain is also positive, which is an encouraging factor on a going forward basis. On the net cash flow, the net cash flow has been, as mentioned earlier on, improving by 34% year-on-year to EUR649 million. This number has been done on a recurrent basis. The factoring, the positive EUR111 million in factoring is actually a re-class of the end of the factoring SAS to the rest of the company, but actually you can see that the level of tax is particularly high and this is related first of all to a withholding tax on HELLA dividend and also some timing on VAT in one country, which has been sorted out, in fact, in '24. So in reality, even excluding the factoring and this element, this is really the number that we will have done. Now, if you look inside, the main contributor is, of course, the working capital. And the working capital improvement means in fact that, what we are doing in the Manage by Cash program is starting to pay off. This is related to, in fact, good collection from customers, limited overdues, synergies on payment terms as well as a better inventory management. I would like to say, however, that on inventories, we have been flat. But this is only the beginning because with the evolution on shortages, we have much room for improvement with an absolute decrease on inventory in '24 and '25. So I continue to expect that we will have a positive contribution of working capital also in '24 and '25, maybe a bit less than the EUR659 million, however, that you see. On the financial expense, of course, increasing year-on-year. This is the reflection of the higher interest rates, but, of course, the end of the purchase, the refinancing of the purchase of the HELLA acquisition in which, we replace the bridge loans by, in fact, structured debt, but in structured debt after the Ukraine war. We expect this one to progressively go down a bit in '24 and much more in '25, with the full effect of deleveraging and refinancing we are doing. Under leverage. So under leverage, we went down, in fact, from 3.1 times mid '22 to 2.1 times end of '23. This is on the back of the cash flow generation we have done in '23. But also, of course, the EUR700 million of cash proceeds from the disposal program. We had done EUR320 million in '22. The remaining part of the EUR1 billion was done in '23 with three operations that, you know, that we communicated early on. So the net debt reduction of EUR1 billion is coming not only from cash flow, but is coming also from disposal. And we have a debt now below EUR7 billion. On the -- of course, if we have net debt reduction, we are also making sure that we have gross debt reduction. The gross debt has reduced by close to EUR900 million. We have, in fact, improving also the rating -- the three rating agencies during the year have moved from negative to stable in their ratings. And in fact, we have diversified our funding sources with a syndicated loan in Mexico, but also with the first Samourai in the Japanese bond market. And we have started liability management in H2. You can expect, in fact, that we will be active in '24 to continue in this direction, diversification of the sourcing fund, strong activity and the reduction of the gross debt in '24 and '25. And last, but not least, we are, of course, on the back of the success of the first disposal program. We did five operations in 15 months. We have launched in October, a second disposal program of EUR1 billion. The first operation has been signed, which is the sale of the 50% stake of HELLA in BHTC that will represent EUR200 million of proceeds in H1 '24. And we are active on the other operations. We have good prospects. We will communicate in due time when we have additional signed deals in '24 and in '25. And this is for the present '23, before moving to the future, starting with '24 with Patrick.

Patrick Koller: So I would like to speak about a new project. We have decided to address European challenges and -- which we have called EU-Forward. Let me start with the strategic goals. This project will last between '24 to '28. Its target is to reinforce competitiveness in Europe. Why? First, we have to adapt to the structural drop of volumes. We enjoyed 21 million vehicles, it included Russia at the time. Russia was considered in the European scope, 21 million vehicles. In 2023, we were below 17 million vehicles without Russia that time, in fact, 16.5 million vehicles. We believe that this is structural. This will not improve and we might even see a further reduction depending on imports of vehicles coming from Asia. We also have to take into account the ICE ban in 2035. This ICE ban has one consequence immediately. It is increasing the fragmentations of the volumes. So we have less volumes in Europe, and we have less volumes per vehicle in Europe. The second point is we need to get prepared to an evolution of the OEM landscape with the arrival of newcomers from Asia. This is true for OEMs for sure, and this is impacting us less, but these OEMs will not come alone. They will also come with some of their traditional suppliers. We have to improve our competitiveness. And we have to secure our strong European positions. Finally, we have to rebalance FORVIA's regional performance, especially on the dependency we have currently, I just spoke about, in Asia, and more importantly, from China, in terms of margins, margin balance between Europe and China. And as I said, we want to improve Europe while continuing to benefit from the profitable growth in Asia. How to do this? By adapting our manufacturing and R&D setup. In the past years, we adjusted our headcounts to the new situation. But we spoke about Seating and we spoke about Interiors. Seating on all the metal parts, the mechanisms and the frames and Interiors on all their products. They are at a high level of capital involved. So here, when you are not using these manufacturing capacities, you have a significant handicap. We need to make sure that we adjust our manufacturing footprint and our R&D footprint to these new volumes. This will be supported as we did in the past, by recruitment freeze, reduction of short-term and temporary workers on top of the natural attrition. We will have a specific focus on R&D and program management through the introduction or the massive introduction of AI and Gen AI tools, which will allow us to change completely, the level of productivity we can generate. EU-Forward could impact up to 10,000 jobs over the period, this, to be compared to the current situation of 75,500 employees, including non-permanent employees in Europe at the end of 2023. About the financials, on the P&L side, we decided to invest EUR1 billion of restructuring costs for '24 to '28. This is the cost dedicated to Europe, broadly equally splitted between '24-'25 and '26-'28. Maybe just to make here a remark, we had already planned restructuring costs for '24 and '25. This plan is increasing the means by about EUR100 million per year during these two first years. The saving and the cash, sorry, the cash EUR800 million for this period of time dedicated to Europe, broadly equally splitted between '24-'25 and '26-'28. The savings we are expecting from this plan are about EUR500 million to be achieved in 2028 and -- which should allow us to increase the margin from 2.5% in 2023 to above 7% in 2028. Back to AI at scale. So here we are very concrete on how we are dealing with this. We are dedicating AI teams in all our business groups, plus on a central platform for our infrastructure and our data management. We ensure best-in-class data management and IT environment. We have more than 200 data products. We promote and prioritize the most promising AI use cases. We have more than 250 AI use cases identified, and we have done PoCs. So, you know, what I would tell you related to what we ambition in terms of productivities are checked through these PoCs. So we have, I think, a very good estimate of what is possible. And what is possible, we believe, is to achieve a 50% efficiency gain on R&D and program management. And to give you an idea, the cumulated costs on these two elements are about EUR2 billion per year. It's an ambition because it has to be seen in the frame also of our EU-Forward, and some of the technologies we would need are not yet available on the market, so that it is very difficult to time it, but we will do it as quickly as possible. And in any case, it should happen before 2030. This is not an European initiative. This is, of course, an global initiative and will impact our R&D and program management resources on a worldwide scale. So, here, a few informations about differentiated regional strategies. You see and Olivier showed it to you, the 2023 regional exposure, Europe 46% of sales and 22% of operating income. On the right hand side for 2028, you see the targets we gave ourselves 40% -- about 40% of our global sales in Europe, and 35% of our operating income in Europe. When we now dig in in the different regions, Asia, I said, it will soon represent 60% of the world vehicle volumes, out of which 35 million will be produced in China. We have very strong positions in China. We have a high intimacy with the major players in China. We did in 2023, 45% of our Chinese sales with Chinese OEMs. So we are close to the market balance. We are also considering Japanese OEMs. They are still producing 25 million vehicles. It's the first single country in terms of production of vehicles. 70% of these 25 million are staying in Asia. And to make it simple, the remaining 30% are in America. India. India is currently producing 3 million vehicles per year, 1.4 billion inhabitants. The target, which is given by the Indian authorities, is to grow to 7 million vehicles, sorry, in 2030. I believe that this might not be ambitious enough. For your information, they are producing 44 kilometers of roads per day currently, and the increase of their middle class is very impressive. So we believe that this is a reservoir of growth in Asia, which is considerable, and we have to be there. So, Asia, China, Japanese OEMs, India are our focus points. North America, we want to pursue our commercial cell activity. We finalize our well-advanced footprint optimization. We are very strong in Mexico. And we want to achieve our structural industrial efficiency gains. We moved a lot of our activities from the US to Mexico. These massive transfers costed us in terms of efficiency and productivity. Now it's done. It's behind us. Now, we can really focus on the Forvia Excellence System. Europe, we have to address industrial capacities. We have an R&D capacities, I should add. We have to reduce our dependency on our Chinese profitability, and we have to reinforce competitiveness globally and agility. So we want to massify in a smaller number of plants. We want to specialize our plants and we want to further invest in automation of these plants, as we showed it to you through the digitalization plan. Now the last part, the guidance and the Power25 ambition. The '24 guidance, we propose sales between EUR27.5 billion and EUR28.5 billion, an operating margin between 5.6% and 6.4% of sales, a net cash flow equal or above the 2023 level in value, and net debt to adjusted EBITDA below one point below or equal to 1.9 times at end of 2024. This guidance is based on worldwide automotive production, broadly stable versus 2023. We might see in '24 , a drop of battery electric vehicles in Europe. This is mainly due to the stop of incentives decided in Germany. It's a temporary situation as the CAFE regulation will impose a CO2 reduction of 15% in 2025. And I'm pretty convinced that we will see a recovery in 2025. This is not an issue for us. The impact might be marginal to us as it will not impact China, where we have the vast majority of our electric vehicle programs. We stay perfectly on track to Power25 ambition. We reiterate our full year 2025 objectives as presented at the CMD held in November 2022 with sales at circa EUR30 billion, an operating margin above 7% of sales, and net cash flow 4% of sales and a net debt to adjusted EBITDA below 1.5 times at the end of 2025. As Olivier said, the second disposal program we have while getting implemented will improve this last figure -- should improve this last figure. To conclude, my last slide, FORVIA in 2025, what should it be? A global leader, a high-value technology supplier, much stronger in Europe, CO2-neutral for Scope 1 and 2, well-developed solutions on design for Scope 3, highly digital and efficient in operations and R&D, we are very clear here and KPIs targets, deleveraged financial structure, it is still our priority number one and attractive for all our stakeholders. Thank you. I think now we will continue the session with the Q&A if any.

A - Patrick Koller: So the first question from Pierre-Yves Quemener, Stifel. Good morning. What is the share of expected revenues derived from sales to BEV in 2024 and 2025, not just to pure BEV players, but all your product sales fitted to BEV vehicles? Are your sales to BEV platforms accretive or is the profitability in line with that of ICE hybrid cars? Many thanks. So, the vast majority of our BEV-related sales are made in Asia/China with a few customers, BYD, Li Auto and an American pure player. This is representing about 70%, 75% of our BEV sales worldwide. So that -- this is why I said that the impact in Europe, where we might see a drop of battery electric vehicles might be marginal, because if we sell less or if our customers are selling less BEVs, they might sell more ICEs/Hybrid vehicles, including an ICE. So even if our content per vehicle is not the same, I would estimate it at around EUR300 per vehicle on a BEV, while it is below EUR150 for an ICE for a profitability, which is about the same. So yes, the BEV sales are accretive. We have made an estimate. We are around a potential drop in Europe of -- in Europe globally, but it is happening in Europe of about EUR30 million of operating income, worst case.

Olivier Durand: And maybe to complement the comment of Patrick, let me remind you that we have the Clean Mobility activities, which, in fact, represent on the ICE passenger vehicle something like a bit above EUR4 billion, in which the revenues have grown in '23. So in fact, we have activity dedicated to Electrification, Electronics, Lighting, but we have also, in fact, the ICE -- remaining ICE-specific activity, which is Clean Mobility, which means that, in fact, if there is a slowdown of the Electrification, we will see a trend more positive than initially expected on Clean Mobility on the back of strong profitability, strong cash flow conversion. It does not change what we will do in the activity in terms of rightsizing. The actions are underway and some of it is, in fact, related to EU-Forward. But in fact, the conversion can be better than what people anticipated, let's say, six months or one year ago.

Patrick Koller: The next question from Gabriele Gallivanone, sorry for the pronunciation, from Mediobanca (OTC:MDIBY). You said you could have done much more than EUR31 billion order intake due to selectiveness. Can you be more precise on what you do not accept in terms of revenues and what was the margin attached? So maybe I will make one general comment. Before we made some discount on the OEM volumes, but we did not challenge the capacity an OEM had to put these vehicles on the market successfully. This is over. We have to be more vigilant. We need to be more marketing risk-oriented. We have to understand if a given vehicle in a given segment, by a given OEM, has a high probability of success. That's point number one. This means that we are doing discounts on the volumes which are significantly higher than what we were used to do in the past. This means that we are much more vigilant on the upfronts related to these vehicles, especially when they are financed through PPAs, so through and part price depreciation. We also -- we have also thresholds. We have our limits related on the margin. And deal -- we have contractual now constraints we have put to ourselves. We call them the five stops. If these critical elements to us are not fulfilled, are not verified, we don't go for it. And you give me the possibility and the opportunity to tell you that this is a real constraint to our salespeople. And the fact that despite these constraints, we were able to achieve EUR31 billion, I think, is a good sign of our technology and our attractiveness to the market. The next one, Stephanie Mudler from Original Events. [Foreign Language]

Operator: [Operator Instructions] Our first question comes from Mr. Asumendi of JPMorgan. Mr. Asumendi, the line is open. You can press star six to open your microphone.

Jose Asumendi: Thank you so much. Hopefully, you can hear me. Jose from JPMorgan. Patrick, thank you so much for the very thoughtful European-Forward plan. This is for me, the benchmark in the supplier industry. A couple of questions. Olivier, can you elaborate a little bit on the key positives and negatives for the profit bridge in 2024 versus 2023? And then Patrick, can you please elaborate on what is the structural overcapacity in Europe when it comes to Seating and Interiors? How do you plan to tackle this overcapacity problem that the overall supply industry has in Europe, but specifically for FORVIA? And then can you elaborate on the opportunity to grow revenues with the American electric vehicle company BYD and Chery? And what does this mean for your CapEx and geolocations in the European region? Thank you.

Patrick Koller: Thank you. You start.

Olivier Durand: So let me start. Good morning, Jose. Let me start by the bridge '23 to '24. So, as you see, the growth from the market is flat. So we are not expecting that, but we are expecting, in fact, the continuation of the outperformance. Hence, in fact, the guidance we show in revenues with the operating leverage that we see currently. We have two elements of self-help. One is, in fact, the full impact of the end of Highland Park. So the EUR30 million loss of '23 is gone. The second is that, as we mentioned, the benefits of the combination and the synergies with HELLA are continuing. The rise of the expectation to EUR350 million is related to the fact that there will be further contribution in '24 and actually in '25 to the tune of EUR80 million to EUR90 million. And last but not least, the impact of the cost savings we are talking about, the ones that we engaged already before, plus in fact what we are doing with the launch of the project of EU-Forward, which should add something like EUR75 million, in fact, to the bottom line. So if you do the math, you will get, in fact, to the neutral point of what we are mentioning in terms of guidance, operating margin. In '25, you will not have, in fact, the equivalent of Highland Park, but you will have more benefit from the savings plan and the actions that we are talking about in EU-Forward plus elements of R&D optimization related to the digitalization that we mentioned before, which is leading to the next step to get to above 7% in operating margin.

Patrick Koller: About the overcapacity in Europe, it's a mixed picture. When you look at Electronics, for example, we do not have overcapacity because we are growing fast. We have overcapacity on our traditional materials, Seating, Interiors. Lighting, the growth is partially compensating it, but we have to make some efforts on investing in standards and massifications. And of course, we have overcapacity on Clean Mobility. If I take it as an average, I would estimate it to slightly more than 20%. We have in Europe, at the end of 2023, 133 plants.

Operator: Our next question comes from Mr. Jacks of Bank of America.

Patrick Koller: We have not answered to the last one, which is related to BYD and Chery.

Olivier Durand: And there was a question also on the impact on CapEx and locations related to EU-Forward, I guess.

Patrick Koller: Okay. So maybe one thing about BYD, because I think it's an important one. We've grown with them very rapidly after having bought the in-house production on seats. In 2019, we were at EUR220 million about this level, and last year, we were at more than EUR1 billion. What I would like to tell you that, in cooperation with BYD, we agreed that BYD would open up their supplier panel because it makes sense considering the growth they have, and because it is also important for us not to be again too dependent on BYD. So according to this policy, we have grown, and we will grow significantly with a few other Chinese OEMs like Li Auto, with which we will do more than EUR500 million of sales in 2024 with Chery, and with LeapMotor as the main ones. You have, in China, 20 OEMs, which are doing more than 90% of their production figures, the full Chinese volumes. We are a supplier -- we are a supplier of 19 out of these 20. Yeah. So we have strong ties to them and we will, of course, support them in their globalization, in their international projects. It's the case for BYD in Hungary, where we will be very pleased to follow them and to supply them in Europe. And this is the case of some others. I would like to make two remarks on this on what is happening in Europe because all of that is related. The one thing is the CIR, the Credit d'Impot Recherche we have in France. I'm insisting you know my message to the politics is keep it, keep it, because this allows us to be competitive on R&D in France. Without it, it would be a different picture. The second one, incentives to BEVs. We saw what the Germans have decided. We need these incentives. For the moment, our European customers have too significant gap between an BEV and an ICE in terms of costs. They need to be supported until we achieve, in Europe, a critical mass, which will allow our customers to be competitive against their Chinese colleagues. And so we should not stop that. It is absolutely critical. We are speaking about an heavy industry. And for this heavy industry, the rules of the game cannot be changed from one day to the other. I think that this is -- allow me this double message, which I believe is very important.

Olivier Durand: And to complete the four questions of Jose, on CapEx, of course, the consequence of what we are talking about in terms of adaptation of footprint and capacity in Europe will have a CapEx reduction impact. And you can anticipate to see some of this in '24 and '25. And I'm talking absolute value. So absolute value should go down.

Jose Asumendi: Excellent. Thank you so much. Thank you.

Operator: Our next question comes from Mr. Jacks of Bank of America. Mr. Jacks, the line is open. You can press star six and ask your question.

Michael Jacks: Hi. Good morning. Thank you for taking my questions. My first one is just a clarification on the restructuring. On Friday, HELLA reported expected cost savings of around EUR400 million from its own European restructuring plan. Could you please just clarify how this fits in with the plan announced today? And how to understand this in the context of the overcapacity numbers that you mentioned, Patrick, which appear to be more weighted towards the traditional Faurecia businesses rather than at HELLA. That's my first question. The second one is just around your gross and net cost inflation expectations for this year. Just trying to understand if there is any expectation for compensation from customers this year again, or if that is now behind us. And then finally a question just for Olivier on taxes. And I apologize if you've already alluded to this, but cash taxes were in the region of around EUR500 million this year, which will, sorry, in last year, which seemed rather high in relation to the profit before tax number. Can you just help us to understand what is driving that? And if this is something that will continue into 2024? Thank you.

Olivier Durand: So on the savings, so, indeed, HELLA has announced an element of the plan. And when we talk about EU-Forward, we are talking about a FORVIA project. So all parts of FORVIA are concerned, including, of course, HELLA. Now, related to the numbers, HELLA mentioned a EUR400 million gross savings until '28. The net savings will be between EUR200 million and EUR300 million. So what it means is that when we talk FORVIA we were talking this morning, net savings of EUR500 million. So you understand that a significant part of the savings of the total group is coming from HELLA, but a sizable part is really about the overcapacity, also, we mentioned, in particular, Seating and Interiors. So you have a contribution in net savings that will be a bit easier -- equal between ex-Faurecia and HELLA or even a bit higher on the Faurecia side. Now, the contents of these -- of those actions are not exactly the same. Indeed, in the context of HELLA, you have a lot, which is related to optimization of the cost, minimization of the increase in people and in cost in the period. Hence, in fact, the cost of restructuring being lower than the total. So when we talk about EUR1 billion of restructuring charge for total Europe, we are talking about total FORVIA and HELLA mentioned Friday EUR200 million, which is part of this EUR1 billion.

Patrick Koller: You also asked what about HELLA and you said that I rather spoke about the traditional materials we have. One of them is belonging to HELLA, which is Lighting, and I mentioned it. You understand that we are focusing here on two things, the manufacturing footprint and the R&D footprint. And what I said about HELLA and about Electronics is that they don't have an overcapacity on the Electronics footprint while growing fast in Europe. But, yes, we have to deal with R&D inside HELLA as much as we do it in our other business groups. The relative weight of Electronics in terms of R&D is significantly higher than what we have in Seating and Interiors or even on Clean Mobility. So you will understand that you have here again different targets and adjusted targets per business group. But HELLA, and, you know, when I spoke about EUR500 million of net savings, the contribution of HELLA is about EUR200 million. So it's a very significant contribution versus the full target in terms of savings, net savings for Europe. You asked about inflation compensation. We have put in our plan until 2028, some non-compensated inflation. We will have to tackle on the top of what we are speaking here about. So this is also why HELLA is speaking about two figures on gross savings and on net savings. I think that we have to deal with the labor inflation and that it will not be possible to get compensation, excluding very exceptional cases, where we would have something absolutely abnormal. We have to compensate through our internal productivity, the labor inflation. We will have to contribute to the management of the potential energy inflation through energy savings and through the PPA contracts we have. On the other hand, we need the raw material compensation because there's nothing we can do about this. We need to work on the JIT business model, which from my point of view, is obsolete in this new environment, especially when you are in high-cost countries. The principle of JIT is that you have to deliver in -- at the tag time of the customer. So it means that a customer is working in zero or one, they are not reducing the speed, they are at full speed or stopped. So you understand that in this kind of situation with the uncertainties, with the fragmentation, which is existing, it is very difficult and we are working on that. Yeah. So I think that this is the picture of inflation compensation. As I said also previously, we have to take our own risks about customers and programs decided by customers. Yeah. In the past, we went to the customers and claimed when we had a significant drop. We will have to take this better into account and manage our risks.

Olivier Durand: You had finally a question regarding the cash tax charge in '23. And thank you for the question, because, indeed, this level is abnormally high. The $515 million include two elements that are non-recurring. One, the EUR68 million of withholding tax on the dividends of HELLA. The dividend of HELLA on the results of '22 paid in '23 was particularly high because it included, in fact, the proceeds of the HBPO sale that happened in '22. So we had EUR68 million, which is a cash out in '23 that will be recouped in '24. And the second item is related to VAT timing in one country, in Americas, in -- which has been, in fact, since then resolved, which was another EUR40 million, EUR50 million. So in reality, the recurrent cash tax charge of '23 is more of EUR400 million. So it means that is an offset of the factoring contribution. That's why I mentioned earlier in the call that the EUR649 million of net cash flow is a clean number because the two offset items. And it means that you will see a tax charge on the cash basis in '24 that will be significantly lower because we will get back this withholding tax and this VAT. The VAT part is already done, for more than INR100 million, INR120 million to be exact.

Michael Jacks: That's all very clear. Thank you very much.

Operator: Our next question comes from Mr. Bhagwani of Citi. Mr. Bhagwani, you can press star six and ask your question.

Sanjay Bhagwani: Hello. Hi. Thank you very much for taking my questions also. I've got three questions as well. My first one is on organic growth outperformance. So from the volume and mix this year, the organic growth -- that is in '23, the organic growth outperformance is somewhere around 250 basis points. How should we think of this going forward in '24? And given that the growth of the BEVs may decelerate, and I think you flagged that the content on the BEVs is much higher. That is my first question. Second question is a follow-up to Mike's question on growth and net inflation. If I understood it correctly, the labor inflation is what will be difficult to pass through, but energy and material net-net probably zero. So how should we think of the gross overall net inflation in 2024, that is basically the labor inflation? And my final question is on 2025 targets. So if we look at the 2025 sales target of EUR30 billion, at midpoint of 2024 target, this implies a top line growth of somewhere around 7%. Now, assuming, let's say, auto production growth of flattish that still means somewhere around 700 basis points of outperformance. So could you maybe outline some of the key drivers of these outperformance accelerating? Maybe some of the program launches you have done this year, they start to pay off in 2025. So those are my three questions. Thank you very much.

Patrick Koller: If I start with the organic growth, as I said previously, the vast majority of our battery electric vehicle sales are made in Asia/China and we do not expect a slowdown of battery electric vehicle sales in China. So I said that we might see a slowdown in Europe in 2024 with a recovery in 2025. In 2024, we think that this is not very significant. We have made a calculation, where we believe that it should not exceed EUR300 million on this type of vehicle. Labor inflation in 2024, here I would like to tell you that, before the crisis, our labor inflation worldwide, I'm speaking under your control, Jean-Pierre, was around 2%, 2.4%, 2.5% per year. It peaked to one point in addition, so 3.4%, 3.5% worldwide. So keep in mind that the inflation was existing in the Eastern part of Europe very significantly, and in China, especially also. In China, this inflation dropped in 2023 and will further be at a lower level in 2024. So I think that our inflation -- I think our assumption for 2024 is an inflation at the level of 2023.

Olivier Durand: On inflation, there will be a marginal impact on the P&L because the remaining inflation, as Patrick mentioned, is lower on the labor side. The energy is more tame, but there will be a slight negative on this one. You had one question regarding this --

Patrick Koller: And just -- you know, I'm speaking about these 3%, three point something percent, you understand. We have some specific countries where we have an unused inflation and for which we need a compensation. But excluding these countries, around 3% is something we should be able to cover through productivity.

Olivier Durand: Related to your question about '25, which is the EUR30 billion revenue that we are targeting in our Power25 ambition. Two comments, number one, this is based on certain Forex assumptions, which are a bit different from the current level. The second is that we expect that the slowdown of electrification in '24 will change course a little bit in '25, in particular, because of the obligations in Europe in terms of the evolution of carbon level, which should -- the car makers will have to face in '25. So Electrification impact a bit different between '24 and '25 year.

Sanjay Bhagwani: Thank you. That's very helpful.

Operator: Our next question comes from Mr. Laskawi of Deutsche Bank. Mr. Laskawi, the line is open. You can press star six and ask your question.

Christoph Laskawi: Hey, good morning. It's Christoph Laskawi from Deutsche Bank. Thank you for taking my questions as well. The first one would be just on the order intake comment that you made and the margins in that. Is the above 7%, including the EU-Forward program already or would that come on top? And then the second point just on the working capital comments of inventory. Could you give us a rough pointer on the net positive for cash flow in '24 and '25? Thank you.

Patrick Koller: EU-Forward is not taking into account a specific order intake level, so there's no change on this. By the way, with the order intake we will achieve in 2024, we will cover most of the period '24-'28 in terms of sales made with new programs. We stick to this sale activity. We want to privilege operating margin and lower upfront -- higher operating margin, lower upfronts, and less risks in our order intake.

Olivier Durand: On to working capital, so on inventories, actually, we have been flat to slightly up in the period '23, if you take the total inventories. This is an encouraging performance because it means that the evolution in terms of number of days has been better since we had strong growth in revenues. What I expect in '24 and '25 is a net decrease on inventories. We don't need, in fact, the level of inventories that we had since shortages are, in fact, basically gone and we are in a more normal working environment. You can expect that this is the main driver of the working capital contribution '24 and '25, we -- and you can count something like EUR300 million per annum inventory plus other elements of the working capital.

Patrick Koller: We need to keep -- and this is clearly our intention, our performance achieved in 2023 on receivables, on overdues, and claim collection. We had some advanced payments, yeah, but I think they are comparable year-to-year. So this might continue and if not, we will have to find ways to compensate that. We believe that we have room for improvements on the payables, especially when we look at the payment terms Faurecia versus HELLA, and we believe that we can significantly improve -- further improve our inventories. We should not forget that we were obliged on the electronic side to make significant inventories related to the supply crisis. This has to normalize and here we have some room for improvement.

Christoph Laskawi: Thank you.

Operator: Our next question comes from Mr. Niedzielski of ROCE. Mr. Niedzielski, the line is open. You can press star six and ask your question.

Michael Niedzielski: Hi. Good morning. I have a question on your 2024 guidance, especially the net debt to EBITDA was under 1.9, or as you said, during the call, equal to 1.9. When I do the math, if I include the EUR1 billion proceeds from the disposals, I get to a number that is much closer to 1.6. And even if I exclude the EUR1 billion of disposals proceeds, I get to 1.8. And that is using the midpoint of your guidance on sales and profitability, and including the restructuring charges. So I was just -- I just wanted to have more color on this. Does the guidance include or exclude the disposal proceeds? And if it does, I mean, are you being conservative with 1.9? Or are there any cash outflows that I have not taken into account? Thank you.

Olivier Durand: So regarding '24, there is no abnormal cash outflows. So what it means is that indeed we hope to be conservative on this 1.9. And this -- and if we have cash disposal -- cash proceeds from disposal on top of BHTC, that will help this number. This is true for '24, as it is true for '25 in the 1.5 times.

Michael Niedzielski: Okay. So just to make it very clear, the 1.9 does not include any disposal proceeds, right. This will come --

Olivier Durand: Besides BHTC, because BHTC is underway.

Michael Niedzielski: Okay. Very clear. Thank you.

Operator: Our final question comes from Mr. Spina of HSBC. Mr. Spina, you can press star six and ask your question.

Olivier Durand: Sorry, we cannot hear you.

Patrick Koller: But maybe we have one on the written form from Michael Foundoukidis, ODDO. Could you explain the free cash flow 2024 guidance which stands at more than 2.3% of sales at Faurecia -- at FORVIA level, sorry, versus more than 3% at HELLA level despite the fact that most of the restructuring seems focused on HELLA. What should it take into account? Could you give us more color regarding the expected net run rate of savings of the new competitiveness plan from 2025 towards 2028? Could you give us more color regarding the seasonability of earnings in 2024? Is it in line with HELLA comments with H2 performance stronger versus H1?

Olivier Durand: So regarding the different questions. So number one related to respective net cash flow objective of HELLA standalone and FORVIA as a whole. Let me remind that, in fact, the depth of the acquisition is sitting at FORVIA level. So it means that the majority of the financial expenses are not in HELLA, they are at FORVIA level. Having said that, we are not saying 2.3%. We are saying above the level of this year. And I hope that we will be able to be also above in percentage. But as you have seen, we are trying to be prudent on the net cash flow generation. You have seen that in '23. You have seen that in '22, and I hope that we are continuing to be on the same level. The last comment I would make is that 3% in HELLA means that we are continuing the progress of cash conversion in HELLA, which has been seen in '22 and '23 since the acquisition. Related to run rates of savings of the competitiveness project that Patrick mentioned this morning, we expect EUR150 million to EUR200 million of savings annually in '25. So you get to something like 40% of the gain already in the '25 number, which means that over '24 to '25, this plan is self-financed and the benefits, of course, are going further after '25. On seasonality of earnings in '24, we have -- you have indeed to expect both on operating margin and on the cash flow that H1 will be lower than H2. On the profitability, you have factors a bit similar to this year related to a specific one-off plus seasonality of inflation recovery. And on the cash flow side, I mentioned some items related to withholding tax, VAT and others. And we have also the IPCE recovery, which are more H2 than H1. So you have a volatility between an H1 and H2 related to this. It should not be as much as this year, but still you will have, in fact, H1 lower than H2 in net cash flow as well.

Patrick Koller: The next question. Ross MacDonald from Morgan Stanley. How should we expect net financial interest expense to develop in '24-'25?

Olivier Durand: I will talk from a cash perspective, which I think is the most important for the company. So in terms of cash financial expense, net of the income, we expect, in fact, to be at the same level in '24 as in '23 in relation to the fact that the interest rates are potentially going down, but for the time being we are not sure. So we are taking that into account and taking into account our different action. On '25, I expect, in fact, a decrease, something like close to EUR100 million on the back of the reduction of the gross debt, the actions that we will do on the financing and, hopefully, some decrease of interest rates, that will be more a '25 event than a '24, given the latest, let's say, feedback we see from the different actors in the financial markets.

Patrick Koller: Tom Swift, Morgan Stanley. Can you please emphasize on what you mean when you talk about actively managing '26 and '26 refinancing needs? Do you intend to return to the bond market shortly?

Olivier Durand: We say actively managing '25 and '26 refinancing needs and, yes, you can expect that in fact, we will be active in the bond market.

Patrick Koller: '26 and '27?

Olivier Durand: We will be active on the bond market dealing with the different maturity, but, clearly, we -- you will see us on this front.

Patrick Koller: Alexandre Raverdy from Kepler Cheuvreux. What should we expect in terms of CapEx and capitalized R&D spending over '24 and '25? Do you confirm a flattish trend? Number two, what should we expect as far as net financial expenses are concerned over '24 and '25? You just answered the second question. So what should we expect in terms of CapEx and capitalized R&D?

Olivier Durand: So I think consistently with what we are mentioning in terms of addressing the capacity in Europe and benefiting in fact from the digitalization and artificial intelligence capability on R&D, you should expect this number, in fact, to be better than flattish. I think it should be in absolute decreasing a little bit. I'm counting on EUR2 billion for the aggregate of the two in 2025.

Patrick Koller: And it will not be related to capacity, I'm sure. It will be related to new standards and automation, but we will keep it at least at the same level.

Olivier Durand: So and just to be clear, the EUR2 billion I just mentioned is to be compared to EUR2.180 billion in 2023 to make sure we are talking about the same indicator.

Patrick Koller: I think that this was the last question. I would like to thank you very much for your attention and see you in May. Goodbye. Thank you.

Olivier Durand: Thank you.

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