Forvia SE (FRVIA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and thank you for taking the time to be with us today. We are conscious of your time and in the best interest of everyone, we would like to keep this call short. I'm here with Olivier Durand, our CFO. Monday, Forvia presented robust 2023 annual results in line with our strategic priorities. In 2023 results -- the 2023 results and the guidance for 2024 confirm the group's capability to sustainably generate strong net cash flow, contributing to deleveraging the group. We also reiterated all our Power25 objectives. Lastly, Forvia announced its EU Forward project, aiming at reinforcing the competitiveness of its European operations. Looking at the market feedback. Since the release of our results, a certain number of topics have been subject of questions, namely, our ability to increase our generation of net cash flow in particular, the sustainability of our working capital requirements. We also heard of wrong estimates about the size of our reverse factoring program and its potential impacts on our balance sheet. Questions on the financing and savings of our EU-FORWARD project by 2025 and 2028 were raised. For these reasons, we believe it is necessary to hold this conference call. In order to clarify these topics and answer additional questions you might have. Before opening the call to your questions, we will start with providing you with some answers on the 3 mentioned topics. Olivier will start with net cash flow generation and reverse factoring. Olivier?

Thank you, Patrick. Good afternoon, everyone. So regarding net cash flow, the main driver of the net cash flow performance in '23 was indeed our improvement on operating working capital. This has been driven by the beginning of a good performance on inventories that remains more or less flat versus the growth in revenues, good collection from customers, including on claims that were late in the year as well as synergies on supplier payment terms. We confirm our capacity to go further on the operating working capital with the contribution expected around EUR 300 million, both in '24 and '25. This will be coming mainly from inventories. Just to give some elements on inventories. We have currently EUR 3 billion of inventories. We need 40 days of -- 40 calendar days of inventories. Inside this, we have 30 days in the ex-Faurecia, 72 days in the ex-HELLA. So clearly, on the back of the improvement of the environment with no more shortages, with a more stabilized environment, the level of inventories should return to pre-COVID situation and to the best practices that we have in the company, which is about what we did in particular in Faurecia. And to give an element of understanding of what we are thinking about 1 day of inventories represents EUR 75 million. So you understand how we are planning to have this improvement of EUR 300 million in both [ shares ]. Regarding reverse factoring, there were comments on the reverse factoring program that we are -- both about the size and about its impact. So the reverse factoring program is something that has been established some years back. It is mentioned in our financial statements. It has no impact on our balance sheet. So to start with, I want to say that all reverse factoring activities is booked inside our payables, booked therefore, in our debt. Number two, it has decreased year-on-year between '22 and '23, so in fact, it has no contribution whatsoever in the net cash flow we generated. Third is size, its fairly marginal compared to the overall payables. In complement to this information, I would like to explain the level of payables we have in the company because there were also questions on the number of days we have. In our balance sheet, we have not only the recognition of the activity we have, but also about the purchase and the sale of what we have as what is called agent flows, which means, in our case, monoliths. What does it mean? It means that, in fact, this is -- in fact, the catalyst system inside our exhaust system on which we have no added value. So we are not allowed to recognize that as revenues but because we are buying and selling this, it is inside our payables and receivables. So actually, our cost of sales is close to EUR 25 billion. So the EUR 8 billion of payables we have represent actually 100 days of payables and not at all the 130 or 150 days that some people have mentioned. So we have a normal level of payables, reflecting what we do with suppliers, and there is no debt recorded in this domain like others. I hope those points are clarifying the situation.

Thank you, Olivier. Back to EU-FORWARD. I might come back to the reasons which are triggering EU-FORWARD. The first one is that we have to adapt to a structural volume drop in Europe. In 2019, we had in Europe a production level of 21 million vehicles. This is including Russia at the time part of the European perimeter. In 2023, we were below 16.5 million vehicles this time excluding Russia for obvious reasons. On the top of this, we have an acceleration of the electrification with the perspective of the ICE ban in 2035. This acceleration of electrification is triggering on reduction of the number of vehicles -- yes, the number of volumes not vehicle, sorry. So now the fragmentation of the European volumes have increased. In order to prepare for an evolution of the OEM landscape and the arrival of newcomers from Asia, we have to improve our competitiveness, not only the OEMs will have to face a new competition, but we will also see newcomers on the supplier side. We have to secure our strong EU positions. We also have to rebalance Forvia's regional performance in order to reduce our Chinese dependency, which you have mentioned on a recurrent basis and this while growing profitable in Asia, Asia, which will represent more than 60% of the world's volumes, 57% last year. We want to do this adapting our manufacturing and R&D footprint in Europe. We will do this supported by recruitment freeze, reduction of short-term and temporary workers on top of natural attrition. We will also invest in an increase of global R&D and program management efficiency, leveraging AI and gen AI. I said it, this could impact up to 10,000 jobs over the period 2024 to 2028. Our headcount base in Europe in 2023 -- end of 2023, was 75,500 and I also mentioned that included in this figure, 18% were -- are sorry, nonpermanent employees. We indicated that we will dedicate to Europe. P&L-wise, EUR 1 billion of restructuring costs over '24 and '28 and EUR 800 million restructuring charge, cash over '24 and '28. How are these figures financed? So the first thing I would like here to detail is before we launched EU-FORWARD in '24 and in '25, we had a restructuring plan of EUR 450 million, out of which dedicated to Europe, an estimated of EUR 300 million, this for '24 and '25. For this period, we have increased the restructuring full amount by EUR 150 million from EUR 450 million to EUR 600 million, and we have increased the share dedicated to Europe from EUR 300 million to EUR 500 million. For the period '26, '28, we have, in our strategic plan a restructuring amount of EUR 400 million, out of which, again, for EU, we plan EUR 300 million. We have increased these EUR 400 million by EUR 200 million from EUR 400 million to EUR 600 million and out of which dedicated to Europe, EUR 500 million. So these are the figures more in details, but giving you a clear information about what we have added to the existing. Why are we capable to dedicate this significant share to Europe. This is because in Asia, we are growing. We have no restructuring need. In North America, we have achieved our manufacturing and R&D restructuring. The 3/4 of our head count in Americas, in North America is located in Mexico. Our priority in America is now to improve the efficiency of what we have. We have made a lot of changes. We have a lot of launches. It is now time through the FORVIA Excellence System to improve the productivity and the efficiency, and we are doing this. So this is why we have and we can dedicate the significant share to Europe. The last point, how is it financed? Before we started, before we defined EU-FORWARD. At the time we did our budget for '24 and confirmed Power25, we considered a dividend of EUR 1 per share. The Board of Directors decided to propose to the general assembly to reduce it to EUR 0.5 per share. In order to give a clear signal that we go back to normal, while we invest in EU-FORWARD and especially in the first year. This is fully financing the first year of 2024 while the years to come after are self-financed through the savings we will achieve. Above the EUR 500 million of savings, if you take the 10,000 people we spoke about, the average savings per person in Europe is EUR 60,000. In other words, the reduction of headcount here will represent EUR 600 million. We have other gains to be considered, additional synergies, lower depreciation and a better absorption of our fixed costs in the plants where we will massify our sales. So we are confident about our capability to deliver these EUR 500 million. We took some prudence in our project. So I hope that this is clarifying also this part and now if you agree, we will start with your questions.

[Operator Instructions] The first question is from Thomas Besson with Kepler Cheuvreux.

I have a few questions. If is it okay, I'd like to ask them one by one. The first one is would you have an idea of the consensus prerelease of what analysts were expecting in terms of restructuring costs or nonoperating expenses to be compared with the new figure you've confirmed this afternoon, please.

No, we have -- it's pretty new this communication. So far, we have not been made aware about -- on consensus related to it.

Thomas, just to complement. As you know, we said 2 things. Number one, historically, we are [ restructuring ] ongoing, which is part of what is happening in this industry. And it was a run rate of around EUR 200 million in the recent period. Number two, we said and we, in fact, took into account in the Investor Day plan and all the Power25 objectives that we will have in '24 and '25, a sizable level of restructuring. That's why the impact that Patrick mentioned is, in fact, not too high compared to the initial expectation. What we did, in fact, is to say we will focus, in fact, the restructuring in Europe because the job is [indiscernible] is done in Asia or not, in fact, not required. And the job in North America is well done with the evolution of the footprint. So we are able to focus on Europe, on the part of Europe that is concerned and making sure that we have the savings associated.

I might say it again for this plan, '24, '28. The total restructuring costs for the group of course, including Europe, it will be at EUR 1.2 billion. It means that we have through this plan increased the restructuring costs by EUR 350 million total P&L-wise.

Understood. The second question, have you changed your assumptions for vehicle production -- light vehicle production in Europe over the last 3 to 6 months? Or have you led this broadly unchanged?

They are broadly unchanged. The assumption -- for this plan are the ones we are speaking about for a while. We do not believe that Europe will achieve a total number above 17 million vehicles until 2040.

Last question, sorry. Okay. So last question. I'm not sure I understood what you said exactly about the dividend. So I understood EUR 1 was the initial thought and then it's been brought down by the Board of Directors to EUR 0.50. Is that correct? And then my question simply is, why does it make sense in your view to pay a dividend at all in this context, knowing that I mean the visibility is still relatively limited. And so you're in the middle of a disposal program, and you're launching a big restructuring program. So it seems a bit strange even if it's a symbolic amount aimed at giving a signal, I understand that, but is it really the right thing to do?

I think it's -- you said it is probably more symbolic than really material. But it sends, I think, an important signal. We are able to pay this dividend, and we want to be back to normal -- to a normal situation. At the same time, we thought that to ask our shareholders to finance the complete EU-FORWARD 2024 program would not be appropriate. So we discussed with our Board of Directors about this reduction from EUR 1 to EUR 0.5. And we believe that this is the right balance between going back to normal while investing in EU-FORWARD.

The next question is from José Asumendi with JPMorgan.

A few topics please if you could address. First, can you comment on your refinancing needs in the next 2 years? Second, can you rule out the capital increases being considered strategically by the company to strengthen the balance sheet, a topic that frequently comes up in discussions. Three, can you discuss also any intentions to buy out the remaining stake in HELLA.

Olivier, you start.

I will start with the capital increase. We have no plan, no intention of capital increase. By the way, that will be totally inconsistent with, in fact, proposing the dividend to the shareholders. So we don't need and we don't plan this. Likewise, the buyouts of the minority shareholding in HELLA is not in the plan. All what we are showing you is based on the current shareholding, the current governance. The synergies, as you have seen, are progressing faster and they're actually bigger than anticipated before. They will continue to contribute in the results in '24 and '25 for a cumulative EUR 350 million, and this is in fact on the current initiatives and of course the current governance and shareholding about the HELLA buyout. We are totally focused on Power25 and delivering Power25. Our very clear priority is the deleveraging of the group. On the last question on refinancing needs. We are of clearly the intention to continue to decrease the gross debt as much as the net debt. And having said that, we have, in fact, a mix of refinancing and reimbursements that we will do. Regarding '24, the amounts are very limited. The first one concerning fact, a bond that is maturing in Q2 in HELLA that in fact will be refinanced partly by [indiscernible] that is underway and the difference will be reduction of the gross debt. We have a bit -- we have 1.5% of maturities in '25 and inside this EUR 1.5 billion, the main one is related to a bond of EUR 1 billion, and our intention is to refinance part of it and to reduce the total gross debt in the meantime. So you will see us active on the market, not only on the European market, but at some point of time also on the U.S. bond market, which is the most liquid and the biggest market. So we continue our diversification of sources of financing that you have seen in the last 18 months.

I would like to make quick follow up on capital increase. Capital increase is not on the agenda. It is not on the agenda.

Just 2 quick follow-ups. One, can you comment on asset disposals as well, that can strengthen your balance sheet? And second, on your ability to win orders with Chinese carmakers, not only in China but also in Europe.

You take the first one, I'll take the second one.

So on asset disposal. So as a reminder, we had the first disposal plan of EUR 1 billion that we completed in 15 months for 5 different operations with, in fact, good proceeds and a good value, including capital gains in our net income. On the -- we have announced in October -- a second one of also EUR 1 billion. The first operation has been signed, which is the sale of the stake -- of the 50% stake in BHTC, the closing will happen in H1. And we are working on the other ones. We have good prospects. The different operations will be some small verticalized businesses, as well as capital openings happen in different activities. You will see some of it this year and more next year. We have the intention to have a maximum value covered in terms of cash in '24, '25, but we will communicate when we are signing further operations. The last message is that our guidance in both -- in terms of leverage in both '24 and '25 are based only on what has been signed so far, i.e., BHTC, any improvement further is again compared to those leverage.

On the second question, we are supplying 19 out of the 20 Chinese OEMs producing 90% of the global volumes. Our sales are balanced between Chinese OEMs and international OEMs in China. It is clear that we will support the Chinese OEMs who will export and who will settle in other regions. The one who has communicated its settlement in Hungary is BYD, and we are working to get awarded the businesses for Europe.

The next question is from Sanjay Bhagwani with Citi.

I have also 3 questions. So my first one is because the focus is a lot on the underlying cash generation of the business. There is net cash flow, excluding the working capital tailwinds. Could you maybe highlight some of the one-off outflows which were there in this year unexpectedly? For example, one I can think of was withholding tax of EUR 68 million. And then probably there were some other taxes, and that's why the cash taxes are way more higher and can this reverse in '24? And then if there is any other outflows, which are one-off this year? So what I'm alluding to is, let's say, although the underlying free cash flow, excluding working capital is looking flattish or slightly negative. It is also impacted by several outflows, which could be one-offs. So that is my first question. And I'll just follow up with the next one, if that is okay.

Yes, okay. So on this first quarter, you are absolutely correct. The level of tax cash out in '23 is impacted by negative one-offs. The number one is the EUR 68 million of withholding tax on the HELLA dividends and the HELLA of '23 was significant given that it included the proceeds of the disposal of HBPO that happened in '22. There were 2 other elements in sites, one related to a delay of reimbursement of the VAT in Mexico and another one, another withholding tax. So in fact, the total of abnormal cash outs were EUR 120 million around which means --hence on this -- those items will come back in '24. The first one has already happened, which is the VAT of Mexico that, in fact, has resumed a more normal level and timing end of January, beginning of February and the other ones are underway. So you are right. In fact, there will be a better cash situation on the tax in '24. And I'm expecting, in fact, the tax charge from a cash point of view to be around EUR 400 million project, even including the growth in operating margin and profit. And '25 will be, in fact, between EUR 450 and EUR 500 million. So absolutely correct, the level of tax is abnormal. Maybe just to complement also the level of CapEx plus R&D in '23 is not at the level we want. And we will work on reducing this in '24 and '25 consistent actually with what Patrick mentioned in the context of EU-FORWARD because if we adapt the capacities and the structure, mechanically, the CapEx level is evolving as well.

That is very, very helpful. So just fair to say that in '24, the working capital tailwind could be EUR 300 million, and then still there is an underlying free cash flow, which is roughly EUR 350 million to EUR 400 million, partially driven by all these factors you mentioned. Is that right?

Right.

And my second question is on the agent flows. Once again, thank you for highlighting this. Because when we look at optically the working capital as a percentage of sales, this looks very big number. But I think you mentioned that roughly EUR 7 billion of sales, which is the agent flows is not recorded in the sales, but it's in the working capital. So is there a possibility where we can -- is there a possibility where we know that what is the working capital excluding this agent flow? So we can have some like-for-like comparison on working capital related to the sale. That is my second question.

So you are right that optically speaking, it inflates in fact, the ratios, and it's a bit abnormal. In order to provide better information to investors, we are providing in our financial statements, I think it's Page 38 and Note 4.1 the amount of agent flows in '23 and in '22. The amount for '23 is EUR 7.4 billion that's -- in fact, to investors and all partners, analysts and bankers to assess what is really the cost of sales and the cost of sales all-inclusive is EUR 27 billion and allow in fact, to see the ratio in a [ quarter ] fashion, both in payables as well as in receivables. We have -- we are providing this information in order to help the analysts, and we will make sure that on a going-forward basis, this is as clear and simple to find for...

That is very helpful. So we need to keep that in mind while looking at the payable and receivable days, I suppose? My final question is on the restructuring outflow. Sorry, I have not -- it's not clear if the EUR 1 billion outflow is just for the new program or this is the overall EUR 1 billion outflow from '24 to '28 and if -- how should we think of, let's say, the total restructuring cash outflow in '24 and '25?

The increase of P&L restructuring costs before and after. So including EU-FORWARD is an increase of EUR 350 million, okay? So -- and be back, the group total amount cumulated '24, '28 is forecasting a total amount of EUR 1.2 billion, out of which EUR 1 billion are dedicated to Europe. So the full amount we have added is dedicated to Europe.

And maybe to complement in order to help the [indiscernible] of the numbers over the different years. In terms of cash, we are expecting EUR 500 million of restructuring cash outs for the total of '24 plus '25 as and in fact, a similar amount of EUR 500 million over '26 to '28, here again, worldwide. Vast majority, of course, as Patrick mentioned, mobilized on Europe. EUR 800 million out of the EUR 1 billion. So compared to previous estimate we had. The cash out -- the complement cash out to the tune of EUR 150 million, EUR 175 million for both '24 plus '25. So we can more or less divide it by 2 to have the mapping and a similar, in fact, addition in '26 to '28 over the period. This, as mentioned, fully financed first of all, by the evolution on the dividends, we are proposing a dividend, which is high for what policy would warrant that Patrick already mentioned. And second, with the savings starting in '24 plus '25, we are fully financing the addition of restructuring that we are mobilizing for Europe in those 2 years cumulative.

So to make it in short, keep in mind, plus EUR 350 million on the full period P&L and EUR 275 million cash, in the same period '24, '28.

The next question is from Pierre Quemener with Stifel.

Obviously, a follow-up on free cash flow. Most of the answers have been addressed, but I've got one point. Is your guide for the free cash flow this year, including the cash out for the restructuring, which should be in the region of EUR 375 million in '24 and same amount roughly in '25, if I understood correctly what you said. That would be my first question. I've got a follow-up afterwards.

So I confirm that all our guidance are including both the expected savings and the expected cash out of the restructuring. The expected cash out for restructuring for the 2 years in total is EUR 500 million, just to make sure that we are not overestimating the size, okay? So you can expect not exactly equal between the 2 years, but you can expect the cash outs all-inclusive, including the EU-FORWARD of EUR 500 million and yes, this is captured in the guidance that we are providing.

Okay. That's very clear. I would have a follow-up maybe more for Patrick on that one.

Yes. Hello?

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

I'll start off with a very direct question, if I may. I believe the main concern in the marketplace has been around the absolute level of reverse factoring market speculation has been for -- in the region of between EUR 3 billion and EUR 5 billion. Can you please confirm that this amount is indeed incorrect? And if you could provide any comments that could help us to understand the actual magnitude, that would be extremely helpful. My second question is just in terms of the net working capital inflow of EUR 300 million per year. Does this also include a planned reduction in trade payables? And should this also normalize to prepandemic levels? And my third question is just on the balance of reverse factoring going forward. Do you expect this to grow, remain stable or decrease in the coming year?

Thank you for the questions, which will hopefully help us to really fully clarify this one for good. The number of EUR 3 billion to EUR 5 billion is massively wrong. It's actually an impossible number because it will mean that in fact, you will have banks providing facilities to us of this tune. And I guess it will be visible in other respects. The parts of activities that we have with reverse factoring is around 10% of our payables. Now what is reverse factoring. Reverse factoring is very different from factoring. It is a platform provided by a set of banks that allow suppliers to do factoring on their side. So in fact, after they are using or they are not using. So there is a limit of capacity that exists and then the suppliers as they will, are using it for their own purpose, those ones, which means that, in fact, the totality of the impact of the reverse factoring is captured in our debt in full, whatever is the value. So the comments on the EUR 3 billion to EUR 5 billion that is mentioned is massively wrong. And the message saying that it will be off-balance sheet obligation is [ enough ] and totally wrong because they are already captured in our debt. Now on the evolution of the net working capital and the EUR 300 million contribution expected in '24 and '25, as mentioned, the main driver will be on inventory level and for the rest of the activity to continue, to collect well from customers, we still have around EUR 200 million of overdues, as you can see in the financial statements. So there is also this item. And on the payable, we decrease, in fact, the number of days between '22 and '23. So let's see about this one, but this is not the driver that we are counting on in '24, '25, which means and the last comment on reverse factoring, once again, we have facilities that we are providing some of our suppliers. They may use in full or not. So I don't know what exactly they will do. All I can say is that the amount of reverse factoring that has been used by the suppliers was lower in '23 than in '22.

And it is not our intention to have reverse factoring exceeding 10% of payables.

The next question is a follow-up from Pierre Quemener of Stifel.

Back, sorry, a bit disconnected. My question was for Patrick. There's been a lot of noise and confusion just over the past 2 days especially surrounding your previous comments in a German paper regarding Chinese concession. The most pessimistic investors assume that you are about to be demoted, crushed by this [indiscernible] competition arriving in Europe? How would you address this quite extreme pushback? And also to that respect, how can we think about your competitive position in China? How can we track that you are gaining share in the region? And how do you fare versus the local competition?

Sorry, but the line was not very good. My understanding of your questions, we have a first question, which is related to how will we face competition coming from Asia and Europe? And the same question was related to our competitiveness and our growth in China. Is it correct?

Yes, that's basically it. Sorry for the line.

So you know that so far, as considering our different [ business ] measures, we do not have a lot of very strong Chinese competitors. But we have a few and it is clear that when these people will come to Europe, they will have no legacy, and they will benefit from low-cost R&D and probably also low-cost CapEx. But we are capable to get aligned to this cost base. We will do what is needed to achieve the optimum footprint and we, through the plan on R&D and project management will significantly improve our competitiveness, again, through AI and gen AI. On the top of that, we have offshored a significant share of our R&D resources in India and in China. So yes, it is a challenge we have to face, but we feel confident that we have what is needed. We have the means to be able to be competitive whatever the conditions will be in Europe. Maybe just one element on AI and gen AI. On our mid-tiers, we have collected a very significant amount of data, which will give us an advantage through gen AI productivities. About China, we are growing in China significantly year after year, which should demonstrate that we are competitive and attractive in China on both our innovations and our cost structure. We are Chinese in China. All our top management, all our division managers are Chinese. And we have the same profitability with the Chinese OEMs as we have with the international OEMs located in China. So here, again, when you consider the content per vehicle, not only the Chinese market will grow, but also the market share, which we can target is growing. I also would like to tell you that Asia is not only China. When we will speak about 60% of production in China, it will mean about 60 million vehicles out of which 35 million will come from China, the 25 million from the rest of Asia. The Japanese OEMs are representing 25 million vehicles out of which 70% are staying in Asia. And India, for me, very important is currently producing 3 million vehicles, plan to produce 7 billion in 2030. It's a huge growth potential. They are building 10,000 highway kilometers per year in the moment. And they plan to have a middle class, which earnings are above [ $35,000 ] a year at around [ 200 million to 250 million ]. So it's very significant. If you have, on one side, the wealth of the population and on the other side, the infrastructure, it is very promising. So you see the plan is for us to defend our position in Europe. We will stay at 40% of our sales in Europe. We feel confident that we are capable to compete in whatever market conditions, but we need to deal quickly with EU-FORWARD, and we have all the means already to benefit a full of our Asian profitable growth.

The next question is from Christoph Laskawi with Deutsche Bank.

Sorry to bring it back to the payables and working capital. A couple of technical questions on also reverse factoring. So the first one would be the cost associated to that program and the cash out for that, do you book that as part of working capital? Or is that in the financing cash flow? And then the second on that program would be -- do you disclose the payment days that are linked to that, so which are agreed with your factor in the contract? And then lastly, if you could help us square essentially the cash inflow from the cash flow statement above EUR 400 million, and the decrease of the payables on the balance sheet, just bridging the gap, how much is due to disposals, FX, et cetera?

The first 2 questions, I will answer and maybe you will have to repeat the last one, not very clear for me. So on the cost, the cost of the program is, first of all, for the suppliers because they are using a financing facility more or less, which is made available. So it's more this one. In terms of the bookings, the payables includes, in fact, all our debt towards our suppliers whether they are or they are not inside the reverse factoring program because once again, we have to pay them at maturity. They can get money in advance of this through the banks under the reverse factoring capability. But for us, the debt is completely captured and counted in our financial statements. And can you take the last...

Yes. Also just a follow-up on the payment days then. The payment days outside of the facility, I would expect at least lower than when you need to pay the factor. Could you comment on the difference between the 2? It was -- if we do the math just roughly, I mean, you are now at around 100 days, and before you launched the facility, it was around 85 days, if my math is correct. And yes, the third question was when we look at your balance sheet '23 versus '22, the payables actually went down quite significantly. At the same time, you are showing a cash in the cash flow statement. And I appreciate you obviously have disposal and there's differences because of FX in the payables, but the decline in payables, whereas you have a cash in the cash flow statement. I'm just trying to bridge those 2, if you could comment on that.

So on the first item, the variation in the number of days is not really a function of the reverse factoring. And once again, on reverse factoring, the capability used today is 10% of our payables, so it cannot be a major driver. It's more of a function of the geographies and in fact, some of the purchase because you have different days for different type of purchase. In the recent period, the number of days have gone down. In fact, it went down by something like 5 days between the end of '22 and the end of '23. Now on the reconciliation between the cash flow and the balance sheet. The balance sheet of '22, in fact, includes SAS and the cash flow does not. So let me explain that. Under the rules of IFRS 5, when you discontinue an activity, you discontinued all P&L activity. You discontinued cash flow, and you put that under one line, but the balance sheet remains the way it is. So excluding this, the reality is that the payables year-on-year on an apple-to-apple basis were flat. But being flat, I mean actually that is pretty good because the reality is that normally with the growth, it will have been different. Now the cash flow is reflecting, in fact, the movements in the period, including the growth of activity and that's why it looks like that there is a positive impact from the payable but let me be clear on the evolution of working capital, the number of days went down. The -- in fact, we had also a reduction of the number of days of receivables and the fact that we are able to grow the business with no impact on the working capital is leading to this cash flow performance.

Olivier, I suggest to take the last question.

The last question is from Tom Jose with [ Neuberger Berman ].

Most of which have been answered, but maybe I'll just quickly put one out there. I think you've guided for FY '24, I mean, great detailing and you pointed to a net leverage of sort of 1.9 by the end of '24. If, let's say, you get to your proposals that would, I imagine, bring you to levels of sort of 1.5 commensurate with IG. But I'm wondering, and following you for a while, was there any aspiration to go IG late this year or any next year? Have you publicly stated that? I'm sorry if I've missed. And I guess the second thing is there are some market forces. I do want to take names who have perhaps been putting reports of factual inaccuracies. Do you plan to not maybe issue clarification, but to keep things factually right, are you planning to respond not or "otherwise."

I will answer the first point. So the guidance that we have provided us excluding any additional signature in our new EUR 1 billion disposal program. So you have EUR 800 million of cash proceeds that would, in fact, improve those leverage either in '24 or in '25. And indeed, in particular, that would improve the 1.5x at the end of next year and would put us closer to a situation of being eligible of investment grade. It is clear that we have this element in line of sight and if we are able to do more than EUR 1 billion in the new disposal program, we will. But we are trying in our communication to be prudent on the timing of those operations, and that's why we kept the guidance as it is today for '25 and to be prudent on the level of '24, which is not capturing any benefit beyond BHTC. Regarding the second point.

We have identified the source of the wrong calculation concerning the reverse factoring, and we have sent a corrective note to this source. This being said, I would like to, again, thank you very much for having been with us for your questions, and I hope that through this call, we could clarify all the open questions and maybe kill a few rumors we had on the market these last days. Thank you very much. Goodbye.