Good morning. I wish you a very warm welcome to our H1 2021 results presentation. We will, with Michel Favre, our CFO, provide takeaways and our guidance for 2021. If I start with the H1 highlights. Despite adverse impacts related to the shortage of semiconductors and raw material inflation, we were able to deliver on very strong EUR 7.8 billion of sales, up 32% on an organic basis, with an EBITDA margin of 14.2% and an operating margin of 6.6%. Michel will show you the very strong operating leverage we delivered. Our budget is allowing us to significantly deleverage our net debt -to -EBITDA ratio of 1.5x as of June. Our sourcing decisions were delayed to the second half. We are on track to reach our EUR 26 billion target for the full year.
New Perspectives strategy , with an especially a successful spin-off, which allowed us to achieve 83% of shares owned by our employees. We also focused on zero-emission hydrogen solutions and ESG strategy. I will be back on this in a few moments. We strengthened our financial structure, including green bonds , at a level of EUR 400 million. We upgraded our full-year 2021 guidance on [audio distortion] If I start with the order intake at EUR 12 billion in the first half, we had a very strong activity with Volkswagen for EUR 2.6 billion. China represents 25% of the total order intake, of which 67% with Chinese OEMs. If you take our top 10 customers in China, five are Chinese , and five are international. Inside these top 10, we have two electric vehicle specialists. The first Chinese is BYD, and he is in number three position.
I think that here we have in China a very strong portfolio and a very robust portfolio. Faurecia Clarion Electronics represented EUR 1.3 billion, which confirms our full-year 2021 commitment at EUR 2.5 billion. Battery electric vehicles represented an excess of 20% of the total order intake, 24% if we would include Symbio. Hydrogen represented EUR 280 million of order intake, confirming again here our full-year 2021 target of at least EUR 500 million. We also have to speak about our launches, which were successful. We launched about 120 new vehicles in H1 2021. While we did that, we also worked on accelerating our momentum for hydrogen, and you see here a few highlights. In February 2021, we signed a partnership with Renault for hydrogen storage systems for light commercial vehicles.
In March, we supplied Stellantis with fuel cell stacks and hydrogen storage systems for light commercial vehicles, preparing the launch— the serial launch— of these vehicles for the end of this year. In May 2021, we won a contract with SAIC in China to provide hydrogen tanks for commercial vehicles. You see on the right-hand side that in April, we also took the majority stake in CLD, a leading Chinese manufacturer of hydrogen tanks. It is the only supplier today being homologated for Type IV tanks . Stellantis spin-off went pretty well. We now have a significant free float. We are included in the CAC Next 20, effective March 22nd. We were also very successful with our Faur'ESO, our Faurecia employee share ownership, with a significant subscription rate, 22%, while the benchmark is at 16%.
This showed you the confidence our teams have in our plans, our strategy, and our future. In addition to our acquisition, I would like to speak about DesignLED. DesignLED is a Scottish company which is specialized in advanced backlighting technologies. Accelerating our ESG initiatives. First of all, on Scope 1 and 2, where we have a very clear target to be CO2 neutral in 2025. We are continuing to deploy our plans. We added Schneider Electric, KPMG, and ENGIE in order to achieve the right level of PPAs, the purchase of green electricity. We also started to deploy in our different plants. This has to be fully done in all our plants until 2024, which means that we will equip all our plants with their own production of electricity, which will represent globally around 15% of our needs.
I think that in doing this, and also putting in place the financial tools that are allowing us to accelerate with partners the deployment, we will deliver our target. We had our first global event celebrating diversity and inclusion with more than 70 trophy winners across 22 countries and more than 100 nationalities. Faurecia Foundation, we have sponsored 11 new solidarity projects worldwide out of a short list of 30 initiatives. All these initiatives are coming from our employees. They are staying the sponsor of these initiatives if they are selected. This is working very well, and we have very nice projects ongoing. Michel, for the financial review.
Thank you, Patrick. Good morning, ladies and gentlemen. I will start with a technical slide. It is to remind you that we are in the process of selling our AST, which means Acoustics and Soft Trim, business. The closing should happen this quarter. Of course, according to IFRS 5, we have restated the 2020 figures. For 2021, you will see the result in one specific line in the profit and loss statement. Going now to the sales. We have put this slide up because it shows what has happened in the market quarter after quarter. Of course, the first half of 2020 was a big disruption with the lockdowns. You see the quick recovery, mainly in Q4 2020, and the disruption due to the shortage of semiconductors.
You can see auto production was down by 11% when we compare the volumes of H2 2020 with respect to this semester, I will say 2021. It is -13% if you compare the volume of production with respect to the first half of 2019. Whatever the impact, we posted sales by -7%. It is an outperformance of 400 basis points with respect to the last semester. More important is the operating margin. Whatever the fact that we were losing more than EUR 700 million of sales, I repeat, EUR 700 million of sales, we were able to improve the operating margin from 6.2% second half of 2020 to 6.6% this first half. Going now to the sales out performance. Difficult to comment because geographic mix is key. The first quarter was with, I would say, better Europe and lower Asia. The opposite is the second quarter, which was clearly impacted.
I would say very positively this year, sorry, it was a comment for last year. We have a huge geographic mix in the second quarter. This explains the +61.7% sale respect to the production of 54.1%. When we go to the first half, we are more balanced. I would say a low geographic mix. Whatever the point, we outperform the market by 170 basis points. I have to mention that this outperformance was despite some adverse customer mix. You have seen that Ford, for instance, which was the second customer of Faurecia, cut a lot of its production. I have to mention that a small currency impact of 5.5%, EUR 286 million, in the first half. With the trend, we can confirm the expected outperformance for the full year, 600 basis points minimum for this full year.
Operating margin. As I was saying, a very good performance and boosted , of course, if I compare it to last year by the volume, the recovery of volume. Inside this recovery of volumes, we have our good performance and our capacity to maintain, even improve, the gross margin by product. We suffered from the raw material pricing increase. Whatever the fact that the pass-through was something like 70%, we had, as expected, an adverse impact of EUR 25 million. I can anticipate that we are putting the same figure in our forecast and guidance for the second half. We have a very big figure for cost-cutting, EUR 177 million. I will say only EUR 30 million is downtime. The main part is restructuring.
Another part is a strong discipline throughout the group in a period where volumes are limited. This EUR 177 million, of course, will continue to inflate the expected operating margin of the second half. On the right page, sorry, you can see that we have two one-offs. One is a cost linked with the employee shareholding plan, the ESOP, EUR 14 million. Compensated by the fact that we have a very positive ruling as expected in Brazil for the PIS-Cofins, which is a tax on sales, and we were recovering EUR 13 million. Altogether, no one-off impact in the first half. Going now to the business group.
Seating, as expected, big outperformance of 400 basis points. We were expecting a higher outperformance, but due to the customer mix, it was only 400 basis points. It will accelerate a lot in the second half. Why? Because we have some very important startups of production in the second quarter with a full-year impact. As you know, the main one is the Jeep Grand Wagoneer complete seats in the States, and we have as well the Nissan Frontier. We'll have later in the year some frames and complete seats for Daimler and BMW. With that, we can confirm the expected 700 basis points outperformance for the full year minimum. Margin-wise, 6.6% with a fall-through of something like 25%.
We expect that Seating will post a 7% of [audio distortion]. Interiors, on one side, were more impacted by Ford. Ford was the first customer of Interiors. Whatever Ford, we were able to make an outperformance of 180 basis points, mainly led by BEVs, and this BEVs from a very well-known American BEV customer. Margin 4.9%, so recovering from, I will say, a loss last year.
We have, I will say, a fall-through of more than 40% for the Interiors activity. Which is good as well, the margin is improving with respect to the second half of 2020. We expect for the full year that margin for, I will say, Interiors will be something like 6%. Clean Mobility was as well affected by the Ford production cut in the States, so a very slight underperformance of 70 basis points. Whatever that, very good margin, 45% fall-through. We are close now to a double-digit margin, and we clearly think that we will post a double-digit margin this year. Very good performance of Clean Mobility.
Clarion Electronics was the most impacted activity due to the semiconductors. Direct impact from some overcost, close to EUR 10 million. Indirect impact from the fact that we were protecting our OEM, so we have sacrificed some other channels , like the aftermarket , with more than EUR 20 million loss of activity, and this part is very profitable. This is why you see that the operating margin was slightly negative. In fact, it is slightly negative only because we are, I will say, estimating the cost to, I will say, put our IT system in place. For the full year, of course, Clarion will still suffer from the semiconductors' progressive recovery.
Altogether, we think that we will be at something like 2% or 2%-3% operating margin for the full year. Going to regions. Europe was by far the most affected region. When you see 3.8%, I think we should see, with a full recovery, 20% at least more. We were, with 29.4% up, slightly outperforming the market by 120 basis points, with a margin of 5.4% up 50 basis points with respect to the second half, 880 basis points with respect to last year. We have a fall-through of 35%. With this 5.4%, if you think that sales will increase only by 15%, with a 15% fall-through, we are already at our 7% expected. This 5.4% is, at the end, a very good result.
North American as well, is very much impacted by semiconductors and mainly by Ford. It is why we have this slight, I will say, underperformance of 120 basis points. Whatever that, we have a strong recovery with operating margin respect to last year, 3.4% plus EUR 135 million, or if you prefer, a fall-through of 47%. I have to mention that this 3.4% is reflecting some lack of compensation for downtimes, and unfortunately, there were a lot of downtimes with very short notice in the U.S. We expect for the full year a 6% margin in Europe, 5% margin in North America.
Asia, by far the best performing zone, is mainly in China. If you see the outperformance in China, 450 basis points. As Patrick was mentioning, mainly BEVs, local BEVs, Chinese BEVs, and as well one American. This outperformance is clearly, I will say, the sign of our dynamism and the fact that we are gaining significant market share. For that, we were able to recover a double-digit margin, more than close to 11%, up 70 basis points compared to H2 2020. We say that all the indicators in China are increasing.
We have merged South America and the Rest of the World because clearly, their weight inside the group is decreasing. We are speaking altogether at 4%. You see stronger performance, but for a part, it is a pass-through of, I would say, currencies and raw materials. What is important is, of course, that we have the EUR 13 million PIS-Cofins contribution.
Putting that apart, we are above 8% margin. What is more important, we are in Brazil at 6%. I think in this context, to make 6% in Brazil is a good performance. This slide is very important, not only because figures are improving. You see more than EUR 600 million on the gross margin, more than 600 basis points, but it is showing how we are managing and driving our improvement.
First, we are protecting our margin of variable cost, our gross margin. We are protecting that through, I will say, the pass-through of raw material, all, I will say, improvement of execution , and digitalization. We have a very good, I will say, achievement in the labor cost. Second, we are controlling our costs strictly . You see the R&D, and please think that the first half of 2020 figures were very low. Of course, we leverage this, I would say, achievement, the low cost base that we have in India, Poland, and Mexico, but mainly India.
Please notice that capitalized R&D has poorly evolved , whatever the low base. More important is the fixed cost management, the sales administrative expenses. To have a flattish figure, I think , is a very good performance. This is, of course, reflecting all the efforts of restructuring we have done. Altogether , you understand why we have improved our operating income by EUR 610 million and by 820 basis points of sales. Net income, I will not comment on all the lines. What is important to notice is first, restructuring, EUR 46 million, a more limited figure, mainly the two closures of Ford plants.
Anyway, we have to continue to do our homework, so we keep for the moment, the guidance of EUR 120 million. Second point, it is the net income from discontinued operations, EUR 31 million. On one side , the operating margin is negative. On the other side, it is the expected loss on the sale of the asset. I will say for the other points, income tax, 27%, I think we will clearly renew this percentage in the second half.
Net cash flow. It was, as I said, in April, we were in advance in our roadmap. We have a very good working capital management. Clearly, this figure shows the performance of Faurecia on this side. Of course, it is coming from the recovery in the EBITDA at 14.2%. I remind you that 14% is the level we are expecting now inside our medium-term plan. We have contained CapEx, and I keep the fact that CapEx will be for the full year below EUR 550 million, probably around EUR 500 million.
We have also contained as well the capitalized R&D. With respect to the figure I show you, these are the activations that will be amortized. There is a part that will be sold to customers. We have, of course, I will say, an exceptional cash out of restructuring, a little less than we were expecting. We are today on a very good, I would say, roadmap. On working capital, sorry, it's very easy, sorry to say that, the second quarter sales were below the last quarter of 2020 sales. It's normal to have an inflow.
With this roadmap, I will say we can improve our guidance without any problem. Of course, our guidance is to be much over EUR 500 million for the full year. Deleveraging is a priority. We are on the good way now with a ratio of 1.5x. You see in this map that we have, of course, dividends. We have the share purchase for the ESOP. On the 28th of July, our employees will subscribe, so an inflow of EUR 87 million will be booked for the second half.
The net financial investments are mainly our acquisition of hydrogen in China, the famous company, CLD. Altogether today, I can clearly give you the guidance that we will be around EUR 3 billion of net debt at the end of the year within a ratio of 1.3x, maximum 1.4x. We were very active in financing.
We have made, I will say, what is called the tap issuance. More importantly, we have issued a green bond. I think we were the first in the sector to issue a green bond, and with a lot of success, and totally subscribed. We have also renewed our syndicated credit facility at five years, to 2026, with better conditions. We have extended it to EUR 1.5 billion.
Our cost of net debts is below 3%. We have no major repayment before 2025. As you know, we have maturity, we have flexibility. We have too much liquidity. I shouldn't say that, but we have too much liquidity, EUR 3 billion, but we have some call if we want to reduce that. I will say we have a very sound, very robust, I will say, financial structure. Now, I will hand back to Patrick for the conclusion of this presentation.
Thank you, Michel. The guidance for 2021, and maybe I'll start with the sales. We haven't changed our volume assumption for the full year, which means that we have increased the volumes for the second half to 39 million vehicles. This allows us to keep our sales target as previously announced, with a strong outperformance, which we confirm will be above 600 basis points.
One comment about the shortage of electronic components. We believe that we touch bottom in the second quarter, and that we will see a gradual improvement in the months to come. Finally, exiting this crisis around the end of the first half of next year. But again, with a gradual improvement in the six months to come, and the following ones. Our operating margin, we confirm it at circa 7% of sales.
We have improved our net cash flow, which is now above EUR 500 million, and a net debt -to -EBITDA below 1.5 x at year-end. In fact, Michel spoke about EUR 3 billion of net debt. I hope that we will do whatever we can to be below EUR 3 billion. The takeaways. In H1, we delivered a strong financial performance with an outperformance of sales of 170 basis points. Strong operating margin, thanks to efficient operating leverage. You saw it, 36%.
Deleveraging, thanks to a strong cash generation. I told you before, this is a clear priority to us, the cash generation and the deleveraging of our debt. A solid order intake for future profitable growth, which is allowing us, and this is my conclusion, to confirm our 2022 and our 2025 targets and ambitions. The deployment of New Perspectives allowed us to increase our free float significantly to 83%. It also allowed us to improve the share owned by our employees at 2.9%, so close to 3%. We are focused on zero-emission hydrogen solutions, and we are doing it quite successfully.
Also , through the acquisition of CLD in China, we will continue to do M&A in this field. We are delivering on Faurecia's ESG strategy through our ambitious CO2 neutrality program, which is perfectly on track. Recent successful issuance of green bonds. The guidance, we just spoke about it. We are confident to be able to do what we say and to deliver our guidance. Even if the volumes might be smaller than the ones I announced, we have a backup plan in order to deal with whatever event we will have to face. Thank you, and now I'm opening up to the questions. Any questions on the phone?
Yes, we have a question from the phone. Victoria Greer from Morgan Stanley. Please go ahead.
Good morning. A couple from me, please. The first in Clarion. Could you give us a bit more color on the chip shortages? Should we think about this mostly as a top-line impact or also as a cost impact? What are your assumptions for the second half that should see that improve? The second question is around consolidation in the industry. We've obviously seen some moves already, and there is some press reporting suggesting that Faurecia might be involved in one of the situations. I expect that you probably don't want to comment on any specifics, but could you talk structurally about how you see your M&A priorities for the next few years? Do you see yourself as a consolidator? Are there any particular technologies you'd look for exposure to? How would you think about the potential leverage in a consolidation scenario? Thank you.
About Clarion and how Clarion has managed the crisis. The first thing is that we benefited from our intimacy with the vendors in Japan, which eased the management of the crisis. We have not stopped our customers. We had a few incompletes that had built up very quickly in a week's time. We managed the situation quite well. This said, we have cost increases. The components have shown on price inflation, which is between 10%-20%, depending on the type of components. What we also suffered from were shutdowns from our customers, not related to us, but related to other electronic suppliers. Finally, this is what Michel said, in order to protect our customers, we transferred volumes from our dealer options and aftermarket businesses to the OEM business, which, of course, had an impact on the margin.
Here again, what I see from what Clarion is reporting, I do believe that we touched bottom in the second quarter, and especially May and June were very critical months. I see that things are improving. The demand is more rational, and new capacities will start at the end of Q3 and in Q4. Consolidation, you are right that we do not comment on rumors. You ask for M&A priorities. We would like to add to our portfolio activities that have a significant profitable growth. We want to have new growth drivers.
It's clear that electronics is a significant part of this, especially whatever is related to electric vehicles, whatever is related to ADAS and autonomous driving, but also reinforcing what we are doing in the cockpit electronics. Consolidation, maybe this is one thing. If we had opportunities in our markets to consolidate and to reinforce our leading positions, we would consider it. It is clear again that we want to have leading positions in all our markets.
Could you talk about how you might think about leveraging a scenario like that? Would there be an upper limit that you would think about?
I don't want to comment on this type of process. All of that is also dependent on opportunities in the market. What we will make sure of is that we will be able, in whatever case, to deleverage very quickly back to 1 x net debt -to -EBITDA.
Great. Thank you very much.
Gabriel Adler from Citi, please go ahead.
Thank you. Thanks for my questions. Good morning. It is Gabriel Adler from Citi. My first question is on working capital. The working capital inflow that supported your cash generation in the first half looks to be mainly driven by higher trade payables. I think your payable days are now around 170 days, compared to about 140 days last year. Could you just comment, please, on how sustainable this level is for your trade payables, and how much of the increase was due to additional reverse factoring of payables? The second question is on R&D. Your net R&D remained flat year-over-year and actually declined as a percentage of sales. Could you just remind us of how you expect R&D to trend going forward, and how long you think this sort of level of R&D is sustainable for? Thank you.
Okay. Thank you. Good morning. As I said, the working capital is normal to have an inflow when the sales are down. Normally, we have an inflow of companies. We have no big change on the suppliers because we have some increase from, I will say, monolith, et cetera, which have a little inflated, which are not in the sales, as you know, according to IFRS 15, but which have a little inflated our suppliers, but no big change on that. What I can tell you is that on the inventories, we were able, in the last quarter, last year, to decrease inventory, and we have no major increase in inventories as in the second quarter. Whatever the facts that we face, some disruption or some stoppage with very short notice, mainly in the U.S.
Going to R&D, we have, I will say, the pressure of electronics on one side, and the hydrogen on the other side. We have, as you say, this plan that progressively, and this is important for Clarion, we continue to increase our base in India. I maintain that normally , year after year, we'll have a pressure between 10 basis points to 20 basis points increase of R&D weight inside the P&L.
Also, to be clear on R&D, we continuously work on reducing our average hourly rates, and this is through offshoring. We are continuously working on reducing the number of hours per application project. This involves digital productivity, including data-driven productivity. The target is very clearly to converge to a stable amount of gross costs, which will allow us to reduce our application costs and to transfer the savings to innovation.
Great. Thank you very much.
Michael Jacks, Bank of America, please go ahead.
Hi, good morning. Thanks for taking my questions. I just have two. The first one is just on CapEx. If you can , please just give some color on the key drivers for the reduction that we've seen and whether or not this will need to be made up in 2022. If you could also please just clarify the guidance. If I understood correctly, you mentioned it'd be close to EUR 500 million for the financial year, whereas in the release it says below EUR 600 million. That's the first question.
The second question is just on the factoring of receivables. With net debt now reducing and free cash flow guidance increasing, is there any need to perhaps make less use of factoring? That's the first thing. What is the net cost of factoring at the moment, and does this come through the operating income line item? Thank you.
Michel, I take the first one, you take the other two, to the next one. CapEx. The first thing we have to take into account is that the volumes are not growing. We are still below the 2019 volumes. The CapEx we are spending is mainly related to increasing our new standards and increasing our digital productivity in our plants. The fact that we now have more and more standards which are not specific to one program, is allowing us to work on capacity productions. This will continue to be the case, and I think that this will allow us to make further savings on the CapEx in the years to come.
When I said the CapEx for your guidance, I said EUR 500 million. That means the EUR 300 million cash out is in the second half. We are back to the EUR 600 guidance expected. If you see the release. For the net cost of the factoring, we are something like 2.2%-2.3%, so it is slightly below the cost of our debts.
Receivables.
Thank you.
Factoring of receivables, of course. Because we have no cost on the reverse factoring. As I said, often, it's not our contract. It is a contract from our suppliers. We only facilitate that.
Thank you. Just to clarify the factoring of receivables at 2.2%, does that come through operating income?
Of course. No, sorry. No, of course not. It is in the financial expenses. It's a financing.
Thank you. We will now take our next question from Tom Narayan from the Royal Bank of Canada. Please go ahead.
Yes, Tom Narayan, RBC. Thanks for taking the question. Could you help us understand your raw material contracts and exposures? What you expect for H2, most interested in steel, aluminum, those sorts of items. Next, would you say you're over-indexed to Ford in North America, versus other OEMs? I know that gaining market share in North America was a key part of your capital market outlook you gave us. Finally, if I could just sneak this in, could you help us understand the strength in margins in China in H1? What specific products drove that? Thanks.
If we speak about raw materials, the total increase we face in the first half is about EUR 80 million. The net impact of raw materials in H1 is about EUR 25 million. We expect the second half to be at about the same level. This is clearly mainly steel and plastics, but mainly steel. Ford in North America, Ford suffered more than its competitors in North America from the shortage of components. This had an impact on us, of course. This doesn't mean that we do not count on the rebound and that we have to put in question the plans we had in terms of growth in North America.
For China, as your operating margin, all our business groups are improving first. Why? Firstly, volumes on one side. Secondly, if you remember, we were implementing a big restructuring cost, merging plants, et cetera, and this is clearly paying. I could say as well, but it is not only true for China, but for the group. The new business has a bigger number of startup productions. These new businesses are starting for the group at an above 8% margin. For China, it is a double-digit margin. The contribution of these new programs is quite huge for the group.
Not to forget that the American electric vehicle producer in China is starting to have a significant impact. We are one of its big suppliers, and this is why it is now part of the top 10 of our customers. It is also the case of Li Auto, which is also an electric vehicle builder, OEM, with which we have a very significant share of supplies. I think that this is working very well. I spoke about BYD. I could also speak about Chery. I could speak about FAW. I think that these ones are the ones that are helping us to continue to develop our business in China.
Okay, thank you. If I could just follow up. With Ford, are you over-indexed to Ford in North America?
Do you mean that we are too exposed to Ford? This is what you mean in terms of sales?
Yeah. Relative to other OEMs in North America, are you over-indexed or under-indexed to Ford?
Ford is certainly one of our big OEMs in America, but we are reducing our exposure while growing with the two other big OEMs in the U.S.
Okay. Thank you.
Giulio Pescatore, Exane. Please go ahead.
Hi, thanks for taking my question. The first one on the margin, the guidance for 2021. There seems to be quite a few things that should improve sequentially in H2. Of course, Ford is one of them. You mentioned some compensations from downtime that did not really happen in H1, and some raw mat adjustments that didn't happen in H1. You mentioned the aftermarket being deprioritized in H1, which could help margin H2. If you put all this together, the guidance does feel a little bit conservative. Where am I wrong?
Michel, you are the financial guy. That's not a question for me.
Okay. I don't know what to answer. You're right, if I were to say we take every impact, of course, our guidance is cautious. We have to be cautious and to be at a minimum 7%, as you know, that means that we have to be very confident to be at 7.2% or 7.3%. If you don't mind, with respect to the recovery of semiconductors, it's a little early to speak of any increase in guidance.
I think that we have to wait until the end of the third quarter to have a clear understanding of the gradual recovery I spoke about. I think that until then, it makes sense to be prudent with the volumes.
Okay, thank you. Can I just ask a second one? On Clean Mobility, can you maybe share off the share of order intake for that business because it gets a lot of attention from the market? Maybe comment on the profitability of commercial vehicles and high horsepower , and the growth in those segments versus passenger cars.
The profitability of our Clean Mobility commercial vehicles is at about the level of the passenger vehicles. What is interesting about the passenger vehicles, too, is the fact that OEMs are reducing the number of engines they are considering, and they are using one to two platforms. These platforms will have an extended life cycle. This is very good for us because when you are on these platforms, and as we are the leader in this market, we are on most of them. It is changing the business model. The profitability of this business will be enhanced through this new reality.
On high horsepower, we are looking especially at how we might deploy our hydrogen activities and benefit from the intimacy we have built with the different customers. We are considering here as maybe a little bit more emergency , stationary power stations.
Okay, thank you. Can I just really squeeze one last one? I saw that you created this cross-divisional business line for the development of sustainable materials with a target of EUR 3 billion in sales by 2030. Can you maybe elaborate a bit on that?
Yes. We have activities already on bio-sourced materials for our Interiors business. We are doing foams on our FAS, Faurecia A utomotive S eating business. We have resources which are dealing with formulations everywhere. The idea here is that we have the competency to develop and formulate materials related to the transformations we are doing. We have both competencies. We understand what the process is and what the process is capable of, including viability reductions related to digital applications.
On the other hand, we believe that the value will be in the capacity to make available in larger volumes the feedstock. We think that , as we did with hydrogen, it is the right time to invest in these sustainable materials, in which we also include some more sophisticated approaches on smart materials, self-healing materials, for example, or antibacterial materials, and so on.
Okay. Thank you.
Sascha Gommel, Jefferies. Please go ahead.
Good morning. Thank you for taking my questions as well. The first one is, again, on the margin, on the gross margin. Michel, can you quickly explain how you managed to get the margin up by 100 basis points despite revenue being down EUR 700 million compared to the second half of the year? Was there anything in terms of product, regional mix, or anything that we shouldn't consider as sustainable in the first half?
It's a very good question. Thank you. Firstly, we have the full year of the restructuring cost. Second, we have a clear improvement of the labor, I will say, activity. I will say lower weight. Before that, we have what is called VAVE. That means Value Analysis/Value E ngineering, which we are accelerating and paying. As you say, apart is due to the start of, we say, new products, improving clearly the margin with respect to the previous products.
I think we have to consider two things. The cost on one side. We spent money on restructuring, which allowed us, as Michel spoke about, to keep the SG&A at the level of H1 2020, where you understand that in the frame of a crisis, we reduced our costs drastically. On the other hand, we have improved our profitability at acquisition time. This, again, is related to all the efforts we are making in terms of productivity, in terms of squeeze management, and especially using digital and data-related productivity.
Okay. Very clear. I have a follow-up question on M&A. You mentioned your priority in terms of growth in highly profitable growth areas, so EV and ADAS. Does that specifically exclude any M&A activity in Seating and Interiors, or would that not be the case?
No, I said that we would also consider consolidating the market in the niches in which we are already strong, because it is generating synergies. It's a low-risk activity, and it would reinforce our leadership position in the different markets. We would consider both, as long as the opportunity is of good quality.
Perfect. My very last question, quickly , on the other receivables in the balance sheet that went up sequentially, both other operating and other receivables. Any reason for that, given that sales came down?
The receivables, don't forget, that you have what is called the other sales. On one side, you have SAS. SAS has EUR 800 million of sales, and administratively, EUR 4 billion. As you know, we have one month of scope. We have seen an increase in monolith sales, which was a big increase. This , as well , is affecting both receivables and payables. No impact on the inventories.
Okay. Thank you very much.
Martino De Ambroggi, Equita. Please go ahead.
Thank you. Good morning, everybody.
Good morning.
The first question is on the order intake. You collected EUR 12 billion in the first half. Just to understand, where do you plan to close the gap with the EUR 26 billion guidance for the full year in terms of geographies, in terms of divisions? The second and the third questions are more strategic. One is on the sensitivity to electric cars. In your business plan assumption, you assume a certain penetration of electric cars. Could you provide sensitivity to a different assumption in terms of the penetration of electric cars?
Because it seems that in the past few months, all the car makers have been pushing on this side. Just to have an idea of what the sensitivity could be on your accounts. The last question is on the Foxconn-Stellantis agreement. It was announced some months ago. I understand it's not your job, but what are the implications for your business that you can assume today?
Order intake, we are EUR 12 billion versus EUR 26 billion. What I can tell you is that we are perfectly on the trajectory we forecasted, we budgeted. This , despite, as I said, a significant amount of sourcing decisions which were delayed to the second half. We feel confident that we will be able to achieve the EUR 26 billion. Now, where? The only thing I can tell you is that this is what we announced, EUR 2.5 billion with Clarion Electronics. We are at EUR 1.3 billion in the first half, EUR 500 million on the hydrogen side, and we are EUR 280 million so far. We will continue to over-perform and continue to fuel our future growth in China, clearly, with most probably an exit of 2021 above what we have budgeted. All the business group will benefit from this order intake.
Electric vehicles. We planned for 2030 on 30% of full electric vehicles being built. What you have to understand that this means for Europe, about 50% of full electric vehicles in 2030. I haven't seen any forecast so far that is more aggressive than this one. I think that we have to take into account the infrastructure that has to be invested in order to make sure that consumers will follow. I would just like to share with you my understanding of what Ursula von der Leyen said. She said that we should stop producing ICEs in 2035 if in the different countries of Europe, adequate infrastructure would be in place. I think that this is very wise.
I think that, yes, we go in this direction without any doubt, we are confident that this will happen, but it will need, most probably, some time to synchronize the capacity OEMs have to build and sell electric vehicles and the infrastructure in the different countries. For the moment, we don't see any reason to increase the 30% we have on a worldwide basis. Foxconn. Maybe I should start saying that Foxconn is telling the market that cockpit electronics is fundamental, which is perfectly aligned with our strategic assessment. Foxconn wants to be more into hardware and wants to develop software, but in other domains, in the zonal approach , and in body controllers, which are not directly in competition with us.
Okay. Thank you.
Jose Asumendi, JPMorgan. Please go ahead.
Good morning, Patrick, Michel. Jose, JPMorgan. Couple of questions, please. The first one, can you speak a little bit about these EUR 177 million resilient factors in the first half, a little bit more the details behind that?
Sorry. Could you please repeat the first question, because it was difficult for us here to understand it.
Yeah. If you could give a bit more detail on the resilience actions.
Yes.
I think it's EUR 177 million-
Yeah.
Figure you report in the first half, on how we should think about this figure for the second half, as this figure was quite strong in the first half. Patrick, can you speak a little bit about Clarion? I would love to hear any details on either the product development or low-speed ADAS. Any new progress there on product development and on Clarion order intake, if you could comment on any notable orders, maybe new clients , or so that you are managing to bring on board.
The third one, Patrick, is also on DesignLED, in this company. Correct me if I'm wrong, it looks like the company could have some patents for external LED applications. Is this the right case? Is this the case? Do you think you could develop this business on exterior LED for the coming years? Thank you.
I will take the first question. Thank you, and good morning, Jose. On resilience action, cost reduction. What we have, of course, as you know, last year we accelerated plan, so we have a lower cost base in the second half. We have EUR 30 million downtime in this first half that normally should not happen in the second half. Altogether, you can take half of this figure. Something like EUR 80 million in cost-cutting for the second half.
About Clarion. On low-speed ADAS, and especially on the auto park and valet parking and so on, when it comes to fusion between ultrasonic and cameras, we are the leading player, but very much deployed in Asia with the Japanese OEMs, and now starting also with the Chinese OEMs. We continue to deploy ourselves in America. We have significant growth in America. We were lagging behind last year in Europe, and we will be able at the end of the year to show you that we are also taking off in Europe with our big OEMs.
I think that. On the order intake, on the portfolio, we are enhancing it continuously. What is, for me, very important with Clarion is that we have not lost one single project because of technology. We might, in some cases, have refused to go down with the prices for good reasons, maybe for bad reasons, but we have never lost one single business because we were not at the expected level in technology, which is, for me, very encouraging.
DesignLED. We bought IRYStec, and now we buy DesignLED. What is the purpose of all of that? We want to be able to promote, to propose to our OEMs, display integrated solutions with the highest possible performance in terms of image quality, but also in terms of low energy consumption. These companies are contributing to that. These companies are techno companies with patents, as you said, with a very high level of technology.
This is what is allowing us, because we were a new entering company in the display field, we immediately went on the larger displays because we did also the right acquisitions on the coatings and all the surface treatments. We recently, for example, entered into a partnership with Corning for glass and cold forming of these glasses. I think that we have here the network, the ecosystem, which is probably one of the best today to offer this high level of technologies. We sold them to people who are very demanding, like Daimler, for example.
This, I think, is an approach we will continue to have. We will continue to scan the market to find possibilities. Now, is DesignLED capable to use its technology outside of the automotive industry? Yes, we are a pure automotive player. If we can value the patents, we will consider it. We are considering it, by the way, because Clarion has a very significant portfolio of patents, which is extremely interesting and valuable.
Thank you. I'll now take our next question from Stephanie Vincent from JPMorgan . Please go ahead.
Hi, thank you so much for taking my question. Stephanie Vincent from JPMorgan . I just had a couple. One is on credit rating, just when I go through some of the commentary of some of the other OEMs that are in the high BB or low BBB area. Most are targeting the same sort of leverage metrics that you are around 1x to, let's call it 1.5 x. You've got similar cash flow, yet Faurecia is a little bit lower rated in the mid BB area. Can you provide some commentary in terms of your discussions with the rating agencies? What exactly is causing that? Is it the trajectory for working capital?
I believe management has discussed that before, or is it some aspect of how your contracts are actually struck versus some of the other high -BB players? There does seem to be a disconnect there. Just on M&A, thank you so much for talking about the 1x leverage target area. Could you also discuss your views in terms of capital allocation? Do you have a clearly outlined focus for this extra free cash flow generation? You've talked about going below EUR 3 billion in net debt, and how you would allocate that towards M&A or dividends as well. I think that would be helpful for credit investors.
Okay. Thank you, Stephanie. Sorry, you have everything inside. Which is the presentation I made for Investor Day of end of February. We have no change. What we have said first is that we are in the rally to continue to improve the rating regularly. It was what we did since 2013, gaining one notch every two years. We target with all our strategic plan goals, with all our figures and improvement of figures, to be investment grade, probably 2024-2025. It has not changed.
One key parameter to do that will be to continue to enhance the industrial profile and to convince, we did that with Standard & Poor's, we have still to convince Moody's, that we have a strong industrial profile. What you see, the track record of figures is showing it. On the target of leverage, as Patrick said, the normal target, we have to have minimum of debts to be efficient on the capital, I will say, structure. To have a minimum 1x, anyway, 1x is a normal, I will say, ratio that we would like to have through the cycle. Going to the capital allocation, I remind you that 40% is for dividends, and to neutralize, we said the share buy-back, 60% is for bolt-ons and deleveraging.
Okay. Just to follow up as well, I guess, on your net debt target of less than EUR 3 billion by year-end, can you make any commentary in terms of your outlook, I guess, for those Schuldschein, which are the ones that are coming to the larger sort of bulk of unsecured debt that's coming to you? Is that something that you're expecting to roll over, or will you pay that down with excess cash flow?
One thing, the EUR 3 billion, if you take all our figures and the expected cash flow, plus the fact that we will raise shares, is a little mechanical. I am sorry to say that and to be blunt. Second, on the debt management, I will not commit today on what I will do on the call, not call, whatever. Clearly, I have said, we have considered that EUR 3 billion of liquidity is a little too high.
Okay.
It's a little bit too high. Here again, I think that we are prudent and that we will wait until the end of the third quarter to better understand how the market will rebound. Because the market will rebound.
Okay. Thank you very much.
You're welcome.
We'll take our last question now from Thomas Besson from Kepler. Please go ahead.
Thank you very much. It's Thomas Besson with Kepler Cheuvreux. Sorry, I missed part of the presentation for different reasons. I hope I don't ask questions you already addressed. The first is about hydrogen. I've seen your orders in 2021. Can you remind us your cumulative orders and tell us how much you need to have in cumulative orders to be able to reach your EUR 500 million revenue target for 2025? That's the first question.
The second question, I would like to come back to the comments you made about the share of EVs in Europe, in 2030. I understand the rational side of your comments, Patrick. Unfortunately, the market is not necessarily always rational and is in the mood to think that the EV share could be more like 75%-85% in 2030, even if it may not happen.
Could you tell us what kind of flexibility you have if ever, suddenly, governments or private companies manage to install a sufficient number of charging points , and suddenly everybody wants to drive that kind of vehicle? Last question, we've talked a lot about what you may do in terms of M&A activity, and I think it's typically a topic that becomes hotter and hotter by the day. Could you tell us whether you would eventually consider raising equity if you have to do a deal that you don't want to miss, the perfect partner? Thank you.
In H2, we are at EUR 280 million. To achieve our targets, we need to complement our order intake in the second half by EUR 220 million, and this is the number we need to achieve our midterm target. We are confident that we will be able to do this. BEVs and what is happening in Europe. First of all, 2035 is real or might be confirmed for Europe, not for the other regions. Europe is representing 25% of our sales of Clean Mobility. We have, I think, a significant business that will remain even after this period of time.
We are thinking about reorganizing our Clean Mobility business and especially making it a Chinese activity, a Chinese legal entity, which will allow significant flexibility on how we will manage it in the years to come, taking into account what might happen on the marketplace. I'm saying it again, we should not underestimate the infrastructure. I think it was quite easy to convince consumers to switch from diesel to gasoline, from gasoline to hybrid. It's a little bit more difficult to convince them to go to full electric related to some constraints you have on the use cases, which will have to be lifted in the years to come.
I'm not convinced that the cost convergence will happen as it was announced or even it is announced in the moment. Are we not resistant to it, okay? We, and I said it, we believe in zero emissions. This will come, and we need to be agile and capable of reacting to the events that will pop up and which will happen on the marketplace. I think that we have a plan which will allow us to do so. M&A. Yes, if we had an opportunity which would be of high interest, we would considering raising equity, yes. We will, of course, manage our debt, I'm saying it again, with the perspective to be able to deleverage, I would say three years to be back to a net debt -to- EBITDA at around 1 x.
Thank you very much.
If we do not have more questions— we might have a question here?
Yes, we have questions on the internet.
Okay.
I will read it. I will read them, sorry. For Patrick, you have already answered. The first one is from Stéphane Houri from BHF . Do you see scope for the Group to participate in large-scale sector consolidation? Has your strategy for Clean Mobility in Clarion changed given the faster EV adoption and more and more in-sourcing announcements in electronics?
I think that it is very clear that when you are active in the electronic field, electronic and software, you have to take into consideration the changes in the future electronic architecture. What I believe is that this architecture is known. All the OEMs will not go where the same speed, but finally, everybody will converge to this type of architecture, which means more computing power embarked, better connectivity with the cloud, and a zonal approach for the electronics. More software and less decentralized electronics.
We are considering each of our segments and are making sure that we measure the risks we have. What I can tell you is that, with Clarion Electronics today, we believe that we have a very little risk, with the exception of IVI, but where we are not very big, which might become a commodity, and this is related to the Foxconn question I had a little bit before.
I also would like to tell you that during our CMD three years ago, we spoke about battery packs. At the time, we considered it and abandoned it the year after because of the little added value we could bring. Today, battery packs are different because you put the battery cells directly in the final battery pack, which will be assembled in the car. We are now back on these technologies with a cooling system, which is completely new, very innovative, including temperature sensors, and I hope to be able to present these technologies to you soon . We are also continuing to check what we can do on the electric vehicle side.
Patrick, there is a second one from Gilles Guillaume of Reuters. How do you see the trajectory for the BEVs and hydrogen vehicles weight, sorry, in future Faurecia setup?
We spoke about hydrogen and our target. This is unchanged. I think that if electrification would further accelerate, it would be good for Battery Electric Vehicles. You will hear people telling you that hydrogen is the best solution for heavy mobility, which is true. What we are seeing on the market is that all light commercial vehicle makers are considering dual power, batteries plus hydrogen. I think that this is probably the way to significantly accelerate the introduction of hydrogen. This, for example, is a perfect solution for pickup trucks in America.
I think that we will have to be on both, and we will have to continue to work on the hydrogen side, which is doing well. We have the technology. We will be on the market with serial production at the end of this year. On the electric vehicle side, we are working on the electronics, and we are working on the battery pack. I will be back to present this to you in the few months to come. Thank you very much. I would like to thank you for your attention. Thank you.