Forvia SE

Good morning and warm welcome to this 2019 Faurecia Performances Presentation. I will start with the 2019 highlights.

Michel will follow with a detailed review of our results and I will close this presentation with 2020 outlook. If we start with the highlights, three main points to underline, the first, we delivered strong and resilient performances in 2019.

All the financial targets are achieved and this in a tough environment and I will tell you more about this. We achieve a strong cash generation and we are very much focused on cash and we will continue to deal with this.

We also achieved on record order intake in 2019 with EUR68 billion of order book. And we did that while accelerating our transformation on our strategic domains, the corporate of the future and sustainable mobility.

We created Faurecia Clarion Electronics, our fourth business group. We acquired the 50% remaining stake in SAS from Continental and we created Symbio, a joint venture for hydrogen stack systems with Michelin.

We also focused on and it's specially, important to involve in those days in this stressed market situation on total customer satisfaction and sustainable development. So customer recognition through 48 customer awards, I think it's significant and we launched flawlessly 221 programs around the world.

We balanced in terms of total customer satisfaction the performance, the measured performance with the customer perception and we have about 200 to 300 interfaces per customer which are now able in real time to tell us the quality they have felt about our interfaces. We have values and convictions.

We are living these values and convictions very much. We have defined related to each of them projects and we have KPIs associated to these projects.

And we launched the CO2 neutrality 2030 program, it's staffed, it's recognized as being an excellent practice. And we also and was just said in the short video, the Faurecia Foundation.

So all targets achieved in a challenging environment. I said that to you and between 2019 and 2018 the market dropped by 5.8%.

This means 5.2 million vehicles worldwide and 2.2 million vehicles in China only. So despite this, you see it with 17.768 billion, we achieved our sales targets with 280 basis points of outperformance.

If you exclude the GM strike which cost us EUR73 million of sales, we would have been at 320 basis points of outperformance. It had also an impact of course on the profitability, we achieved 7.2%, but it would have been 7.3% and excluding Clarion, 7.5%.

The operating income was EUR1.283. Net cash flow, here again, we performed better than our guidance and even better by about 16 million than last year.

We achieved EUR587 million. So about Clarion Electronics, it was a year in which we consolidate Clarion.

We start with this the April 1, 2019. We created this business group.

We integrated Parrot and Coagent. By the way, we had to buy 100% of these two companies in order to integrate them.

All of that is done. We were very much focused on our cost base we had to improve profitability very quickly and competitiveness.

So we reduced by 14% of total headcount in 2019. And we are in the momentum to achieve 19% in 2020.

And by the way, at the end of the first half, we closed four plants three in China, and we achieved EUR22 million of savings which is slightly above what we forecasted and communicated. So we are perfectly on track with the 18 million we announced before.

The Clarion operating margin alone reached 3% in 2019. And we also confirmed the order intake target we communicated during the Investor Day of EUR1.9 billion in 2019.

This is allowing us to reach the 2.5 billion sales and 8% profitability in 2025, the 2 billion, which was our first target should be achieved in 2023. We also reconsidered our product lines and here you have the full offer of Faurecia today.

So in fact, we have 18 product lines, five new product lines, four belonging to Clarion Electronics, one is to fuel cell electric vehicles, which is Symbio, but not only the storage systems are owned by Faurecia to 100% and are part of the full scope of hydrogen vehicles. You also have in Interior Modules; Interior Modules is the part which is related to SAS to all the jets we have which are doing the assembling of all the Interior Modules.

One point maybe I would like to underline is smart materials especially considering the CO neutrality. We want to invest in this part.

We want to work on new materials with new functionalities, but also green materials, which will improve our CO2 neutrality by design. Our record order intake, I just spoke about that, we achieved EUR68 billion of order book in 2019, which is reflecting and continues gain of market share and what is also important, we achieved these ones being selective, allowing us to improve the profitability and we have never been at the 2019 profitability at initial business plans.

On the bottom of this slide, you see the seating sales growth profile for the years to come. And I think it was important for us to show you this and also to tell you that we will rich benchmark, industry benchmark on seating before 2022.

When we look at the new value spaces, we achieved 17% of our order intake with new value spaces, it was 12% in 2018 and this is including commercial vehicles and high horsepower for 1.6 billion and Faurecia Clarion Electronics for 1.9 billion. And also, I would like to mention that we achieved serial orders from Hyundai from another OEM for fuel cell tanks and complete systems.

This is done through an ecosystem. I think we were one of the first really working on an ecosystem believing in an ecosystem because it's very difficult to be able to deal alone with all the complexities the systems are requiring.

And if we look at what was achieved in 2019, so when we start with the sustainable mobility part, we partnershiped with Michelin for fuel cell systems, it's related to our Symbio joint venture. We acquired Ullit, which is a French company, specialized in high pressure tanks.

We have together 700 bar tanks which are homologated. We have on cockpit of the future the acquisition of Clarion, Creo Dynamics, which is a noise cancellation specialist, Covatech, which is an optical bonding specialist for older displays.

We acquired the stake in SAS and we partnershiped with Microsoft, with Aptoide, with Devialet and Allwinner which is a SoC supplier in China. Cyber security, we invested in Guardknox, which is an Israeli company and we opened our technology platform in Tel Aviv, which is very much focused on cyber security.

Two important figures about innovation, 584 million over the last three years, 235 million in 2019, we are accelerating our innovation spend. It's normal, we are becoming more and more a tech company and we have to make these efforts.

In parallel to that we posted 608 first patents which is a significant increase, even not considering the FCE perimeter which achieved 132 patents. A few pictures about the CES Health 2020, I think that here again we were able to show the complementarities between Faurecia, Clarion electronics and our traditional niches.

I think that this allowed us to have a very coherent offer for the company of the future, but also, you saw it on the ADAS and on the zero emission part. The CO2 neutrality, we believe that this will certainly be the next disruption in the industry and I should say in the industries, it will be totally transversal and we have to work on this with, I think the right priority.

So we have staffed this program. We have started working on this program.

We gave ourselves the target for Scope 1 and Scope 2 to be ready in 2025. This target has to be validated, we are working on this and we will soon be able to tell you more about this.

We are working then on the design, we believe that we will need at least three loops in order to better understand how to manage the new materials, how to manage the new arbitrage we will have to make in terms also of the related supply chain. In a starting point, especially for Scope 1 and Scope 2, it is for us totally coherent with the competitiveness of the automotive industry, using less it's less energy or less material is productivity.

And so we are dealing with that as we are dealing with the digital transformation both are again complementary and will allow us to improve our global cost base. On the design side it's a little bit more complex.

Our customers have made some declarations about their own targets. And what we want to be is a front runner in supporting them on how to measure the CO2 on the new products at an RFQ phase.

I think that this is an important point and we are recognized for what we have started to do. You've seen that the climate disclosure project has identified us part of the top four suppliers out of more than 100 and this is for the moment more related to the organization to the clear targets and to the concrete projects on which we are working.

Michel, your turn for the detailed review of our results.

Thank you, Patrick. Good morning, ladies and gentlemen.

So as I like to be [indiscernible], we have achieved all of our guidance's, sessile performance total the three business points. Operating income in gross, operating margin at 7.2% and if we include the deviation of Clarion, 7.4, net income of 590.

If we exclude Clarion, we come back on this, 722, so in gross as well. Net cash flow at EUR587 million, which was not an easy task in the current environment, net debt at 2.5, including EUR4.9 billion of IFRS 16 debts and that one at least we propose to grow the dividends.

With that I would like to highlight it was not an easy year as you know, market was down by something like 5.8%, which means for Faurecia, EUR1.1 billion of sales loss, EUR250 million operating margin loss. So it was the things, as we said the events, we have to compensate.

So starting with the sales module we can see a small currency impact which is in US dollar, which has the ability to reach back to zero. Gross ex currency at minus 3%, which means total the three business points, so which is, the composition, which is 1.1 is the gross.

Clarion Scope, EUR586, nine months. You have at the bottom, the key events it was an end of production for seating.

It was a one off, it would as Patrick has said, we will have some big gain of market share on seating starting end of 2020, accelerating in 2021, mainly two frames platform and one complete seat platform for FCE. We have as well, GM.

GM is of course was EUR17 million, if we again take GM, we should have achieved in front of us 20 basis point out performance. Operating margin, due to the same event I mentioned 250 as an impact for the volumes, it was capacity to buy as it grows as outperformance, but not at the same margin because new businesses are at the page margin of the groups slightly better, so which is why you see only 188, we fully offset that with the workers cutting program EUR175 million.

This figure is integrating EUR21 million for Clarion, although, online is a composition of some one-offs last year, and some new ones this year. So as a whole 7.4% is excluding Clarion, 7.5 if I eject GM as GM strike, was a EUR 21 million impact on operating margin.

We have the Clarion division, even if Clarion itself has achieved 3% margin and for the full new business 1.5. How we did that?

We have our business plan and we continue to implement this real action plans this year in 2020. On one side, we have made an A, I would say active restructuring.

It was a research opportunity in China. We saw a big drop in some regions.

It was as well an opportunity in Europe to adapt permanently to the footprint of our customers. For instance, we have seen, we've faced some top of production and that's of course Germany, why we have a big hope in this job.

So we have to permanently adapt to that. Second key point, since I will say mid 2018, we have made, I will say some action start to squeeze the cost, the a major one is squeeze of equipment or limited equipment, we have of course reduced the protectors, we have reduced our EBITDA [ph], this has paid in 2018, this is paying in 2019, this will continue in 2020 as for instance, on the indirect labor, we are below today and much below our budget.

That's been at least our cost reduction programs we have presented that in the survey in different times One for instance is a GBS EUR17 million with receiving last year, so all of this of course is contributed to the EUR175. Starting now of our business group, seating.

So seating was an adverse impact from end of production. On one end, that means a drop of complete seat, on the other hand, we continue to gain market share on frames.

So frames are growing in this figure. The impact was exceptional this year at 700 basis point as the top of sales compensated by of course are some programs, but when you see the operating margin, it is a definitive improvement.

We are above 7% operating margin. As you know frames mechanism are much more profitable to complete seat.

So on one end we took advantage of the cost cutting program. On the second end we clearly took advantage of epidemics.

With that I can give as a highlight is that next year, for this year 2020 that will be still EUR140 million is a less part of the end of production. Seating will start to grow is a signal after 2020 with two new platforms of frames and this will accelerate in 2021.

Seating will post a very big outperformance from 2021 onwards. Interiors, opposite, bigger performance of 490 basis points, mainly with customers we see FCA Tesla in North America for instance, Vinfast in Asia, Southeast Asia, so very active growth, a lot of new programs.

On the opposite o we face similar casual issues. The main one is decoration.

It is a surface treatment painting with a lot of stops and some difficulties around the year 2019. We have given you the figure of EUR37 million adverse impact.

This is clearly a figure that we changed drastically this year. We have probably posted a small loss in the first half, positive figure in the second half.

We have to mention as well some other cost on one program hump up in North America that is almost resolved today. Clean mobility, strong growth, five of the business point outperformance, some significant gain of market shares and you see the customers RNM, General Motors, but Hyundai and Honda as well.

Big improvement of profitability, we have won one off with PIS-Cofins in South America, we saw that in UA, FCM would have posted 20 basis point improvement and clearly this improvement will continue in 2020. Clarion Electronics, so it is a new business group starting, so starting with Coagent both in 2018.

After that we have added Parrot and of course Clarion. So you see that today it's a strong scope perimeter.

We achieve after second quarter 2019 loss, we achieved big improvement, big contribution was on one hand in Coagent, some new platforms was the second end, the first part of the savings of the cost cutting program in Clarion EUR21 million savings if you remember. Clarion itself was a 50% margin, Coagent of course positive, Parrot negative because it is, we say company developing new programs for Europe and top of that EUR6 billion integration cost.

We are deploying SAP at very speed around the Clarion, for say Clarion, it is done for Parrot, it is done for Coagent, Japan will be done in the second quarter. At the end of the foreseeable quarters this year, so after 15 months, we will have fully deployed all our information system and this will generate significant savings.

So clearly you know cost synergies Clarion above EUR80 million. A big part would be captured in 2020.

By regions, Europe outperformance of 120 basis points, some gain of market share. On the margin side, only a small gain, but please take into account that as a decoration was very dilutive, so it generated by something like more than EUR20 million or if you prefer more than 20 basis points.

This will clearly be one of the big victories of improvement of Europe that we expect for 2020. North America very much affected at the top line at the end of production of GM Class, so it was a year of drop of sales.

On the opposite we were able with cast cutting as we have the GM one off as you know EUR70 million. On the opposite operating income, smaller decline.

If we range as GM impact, we will have above by 40 basis points. So in UA North America is showing that, as Europe that we are adapting our cost base.

Asia, two big fitting things, first a big drop of volumes in China, which was a major impact, second impact of some bottoms and failed as a scope our Clarion Scope. In this delicate environment we are able to make active restructuring more than 10 plants closed in China.

We are I will say, limiting the impact of the top – of the top I will say of volumes So as you can see that was a margin, we report to the highs in 9.9% knowing that Clarion Japan and Clarion Southeast Asia and China activity by 80 basis points. So we have limited the growth to very small figure, which is quite a performance of our Asian teams and many Chinese teams.

South America, I would not comment so much on the growth because probably there is a composition between as a currency devaluation as it goes because we passed [indiscernible] in the sales with a reset on the margin, we have one off with PIS-Cofins with a ruling. If I deplete from that South America is slightly up that means above 4% of operating margin.

We continued to suffer in Argentina; volumes were down by 40%. So where uncertainty proceed a small loss in Argentina and this will be reduced because we are limiting year-after-year our exposure to Argentina.

On the opposite we posted 5% without the PIS-Cofins now in Brazil and this will improve in 2020. Now, if I take the profit and loss statement, very good achievement growth of gross margin, we improve by 100 basis points and which is quite that we say a good performance and showing two things [indiscernible] program that as well as the mix, we improve the mix of business and we are starting new programs at least at the margin of the group even better.

On R&D, a big increase, have business scope, Clarion and you knows that Clarion business is more R&D consuming and those are – is Faurecia itself, but it was an innovation on one side, it is what we call the new value space and we are developing on the other side. So to be at 2.4% and to be able to finance 2.4% is one of our flagship achievements of this year.

We did that with a reduction of SG&A, general and certain expenses. It's not very easy to read because on one side we have the scope EUR107 million and yeah, if you make a percentage, it's obvious that Faurecia Clarion has much higher G&A expenses at the average.

It is as we say big part. This will be resolved because it is on this that we are concentrating our workers cutting program.

On the other hand that means that we have reduced SG&A by more than EUR50 million, which is in line with of course what has happened at the market, but at least what we're achieving, for instance grew the CBS I was mentioning before. Net income, so a lot of lines and sorry for that.

But we have the amortization of good will and we have made a good will for Clarion. We have for nine months of EUR45 million amortization linked with Clarion.

We have a big acceleration of restructuring at Faurecia of course EUR63 million for all the brands deployed on the perimeter of Clarion. As a non-recurring expense we have EUR16 million as acquisition cost.

The financial expenses, on one side we have IFRS 16 award, which has started January 1, EUR45 million. On the other side we have the Clarion cost EUR59 million, so which means if you make some calculations that we have reduced the cost of the debts of Faurecia alone.

What I can mention as well is the income tax. We were able to activate deferred tax in Germany to reduce again as a corporate tax to 21%.

As guidance on all these figures that we set restructuring will be probably EUR100 million minimum, financial expense 200, corporate tax, if you allow me to be cautious 25%, but probably will do better. Going to the bottom, we have a lower I will say minorities as this is Clarion minorities I mean in Chinese and this is reflecting the fact that Chinese will use without of course.

So as a whole EUR590 million, we say in the result. If we take now all the figures are linked Clarion, with EUR40 million operating margin, you will see that excluding that we have achieved EUR722 million net reserves.

So growing our net results with the additional restructuring cost in I assist a quite delicate environment Similarly for the net cash flow, so a big improvement on the EBITDA, the big part is link and to fill this link with IFRS 16 award. CapEx, we were almost flattish integrating Clarion, Capitalized R&D, we have goals but it is the scope, excluding the scope is only EUR50 million and which is as we said very positive that we continue to decrease if we exclude Clarion, our net that means activation minus amortization.

Restructuring of course a big figure and this week continue in 2020, same thing for financial expenses. So one key thing, it was our capability to continue to reduce the working capital for our C2C plan.

We have reduced inventories. We have continued to improve as it turns with suppliers.

If you allow me one line to insist, we have due to the – set of December, we have a small drop of factoring of receivables and which is I will say a one off impact. Now, I forget to mention is also at the bottom, we have the sale of certain plants, EUR110 million.

We add some sale of asset as the year before. So when you compare from when you're trying to do, the sell is very limited.

So despite the net factoring addition, despite additional restructuring, we were able to deliver, I will say better than expected EBITDA than less. Financial debts, you have on the left side as impact IFRS 16.

It was a little higher than expected due to financial impacts we were taking on the request of our auditors the average interest rate and not the total duration. We have the Clarion acquisition.

So we were at over 2.6 in total cash flow, if we pay dividends, we are able to go back to the 2.5 which was our guidance. If you look at the debts, we have made an active refinancing last year.

We have now three months over five years. We have – so to China we serve very good conditions.

All of these is below our cost of 2.5%. So we have the maturity, we have the cost and we have the flexibility.

We have a syndicated – booking syndicated line EUR1.2 billion, five years and all. Dividends, so last slide, you see the momentum.

I think it is speaking by itself. You see the momentum, and we want to continue this momentum.

We have forecasted dividends. We have forecasted the net cash flow, which you remember has a 40% guidance as the net cash flow will be dedicated to dividends.

So we can propose to the shares on the queue to continue to grow the dividends to EUR1.3 for this year. I give back the floor to Patrick.

Thank you, Michel. Outlook 2020 and to start to start with our market assumption, so, it's clear that the visibility we have is low.

But I think that we took reasonable assumptions. You have them here in North America we consider that the market will be slightly down between minus 1% and minus 2%.

We believe that it will be around 16 million vehicles. Europe should be down also between minus 3% and minus 4%.

This is related to the uncertainty of the CO2 convergence of our customers, but it's also related to the Brexit and to the trade constraints with the USA. China at minus 5%, this is related also to the crisis we are going through today.

So we see China at around 20 million vehicles, within Europe at 20.25. China is no more the first automotive market worldwide.

I think that this is by the way, good news because it means that when we consider that we have lost since 2017 4.5 million vehicles in China. It will have consequences.

The first one, it will accelerate the consolidation of this market, it will eliminate the weakest players and there's no reason on the top of that not to see the market recovering at least 4.5 to 5 million vehicles in the next future. We nevertheless consider and we are more pessimistic than HIS that in 2020 the market will drop between 1 million and 1.2 million with our assumptions.

Globally it means a market at around 83 million vehicles, which means versus last year versus 2019 a drop of about 2.5 million vehicles. Now when you look at the seasonality, we will have an abnormal seasonality on first quarter and first half, which will be dropped because of what is happening in China.

And we most probably will have a first quarter with a drop at double digit. Again, what is important to consider and I think that we need to have these figures in mind since 2027 the World Market dropped by 9 million vehicles, which means about 10%, 18% for China, 9% for Europe, and 6% for North America.

So we have room to progress in the future. And I think that we should keep that in mind because we have to get prepared for this.

An update about the China situation, it's evolving every day and I have to make some corrections versus this slide, but maybe to position ourselves in this context, we made EUR2.6 billion of sales in 2019. We have at the end of the year 58 plants out of which four are in Wuhan and two in XiangYang, which is in the Hubei province.

We have in China 19,700 people at year end. Good news is that none of our employees is infected.

None of them has got the virus. The startup of production has started.

I'm writing here that 52 plants out of the 58 should have restarted today. It's not the reality.

We are today at 45 plants, the remaining from 45 to 52 should restart this Friday. Out of the 45 we've restarted, we stopped five because we have no codes from our OEMs.

We have three difficulties to deal with. The first one, it's a very temporary difficulty.

It's related to the workers who have spent time outside of the province in which the plants are and which have to go through and guarantee, so this will come to an end very quickly. The second one is related to our supplier base and we have suppliers into Hubei area which have not started.

We have in China about 900 suppliers and we have difficulties with 39 out of them. We have alternatives which are being put in place.

Most of our suppliers are larger suppliers and they have plants outside of Hubei and so the point is to transfer the tools from the Hubei based plants to other provinces and we will deal with this. The last difficulty is borders which are existing now between provinces and also cities.

So we have as an example to change the driver when we come to a province border. The driver belonging to province A is not authorized to enter in province B.

So this is a little bit of logistics and it works for the moment quite well, but we will have to see how it will work with an increase of activity which we expect in the days and weeks to come. I wanted tell you that we believe that the measures taken by the Chinese authorities are working, you have to consider that in the Hubei province, we have 82% of all the cases, which were declared.

But we have 94% of the new cases, which were declared in the last weeks. And when you look at XiangYang, we are at 187 case and the cases, the new cases are decreasing now for eight days in a row.

So we see it contained outside of Hubei. In Hubei it's going down, but we do not have these eight days, which are significant before you can speak about a real reduction of the cases.

When we now look at our supply chain, we are very much hedged; it's at fewer millions between our imports and our exports. And you have the figure here, our exports are representing EUR176 million representing 7% of our Chinese sales and all the plants which are exporting have restarted and we have had so far with these plants no issue with the supply chain, so our exports have normally restarted through an accelerated transportation process.

What else can I say to – what else can I tell you about this? We are now and that's something you will understand, we are completely focused on health and well-being of our teams in China.

It's very tough for them, but we believe that again, we will come out of this. We see that the local authorities, the Chinese authorities are considering incentives, but also cost reductions in order to support the companies like for example elimination of some rental costs of buildings, buildings belonging to the state.

We have social cost reductions, we have tax reductions, which are also different from one province to the other. And we have to collect all of that to see how we will deal with all of this.

We don't know how long it will last. So we have taken internally some tougher assumptions as the one I just gave you in order to get prepared.

And this is again part of our resilience plan. And by the way, we did not wait January to launch our resilience plan for 2020.

We anticipated a global reduction of the world market during our budget exercise last year and we were ready with our resilience plans, the 1 January of this year and we have started implementing them. So they are in hard in all the objectives of our business groups.

Our guidance for 2020, so I spoke about the reduction of 3% versus 2019, in this frame, what we are considering is a growth related to scope effect of 500 basis points and an out performance versus the market between 100 and 200 basis points versus the worldwide automotive production. We also propose an improved profitability with an operating margin at least at or higher in fact than 7.2% and continues significant cash generation with a net cash flow above EUR500 million.

This puts us perfectly in line with our midterm targets we announced during our CMD last November, which was sales in 2022 above EUR20.5 billion, an operating margin at 8% of sales and a net cash flow at 4% of sales. Very quickly about PSA, FCA merger, the only real new information is related to the December 18 agreement, which was signed between the parties, so that the merge is now on the rails and what has to be done before the spinoff will be decided, is to make sure that remedies will be accepted by the European community, so it's the normal antitrust process and also all the audit elements, especially the ones related to US request, which have also to be achieved, but which are not on the critical path.

So that our, my guess and it's a guess, I'm not you the deciding party here is what we should see the spinoff happen probably at the end of the third quarter beginning of the fourth quarter. At least this is our working assumption.

The takeaways, inn 2019, we confirmed the group's resilience and agility. We achieved all our financial targets, and we secured profitable growth with a record order intake being at 68 – cumulated for years, EUR68 billion.

Despite a tough environment, the group continued its transformation. We have even accelerated our transformation, creating a fourth business group and investing in innovation on corporate of the future and sustainable mobility.

Our 2020 guidance continue to show a willingness to improve all our financial results. And especially, we are focused on cash generation.

We are on track with this guidance to achieve our 2022 targets, all of them. And finally, Faurecia is committed and I think that this is very important.

It's something we are living with passion inside the company. We are committed to value creation for all stakeholders.

We want to make a positive contribution to society. And for that we are engaged in the CO2 neutrality by 2030 and also through our new foundation, which is in particular in the moment active in China, and especially in the Hubei province.

Thank you very much. Now, I'm open to questions.

Thank you very much. It's Sascha from Jeffries.

My first question would actually be on the order intake. What is the base for the numbers in terms of lightly equipped production that you included in that number?

The second question is for Michel, reverse factoring, how much are you doing? How much has it changed and is there only an impact on cash or did you also have a benefit on your gross margin from that?

And then lastly, there was some indication that OEMs are stretching payment terms for their suppliers i.e. putting pressure.

Do you see that and what are you doing against it? Thank you very much.

Okay. So the volumes for the order intake, the first thing is, we revise every year our midterm plan and of course, we take into account the midterm plan volume.

So they are revised down as you as you can imagine. And not only we also then consider marketing volumes, we never take the market shares the customers are proposing to us, so that globally the volumes we are using are conservative to sometimes significantly conservative.

Reverse factoring, so firstly there is no impact because as a contributor with this it means that means that we validate as quick as possible as invoices of the suppliers and we give the opportunity to the suppliers to sell zero receivables to the reverse. So it is outside of Faurecia.

Now, of course, giving the service we have much better chain and we tied to get some days of payment terms which has worked because you have seen that we have improved, but it is payment terms, we've increased that. So basically today we have probably something like we say probably EUR200 million of receivables on Faurecia, so to the bounce as we continue to grow.

Your question was about customer payment terms. Of course, we see pressure, which you have seen one customer changing overnight.

We refused. So we defend and work with

It was a Chinese.

It does not, we have refused and we will fight so no change of them in terms except if we agree with that. But this is managed directly by the top management.

Thomas from Kepler Cheuvreux, three questions please. First, can you give us the effective impact of the contribution of SAS on your accounts?

Maybe the pro forma for 2019 or the revenue, adjusted EBIT and cash impact on 2020? The second question on China, I understand the [indiscernible].

Do you think it's fair to assume that in 2020, again, international OEMs and notably Volkswagen are going – and premium automakers are going to do better in the markets, notably from what we hear about relaxation of big seating caps are removed. And I think, just want to confirm that it would be helpful for you is that the case?

And last question, your North American margins, we have to believe there are still some upside when we look at where you are compared with some of your direct North American competitors. And also, you've been hit obviously by a few one offs in 2019.

What kind of upside potential do you see for national margins this year and by 2022? Thank you.

So I take the two last ones, so I'm starting with North America. I think that the upside we have in North America is about 100 basis points.

And this should be achieved in the next two years. China, we see effectively international OEMs regaining market shares.

We are now at around 44% for the Chinese OEMs which is significantly less than a couple of months ago. And yes, it is supporting our market share considering the content we have with the international OEMs.

We have worked on their offer and they are offering today very attractive SUVs, including in terms of price competitiveness.

SAS performance figures 2019, EUR747 million of sales, a little more than 8% operating margin, as you mentioned that because we did only from first of 1 February, so 11 months. Another question?

Gaetan Toulemonde, Deutsche Bank. A few questions.

The first one, I remember in the past, you were very optimistic for 2020 and 2021 and because of some contract which had been delayed, you confirm some optimism for 2021. Can you give us some update on that front?

That's my first question.

It's – we are speaking about mainly on North American contract a significant one which is related to complete seats, which was delayed. So the current vehicle did quite well.

And so, they continued to expand the sales on this one. But this comes to an end and we will see now – we will have in the two months to come, the real start of production of this vehicle.

The other ones are related to platforms – to metal platforms and two one, one belonging to Japanese OEM and the other one belonging to one German OEM. And they also were delayed, and they will start and this is what Michel said at the end of this year.

So in the fourth quarter of this year, the three are significant from a sales point of view.

I remember that time you were mentioning approximately 400 basis points if outperformance of the car production. Is it something you confirm for 2021?

Yes.

Okay. My second question is – I raised that already in the past, the 175 million of resilient cost.

Can you give us a little bit more details on that and what kind of assumption we can work on for 2020 on that specific item?

Okay, so for 2020 we are going – we are targeting the same amount at least. Yeah.

So if you want to give some details about the 177 Michel?

Yeah. You have EUR21 million Clarion as I have indicated, a little more than EUR40 million restructuring for Faurecia itself, EUR70 million of GBS and the rest is a fees as we said a labor cost reduction.

Global Business Services, GBS. We have also significantly reduced the number of our plants.

We have restructured, we have spent a lot of money in 2019. In 2020, we will see what the market conditions will be.

For the moment, we are considering about EUR100 million for restructuring, but we might spend more and if the volumes will get even further stressed than our assumptions today.

Okay. So if I understood well, 20 million from Clarion and 40 million restructuring, so in total 60 million, so 190 million provision for restructuring.

So in theory in 2020, we should have significantly more.

We have again EUR40 million for Faurecia and the EUR50 million for Clarion, so EUR50 million, yes.

Okay. Another question regarding Clarion, you still expect an improvement of the operating profit despite the fact that 25% of the business is with Nissan which is suffering?

Yes, because the volumes are protecting the prices and the restructuring, we are doing will allow us to maintain our cost base to the expected level from a margin point of view.

Okay. So the profit of – the profitability of Clarion, can you give us an idea, I mean, last year 10 million.

What would be this year on the following year?

We confirm I would have say we've said at the Investor Day, that means, Clarion we said was 3%, but altogether 1.5, 2.2 and if you exclude the EUR6 million integration cost. This year we target to be between 4 and 5.

You will go progressively to 7% in 2022 and we target to be at 8 in 2025.

Perfect, thank you.

We revised down the growth of Clarion versus the first information we gave you. This is just in order to protect our cash.

We have to be careful not to get overwhelmed with new programs. It's a question of managing the resources, the financial resources on one hand, but the human resources also on the other hand.

Do you have by phone?

Hello, thank you for taking my question. The first one on the outlook, on the market outlook, so back at the Capital Markets Day you were getting for worldwide slightly negative and now you're saying minus 2%.

But within that in the Capital Markets Day you were indicating China slightly up. So do you kind of compliment the guidance that within that China seems to be or has to be a bit weaker we would expect.

So can you maybe explain the valuable parts that other market is doing better than you expected since November? This is the first one.

I am not competing with you because at the Investor Day we were not minus 2, we are going now to minus 3, taking into account that China will go probably to minus 5. Of course, the first quarter will be very much impacted.

Second quarter will be more balanced because last year it was a quarter of destocking. So low quarter because second half as you know is complicated to anticipate and we have said 0% plus, I think that if China rebound, probably the rebound will be much more.

So clearly with respect to the Investor Day the only difference is China.

Okay, thank you. And then on the free cash flow, maybe just following up on Sascha's question, you mentioned that reverse factoring will continue to be favorable this year and, in the future,, can you quantify how much we expect it to be a positive impact that – of 100 million – on top of 100 million free cash flow guidance.

The working capital, it is working capital you say?

Yeah, on the reverse OpEx.

Working – you have factoring of receivables, we have adopted. But we still keep our guidance of EUR1 billion and this is when we say guidance for the level of effective receivables year-after-year.

So we think reverse factoring as I have mentioned has no impact to the payment terms, which is what you see is aligned to working capital. As I say working capital, we have a very positive achievement EUR166 million this year.

And again guidance for 2020, I will say positive. We anticipated positive inflow because we have, one major plan is inventories.

And we want to gain one – we say probably two days of inventories, which is something like EUR160 million. For instance, Clarion has variant inventories, which would be one of the major actions.

So today it's too early to commit on a very – on the figure on working capital, but clearly the target is as well, the positive inflow coming from working capital.

Okay, thank you. And maybe just if I could squeeze one more, again trying to reach your midterm guidance on free cash flow, if you're guiding for above 700 million next year, which is solid given the environment where we are in, but your guidance for 2022 is 4% to 10% [ph], so just help us understand how – what are the moving parts, are we going to simply double the amount of free cash flow that we can generate over the next – on the 202?

So we're not doubling. In fact, we are around three, three plus and we want to go to 4% of sales.

What I can tell you is we are working on a yearly basis of course, but we also have set top down targets to our teams which are related to the cash generation for 2022. I'll give you two examples, but we have some other projects which are ongoing.

We currently have 5.4 million square meters and we intend to go down to 4.5 million square meters despite an increase in sales of about 2 billion between now and 2022. Another example, we are around 14 days of inventories, and we intend to go down to eight days of inventories.

So I don't know exactly if we will be able to do it in 2022, maybe it will be in 2023 because these targets are extremely tough and our teams are working in making them robust, but this – our contributors, so these are boosters to improve these – this cash generation and I can tell you, we have more than this. We have in total, six very tough top down targets which will contribute to this cash generation.

So which we give you in Investor Day is totally valid, yeah. So when you – I'll take the question, we have an implement of EBITDA by minimum of EUR1 million year-after-year, we want to cap the CapEx plus and activation at EUR1.4 billion maximum even less.

We will keep a positive working capital and I was mentioning inventories, but we want to further reduce inventory from 30 days to if possible eight days in 2020, investment at least, we have a very high level of restructuring this year, which we hope to reduce in 2022. So it is at least that we will secure this level of percent that is for us a key commitment.

And Clarion will consume between '20 and '21 about EUR150 million of cash, which target –our targets and which was communicated is to be cash neutral in 2022. So if you look at all of that we feel confident that it's an achievable target.

Thank you. Thank you.

Thank you very much for taking my question. One sort of a longer term question on your CO2 neutrality target, you mentioned earlier that during some RFQs you can now forward including the CO2 footprint, is that something OEMs already require and can give a bit of color as you are the only ones doing that or if there are others doing the same?

That's the first question I'll follow up with more.

So far, customers are speaking about that. We haven't seen any RFQ which is mentioning it.

But finally it will probably be dealt with like the weight reduction. At a point of time we spoke about – on price related to cost reduction.

This industry cannot afford to have any kind of price increase related to CO2 neutrality to be very clear. So what I believe is that we might be penalized if we do not achieve the CO2 neutrality targets.

The point is that the industry today we don't know how to measure our CO2 level on a new product, on a new project and we are now engaged with some partners to work on that. I don't know if other Tier 1s are working on this.

I think that it's an urgency for all of us. What is easy to measure for our customers and what is important for us as being in communities is to achieve carbon neutrality on Scope 1 and Scope 2, which means our plants and all our sites.

And I think that this can be achieved quicker than the global carbon neutrality, which is integrating the design of new of new products. And so we are committed to make investments which are by the way, inside our CapEx envelope, because they are productivities.

They are corresponding to cost savings, as much as it is the case with our digital transformation.

Got you and then sorry to come back on the question with regards to the free cash flow, just two parts of that is, one, can you quantify roughly what you are expecting in terms of a contribution of working capital to your cash flow in 2020 and maybe also 2021. And then the second point you mentioned obviously, the inventory days going – to go down from 30 to eight.

Now, in light of obviously, what you've seen in China in terms of the disruption, how do you think that is a face strategy when you do have certain disruptions and then having to stop your plants because of your own supplies being not on time?

So all that is related to China is not a big issue because it will not last for very long, so we have – even if we have increased inventories at the point of time in order to protect our customers and especially to re-launch the supply chain, this within three months will be managed after the rebound. So I'm not concerned about this.

When you look at our days of supplies, in fact, we were in '19 at 14 days and we want to go down at eight days at the end of 2022. It's also related to the savings on the square meters.

We have external warehouses, for example, so we will eliminate all the external warehouses stuff, we will do it very quickly. We also will use artificial intelligence, we have a much better understanding today of what are the consuming profiles, especially in digits of the end customers and so we know much better what are the low runners, the high runners and how to deal with these inventories.

So we have tools which are allowing us today to be much more precise in the way we are dealing with these inventories. Maybe to tell you that we are not, Christophe and I satisfied with the 14 days, we should be better than this.

So, we have also some room which is an efficiency room before we are really tackling what has to be achieved through these new technologies. So I told you the eight days we will make them is it in 2022, is it in 2023, this has to be now checked, but we will get very close to this in 2023.

Thank you and maybe the last one, just on your JV with Michelin, can you give us a little bit of color? You obviously announced the contract with Hyundai on your fuel tank, can you give us a bit of color where do you see that business going in terms of scale and in terms of the timeline again, following up from your CMD, has anything changed since then, since you these customer request?

I think that more the battery electric vehicle is growing and more the best spective for hydrogen vehicles is growing. So it's going in parallel.

I'm taking this opportunity to say it again, we're speaking about electric vehicles. So it's exactly the same power train architecture.

The difference is on one side the energy is coming from the batteries, it's stored in the batteries. On the other side, it's produced by the stack.

Yeah, but fundamentally, we're speaking about electric vehicles. Now when you are considering higher horsepower's, when you need power, which is the case of commercial vehicles including trucks of course, the batteries are not working because the load you have to consider to power these vehicles is just too high and you will lose a significant part of the load – the real load to active load of these vehicles.

On the other side these vehicles can't stop. I believe, for example, that the trucks will be the first real autonomous vehicles we will have on the highways and you might have trains of trucks and you can't think about one of these trucks in that train getting stopped because of autonomy.

So we have with hydrogen the autonomy we currently have with diesel engines and we refill at the same speed. And I think that again, this is very significant.

On the top of that we will see hurdles. No, I'm saying that as an example, we were very lucky this year, we haven't had done the snow case in Paris, but we are used to that.

Now think we would have 80% of our cars being DEV and these vehicles will be stacked in a snow case outside of Paris and the batteries get empty. How do you clear the highway?

How much time would it take? Yeah.

So we will see practical cases, which I believe will make evident that we will need to have several power trains co-existing corresponding to different use cases and two different environments. So I believe strongly that hydrogen is a significant solution, which has no issue with some geopolitics and sensitive materials, it's very easy to implement.

We have all the knowledge and expertise in France to deal with that. And I think that the growth will be quicker, will be in volumes higher than what we have thought about and we are revising up every year these elements.

And I remind you that during the CMD we considered a very aggressive plan at 30% of electrification, full electrification, which were – in which we included 5% of hydrogen vehicles. And I'm sure that next – that middle of this year, we will have to revise not the 30% because still nobody is at this level, but the share of hydrogen vehicles.

Good morning just a couple for me please. Firstly, looking at the R&D capitalization in H2 and was about a 55 million benefit incrementally to EBIT about 60 basis points of margin in H2 and now a benefit in EBIT margin by about 150 basis points.

Firstly, why is it awful lot in H2 and also what would you expect on those lines for 2020? And then secondly, on depreciation for 2020, obviously, it's awful lot in '19, but that's on the IFRS 16 change, would you expect to start needing to depreciate more in '20 or should we think about some of the percentage of sales?

Thanks.

Okay. So thank you for your question.

So as you mentioned, efficacy decision was increasing more because it's – we use comp impact and we are comparing three months for Clarion in the first half, six months ii the second half. So it is mainly wise, it is a measure impact in the second half effects the first half.

If now, we project to 2020 we are mechanically with Clarion EUR15 million, EUR20 million more. We think that we could offset that at Faurecia itself.

So the target is more or less to be flattish or slightly up, but very slightly up. So depreciation due to the gain of increasing CapEx in the few year's, so we continued to grow with the depreciation as we say for everything by something like EUR20 million, EUr30 million, same thing for amortization, which will go as well.

Great, thank you.

Thanks for taking my question. I just got follow-ups for Michel.

First one is what is the cash contribution from SAS for 2020? And then the second is do you have any further proceeds from asset disposals for 2020 or 2021 and 2022 within your plan?

About SAS, I have given some figures about operating margin, but you can take cash in between EUR40 million and EUR50 million. For set of a set –

It was FCE I think it was the question.

FC?

FCE.

FCE, I'm sorry, FCE we have given the guidance at Investor Day something like that minus EUR774 million because we have the last part of pension to pay with due to the departure of end of December. We have goals of the order book to finance.

For 2020, 2021 on sale of asset, there is nothing in our guidance. Probably we have some small things to sell, but it will be material.

Thank you. Can I ask this one follow question on working capital?

I know it's been asked quite a bit, I think you say you expect luminous factoring or basically the delta between receivables and payables to further increase in 2020. Since this will be the eighth year of consecutive working capital event.

Just besides inventory, is there a level at which you feel like your working capital days are at the limit or would you be still looking to expand the working capital days into 2021and 2022?

I'm not sure if I understood your question. I insist the main improvement will come from inventories.

So five days of inventories is a very big figure. We are – it would be clearly with a lot of improvements starting with your prediction of viability inside of our plants, so which would be a measure, we'd set targets for other teams.

This would be year-after-year, we cannot make that in one year. It would be stupid to say that.

So we will have this very positive flow coming from inventories decrease. If your question is to see that positive working capital is a shy target, I agree that it's too early to commit on big figures at the beginning of February.

Thank you.

Good morning, Patrick and Michel. A few items that is – or just, I'll just go one by one, I guess, can you comment please on seating.

You mentioned the acceleration in sales, can you give a bit more color please around which programs or which regions are going to be driving this acceleration? Then two on China, just to keep it simple, which measures that you think you need or are you taking to get back to double digit margins?

Michel, can you comment please on absolute levels, CapEx and R&D for 2020? Michel please CapEx and R&D absolute levels.

And then final one, FCA at which products are you currently not represented? So which products are really saying them at the moment?

Thank you.

Jose, can you repeat your last question because the sound is not very good.

FCA, yeah, sorry, yeah currently FCA, which products are currently not standing or are you under represented?

Okay, thank you. Seating, so 2020 as Patrick was mentioning, one, Nissan complete seat program, one Nissan frames programs are two different products and the start of the Jeep Grand Wagoneer, but the Jeep Grand Wagoneer is a big hump up will be 2021.

We have as well the start of frames for this very well-known German car maker this will accelerate as well in 2021 and 2022. It was a big German car maker, the frame we start in 2021.

So we have some different platforms and figures out very, very significant. China –

Maybe just one more precision about that, in 2020, but it is happening at the end of the year, we will launch an equivalent of EUR3.5 billion of lifetime sales. In 2021, we will launch in addition to this an equivalent of EUR5.4 billion of lifetime sales.

And in 2022, it's 1.5 billion in addition of lifetime sales. So this gives you the magnitude of the growth we have in front of us within seating and which is explaining the graph I showed you about the sales growth, starting really in 2021.

Now your question is about China, China, we have some restructuring and some full year impact of restructuring. Second thing we have some cost cutting measures and promotion activities.

So China is a commitment we can repeat is that we will make a double digit profitability. And Asia as a whole, we target to post more or less the same figure as this year.

R&D activation, we have made at the end of the second EUR681 million, I can speak of EUR700 million maximum. And for FCA, FCA we are mainly delivering the JEEP platform and Johammer [ph] platform, both in interiors and via community, but we have a huge market share and we are humping up for Jeep as well in seating.

So our exposure is mainly Chrysler and the Chrysler is Jeep plus Johammer.

When you take seating, we spoke about seating. The seating market share within PSA is 25%.

When we look at the market share we have with FCA, it's 2.1%. So you see that especially on the platforms if we do the job correctly – because what we have to do now is to work with both companies and to propose on hybrid new platform which is convenient for both brands.

Yeah. And we are working on this.

It should allow us to increase our market share with FCA and of course Nora, if we increase the volumes, we will also improve the prices and we will contribute to the requests made by the new group or will be made by the new group to generate productivities.

Excellent, thank you.

Yes, good morning. A question about what kind of relationship you have with your OEM customers.

Last year, there was very high profile, faceless one of your customers or previous customers, I should say, who passed the contract? I mean, you no longer have a contract on that product.

And that is terrible launch in United States. And you said you think there's an increasing realization of the differential in policies between different suppliers and that people recognize maybe Faurecia's differentiate qualities are different from those of maybe others and so this could be a competitive advantage in the future?

So I don't – I can't speak about obviously, our competitors, but I will tell you what we did, what is absolutely critical for the OEMs is the launch phase. Not to be late in the launch, not to patch your bait then with the launch to be immediately at the right quality level.

And so what might go wrong in the launch is the plant in which you are launching the products and the program management, which was not delivering on time. A couple of years ago, we have started risks anticipation processes, on both the management of our programs and the plants.

And this works. This works really.

So now two years in a row we launched more than 220. We are launching between 220 and 250 programs per year.

And we haven't had difficulties with these programs. When we look at the delta on startup costs which is really measuring the quality of our lunches.

We are at in both years in a limit, which is a good one. I give you an example of what might have happened in the past in which cannot happen anymore today.

Think about the plants where you allocate three or four new significant programs, you allocate them because of the cost base, the attractive cost base of this plant, but the lunches are quite simultaneously. So then because of that you have to expand the plant and because of the geography you have to do a completely new layout of the plant.

And on the top of that, you implement SAP. It's a real case I'm describing to you.

Yeah. So each single decision was not a bad decision.

It was rational, but cumulated it's the recipe of a disaster, because the plant cannot digest this level of perturbation. So what we are doing today, we have lockbox with – and certain number of criteria, where we anticipate on the three months rolling base, the level of disturbance we will create through these decisions and our different plants.

We are measuring, for example, the quality of our management team, the seniority of this management team, we're considering if we have a new technology, a new process, which will be implemented, we are considering if it's a new customer for us, we will deliver and so on. This is appreciated by our customers.

We are I think the only one doing it with a real methodology, which we deploy systematically on all our programs and all our plants. The other thing we are doing is, is it easy to work with us.

And obviously, several years ago, it was not easy. And so what we did is now we are measuring the perception on the top of measuring the performance.

And we have few apps, which are now distributed to all our customers and follow up in real time on how easy is it to work with us, how reactive are we? And finally which is the real measurement of our relationship is the customer recognition awards, 48 last year and the order intake.

And I think that on both and not only considering the amounts in sales, but also the profitability we were quite good. So I think that we have significantly improved our relationship.

We continue to focus on that. It's absolutely critical.

So again, especially in both times which are stressed and where our customers have some concerns. We are in the same boat.

So we support them. We are not in an antagonism with them.

We try to find solutions with them to make our industry better. And I think that these solutions are existing including with new business models.

Thank you.

It's, it's Sascha from Jefferies again, just to follow up on the seating business. How should we think about the mix contribution from that ramp ups to frames which would be accretive in terms of profitability, but then there's a full seating contract as well.

Just on a relative scale is that neutral for your mix overall, or is there a net benefit from more frames versus complete seats in 2020 and then '21?

We will maintain, so we will – we had a significant advantage and when we look at our order intake in 2018 in fact, because we won a very significant number of platforms. We have a less advantage – and less bigger advantage through the mix in 2019.

But still and we will continue to be selected to maintain the mix advantage. Yeah.

Gaining complete seats, if you do not have a clear perspective to be able to sell components related to this jet doesn't make a lot of sense. Okay.

So we are only considering the jets when we believe that we have the possibility but this will support the sound of all the seat components, which we can add to this.

And then very last question on CO2 compliance in Europe, we are now into 2020 and maybe you can share your view and how you see clients preparing for that. How are you preparing for that?

Do you think everyone will comply? Will there be a bloodbath in the second half of the year in terms of pricing and all of that maybe you can share your view?

I have no idea. To be honest, I have no idea.

The only thing I can tell you is that if you ask our customers, they all have plans and they have plans to achieve and target without having to pay penalties. The only problem is that all of these plans are related to theoretical sales.

Yeah. So we are considering selling a car, A, with power train A rather than car B with power train C.

Yeah. Will this materialize, nobody knows.

You have most probably seen a lot of advertisements in television about electric cars. Everywhere we see this advertisement.

Will they be able to sell all these cars? I don't know.

What I'm sure is that we will most probably have a first answer to your question in the second quarter when it will become evident for them that they might have to deal with gaps. And then what the reactions will be, I don't know.

Yeah. Measured, organized or different and by the way some or most probably the financial scale to deal with that to accept some discounts in order to replace their volume.

Some others will have more difficulties with.

Okay, so again, thank you very much for being here and supporting our company. On our side you've seen we are trying to do our best.

Thank you.