Earnings Call: H1 2021

Jul 26, 2021

Good morning. This is the Chorus Call conference operator. Welcome and thank you for joining the Suez Paper Stock 2021 Results Conference Call. As a reminder, all participants are in a listen only mode. After the presentation, there will be an opportunity to ask At this time, I would like to turn the conference over to Mr. Frederic Quipayi, CEO of Sojf. Please go ahead, sir. Thank you. Good morning. Thank you for joining this call. As anticipated with you last time, the market has been very challenging this During this semester, with high volatility on volumes and supply chain raw materials prices under pressure. As you will see in the presentation, I considered we have been we have done a good job to face this unique situation with quite good results. I propose we go to Page 4 with the highlights of the 1st semester 2021. So most of the time, I would compare versus 2019 because it Makes more sense for the 1st semester. First, the revenues. So our revenues versus 2019 are minus 9% for the 1st semester. But at constant exchange rate, this would be 4.5%. So you will see the split by geographical area and by business units, but we have been able to represent the market in all geographical areas and on 2 business units among the 3. The EBITDA. The EBITDA is at 16.1% versus 12% in 2019. We have also calculated an EBITDA adjusted without nonrecurring and non operating items. This would be at 14.5% versus 12.3% in 'nineteen, so an improvement by 2%. You will have the breakdown of the EBITDA items in the next slide. But one of the big efforts that we have done that has paid our benefits down by more than EUR 20,000,000 versus 1st semester of 2019. Our EBIT is at 7.2% versus 4% in 2019 semester 1 And the other EBIT adjusted will be EUR 5.5 versus EUR 4.3 in first of twenty nineteen, so an improvement by more than 1%. Our net income is at €21,000,000 positive versus positive €7,000,000 in 'nineteen and a loss of €30,000,000 in the 1st semester of 2020. The free cash flow is following the positive trend. We have been able to add a free cash flow without the IFRS 16 by €32,000,000 positive versus A consumption of €71,000,000 last year and a consumption of €2,000,000 in 1st semester 'nineteen. So this is mainly thanks to the improvement of the EBITDA, but also a good job that we have done on the working capital and all balance sheet items, Even with very difficult situation on inventories due to the situation, we have been able to push the working capital to improve this free cash flow for the 1st semester. The net debt we bought IFRS 16 is following this trend with an improvement of almost €30,000,000 versus last year 2020, with a net debt of €261,000,000 I propose we go to Page 5 with the main takeaway of the 1st semester 2021. So as I said before, our sales at constant exchange rate would have been minus 4.5%, with the market going down at minus 13%. So we have over the performed the market in all geographical areas. The 2 main markets for us are Europe and NAFTA. In Europe, our decrease is by 11%, in the market going down by 23%. And NAFTA, The market is going down by 20%, and we are decreasing by 3.5%. 2 business units have performed much better than the market. We stood very close basically to 2019, including inflation, mainly thanks to new businesses that we have started achieved last year and beginning of this year and for filtration, the resilience of aftermarket and OES. Unfortunately, suspension is not following the same trend, basically going same direction as the market with minus 14%, mainly due to the customer portfolio and very high exposure to Europe. So as I anticipated before, it was quite a challenging semester. As you know, the steel prices are moving, but it's true also for the plastic And most of the commodities, thanks to strong defensive actions that we launched very early, we have been able in the 1st semester, you will see that in the P and L, to contain these increases, keeping our prices for now lower than in 2019 2020. If we go to Page 6, the split of sales by geographical area. And if we compare versus 2019 and the market, So as I said before, we have over taken in all geodiaptical areas. For example, Europe, the market is down by 23. We have been at minus 11% North America, minus 2% versus minus 20% and South America and China, In fact, we are even growing versus 2019, thanks to new products that we launched, especially in China, where the growth is by 42% versus 2019 versus the flat market. So the performance in all geographical areas for our sales I've been quite good compared to the market situation. If we look by customer, Page 7, Stellantis is now our biggest customer with almost 22% of the sales, followed by Ford and Nissan. These two customers have performed better in 2021 than 2019, mainly thanks to new projects that we started in production. For Ford, it's in North America And for Renault and Nissan, mainly in Asia and Europe. Then we have a quite well balanced portfolio of customers With Daimler, GM and with BAG, BMW, Volvo and also Toyota. We think by business unit, Page 8. So here, we can see that Air and Cooling and Filtration Are performing quite well versus the market because for Air and Cooling, the reported decrease is minus 3%. But At constant exchange rate, we would have been flat versus 2019. So it means that we have been able to compensate the market drop And situation, in fact, we would have had a growth by 3%, mainly thanks to the good performance of EIM and OAS. Suspension, I mentioned it before, following the trend of the market with minus 14%. So overall, SoJ P is at minus 4.5 constant exchange rates. If you look now at Page 9, the breakdown of our performance for the EBIT. So the first thing you can see that the big effort and actions that we have launched last year in a very anticipated way Help us to compensate the volume because volumes decrease are from minus €21,000,000 and fixed cost plus 22,000,000. So it's balancing the negative effect of volume. We have done the job on efficiency and variable cost with a positive impact versus 19 of €80,000,000 Then we have a minus €4,300,000 in Romania, which is due to the start of production of our new plant for suspension in Oradea. Then we will have €60,000,000 we have €60,000,000 of non recurring operating items. At the end of the call, if you have any question on these items, we will detail them with Yant. So at the end, the good point is that Thanks to the fixed cost actions we launched last year in a very strong way, we have been able to absorb the volume effect, but we will have some challenges for the The second part of the year that I will be taking later on variable cost and especially on the material price. So we need to Continue to be very, very careful on the fixed cost and variability of volumes. Now I will let Jan explain the Page 10 Thank you, Ivan. Thank you, Frais. So a few points of attention. As Fred pointed out, Despite the pickup of revenues in the first half of the year, we still are 9% below 2019. So the market has not fully recovered from COVID-nineteen. Contribution margin, Fred insisted it is a very Significant points on the evolution of raw materials. This will hit it in the second half of the year. As you can see, over the first half of the year, we haven't been hit at contribution margin level. We even have improved the percentage of Contribution versus 2019 2020. We've done our homework on gross fixed cost. You can see that with more than €22,000,000 reduction of caustic cost, minus 16% below 2019. And this strongly helps us deliver solid results. Restructuring, Non significant, I would say. As you can see, when things go in the right direction, everything goes in the right Because usually, we have negative exchange differences. And in the first half of twenty twenty one, we even have favorable exchange differences. All in all, an EBITDA solid EBITDA at 16%. Write downs are not very, very significant. We already have done a lot of cleanups in 2020. EBIT includes some favorable one offs. These are the booking of the tax credit in Brazil that will be recorded over the next 5 years. So non cash event for the time being. It will turn into cash savings as years come. And the second one, which is roughly half of it, It's the settlement of the litigation on pension issues in the U. K. So obviously, it will not happen again. All in all, We have roughly €10,000,000 of favorable positive one offs. So this will not Happened again in the second half of the year, and we prudently are integrating some negative one offs over For the time being, nothing is showing up. Income tax, as you can see, Roughly at 73%, 34% of pretax. All in all, net income of operating activities at Close to €25,000,000 that's to say 3.6 percent of total sales against €1,100,000,000 in 2019. Next line is interesting. We've been approached very recently by an entity which is interested in Quarrying from us. Filtration Argentina, the deal is not concluded. We are in discussion, but We have decided to show filtration Argentina as an IFRS 5 asset held for sale. And in H1, we have booked the possible loss on the disposal of this entity. And maybe we'll say more All in all, that gives you €21,000,000 full net income versus a loss of €29,000,000 last year, that was mainly due to COVID, and profit of close to €7,000,000 in the first half of 2019. Moving on to Page 11. As Fred pointed out, Cash flow is mainly driven by the activity. You can see sharp improvements versus the first half of twenty twenty, even more Funds provided by operations in 2019. And on top of that, you can see that usually when we have an activity which It's increasing. We have a negative working cap. Here, we have a negative working cap of only €5,000,000 versus €23,000,000 in 2019. So this makes the bulk of the improvement of free cash flow between 201920 21, we deliver free cash flow. Remember, everyone, this is before IFRS 16, so real free cash flow, not accounting free Positive of €32,500,000 once we had a cash burn of €3,300,000 in the first half of twenty nineteen. All in all, net debt, again, before IFRS 16, of EUR 261,000,000 and what's significant is that it's Very comparable to net debt before the COVID-nineteen. So as you can see, we had 267 at The end of the first half of twenty nineteen. Factoring, we have not pushed that much. Factoring is very similar to what we had at year end and even below what we had at the end of the first half of twenty nineteen. When you move on to Page 12, we told you in the previous Conference that we had a big cash out in Q2. In Q2, we have repaid a bond of €100,000,000 without any issues. So this has been fully repaid at the end of May. And during Q2, we Also have signed €30,000,000 of new loans on Romania, so linked to the activity in Romania. And what we are going to do in the second half of the year, we are going to start discussing with the banks to extend The current maturity of our loans, which, as you can see, already is at an average of 3 years, but some loans have maturities expiring in 2022 and 2023, and we'll start discussing with the banks in order to extend these lines for another 2 or 3 years. So all in all, a solid liquidity situation for Sergey. Fred? Thank you, Liam. If we go to Page 13, we will have the split of the EBITDA and the sales by business unit. So Page 13 suspension. Unfortunately, as you can see, the sales are going down sharply versus 2019 with minus 19%. The EBITDA in percentage is 12.6% for the 1st semester. But if we offset the special events, In fact, it would be 9% versus 9% in the 1st semester 2019. So we have been able to keep the EBITDA in percentage Even with sharp decrease of the sales, mainly thanks to a good job done in the fixed cost and keeping the raw material flat for the 1st semester of 2019. So suspension has been able to offset the decrease of receipts with strong action Close to 2019, euros 240,000,000 versus €246,000,000 mainly thanks to aftermarket OES3 rent And good increase of sales in South America and in India. The EBITDA is improving quite well with 16% Versus 11.5% in 2019 and with fixed costs sharply decreased versus 2019 And the profit before fixed under control, futures and business unit is going quite well in this 1st semester. Thanks to all the efforts that we launched last year, especially a bigger contribution in France. Aaron Kuehlin, Page 15. The plan is quite similar to the situation one. Sales Quite close to 2019, thanks to a good performance of China. And the EBITDA is now at 19.2%. Yes, we don't have much exceptional events in Aram Collin compared to 16% in 2019. So the same thing, we have been very good in defending the profit Before fixed expense and raw materials, plus we have done the job on the fixed cost from last year, which is paying off in the 1st semester of 2021. I hope you know we go through the transformation that we started about the The transformation and our strategy that we explained to you last time, even in this difficult Today, while we have a lot of operational challenge, we have continued to do what we need to do from a strategical point of view and business Development point of view. And we have continued to acquire new businesses. So if we go to Page 18, The activity, the commercial activity and remuneration was quite positive during these 1st 6 months. Air and cooling, the business unit, I've been able to conclude many important contracts in the 3 big geographical areas, Europe, Maxtra and China. We have been awarded in Europe for a new module of thermal management for a premium German consumer, Fully electric mobility. And also in North America, we are continuing to have strong renewals about our current position for the ICE application. Just one thing about the current RFQ that we are on which we are working, 50% from a number of our Q point of view are about the e mobility for an e thermal management for the new applications. So the RFQ activity is very intense in our And on situation, we have continued our strategy to face the discipline of diesel engines, Pushing air purification and transmission features, we have been awarded on a significant number of contracts during the 1st 6 months for air purification features and for transmission features, mainly in MRSA. So these 2 project So families are growing in the portfolio of filtration. And of course, we have as I said before, we have continued to focus on development. So We have actually we have currently a lot of R and D activities on these two activities, electric mobility and air purification. So it's a challenge to do it in a decreasing market from a turnover point of view. It's a challenge to do it in the current operational situation, but we have been able to be very aggressive. We have been very aggressive on this side. I'm quite happy because it will help us to be among the suppliers, the key suppliers for Telman Management and our clarification with our OEMs and new consumers. If we go to Page 20, so some examples of the Currently awarded businesses on e mobility for Air and cooling. As we have anticipated in yellow, we have been awarded this semester with German etra premium brand for all the etra management of the e car That will start in 2023. Now it's time to look at the next The last part of the year, the 2nd semester, if we go to Page 22, we have a market outlook of what IHS is forecasting for the 2nd part of the year. IHS right now is predicting the 10% increase For the full year 2021 versus full year 2022, but still minus 8% versus full year 2019. In the forecast that we built, we have been very present compared to Yachevs. Why? Because As I said last time, we prefer to be present and anticipate some issues with the market and the ready Cost structure in our way of working to have lower sales and then overperform than the opposite. The market is still very, very difficult to predict and to forecast. For example, in 2 months, the expectation of EHS Decreased by something like 2% or 3% for the worldwide volumes. So I think we will have to be very careful in the 2nd part of the year. It will still be very volatile. Page 23, Here, we have a slide showing the steel prices evolution in euro per ton of the index in one hand, in yellow and or in this case, internal prices. So it's a bit difficult to have a Perfect comparison. Why? Because in suspension, SJP, we don't purchase steel Growth Tier, sorry, we purchased manufactured steel. That's why the indexation is not exactly happening in the same time as the market And with the same impact as the market. So if we look, for example, in 2020, it looks like we were buying Higher than the market. And then the prices boomed for the market in the 1st semester of 2021, And our prices remain, I will not say flat, but under control compared to the strong increase of the market. So this is something that we are following in a very detailed way, of course, steel by steel, pan pipeline, geographical by area by geographical area. The good point is that we have been able with our definitive strategy to keep our purchasing prices under control for the 3 business units Including suspension for this year, but we expect, and this is in the next Slide 24, The 2nd part of the year for 2021 that will remain challenging, NAFTA and Chinese demand are growing, And we expect an increase of the pricing that at one point will affect us and also our purchasing prices. So that's why we have already started strong research activities and tactical actions in order to mitigate the impact of the market On our accounts, of course, we are discussing with customers to apply the indexation that is included in the contract Or we have already started negotiations when needed. But we nevertheless That the raw material increase will affect our profitability H2 versus H1 of 2021. Page 25, so a financial outlook for the full year. So as I said before, The visibility of the market is still very, very low. We have to be very agile and flexible. Sometime, You know the volumes are updated in a weekly basis. So I'm quite happy that we have been able to be very flexible in the 1st semester, and we'll have to continue in this direction. There is also a bigger challenge on the raw material pricing, as I said before. Steel, plastic, media, All the commodities are increasing strongly. So we will combine defensive actions with the supplier and offensive action with the customers to mitigate as much as possible the impact in our P and Ls. On the volume, we have been much more Careful than EHS expectations. And then if the volumes are in line with EHS, we will have a good news compared to your forecast. The group, as I said, we have started the resourcing activities and commercial actions to reduce the negative effect On the contribution margin of materials and also on the operational actions, we have launched many actions to have the direct labor And the plant under control. As mentioned before by Jan, we have started negotiation about situation Argentina. And currently, we still confirm what we said before is to achieve a full year EBIT margin at least equal to what we have done in 2019. So our presentation is now complete. Hi, Pete. We can go through the question and answers. Excuse me. This is the close question is from Monica Bosio with Incela Sampaolo. Please go ahead, madam. Good morning, everyone. Thanks for taking my questions. The first one is on the contracts you signed during the 1st part of the year. Would it be possible to have a quantification of the contracts and maybe some trigger on when The contract will start to contribute at the revenue level. And the second question is more general on the guidance. I understand that the first part of the year has been favored by no recurring items. But even excluding this, the results were above my estimates. The guidance are including Raw material impact in the second part of the year. Is it possible to have A clarification in term of this impact because it seems to me that you are positioning on a very safe And maybe you are too conservative. Maybe I'm wrong, just a favor on this. And the third is on the suspensions business. I've seen that there are more than EUR 7,000,000 of Novakarim. Can we have a detail On this, thank you very much. Thank you, Madame Bovio, and Leo. Thank you for your questions. So the first one about denominations. In Page 20, so there are a true example of the business on which we have been awarded with the date of start of production. So to answer your question, when it will start to contribute, in fact, usually it's 1 year after with a peak Turnover generation. We have not indicated right now the turnover per program. Why? Because in fact, When we say Swedish OEM, in fact, it's not difficult to understand for me who we are talking about. And right now, our customers are very, very, very protective and reluctant to give us the right to communicate in a 2 detailed way. So that's why we have not indicated the turnover after this program. What I can say to try to answer to your question is that We are currently looking at the future, of course, what's going to happen from 2022 to 2025. For Air and Cooley, I'm quite confident that in fact each year, we will be able to generate The same turnover in electrical application or immobility application than the percentage of the market. So for example, if in 2022, We have 10% of hybrid electrical and fuel cell costs will be at least at 10% of turnover generation, Thanks to the business on which we have been awarded the last 3 4 years. So this is the first indication. Of course, the more it will go, the more we'll be able to be more accurate on these figures because it will start in production and we'll be able to communicate in a more clear way. Okay. 2nd question about the raw material increase for the 2nd part of the year. It's a strong increase with, let's say, 1 digit impact. Jan, Is it correct the way I say it? I'd say mid- to high single digit impact, negative impact in the second half of the year. So it is significant, Monica? Yes. €1,000,000 are not in substantial interest. In €1,000,000 what does it mean sorry, So we are seeing the digit EUR1,000,000. Okay. Yes, absolutely. It means it's below 10. And as for suspension, the net recurring in the 1st part of the year. Okay. So Monica, I mentioned that we booked a €2,900,000 tax credit. It was in Latin America, and it was on suspension Brazil. So this is 1 month. Then we had some in the previous years, and we collected money from the insurance that's close to €2,000,000 The rest are bits and pieces. But all in all, it's close to EUR 7,000,000 positive one offs on suspension. Okay. Thank you. The next question is from Francois Robillard with Intermonte. Please go ahead. Hi. Thank you for taking my question. Just mine is on filtration. You talk often about The new your new business line in cabin air filters, just to have an idea of How much of these sales are gaining ground or covering losses in new contracts made on thermal engine filtration with OEMs? So yes, thank you for your question. For no impact, It's very difficult to estimate because we have acquired this business in this year and they will start in production in 2 or 3 years. And with volumes that are still very difficult to predict, right now the strategy that we have on filtration is to renew everything possible that we have on diesel application, what we have done. And for now, these projects Are in top of the renewal we have done on the results. If we follow the trend of EASL for 2018 2022 to 2025, This new application plus the transmission features should be able to compensate at least 60% to 70% of the decrease of The guidelines as it is forecasting now. This is the current trend from a turnover point of view because from a profitability point of view, the It's quite different, but from a turnover point of view, we are covering between 60% to 70%. 60, 60 ago, 60. Yes, yes. But the new product line that is going very Quicker than anticipated and it's a very good news, it's transmission filters for automatic gears. The advantage of this product line is that you will have Only this kind of features on the e mobility product. So we have already good market share in China, and now we are starting to get Market share strong market shares in Europe and NAFTA and the turnover is big in each contract. So in the 2nd part of the year, we'll continue also to push with family the transmission features. Okay. And then another Question on your fixed cost reduction. How much of it is still due to temporary Shun, like fellow, I guess, in regards to you on a There you go. In 2021, in fact, most of our reduction It's our structural reductions and not thanks to Chigro or Kazan Zigazione or Achomar speaking. Yes. The amount is very low in the season of 1st semester 2020. Okay. Can you give us a number? Jan, correct me if I'm wrong, but it's minus below EUR 2,000,000 of EUR 2,000,000. It's €1,000,000 to €2,000,000 in the first half, so very much below the favorable impact we had last year. Why? Because I prefer to push the future actions rather than to rely forever on the support of the government or this kind of action. So of course, when we did, we have used it, but we prefer to have structural actions that will have a carryover in the next years. Okay. And just one last question, if I may, on restructuring. Last year, you booked quite a significant amount. Is it Already included in your cash figures for the first half of the year? Or will you still drag on into the second half All the payments on restructuring actions booked last year on your P and L. Sorry, good question. About the social plan mainly of France, No. One part will be paid this year, so 2nd part of the year. Half of it will be paid 2nd part of the year. And the other half will be, in fact, next year. In fact, we have a second action for the closing of suspension plan in Europe, for which we already have cashed out close to EUR 2,000,000 in the first half. Yes. When you mean action on suspension, it's a German plant, right? We have booked Reserve for restructuring on the German plant, which we already have cashed out close to €2,000,000 Got you. Thank you. You're welcome. The next question is from Roland Pooning with Value Holdings. Please go ahead. Yes. Good morning from my side. Thanks for taking my questions. My first question would be on your very nice outperformance in the first half of 5 Percentage point or if you look at like for like, it is 9%. If you take the IHS forecast for the second half Minus 3.4%. Do you have any guess for your outperformance in the second half? That would be my Cooling and Filtration versus the 2019 figures. I guess it is head by the aftermarket. Just looking at the OEM business in these two segments, What would be the other picture of the development of outperformance? And the second question is on the potential €21,000,000 loss. If you Sell the filtration Argentina business, what would be the tax quote on this amount? And last question would be On the bigger picture, we saw in the last weeks a lot of OEMs Accelerating the evolution of the EV only world or of the electrification picture for the next year. For example, last week, the dialogue in Germany, what does this mean really to your planning for the next 3, 5 to 7 years. Thanks a lot. Thank you. So first question was about the sales of semester 2 versus the IFRS. Basically, the assumption that I used in order to build the forecast Is to consider that our trend will be the same as 1st semester. So if in 1st semester we lost 9% versus 2019, I consider that this trend may continue in the 2nd part of the year. When you are right, EHS is much more Positive, if I can say. So this is the way we built. I hope that we will overperform like we have done in 1st semester. But again, there are so much volatility about the chips or the raw material shortage that OEM can face Or even the COVID situation because we don't know if from September on there may be new restrictions or new issues with the variant. That's why in my approach on sales, I prefer to be conservative in this kind of environment. Your second question was about Erin Collins, if I remember well. Could you repeat, please, your question on Erin Collins product development, please? Yes, of course. Thanks, Eduardo. You had roughly flat development in Air and Cooling and also in Filtration versus the 2019 figures. Especially in filtration, you had some kind of aftermarket business. When we adjust about the aftermarket business and just compare OEM business with the Market figures, what would be the picture there? Okay. Very good. So yes, it's a good question. You are totally right. So on filtration, on OEM On the OEM side, our decrease is roughly minus 6%. So we are still over performing the market. But in fact, both institutional and clearly, you have to be very careful with these figures. Why? Because in fact, we are suffering of Decrease in our current programs because the market is decreasing. And we are starting new programs in order to compensate. So in fact, The minus or the flat figures for Futurational and Cooling are a minus of the market and development of new programs that we have started this year or last year, which requires more effort than just doing the current application. So on situation, we are beating up the market, thanks to start off production that we started last year and In Air and Cooling, we will see. We launched In Air and Cooling beginning of this year and 2nd part of last year, We have 13 new programs, most of them in water pump and thermostat holding activities in cooling side, So which require a lot of effort, but it helps us to go through the market decrease. So in OEM side, it's going well also in the inflation side. Then you have a question about the 3, 5 years outlook for the e mobility. The good point, we have not waited for the current pressure to start. Erenkuri, we started 5 years ago, Being nominated with Renault on the electrical application for the battery. And then we acquired knowledge, Each time we work on a new program and a new business. In the beginning, my strategy was to quote as much Possible RFQs in order to learn, to improve, to be close to the customers, now more and more we are able to have a selective Based on our know how and also, let's say, the feasibility of the program and the volumes of the program. And we are doing that with our legacy customers in one hand. And in another hand, we have integrated new customers, Most of the time, 100 percent electrical cars customers in order to continue to learn with them And to be ready to get market share from them once it will boom. So the difficult part about Evotiente We have a lot of quotation, lot of RFQs. So it means lot of investment from an R and D point of view for the last 3 years in air and cooling and non inflation. But that if you look at the churn level per program compared to ALF application, for now, it's much lower. So what does it mean? Based on our calculation, we have to be awarded on 3 eMobility business To have the same turnover as the ICE application business currently. But the more we grow, the more the trend will reduce Because I guess the volume will continue to increase on hybrid electrical cars. So the good thing is that we started early And we are quite a good customer in CAC. And I think on e mobility, it will be very important because the game has changed. In the past, the customers were coming on us, Knowing exactly what kind of product they want, and then it was just about the price. Now the situation is different. They have, of course, The idea is they know where they want to go, but they are more open to discussion and technical proposals from our side. So that's why I push a lot to be present from the beginning on this kind of application. And the last question you had was about Argentina. Ben, hold on. You had a question on the impact The reversal of the translation reserve. So we are triple checking because it's a very material amount. But For the time being, we assume no tax impact. Okay, great. Thanks a lot for your answers. You're welcome. The next question is from Gabriela Gambarova with BankAxross. Please go ahead. Yes. Thanks for taking my questions. The first one in regards to your effort to cut the fixed costs, So around €22,000,000 in the first half of twenty twenty one versus the same period in 2019. I was wondering if you could assume a similar benefit in the coming next two quarters in the second half of the year. Yes. The trend is roughly the same, not exactly as big as it was in the 1st semester because in fact, 2nd part of 'nineteen, there were already savings. But in the same time, I have done actions in the 1st semester of 2021 In order to have the full benefit in semester 2, so yes, there will still be a big positive impact of the fixed cost in the 2nd part of the year. Okay. Great. Thanks. And regarding the free cash flow generation, could you provide me Some indication for the whole year even directionally on the various components of it. I mean, is it possible To know what do you expect on this front more or less? We prudently Expect free cash flow for the full year in line with the numbers at the end of H1. Okay. So the 2020 the full year free cash flow May resemble the $33,000,000 you recorded in the first half. Absolutely. I got it. Okay. And then I had one last question on Romania. I saw that there was an impact In terms of EBIT of around $4,300,000 in the first half, I'm looking at Slide 9. And I was wondering, I mean, how this item will evolve in the latter part of the year? Well, yes, it's a good question. You are totally right. So as you know, Oredia plant will be the biggest plant of suspension. So it's a good plant 32,000 square meters. We started the activities of it 2 years ago. And last year, we have purchased most of the machines that we needed to produce. Unfortunately, last year, it was a very special year, as you all know. And we had a lot of difficulties to have the suppliers coming to our plants, Assembling the machines as they should have been. So when we started the year in 2021, we were in delay about these machines. So we have to pay a lot of extra costs to push the suppliers to come. Ourself, we have a lot of extra costs in the first Part of the year because we have to work in overtime because the capacity was not installed yet. So it was difficult 6 months for Romania. The good news is that most of our machines are in place. We have reached about 92% of the capacity required by our customers. There has been a big catch up down these last 3 months on this Project. So of course, we are still running after the emergencies of the deliveries with the customers, But we don't spend anymore so much inefficiency cost on special price, direct labor, extra work Of special cost for the suppliers. So I would say that the worst has been booked in the 1st 6 months. We still have new operational challenge in the 2nd part of the year. In order to have the full capacity installed for the new programs that which will start, We will have a new program starting in September, another one in the end of the year. And then slowly but surely, we will do what needs to be done From an operational point of view to stop the loss and then slowly but surely to make it profitable. So the next 6 months will be focused on the operational improvement. And then in 2022, 'twenty 3, We will continue the purchasing and the commercial improvements in order to make this plant profitable. But I would say that the worst has been booked in the 1st 6 months, the 1st month because it was a hell. To have the Chinese supplier coming in Europe, assembling our machines was a real fight due to the constraints that you all know. So I would consider that the worst is behind us and the best in front of us. Okay. So We expect there will be a loss in the second half for the Romanian plant. It's not unusual for a plant in ramp up, But the loss should be lower than in the first half. And last question For me, it's on the slide with the clients, slide number 7. I saw this, I mean, important share for Stellantis, very important one, But shrinking, is there any reason for that? Yes. The reason basically is that air and cooling and Nutrition was very strong with PSA and suspension strong with PSA and FCA. So when Stellantis, they merged, basically, it became our biggest customer. And we are sorry, we are also very strong in North America with Chrysler. So yes, NovoStrategy is 22% of the project portfolio. It's a good point in one hand. It can create opportunity. In the over end, of course, it may create some challenges to other customers so big in our product portfolio. But For now, I would say that the discussions with Stellantis are quite positive, both from a business development point of view or pricing point of view when we have Some issues. We have a good customer intimacy, both thanks to the fact that we were strong with FCA because We know it's clear very well and also that we have a good intimacy with PSA on the other end. Okay, Frederic and Guillermo, many, many thanks. Thank you. The next question is a follow-up from Monica Bosio with Intesa Sanpaolo. Please go ahead. Yes, thank you. Just some housekeeping questions. Can you give us an update on the full year tax rate and the rough indication of the CapEx spending, including intangibles by year end. Thank you very much. So Monica, you explained that the tax Trade, I think is at 34% on pretax on the first half. Since we have taken a prudent reception on a full year basis, we have assumed a 40% tax rate for the full year. Okay. And In terms of CapEx and intangibles overall for the full year, just to figure out. Tangible CapEx should be quite similar to what we had last year. Okay. I think intangibles, it's accounting. So I think The real milestone is tangible CapEx. And before IFRS 16, it should be slightly below what we booked Next year. Okay. Thank you very much. Thank you. Thank you. The next question is a follow-up Francois Robillard with Intermonte. Please go ahead. Yes. Monica just took my question on CapEx. So just Quickly, if you can come back on your expectations for volumes for the second half. So IHS is minus 3.4%, you say you're more cautious. Are we talking mid single digit, high single digit decline? Can you just give us briefly some My assumption was to consider the same trend as 1st semester. So 1st semester, we were 9% below the mark below 2019, sorry. I consider that this trend may continue in the 2nd part of the year. So it creates a big spread versus CHS, Well, I consider that the delta that we had in 1st semester versus 2019 will continue into the end part of the year. Okay. Thank you very much. You're welcome. Due to all the unexpected things that can happen in the coming months The next question is from Giulio Cancellato with Equitare. Please go ahead. Good morning. Thank you for taking my question. I just have one quick question on the Argentina. I was wondering if you could give us some more details in terms of turnover and operating margins of the That will be sold and assuming that it is a loss making, how much have you lost in recent years? Fred, do you want me to take it? Yes, please, Jan. It is a small entity. We are talking about Roughly €15,000,000 of annual turnover. It is loss making. And I think it's also the positive impact of the deal, which we are considering Because this positive impact will be cash flows in the years to come. That will be if the deal goes True, which is not a certainty at this stage. This will improve the cash generation of the group by a few million every year. So I think this is we want to refocus the businesses on Well, we are strong. I said that in the last conference call, Europe, NAFTA, China. If it also helps our cash flow, I think it's the right decision if we can conclude this deal, which, as I mentioned, is not yet done. Absolutely, Janine. It's right, both from a financial point of view and strategical point of view because currently in Argentina, our plants is 100% aftermarket And Argentina is importing most of the filters now from China. So there is a crazy competition in the local market with Chinese filters. So that's why our strategy to reproduce where we are strong and generating cash, I think, It's the right approach, and we are continuing this approach. But in terms of EBIT on the full year, Because many things happened below EBIT in Argentina because of the accounting rules. It is a plant with a €2,000,000 positive EBITDA. So it's not going to change the matrix on Okay. Thank you very much. Gentlemen, there are no more questions registered at this time. Many thanks for this call and your questions and your attention. I wish you a good day. Thank you very much. Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.