Earnings Call: H1 2020

Jul 21, 2020

To the Valeo H1 2020 results conference call. I now hand over to Mr. Jacques Aschenbroich, Chairman and CEO of Valeo. Sir, please go ahead. Good evening for all of you. I am here with Thierry Lacorre, our investor relation, and with Robert Charvier, our CFO. As you can imagine, the shock of the COVID-19 has hit the whole automotive industry, probably the whole economy in general and Valeo in particular. Before going into the figures and the positive part and the negative part of what we have lived through during those last five months, I would like to speak about the trend of the automotive market. All the study we are doing in different parts of the world, of course, in France or Germany or Western European countries, what we do in China or North America, show very clearly that the automotive is considered as the safest way to travel. Going more in detail, lots of people that were not used to use a car are now coming back to using car, even for the younger generation. That is obviously extremely important long-term topic. We have to make sure that it is not only a kind of a bubble, but it is in-depth in the market. On top of that, 75% of people consider that using car is better than using mass transportation, train or planes or subway. That show how much the automotive will rebound after the COVID-19. On top of that, you have seen that most of the plan that have been put in place in France or in Germany or in Spain are kind of the Green Deal. All the measure that have been taken are taken provided that the car will be more environmental friendly, with a focus on electrification, BEV or plug-in hybrid or mild hybrid, which is obviously the strategy we have had and a confirmation of our strategy. I will come back to that later on. That is the first topic. What are the trend of the market post-COVID? The second topic is, and I will come back later on, since the appearance of COVID in China, end of January, we have put in place a very strict health protocol. That health protocol has been started, of course, in China and has been rolled out overall in all our plants. We have seen in the last few weeks that the virus is still transmitting, it is not over. We stay with that protocol as long as the virus is still there. You have seen what happens in North America, in the U.S. or in Mexico. You have seen what happens in Brazil or India. You have seen what happens in Hong Kong even though we have no activity in Hong Kong or in Australia, even though we have no activity in Australia or in some European countries where the Barcelona area has been locked down again or in Morocco. We put that in place. We stay with that protocol, like I said, as long as the virus fly, despite the cost. The impact of the health protocol is around 10% of our direct and indirect labor cost. So it is equivalent of close to 0.8% to 1% of margin. We assume that decision. We take our responsibility, and we do not want to take risk with our people and risk with disturbing the automotive supply chain. That is something which is extremely important. You have seen that we have put in place very quickly, and we have spoken about that in the call in April, very quickly some cost reduction program in place, which allowed us to save EUR 570 million, which is a big part of our cost compared to the material purchase. We have saved additional measure to save cash EUR 633 million, including dividend reduction, including inventory reduction and including the CapEx reduction. So you have seen we have reacted extremely quickly to take into consideration the actual situation of the automotive market. On top of that, Robert will come back on that, we have recognized and recorded EUR 622 of one-off charges, which are mainly linked to COVID-19. That is something that we will come back on later on. I will come back on the cash consumption and what we expect in the second half of the year, being very cautious, to recover in terms of cash in the second part of the year. That is what I wanted to say as an introduction. If you agree, we go to the page three, where you see that the COVID-19 validates our strategy. It validates our strategy because all the market trends. The car has a role to play, like I said. The Green Deal is a backbone of the recovery. The cars in ensuring passenger health and safety, and the smart mobility. You remember maybe that investor day on the 10th of December, we spoke about that smart mobility where our technology, especially the 48 volt, but also the ADAS allow us to enter, and we have a UC with some orders. Going into the page five, that is a slide that we have shown on the 10th of December. We have developed those 12 technology platform, and like I told you at that time, the peak of the spending is over. We see that you have it on the right end of the slide, the additional or increase of content per car. If we look at, and normally we do not speak about specific product, but when we look at our forecast in H2 for two of our product line, the 48 volt, the sales will be multiplied by three compared to H2 last year. Concerning the front camera, it should be up more than 50%. So you see, the story we have on 48 volts and front camera is online with our expectation. If you go to page 6, you see that not only we speak about 48 volt, but our customers speak about it. On the right-hand side, the Golf 8 with positive comments of Volkswagen, and on the left-hand side, the positive comments of Daimler. In the low part of the slide, the Citroën AMI, which is powered with our 48 volt technology, is the first car being powered full electric with our 48 volt technology. In the middle, you see our president went to our plant in the north of France, the plant of Étaples, to announce the French contribution of the impact or relaunch plan for the automotive industry in France. On the next page, you have two orders that we have. One with Honda, which is the first time we sell front camera in ADAS with Level 2, and it's only with our camera. We spoke about that on December 10. We can replace the existing camera and the existing radar from competitors with a full Level 2 ADAS system. On the right-hand side, the driver monitoring system, health and monitoring system that we have sold to a premium Chinese car. On page 8, pardon. You have the different market that we have sold our 48 volt technology. The Citroën AMI, the three-wheelers, we spoke about that. One electrified droid that will be SOP'd in Q4 this year. Some targets we are having, some orders we are having for some other three-wheelers or other two-wheelers. You see all the stories spoke about not only being focused on OEM, but being focused on smart mobility is something that takes traction. On page 9, you know that the sustainability is at the heart of our DNA. We have been recognized by Robeco, some corporate recognized MSCI, ISS, ESG. On top of what we have achieved, and you have seen on the left-hand side that 93% of our turnover is linked to safer and greener mobility. On top of that, we are working hard for a long-term carbon neutrality program that we are going to disclose as early as next year. I don't believe in long-term neutrality carbon program if it is not supported by short-term action. You see at the same time what we do in the next 5 years and what we want to do in the long term to have a neutrality program. In the health protection, I'll come back very quickly on that. It's worldwide mandatory. It's ensuring the maximum protection for all employees. It has been audited, that not only it is a responsibility of our plant manager to put in place or the responsible in the R&D centers or head offices, but it's audited to be sure that it's respected by the management, by each individual. We do it, as I said, as long as the virus is flying, despite the cost of around 10% of direct labor productivity. On top of that, we are responsible for the community we are in. You probably remember that in a consortium, we provided 10,000 ventilators. We have given 80,000 FFP2, FFP3 mask to hospital, and we are producing some mask in some of our plants to donate them to the local community. What is extremely important in a turbulent world and the one we have been crossing, is of course our liquidity position. If you go page 14, you remember that at the end of last year, we had EUR 1.3 billion of undrawn credit line. We have been able to negotiate, and Robert has negotiated with our partners, banking partners, one additional billion of credit line. We have not drawn any one of those credit line. We have no debt falling until June next year. The average debt maturity is 3.4 years. If you look at our headroom for the covenant, we have adequate headroom. At the end of June, maybe Robert will answer some of your question, we had EUR 2.1 billion in cash or cash equivalents. If you look at the next page, you see the evolution of our leverage, and it's clear that because of the crisis between the end of 2019 and June 2020, the leverage went up from 1.3 to 2.7. You see when we speak about the guidance, we have a goal, and it's a minimum. We generate at least EUR 400 million free cash flow for the second half of the year, which will allow us with the EBITDA corresponding to what we are going to achieve, to stabilize or to reduce, that is our goal, to reduce our program debt. I'll come back to that later on. On page 16, you see the maturity, you see the cash and cash equivalent plus the undrawn credit line on the left-hand side with the sum of both is EUR 4.4 billion. You see on the right-hand side, the evolution. We have worked a lot in the last few years to have a kind of even reimbursement date of our existing debts. What has been important, and you remember we have spoken a lot about that, is our out-performance. I recognize that early 2018, we went down to a low level, and we have spoken about that several times, explaining the reason why we came down to that low level. I told you several times that our order book and what we had in the order book made me extremely confident that the growth story of Valeo was not only not over, but that we had the potential to grow significantly more than the market. Even in that second quarter of 2020, you see that we have a strong out-performance in each one of the region. 7 points in Europe, 12 points in China, 6 points in Asia, excluding China, 10 points in South America, and only 1 point in the U.S. One major program we are on, which is away from sovereign GM, should have started in the second quarter, and of course because of COVID-19 has been postponed and is on ramp-up now. We are absolutely confident to carry on out-performing the market. If you look at that with more perspective on the next page, on page 19, you see that in the last half years, H1 2019, H2 2019, H1 2020. In Europe, we are out-performing the market 3 points, 9 points, 9 points. In China, -3, +11, +15 is second quarter this year. In Asia, excluding China, -1 H1 2019, 0 second half of last year, 6 points in the first half of this year. The U.S. has already spoke about that. 9 points in H1 2019, 10 points in H2 2019, and 4 points in the first half of this year. If you were to take South America, the out-performance would be 6 points in H1 2019, 16 points in H2 2019, and 16 points in H1 2020. If you take worldwide, you have the figures, 4 points in H1 2019, 8 points in H2 2019, and H1 2020, 6 points. You see, we told you at the first beginning of the year that we are extremely confident that we would out-perform the market at least 5 points, and we have the confirmation of that statement. If you go page 20, you see that all our business group are out-performed the market. CDA and Powertrain being the one out-performing the most, with 11 points for Comfort and Driving Assistance, and 8 points for Powertrain, then Visibility. The Thermal Business Group is lower, and you remember we said that starting in 2021, the Thermal Business Group should start accelerating. If you look at the way the market has recovered from the COVID-19. We have already spoken several times about that China has a strong recovery since March. Since May, we are turnover above last year. North America has been later than expected. The start of production has been in the end of May, but it is quicker than we had expected. You probably know that most of our customers have canceled their summer vacation. Europe has restarted in time, middle of May, but has a more gradual recovery. Korea and Japan are very much impacted. Those markets are export-driven, and they have been impacted by the reduction of export market at the time of the COVID-19. We have the impression that both markets are step by step increasing. Brazil and India have a very, very, very slow recovery. The order intake, EUR 5.6 billion, new order intake. You might find that figure low, which is true, but you have to consider that most of the request for quotation has been suspended since the second half of March this year. We see what happens. We have a potential of quasi-normal order intake for the second half of the year. But we will have to look at in detail whether or not our customers are really giving those order intake or are postponing some of them. It is too early to answer that question. Page 23, we have a strong action plan to limit the COVID impact and the outbreak. If you go directly to page 26, the figure I have shown you earlier, is EUR 570 million cost reduction we have had. In the following page 27, you have the description. We have had EUR 248 million of cost saving for direct and indirect labor, including the reduction of 12,000 employees during those 6 months of the year. We have reduced our development effort, EUR 196 million. We have reduced our production overhead, EUR 97 million, and some other additional cost saving were EUR 29 million. Most of it, obviously 90% of it, happened during Q2. If we look at what it means in terms of variabilization of our cost, which is the reduction of operating costs, excluding material consumption, divided by the loss of sales contribution after material contribution. That is really what we have an impact on, and it has been impact of 58%. That means we have reduced 58% of the cost we had access to. In terms of R&D, I already mentioned that figure, and you have it page 29. It is a reduction of 196 million of development expenses. You have to know that during that period, our customers have stopped also their own development expenses, and we had no way else than doing the same. You remember we spoke about April, what could be our target in terms of drop-through, which is excluding one of charges and capitalized development expenditure impact. We told you that our target was 25%. That is exactly what we have achieved in Q2, and for the whole H1, we have reached 28%. Concerning additional measure saving cash, the reduction of dividends, we have already disclosed it. We have reduced our dividend from EUR 1.25 down to EUR 0.20, which makes a saving of EUR 249. We have reduced our gross inventory for the value of EUR 243 million and reduced our CapEx EUR 141 million. Concerning Valeo Siemens, we are totally online. You remember that we told you the losses expected this year should be lower than 2019, and that is looking at what we have achieved in H1 and the forecast for H2, we should be online with that. For the first half of the year, we are totally online with our expectation. Concerning the one-off charges, we have recognized EUR 622 million, which are most of them linked to COVID-19, for value of EUR 622 million. Maybe, Robert, you could explain the details of this impairment test. Yes, of course. In fact, we consider that the COVID crisis will generate a significant change in the automotive environment, not only in 2020 but in the forthcoming year. So we have decided to perform a thorough review, a thorough analysis of the value of our assets based on scenarios which are providing for a significantly lower production volumes during the next five years. As a result, we have recorded one-off charges of EUR 622 million. If you go page 34, you can see that as a result of the in-depth review of the value of the assets, we have decided to write down almost all the industrial assets we have in Brazil. During the last years, we have made losses in this country, and we consider that the future of the automotive industry in this country will remain very difficult in terms of volumes. This is the reason why we have decided to write down a significant part of the industrial assets we have in this country. In addition, we have decided to write off 100% of the residual assets that we have in Valeo, and which are related to diesel engines or to the manufacturing of components which are equipping diesel engines. I think it was, in fact, necessary. We know that the volumes are dropping, so we just decided to write down those assets. In addition, we have performed evaluation of the assets related to the Top Column Module activity. You know that we announced in October last year that we made the decision to get out of this business. The revision of the volumes for the forthcoming years are showing that the value of this activity will decrease, and we have acknowledged this decrease of the value through the impairment of the assets of this activity. We have also performed a thorough review of the capitalized cost related to the projects which are set to go into production between now and during the next 24 months. We have also recorded some loss of values related to those intangible assets, just because we have taken into account lower volumes. Or in some case, we have even taken into account the new volumes which have been provided to us by our customers. All in all, you can see that the split of the EUR 632 million is the following. We have reduced the values of operating assets by EUR 392 million. We have also made a thorough assessment of all the operational risk, and we have recorded a total amount of EUR 109 million, knowing that, for instance, within this amount, we have around EUR 30 million which are related to onerous contracts. Top Column Module, I have already mentioned this fact. We have recorded a one-off charge of EUR 53 million. We have decided by the same time to stop. We had a startup. We have several startups, but among those startups, there is one startup that we have decided to discontinue. We have decided to write off the value of this startup, of this investment in our balance sheet. Finally, when we review the deferred tax asset, we have decided to impair some deferred tax assets for EUR 37 million, which are located in France and in Romania. All in all, we consider that around 90% of the one-off charges that have been recorded at the end of H1 are linked, related, or related to the COVID-19 crisis. Once again, we consider that the automotive world after the COVID crisis will not be the automotive world we were expecting at the end of last year or just before the beginning of this crisis. Page 35, you can see the bridge between the operating margin of 2019 and the operating margin we are publishing for. We are reporting for 2020. You can see that starting from the EUR 514 million of operating margin last year, we consider that the drop related to the COVID-19, so I mean, the impact of the loss of sales after taking into account the positive impact of the cost reduction measures that we have implemented during the semester represent a loss of EUR 764 million. The impact of the capitalization and amortization of R&D, which are indicators, which are by nature, which are fixed, represent a negative impact compared to last year of minus EUR 133 million. In fact, the level of amortization has increased in line with what we disclosed during our Capital Markets Day. By the same time, due to the fact that we have frozen a rate of projects, rate of development during the semester, the level of capitalization was lower. The impact of the one-off charges which have directly impacted the operating margin of H1 2020 represent minus EUR 457 million. In order to avoid any misunderstanding, if you read the financial statement, you can see in the notes to the financial statement that the accrual for warranty risk has significantly increased. We have disclosed this information. What you have to keep in mind is that this increase is balanced by a receivable we have vis-a-vis our insurance companies of amount, which is very slightly lower, but very similar to the increase of the warranty risk. It has been dealt with totally outside the one-off. It has nothing to do with the one-off, but I wanted to make it very clear. We have an increase of the accrual for warranty, but at the same time, the impact in the P&L is very significant. We have recognized a receivable vis-a-vis the insurance company, which in fact is insuring the related recall. If we go page 36, you can see that the level of net loss, before taking into account the EUR 632 million of one-off charge, is EUR 593 million, with a significant impact, of course, of the loss of sales related to the COVID-19 crisis. In terms of EBITDA, the EBITDA margin before the impact of one-off charge represent 5.8% of our sales or EUR 409 million. Maybe- Yeah From there I can go for the cash, if you allow me. Yes, of course. If you go to page 37, you see that obviously we have consumed cash in the first half of the year, but the EBITDA was low, of course, EUR 202 million. You remember in the previous page that excluding one-off, the EBITDA would have been EUR 409 million, which is 5.8% of sale, and I'll come back to that in the guidance. What is extremely important is that in the second line of page 37, we have consumed EUR 574 million of working capital compared to the generation of EUR 230 million of working capital last year. You remember we are a negative working capital company. That means if you have a negative working capital company, when you grow, you don't need to finance your working capital during the growth. I always warn you that in case we would have a drop in our sales, then we would consume cash. That is exactly what has happened in the first half of the year. It's unpleasant because we consume EUR 1 billion, a little bit more than EUR 1 billion of cash. But obviously, and that will be part of the guidance, when we grow again, and if we take the assumption of IHS for the second half of the year, once we grow again, we'll recover a big part of that working capital. You'll see that in the guidance. The rest is a change of provision or any kind of restructuring cost, payment for lease liability and so on, which are marginal. What is extremely important is that quasi 60% of our generation, of our loss of cash, consumption of cash is due to the working capital. If you go for the outlook. We frankly hesitated whether or not we should give an outlook. We know that some of our competitors didn't. We think by respect to you and our shareholders, we needed to give an outlook what the second half of the year should be, being extremely cautious in our figures. Of course, it implies that the IHS figures are true, and it implies that there is no second wave of COVID-19, or that there is any kind of negative impact on production supply chain or market evolution. Provided that wouldn't happen, you don't know, I don't know. We should and we will continuing outperforming the market. We have seen the figures in the last quarters. I'm extremely confident that we should carry on outperforming the market in each region. The restructuring, we have to transform now some cost saving, which has been the reaction to the COVID, to structural cost reduction in order that we structurally reduce our cost basis, and we think we need between EUR 50 million and EUR 100 million to accelerate that structural reduction in costs. The EBITDA should be around 10% of sales. You remember excluding one-off, it has been 5.8% of sales in a very difficult market condition. I'm confident that we should achieve an EBITDA around 10% of sales. Again, extremely cautious in terms of free cash flow. We should exceed EUR 400 million free cash flow. It will, of course, all depend on the structure of the recovery of the sales in the second half of the year, but I'm very confident we should generate more than EUR 400 million. The Valeo Siemens is totally in line with our expectation and the impact on our period, the net loss of Valeo Siemens is exactly in line with our expectations. You see, the outlook for the second half of the year shows a clear rebound on both our EBITDA and our cash generation. Those figures, and you have seen comparing the EUR 400 million compared with the EUR 570 million of working capital for the first half of the year is cautious, but at that stage of the COVID-19, I prefer being cautious. That's what we wanted to highlight. I really want to thank all our people. They did a tremendous job. It seems easy to save EUR 570 million. You know what has been done with some countries, kind of Kurzarbeit in Germany, partial time in France or similar measures in different European countries. There's been very difficult measures in the U.S., for example, with the furlough, which has a tremendous impact on the salary of our people. They did a fantastic job to save the cost, the 570. They did a fantastic cost to reduce the inventory. They did a fantastic job to reduce the CapEx. The team is really to thank a lot for what they have achieved in the first half of the year. Thank you, and, of course, Robert and myself are ready to answer any of your questions if you have any. Thank you. Ladies and gentlemen, we will now start the question and answer session. If you wish to ask a question, please press 01 on your phone keypad. We will only take 2 questions per person. Thank you. The first question will be from Tom Narayan from RBC. Please go ahead. Hi. Yes, good afternoon, Tom Narayan, RBC. Thank you for taking the question. The first question on working capital, the use of cash amount there, just wondering if you could give some color on what drove that, perhaps between inventories, receivables and payables. My second question, the EUR 570 million cost savings, which I think you said 90% of it was implemented in Q2, how much of that comes back in Q3 or in H2? Thank you. For the first question, it is a very good question. You have seen that we have reduced our inventory. If we have to look at receivable and payable, the difference is, Robert, EUR 600 and- EUR 690 million. EUR 690 million. EUR 690 million. There is a huge impact of the variation of receivables and payables. Of course, it will depend on the speed of the recovery during the second half of the year. But we consider that this situation will, in fact, has started to reverse because we are currently at a sales trend which is much higher than what we observed during Q2. So we consider that this trend will reverse, and this is the reason why, first, we will be free cash flow positive during the second half of the year. We are guiding for a free cash flow generation above EUR 400 million, but it is clear that if the recovery accelerates, we could generate more than EUR 400 million of free cash flow just by the mechanical impact due to the reversal of the working capital. The second question concerning the EUR 570 million of cost saving. It has been directly a variabilization of our cost. We had most of our people stopped. The drop of production in April was around 80%, around 50% in May, and around 20% in June. We had to react extremely quickly in terms of variabilization of our cost. So a part of it are the 12,000 people that have reduced, they probably won't come back in the second half of the year. Our work is to carry on variabilizing our cost in the second half of the year. So a part will come back, but not all of it. That is the work we are having. Okay. Thank you. I'll turn it over. Thank you. Next question from Thomas Besson from Kepler Cheuvreux. Go ahead. Thank you very much. It's Thomas. I'll stick with two topics as well. First, I'd like to come back on the organic growth momentum in Q2 and what you see for H2, and I don't know if I missed it, but I didn't see the details of the order intake this time around, but usually it's here with region, innovation, share of joint venture. So that's the first question. And I don't understand your question. Can you repeat your question? Of course. Sorry, I'll repeat it. That's what I think. Sorry. Organic growth momentum for Q2 and H2, try to understand a bit better, the effect of the geographic mix and so on. Also, I didn't find the details of the order intake. I don't know if it's because this time around you don't put it because of the situation or because it's somewhere else. But usually, you provide the regions, the share of innovation, the share of the joint venture. That's the first question on top line. Second- That is the first question. It is two questions already. I tried to stick with one, but it is difficult. We always want to know more. Do you want me to ask the other one or? Yeah, you can ask the other one. Yeah. Okay. Sorry for that. The other topic I wanted to address is on the one-offs, basically. Can you explain, again, I think Robert addressed that a bit during the presentation. What have been the assumptions you have taken now for these impairments? I think you have completely changed the scenario for the next five years. But for the 2024 to the future, are you reconciling that with the plan you presented in December, or is it something completely different? Basically, I would just like to understand how it works to get to these one-offs that you have taken in the first half. Thank you. For the first question, the order intake, it has no meaning to speak about the order intake and the split between region because it is not significative. We preferred not to speak about that. We will do it, of course, for the whole year, when it will be a much more relevant figure. For the growth, the only guidance we gave is that we should grow more than 5% globally for outperformance of more than 5%. That is what we achieved. We should carry on having a good momentum in each one of the region at that stage. What we see for the beginning of the semester is in line with that. Concerning the one-off, before Robert goes into the details, it is an obligation we had from the IFRS to do a real in-depth impairment test. We have worked with scenario. It does not mean that will be the scenario that we give you when we have a better view on what is going to happen. It is a scenario that we are working on for the sake of the impairment test. Do not take it as our new forecast of the long term. It is scenario that we have taken. It is scenario that we have been speaking with our auditors, and that is only scenario. Once again, it is not our long-term view of the market. It is the best we could do to do our impairment test. Robert. In terms of scenario, you ask for a kind of reconciliation with the assumptions we made when we presented our long-term objective, our midterm objective during our Capital Markets Day. In fact, what you have to keep in mind is year by year, we have taken into account a drop of volume, which is around 10%. It depends on some years. In 2021, it is higher than 10%. By end of 2024, it is slightly below 10%. All in all, we can consider that we have taken into account a decrease during year after year of around 10%. Once again, sometimes it is higher than 10%, sometimes it is slightly lower than 10%. What is very important is that on top of that, when we had, and especially for the review of the value of R&D capitalized cost, we have also taken into account the last figures we have received from our customers. In some case, the decrease can be higher than the 10%. This is the reason why I wanted to be precise on this topic. I do believe that we performed evaluation using assumptions which are, I would say, cautiously realistic. Thomas, don't consider it as a long-term view of the market. It is only done for the sake of the impairment test. Thank you very much. We have difficulties to have a precise view on H2, so my view on 2024, 2025 is as good as any. I understand very well. Thank you very much. I agree with your statement. Yeah. Next question from Kai Müller from Bank of America. Hi. Thank you very much for taking my question. The first one, really to sort of come back a little bit on these write-downs. Can you just split out exactly, you obviously touched on these operating assets, but where do we have the EUR 197 million in impairment on your R&D? Is that sitting in those EUR 392 of operating assets write-down as a first one? What is the big delta between the operating assets impairment and the net income impairment? Is that just the items that flow below the line, for example, for your investments in the startups, et cetera? The second point, really on the outperformance. You talked just now, obviously, that you want to do those 500 basis points. If you think about longer term, is that also your target? Maybe, in regard of that, can you give us a bit of color what you think your drop-through will be on any of the growth that is coming through in the second half and also next year? Because you showed us, obviously, for H1, and you communicated what Q2 would be at Q1. Can you give us a bit of color how you think about it in the second half and maybe on an operating basis rather than EBITDA? For the first question, in the market day on December 10, we told you that we were extremely confident that we outperformed the market 5 points a year. Despite the turbulence that we have seen today, we demonstrated we are able to do it. There is no reason why we shouldn't do it in H2 this year, and I'm very confident with the order intake we are having. So we have now to reconciliate the order intake with the market conditions, and for the time being, it's too early. The outperformance of market, we should confirm what we said on December 10, and we said at the beginning of the year. There's certainly no doubt about that. We gave only the flavor of two of our product line that we have developed in the recent years, the 48 volt. I mentioned the fact that the sales in H2 should be tripled compared to what in H2 last year. Yeah. But that is raising the market, and for the front camera is 50% more. That confirms the order intake we gave you that we had in 48 volt, that was EUR 7.5 billion, and the sale that we should have in 2022 was EUR 1.1 billion. What we see in the market is, despite the market condition, exactly in line with that. For ADAS, where we had something around EUR 11 billion of order intake, and we expected the sales to. For ADAS, pardon, not CDA. For ADAS, sales going up from EUR 2 billion to EUR 3.2 billion, as far as I remember. What we see now is confirming those assumptions. So I feel very, very comfortable concerning the outperformance of the market, especially in those two product line that overall. You have seen that with the different business segments and business group where we are growing. So I feel very, very comfortable with that. The second part concerning the impairment test. The impairment test and the way we have accounted for the impairment test. I have to admit, Kai, that unfortunately, it is just driven by the IFRS accounting principles. I have to admit that it's a bit complicated because different lines of the P&L have been impacted by the one-off. What you have to keep in mind is the fact that during the last years, during the last 10 years, each time we had to impair an asset related to the impairment test performed at the level of cash generating unit. The impairment was recorded in other income and expense, so it was not taken into account directly in the operating margin. So when we take into account, for instance, the Brazil asset, or when we take into account the asset of Subsystems Group or the asset of two other cash generating units, it has been accounted for in other income and expenses. By the same time, when we have decided to impair the asset related to the manufacturing of component for diesel engine, it has been accounted for in the operating margin because the test was not performed in accordance with the impairment test of CGU. We have the same impact for some other operational liabilities. I have, for instance, mentioned some onerous contract, which have been recognized for a total amount of around EUR 30 million. Those EUR 30 million have been recorded for into the operating margin. Of course, the investment in startups have been recorded on the line joint venture and associates, and the impairment of deferred tax assets are recorded on the line tax. Okay. On the operating leverage for the second half? It's a complicated- Sorry. If we think not in operating leverage, but in variabilization of the cost, we have the same goal, to variabilize at least 50% of the cost in the second half of the year. We achieved 58% in the first half of the year. Should be higher than 50% in the second half of the year. This is your key, yes. Yeah. That's the basis on which you say you want to at least achieve a 10% EBITDA margin. Is that correct? Yeah. Again, it's a big adventure to give an outlook at that time of the year with those market conditions. We try to be cautious. Okay. Fair. Thank you very much. That's helpful. Thank you. Thank you. Next question from José Asumendi from J.P. Morgan. Please go ahead. Thanks very much, Jacques, Robert. Jose here. Just sticking to two questions. The first one on the number of workers, the 12,000. Did you take full benefit of the workforce reduction in the first half, or are there any benefits coming in the second half of the year, or do you plan to do more workforce reduction in the second half of the year? That's the first question. Second question, Valeo Siemens, what is the roadmap to hit breakeven there? Can you just give us some simple maybe roadmap as to top line growth or second half revenue growth versus first half? Just a few parameters to understand when does the business hit breakeven. Thank you. It's easy for Valeo Siemens. You just take what we said on the 10th of December, and we wouldn't change one line compared to that. It's totally on track. Therefore, we wouldn't change anything. For the 12,000 people, the notion of temporary people in France, Germany, Eastern Europe, or North America is very different. It is something that has been done along the quarter. We'll have part of the additional benefit in the second half of the year. The rule, and you have seen that we have put between EUR 50 million and EUR 100 million in restructuring costs for the second half of the year. Now we have to go to much more structural cost reduction, in all parts. That means in direct labor, indirect labor, in R&D expenses, in order to take into consideration the evolution of the market. That will be all what we need to do in the second half of the year and in the next years. Part of the 12,000 benefit will come in the second half of the year. How much did you see in the first half? Was it maybe a quarter or so of the 12,000 that you saw the benefit in the first half? Or how much did you benefit from the 12,000? Maybe half of that? First, we really took the benefit of those reduction of temporary workers during Q2, in Q2, in fact. We started to decrease the number of temporary workers in Q1, but the majority of the benefit is related to Q2. In the next few quarters, of course. And of course, in the next quarters. But your question was concerning H1. Thank you. Thank you. Next question from Gabriel Adler from Citigroup. Go ahead. Hi, it's Gabriel from Citigroup. Thanks for taking the question. My first question on the production outlook, given your pretty interesting comments at the beginning of the presentation about increased demand for cars as a form of mobility as a result of the crisis. Do you think that the IHS expectations of minus- We cannot hear very much. It's terrible. I don't understand what you say. Sorry. Can you try to be closer to your mic or? Is that better? No, we don't hear anything. Now can you hear me now? Hello? Yeah, it is better. I want to understand, given your comments around increased demand for cars as a form of mobility in a response to the crisis, whether you think the IHS expectations of -10% in the second half, which your guidance is based on, could perhaps be too cautious? Or do you think this level of demand is already reflecting additional demand for cars as a result of the virus? My second question is just on the write-down again. I just wanted to know whether you were providing a level of D&A savings that you expect as a result of the asset write-downs. Any guidance on that? For the first question, I would take what Thomas said earlier. It's difficult to know what will happen. Today, it's the best thermometer we are having, the IHS. What we see for July, and assuming our performance should be aligned with that's the reason why we took IHS figures at that stage. In reality, you know that CPCA doesn't do any forecast for China, and IHS has not been very good in China in the last few years. So the Chinese figure might be different from IHS, maybe better. That is the first point. The second question? Was relating to depreciation and amortization. Am I correct? No, to the one-off, the impact of the- Short time, the impact of the one-off will not be that significant. Of course, we will benefit from a lower depreciation related to the impairment of Brazil and the other CGU which have been impaired. So you can consider that we could save, I would say around EUR 20 million per semester, EUR 20 million, EUR 25 million per semester as of the beginning of H1. H2. Of H2, sorry. It will be higher next year. It will be, of course, higher next year and especially when the R&D project will enter into production, because we have impaired the value of some of those projects. So the level of depreciation, of course, they will no longer be depreciated. Do not forget that between now and the date of the start of production, whereas in the past we were capitalizing those costs, we will not be able to capitalize the cost between now and the start of production. So I do not expect in H2 a significant impact in terms of depreciation coming from the R&D which has been impaired. Concerning the other assets, it will be between 20 million EUR and 25 million EUR. Which is significant but will not change the It is not a game changer. In fact, of course, it will benefit to the operating margin. But once again, we intend, of course, to improve the profitability of the company, and we do not rely on the decrease of the D&A related to the impairment. It will be more next year than this year. Of course. Yes. Okay. Thank you. That's helpful. Thanks. Thanks. Next question from Henning Cosman from HSBC, please go ahead. Hi, Jacques and Robert. Henning. Thanks for the statement about the depreciation as well, because I suppose it implies still a very negative adjusted EBIT result excluding joint ventures for the full year. I wanted to talk about that, if you don't mind, again, in the context, just conceptually, of that drop through operating leverage going forward. Because I'm aware you haven't collected consensus this time, but even if I were to imply or apply 25% operating leverage in the recovery, it seems it's taking you until beyond 2025 to return to previous absolute peak profitability. I was just wondering if you could discuss that again in the context of those structural cost savings and if it's indeed possible to achieve drop through operating leverage in the magnitude of 25%. That's the first question, please. The second question is on the order intake. I know we have discussed in the past that you're netting the order intake for cancellations. I was just hoping to understand if you're treating these adjusted client budgets for lower target production volumes, if you're treating that as cancellations, and as such, your EUR 5 billion order intake number is net of such adjustments, or how we need to think about that. Thank you. I can answer the second question. At that time, it's impossible to net from market evolution or operating income. In the past, we have only netted from pure cancellation of our customers. Therefore, we never netted from market assumptions in the past. What we'll have to do in the future is according to, but that cannot be done today, according to the market condition, what will be the evolution of our turnover. What I don't agree is your statement that the forecasted profitability should be reached only in 2025. I won't give any figures at that stage, but you have a lot of things to take into consideration. First, all the technology platform that we have put in place will have a huge impact on the R&D expenses, and that was obviously forecasted. The second is, you don't know, I don't know what will be the level of order intakes in the years to come. We don't know, and you don't know, what will be the policy of our customers concerning the lifetime of their existing models and the lifetime of their future models. You don't know, and I don't know, how much of the existing products will be reused for their next platform. So we have a lot of uncertainties today. I'm pretty sure that we can reach what we have given for the Market Day. You remember we had given a flavor what could be 2022. So 2022 is tomorrow, and we'll have to review that. But I don't agree with the fact that we could come back to normal profitability at 2025. That is not possible. That is not true. Just to clarify that the EUR 1.5 billion absolute adjusted EBIT excluding joint ventures, that would be far too late to only re-achieve that in 2025, yeah? The 1.5? Or 1.448, I believe, was your adjusted EBIT level in 2017, excluding joint ventures. What we said, you remember you criticized us because we said 15% EBITDA. The 15% EBITDA will be reached much before 2025. This is a target. Yes. So of course, and this is what you have explained, we will need to implement some structural cost reduction. This is the reason why we are guiding for restructuring cost between EUR 50 million and EUR 100 million in H2. It is clear that due to the fact that we consider the market will be significantly lower than expected, we will have to adapt our cost base. I do hope that we will reach our objective of 2022 before 2025. Much before. Thank you both. I appreciate it. Thank you. Next question from Chris McNally from Evercore ISI. Please go ahead. Thanks, gentlemen. A lot's been asked, so I'll try to just recap. One short-term, one longer-term. Just to recap on the second half decremental margin. I think what a couple of my colleagues have been trying to understand is, if we have 10% down production, 5% content per vehicle or outgrowth, that means revenue is only down about 5%. If we run your EBITDA margin guidance, you get a fall through that's in the 50%-60% range, which would obviously be worse than first half, where you did a very good job. So could you just maybe just review why the fall through would be worse in the second half? Can you allow us to be cautious for the second half of the year? That is the answer to your question. Yes. Okay. This is a guidance, and we have decided to be cautious for sure. Fair. The second question is a little bit longer. It is a recap of what was just asked. Rather than thinking about incremental margins, your 2022 guide was predicated on a 90 million production plus. You said 21.5 million in revenue, got you 7% and 15% on EBITDA margins. Whenever we achieve that level of production again, going back to the 2022, is it fair to then to apply those same. Again, whatever year that is, we do not have to think about a year. But is it fair to then assume that nothing has structurally changed, you just validated the Siemens JV? Or do we need to continue to take out maybe more costs from here to get you back on track, even at the same level of production as the December 2019 guide? The business model has always been to compensate the price reduction we give to our customers with the structural cost reduction or price reduction we get from our suppliers. Provided that will carry on to happen, and there is absolutely no reason why it should not happen in the future, what you said is clear, that there is no reason to think that anything has structurally changed. Robert? Nothing to add. No, nothing to add. No. Okay. The business model remains the same, so there is nothing to add. Yes. Nothing should structurally change. What could change? What could change is the length of the platform of our customers, that it lasts longer. That means that we would have less R&D expenses that could increase the margin. I don't think the other way around could happen. That means I don't think our customers would shorten their product life cycle because they are under stress for cash and profitability. I think they'll rather increase. Then you could ask, will the behavior of our customer change and more pressure on the pricing? We don't see it in the first half of the year. Absolutely not. And I don't think it will happen. Why? If our customers are under stress, our competitors are under stress, the same way we are in terms of, you have seen the figures of Continental and the figures of Autoliv. Everybody is under stress. I absolutely believe that the pricing discipline will be there only because we have no choice. Therefore, I really believe that the business model has not changed. Thanks a lot, Arnaud. Thank you. Next question from Michael Foundoukidis from ODDO BHF. Please go ahead. Hi, this is Michael. Thanks for taking my questions. I have two. The first one, coming back on the order intake, which is down, if I am correct, something like 50% year-on-year. You said that it was not meaningful, but we had some suppliers like Autoliv a couple of days ago, which published a flat year-on-year order intake for the first half. So my question was, should we think that you are becoming more selective than before because of your financial stress, because of your recent R&D cuts, and how should we think about next few years? I am not talking necessarily about 2021, but more 2022, 2023, 2024 outperformance, in this respect. That is the first question, and then the second question is on Valeo Siemens. You talked before about revenues ranging between EUR 500 million, EUR 600 million for this year. Should we expect more, because of the very strong dynamic that you highlighted among EVs, and how does this change your perspective for JV in the next, let us say, 12 months despite the crisis? Thank you. For the question concerning Valeo Siemens, I will not make any other answer but the one I did. The sales this year will be impacted by the market the same way, and it will recover next year. I wouldn't change one line, compared to what we disclosed in the Capital Markets Day on 10th of December. I don't change anything at that stage, not on the top line, neither on the profit and cash. For the first question, I didn't see anything concerning Autoliv. What we know is that for the RFQ we are in, everything has been stopped in Q2. Yeah. You could say it's 50% of what we get normally, but if you relate it to the first quarter, then it's normal. At that stage, I don't see any reason why the second half of the year shouldn't be back to a normal level of order intake. I never disclosed, anticipated any order intake, because it's extremely difficult. The question mark we are having is that all the potential we are having for the second half of the year, whether or not it will happen at the second half of the year or part of it would be postponed to 2021. I don't have the answer to that question. We see clearly after the lockdown, once our customers are going back to work, that the activity between our team and our customer's team is back on track. What will be the decision process of our customers? I don't have the answer, therefore. I never gave any figure, but it looks like the potential is back to normal. Which it doesn't mean- Let me just- Back to normal. Yeah. And concerning the, pardon? Go on, sorry. No, just to follow up on what you said just right now. What do you consider as normal? Because of course, I believe that volume expectations have come down since last year. At the same time, you are cutting heavily your R&D spending. So what should we consider as normal for? Don't ask me to give you some flavor what would happen. Few billions could go and spread into 2031 without knowing it today. What we had in one half of the year, you said 5 and 6 billion is half what we should have normally. If you multiply that by two is a little bit less than the potential we have in the second half of the year. The project we are working on today is more than the double of what we achieved in the first half of the year, more than double the 5 and 6. Yeah, more than the double. So what will be decided in the second half of the year? I don't know. Yes. What we can say is that when we look at the activity of our sales team during the last three or four weeks, it's a back to normal. back to normal. This is what we can see today, based on the number of RFQs that we have received. The fact that some requests for quotations which were frozen in April or in May are now back on the table, so we are discussing. I think that when, once again, it's a good indicator when we look at the activity of our sales team, it's back to normal itself. To say it in one word, I'm not worried at all. I wouldn't agree to what you said that it's half of what we normally have. It's factually true, but it doesn't reflect the reality because everything was stopped during three and a half months. If you consider that for two and a half months, it's a normal level. You should never forget that the industry totally stopped during three months, and all the work of RFQ and product development and response has totally stopped during those three months. I'm not worried about the level of the order intake. I'm not worried at all. Okay. But what I was just mentioning is that volumes expectation from OEMs on the RFQs that you have in the past three, four weeks, as you said, are, of course, or at least I would guess, much lower than the one that you would have, for example, in January of this year. If you take the volume assumption, of course. When I told you that the potential we're having is more than two times that what we have achieved is taking into consideration that the new volume assumption, of course, it's very important to be accurate in the volume assumption for two reasons. The first one is because it's the basis of our cost calculation, and the second is because it's the basis of our future investment. So it's something which is extremely important. We have to be consistent. We consider that the world, the automotive world, has changed since the COVID crisis, and it will have to be reflected in the volumes that we will take to value the future order intake. Okay. Thank you. Thank you. Next question from Sascha Gommel from Jefferies. Please go ahead. Good evening. Thank you for taking my questions. I have a follow-up on your Q2 outperformance. I am not sure if I missed it, but when I go through the regions, your outperformance kind of went down sequentially versus the first quarter, in Europe, North America, South America, China. Could you explain what was behind that, why the outperformance kind of went down across the board in the regions? That was kind of my first question. You look at the page 18, where we have the outperformance of- Yes, exactly. Yeah. But it has little meaning. The reason why we said the outperformance still exists region per region. Look at Europe, the market was down 56%. In North America, the market was down 68%. Only in China it was +17%. In South America, it was down 72%. Instead of looking at those figures, where you have such a drop of the market, I even hesitated to put that slide because what kind of meaning does it have? I think it's better to go to the following page, where we look at. Because more average between first quarter and second quarter, I think the page 19 is probably more representative of what has happened than the Q2. Then you see that we have outperformed, except U.S., where I recognize that there was a drop, and I tried to explain the reason of the drop. But in all other regions, we have incremental increase. So I don't worry that much about the drop quarter per quarter, because when you have a market dropping 72%, I think it has no real meaning. But because we always showed that chart in the past, we have showed it. But the only chart which has a real meaning is the page 19. Okay. Understood. My second question would be on your free cash flow guidance for the second half of the year, that at least EUR 400 million. How much of that is working capital reversal in your planning? I would answer the question, if I were in your feet, what would I do? I would look at what could be the difference between potential EBITDA and potential CapEx. And I would make assumption of the reversal of account payable, account receivable. And you would have probably a much more optimistic figure than what we have disclosed. So just do your calculation. There are so many uncertainties in the market, maybe risk of rebound or problem in the supply chain. Because the only thing you remember is around 10% EBITDA, around or more than EUR 400 million of free cash flow. You forget all the caveat we have done on the circumstances. So give me the favor, just think that we are being cautious. If everything happens the way we hope things will happen in the second half of the year. Okay. Very well understood. The last question is actually not direct, it is more understanding. Why did you change the reporting of your kind of operating income and include the R&D kind of benefit? Was there specific reason why you started to include that? I remember the definition of EBIT. No, we did not change anything. We did not change anything. What I said is that the impairment of the capitalized R&D was accounted for in the operating margin, because this is the rule. So in the past last semester, each time we impaired some project, it was accounted for in the operating margin. The point is that the impairments were very small. Sometimes there were even no impairment. We have a more significant impairment this semester. It has been accounted for in the operating margin, but there is absolutely no change in the rule we are applying when we calculate the operating margin. Absolutely no. When you look at per business group, you see that we are real increase of some R&D expenses. Those increases are mainly due to the Impairment impairment we are doing in each one of the business group. It has absolutely no change in our accounting rules. No change at all. I was more referring to page 49, actually, because there is a restated operating margin, and you start to include the capitalized versus amortized R&D. I was wondering if this is the new way of No. -representing the numbers. No, I think that Okay, I understand. It has nothing to do with any change in the accounting. The objective in Q2 was to variabilize as much as possible our cost. In fact, when we speak of amortization of R&D or depreciation of an asset, it is what it is. You can do nothing to variabilize the depreciation level. In addition, when we speak of R&D, we significantly reduced our development efforts, so the growth R&D, the earned. The consequence is that the level of capitalization decreased. We consider that what is relevant is not to measure the impact of the COVID-19 crisis, taking into account the impact of the depreciation and the capitalization. It is more meaningful to take into account the impact of the development effort decrease that we were able to implement it. This is the reason why we highlighted the impact of capitalization and depreciation. But once again, the capitalization and depreciation are accounted for in the R&D, which is accounted for in the operating margin. There is absolutely no change. It was just an indication that we have given. We thought that it was important for you to understand the impact of capitalization and depreciation on the results of the company for the semester. We have, of course, no capitalized R&D due to very limited level. Very limited, but at the same time, we were also able to reduce the development effort. Absolutely, yeah. I see. Thank you very much for the answer. I understand that it is true that the impairment we did have an impact on all the lines of the P&L. The same way, the cost-saving measure we did on the variabilization has an impact on direct labor, indirect labor, overhead, R&D, gross R&D, administrative expenses, selling expenses, and so on. We have to try to reconciliate it as easily understandable by you. Yes. I think that if you want to have very precise figure, you can go to page 14 of the press release. You have the split of the one-off cost by line of the P&L. It can help you to understand the way the P&L has been built. Of course, Thierry and myself are ready to answer any questions concerning those topics. I consider that this is very important. Once again, if you have any questions, don't hesitate to call us up. We will answer you with a lot of details. We appreciate that. Appreciate that. Yeah. You will not present like that in future, right? That was just for this quarter to show the underlying drop-through. Yeah. Yeah. Okay, good. Thank you. Thank you. Next question from Stephen Reitman from Société Générale. Please go ahead. Yes, good evening. I have two questions as well. On the cash flow, you've given us a snapshot at the end of first half. Can you give us more color on how this developed during the course of the six months? Was the EUR 1,049 cash outflow, what was the peak level you saw? Are you actually generating cash in the last month, for example, in June, as a sort of run rate going into the second half of the year? My second question is about customers. What we've been hearing is that some automakers are looking at some of their longer term spending plans, particularly when it's relating to ADAS, and looking potentially delaying certain projects, postponing them a bit as they concentrate on electrification, obviously for the CO2 requirements. Some of the other schemes which had a longer lead time are maybe being put back even further. What is your experience with this? Thank you. Maybe I will start with the second question, and Robert will answer the first question. In one word, I do not know. So maybe it is not enough. We do not see any slowdown in the electrification of the Powertrain. Both 48 volt and the BEV, PHEV, we do not see any slowdown. You have probably noticed that most of our customers are communicating a lot that they achieve their 2020 target in terms of CO2 emission. So we do not see any. In terms of ADAS, for the time being, we do not see, at that stage, any slowdown. What we see is that it remains extremely active. Where we see a slowdown on the OEM side, maybe not on the GAFA side, is on full autonomous or Level 3 cars. We see, and you have seen that the project between Daimler and BMW has been canceled. We see more or less a slowdown in that topic, and we see maybe an acceleration for Waymo and some others cars. Cruise would be halfway between a new company and GM, because you know that Cruise is belonging to GM. In that respect, we see a slowdown, but we have a lot of interaction with those new mobility players, Waymo and the others. So it does not have any impact towards what we explained to you in the last year, for example. The real question, nevertheless, will be what will be the product life cycle of our customers? For the time being, it is probably too early to know. On the cash- If we go back to the cash. You know, the month with the lowest level of sales was April, and it was in North America and in Europe. So the impact in terms of cash was at a peak during the month of June. Since end of June, we have started to recover, and I expect a first significant cash generation during the second half of July. Because we will start, end of July, we will cash in a significant level of sales we made with our customers in the month of June. So I consider that the peak in terms of cash consumption was between mid-June and end of June. So July will show a first recovery, but do not forget that the month of June was still low in terms of sales. What we can see today is that July should be okay. Normally in the forthcoming month, we will start to improve, month after month, the free cash flow generation of the company. Thank you. I was just thinking of a further question. You mentioned that you are basing your assumptions on the IHS minus 10% in the second half of the year. Can you tell us your experience in the first half? Obviously, IHS changed its numbers very rapidly, particularly in March. Were you ahead of them when you were in your internal forecasts? Or were you basically matching the pace of change that IHS was making in their own forecasts? Or do you have a better warning of what was happening from your people on the ground? On the production itself, we do not have better warning. What we know is what we have in our own forecast. Therefore, I do not blame IHS not to have been in a situation to really forecast the production, because nobody could forecast, especially when everything stopped in February in China and end of March in Europe. I could not make any comment and answer your question. What we are seeing today, and I think I mentioned that during my presentation, we see a kind of V curve in the North America and in China. We see a much more progressive improvement in Europe. We see a slight improvement in Korea and Japan. And we see a very, very low production level in Brazil and India. What is important now is it sustained? And it has to be sustained in order that the IHS figures could be reached. That is obviously an uncertainty today. But we do not see, because we have a daily tracking of our sales, we do not see any deviation in the last few days. We have to really be focused on what is happening in a very short-term. The month of July is in line with our expectation or rather better. Thank you. Thank you. Next question from Victoria Greer from Morgan Stanley. Please go ahead. Hi there. Just one, please. Just to come back to your expectations about free cash flow around EUR 400 million for H2. I understand, obviously, there is a lot of uncertainties about that. But there are some numbers in there which I guess you do have visibility on, and could you just help us on those, please? So CapEx specifically D&A, and then also should we think about the EUR 50 million-EUR 100 million restructuring costs that you have mentioned as cash outs? Could you talk about those three in absolute numbers for H2? The CapEx should be around EUR 100 million less than last year, than second half of last year. D&A? D&A, in fact, has no impact because either they are reduced and we have a better operating margin, but when we calculate the EBITDA has no impact. On the other hand, I think that what is important to keep in mind is the fact that when we speak of the restructuring cost, we are guiding for an accounting charge between EUR 50 and EUR 100 million. But let's assume that we spend EUR 60 million. I don't think that the cash out, we should be around one third maximum of what will be accounted for in the P&L. And normally we should have the cash out in the first quarter or in the first half of next year. Okay, that's clear. And could you give us steer at all around the absolute D&A for H2 or it's still a bit uncertain? No, it's still uncertain. Okay, great. Thank you. Thank you. Next question from Ashik Kurian from Exane BNP Paribas. Go ahead. Ashik, sorry. My question was answered, but given time, I will just ask one question. In your scenario of -10% primary production decline in second half, can we still expect the working capital headwind that you had in the first half to be fully recovered by end of the year? No, unless I have not understood correctly your question, but with the -10% in H2, it means that we will not be at the level of sales of, I would say, at the end of Q4 last year. When we speak of working capital, what is very important. The main driver of the working capital at Valeo are the level of sales of the last four months before the date when we measure the working capital performance. I mean, what will be very important for the working capital recovery of H2 will be the sales of September, October, November, and December. Assuming that we have the same level of sales during this period as we had in same period in 2019, working capital should be neutral, which means that in this case, we should be able to reverse the complete negative trend we have observed in H1. Frankly, I do not believe today that the sales of September, October, November, and December will be at the same level as last year. Perhaps I am wrong, but this is not the most likely assumption. So I do not believe today that we can reverse 100% of the working capital negative trend of H1. Okay, perfect. Thank you. Thank you very much. That was last question. Mr. Chambure, back to you for the conclusion. Yeah, thank you very much to have attended that call. Like always, we can see the two phase of what has happened. I want to remember the one phase is that the team has incredibly fast and reacted to the crisis. Of course, the figures are terrible, but that was nothing else to be expected. What we are absolutely focusing on now is the realization of the cost on one hand, and cash management on the other hand. The figures are what they are. I am much more optimistic now than I was a few months ago. Now we have to do our job to recover the biggest part possible of the working capital and make sure that we remain extremely cautious on cost and all cash relevant expenses, especially the inventories and the CapEx in the second half of the year. Thank you very much for having attended. I hope that explanation has been clear, as clear as possible. We have hidden absolutely nothing and hope to see you live sometime soon. Thank you very much. Thank you. Thank you, ladies and gentlemen. This concludes today's conference call. Thank you all for your participation. You may now disconnect your line.