Earnings Call: Q4 2015

Feb 12, 2016

Welcome to Renault's fiscal year 2015 results presentation and conference call, which is broadcast live and in replay versions on our website. The presentation file, press release, and activity pack for this call are all available on our website. I would like to point out the disclaimer on slide 2 regarding the information contained within this document, and in particular about forward-looking statements, and invite all participants to read this. Today's meeting is scheduled to last about 1 hour and 15 minutes. As usual, we have two key speakers. First up will be Dominique Thormann, CFO, who will take you through the highlights of the financial results. Then Carlos Ghosn, Renault CEO, will share with you his review of 2015 and the outlook for the year. The presentation will last around 30 minutes and will be followed by a Q&A session. Without further ado, I will hand over to Dominique. Good morning, everyone. Despite the high volatility in emerging markets, and thanks to a better than expected European business, I am pleased to report this morning that we have achieved all our targets for 2015. In addition, the group's operating margin exceeded the 5% midterm plan target earlier than planned. Before going to the financial results, I would like to start with a quick summary of the commercial results on slide 5, which we released last January 18th. Group sales increased 90,000 units, or 3.3% to 2.8 million units. This performance was achieved in very much the same environment as in 2014. The European markets were strong and up 9.4%, while our main emerging markets were in turmoil. This year, again, Europe was the main contributor, with an increase of 10.2% in registrations. Outside of Europe, our registrations fell 4.8%. The main decline came from the Americas region, with a drop of 62,000 units, reflecting primarily a weak Brazilian market. In Eurasia, we declined 8.6% due to Russia, where the market was down 36%. However, the recovery in the Turkish market, up 26%, mitigated the drop in the region. In the Asia Pacific region, our imported vehicles in China declined, as the region's main focus during the year was on preparing the launch of our locally produced Kadjar. The plant, as you know, was inaugurated last February 1st. On the contrary, the Africa, Middle East, India region grew its sales by 52,000 units, thanks to the success of Kwid in India and recovering sales in Iran. Let's turn now to slide 6, which shows group revenues. In total, group revenues reached EUR 45 billion 327 million, an increase of 10.4% from last year. Revenues for the automotive division increased by 10.9% in the period to EUR 43,108 million. Revenues from our captive sales finance company, RCI Bank, increased by 1.7% to EUR 2,219 million in the period. As you know, this indicator is not representative of the bank's real performance, which I will detail later on in my presentation. The automotive revenue variance analysis shows next on slide seven. Starting on the left-hand side of the page, the first item is volume, which shows a positive impact of 3.2 points. This is in line with our registration increase, as we had almost no impact from the change in inventories. I will give more details on inventories later in my presentation. The geographic mix was a slight negative of 0.1 points, reflecting stronger growth in southern Europe than in northern markets, including France. The third item to note is the model mix effect. The impact was positive by 1.3 points, contributing EUR 491 million. This is an indication of the positive impact of our recently renewed models in Europe. This despite an opposite effect resulting from the launch of Kwid in India, which sells at a significantly lower price than the average of the group. The fourth item is the price effect, which is positive by 2.1 points. This impact is higher than in the first half, as we continue to adjust our prices to offset adverse currency movements, mainly in Russia, Brazil, and Argentina. Sales to partners continued to be a strong driver of revenue. During the period, the item contributed 4.8 points, or EUR 1,900 million. As expected, the progression in the fourth quarter was not as strong as we did not benefit from new contracts as we had in previous quarters. The next item, foreign exchange, impacted negatively by EUR 51 million or 0.1 points. This is the result of a basket of currencies, but is in line with what I told you at the end of the third quarter. As in the previous quarters, we benefited from the strength of the British pound, the US dollar, and Korean won, while we suffered from declines in the Russian ruble and Brazilian real. The last item named Others was a negative of 0.3 points. It represents the other activities outside the scope of new cars, mainly spare parts, wholly owned dealers, and buyback restatements. I will now turn from automotive revenues to the group operating profit by activity. In 2015, the automotive operating profit grew 74% to just under EUR 1,500 million versus EUR 858 million last year. We continued to improve our automotive margin in the second half, reaching 3.8% versus 3.1% in the first half. On the full year, the automotive operating margin came to 3.5%, a 1.3 percentage point improvement. RCI Bank delivered an EUR 824 million contribution to the group's earnings, an improvement of 9.7%. In total for 2015, the group's operating profit showed a strong EUR 711 million improvement at EUR 2,320 million, giving a group consolidated operating margin of 5.1% compared to 3.9% in 2014. We are pleased to have been able to deliver our operating margin target sooner than expected in our midterm plan, despite adverse conditions in some of our international markets. Let me explain how we got there. Slide nine shows the main variances which explain the increase. I will start the walk-down reading left to right. Cost reduction activities contributed positively by EUR 527 million. As we told you, we did not repeat 2014's performance, which had benefited from the impact of the competitiveness plan signed in 2013 in France. Monozukuri activities provided a gain of EUR 596 million, but the G&A variance was negative by EUR 69 million. Looking at cost reductions more in detail on slide 10, excluding raw materials, savings from purchasing were higher than last year at EUR 492 million, notably due to the volume effect. Warranty costs impacted positively by EUR 197 million compared to minus EUR 107 million in 2014. The reason here is lower cost than anticipated for recalls. R&D contributed negatively by EUR 155 million as we significantly increased our spending to renew our lineup. However, it is worth noting that our capitalization rates decreased from 44.6% in 2014 to 39% last year. Manufacturing and logistics costs improved slightly with a positive contribution of EUR 62 million versus EUR 397 million in 2014. This variance came from the lower benefit of the competitiveness plan already mentioned, but also from start-up costs related to product launches. Finally, we also faced higher logistics costs due to supply chain constraints. Turning back to the operating profit walk down on slide 11, raw materials provided a tailwind of EUR 61 million versus EUR 134 million last year. Commodity prices continued to fall in 2015, but the euro-U.S. dollar exchange rate was less favorable. Mixed net enrichment impacted negatively by EUR 379 million versus EUR 226 million last year. At the end of the first half, we explained the reasons for this deterioration and had told you to expect roughly the same amount in the second half. However, thanks to the success of our new models and despite the cost of Euro 6, the negative impact was limited to only EUR 96 million in the second half versus EUR 283 million in the first half. Volume and sales to partners delivered a positive EUR 441 million. RCI Bank and other businesses accounted for plus EUR 39 million. This results primarily from a very good year at RCI, as I will detail later. Lastly, currency was a slight positive amounting to EUR 22 million, as we benefited notably from a favorable dollar Korean won exchange rate for exports to Nissan North America. Continuing on through the P&L with the other operating income and expense items on slide 12. This year, these items amounted to a charge of EUR 199 million, which is significantly lower than last year. Continuing costs in France related to the competitiveness program, restructuring charges outside Europe, and some minor impairment charges explain this amount. After taking into account these expenses, our EBIT line almost doubled at EUR 2,121,000,000 compared to EUR 1,105,000,000 in 2014. Continuing down the P&L, the next item is net financial income and expenses. The net charge decreased EUR 112 million from last year at EUR 221 million, due primarily to the lower cost of debt and revaluation gains. The next slide, number 14, shows the impact of associated companies in Renault's P&L. Nissan contributed EUR 1,976,000,000 to our 2015 results. This was EUR 417 million more than the prior year. Renault share in AvtoVAZ's results came to a negative EUR 620 million. For the first time, AvtoVAZ reported IFRS compliant accounts on Renault's close cycle. We therefore no longer have the three-month time gap for consolidation. As you know, the Russian economy went through a severe downturn in 2015, a 35% decrease in car sales, a 33% decrease in the yearly average exchange rate of the ruble, and high interest rates. In this context, AvtoVAZ's operating margin came to a loss of about EUR 365 million, corresponding to EUR 136 million loss for Renault share. This item, combined with the financial costs and impairments decided by AvtoVAZ, led to a negative contribution in total of EUR 395 million for Renault share of their net income. In addition, Renault recognized an impairment on its investment in ARA BV, the AvtoVAZ controlling holding company, for EUR 225 million. As a result, the sum of these two items, Renault's share in the net loss of AvtoVAZ amounted to EUR 620 million. The value of this stake is now booked for an amount of EUR 91 million in our accounts. I will turn back to the P&L on slide 15, where the net tax charge for 2015 came to EUR 331 million compared to EUR 136 million last year. In 2014, excuse me. This rise reflects the increase in our pre-tax profits, but which was partially offset by the recognition of deferred tax assets, notably in France for EUR 161 million. Bottom line, the net profit after tax increased significantly and came in at EUR 2,960,000,000, almost EUR 1 billion more than in 2014. After taking into account minorities, the net result per share came to EUR 10.35 versus EUR 6.92 in 2014. Now that I have completed the analysis of the P&L, I will turn to slide 16, which shows the change in net automotive cash. Cash flow from operations totaled EUR 3,451,000,000, reflecting primarily improved operating performance. Changes in the working capital requirements impacted positively by EUR 663 million, notably as a result of higher production in Q4. Net tangible and intangible investments came to EUR 3,081,000,000. This is EUR 430 million higher than in 2014. The expected increase is mainly explained by CapEx related to our new products. As a result, automotive operational free cash flow came to a positive EUR 1,033,000,000. Regarding dividend flows, dividends received from quoted companies in the period totaled EUR 581 million, while dividends paid in the year amounted to EUR 599 million. Other financial items were negative EUR 458 million, resulting from different value adjustments of currencies and redeemable shares, as well as the reclassification of the AvtoVAZ loan. In summary, net automotive cash increased by EUR 557 million and came to EUR 2,661,000,000. Slide 17 shows you the status of our inventories at the end of the year. Inventories increased slightly over last year but came in under our 60-day guidance. As fourth quarter sales were higher than forecasted, the number of cars in inventory were cut by almost 40,000 units in the quarter. Global inventories represented 53 days of supply at the end of the year, versus 57 days at the end of 2014, and this is a bit low. The appropriate level, we believe, remains at about 60 days of sales. I would now like to move on to the automotive liquidity reserve situation on slide 18. Cash and cash equivalents totaled EUR 11,600,000,000 at the end of December, a similar level to the end of 2014. Together with fully available undrawn credit lines, the automotive gross liquidity reserve increased EUR 100 million and stands at EUR 14.9 billion at the end of 2015. I would now like to take a few moments to give you a bit more detail on RCI Bank's performance on slide 19. RCI Bank's new financings increased by 23.8% at EUR 15.6 billion, thanks to a favorable geographic mix with a recovering European market and a rise in the finance penetration rate on new vehicle sales. Average loans outstanding were up 11%. The cost of risk improved by 10 basis points and reached a new low at 33 basis points of outstanding. Operating expenses relative to average outstanding loans improved seven basis points, representing 1.51%, demonstrating good cost controls. In total, the pre-tax return on assets reached 2.99% versus 2.93% last year. The return on equity, excluding non-recurring items, stands at 18.7%, up 20 basis points. As you can see on slide 20, RCI Bank's dependence on the capital markets continued to reduce with the successful development of our retail online bank deposits. Following the successful launch in France of the ZESTO savings plan in 2012, of Renault Bank direkt in Germany in 2013, and Austria in 2014, last year, as the first automotive captive sales finance company, we launched a similar plan in the U.K. with the same success. At the end of December, total deposits amounted to EUR 10.2 billion, crossing the EUR 10 billion mark well ahead of our plan. The source of funding represented more than 35% of average outstandings, while our previous target was 30% of outstandings by 2016. We are now targeting to maintain deposits at about a third of our outstandings. This completes my financial review for 2015. I will now pass the floor to our CEO, Mr. Carlos Ghosn. Thank you for your attention. Good morning, everyone. Today, I will first share with you an assessment of the year 2015 before commenting the opportunity and risks that we see for 2016. 2015 was a good year for Renault. We delivered, and in some markets and for some products, we even overachieved the objectives that we have given ourselves. Based on this performance, we can look at 2016 with a certain degree of confidence. What are the main takeaways from 2015? In a contrasted environment, we demonstrated our ability to take advantage of the recovery in Europe while resisting in the more difficult and volatile emerging markets. Renault is more diversified and will no longer be too dependent on one specific segment or on one specific region. We have a much better footprint, which will allow us to mitigate business risks globally while simultaneously seizing opportunities. In Europe, we consolidated our market share at 10.1% in a market that grew 9.4%. In emerging markets, we dealt with adverse economic conditions and sometimes severe currency headwinds, but we successfully managed a good balance between protecting our market share with a watchful eye on our profitability. The success of our product cadence, especially the new models launched during the year, was the key driver behind our business performance. In 2015, we introduced five major new vehicles, the new Espace, Kadjar, Talisman, Kwid, and Duster Oroch. We launched three new products in Europe, all based on the Alliance Common Module Family platform architecture or CMF. These products contributed to the renewal of our range in the C and D segments and have been well-received by the market. They also reinforced our new design language, which has received acclaims recently, like Talisman, who was voted the most beautiful car of the year at the International Automobile Festival in France. In addition, we launched our breakthrough entry vehicle in India, Renault Kwid, offering an unprecedented modern value for money package. So far, the order intake has exceeded our initial expectation, reaching more than 100,000 orders as of today. In Latin America, we entered the pickup truck segment with the Oroch, a Duster-based half-ton pickup. It was voted pickup truck of the year in Brazil. It too has been very well received by the market and is off to a good start. Finally, our sales to partners remained a very solid pillar of our growth in 2015, contributing both to higher revenues and better capacity utilization. Working effectively with partners has become one of our trademarks that we will continue to develop in the future. The success of all these activities allow us to meet one of our Drive the Change midterm objectives sooner than forecasted, namely delivering an operating margin in excess of 5.5%. Our challenge is now to transform 2015 achievement into a recurring one, and of course, to reach our second target, which is to generate more than EUR 50 billion in revenues measured in 2017. Before moving to 2016, I would like to say a few words about the Alliance Stability Covenant that was signed with the French government and Nissan in December and the recent controversy surrounding emission levels from diesel-powered vehicles. The Alliance Stability Covenant is good for Renault and good for the Alliance. There is a shared understanding amongst all parties that the Alliance need to continue to prosper and generate growing synergies. For the last 17 years, the Alliance has enabled both Renault and Nissan to grow profitably in a sustainable way. As regards emissions, at the risk of stating the obvious, there is no fraud or cheating at Renault. This has been independently verified by a government-appointed commission in France that concluded that our vehicles are not equipped with any fraudulent software. All our vehicles are compliant with existing regulation in all markets where the group operates. That being said, we are working to further improve our performance in emissions. We already made an announcement in December stating that a specific engineering task force had been put in place, and that we would roll out enhancements for better emissions performance. We hold all the cards needed to make 2016 a banner year for Renault. Let's start with the main opportunities. Beyond the carryover effect of the products launched last year, 2016 will see an unprecedented product cadence in Renault's history. The group will launch no less than nine all-new vehicles, and 10 if we take into account the Chinese version of Kadjar, which will be locally produced in our first plant in China that I inaugurated two weeks ago. In Europe, we will have completed our line-up renewal with the Mégane and the next generation of Scénic, which will be unveiled in two weeks at the Geneva Motor Show. Outside of Europe, we will have a new crossover for Russia based on our Global Access architecture, as well as a new C-segment car. Early next year, we will extend our market coverage in Latin America with new products, including a new one-ton pickup truck. Last but not least, as I alluded to earlier, this year will see the start of our production in China. Our new plant will write the first chapters of an important story for Renault in the country. Thanks to our new industrial presence in China and the extension of our segment coverage in emerging markets, we should be able to grow or at least maintain our sales performance in all regions despite adverse conditions in some of them. 2016 should also mark another milestone for Alliance synergies as we are moving towards a more integrated and converged organization. All the C and D products launched last year or to be launched this year share the same platform architecture with Nissan, thereby reinforcing their cost competitiveness. Also, the production of the Nissan Micra in France will start by the end of the year, which further demonstrate the growing synergies within the Alliance. We are confident in our own strengths, yet we are also aware of the challenges surrounding the industry. Let me illustrate a few. Given commodities and energy price trends, we are not expecting that demand will improve in some key emerging markets anytime soon. This is especially the case for Russia and Brazil, where we expect further declines this year by 12% for Russia and 6% for Brazil. We remain convinced that these markets will recover at some point, and we will be ready when this happens. However, for the time being, we have to continue the hard work or keeping our businesses healthy in these markets. The volatility of currencies is also a characteristic of many emerging economies. As we have said frequently in the past, the only effective way to mitigate this risk is to increase localization. As our manufacturing footprint has become more global, so have our sources of supply, but we can still do more. There is no other effective way of capturing growth opportunity in emerging markets other than reaching a high level of local content. Emissions regulations are nothing new, but following what happened last year to one of our competitors and the confusion surrounding this issue, we will address this topic in a more demanding, clear, and stringent manner. As I also already mentioned, we have decided to further increase our resources allocated research and development in this field. We are also advocating for more effective regulation that will close the gap between standardized tests and on-road consumer experience. We are pleased that the European Commission and Parliament have reached an appropriate solution. If our product cadence is definitely an opportunity for this year, we are fully conscious that execution will be a challenge. Our task will be to launch all these products around the world on time and at the right level of cost. Challenging as the task may be, we are confident in the disciplined execution of these launches. Most importantly, we have simplified our industrial system as all these new products are based upon only two platform architecture. In summary, I would say that Renault is turning a corner. We moved from a cost-cutting and restoring competitiveness focus to a profitable and sustainable growth one. The priority at the beginning of the plan had been to restore the competitiveness of our business, primarily in Europe. This has now been achieved, particularly thanks to the competitiveness agreements signed in Spain and in France. As we will progressively benefit from our fast product cadence, our challenge now is to sustain an accelerated revenue growth. As we committed in our plan, we will have to achieve the EUR 50 billion target measure in 2017 while optimizing our margin above the 5% mark. 2016 will also be a year during which we will be framing the contours of our next business plan. Much of the upstream work has already started and will lead to specific targets to be achieved in the future. The transformations on the way in the industry will allow us to capitalize our know-how in some segments where we are playing a leadership role, such as electric cars. The electrification of powertrains and the place of zero-emission vehicles will gain in importance in the coming years. Simultaneously, as we have already announced, the Alliance is moving forward in the field of autonomous driving and connected cars, with plans to bring vehicles to market in a different stage between 2016 and 2020. All of this and more will be contained in our future midterm plan that we will announce next year. In the meantime, for 2016, as you know from our commercial results press conference, we have set sales plans aiming at accelerating our growth rate in all regions. For financial results and at constant consolidation scope, we aim to grow group revenues at constant exchange rate, to increase group's operating margin beyond 5%, to generate a positive automotive operational free cash flow. Thank you for your attention, and we're ready for your questions. Thank you, Mr. Ghosn. Now it's time to open the Q&A session. As you know, we have questions from the room and also from the call. I propose to start with the question from the room. Thomas Besson, please. Is there a microphone? Merci. Hi. It's Thomas Besson. I have two questions, please. First, can you please give us a bit more details on the probably biggest growth opportunities for Renault in 2016, which I think probably come from China, India, and Iran, and give us some details about the consolidation of these results for China, the possible write-up of your Iranian assets, and the profitability of the Indian business? That's the first question. Sorry, it's a lot of questions. It's already five, Thomas. Okay. On RCI Bank, Dominique, we've seen a continuous improvement of the contribution of RCI the last 15 years to a new record this year. Can you help us understand how sustainable that is, the share of financing versus insurance and recurring product, and how much at risk it could be if the financial environment becomes tougher in terms of refinancing, if we get to a more kind of credit crunch environment as the market seems to fear currently? Thank you very much. Okay. Just make sure that we answer all the questions asked. The first question is, what are the growth opportunity for 2016? First, Europe, because we said the European market should grow by 1%-2%, while January was +6%. Okay? We don't know what's going to happen, but we're confident that the market will be at least at +2%. On top of this, we should grow market share in Europe in 2016. So there is a double, I would say, benefit. First, the market will grow. Second, our market share will grow. It will grow for a very simple reason, as you know, that we are now entering segments where traditionally Renault has been strong, which is particularly the C-segment. Remind all of you, in 2005, the company was a one product, one region company. We were making all our profit on Mégane, particularly on Scénic and in Europe. Okay? Now it's a completely different picture, because we have so many other product contributing to the profit and so many other region. But still, the C-segment, Mégane and Scénic are a stronghold of Renault. This is number one. Number two, India. India is a Kwid story. We told you from the beginning, the A platform based in India will bring a breakthrough to the industry. We're starting it in India to test it in India, and if it works in India, it will work everywhere in the world. It's a kind of Logan story. It's a modern Logan story, and obviously, the success of Kwid is pushing us to develop many cars on the same platform, which will go on the emerging market. It's a very long-term story that's starting in India with a very good start, because we have 100,000 orders. Today, our challenge is to produce these cars. India will be a second important, growth. Third, China. We've been practically absent from China for this time. People are a little bit nervous about China, is China is going to grow? But for us, it's a pure opportunity. It's a 23 million car market. I'm showing 23 million because I'm including LCV, and we have a very strong LCV lineup. By the way, we can do crossovers, we can do also LCV in China, waiting for the license for sedans. China is pure opportunity for us. We sold miserable 25,000 cars in 2015, and we have a 24 million cars opportunity in front of us. For us, it's pure opportunity, no matter what the market does. Producing in China on a platform which is shared with Nissan, with a plant which is a copycat of Nissan plant, with a lot of support on engineering, on purchasing from the suppliers, already tested by Nissan for the last 10 years. For us, China is pure opportunity, and this is going to be a third dimension of growth. Now we have Iran also. Iran, when you read the newspaper, you have the impression that, oh, my God, that mean our friends, competitors in France are signing a lot of agreements and nothing's happening with Renault. We don't have to sign agreement because we never got out. We have already the capacity available. We have a 200,000 capacity available already signed. And we have three cars already industrialized in Iran. We don't have to bring them. You're going to see a ramp-up of Renault much quicker than anybody else because we're already there. We don't have to sign new agreements. We already have a 200,000 capacity that we are far from using. Obviously, doesn't mean that we will not sign additional agreement to go above 200,000. But we have everything ready to perform in Iran this year, because we have the cars already in, and we have the capacity available. Now, this being said, we have also some bad news. I want you to consider, Andy. The bad news is Russia may continue to go down. We're foreseeing -12%. Okay? What's going to be the reality? Nobody knows. January was terrible in Russia. It was terrible. We don't know. Brazil, is another sad story. These are two important markets for us because three years ago, it was the second and the third market of Renault. Russia was one of the most profitable market of Renault. Okay? I don't expect good news here in 2016, but we have a lot of good news in other regions to be able to cover eventual bad news coming from these two countries. This being said, we know Russia will come back. We know Brazil will come back. The challenge for us is just to make sure that we are maintaining, and we are not using the time to fine-tune our operation, strengthen the operation in order when the market will come back, we will move up very quickly. Just want to remind you that three years ago, Russia was the most profitable market of Renault, the highest internal margin, by far. It was the highest margin. Now we are struggling to maintain balance in Russia, while all car makers, as you know, are in very dramatic situation. Thanks to the localization rate we have, which is very strong to a very concentrated product offer based on three cars. We have a lot of assets, plus AvtoVAZ behind us, but I don't think 2016 will be good news. I think this will be something which will probably benefit for us at a later stage. This is about the growth. What was the second question? That was about the profitability of these different businesses, and then it was about RCI. Of the different businesses? of the businesses in these regions. I guess that you have already addressed. Obviously, I can tell you today with very certainty nobody's making money in Russia. Nobody, okay? Probably the company which is faring the best in Russia is Renault. Only because localization rate of Renault is one of the highest, and second, because we don't offer a Christmas tree of products. We are concentrated on three products, mainly. That's basic. We have a very efficient manufacturing system. Everybody else is in trouble. Obviously, AvtoVAZ, because it depends mainly on the Russian market, but also all the others. Also, one thing which is very important for you to know is if you take a snapshot of 2005 and 2015, you take the two years. As I said, 2005, Renault was a one region, one car company. Mégane, particularly Mégane Scénic, Europe, particularly France. That's it. With it, you had 90% of the profit of the company. Today, when you look at the picture in 2015, we are an M0 story. We are an A-B story because Captur and Clio are big contributors to the growth and to the profit of the company. We still are a Mégane story, and we're going to see the size of the Mégane story this year and in 2017. We're going to be also a D story because even though D has been a D-E segment, have been a handicap for us for a while, the new Espace is going very well. The new Talisman is promising. We're going to have a new crossover on a D segment coming. So this used to be a handicap for so many years for Renault. It's going to start to be something positive. On top of entering new market, like the pickup truck, where we have never been in the past with the launch of Oroch and the 1-ton pickup truck on a Nissan platform. So that's what I can tell you about the profitability. That means the profit of Renault are much more balanced now, region by region, potentially, and product by product. Now, I know you have a question on RCI. I'm going to give it to Dominique Vidal. But two things you need to understand about RCI. The first thing is that the discipline in the company into using financing to boost the loyalty of customers is much higher today than it has ever been in the past, not only for the Renault brand, but I would say even for Infiniti and Nissan brand in Europe, because as you know, RCI support Infiniti and Nissan in Europe. That's number one. The level of penetration of RCI is much higher than it has been, particularly because I think we have a much better and mature understanding about how we can use, independently of the profit you make on financing, using financing to bring more loyalty to the brand. This is something which is very important. On top of the expansion of the company, but then I will leave it to Dominique. Following on that, how we get to the increased earnings at RCI is precisely through more the service side than it is through the financing side. If you look at the last several years, and if you take a snapshot of RCI a few years ago, and you look at the growth of its balance sheet, that's not going to give you the clue as to how the profitability increased. It's coming mostly from services, and as Mr. Ghosn has just said, it's services that are much more linked into the manufacturer's marketing plans and service plans so that we're trying to generate and direct more traffic to the aftersales and to the shops of the two manufacturers. That's really the explanation. When you look at how we financed the growth of the balance sheet, when I showed you the EUR 10 billion that we've collected in retail deposits, we had zero, and we were very vulnerable during the last financial crisis, because when the capital markets freeze and that's your only source of funds, the only option you have is to reduce your loan production, which is what we did. However, this time, we have a steady inflow of retail deposits, which is allowing us in these turbulent times, and you're right, I have no idea what's going to happen in the capital markets, but we are facing absolutely no problem of liquidity, cost of funds, availability, or any of our balance sheet ratios, which we're able to meet without any concern. As we diversify, as I said, we were the first, for example, to open in the U.K. We have now a sterling source of funds. We are well diversified on the continent in euros, and then our foreign affiliates in South Korea or in South America also access the local capital markets. We've diversified the funding footprint. We have a much broader service offering for both retail as well as for the networks, and we still have huge opportunities. Used cars, there are many activities around that are transforming the whole financial services industry related to how automobiles are being purchased and used. Insurance. It's going to continue, I think. Just maybe one follow-up. You had a question about the write-back of provisions we took a few years ago on Iran. I would just like to settle this one. What we wrote down were cash and cash equivalents and receivables. As we redevelop and as Iran normalizes, those monies are being used locally, and they're going to be part of our expansion. There's not an accounting write-back of those provisions, okay? Just so we're clear on how that's going to work in our accounts. Thank you, Dominique. Before moving to the call, I will take one more from the room, but please, two questions, which are really two questions. François? François Maury, Oddo Securities. A question about emissions. Today, when you discuss with investors, the feeling is that you try as a carmaker to minimize the consequences of the emission crisis, or at least that you are not transparent enough. The fact is that every time this issue is raised on the market, your stock is down. Every time that Mrs. Ségolène Royal is talking to journalists, your stock is down. I know it's an industry issue, not a Renault specific issue, but it seems that Renault is not sitting on the right position. It's more sitting about the bad guys and not the virtuous one, at least when we read the press. I would like to understand, as a representative of the automotive industry and as the Chairman of Renault and Nissan, what you intend to do to recreate the trust, the confidence of investors and of customers, especially in terms of transparency. Some of your French competitors has announced, for example, the appointment of an independent Transport & Environment company to measure the emission. So what do you intend to restore the trust back? Do you think it's a good solution? Taking one independent entity, whatever it is, to test your cars when you can test any car today in any condition and find 5, 10, 15 times more emission than what is written. You think it's a solution? At least to see how many No, because what is important is emission. I'm going to tell you exactly what we think about the problem. I'm going to tell you what we're doing about it. Okay? Emission is a very complicated issue. Why it's a very complicated issue? Because anybody can take any car and making it emit 10 times, 20 times, 30 times more one, which is written. Anybody can do that. Okay? There is no way anybody can have real driving emission standard that reflects the way you're going to use your car. No way, because there are billions ways to use a car. Now, obviously, the way the car was tested so far was very standard. In a lab, et cetera, under certain conditions. You had to go through this test to be homologated. This was the rule. We didn't put the rules. European Commission put the rules. Okay? Everybody follow the rules. Then after you follow the rules, then you have to satisfy your customer. When you satisfy your customer, you need to understand what he wants. Okay? Obviously, he wants a car which is normed, in the norms, but he wants a car which is cost competitive. He wants a car with good fuel efficiency. Frankly, he doesn't care only about NOx. He cares also about CO2, and he cares about many other things. But everything we're talking about is one specific emission, which is NOx. That's what we're talking about. We're talking about NOx, diesel, Euro 6. That's all. But you can open a Pandora box where you say, "Oh, you know what? I'm going to test the car on something else. I'm not going to take NOx, I'm going to take something else. I'm going to take CO2. I'm going to take fuel efficiency. You can here find any car maker, any models, and just say, "You guys are cheating because what I'm seeing on my car is not what you're announcing." It's a very complicated issue. It's a Pandora box. Today, what is at stake is the fact that the regulator understand that regulating on everything is practically impossible. Giving the impression to the consumer that whatever he's going to get or measure in his car is going to be reflected by whatever norm, is practically impossible. So how do we get out from it? How do we get from it? First, just to tell you one thing, and we are totally conscious of the problem. It's a complicated issue. We want to make sure that when we bring an answer, it's not an answer that satisfy the French newspaper or the next 3 weeks or the stock market for the next 24 hours, but they're going to stay with us for many years to come because this issue is going to stay for many years to come. So every initiative we're taking, just making sure we test it with time. What's going to happen one year down the road, 2 years down the road? What's going to happen when Euro 6d will come with the new regulation? The first thing is, I want to tell you that when we had this unfortunate story, started with a tract of the whatever, CGT saying, "There is a police in Renault. What's going on?" All of a sudden, people say, "Oh my God, it's a new Volkswagen story." We had to calm down by saying, "Well, it is not a Volkswagen story. Our cars follow the norms. Yeah, you want to test our car, you're going to find 5, 10, 15 times, et cetera. Thank you for having interest in Renault. But by the way, you can test any other car, not only on NOx, but how about testing on CO2 and testing on other things?" You're going to find these kind of things. Okay? The first thing is calming down and telling the truth and the facts. We've done it, first with the officials. We had from the official a clear statement saying, "These guys are not cheating." Second, all our vehicles are on the norm. Third, but you can improve your performance on emission outside this. Okay, very good. Everybody can improve, et cetera. We're going to do that. But we're going to have to do that, putting it in perspective. We're talking about diesel, NOx, Euro 6. How about the rest? Okay? After NOx, you're going to have another emission, then you're going to have CO2, then you're going to have fuel efficiency. By the way, there are costs involved. There are new technology that we are considering for Euro 6d. We're talking about EUR 250 over cost per car. EUR 250 over cost per car. Just for what? Not to do the norms, but also to make sure that outside the norms, in real driving condition, we don't go beyond 2 times, okay, versus 5 or 10 times. At the end of the day, what's the benefit for the consumer? We need to ask ourselves a question because at the end of the day, our job is to make sure that our cars are attractive and they are competitive, still following the norms. And by the way, when we say, we have some of your competitors are better than you because using, yeah, maybe. But they have overinvested in a certain way in diesel, which is a strategic decision, which I understand. You worry about emission, buy electric car. You worry about emission, buy electric car, and we are the leaders in electric car. If really your first concern is emission, well, we have the perfect car for your concern, buy electric, buy Zoé, buy Kangoo Electric, and we have other products coming. And we think that the answer, if this growth is emission growth, the answer is going to be zero emission. And zero emission, we are the leaders. In a certain way, you have from one side to make sure you get out from the debate, there is cheat, you don't respect the norms because everybody recognizing today that this is not the case. If there is a problem, there are not enough norms. Fine, bring the norms. Let's see how the norms are going to do for the technology, by the way, because when the consumer is going to start to see that diesel costing more and more money, they may be tempted to switch to gasoline or switch to electric, which is fine for us, by the way, because we are very strong in these two categories. We obviously have a communication to do a lot of public relation, and we're talking about it. But we want to talk about it in a way that you don't divert short-term issue and find yourself in trouble 6 months down the road. We have to have a message which answers the concern on the short term, but answer also the questions that are going to come 6 months down the road or 1 year down the road. That's a little bit our concern. The idea of saying, "Okay, can we take an NGO and tell them to test our cars?" Frankly, my opinion, it doesn't resist 5 minutes analysis. Okay? First question about why an NGO will test your car? For one car maker. Why? Okay? NGO are not to test the car of one car maker. They are to eventually save the world or resolve the emission. And all of them is suspicion. If I hire an NGO, I'm telling you, "How about you test my car, but I'm not going to pay you money." You're going to say, "Hey, wait a minute. Why the NGO is interested in testing your car? What are you doing with them? What's your interest there?" It doesn't solve a society issue, nothing at all. And second, nobody what test you're going to do, you can always come with an experience showing that you are not respecting the norm. Because in the consumer mind, you need to tell them that you can use the car in a way where emissions are going to be no matter what, 5 times, 10 times, much higher. Because even in Euro 6d, which has been decided by the European Parliament, real driving condition, it's normed. These are very specific condition on which the car are going to be tested. I can bet you that anybody who is going to go take a car, test it in a completely different condition, you are going to get 2 times, 3 times, 5 times the norm. I am going to say, "Hey, this is not my real driving condition." We have to be very careful about the emission, be very transparent, make sure that we do not bullshit anybody about it. It is a complicated issue, and this is an issue which is going to stay with us for many years to come. Today, concentration is on NOx diesel because there was a cheat discovered, et cetera. But tomorrow it may be CO2. It may be fuel efficiency. It may be something else. I bet you because of the attention about that, you are going to have a lot of media excited about, "Okay, let us go test cars into different condition." Emission problem have one solution is zero emission. There is no test, there is nothing. You do not emit anything. We have it. Now, on where we are testing, we have to recognize you are always going to get an emission different from what is tested because you can always use a car in a way where you are going to obtain a completely different performance than what is normed. Because you are never going to test the car exactly the way it has been normed, even with the real driving emission, which has been delivered. That is why I am very prudent on this. Very prudent on this because of the confusion, and not to promise anything that we cannot deliver, and not promise anything which is against the nature of our product. Thank you. I think it is time now to move to the call. Yeah. But just Sorry. This is an important question about. But we are communicating. We are putting all the data. We have a continuous engineering working with the French government, in other country. We are making a lot of interview with the specialized press to try to explain the problem and also telling them, first we have electric cars. You worry about emission, buy electric car. Second, by the way, on CO2, we are one of the best car company in the world in term of emissions, fuel efficiencies, and CO2, which is global warming, by the way, which is the main concern of COP 21. Then you have the specific emission on which we say, "Please norm. Put the norms." Because when you put the norm, that is important. Then after the norm is being reached, then we can give the consumer what he wants. Okay. Thank you. First question from the call, please. We have a question from Charles Winston from Redburn Partners. Sir, please go ahead. Yeah. Hi, morning. It's Charles from Redburn. Two quick questions to Tom, please. Could you just give us an update as to what the impact of FX would be in 2016 at current spot rates? There's a very bad echo on this line, so apologies, if I'm a bit unclear. Second question is just on updating us on content or enrichment costs. Could you give us updated thoughts for 2016 and maybe how that might move into 2017 as we start getting RDE testing in other areas? Just what that cadence would be from known 2016 to 2017. Thank you. Okay, Charles, there was indeed an echo, so let me. If I miss your question. I'll put the question again. Please write to me and I'll update you. On foreign exchange, the impact in 2015, as you saw, was minor. However, it did deteriorate in the second half. We had a positive impact of a little bit more than EUR 100 million in the first half, and we ended up with plus EUR 22 million for the full year. So clearly H2 was not as favorable. If you'd asked me the question about a month ago, I would've said, basically that would be the guidance for 2016. However, the last few weeks, few days, have actually been worse. So I would expect that the foreign exchange impact will be more negative in 2016 full year than if you just double the second half of 2015. I don't have a crystal ball. We have no idea where currencies are going to go, but the current mix right now is unfavorable. Now, content and enrichment. Content and enrichment, you're right, the second half it was less adverse than the first half. I think this is what I said in my remarks, the first reflection of how we're able to price for value. We did say at the beginning of the plan that we would reinvest a part of our cost competitiveness in the attractiveness of our vehicles, which we've done. The cost ends up upfront, and then it's a question of how you're able to pass that on to consumers. That's the enrichment content that we've decided, and then, of course, there's all of the content that we don't decide but that is mandated, that's regulated. The Euro 6. Now here, this is Euro 6b, which is landing in the accounts this year. That's part of the non-feature content, which is in the cost of the vehicle and being passed on. If you look at the second half, we were much better at passing on content in pricing and in vehicle attractiveness. I would expect, as the model range continues to unfold as it was presented, that that number should. The second half is more a guide for the full year 2016 than the first half of last year. The best guidance I can give you is just look at the second half of 2015 and use that to work off of your projections for 2016. Thank you, Dominique. Our next question from the call, hopefully the line will be better. Yes, we have a question from Mr. Dominic O'Brien from Exane. Sir, please go ahead. Hi, can you hear me? I can still hear an echo on the line. No, you are better than Charles. Okay, thank you. Just a couple of quick questions on the product cycle. Firstly, can you increase the current monthly run rate of the Kadjar through 2016? Secondly, when we think of the Renault Mégane, your market share has typically been very cyclical around its own product cycle. I know it is early days, but in the orders that you have so far, do you think you will be able to gain material market share in this segment this year? Thank you. Kadjar. Where? Yeah. What? Huh? Kadjar. Kadjar. Okay. No. Oh, okay. We have with us the head of manufacturing who is under pressure always to produce more. Globally, just one information while he's preparing to answer, can we produce more Kadjar? Which is the question, is when we signed the competitive agreements, if you remember, with the unions three years ago, and we said we're committing to bring the production in France for more than 710,000 cars, while we were below 500,000 at a certain point in time. Just for your knowledge, in 2015, we produced more than 660,000 cars in France, and our forecast for the year 2016 is above 710. It's 730,000, 740,000. Frankly, it's not done artificially, it's just done because the market is strong, and the cars are being successful, and we need this capacity. We are increasing the use of capacity in Europe, and we will be increasing the outcome of the manufacturing plants in Europe in 2016. This being said, the answer on Kadjar, can we produce more Kadjar in 2016? Mr. Dos Mozos, he's the head of manufacturing. Good morning. Yes, we are studying that. It's in the same plant we produce the new Mégane. We are working in three shifts, and also we are studying with these people the possibility to work in the weekend shifts. Weekends. Okay. The answer is yes, we can produce. But at the same time, if we have even more success than what we are foreseeing for the moment, we obviously are going to have to make some investments, which is totally possible. For the moment, what we're trying to do is go to three shifts, working the weekends, use as much as possible existing capacities, just to test if the car is really solid and we have much more demand. And then after that, we will make the investment. What was the second question? Mégane? Second question was about the start of the Mégane and if we intend to increase our market share on the C-segment this year. Well, hopefully, yeah. But anyway, Stéphane, we have the head of. He was until yesterday the head of the European operation, and now he's the head of the regions. And I'm going to let Stéphane, so he put the budget and the objective for 2016. The answer is very simple and clear, yes. As the CEO has already explained, if you go back into Renault's performance history, 2005, indeed, if you go back, especially in Europe, Mégane was a pillar of not only our volume contribution but also our profitability. And we are on track to rebuild this. Why do I say this? Because obviously the car has been launched in Europe. Not in every single country yet, but the response has been very good. The car has received some prizes and awards already, and we are on a very good track with regard to our order entry. So clearly, yes. Okay. Thank you, Stéphane. So one question from the room. George. Two questions, please, George. Okay, thanks for the reminder. George Young, Natixis, two questions. The first one on the CapEx cycle. With what you said in terms of product renewal, the need to invest more, related to emissions and the future projects regarding autonomous driving, et cetera, should we see a surge or an uptick in the CapEx cycle, or will you still remain at the 9% CapEx to R&D ratio cap? That's the first question. Second question on the Alliance and the synergies. You've more than doubled the synergies over the past few years, heading for EUR 4.3 billion. How far can you go, and how can you sustain those synergies? Beyond that, how can we ensure the sustainability of the Alliance between Renault and Nissan? Okay. First question is about the investments. We cap the investment at no more than 9% of revenue. Last year, in 2015, we were around 8%. We were not at 9%, even though we are in a very heavy cycle of renewal. Let's also not forget the fact that part of our investments and the concentration of the investment are going to be in China. In China, we foot only half of the bill. We have a 50/50 joint venture with our friend from Dongfeng, though we pay only 50%, and they pay the other 50%. The question to your answer, we will at no moment will be higher than 9% in the foreseeable future, and we are capping the investment, not by avoiding doing project, by particularly doing them in a different way. A lot of cost reduction, a lot of sharing with Nissan, sharing with Daimler. This is the best way to cap the investment, and at the same time, continue to have a very strong output of new products and new engines. Now, you had the second question, which is synergies. Synergies are going to continue to increase. They're going to increase, first, because obviously the benefit of putting together the platforms is growing. Because obviously, this decision have been made three years ago, but the platform was ready, but there were no cars. Now, the cars start to go out, and the benefit of putting together the platform are going to increase the synergies at the level of the Alliance. That's number one. Now, you're saying the sustainability of the Alliance, what's going to happen with the Alliance in the future. That's a good question because it's interesting that there is a lot of questions about the sustainability of the Alliance, even though it has been 17 years already on the road. 17 years. There have been other merger which collapsed after three, four, five, seven, eight years. People thought that by merging, company would be very solid, et cetera, and then it didn't work. So this way of working together where we keep the two company autonomy separate with their own identity, their own culture, everyone with his own specificity, but still working hard to develop synergy in what, frankly, doesn't matter for the consumer. Because after 17 years, nobody can say that there is cannibalization between Nissan and Renault. Nobody. Not even in Europe. When we look at our shopping list, in the shopping list of Renault or shopping list of Nissan in many region, you rarely find the two company together, or rarely, or if not, it's marginal. We still cross-shop with Nissan. We still cross-shop with Toyota, Honda, Hyundai, et cetera, and Renault is still cross-shop with Peugeot, Citroën, Volkswagen, Fiat, et cetera. So there is no cannibalization. So we can continue to work like this for a very long time. We're going to continue to build synergies. There are still a lot of opportunity for synergies. We've done a major step two years ago. We're going to have another step coming in 2016 with more convergence, without ever mixing the company. And that's why the Alliance Stability Covenant that was signed in December, in a certain way, clarified the rules. There is no more doubt, questions about who's going to do what. That's it. The rules have been clarified, and I think it's going to stay with us for many years to come. Okay, so, I propose to turn back to the call. Is there any questions? Yes, we have a question from Dominic O'Brien from Exane. Sir, please go ahead. They already have questions. I am sorry. We have a question from Mr. Horst Schneider from HSBC. Sir, please go ahead. Okay, Urs. Yeah. Thank you for taking my question. I hope you can hear me. I want to come back to the issue, Mr. Ghosn, that you mentioned beginning of the call that Renault is by now a different company, not anymore focused on one product and one region. In that context, I want to get more information on the split of profitability between the entry range and the rest of the business. My understanding was so far always entry range is above group average in terms of profitability, maybe close to 8% in terms of margin. Having in mind that now Russia and Brazil have deteriorated that much, I just want to know if that is still the case, and if you are still generating profit in Russia and Brazil, or if these countries are by now loss-making. In that regional context, looking at the share price, it's obvious that the market fears some major deterioration of volumes, not just for you, for the industry in general. I want to ask if you see any signs of weakness in your current business, in the order intake. Yeah, that would be great. Thank you. Okay. Well, we had, but for internal purposes, I've been told we cannot use it outside because you guys are too curious, so every time we show you something, you want more. We have a very simple chart where I put the regions and the products, and we put Circles. Green circle is profit, red circle is losses. Then we were, product by product, region by region, putting all these circles on the map. What's interesting that in 2005, there was one big green circle on C-segment Europe. A small green circle on LCV, like commercial vehicle, Europe, and practically everything else was red and small. That was the state in 2005. Today, when you look at this map, you have big green circle practically everywhere in Europe except for D, E, which will be green this year. Then you have most of the region green. Okay? What I want to tell you, it's a different company. We have invested and developed a product and established a presence in markets, where we can tell you for the next 2 to 3 years, you should see much more contribution to profit coming from the different regions. The most promising one for me is obviously the most distressed, because it is Russia, because in Russia today we have nothing anymore, even though it was the most profitable region in term of margins, not a long time ago. I'm really convinced that when the Russian market will turn, by the way, it's going to be this year at 1.4 million car. It was not far from 3 million, a couple of years ago. So when this market is going to turn, because Russia collapsed quickly, but also Russia recovers quickly. This is going to be a very important engine for Renault. Do not count on it in 2016, but this will happen sometime in the future. In the Americas, it is another region which is extremely promising. Brazil was a very promising, for us, market. We are building our position in Brazil. Now we are barely holding to profitability, because of the collapse of the market. Brazil is not going to stay where it is. At a certain point in time, Argentina will be turning the corner, we think, in 2016, 2017. This is also something which is not in our account today. That will come later. China, for the moment, we have nothing. You know very well that most of the car maker are double-digit operating margin in China, even though with the competition taking place and the reduction of price, China is a very profitable market. We are not a rookie in China. We are coming in China with the Nissan industrial system. That is basic. We are going to come running. We do not have to warm up and learn our way. We are coming practically as another brand of the Alliance, with the same system of the Alliance, with a product that the first signs are very positive. Korea is a positive element. India has been a suffering market so far, but finally with the CMF-A platform and the Kwid launch. My point, honestly, obviously, I can tell you that most of the region should contribute much more to the profitability, because we know that at a certain point in time, when Europe will be recovered, Europe profitability will stabilize. The progression of the company is going to be mainly by growing the company in all these regions where we have established presence and obviously improving the profitability in this region. What was the second question? It was about, are you seeing any weakness in volume in the order in China? Well, this is a good question because when you see the collapse of the stock market and the strengthening of the JPY and everybody going for refuge, you say, "Okay, what the hell is going on?" We say, "Okay, are we missing something?" We go back to the guys who have the hands on the wheel in the region, and we ask them, "Do you see any weakening of the order?" Obviously the answer is yes in Russia, but this is not a surprise. The answer is yes in Brazil, but this is not a surprise. In Europe, Stéphane? Up. Up. He is asking for more cars and more engine. That is the situation in Europe. You have the situation in China, obviously in China. But again, in China it is easy for us because we are going up because we are starting with practically zero. India, Monsieur Combier, is always asking for more Kwids. Today, people are turning down Kwid because you are telling them six months to deliver the car. We do not see any sign from, I am not talking about Russia or Brazil, these are the two exceptions. We do not see any sign of weakening or canceling or reducing orders. That is the situation that we see today. Okay, one question from the room. Philippe? Just a question regarding the costs. Monozukuri, you are perceiving, actually, do you think that you can increase again cost saving in 2016, or due to the renewing of the product range, do you think that you can increase the cost saving in 2016 compared to last year? A second question, regarding Aptivus. Actually, what you are going to do with Aptivus in 2016 in term of consolidation? Okay. Well, on Monozukuri, taking the opportunity presence of Thierry Bolloré, who is in charge of all this area and particularly driving our total delivery cost, maybe to mention about the cost reduction for 2016. Good morning. Cost saving, frankly speaking, we are going to be constant in performance. I am talking in percentages. Our goal is permanently to absorb the extra cost that we have, of course, with the launch of all our new cars, with also the regulation, as you can imagine. But all that is already embedded in our plan, in our budgeting process. That is why we are pretty confident. For AvtoVAZ, I think what we are going to do with AvtoVAZ, as you know, we have the intention to consolidate AvtoVAZ, but one of the reasons for which it is taking some time, when you consolidate the company, you need to sign a specific document saying that you guarantee that all the processes and everything is clear. We are not at that point there, that is why it is taking more time. But I hope that by the end of this year, we should be there. Then at that moment, we will consolidate. That is the position that we have officially. AvtoVAZ, what you need to know is obviously when you look at the numbers of AvtoVAZ, say, "Oh my god, it is terrible." But what you do not see is all the work which is done on the ground. AvtoVAZ has reduced 20,000 employees for the last two years, a lot of them being indirect. Not only indirect, but a lot of them being indirect. Second, the quality level of AvtoVAZ has improved tremendously. Even recognized by the people of Renault and Nissan, which obviously is, for me, a recognition of the fact it is real, because usually between car manufacturers, you are much more picky when you are examining the quality made by somebody else. Okay? They are happy with it. They say, "No, it has been a strong improvement on quality, far from what used to happen." Third, new product line upcoming for AvtoVAZ that has been successful. The cars that are coming on platform, particularly Renault platform, are selling well in Russia. The fundamental work of putting this company together, having a strong management, much more competent, improving quality, reducing the structure, cleaning the supplier network, particularly by making sure that the suppliers we have are really suppliers we can count on, that are capable to grow with us, has been done very quickly. Unfortunately, it's not visible in the number because the market has collapsed. Okay? I'm expecting when this market will turn on, you're going to see how important it was for us to have AvtoVAZ. Because this capacity, we know how much it costs you money to build capacity in Russia, and these capacity are huge. We transform some of them. We have much more room for increasing capacity if needed into the future in AvtoVAZ. As you know, localization rate is extremely important in Russia. But here, most of the suppliers are already based there. Not all of them we can work with, but we have already something to work with in order to increase the localization. So it's a lot of suffering now. We're going to consolidate. I know the results are not here, but this is more an investment for the future, much more than something we're going to benefit from on the short term. But now, I think maybe Dominique Thormann can tell you what does it mean on the financial results, maybe. Yeah, I think this is the key point. AvtoVAZ is 50% of what we sell in Russia is made in their factory. So the integration, the industrial integration, the vehicles, the supply base, the supply chain, all of this is progressing. But consolidation is just an accounting consequence of control, right? Of an entity of a company. Economically, there's not much difference, in terms of what we're doing today. But today, we do not have control in a capital sense. The day we'll have control, then clearly, when all the other conditions are met, accounting, internal controls, et cetera, all of that will lead to a consolidation. So it's the end game, but it's really not what's fundamentally at stake today. Yeah. If we think that Russia is going to stay at 1.4 million cars, we should get out. Okay? We should get out, logically. If we all think that Russia is going to stay at 1.4 million cars with the ruble going up and down, I don't think any car manufacturer can make money in these conditions. A lot of people will get out. We don't. And you know very well that the day energy prices start to move up, commodity prices start to move up, this market is going to fly. Particularly that it went down 50%, to come back to the same level, it will go up 100%. Okay? So what is important for us is be ready on quality, on product, on efficiency, on relationship with the suppliers. So when the market will pick up, and nobody knows when it will pick up, we'll be the first. We today have 34%, 35% of market share in Russia. Obviously, we are all struggling. Yes, it is true. But when it turn, this market can be very, very profitable. Okay, thank you. Maybe time for one very last question, and only one. Is there a question from the room? No, that is it. Yeah, Alexi? Okay, one question, please. Thank you. Good morning, Alexi at Bernstein. Barclays. I have just one question left. You have overachieved your plan in 2015. You are already above 5% operating margin. What is the trigger now to look at the capital structure of the Alliance? Capital structure to the Alliance? In what sense? Is that 43% a long-term goal? Do you know the Yeah. I don't think we have a particular goal here. The 43/15, the merit is it exists. That's it. It happened in the past. It was signed in 1999. To change this, you need to have a very clear purpose, strategic purpose, something which gives you lasting benefit. As long as you don't have this, the only merit of the 43/15 is it exists. And there is, for the moment, an acceptance from all the parties. For you to change that, you're going to need a very strong purpose, strategic operation, a huge opportunity coming. I don't think we're going to play any game to start to fine-tune these numbers without a specific purpose. You've seen that last year we spent eight months discussing an issue which was not even at this level, and it was extremely sensitive, and we had to pay attention to a lot of stakes, and we wanted to make sure that our two main shareholders, which are Nissan from one side and the French state from the other side, were still motivated and working together, et cetera, and working with trust. We were able to do that. It's very sensitive. The only way you can touch this is you have a very strong purpose. And if you can have a strategic purpose which is very clear, then we'll move. Okay, thank you all of you who have been here this morning. I know that we have not enough time to answer all your questions, but all the IR team will be available today to answer the questions you may still have. Have a good day. Bye.