Forvia SE (FRVIA) Earnings Call Transcript & Summary

Good morning, and a 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 a 2020 outlook. If we start with the highlights, 3 main points to underline. 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 achieved a strong cash generation, and we are very much focused on cash, and we will continue to deal with this. We also achieved a record order intake in 2019 with EUR 68 billion of order book. And we did that while accelerating our transformation on our strategic domains, the Cockpit 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, and it's especially important in those days and 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 are 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 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. 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 EUR 17.768 billion, we achieved our sales targets with 280 basis points of outperformance. If you exclude the GM strike, which costed us EUR 73 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 EUR 1.283 billion. Net cash flow, here again, we performed better than our guidance and even better by about EUR 60 million than last year. We achieved EUR 587 million. So about Clarion Electronics. It was a year which we consolidated Clarion. Let me start with this, the 1st of April 2019, we created this business group. We integrated Parrot and Coagent. By the way, we had to buy 100% of these 2 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% the total head count 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 4 plants, 3 in China, and we achieved EUR 22 million of savings, which is slightly above what we forecasted and communicated. So we are perfectly on track with the EUR 80 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, sorry, of EUR 1.9 billion in 2019. This is allowing us to reach the EUR 2.5 billion sales and 8% profitability in 2025. The EUR 2 billion, which was our first target, should be achieved in '23. We also reconsidered our product lines. And here, you have the full offer of Faurecia today. So in fact, we have 18 product lines, 5 new product lines, 4 belonging to Clarion Electronics. One is the 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 CO2 neutrality. We want to invest in this part. We want to work on new materials, 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 EUR 68 billion of order book in 2019, which is reflecting a continuous gain of market share. And what is also important, we achieved these ones being selective, allowing us to improve the profitability. And we've 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 reach 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 EUR 1.6 billion and Faurecia Clarion Electronics for EUR 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 of systems are requiring. And if we look at what was achieved in 2019, so when we start with the sustainable mobility part, we partnershipped 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, of Creo Dynamics, which is a noise cancellation specialist; Covatech, which is an optical bounding specialist for all the displays. We acquired the stake in SAS. And we partnershipped with Microsoft, with Aptoide, with Devialet and Allwinner, which is a SoC supplier in China. Cybersecurity, we invested in GuardKnox, which is an Israelian company. And we opened our technology platform in Tel Aviv, which is very much focused on cybersecurity. Two important figures about innovation, EUR 584 million over the last 3 years, EUR 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. [Presentation]

A few pictures about the CES of 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 Cockpit 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 3 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, if 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 see that the Climate Disclosure Project (sic) [ Carbon Disclosure Project ] has identified us part of the top 4 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 highlighted by Patrick, we've achieved all our guidances. Sales performance, 280 basis points. Operating income, in growth. Operating margin, at 7.2%; and if we exclude the dilution of Clarion, 7.4%. Net income at EUR 590 million; if we exclude Clarion, I will come back on this, EUR 722 million, so in growth as well. Net cash flow at EUR 587 million, which was not an easy task in the current environment. Net debt at EUR 2.5 billion, including EUR 0.9 billion of IFRS 16 debts. And last but not least, we proposed to grow the dividends. What 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 EUR 1.1 billion of sales loss, EUR 250 million operating margin loss. So it was the things -- I will say, the events we have to compensate. So starting with the sales, where you can see a small currency impact, it is in U.S. dollar, which has revaluated with respect to the euro. Gross ex currency at minus 3%, which means 280 basis points, so it is the compensation between the EUR 1.1 billion and the growth. Clarion's scope, EUR 586 million, 9 months. You have on the bottom the key events. It was some 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 2 frames platform and 1 complete seat platform for FCA. We have as well GM. GM, of course, was EUR 70 million. If we, I will say, reinject GM, we should have achieved a 420 basis point outperformance. Operating margin, so you see the same event. I've mentioned EUR 250 million as an impact for the volumes. It was compensated by the growth, the outperformance, but not at the same margin because new businesses are at average, the margin of the group, slightly better. So it is why you see only EUR 188 million. We fully offset that with our cost-cutting program, EUR 175 million. This figure is integrating EUR 21 million for Clarion. Other line is a compensation of some one-offs last year and some new ones this year. So as a whole, 7.4% excluding Clarion; 7.5% if I reinject GM, the GM strike, which was a EUR 21 million impact on the operating margin. We have the Clarion division. Even if Clarion itself has achieved a 3% margin and for the full new business, 1.5. How we did that, we have our resilience plan, and we'll continue to implement these resilient action plans this year, in 2020. On one side, we have made an, I will say, active restructuring. It was, I will say, the opportunity in China with a big drop in some regions. It was as well our continuity in Europe to adapt permanently to the footprint of our customers. For instance, we have seen -- we have faced some drop of production in North of France and Germany while we have a big growth in East Europe. So we have to permanently adapt to that. Second key point, since, I will say, mid-2018, we have made, I will say, some actions to squeeze the cost. The main one is the freeze of recruitment or limited recruitment. We have, of course, reduced subcontractors. We have reduced travels, et cetera. This has paid in 2018. This is paying in 2019. And this will continue in 2020 as, for instance, on the indirect labor, we are below today -- much below our budget. Last but not least, our transversal programs, we have presented that in the Investor Day in different times. One, for instance, is GBS, EUR 17 million, I will say, saving last year. So all of this, of course, has contributed to the EUR 175 million. Starting now per business group. Seating, so Seating was facing an adverse impact from end of production. On one hand, that means a drop of composite. On the other hand, we continue to gain market share on the frames. So frames are growing in this figure. The impact was exceptional at this year at 700 basis point as the drop of sales compensated by, of course, some new programs. But when you see the operating margin, it is a definitive improvement. We are above 7% operating margin in the second half. As you know, frames mechanism are much more profitable than composite. So on one hand, we took advantage of the cost-cutting program. On the second hand, we clearly took advantage of a better mix. What I can give you as a highlight is that next year -- for this year, sorry, 2020, there will be still EUR 140 million. This is the last part of the end of production. Seating will start -- restart to grow in the second half 2020 with the 2 new platforms of frames, and this will accelerate in 2021. Seating will post a very big outperformance from 2021 onwards. Interiors, opposite, big outperformance, 490 basis points, mainly with the customers we see, FCA, Tesla in North America, for instance; Vinfast in Southeast Asia. So very active growth, a lot of new programs. On the opposite, we faced some operational issues. The main one is Decoration. It is the surface treatment, painting with a lot of scraps, with some difficulties all around the year 2019. We have given you the figure of EUR 37 million adverse impact. This is clearly a figure that will change drastically this year. We'll have -- probably post a small loss in the first half, positive figure in the second half. We have to mention as well some other costs on one, I will say, program, in the ramp-up in North America that is almost reserved today. Clean Mobility, strong growth, 500 basis point outperformance, some significant gain of market shares. And you see the customers, Renault Nissan, General Motors, but Hyundai and Honda as well. Big improvement of profitability. We have one one-off with PIS-Cofins in South America. Without that anyway, FCM will have posted a 20 basis point improvement. And clearly, this improvement will continue in 2020. Clarion Electronics, so it is a new business group. So starting with Coagent, bought in 2018. And after that, we have added Parrot and, of course, Clarion. So you see that there is a strong scope perimeter. We achieved -- after, I will say, second quarter 2019 in loss, we achieved big improvement. Big contribution was, on one hand, the growth in Coagent, some new platforms; on the second hand, the first part of the savings of the cost-cutting program in Clarion, EUR 21 million savings, if you remember. Clarion itself was a 3% margin; Coagent, of course, positive; Parrot in negative because it is, I will say, a company developing new programs for Europe. On top of that, EUR 6 billion integration cost. We are deploying SAP at very speed -- quick speed all around Clarion, Faurecia Clarion. It is done for Parrot. It is done for Coagent. Japan will be done in the second quarter. At the end of the second quarter 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 the synergies -- cost synergies for Clarion, above EUR 80 million, a big part will be captured in 2020. By regions. Europe, outperformance of 120 basis point, some gain of market share. On the margin side, only a small gain, but please take into account that the Decoration was very dilutive. So it was dilutive by something like more than EUR 20 million or, if you prefer, more than 20 basis point. This will clearly be one of the big vector of improvement of Europe that we expect for 2020. North America, very much affected also top line by the end of production of the M-Class. So it was a year of drop of sales. On the opposite, we were able with the cost-cutting as we have the GM one-off, as you know, EUR 70 million. On the opposite, operating income, small decline. If we reinject the GM impact, we'll have grow by 40 basis points. So anyway, North America is showing that, as Europe, that we are adapting our cost base. Asia, 2 big -- 3 big things: first, a big drop of volumes in China, which was a major impact; second impact, some bolt-ons; and third is the 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 drop, I will say, of volumes. So you can see that on the margin, we're able to drive 9.9% knowing that Clarion Japan, Clarion Southeast Asia and China are dilutive by 80 basis points. So we have limited the drop to a very small figure, which is quite a performance of our Asian teams and many Chinese teams. South America, I will not comment so much on the growth because probably there is a compensation between as the currency devaluation and growth because we passed through a part of it in the sales. What I will say on the margin, we have a one-off with PIS-Cofins with the new rulings. If I deflect 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 we are unfortunately posting 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 a 5% without the PIS-Cofins, and it is now in Brazil, and this will improve in 2020. Now if I take the profit and loss statement, very good achievement with the gross margin. We improved by 100 basis point, which is quite, I will say, a good performance and showing 2 things, the cost-cutting program but as well the mix. We improved 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. Half is scope, Clarion, and you know that the Clarion business is more R&D consuming. And the other half is Faurecia itself, but it is the effort on innovation on one side, it is what we call the new value space we are developing on the other side. So to go -- 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 G&A, general and administrative expenses. It's not very easy to read because, on one side, we have the scope, EUR 107 million. And here, if you make a percentage, it's obvious that Faurecia Clarion has much higher G&A expenses at the average. It is, I will say, a big part. This will be resolved because it is on this that we are concentrating our cost-cutting program. On the other hand, that means that we have reduced the G&A by more than EUR 30 million, which is in line with, of course, what has happened in the market but at least what we are achieving, for instance, through the GBS I was mentioning before. Net income, so a lot of lines, sorry for that. But we have the amortization of goodwill, and we have made the goodwill for Clarion. We have for 9 months a EUR 45 million amortization linked with Clarion. We have a big acceleration of restructuring. As for FCE itself, of course, EUR 63 million for all the plants deployed on the perimeter of Clarion. It's a nonrecurring expense. We have EUR 16 million as acquisition cost. In the financial expenses, on one side, we have the IFRS 16 rule, which has started 1st of January, EUR 45 million; on the other side, we have the Clarion cost, EUR 39 million, so which means if you make the calculations that we have reduced the cost of the debt as Faurecia loan. What I can mention as well is the income tax. We were able, through activation of deferred tax in Germany, to reduce again the corporate tax to 21%. As guidance on all these figures, I will say restructuring will be probably EUR 100 million minimum; financial expense, EUR 200 million; corporate tax, if you allow me to be cautious, 25%, but probably, we'll do better. Going to the bottom, we have a lower, I will say, minorities, but this is -- Clarion minorities are mainly Chinese. And this is reflecting the fact that Chinese volumes were down, of course. So as a whole, EUR 590 million, I will say, net result. If we take now all the figures linked with Clarion, with EUR 14 million of added margin, you will see that within that, we have achieved EUR 722 million net results, so growing our net result whatever the additional restructuring cost in, I insist, a quite delicate environment. Same analysis on the net cash flow. So a big improvement on the EBITDA. A part -- a big part is linked -- to further linked with the IFRS 16 rules. CapEx, we were almost flattish integrating Clarion. Capitalized R&D, we have a growth, but it is scope. Excluding the scope, it's only EUR 30 million. And which is, I will say, very positive is that we continue to decrease, if we strip Clarion, our net, that means activation minus amortization. Restructuring, of course, a big figure, and this will 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 the terms with suppliers. If you allow me one line to insist, we have, due to the -- instead of December, we have a small drop of factoring of receivables, which is, I will say, a one-off impact. I have forgot to mention is the other -- at the bottom, we have the sale of Saitama plant, EUR 110 million. We had some sale of asset as the year before. So when you compare from one year to another, the sale is very limited. So despite the net factoring reduction, despite additional restructuring, we were able to deliver, I will say, better than expected and can be better than last year. Financial debt. You have on the left side the impact of IFRS 16. It was a little higher than expected due to financial interest. We were taking, on the request of our auditors, the average interest rate and not the total duration. We had the Clarion acquisition, so we were at 2-point -- almost 2.6%. And for the cash flow, it is by dividends, we are able to go back to the 2.5%, which was our guidance. If you look at the debt, we have made an active refinancing last year. We have now 3 bonds over 5 years. We have the new Schuldschein with very good conditions. All of this is below a 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, EUR 1.2 billion, 5 years undrawn. Dividends, the last slide. You see the momentum. I think it's speaking by itself. You see the momentum, and we want to continue this momentum. We have for that the results. We have for that the net cash flow, if you remember, has a 40% guidance that the net cash flow will be dedicated to dividends. So we can propose to the shareholder meeting to continue to grow the dividend to EUR 1.3 for this year. I give back the floor to Patrick.

Thank you, Michel. Outlook in 2020 and 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. 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 U.S.A. China, at minus 5%, this is related also to the crisis we are going through today. So we will [ cease ] China at around 20 million vehicles. Within Europe at 20.25 million, 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 their consolidation of this market. It will eliminate the weakest players. And there's no reason, on the top of that, to -- not to see the market recovering at least 4.5 million to 5 million vehicles in the next future. We nevertheless consider, and we are more pessimistic than IHS, that in 2020, 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 with first quarter and first half, which will be dropped because of what is happening in China. And we -- most probably, we'll have in 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 (sic) [ 2017 ], 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 be -- 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 are -- we made EUR 2.6 billion of sales in 2019. We have at the end of the year 58 plants, out of which, 4 are in Wuhan and 2 are 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 start-up 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 who have restarted, we stopped 5 because we have no calls from our OEMs. We have 3 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 their plants are and which have to go through and quarantine. This will come to an end very, very quickly. The second one is related to our supplier base, and we have suppliers in the 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 we 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 off in 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 would like also to 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 [ Shanghai ], we are at 187 case. And the cases -- the new cases are decreasing now for 8 days in a row. So we see it contained outside of Hubei. In Hubei, it's going down. But we do not have these 8 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 a few millions between our imports and our exports. And you have the figure here. Our exports are representing EUR 176 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 -- and it'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, an elimination of some rental costs of buildings or -- yes, 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 than the one I just gave you in order to get prepared. And this is, again, part of our resilience plan. 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 1st of 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 outperformance versus the market between 100 and 200 basis points versus the worldwide automotive production. We also proposed an improved profitability with an operating margin at least at -- or higher, in fact, than 7.2% and a continuous significant cash generation with a net cash flow above EUR 500 million. This puts us perfectly in line with our midterm targets we announced during our CMD last November, which was sales in 2022 above EUR 20.5 billion, operating margin at 8% of sales and a net cash flow at 4% of sales. Very quickly about the PSA-FCA merger. The only real new information is related to the December 18 agreement which was signed between the parties. So the merge is now on the rails, and what has to be done before the spin-off 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 U.S. requests, 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 the deciding party here, is that we should see the spin-off happen probably at the end of the third quarter, beginning of the fourth quarter. At least this is our working assumption. The takeaways. In 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 EUR 68 billion, accumulated 3 years, EUR 68 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 Cockpit 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 and 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.

It's Sascha from Jefferies. My first question would actually be on the order intake. What is the base for the numbers in terms of light vehicle production that you include 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 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?

Okay. So the volumes for the order intake, the first thing is we revise every year our mid-term plan. Of course, we take into account the mid-term plan volumes, so they are revised down, as you can imagine. Not only, we also then consider marketing volumes. We never take on 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 principle, what does it mean? That means that we validate as quick as possible the invoices of the suppliers and we give the opportunity to the suppliers to sell their receivables to the banks, so it is outside of Faurecia. Now of course, giving this service, we have a much better chain and we try to get some days of payment terms, which has worked because you have seen that we have improved. But it is payment terms, linked with that. So as reverse factoring today, we have probably something like we say probably EUR 200 million of receivables in Faurecia sold to the banks, and this will continue, too. Your question was about customer payment terms. Of course, we see pressure, which we have seen one customer changing overnight, we have refused. So we defend our --

[ It's with ] the Chinese.

I don't know. But we have refused and we will fight. So no change of payment terms, except if we agree with that. But this is managed directly by the group, top management.

Thomas Besson, Kepler. Three questions, please. First, can you give us the effective impact of the consolidation of SAS on new 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 visibility on volumes is poor. Do you think it's fair to assume that in 2020 again, international OEMs and notably Volkswagen and premium automakers are going to do better than the market, notably for what we hear about relaxation of big cities' 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, I mean is it fair to believe that there are still some upside when we look at where you are compared with some of your direct North American competitors? I understand you've been hit obviously by a few one-offs in 2019. What kind of upside potential do you see for NAFTA margins this year and by 2022?

So I take the two last ones and 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 2 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. So pro forma figures 2019, EUR 737 million of sales, a little more than 8% operating margin. I remind you that we will consolidate only from 1st of February, so 11 months. Other question?

Gaetan Toulemonde from Deutsche Bank. A few questions. The first one, I remember in the past, you were very optimistic for 2020 and 2021 because of some contracts which have 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 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 continue to expand the sales on this one. But this comes to an end. And we will see now, we will have in the 2 months to come the real start-up production of this vehicle. The other ones are related to platforms to metal platforms, two ones, one belonging into a Japanese OEM and the other one belonging to a 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 3 are significant from a sales point of view.

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

Yes.

Okay. My second question is, I raised that already in the past, the EUR 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, yes? So if you want to give some details about EUR 177 million, Michel?

You have EUR 21 million for Clarion that we have indicated, a little more than EUR 40 million restructuring for Faurecia itself, EUR 70 million for the GBS. And the rest is a phase as, I will say, the labor cost reduction.

Global business services, GBS. We have also significantly reduced our -- 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 EUR 100 million for restructuring. But we might spend more if the volumes will get even further stressed than our assumptions today.

Okay. So if I understood well, EUR 20 million from Clarion and EUR 40 million restructuring, so in total, EUR 60 million for EUR 190 million provision for restructuring. So in theory in 2020, we should have significant more?

Yes. We have again EUR 40 million for Faurecia and EUR 40 million for Clarion, so EUR 80 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 profitability of Clarion, can you give us an idea? I mean last year, EUR 10 million. What it will be this year and the following year?

We confirm what we have said at the Investor Day. That means Clarion itself was 3%. But altogether, 1.5%, up 2.1% if you exclude the EUR 6 million integration cost. This year, we target to be between 4% and 5%. It will go progressively to 7% in 2022. And we target to be at 8% in 2025.

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 the one hand, but the human resources also on the other hand. By phone?

Now from Giulio Pescatore from HSBC.

The first one on the outlook, on the market outlook. So back at the Capital Markets Day, you were guiding for, worldwide, slightly negative and now you're saying minus 3%. But within that, in the Capital Markets Day, you were indicating China is slightly up. So you're kind of confirming the guidance, but within that China seems to be -- or has to be a bit weaker, I would expect. So can you maybe explain the variables? Are other markets doing better than you expected since November? The first one.

Yes. I am not competing with you because at Investor Day, we were more at 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 in the second half. As you know, it's complicated to anticipate. We have said 0%-plus. I think that if China rebound, probably the rebound will be much more. So clearly, respect to the Investor Day, the only difference is China.

Okay. And then on the free cash flow, maybe just following up on Sascha's question, you mentioned that reverse factoring will continue to be unfavorable factor this year and in the future. Can you maybe quantify how much you expect it to be a positive inside that EUR 500 million -- above EUR 500 million free cash flow guidance?

Which time? Working capital?

It is the working capital, you say?

Yes, on the reverse factoring.

You have factoring receivables, we have a drop. But we still keep our guidance of EUR 1 billion, which is our, I will say, guidance for the level of effective receivables year-after-year. Second thing, reverse factoring, as I have mentioned, has no impact. It is payment terms, which is what you see in the line trade working capital. In this line of trade working capital, we have a very positive achievement, EUR 166 million this year. In the guidance for 2020, I will say positive. We anticipate a positive inflow because we have one major plan is inventories. And we want to gain 1 -- I will say probably 2 days of inventories, which is something like EUR 160 million. For instance, Clarion has very high inventories, which will be one of the major action. So today, it's too early to commit on a very -- on a figure on working capital. But clearly, the target is as well a positive inflow coming from working capital.

Okay. And maybe just if I could quickly on one last one, again trying to read your mid-term guidance on free cash flow. You're still guiding for above EUR 500 million next year, which is solid, given the environment where we are in. But your guidance for 2022 is 4% of sales. So can you just help us understand how -- what are the moving parts? Are we going to basically double the amount of free cash flow that we're going to generate over the next -- on the 2021 and [ 2022 ]?

So we're not doubling, in fact. We are around 3%, 3%-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 for our teams, which are related to the cash generation for 2022. I'll give 2 examples. 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 EUR 2 billion between now and 2022. Another example, we are around 14 days of inventories. And we intend to go down to 8 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 these are contributors. So these are boosters to improve this cash generation. And I can tell you, we have more than this. We have, in total, 6 very tough top-down targets, which will contribute to this cash generation.