Forvia SE (FRVIA) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the Forvia First Quarter 2023 Sales Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Olivier Durand, Group Chief Financial Officer. Please go ahead, sir.

Thank you. Good morning, everyone. I'm here with Yasmin [indiscernible], our new controller and with Marc Maillet, who is leading our Investor Relations. So we are pleased to report our Q1 sales of '23. We are starting the year on the strong beat with a sales growth of 29%. to EUR 6.6 billion. This is an organic growth of 17.6% and I will come in detail on this. In Page 2, I would like to start with the technical aspects. As we mentioned before in our annual call further to the deal for the disposal of our SAS cockpit module activity, we are applying as normal, the IFRS 5 regulation, which states that you have to report your numbers post major disposal in a pro forma fashion, as if the operation is already closed. So going forward, all our numbers starting today will be reporting excluding SAS activity and for '23 and also restate '22 for the same event. So this is why [indiscernible] in fact in Page 4, EUR 6.644 billion for Q1 '23 to compare with EUR 5.149 billion for Q1 '22 post implementation of IFRS 5. So as mentioned, this is representing 29% growth on a reported basis. On an organic basis, taking into account the fact that we consolidated only from February 1, '22, i.e., only 2 months of the first quarter of last year. This is and excluding the small ForEx impacts, this is 17.6% growth on an organic basis. The market evaluation from share that we received a few weeks ago is talking about 2.7%, the final number will be reported by HS in the coming days potentially slightly higher than is 2.7%. On the base of what we have, this is representing an outperformance fairly strong of 1,490 basis points. You have to consider inside 2 elements: the geographical mix, which is positive this quarter given the recovery of Europe compared to what happened on the onset of the world in Ukraine in February, March of last year for 400 basis points. And the second element is, of course, the impact of the inflation pass-through, which is 240 points around. So this is all presenting excluding this 850 strong outperformance for Q1. We are pleased to report that all the business groups and the streaming regions have outperformed the market growth in this context. I will now move to more details, starting with the business groups. In Page 5, starting with Seating. Seating is an activity that has increased very significantly in Q1, 22.5% organic growth to more than EUR 2 billion of revenue. This is on the back of the recovery in Europe and the strength of our Chinese operation in notably with BYD. Interiors, an increase of 17.3% on an organic basis to close to EUR 1.2 billion. Interiors are now reflecting the sale of SAS. So this is where the IFRS 5 in terms of segment has an impact. You see the recovery and the ramp up in Europe with the ramp-up of the 7-Series with BMW and the growth we have in North America, not only with Ford, Tesla and new EV OEMs. If I move to Page 6, Clean Mobility. So Clean Mobility organic growth of 11.2% outperforming the markets. But on a more moderate basis, given the electrification going, this is representing still EUR 1.2 billion of revenue in our activity of Q1 with strength in particular in Europe. Electronics, electronics represents more than EUR 1 billion of revenue in our Q1. This is the combination of HELLA Electronics and the activity we had [indiscernible] of HELLA of Faurecia Electronics. The combined growth, 13.3% on an organic basis in particular, with the strength of HELLA Electronics, given the continuous demand on electrification components and on the -- of course, in our numbers, we include the scope effect of the 1 month -- the additional 1 month of HELLA Electronics, which is representing EUR 247 million. Moving on to Lighting in Page 7. So lighting EUR 922 million of revenues in Q1. This is a business coming the acquisition of HELLA, and you see the impacts of the scope effect of the additional 1 month of EUR 281 million. Now the organic growth of the activity, very strong 22.6%, representing really the conversion in revenue of the order intake being taken and the strong demand in premium lighting solutions that we enjoy. On Lifecycle Solutions, our aftermarket and specific application activity. This is also coming from HELLA. EUR 280 million of revenues and a scope effect of EUR 88 million coming from this additional months of HELLA and a solid organic growth of 15.4%, which is driven by the growth of the activity on the commercial vehicle, different businesses and also the price increases that we have done in this activity since the start of the inflation rate. If I go to Page 8, you have a zoom on the evolution by regions. So going forward, we will report regions in 3 buckets. EMEA, reflecting Europe and also the activity we have in Middle East, Africa, which is mainly South Africa, Americas, and we will continue to reflect also inside Americas. What is happening in North America, U.S., Mexico and Asia, in particular, with the strength of our activity in China. You see that we have solid organic growth in all 3, in particular, in EMEA, reflecting, in fact, the development in seating, interiors and also the recovery of the market. We have Americas with 9.7%, a bit softer than the other regions, reflecting, in fact, also the selectivity we have in North America and the strong organic growth of 17.6% in Asia, in particular, with a 15% in China compared to a market that has been soft in Q1, as we know, and an organic growth of 25.9% in the other countries of Asia. So overall, strong start in revenues for the company across the board. In Page 10, a small update on our disposal activity. So a reminder, we have signed all the agreements and transactions necessary to complete our commitment of EUR 1 billion cash proceeds by the end of '23 on disposals. Of course, the first operation that you know was the one in December '22 with the sale of the stake of HBPO. We have finished also the -- we have closed the TAFE operation in India for EUR 40 million. And the other transactions proceeding well with antitrust application. So we are confident that all is proceeding well for cash proceeds in the different -- and as you would expect in the Page 12 and Page 13. Given the strong start of the year and an overall environment that is less adverse than some months ago. We confirm our guidance as announced on February 20. So with a volume production of EUR 82 million vehicles for the year, overall flat with revenues between EUR 25.2 billion and EUR 26.2 billion post disposal. And post disposal is picking out the SAS activity for the whole year, given IFRS 5 rules and also the commercial vehicle business that we sold to commit estimated for closing from July 1. Operating margin, 5% to 6%; net cash flow above 1.5% and leverage, net debt adjusted EBITDA going down to between 2.0x to 2.4x. That will put us in Page 13 on a good trajectory for achieving our target midterm 25, which is what we announced in the Capital Markets Day on November 3. So as a reminder, here as well, we are a bit more than the S&P IHS's latest forecast at 88 million vehicles compared to 90 million from IHS. We are anticipating around EUR 30 billion of revenues, operating margin above 7%, net cash flow of 12% of sales, which will put us with a leverage below 1.5x at the end of '25, i.e., in line with this industry. And on this note, we are open for questions.

[Operator Instructions] The first question comes from Thomas Besson of Kepler Cheuvreux.

I have 2 questions, please. First, can you discuss what you see on the ground in terms of China trends. I've seen some headlines suggesting that you see some improvement. But for the time it been soft comparison base are obviously going to make it difficult to read precisely what happens in Q2 and Q3. But can you give us your perception of how Chinese production is going to develop versus your relatively cautious initial production and IHS trends. First question and the second, could you give us a bit more details on the disposal programs? I think we were expecting you to have closed the [indiscernible] bio production. Is it possible to have an idea of how much cash you're going to get from it. And can you get us -- give us your view on how many of the transactions you have announced will be closed by the end of June, namely to cash in before the end of June based on the approvals you've had so far.

Thank you, [indiscernible]. So China trends. I think the trend in China objectively is a little bit difficult to assess. And the good point is that as we -- the post Covid has been very, very smooth in reality. In terms of new disruption, almost no disruption in the industry and the recovery of the activity. But there is no -- we have not seen yet a specific incentive for the automotive industry. So I think it's a bit difficult today yet to say, will there be additional strengths, additional recovery in China in the second half. So that's one of the reasons why we remain with the same guidance of production for the year. We are at 82, IHS standards and ports has been so far at 85, and I think it reflects a little bit of cautiousness on our side in China. And we have yet to get confirmation conciliation of this. So I think China is okay, but let's -- we have still to see whether it can be with a strong second half in terms of activity. On the disposal program, so the operations are going well. In fact, on symbio, we have started to fight the antitrust, which means that in calendar, we have no delay. However, I have to organize, we are 3 inside this partnership. And given the fact that we have 3, we have to align the government -- we have to take into account the governance model and time line of each of the 3, which is one of the reason of a slight delay in the operation from a formal standpoint. So I think this is just a matter of weeks. But I cannot, today, communicate anything more than the last time on symbio. All I can say is that the 3 partners are very clear on the objective that the activity of Symbio is going on that I think it will be a strong partnership, but I can -- you have to wait a few weeks for further communication. In terms of cash index in the first half, I think at least one operation, it should cash in between June and July. Between symbio, the sale of the commercial vehicle to [indiscernible]. But we still depend on a monthly cross proceeding to be cautious, but at least one between June and July, it is a logical outcome.

The next question is from Michael Jacks of Bank of America.

I have 2. The first one, just on pricing. You commented earlier, I think in the conference call that negotiations still remain tough. Can you perhaps comment on where exactly you're finding them difficult? And perhaps put some -- or add some context to the 240 basis points of recovery that you achieved already in Q1 in terms of the percentage recovery that you're seeing at the moment? And then my second question is just on the cost side of the equation. We've seen some signs from the broader industrial complex that raw material impacts, for instance, are better than expected in Q1. So perhaps you could just give some color on how you're seeing costs developing relative to your expectations?

Thank you. On the first question, which is about the pass-through of inflation, if I'm correct. So we have to distinguish between the end user price evolution and the pricing evolution in between the carmakers and the car suppliers like us. So clearly, there is price pressure or price evolution for carmakers versus end user, which was expected. We know that the prices, the conditions that are faced by the end user is related large net of shortages and exceptional ccumstances. So it is normal that there is more competition on price and adjustment of some prices or of some rebates in different parts of the world from the carmakers. We did not enjoy a benefit of those price increases as a car supplier like our competitor we are not facing universal the consequence in the opposite direction. But it is clear that in terms of negotiation of price with carmakers the situation remains of significant tension because of the inflation absolute. So I think the last 2 years largely have shown this we are now more equipped car makers than us for the negotiations, but they are all tractor life and the fact of what we have to do. We target 90% recovery for the year of the roughly speaking, EUR 400 million of inflation that we expect for the year at FORVIA level. What is the most difficult inside this one is impact the risk of labor cost, raw materials, they are agreements, they are -- not easy it's a matter of tough discussion, but it's part of what has been faced by this industry in the past. Energy is a new thing, but we have good reference and good external reference and thanks to the hedging that we did we are, I would say, on the positive side of this evolution compared to other companies. Labor cost, which is inflation of salaries, which is around 200 points above the average that we had in first, of course, is the most difficult to pass because the customers would say that this is part of the activity also that we have to swallow and with productivity. So this is part of 90%, but in parallel. This is just reinforcing the needs of what we do in terms of fixed cost reduction and reducing our breakeven point, which is part of our strategy, as explained in the Investor Day. On pricing of the end user of the carmakers versus end user, this is an element that we expected and this is in a way a logical evolution given that shortages remain there, but they are less prevalent than before.

On the development of the cost side of the equation -- for SCA in Q1?

So on the development of the -- yes, sorry, on the development of the cost side of the equation, let's say, the evolution. In fact, the content is a bit -- weight is a bit different than before. And this is why also the impact in sales revenue is lower than before. The raw material is obviously the biggest part the raw materials are, in fact, softening and some of them decreasing with one exception, which is that semiconductors remains with strong tension and with some price increase. And on energy, a bit of increase with additional labor inflation is not too much a Q1 topic, but starting to Q2. So that's why the ratio is going down. It's because raw material is, of course, inside the story, the biggest value. So there is an evolution in the content.

The next question is from Christoph Laskawi of Deutsche Bank.

The first one would be on North America and the outperformance. You highlighted that you are selective there and hence, the outperformance is slightly lower. Then in other regions. Could you just tell us to the point where that is picking up again and we should expect North America trending closer to your group run rate? And then the second question, I mean I know, it's a sales call, but I still try a bit on efficiency. Given that revenues have been developing quite good during Q1. And we're hearing that in general, operations are a bit more stable. Could you confirm that for us here? Do you see efficiency improving just as start stops fading out in the volatility cologne is lower. Or do you still see quite a lot of volatility in the cologne, which makes it difficult to run operations?

On North America, so we have a Q1 in which we have clearly outperformance compared to the market. It's, however, lower than the other regions. This is particularly the case in Seating and Clean Mobility. Going forward, as we mentioned during the Investor Day in November, to be fairly selective in our activity in North America just in time. So you can expect, in fact, that -- and also the iron pact activity, the [Grand Wagoneer] remains with low volume. We intend to stop on this one, and we are discussing with the customer in this direction. So I would not expect significant additional growth in North America for the rest of the year. So the driver of growth on our side will be China and with an extent, depending upon the growth of volume. And recovery in Europe that we start -- we have started clearly to see in Q1. Related to efficiency and colors and shortages in a way. Shortages are less prevalent and also are not as long as before. Nevertheless, we still see cases of Stop & Go and we sometimes still fairly short notice. So what I would say is that the extent of the topic is getting lower, but we are not yet in a normal and perfectly smooth activity in some places. So we have to do our homework, which is to be as flexible as possible and to improve on our operations beyond -- but it's not yet arises activity better, but it's progressive.

The next question is from Martino de Ambroggi from Equita.

My focus is on the Clean Mobility division. If you could provide us an indication of what is your expectation for the rest of the year in terms of growth of sales and why not margin evolution. The second is on net working capital because in your previous call, you guided for a positive effect between EUR 200 million and EUR 300 million. I was wondering if it's still valid based on the evolution of the market volumes, which is better than your implied, what you imply in your guidance? And last on the labor cost. You mentioned this will start to grow in the second quarter, and this is not easy to recover. Could you quantify what is the impact of labor cost you expect for the current year?

Thank you. Good Morning. Clean Mobility. So -- you see that Clean Mobility is continuing, in fact, to have a growth above the market. But of course, the impact of electrification is moderating this growth. For the year, we expect a growth of activity of overall clean mobility around the evolution of the total company, excluding in fact, the impact of the disposal of our commercial vehicle activity to come in from North America and Europe. So overall, the same trend as the average. This is related to, in fact, the mix of region, which is on one side, and on the other side, electrification. We are clearly benefiting in all the deals of our strong position. We are market leader in this activity. In the big remaining contracts that are happening, we are gaining market share. And the last element I should mention is that, of course, we treat this activity as a cash card. And I can confirm that the decisions we are taking are going completely in this direction. Why cash card? Because given the evolution of there means less innovation, less R&D for the future to do, and I'm excluding hydrogen, of course, in this reasoning. The second is that the number of engines and programs are reducing but the volume per engine or program is increasing, which means less CapEx, less R&D for the same level of revenue. So you should see that in the cash performance of this activity even more in the future. Related to operating working capital, I confirm, in fact, this expectation, this is primarily related to inventory. We are having a high level of inventories in the overall Forvia. This is particularly true in. This is reflecting the difficulty to historically given the Stop & Go to have optimized inventories, but it's also reflecting certain internal topics. So we are addressing both. And I think the fact that Stop & Go are less equivalent and less durable is helping. So you will see improvement of the inventory and working capital during the year, probably more second half than first half. On labor inflation, so salary increases are in our company more kicking in Q2 than in Q1. That's why I mentioned this. So it's around 2 points. So it's a bit more than EUR 100 million of impact on a full year basis. And we expect to recover a significant part of it -- but by far, the totality, and that's why we have the productivity. So when we say 90% recovery organization, you can expect that, in fact, it means much more than 90% on other categories. This is particularly the case in emerging, which 100%. And in raw material, of quite a few also. So this is -- so labor inflation you see in the 400 million is between 25% and 30% of the increase.

Next question is from Sanjay Bhagwani of Citi.

I have 2 questions as well. So my first one is on -- could you please maybe provide some color on refinancing? And when we actually talk about deleveraging, do you intend to achieve your target net debt to EBITDA just by, let's say, increasing the cash element? Or do you also intend to pay off the gross debt. So my question is like can we expect the gross debt itself to go down this year? Or the net debt is just a function of keeping the gross debt same and increasing the cash, that is my first question. And my second question is on outperformance. So when we look at the outperformance in Q1, like even if I take out the geographical mix, pricing and everything, this is still looking very strong at 8.5% of outperformance just from volume and mix. So could you maybe provide some color on what are the key products which are driving this? And can we expect this trend to continue into Q2 as well? Those are my questions.

Thank you. So first of all, refinancing. So the refinancing of the transaction has been closed with the last operation being closed very early February. So this pit is behind us. Related to debt management, we are starting, in fact, to work on the reduction of the gross debt. Given that the refinancing is completed and that we have signed, in fact, the transactions necessary for our disposal program. The first element of this has been that we have reimbursed $125 million of the -- of debt, which were in HELLA. And so we will continue to work on the reduction of the gross debt. However, we will be cautious on this one. Because we will take into account any evolution of the banking uncertainties that are existing. But it's clear that we want to reduce not only the net debt, but also the gross debt. So you will see a bit of this progressively during the year. In terms of dividends, so as you know, further to the atomization of our Board, there will be no dividend. We will propose to the general assembly no dividend payout in '23 on the results of '22 for Faurecia. We intend, in fact, to resume our historical dividend policy starting with the results of '23, so we pay out in '24, which is 40% of our net cash flow through dividends and purchase of shares. On deleveraging as a whole, our objectives is between 2.0x and 2.4x. You can see that if we do all the other operations, we are clearly inside this range. If there is opportunities on volumes and further actions in the EH2, we hope to be on the good side of this range. And that will put us clearly in the right direction of our midterm objective, which is 1.5x in '25 to be back to a strong balance sheet situation comparable to historical average equipment suppliers. On outperformance, Q1. So you're absolutely right. The outperformance of Q1 even if taking out the inflation and taking out the positive regional mix is strong. So 1 point is we have to see what will be the final evaluation of the market of Q1, potentially it can be a bit above the 2.7% and let's see what IHS and S&P are reporting finally. But anyway, it's putting us in a good trajectory for our expectation. I think when you see by region, you see, of course, the strength of Europe. You see China and Asia that are strong. China on the back of BYD in part in particular, in Seating and Asia with the development in electronics and in terms of activity overall, I would say, seating a good start of the year in volume. Lighting also which is confirming the quality of the backlog and the order intake we got. And we expect, in fact, electronics of HELLA to further gain traction in the rest of the year. So it's indeed a good start of the year.

That is very helpful. Actually, on refinancing, I was referring to the bonds that are coming to refinancing that is in '25, '26 and '27. But if I understood it correctly, you may actually pay off part of it. So you may not need to refinance the one which is coming due in 2025. Is that correct?

So 2 things on this. First of all, we have the last part of '23 for the end of the year. So for these parts, it will be a mix of proposing for renewal and part of it for actual payments. And related to 2025, '26, '27, we will be quite opportunistic on -- depending upon the evolution of interest rates. So we are focusing on continuing to extend the maturity progressively.

The next question comes from Edoardo Spina of HSBC.

2 questions. The first one, I wanted to go back to the electrification discussion and ask if you are noticing any updates, any changes in the pace of growth in your order intake especially in China and maybe also Europe. And what that means for your business, you mentioned it's becoming a cash cow that suggests that the revenue should slow down at some point, but you still guide for ourperformance. So I wanted to ask about this part. And secondly, on the hydrogen businesses that you have, if you expect to increase the pace of investment once Stellantis joins you in Symbio, if that also means some direct investment for your group with your own activities for the hydrogen market, if there is any change there.

So on electrification, we have to look at the different aspects. Thanks to the acquisition of HELLA, our profile versus implification has changed completely.. We are, in fact, now in a situation in which we have only 1 activity clean mobility and the non-hydrogen of clean mobility that is, in fact, depending upon electrification directly. This activity represents pro forma post the sale to came only 16% of our revenues of '22. Vice versa, electrification is actually benefiting quite a bit of other activities. And I would say electrification is benefiting all the activities acquired from HELLA. It's obvious on the electronics in which we have. You have not only more semiconductors and electronics in an electric vehicle naturally. But second, we have products like the heat management inside the car that are, in fact, more important in the electric vehicle. It is true also for lighting. Lighting, you have an extension of the addressable market with electrification. Why? Because in an electric car, you don't have, in fact, a radiator. So you have the full phase of the car, which is available for something else. And this is where we have this concept of physical shields that you see more and more in cars in which, in fact, the whole front is available for lighting or for decoration. We are the leader inside this proposition. The advantage of it is not only for decoration, for specification, but is also for security because, in fact, this space is becoming available to put sensors and sensors for autonomous driving and to have those sensors at the middle or the front of the car is, in fact, key for ensuring the largest possibilities on autonomous driving. So clearly, from a technological standpoint, we benefit from electrification going forward. The last one is from a customer standpoint, we see the growth of electric vehicle companies. And I have to say that we are fairly strong with many of them. BYD, obviously, we are more than doubling our revenues with BID year-on-year Q1 2023 versus Q1 '22. And we have solid growth also with another one that I cannot mention, but you -- I think you can identify which one it is -- so both from a technological and from a customer point of view, we are now, thanks to the acquisition of HELLA, in fact, in a positive situation with electrification. Now obviously, the tonal activity, the exhaust system activity of clean mobility will go down progressively and the fact that we gained market share and that we are a very reliable partner will moderate this decrease and will delay it decrease. But it's clear that we know about this, and that's why we are managing this business as a cash card from. On hydrogen, we have 2 activities in hydrogen, Symbio and the banks. Symbio is a company in which today we are at 50-50 with Michelin. And with the entry of Stellantis. In fact, we will be a -- the -- I can tell you that this entry of Stellantis, which includes, in fact, engagement and on privileging Symbio in their purchase is a testimony of the future of the good future of Symbio. It shows also interest for hydrogen beyond commercial vehicle for significant cars, starting with the big ones in the U.S. This company is consolidated on an equity basis. This company has a solid financial from the IPSA proceeds from the European in defined by the French government. And the entry of Stellantis will in fact, reduce the cash need coming from legacy shareholders, i.e., Michelin, on going forward. So you can anticipate that, in fact, on top of the cash proceeds of the buyback of shares of Faurecia Michelin by Symbio. In fact, the injection of cash of Symbio going forward will reduce. On the banks, this is it that we have a 100%. We are investing in the development of this activity. We have good commercial position that represents an investment because we believe in this activity, and there is no change on this. No acceleration as well compared to previous estimates.

The next question comes from Jose Asumendi of JPMorgan.

A few questions, please. Can you speak a little bit around the operating leverage in your business. I mean, you've had a very strong start of the year. Outperformance to production is better than expected. Geographical mix is better than expected. Am I right assuming that your operating leverage is going to be stronger in '23 versus what we have seen in the previous years as you're mostly also skewed towards Europe and North America. That would be the first question. Second question, please. Are we still on the camp of sequential higher margins first half 2023 versus second half '22? Any color will be appreciated. And then three, I look at consensus, it looks like it's still going for the lower end of the 5% to 6% operating margin guidance. I'm really struggling to see how we can be on the lower end of the 5% to 6% in the light of strong start of the year, your strong pricing power, your cost savings 90% recoveries on inflation costs. Can you give us -- can you help us a little bit -- are we trending towards the upper end of the 5% to 6%.

So on the aspect of volume and mix to start with, so we remain with the guidance and the reference of 82 million cars. And simply said because there are 2 forces that are yet to be completely estimated for the second half, which is on the one side additional activities and strength in the consumption and the automotive consumption in China. And this is yet to be confirmed. Quite frankly, there are signals that are going diverse -- there is no clear trend. There are diverse signals. I'm going to China this week for the -- I hope to see some. But so far, I think really it's a mixed bag of signals. So we cannot count on it yet. The versa demands and at some point of time, potentially on production impact in Europe still to seem to be seen. I don't think this is a topic immediately, but -- so that's why we remain at this level. I think the 2 key factors remain with the same level of uncertainty than there were a couple of months ago. So we have no clear elements to change. On the geographical mix, the strength of the geographical mix of Q1 is logical and was expected. We are strong in Europe. Europe was heavily impacted in Q1 '22, where there were some number of products in -- that were not available in the first weeks after the start of the war in Ukraine, so of course, on a comparable basis, you have this positive factor. It will not be the same in Q2 -- and we have embarked this mix factor in our assumption. So I do not see there anything specific or are new to take. Related to operating leverage, I would say that we are still with the same assumption. On the positive side, we have the actions that we -- synergies, cost reduction to reduce our breaking end points improvement on the operational efficiency, Absolutely. And we will continue and we'll make sure that it does happen. On the other side, negotiations with customers are tough. Inflation pass-through is not anything and in particular on the labor side. So let's say, the timing of those 2 is what we are working on to optimize it. but it's not a natural positive. So what we say is operating leverage of 12% on average. If it is China, it's a bit more because our margin is in China are above the average. But the assumptions that we mentioned on the back of our annual results, '22, I think remain unchanged. Profitability, H1, we mentioned that H1 '23 will be lower than H2 '23 remains so. I think it's about timing of the inflationary come. It's also related to the end of the Highland Park topic in remaining -- the remaining cost will be H1 and normally the H2. So we expect, in fact, to be equal or slightly up compared to '22. The range of operating margin, 5% to 6%. I have not seen you to say. Once again, volume is on the positive side compared to the '22 and if it is in China, it will help, but we have to see the confirmation. So I do not want at this stage to go further in terms of indication and this range of operating margin.

That's very helpful. I didn't quite get one comment, the line just spoke down there. You said first half '23 lower versus second half '23 in margin. That's how you said -- that's what I -- Did I understand that right?

So what I said is 2 things. One is the operating margin percentage lower in H1 '23 compared to H2 '23. Second is that H1 '23 will be equal or slightly above H2 '22.

The last question is from Pierre-Yves Quemener of Stifel.

I would have 2 questions on NAFTA. On the first one, you've already partly answered, Olivier. But could you just refresh us what would be the kind of losses you would expect from Highland Park in the first half of '23 before it's back in the black in H2. And still in NAFTA, second point, should be softer, if I understand you correctly, compared to other regions in terms of organic growth in '23. When should we expect to see NAFTA growing -- growth picking up again in '24 or more in '25, given your more selective approach to order intake.

So Highland Park, we -- a part, we expect -- I think we mentioned that last time, around EUR 30 million of impact negative -- on impact in H1 '23. And concerning North America, I think we will -- so we will have 2 business that's growing a little bit in different directions. We expect growth in Interiors on the back of the deals we have signed and we are signing. And we will be quite careful on Seating, in particular on just [indiscernible]. In Investor Day, we mentioned that, in fact, the weight of activity between what we call seats structure or the frame, the mechanisms and the pure assembly just in time will be, in fact, going towards a reduced rate relative rate of just in 10. This is particularly the case in North America. So growth in North America not picking up particularly in '24.

Gentlemen, at this time, there are no more questions registered.

So thank you very much for everyone. As you see, a strong sales start of the year, which is encouraging. However, we are in a -- we remain in a volatile environment, and we got the by day, and we are doing our work in terms of cost, in terms of working capital improvements and in terms of cash flow generation to get the reduction of leverage that is at the center of our strategy. Thank you very much. Have a good day.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.