Earnings Call: Q4 2020

Feb 22, 2021

Good morning. Good morning and welcome to our 2020 results presentation. I also would like to thank you for your interest. The agenda of this morning, I will start with the 2020 highlights, followed by the financial review made by Michel Favre and we will close the session with takeaways and Q and A session. 2020 highlights. So the first thing is, of course, related to the COVID-nineteen and how, with Safer and Stronger Together, our protocol, we resisted to It worked well and it is recognized by our population, our fluorescence, through an employee survey we've made, which showed the best ever result in terms of being federated to what we are doing. So thank you very much for all our people for this discipline and this rigor in the way we implemented it. It's also related to agility and resilience during this period of time, which allowed us to even accelerate our cost reductions and we will be back on this. Strong recovery in the second half. All the committed targets are overachieved. Sales of €8,500,000,000 we had a target of at least 8,000,000,000 To be underlined, Q4 at plus 2%, excluding about €100,000,000 of tooling and prototype sales, which we will find back in 2021. They were delayed. If I would also consider in this fourth quarter about €100,000,000 of late SOPs or delayed SOPs, we would be significantly above the IHS Q4 forecast. An operating margin at 6.1% for a target of at least 5.5%. We had €45,000,000 of one offs, which will be explained. Without them, we would have been at 6.7%, an EBITDA margin at 13.8%, and net cash flow, and this is really the good news, at €1,100,000,000 for a target of at least €700,000,000 which allowed us to offset the cash spent in the first half. It shows also that we are able to cope with a reduction of volumes of about 20%. And this allowed us a significant deleveraging. Rigorous management of liquidity with recovered financial flexibility at year end. In fact, at year end, we were €800,000,000 better than the 12/31/2019. A new record intake of €26,000,000,000 and I will be back on this figure. An accelerated momentum for hydrogen, which confirms our strategy. We strongly believe in the acceleration of the hydrogen activities. And deployment of carbon neutrality program with ambitious targets. We have two ESG targets priorities: it's gender diversity and CO2 neutrality. About customer satisfaction, the reality is that only the order intake is a very concrete reward related to customer satisfaction. It is related to innovation, technology, to performance. It is, of course, related to quality. It is related to the easy to work with and it is related to competitiveness. We achieved €26,000,000,000 which is our record figure and which allows on a three year cumulated an order intake of €72,000,000,000 We would see during the CMD this afternoon how it mechanically allows us to forecast close to €25,000,000,000 in 2025. We overachieved also the order intake of Clarion Electronics related or compared to what we indicated during our CMD in 2019 at €2,500,000,000 versus €2,100,000,000 And China represented 20% of our total order intake. So we are here, I think, on the right momentum. It was a great year, and this is the level we want to maintain for the years to come. About 2021, so our current assumption is maybe conservative at 76,600,000 vehicles. It represents versus the 70.7 which were achieved in 2020, plus 8%. Versus IHS latest forecast, which is showing plus 14%, we are below. We are below not so much in H1. We are more conservative versus IHS in the second half. In the first half, related to the COVID and the COVID variants, but also related to some supply chain disruptions, to start with electronic components, but not only, we see some risks. IHS since December of last year has reduced for the first half, and I should say the first quarter, its forecast by about 900,000 vehicles. So we are pretty much aligned with the forecast in the first half, but we have for sure opportunities in the second half, which our small table here is clearly showing. This allows us on 2021 guidance with strong operating leverage and solid cash flow generation. Again, it is calculated on a forecast of 76,600,000 vehicles. With this one, we forecast an excess of €16,500,000,000 of sales with a strong outperformance above 600 basis points. And I think that this is what will characterize the day and including the CMD of this afternoon. We are back on outperformance on sales outperformance. An operating margin close to 7% of sales, which is close to the pre COVID level and net cash flow of 500,000,000 which is including €180,000,000 which are related to cash outflow from the restructuring we decided and we executed in 2020. With this, we are here better than the net cash flow we generated in 2019. You also have for 2019 to exclude the sales of our headquarter in Japan, Saitama. This allows us a net debt to EBITDA below 1.5 times at year end. This was, in a nutshell, our highlights. And now, Michel, the results. Thank you, Patrick. Good morning, ladies and gentlemen. So I will start with this curve of recovery of sales. As you can see and it is usual for the Automotive business, recovery was very quick. There are Still low volumes mainly July for North America and Europe, a quick recovery, close to volumes I speak for the worldwide market production, I will say the one of 2019, knowing that 2019 is a low base in the cycle, something like minus 8% versus 2017. As Patrick highlighted, we were impacted by low level of tooling and prototype due to the postponement of startup of production. This will of course favor our growth in 2021 and of course we will have a lot of startup of production as you know. Altogether, we are at minus 0.3% in Q4 versus last year, so I would say very close to 2019. You have on the top the evolution of our sales. So currency effect was highly negative due to the dollar, first a little renminbi. On the other side, we have the benefit of the integration of SAS, the scope, as this we will have still one month in 2021 because we are consolidating since February 1, so you see the figure three twenty four for SAS. Altogether, minus 3.5% organic growth respect to market at minus 0.3%. You will see that we are accelerating. This last quarter is always showing an acceleration and clearly you will see months per month in 2021 a strong acceleration. We are very confident that we will outperform the market by more than 600 basis points, be helped as well by the geographic mix. Further result: you have a lot of impacts, scope, etc. In the scope and other, if you remember, there was a €16,000,000 in 2019 PISCOFINS '1 off. Cautiously, we didn't book anything last year, we are waiting for a final ruling, but clearly we have asked as well an upside on this. What is important to notice is first, some one off due to the COVID. Have depreciated our inventory of masks. We were facing an administrative closure of an important plant in North Africa. The cost of it was close to €10,000,000 This of course is a one off due to this famous COVID. We have as well provided preciously the end of some production of some Chinese carmakers who were definitely damaged and killed by the crisis. Crisis. Altogether, and it is important to notice that the run rate is 6.7%. If you take this run rate, if you take the growth due to the outperformance, if you take the cost cutting, I will come back on that. And last but not least, the improvement of margin, because we will start new projects at a better margin than before and mainly at a better margin than our guidance, because the goal is 8%. We can enter in 2021 with, I will say, very positive figures. Cost actions, I am highlighting here only the recurring, I will say, cost action, the one which will be valid anyway in 2022. So on the half year, we have accounted €66,000,000 You will see the figure now for the full year, which is on the bottom, euros 145,000,000. In my budget, and you know the commitment, when I compare 2021 and 2019, we are over €150,000,000 net cost savings between 'nineteen and 'twenty one. And this figure will be above €200,000,000 net cost savings. So we are in a much better shape. I will not come back on the figure for the full year, but clearly we have demonstrated our resilience, we have demonstrated as well how we are building, I will say, a strong profitability in twenty twenty one-twenty twenty two. Zooming on the business, Sitting is back to the profitability of 2019. Seating was impacted by this problem of COVID in North Africa, so we are more speaking of close to 7% margin in the second half. And clearly seating will post firstly a very big growth. You know that we have some important start up of production, some well known Jeep Grand Wagony, but as well we have the Nissan Frontier. We have the first start late twenty twenty one, it will be more for 2022, of two big platforms for France. Seating will be probably the best, I will say, efficient business in 2021. Interiors impacted by the drop of sales, by some customer mix, clearly and the tooling sales, they will resume growth and outperformance this year, probably something like 400 basis 400 basis points. UC's operating margin, 4.3%. As you have seen, we have announced that we are stopping the activity of decoration, that we are divesting the acoustic. That means that in fact pro form a we are above 5% and interiors will be very probably at 6% or above 6% in 2021. T Mobility impacted by the trend on the commercial vehicles, both in Europe and North America, presuming a figure of profitability close to 10%, some impacts in the COVID as well. So clearly next year, 2021, we are clearly targeting the same magnitude of outperformance than interiors, 300, four hundred basis points and somewhere, I will say, a margin double digit. Clario Electronics, probably a very efficient turnaround, very big cost cutting program achieved. As you can see, we are in a low level of sales. We are giving a target of more than €900,000,000 of sales for this year, so big, big growth. And on top of that, of course, which was flattish, zero this year, will go probably to something like 3% in 2021. Europe was impacted by the low volumes, including third quarter, was impacted by the tooling sales, is why margin is steadily below 5%. As you know as well, decoration and ST are as well European activities. So Europe will be back to growth with an outperformance and as well Europe will be back probably to something like 6% operating margin in 2021. North America, same thing in 2020, low commercial vehicles as well some difficulties for the Nissan volumes. We have a lot of startup of production in North America. We will benefit of this growth, we will benefit of the cost cutting program. So clearly same thing as Europe, a margin of 6% minimum must be achieved. Very good performance was Asia and mainly China. We strongly outperformed in China and will continue to strongly outperform this year. We are back to double digit profitability and as you have seen, we have provided some risk in China. So the margin must be as well inflated with this impact. So very strong performance and as you know, 2021 started on a very positive basis. So we are very positive and we think that Asia could be a further upside for the group in twenty twenty one-twenty twenty two. South America, more complex to comment, strong drop of sales. On one side, we were clearly reducing our exposure to Argentina, which was a loss making activity. We have made our homework to variabilize costs and to save this 3% operating margin, which must be repeated at least in 2021. For the group, gross margin at 12%, we target to be back at the level of 19% in 2021. What is important to notice is the big reduction of R and D, 24.1% and moreover, of course, of gross R and D. In the capitalization, you see still a high figure, but we have €225,000,000 which are tooling, which will be sold this year. Without that, it is $6.19, so a very low figure with respect to the past, with the fact that we have some small perimetoscope impact. And on the selling and financial expenses, we reduced by minus 10%, we made as well our homework on this side. For the rest of the P and L, what is clearly to be noticed is the restructuring. Big acceleration, We massify our plants. We were closing a lot of plants. At the end of the year, early this year, we have some important impact coming from one announcement from Ford that they will reintegrate an activity in Cologne and we have provided for that. And same thing, the Ford closed their operation in South America, will close very soon. And as well, we have provided that, is the balance sheet of 2020. So it is why the figure is quite high. We are giving guidance is that the figure will go back to something like €120,000,000 P and L impact and less than 100,000,000 from 2022 onwards. On corporate tax, a high figure. If you remember, we impaired some deferred tax assets in the first half. Cautiously, we were not recovering that in the second half. This is a clear upside for the future and to be blunt, we have more than €500,000,000 of cost of tax P and L impact and to recover in the next years. We are back in France to positive figures now since 2016. This will accelerate and will favor this recovery. Cash flow: As Patrick was saying, it was the best performance and we were above our expectation. We were back in H2 to a very positive figure, €1,000,000,000 What is very positive is that we were able to recover as a negative working capital of the first half. Of course, it's the CapEx. We made our homework, reduction by 40%. Capital R and D, same thing, more than 15% reduction. A part of this will come back in 2021, take as an assumption that CapEx will go back to something like $6.50 and Captis R and D to something like €700,000,000 We will have a one off impact in 2021, it is restructuring, more probably something like €180,000,000 cash out because a big part of the people living will be paid, are paying in fact, this quarter. Altogether, when you will compare 2019 and 2020, EBITDA at least the figure of 2019, CapEx reduction, KLS R and D, same thing, more restructuring, working capital we target to be flattish even positive. As you know, we have a big target which is to reduce inventories by one day, euros 90 million. If you observe the bottom, you have €99,000,000 in 2019. This is a Sattama divestment, highlighted by Patrick. Of course, it was a one off. Altogether, when you take our guidance of €500,000,000 it is a much better quality of the figure of 2019. For the figure below the cash flow, the main impact is the SIS acquisition, IFRS 16, but what is remarkable for us is that I gave a guidance of €3,500,000,000 of net debt. Thanks to the net cash flow of the second half, we were able to reduce our net debt and to be at €3,100,000,000 which is a very positive figure towards less than €3,000,000,000 in 2021, which is our target. As a leverage, this allows us to be below two. In fact, if I take the run rate, we are already very close to the €1,500,000,000 indicated in this slide. I gave you to remember as well one key objective, it was to overtake €1,000,000,000 of EBITDA. You see the figure and with the run rate we have, we will improve this in the next two semesters. Small flash on the debts: We have enhanced our net debt with the issue of the two bonds: one new bond and one TAP, euros 1,000,000,000 late July. So as you can see, we have a very solid maturity, something like five years low cost, something like 2.7% we have a very large flexibility through our syndicated line, more than €1,200,000,000 and last but not least, a very solid liquidity. So I think we have everything to make a very nice rally in the next two years. And last but not least, as you can see strong confidence in our capability to drive all our targets: one is to go back to dividend. We passed the dividend last year with respect to the net cash flow. We are back to dividend, €1 per share and our intention, our objective is of course to restart the strong rally, the strong momentum you can see on this slide. Now I give the floor back to Patrick for the conclusion. Thank you, Michel. The takeaways. In 2020, Forrester continued to deploy its strategy while achieving a very resilient performance and getting ready for 2021, which is an unspecific year for Faurecia. As far as the strategy is concerned, we made a record year in terms of order intake with €26,000,000,000 We accelerated further our hydrogen mobility solutions activities on both sides, on the storage side and also with Michel on the stack side. We committed on ESG, our two priorities. We have very clear targets and we are focused on these targets, CO2 neutrality and gender diversity. It's something we will detail more this afternoon during the CMD. A very resilient performance in 2020 with a recovery of our profitability in the second half, achieving an operating margin at 6.1%, six point seven % excluding the one offs and EBITDA margin at 13.8%. I said it before, on sales level in the fourth quarter, which is preparing the path forward in 2021. And strong cash generation in the second half, exceeding €1,000,000,000 and offsetting the cash consumption we had during the first half strong liquidity restored, I said it before, 800,000,000 more than the 12/31/2019. Why is it a special year for Faurecia? First of all, because we are back on sales outperformance, I think that this was important. We said it. We knew it. We saw it coming with through the order intake and our order book, but it's now becoming a reality. Independent shareholder structure with an excess of 85% of free float past spin off, which should support new value creation opportunities, on track for 2022 and also ready for the 2025 ambitions we will present during the CMD this afternoon. Thank you very much for your attention and we are now open to start our Q and A session. We will now take our first question from Thomas Besson from Kepler. Please go ahead. Thank you very much. It's Thomas Besson from Kepler Cheuvreux. Have three questions, please. Firstly, could you come back on some of the elements of divestment and acquisitions you've announced recently, please, both in terms of the decoration system and what you've acquired in hydrogen? Could you just give us maybe the revenues annually of these two activities and the impact on the profitability of the group they integrate? Second question, I'd like you to come back on the main growth drivers for Asia in 2021. Understood that it was going to be with North America, the main area of growth. And lastly, more of a housekeeping question. Could you give us an indication of what we should expect in terms of CapEx and tax rate for 2021, please? Thank you. Merci, Thomas. Divestments and acquisitions, we decided to divest our acoustics activity and we also decided to dry out our deco activity. Cumulated in 2020, they represented about €380,000,000 of sales and an excess of €35,000,000 of losses. ASTY, because we have no chance to achieve a leading position on this activity. We believe that this activity will develop much better and will be synergetic to Adla Pelser. So I think that this is a good move. It is not directly related to the core business of Faurecia. Nevertheless, we decided with Adla Peltzer to continue to partnership on this and to integrate them into our Cockpit of the Future developments. On Deco, it's part of Deco. We are here focusing on aluminum parts and some wood parts. It's an activity we entered very late and we have never been able really to catch up with the best in class in this domain. The dry out will be effective the fourth quarter of this year, so it means also some restructurings, which have been decided and which have been accrued in 2020. Yes, we will grow in Asia in 2021 and in North America. In Asia, we will grow significantly with FCE, which has won a lot of new businesses. Clean mobility will also be back with a significant growth. Even if in China for the CVI, we have a very specific for the commercial vehicles, have a specific situation, but regulations will support clean mobility. And we will have growth related to the new joint ventures we have decided in 2020 we have signed in 2020, which will pay off and which will support and boost our growth. Sorry, for the first part, divestment and acquisitions, I've forgotten acquisitions. We bought CLD. CLD is one of the top three Chinese hydrogen storage system suppliers. We are very proud of this. It's a company which is providing tanks to Toyota, which is providing tanks to Hyundai, which is a leading technology company, very active with the fast growing OEMs in China. So this is just a sign that we will continue our development. We will detail this development on the hydrogen side during this afternoon. On the hydrogen storage side, we will have plants in twenty twenty one active, delivering serial components in China, in Korea and in Europe. CapEx, good morning, Thomas, six fifty, six fifty and tax rate. Tax rate to 25% to 26%. Thank you very much to both of you. Thank you, Thomas. Thank you. We will now take our next question from Steven Reichmann from Societe Generale. Please go ahead. Yes, good morning and congratulations on the figures. A question just on your forecast for 2021, is this the furthest you ever digressed from IHS? I just want to get your feeling for the ability to predict the market in 2021 and because obviously we're having quite divergent views from some of the OEMs on Friday. Renault cast in quite a cautious note, whereas I think some of the Germans have been much more positive. So I'm just really looking at your kind of thought process there. Thank you for this question. Forecast, '20 so the first half and especially the first quarter is uncertain or was uncertain because time passing, have more visibility, mainly related to the electronic components shortages. I think that this is more a supply chain disruption issue than a capacity issue. It is related to some very different momentums on deodorings, especially starting in the second quarter of twenty nineteen. I think that the peak of the disturbance will be achieved in March. What we see today is we have sporadic slowdowns or shutdowns. It might be one shift. It might be a few hours, but we don't see something massive. We don't see it neither in Europe nor in America or in China. But when we listen to our OEMs, they don't know. They are not procuring directly these components. They are getting the information through their Tier 1s and their big Tier 1s. One supplier in Taiwan, to give you an idea, is representing a wafer and microcontroller supplier is representing about 70% of the worldwide automotive requests. And these 70% are representing, for HEM, less than 3% of its sales. So this gives you the situation in which we are. It's a supply chain which was not correctly managed, maybe not correctly known, and this has to change in the coming months. COVID-nineteen, we had also at the beginning of the year the concern about the variance, which is still there, but seems to be under control. When you look at globally, we see a slight contraction of the contamination rate. I'm not saying that we are out of the difficulties. But nevertheless, this, with the vaccinations and the vaccination campaigns, should support a recovery at the end of the first half. So in a nutshell, we have about 4,000,000 vehicles difference with IHS, less than 1,000,000 in the first half and about 3,000,000 in the second half. So if the things would get confirmed, if the today identified risks would get mitigated until the end of the first half, we clearly have an upside, an opportunity on volumes in the second half. That's very clear. Thank you. We will now take our next question from Horst Schneider from Bank of America. Please go ahead. Arst, we can't hear you. Sorry. I I I can you hear me now? Yes. Yes. Perfectly. Thank you, Arst. Okay. Thank you. Sorry. I was on mute. On the shortage issue, Patrick, in in when you made the introduction to your speech in this call, you said it's largely semiconductor. Just want to understand if there's also such shortage on other materials and and and that maybe also relating to the supply chain. And as a follow-up to that also, I I think you you don't suffer from higher purchasing costs. So because it's largely passed through for you, but maybe you can update us, on the impact. Then the other question that I had that was on the outperformance and maybe if that is related also to a positive mix effect because the OEs basically prioritize the more profitable models where you have got then also more content. So maybe you can also elaborate on that. And the last one is more housekeeping issue. But when is now exactly the spin off from Ceylandis happening? Thank you. Thank you for the questions. Shortages, the main shortage is very clearly the electronic components, but you also heard about containers, maritime containers, especially for the routes between The U. S. And China and Europe and China. We are not impacted by that. We have very low traffics between the regions. We are domestic very much domestic in all the regions in which we are operating. And by the way, these shortages are normal after a crisis. It happened exactly the same way in 02/2008 and 02/2009. So this will probably normalize during in the weeks to come. Raw materials. We see increases in raw materials in steel, in plastics and, of course, in electronic components. But as you said, we have a significant percentage covered by mechanical pass through equations. Our net risk in brackets, we will deal with it, of course, is around €20,000,000 for the first half. Our content per vehicle is growing. Yes, We are and this will be detailed this afternoon business group by business group. You will see our mix, our product mix and how our content is calculated versus average. We are quite strong on the premium vehicles. And we are strong on SUVs and electric battery electric vehicles. And all of that is supporting higher margin through higher content per vehicle and more sophistication. Stellantis, general assembly, will be organized March 8. After that, the distribution of the shares should happen. We do not have yet the precise date, but our own guess is that this will happen until the March 16. And it was, again, recently confirmed by Stellantis. Okay. That's very clear. Thanks very much. Thank you. Thank you. We will now take our next question from Tom Narayan from Royal Bank of Canada. We don't hear you. Hello? We don't hear you. You are probably on mute. Tom? Hi. Can you hear me? We can indeed. Sorry. Okay. Yeah. Tom Nerayan, RBC. Thanks for taking the question. Question on the the first question on the h two. We don't hear you. Lost We you. Are losing you. You repeat? Yes. Sorry, I'll start over again. A question on the H2 margins on Slide 10. How much of the lower R and D and SG and A comes back in 2021? And then if I may, and I know you'll cover this in the CMT, but I'd love to ask a little bit about the long term guidance, if that's okay. And I know you're calling for, you know, this 11% CAGR, which includes the 5% per year, which would imply a six percent market growth per year. I understand the outperformance, but the market growth implies something like a 6,000,000 vehicle production level in 2025. And I know some of this comes from China. Just curious what you're assuming there from The U. S. And Europe, given those are rather mature markets, I think IHS has it peaking in 2023. Thank you. I will start with the long term guidance. So you know what we take is, as a reference, IHS. And considering our starting point and our convergence back to the 2017 figures, we are delayed versus IHS. So we are a little bit more conservative and you will see this afternoon. We will be back to the 91,000,000 vehicles achieved in 2017, not before 2025. This said, we are communicating about our outperformance versus the market. So if we would have on the market a little bit more volumes, it will not reduce our outperformance. Our outperformance will be above 500 basis points between 2021 and 2025, in fact, '20 and 2025 and with some differences, but which will be detailed business group by business group this afternoon. And we feel quite confident that this is perfectly achievable. For the H2, if you remember, H2, production market is 41,000,000 vehicles. So we are already in H2 at the horizon of 2022. I have given the figures of net cost savings, EUR 66,000,000, EUR 60 8 million. So this is clearly recurring. It is a minimum that we will achieve. In fact, we will add minimum EUR 30,000,000 to this figure, if you take half year or EUR60 million if you prefer, for a full year. So this is fully secured and we have, as you know, the restructuring that we have accelerated in the second half, which will have, I would say, a full year impact from mid to the end of this first half. So we are totally confident that the 200,000,000 net savings will be done, will be achieved and even more. The life after the COVID will be different. When we take, for example, on the SG and A is the travel policy. We will travel less, for sure. We might travel longer, less frequently. Believe that we will cut our travel expenses by at least 40%. We worked on our efficiency. We believed that the world would collapse if we would not be able to send our experts around the world en masse. None of this happened. We have a high level of autonomy in the different regions, which is really good news. So we have learned to work with digital tools. Traveling is not really needed. You know, I'm making several digital plant visits per week. It works very well. It allows me to have a good understanding of what's going on. It allows me also to make a follow-up from one visit to the other. So I think that we will organize ourselves clearly differently in the next future. Okay. Thank you. We will now take our next question from Sachet Gommel from Jefferies. Please go ahead. Good morning, and thank you for taking my questions. I have three actually. The first one is on the flowback. I think you have the approval to buy back up to 10% of your own shares. Are you considering to buy into the flowback in case the share is under pressure? Do you want us to so thank you for your questions. Yes, we will we have the ASOP, the employee share owner plan, which will represent about 2% of our shares. And clearly, will have to buy back shares and we will do it at the appropriate timing. Michel, you want to add something to this? This could be made mainly during the period just after the spin off. We consider that the spin off is a fantastic opportunity for us to globalize our shareholdership. As you know, some big funds were restricted, so they have vocation now to enter or to enlarge into the capital of Russia. So we are very confident that this drawback will be an opportunity and probably you have seen the declaration of Robert Peugeot that we will at last normally eliminate as a famous discount due to the holding or controlling position of PSA. Very clear. Thanks. My next question would be on the clean mobility division. When I compare the kind of, let's say, recovery in the second half of the year, it was on the margin side. It was a bit less than in the other two divisions. And I would expect that given the CO2 regulation in Europe that that division should actually have bounced back a lot stronger than the others. Any reason why that one was a bit lagging in the second half? No. As I indicated, I would say, in the one off were impacted the key mobility. The second thing was very low volumes of commercial vehicles. You know that commercial vehicles was more impacted than the light vehicles. So clearly, I will say, recovery on this segment as well will help a lot in key mobility. And I can tell you that the last quarter was already as a target you were giving to the group. And 2021 will be at double digit operating margin. Very clear as well. And then my last question it's on the working capital structure. I think you're now at an let's call it all time low in terms of working capital. I think it hasn't been that that negative, ever ever. Are you feeling comfortable, or or is that something where, obviously, if we if we go into a volume decline that kind of exaggerates the the cyclical swings in your cash flow? Are you considering kind of derisking that? Or are you saying, no. You you feel very comfortable with that kind of structure? No. We are comfortable. I don't know what means are comfortable. Are indicating in the document number of days. Please take into account that we have some sales according to IFRS 15, administrative sales, which are not booked, like the monolith, which is a net in the gross margin. We have as well some, I will say, some other things. So figures are much more important to calculate as a number of days. As I said, customers, no discussions. Suppliers, it is a permanent optimization and SAS is contributing to that. And last but not least, inventories. We have the target to reduce by one day this year and another day next year, which means twice EUR90 million. So we will continue to improve our working capital. Understood. Thanks, Michel. Thanks, Patrick. Thank you. We will now take our next question from Jose Asmande from JPMorgan. Please go ahead. Good morning. It's Jose from JPMorgan. And, yeah, very compelling set of of targets for the next years, in my view. So congratulations on that. Just just two two topics. Please, one, can you talk a bit about Clarion, the work you've done there to to restructure the business in the last twelve months? Can you comment on the order backlog? And when you look at the product launches you have for 2021, can you comment a little bit about how the old backlog is is, is shaping up in terms of, like, the camera business, the display business? And maybe you can give us some things around the profitability of those products. I guess you can discuss this on the other CMD, but maybe just just some high level color on on Clarion, please, on restructuring and all the backlog. And then, Michel, just a clarification, what are the incremental cost savings you're planning to book year on year in 2021? Thank you very much. Michel, you start with the last question, please. Cost savings, minimum EUR 50,000,000. Our budget is above this figure. For For Clarion, so we achieved cost savings of €80,000,000 So it means that the integration of Clarion is now achieved. The main cost savings related to the organization is now achieved with 40 of indirect labor less than when we bought the company. We also worked on the footprint and we are not at the end of that. We will build a mega plant in China, reducing the footprint we currently have to one single plant. It will be dry in November this year. And we will also continue to work on the bill of material, especially related to this crisis. I think we have a few things to do. Even if we haven't stopped our customers, not one single hour. I believe that the focus also on our three product lines is paying off. We have cockpit electronics, we have display technologies and ADAS. When you look at the €2,500,000,000 of order intake, it is well balanced between the three product lines. The winner, if I may say so, from these three product lines are display technologies, where we are differentiating ourselves, especially on the large displays. But you will see this afternoon the progress we have made. We have, I think, the right mix now and the right technologies to be successful in each of them. And you will see also that we are diversifying our geographies. In 2020, we made significant progress in North America. We are starting in Europe. We made some order intake relevant order intake in Europe, but we will continue in the years to come. And we also have significantly increased the number of customers of Faurecia Clarion Electronics. Thank you very much. Thank you. We will take a follow-up question from Horst Schneider from Bank of America. Please go ahead. Yes. Thanks very much for taking another question. I just want to come back on this light vehicle production forecast. They are so much more cautious than IHS. Can you maybe split it up by region? For which region you see most of the downside risk? When I look at the IHS figures, I think they see the main downside at the moment concentrated on China and Volkswagen. Do you see more risk maybe in Europe or North America? That's just a follow-up. Thank you. I would like to maybe explain when we did that. So we did this when we decided to build when we fixed the assumptions for our budget, sorry. So we did this at the end of last year. And we cannot change this because this is related now to the targets we gave to our business groups and it's not bad to have some tension related to the volumes. So as I said, IHS is converging. They are considering that they were maybe too optimistic in the first half and again, especially in the first quarter. We have an upside, most probably, in the first half, which is around 500,000 vehicles. Where are the risks? The risks are in Europe, very clearly, and a little bit less in North America. And this is the small table I proposed, where I said Europe minus in Q1 at the level we are considering in the second quarter and a significant growth in the second half of the year. America, we believe that the risk is related only to the shortage of electronic components. We saw that some of the customers have a little bit more issues with that. But the inventories are very low in North America. So each produced car is sold. And I'm sure that there will be a recovery of any lost car in The U. S. China is doing very well. Of course, we have we just passed the Chinese New Year, but the first quarter is robust and we see here a robust situation all along the year. So I said it, if I would have to redo the budget today, I would be less conservative for sure on the second half. We have clearly an upside, an opportunity in the second half as long as we will not see a new crisis or new difficulties, issues popping up. With what we know today, we should do better in the second half. But just that I get that right, so the main downside risk, in fact, is in Europe, right, not in North America or China? Europe is, at the highest risk, if I may say so. But, again, you know, for the moment, we have not seen it materializing very much. We saw in January some lower volumes related to some lockdowns to the COVID situation. We also see some difficulties related to the shortage of components, but limited. We believe that this might last until with this proportion until the end of the first quarter and we should see an improvement in the second quarter in Europe. In America, it's again related to the shortage of components. In America, we are living from hand to mouth, and and, you know, the the demand is is there. And in China, normal situation above 2019. Okay. Then just another brief follow-up. So, I mean, there are a lot of uncertainties, I mean, of course, on the production on a market level. What would you say then? I mean, how conservative is your is your guidance on outperformance? I could imagine that finally Europe is stronger. Also your outperformance could be even stronger than in 2021. Is that right? Or what's the level of conservatism built into that? I think that an excess of 600 basis points is quite a good figure. So we will see. But we have a pre d'Or, if it is a question? Yes, yes, we are. When we communicate figures, you know it, we communicate figure we are quite sure to be able to deliver. All right. Thanks very much. Thank you. Patrick, we have two questions. We have two questions per Internet. The first one is what is the part of e vehicles and hybrid vehicles in your order book? Order intake, this year I noticed that it's 38%, order book is probably over 30%. It is accelerating, as you know, with the new platform of the customers. But we have already, I will say, our order intake, a higher share than what is forecasted for 2025. And this will be detailed this afternoon again, not only for the past year but also for the years until 2025 and for clean mobility, especially we have a focus until 02/1930, which is needed for the hydrogen and the electrification part. What is your visibility on the electronic components shortage in S1 twenty twenty one? We don't have visibility. So the automotive industry has stopped ordering in April. At this period of time, consumer electronics increased its orders. At the same time, the five gs development and preparation increased the demand on microcontrollers. I believe that the consumer electronics will probably slow a little bit down because the peak is now behind us. The orders have been replaced. What is disturbing the supply chain is, as usual in this case, you have some panic orders in order to rebuild some inventories. I spoke with one of these big electronic producer, component producer, and he said to me that if he takes the automotive orders, the automotive production in 2021 should exceed 120,000,000 vehicles. Okay? So what is needed, and I know that all the OEMs are working with the Tier 1s on this, is to give visibility to the supply chain. And this is happening. So I believe, but it's my guess with what I know from the situation, that the peak of the disturbance will happen in March and that after March, we will slowly recover until the end of H1. I think that after the summer break, we should be back to a normal supply situation on electronic components. What I don't know is this situation might be beneficial for some of the players of the supply chain, which have no interest to normalize very quickly the situation, understanding that pressure on the prices is there until the shortage will be over. So I think that this is ending this session. Thank you very much for your attention. I hope that we will be together again this afternoon for the CMD. You will see a lot of technologies. And I think what is also important, you will see some of our key team members to give you an idea on how this group is staffed and organized. See you then. Thank you very much. Thank you.