Hello and welcome to the Stellantis H1 2025 Pre-Release of Preliminary Financial Information Call. You will have the opportunity to ask questions at the end of the call by signaling star one on your telephone keypad. Please do not exceed one question per person and, if necessary, an additional one. I now give the floor to Mr. Ed Ditmire, Head of Investor Relations, to begin this conference. Sir, the floor is yours. Thank you.
Hello everyone, and thank you for joining us today on short notice as we review preliminary financial figures for the first half of 2025. Earlier today, the company posted a press release covering these disclosures, as well as the publication of consolidated shipment volumes for the second quarter of 2025. This press release is available on the Stellantis Investor Relations website. Our call today is hosted by Doug Ostermann, Chief Financial Officer at Stellantis, and after prepared remarks, he will be available to answer questions from analysts. Before we begin, I want to point out that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement. As customary, the call will be governed by that language. Now, I'll hand the call over to Doug.
All right. Thank you, Ed. And to everyone who's joined us today, we very much appreciate you participating on the call. Let me discuss briefly why the company took the step of releasing preliminary H1 2025 results today and is holding this call with the investment community. On April 29, I presented the company's Q1 2025 revenue and shipments update, and we made the decision to suspend current year financial guidance really due to the uncertainties related to U.S. tariff policy, the potential impacts on the automotive market, and the evolving Stellantis tariff response plan. I've mentioned previously how the year was evolving, including disclosing an initial estimate of the net tariff impacts for 2025 of EUR 1 billion, EUR 1.5 billion for the full- year, and enumerating several other headwinds that had emerged, including forex changes, lower volumes in certain products, and customer segments and the like.
As we finished the second quarter and during the financial closing process, it became clear that our preliminary financial results, while generally in line with expectations in the market in terms of volumes and revenues, diverged from analyst consensus in terms of profitability and cash flow. As a result, we felt it was important that we do not currently have guidance in place to update the investment community. We decided to sync the publication, therefore, of our quarterly consolidated shipment volumes with the disclosure of the preliminary results, which we released this morning, to make things as simple as possible.
Now let's turn to the results themselves. For the first half of 2025, the preliminary figures we've disclosed today are net revenues of approximately EUR 74.3 billion, adjusted operating income of approximately EUR 540 million. AOI, consistent with the company's definition, excludes the impact of approximately EUR 3.3 billion of net charges from our IFRS figures. A bottom line net loss of approximately EUR 2.3 billion, inclusive of those unusual items. On industrial free cash flow, a EUR 3 billion outflow. Now let me run through some of the specifics on key items that impacted the first half in significant ways. First, if we turn to AOI, there were really kind of four things that shifted the AOI level below the kind of low- single digit H1 expectations I discussed back in February when we set our initial full year 2025 financial guidance. Of course, before that, guidance was suspended in April due to the tariff-related uncertainties. The first was lower than expected volumes, where we've noted in prior updates the sluggish European LCV market.
On the passenger car side, we suffered from a lower production ramp-up of certain newly launched products. In North America, our fleet sales remained low relative to the market, dragging on our share even as the retail side showed some encouraging improvement. Shipments were also impacted in the first half due to some downtime that we took in the initial period of the tariff announcements, particularly in our products that are produced in. Europe, in Canada, in Mexico. Until we had some clarity on the policy itself. The second impact was really higher industrial costs, including the impact of higher fixed asset absorption due to lower volumes, of course, and higher warranty costs. The third was foreign exchange, with an impact of just under EUR 1 billion year- over- year. That was primarily related to the Turkish lira, strengthening the euro against the U.S. dollar and Brazilian real.
The last was tariffs of approximately EUR 330 million net impact that was felt in the first half. That is really consistent with the disclosed estimate that I made of EUR 1.15 billion in net tariff impact, as we will see more impact in the second half. Next, let's move to the net total of approximately EUR 3.3 billion of adjustments to AOI, and I'll provide you some detail on that figure. First, approximately EUR 2 billion is related to management taking some decisive and tough decisions on product programs where we really could not see sufficient returns. This included our hydrogen fuel cell LCV efforts, as we announced to the markets last week, which resulted in approximately EUR 700 million charge of that EUR 2 billion I mentioned. Certain product cancellations and related supplier payments, as well as restructuring charges, mostly related to the European headcount reductions.
Second, about EUR 700 million across two non-cash items. The majority of this was related to impairments of certain Maserati vehicle platforms. It really reflects the reality of the current sales pace that we see on those vehicles. Third, there was a net expense of roughly EUR 300 million associated with several items related to the change in U.S. CAFE penalty rates going to zero with the passage of major U.S. congressional legislation, the One Big Beautiful Bill, including a write-down of the CAFE credits and a provision for purchase commitments netted against the release of the majority of our CAFE compliance cost provision. Last, approximately EUR 300 million relates to about 2/3 of an expansion of the Takata airbag recall campaign in Europe, with the rest split between miscellaneous items.
In total, about half of the approximately EUR 3.3 billion of net charges relates to future period expected cash flows, and the other half are all non-cash in nature. Turning to our industrial free cash flow, we had said in February that we gave our first half of 2025 that we expected positive flows only to come really in the second half of the year. Of course, that turns out to be the case. The marginal AOI generation in the first half was insufficient to cover our CapEx and R&D spending as we continue to invest in the business. That was really the major contributor to the negative industrial free cash flow that we reported for the half.
Lastly, a quick comment on inventories. Total vehicle inventories at the end of the first half of 2025 were unchanged, roughly in line with the prior six months where we ended the year last year. The OEM inventories figure were up about 60,000 units, while the dealer inventories were down about 60,000 units. Total inventories globally roughly in line. Really, when I look at the first half results. Of course, they are far below our potential, even taking into account the strong industry headwinds that characterize the first half of the year. This is because we still have really a lot of work to do in terms of progressing our commercial recovery. At the same time, directionally, there was sequential improvement from the second half of 2024. If I look at the half, specifically our volumes and revenues increased in the first half versus where we ran second half last year.
Our AOI margin improved, and cash flow outflows, while there were still outflows, were cut roughly in half. We have seen progress, sequential progress, but certainly the management team is not happy with where we're at, and we're going to continue to progress in the second half. Progress on product was a big part of the story in the first half. We did launch a lot of products late in 2024 and early 2025, including five new B and C segment entries in Europe. Those closed temporary product gaps in our portfolio that were extremely important to execute, as well as the very well-received refresh of our Ram medium and heavy-duty pickups. Of course, we have more to come in the second half.
We expect continuation of the product wave, including significant remaining ramp-up of the new B segment cars and the approaching launches of three all-new STLA M edium nameplates in Europe, as well as the return of the Jeep Cherokee to North America to help drive improvement in the second half results this year. We plan to reestablish current period financial guidance that encapsulates that improvement on the H1 2025 update call that will be held on July 29, which will be hosted by our new CEO, Antonio Filosa, and of course, myself. That concludes my prepared remarks. Operator, please open the line for any questions that we have.
Thank you. As a reminder, to ask a question, please signal by pressing star one. The first question is from Thomas Besson from Kepler Cheuvreux. Please go ahead.
Thank you very much. I'll start with a question about your continued share losses, both in the U.S. and Europe. I think the timing of your product launches was suggesting that your market share was going to stabilize in Europe first and in the U.S. At this stage, we are still seeing no real share gains in Europe. Could you talk about that, explain how much of the ramp-up for the smart platform has been an issue, and whether eventually you will have to take some industrial action as you announce capacity expansion in Morocco while your volumes continue to decline?
Yeah. Thomas, good question. Really, when I look at our progress in Europe, our share is up in the first half if you compare it to where we ran second half last year. We're up about 130 basis points in that comparison. That, of course, is related to the fact that we've launched a lot of exciting new products. The ramp-up of those products, to your point, has been relatively slower than we expected. Of course, we really haven't gone off the ground yet with what I consider to be one of the most exciting of our B segment products, the Fiat Grande Panda, which we'll have kind of a big launch event in September for that vehicle. I'm excited to see the reaction of the public when they really get a chance to drive it and experience the car.
Of course, the other headwind that I mentioned in my script was LCVs. If you look at the LCV market in Europe, it's down about 13% year to date. That has a unique impact on us because we're about 30% of that market. We have a very strong share there. It also is a very big profit contributor for us. That, of course, has had an impact on us. My own view, and I think what we hear from clients, is that there's a lot of uncertainty in the environment today, both economic uncertainty and a lot of regulatory uncertainty. In the face of that, a lot of our commercial customers are hanging on to their fleets for longer and are kind of taking a wait-and-see approach before they renew those vehicles.
Obviously, we're having discussions with them and trying to come up with programs that can help them get over the hump on that. That has had an impact on us in Europe as well. I don't know if that covers all your question, but.
Yes. Thank you very much. Can I ask a follow-up on a more positive note? I think you've managed to report very strong gains, both in Middle East, Africa, and in LATAM, that have been strong contributors to AOI last year. Should we expect that you get some positive traction in terms of operating leverage and therefore higher margins in these regions in H1, or is it not necessarily the case?
Yeah. I mean, thanks for noting that, Thomas. I'll save the kind of regional detail for the call on the 29th. You're right. We continue to have a very strong business in the Middle East. We have a very good leadership team there. There's, as you know, a very young and growing level of affluency in that part of the world, a lot of population growth. Our brands have been very well received. I think we're very well positioned there. It is an exciting part of our business, for sure. Thanks for the question, Thomas.
Thank you, Doug.
Our next question is from Philippe Houchois from Jefferies. Please go ahead.
Yes. Good morning. Good afternoon. Two questions, if I can. The first one, can you comment on the gap between operating cash flow and free cash flow? Because the implied CapEx is very, very low. Is it just a very kind of cash-saving first-half spend, or is there some other factor that might explain it?
Yeah. I mean, I think we're comparing a little bit apples and oranges there because the perimeter is very different. When you look at the negative $2.3 billion from cash flows from operating activities, right, you're looking at our perimeter there that includes the financial services business. We had an increase in use of capital within our financial services business, I think of over $4 billion. Really, we're growing that business pretty rapidly, as we've discussed, particularly in North America, where we bought a subprime lending activity and have been building out the full portfolio of prime and leasing and wholesale floor plan and the like. That ramp-up is actually ahead of schedule, and that has taken some level of capital.
When you look at the number below that on the press release, the industrial free cash flow, that is just the industrial perimeter, right? That's where, of course, when we look at the $500 million of AOI, that clearly was not enough to cover our investing activities when we look at our levels of R&D and CapEx. That's how we get to kind of an industrial negative free cash flow. I hope that answers your question, but happy if you have a follow-up, Philippe.
Okay. Actually, I have a follow-up. Actually, before I get to my follow-up, I guess if I have a long wish list of what I wished to hear from Stellantis, you can imagine. One of which will be. [crosstalk] Oh, a few people. I'm sure. One thing I think. High time that you start splitting industrial cash flow and financing cash flow for a group the size of Stellantis. It doesn't make sense to combine the two. I think it works for Ferrari, it works for Porsche, but this is no longer adequate, in my view, for the disclosure of Stellantis. My second question would be. You said a few times that you see the improvement in retail, you don't see the fleets. What are you doing to regain market share in fleets? I'm thinking specifically on the Ram. You've lost a lot of share. Ram used to be a big pickup for commercial buyers and fleets. What are you doing to regain that share? Hello. Have I lost connection here?
Whoops. I don't know if you heard all that, but we do provide more detail on your first comment on the flows related to the financial services business in the 6-K. Maybe offline, we can get together and walk through some of that for you. To your point, I mean, you make a good point. At some point, we continue to monitor kind of the size of our financial services activity and try to provide more and more transparency there for the investment community. It is something that we are thinking about, for sure, to your point, Philippe. Your second question was on Ram, which is a very important part of our business. You asked, what are we doing there? The first most important thing we did was to bring Tim Kuniskis back to head Ram. What's more important is all the great ideas that he's come up with.
The first and most important is that we are reintroducing the V-8 into the Ram pickup truck. We've seen marketing data that shows that as much as 40% of the market won't consider you unless you have a V-8. You can imagine it's pretty important that we get back into that part of the market. In addition, as I've mentioned, when we ran out the old DS truck, we had positioned the new truck, which we refer to as the DT platform, at the upper end to not play in that lower end of the segment because we had the DS truck. We now are coming back with that truck in that price tier that we've announced called the Express, and that's going to allow us to address that lower end of the market that we've been absent from. That's a big key.
We also are doing some things to improve the production numbers on the Ram truck so that we can get back into the fleet piece that has really been missing for us. On the excitement side, you may have seen we announced we've gotten the Ram truck back into NASCAR. There's a lot, and we are expecting significantly better results in the second half out of the Ram brand, which is so important to us from a customer standpoint, from a profitability standpoint, and the like. It's a great question, Philippe. Thanks.
Great. Thank you very much.
Our next question is from Horst Schneider from Bank of America. Please go ahead.
Yes. Good morning or good afternoon. Thanks for taking my questions. Doug, I'm not sure if you mentioned that in the beginning, but if yes, maybe you can repeat that. Can you give any indication what was the margin? One just continuation of the H2 2024 trend? North America more significantly loss-making, but Europe remained positive. Can you confirm that?
I would really prefer to keep the details of the region by region for the call on the 29th. That way, we can kind of lay it all out for you and give you clarity on the numbers there, rather than trying to quote individual numbers without detail and explanation. We will cover all that on the 29th for you, rest assured. Also, of course, you will get the benefit of the commentary from our CEO as well.
Yeah. I want to follow up with another one. I mean, we just had last week kind of warning from Renault, which was saying basically that there's increased competitive pressure in Europe. That just happened in June. Maybe you can comment on this specifically in Europe if you see something like that too, and if you can share any further detail on that.
Yeah. I mean, Europe is a very competitive environment. I won't disagree with our counterparts at Renault. I think we're very fortunate in that we have some fantastic new products, right? That are coming out. For us, there's a number of headwinds that we are combating in Europe. I talked a little bit about the sluggish LCV market. Of course, the race to be compliant on the CO2 side. With increased BEV penetration, we increased our BEV penetration in Europe in the first half to 13%. And our BEVs have been very well received. Our new B-segment BEVs are based on very affordable LFP technology. They have really nice ranges. I think the pricing is very attractive, and we make money on them. It is a profitability headwind, of course, because we don't make as much money on a BEV in most cases as we do on the ICE counterparts.
It's a tough market as everybody tries to get up that scale to the levels that are going to be required for compliance. Now, luckily, because of the change in regulations, we all have three years to be compliant, right? There shouldn't be a panic at the end of the year, which we had all kind of feared. Yeah, Europe's a tough environment. I give our team and the new products a lot of credit for being able to increase our market share sequentially second half 2024 to 2025 by 130 basis points, despite a 13% decline in the area where we have basically one of our strongest market shares at 30% in LCV. I think it's, given the environment, as you said, which is pretty tough, I think it's quite a good accomplishment for the team. Certainly not where we want to be. We want to continue to strive for more. There are a lot of headwinds in Europe. You are correct on that.
Okay. Then maybe the last one, since my first question you couldn't answer, that on tariffs, when you talk about the EUR 300 million headwind in Q1, that was already kind of a peak number, or it just does partial impact in tariffs, peak especially in Q3, and then mitigation effects basically coming to force, which would lower the pain again towards the end of the year?
No. I mean, the tariffs only came in partway through the half. So it certainly is not representative of what we expect for the second half. Remember that I kind of guided to EUR 1 billion-EUR 1.5 billion in total. So EUR 330 million in the first half. We'll see significantly more in the second half unless things change. And frankly, the tariff front seems to evolve on a daily and weekly basis, right? Because the administration is still very much engaged with many countries around the world in negotiating deals. We will have to see how that evolves. I think given the current outlook, I would expect to see that figure probably double in the second half or more.
Okay. That number was then before mitigation actions on price, for example?
Yeah. That's a great point. I believe tariffs are, we all know, inherently inflationary. A lot of us in the industry, I think, have been reluctant to raise price because the tariff policy has been changing so much. I think people have been slow to react because we're all kind of waiting to see how it all evolves. Of course, most of the OEMs in North America, anyway, typically will run 60-90 days of inventory that wasn't subject to tariffs that you could kind of continue to sell down. I think we're coming to the end of that period. I think in the second half, you will see more reaction from various OEMs. I think there will be some mitigation. We'll have to see how it evolves.
Okay. Thank you so much.
Thank you. Ladies and gentlemen, we have time for one last question today José Asumendi with J.P. Morgan, please go ahead.
Thank you very much. Thank you, Doug, for making the call today. One final one. It will be great if you please comment on how you think about the liquidity of the business. Do you think about it on a cash basis, net cash basis, your refinancing needs? If you can just comment so we can get some comfort there from the equity and credit perspective. If possible, I think the last time we left it in terms of cash generation, second half positive, but not offsetting the cash currency in the first half. Is this still how we're thinking about it, or have we seen maybe some additional headwinds which could maybe mitigate this cash generation in the second half? Thank you.
Yeah. José , always nice to hear from you. I appreciate you asking about liquidity and cash and all the things that are near and dear to ex-Treasurer's heart. Let me try and answer your question. Look, the way we think about having sufficient liquidity for the business, I think we've been pretty clear about and consistent in that we think we really want to have liquidity that is roughly 25%-30% of trailing 12-month revenues. Despite some cash burn here in the first half, we will remain, when you see our full financials, you'll see that we've remained in that range. I feel like we have sufficient liquidity. As you, I'm sure, probably know, José , we went in the first half and issued debt both in the U.S. market and in the European market to replace those maturities that are going to expire this year.
In fact, issued a bit more than what will expire this year because the markets were pretty constructive. I feel from a liquidity standpoint, we're still in very good shape. We have a very strong balance sheet, and we've worked hard to build a fortress balance sheet because we know that this business can be volatile, and there will be periods like we're experiencing right now when cash is in the outflow position. We need to continue to invest in the business. I think we're in pretty good shape on that front. As you mentioned, though, of course, we need to turn the corner and start generating positive industrial free cash flow. I will outline our expectations for that in the call on the 29th, where we plan to reestablish guidance. I don't want to preempt all that. We'll get into that on the 29th call for sure, José . Appreciate the question.
Thank you very much.
Thank you. With this, I'd like to hand the call back over to Ed for any additional or closing remarks. Over to you, sir.
I would just like to say thank you to everyone for participating in the call today. We look forward to updating you on July 29 in more detail on both the H1 results. Importantly, how we see opportunities to improve the second half, as well as reestablishing guidance for you. I look forward to speaking with you then. Of course, I will be joined by Antonio Filosa during that call, and I am sure we will all look forward to his commentary as well. Thank you.
Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.