OPmobility SE (OPM) Earnings Call Transcript & Summary

Good day. And welcome to the Plastic Omnium Analyst Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Laurent Favre. Please go ahead.

Good morning, everybody. Laurent Favre speaking. I'm here in our headquarter in Levallois-Perret with Adeline and Philippine. And because the industry is facing a very unique crisis, we have decided to organize this call with a target to give you the transparency you need regarding how PO is acting in this environment. You have received the press release this morning. You have received as well some slides. I will comment in the next minutes before going to the Q&A session. Before we start to comment the slide, I hope that you are all doing well in this difficult time. And if I can summarize the press release and the slides we will comment in the next minutes, the main topics, the main highlights we will comment and we are proud of is starting with our great outperformance with our turnover because we are outperforming the market by 20 points. Also mentioning that because we had anticipated since many months that the market will go down, we had worked very hard on cost reduction before the crisis and were able to act very rapidly to shut down our factories. And the last point, which is also very important looking forward, is the very strong financial basis we have, and we have also reinforced during the previous week. I go now to the slides. You have got the slides. I will try to comment them to give you more details. And then after 15, 20 minutes, you will be more than welcome to ask some questions, if some questions are still open. I start with the first slide which is showing basically the outperformance during Q1. As you can see and as you know, the market went down by 24.4% in Q1. On a global base, it was mainly due to the situation in China with a 49.3% drop in production. And the impact of the COVID-19 was full in China, and we will come back to the Chinese situation in a couple of minutes. In Europe, the year did start pretty slow. But on top of that, middle of March, all the OEMs did stop their production, shut down their production suddenly. And therefore, the market went down by close to 21%. And in North America, the corona crisis came a bit later, but the market went down by 11%. In this unique environment, Plastic Omnium was able to maintain the turnover at a similar level as in 2019, which means an outperformance of about 20 points. And what is important to mention is that the outperformance is also on a global base, meaning in all the 3 main regions. So as you can see on the slide, we have an outperformance of 15 points in China. We have an outperformance of close to 19 points in Europe. And we have an outperformance of 17 points in North America. That means we outperformed the market in all the main regions. We outperformed the market as well in our 2 activities, meaning industries and in module on a similar base. Therefore, we are very well balanced for the coming quarters with this outperformance in all the areas. Regarding the results and regarding the profitability, before the shutdown of the production in Europe, middle of March, we were perfectly in line with our expectation for this year, meaning that the action plan put in place to reduce the cost, to improve the situation in Greer, for example, were paying off. And we were also able to compensate the drop in sales in China. That was before middle of March. For sure, after middle of March, the world did change completely because we had to shut down more than 90 factories within a couple of days. Regarding the cash, the free cash flow in the first quarter was also in line with our expectation. That means also the actions we had put in place very early this year and end of last year were paying off and were able to compensate the issues we are facing in China. That is for Q1 regarding the turnover and regarding the performance of Plastic Omnium. If you go to the next slide, which is showing you the status of our factories, you see the world map and you see the number of factories we have by region. I recall you that we have in total 131 plants. And you can see 58 in Europe/Africa, 46 in Asia, 6 in South America and 21 in North America. And on this slide, you can see how many factories are open as of today and how many are right now shut down. You will see later on what is the plan to reopen our factories in the coming weeks. If I start with Asia, you see that in Asia, out of the 46 factories, 36 are under operation. We have our 29 factories in China which are operating right now, with a capacity utilization at about 50%, which is increasing slowly but increasing week by week. Our factories are also open in Korea, in Japan and Thailand, but we have shut down the factories in India and in Malaysia. Coming to Europe and Africa. After having shut down everything middle of March, as of today, we have 14 plants which are again operating, again, with very low activity. But the 14 factories operating right now are, for example, in France, where we do produce some parts since last week, in Slovakia, in Poland, in Russia. The start is very slow, as I said, but for sure, it's a very positive signal to see that it is catching up a bit. 44 are still shut down as of today. In Americas, the situation is a bit different because in North and South America all the factories are shut down. The COVID-19 crisis came some days after the impact in Europe, and that is the reason why it is still shut down, and we don't predict to open any factory there before May. That is the situation of our factories as of today. If you move to the next slide, which is the Slide 4, you can see the number of factories open today, 50, I was mentioning before. And what do we see, what do we estimate for the coming weeks in terms of reopening of our factories. And you can always see the number of factories which are going to be open in the mentioned days. That means in end of the month, we should have 77 factories operating again. And end of May, 130 out of 131, meaning that end of May, all of our factories almost should have started again to operate. We do predict that, again, with a very slow ramp-up as we have experienced in China because one of the challenge will be, for sure, the supply chain. Supply chain, meaning that all our suppliers are able to operate again, meaning that the logistics is able to work as well. We are monitoring that on a daily base. That means we have the full transparency about how our suppliers are acting. As of today, we don't see any major risk. We are changing suppliers if we see any kind of risk due to the supplier or due to the logistics, to the supply chain. But as of today, we don't see any major risk regarding the supply chain. The other topic is for sure and that is the most important to ensure safe condition for our employees to be able to start again. And based off our experience in China, we have developed a very detailed booklet, which is basically online on the Internet if you want to have a look on, with all the instructions needed for employees worldwide. That means we are adapting the layout of all of our factories to make sure that the distance are respected. We are changing the shift model. We are cleaning the equipment on a regular base, and we are providing also all the necessary equipment to our employees like, for example, the mask. And by the way, this week, we will start as well to produce our own mask in Europe, and the end of May in North America to be also self-sufficient for that. That means very strict protocol worldwide applied in all the PO factories before we restart the operation based on internal audits to make sure that everything is in line. The third reason why it will take time to recover or that ramp-up will be, that the volumes will be higher is for sure the demand because the COVID-19 was, at the beginning, a sanitary crisis, but now it is becoming an economic one. We have many people in the world getting unemployed, being impacted. And we do assume that we will have consequences on the demand, meaning that the sales won't come back to a normal situation in the next month. That is the experience we have in China. That is the reason why in China, as of today, even if the sales are going up 14% more last week, the capacity utilization of our factories are still at only 50%. That is regarding the ramp-up and the situation of our factories. That means we are reopening, which is a good news basically, even if it's at low level, as I was mentioning before. If you go to the next slide, you see how we do assess the market for H1. I have mentioned before that in Q1 it was a drop by 24% in production. That means more than 5 million less than last year. In the second quarter, our assumption is 45% drop. That means the second quarter will be much worse than the first one. It is important to mention and to consider for us as well for the actions we are putting in place, and I will come back to that later on. A 45% drop in production, the most impacted regions are Europe and North America, with a 70% and 65% drop in volume. As of today, as I said, most of the factories are shut down anyway in those regions and 20% drop in China. You see China was 49% less in the first quarter, 20% in the second quarter. That shows again that it takes time for the market to recover after such a crisis. If you move to the next one, that is how we do assess H2. For sure, it's early to give our firm opinion on H2 because things are changing on a daily base. Like the programs we have from our customers, we are getting new information on a daily base, but it was important for us to share with you what is the current status. But what we do see for H2, and I start to comment again H1. H1 is minus 35%, which I was explaining before. For H2, we predict a drop of 14%, meaning 6 million vehicles less than last year, which will mean in total for the year, 25% drop in production, meaning 21 million vehicles less produced worldwide, coming down to 65 million. The main region being impacted Europe and North America by 30%; and China by 20%. That is what we do assess as of today. That is what we do consider as well to anticipate the additional cost down reduction action we need to put in place. We have started very early this year, and I will come back to that again later on. But that is now the base, the 65 million we are using for defining additional cost reduction at Plastic Omnium. I'll go now to the action plan, which is the next page, sorry, the next slide. First of all, as I said before, we have anticipated early this year already that the market would be flat. We were saying at this moment minus 5%. You can remember before the start of the year that was our assumption. And then pretty fast, as we have seen the crisis in China popping up, we had anticipated that it could impact the worldwide production. It was already middle of February. And that's the reason why we had put in place all the necessary action to be ready to shut down our operation very fast in case of. And also, we had already defined additional action to preserve our cash and to reduce our cost. That is what we have been able to do very fast as we had to shut down 90 factories in some days, middle of March, because the OEMs had to shut down their own factories. Therefore, we were able to react extremely fast and to shut down all this operation and to mitigate, I would say, the impact on P&L of Plastic Omnium. What we have done is, first of all, we have stopped the contracts of our temps. And you look, those temps are about 20% of our employees worldwide and the impacted countries by the COVID-19. That means we are able to stop that, I would say, immediately. We have put also in place for all our employees all the possible short-term work measures which are legally possible in the different countries. As of today, for example, in Europe, more than 90% of our employees are in short-term work. When I say more than 90%, it not only concern the people in the factories, it's also the people in the headquarter, the people in the R&D centers. That means 90% of the PO employees are in short-term work. For 100% short-term work or 50% or 80%, the average is more than 80%. That means we are able with those 2 measures, meaning the temps and the short-term work actions for the PO employees, we are able to reduce our personnel cost by more than 50% in the countries which are shut down, meaning by more than 40% for the global payroll of Plastic Omnium, which is a great saving to face the situation we are in right now. Additionally, for sure, we have stopped all the not necessary expenses. We have stopped all the projects which are not extremely important in terms of strategy. We are still investing in innovation even more than in the past, I would say. But all the rest have been stopped. And we have monitoring on daily base of all the cost reduction with the different division. Regarding the cash, as of today, we have EUR 2.6 billion of liquidity, which is extremely comfortable in the situation we are in. EUR 1.3 billion cash immediately available and EUR 1.3 billion credit lines not drawn with an average maturity of more than 5 years, which is also a confirmation again that the banks do trust us to face this difficult phase. To preserve the cash on top of the actions I was mentioning before concerning the cost reduction, we have also put in place aggressive actions to reduce our investment by 30%, more than 30% this year. That means with a base of EUR 512 million, we will be below EUR 360 million this year. We are strictly managing our working capital. When I say working capital, it is inventories, but it is even more the overdues. And we are able to reduce massively our overdues. And based on that, we are performing a stress test, assuming that the crisis could last much longer than what we were seeing before. And we are more than comfortable to be able to face a crisis, which would last much longer or which could come again in a couple of months. I wanted also to mention that beside what we have done regarding cost down action and everything to preserve our cash as well, we have also put some effort to support our employees because most of our employees are in short-time work. I was mentioning before, they have an impact on their salaries. And we try to compensate that to an acceptable level for the employees. And last but not least, we have also decided to create a fund of initially EUR 1 million dedicated to the local initiatives, supporting the many victims of the COVID-19. Everybody is very engaged at Plastic Omnium to make it happen, starting with the top management. And the top management, the 305 top managers of Plastic Omnium, they all did accept to reduce their salaries temporarily to support the company and also to contribute to the effort of everybody. Therefore, strong action in place, strong liquidity available as well. And we are ready to face a longer crisis. That is, in a nutshell, what I wanted to comment. That is the last slide you can see. We were, since the beginning, very agile. We have been able to anticipate since many months a market going down, crisis becoming global. And therefore, we have been able to react extremely fast and able to shut down 90 factories in some days, able to put more than 90% of our workforce in short-term work in some days as well. That is our strength, and we are continuing to anticipate with the numbers I have mentioned before regarding how the market will or could develop this year. We have a very solid financial structure, giving us as well confidence to be able to face this crisis. And everything is based on the team, which is very committed, a team working very hard to make it happen and to work on the next step of the history of Plastic Omnium. That was, in a nutshell, my presentation, my comment on the press release. And I will now open for the Q&A session.

[Operator Instructions] Our first question today comes from Michael Foundoukidis from ODDO.

Michael Foundoukidis, ODDO. Could you give us more color on the free cash flow of Q1? I mean you said, of course, that cash was around EUR 1.3 billion at the moment. But could you give us more color on the working capital impacts that you have seen end of March and what we should expect probably end of June? That would be the first question. And then maybe an update on Greer. Has the lockdown been positive for you given the fact that it could be something that would help you make some adjustments? And then last question, maybe on the operating and the cost leverage. Could you give us some figures of what we could assume? Is it around more 20% or closer to 25%?

I will start with the first one regarding the free cash flow. I was saying before that we were in line with our expectation regarding Q1 free cash flow performance. That is in line with the, I would say, the guidance for the year we were giving at the beginning of this year. Regarding the free cash flow for the first semester, it is much too early today to have any kind of prediction. I was saying before and we were pretty transparent to show you the situation of our factories or their reopening. That is changing on a daily base. That means I'm sure that it will be different in 1 week because the OEMs are facing some difficulties in their supply chain because of many reasons. And therefore, everything is very volatile, I would say. Everything is very uncertain. It's not like a market going down, but on a stable base. It is opening, reclosing and so on. And therefore, it's not possible for us today to give numbers which would be serious, I would say. And therefore, we want to inform you if we can inform you, we don't want to give you numbers if they are not funded. And therefore, we are fighting to get the best performance as possible with the actions we have put in place. And I'll recap that, we will reduce the invest by more than EUR 150 million this year. We are able to cut all the other expense by 30%. We are able to cut the personnel expenses by more than 50% for the countries or for the regions where the production is shut down, which means 40% in total. And these are all the actions we are putting in place to preserve our cash. And additionally, the action on the working capital, and that is mainly because there is less production, that is mainly the overdues with our customers, we are able to reduce as well compared to last year. These are the actions we are working on. Again, notable as of today, we don't want as of today to give any indication regarding the free cash flow for the first semester because the market is too volatile and too uncertain and it's, again, changing on a daily base. Regarding Greer, before the shutdown of the operation in Greer, which had happened end of March, we were 100% in line with our action plan. You know that we have a daily monitoring of the operation in Greer or we had because now it's shut down, daily monitoring of the operation in Greer and all the KPIs, the industrial KPIs, productivity and so on. We're in line with the targets. On a weekly base, we have our monitoring of the financial action. That means what we do in order to save money. And here as well, we were 100% in line with the expectation. That is the, I would say, the positive point. The shutdown means for us that we cannot work in the factory. All our suppliers are shut down as well. Therefore, the adoption of the layouts we wanted to work on during the summer breakdown to improve the workflow and the layout of the factory, we cannot anticipate as of today. We do expect Greer to reopen somewhat in May. The date is not clear right now with the customer. The customer is intending to work only 5 shift a week instead of 6 previously, meaning that we could have more opportunity to work on the layout during the weekend than what we had expected, therefore, to anticipate some actions. That is the situation for Greer as of today. Again, year-to-date, in line with expectation. Today, all the activities stopped. And we hope that when we will be able to reopen, we will have a bit more time because less shift to work on the layout and to improve the Greer situation. The third question, I will hand over to Adeline.

The third question related to the operating leverage. And basically, are we able to be profitable with an assumption of a drop in automotive production by 25% for 2020? Again, I come back on this specific item to Laurent Favre's previous comment, saying that everything will depend on the rhythm of restart of the production by plant, by region, by customers. So we will make our best today to reduce significantly our breakeven point. And again, we have achieved today reducing by 30% our total cost. I remind you the cost structure of Plastic Omnium. We roughly buy 70% of what we sell in raw materials, components, paints and so on. So that's 70% of our total sales are variable. To reach the 6% operating margin we had in 2019, there is a difference, there is cost of 24%. And those are the basis we reduce 30%. So again, depending on how the automotive production will recover, you can do your own math and assumption on that.

And I repeat again what Adeline said and what I said before. The difficulty we are in is not stable. It's not minus 25% for the complete year and then stable each month. It's changing dramatically because our factories in Europe, for example, were completely fully loaded in the first month of the year. That's the reason why we have outperformed the market so strongly. And suddenly, we had to shut down everything. I mentioned before 90 factories in some days. And now we are reopening again. Therefore, it's not a normal mode where we can adjust, I would say, the breakeven point to a new situation. That will be probably the case in 2021. Really, it's much more a very volatile and uncertain mode and this is changing on the daily base. And therefore, you have understood the cost structure Adeline mentioned before. You can make, please, your own assumption. But it is really difficult to predict today because, again, it's not in a normal mode with a similar sales level on a weekly base, it's changing on a daily base.

But what is sure is you perfectly understood that we reinforce based on the assumption of a 25% drop of the automotive production for 2020 for the full year. We are currently reinforcing our cost reduction.

And I will complete. Again, we are reinforcing our cost reduction because we don't believe that, without mentioning numbers, that in 2021 the market will go back to the initial situation. And therefore, we are pretty convinced that it will be very weak this year, minus 25%, and it will be still weak next year. That's the reason why we are now putting in place additional action, a structural action, I would say, to make sure that we are able to face this new situation, this new reality.

We now move on to our next question from Thomas Besson from Kepler Cheuvreux.

Can I just continue on what you said? So you assume 25% decline for 2020, which I think is probably at the bottom end of what we understand from other companies or consultants. And still weak in '21, what does it mean? Is it still going to be up 5%, 10% or 15% or you assume that 2021 would be flat or down?

I mean, first of all, we were the first one to say minus 5% this year. You can remember, everybody was saying stable or minus 2%. Then we were the first one saying that the COVID-19 could impact Europe and North America. It's more than what we thought, but we were the first one to say that. And now we anticipate that the market will be at 65 million cars liven this year. I don't believe it's the best case. I think it's really a realistic case. It's only based on the experience we have made and we are making right now in China because, as of today, it's at 50% of the capacity utilization, the automotive industry in China. Therefore, it takes time to catch up. And there will be, as I was mentioning before, probably an issue with the demand because it's an economic crisis and many people will be impacted by the crisis. And that's the reason why we come to the 65 million and the reason why we believe H2 will be at minus 14%. Our assumption for next year, today's assumption is a scenario, is about 70 million cars. That is what we believe. It could be a bit more, but I think 70 million is a realistic number. More important, that is the number we want to consider for Plastic Omnium to be, I would say, to be adapted to this number and to achieve good numbers, profitable numbers with this level of market. And therefore, we are working now on, I would say, adapting Plastic Omnium to this new reality which could be 70 million cars next year.

Okay. Very clear. So in a depressed market in Europe and the U.S. still next year, what kind of mix do you anticipate? Do you believe that you'll still be blessed by a lot of large expensive SUVs than pickup trucks? Or are we going to see global unemployed people buy inexpensive passenger cars?

I think it's too early to say. Today, we don't see a huge change in the mix. I don't believe we'll see a big change next year compared to this year. I don't believe it will impact negatively the SUVs and this kind of car. I believe for the other cars, there could be some grants from the different governments to support the demand, but we don't anticipate any big change in terms of mix for next year.

Okay. Can I come back to your liquidity position? So EUR 2.6 billion right now with EUR 1.3 billion undrawn credit lines, but you're about to pay back EUR 500 million bond. With your current plan of reopening factories in the coming weeks, do you anticipate to have to draw the EUR 1.3 billion credit line or do you believe it's not going to be necessary in the next couple of quarters?

I mean the most important is to know that we have the EUR 2.6 billion, which is more than sufficient for the, I would say, for the next month and for many, many months, which is comfortable. Yes, we will reimburse our bond of EUR 500 million. If we need to draw credit lines, we will see. I don't believe. But the most important number to have in mind is the EUR 2.6 billion. And then undrawn credit lines with a maturity at 5 years at least, which is, again, showing the confidence our banks have in Plastic Omnium.

And no covenants on that, on those credit lines.

Yes. Obviously. One last question for me, please. Laurent, you arrived with a strange timing. Sometimes you're lucky, sometimes you're a bit not lucky between Greer and COVID. Can I ask you what has surprised you so far compared with your expectations getting into POM? Have you positive or negative surprises and both are interesting?

Okay. I hope that you don't believe I'm the reason why the COVID-19 did appear but...

No. Not at all, not at all.

No, no. But I think what I was mentioning many times, the anticipation. And that is something which is, I believe, different in Plastic Omnium. We were always anticipating that -- we were not anticipating the size of the crisis. But again, we were anticipating the market going down this year, anticipating the COVID-19 becoming the worldwide issue and now anticipating that H2 would be weak as well and next year would be weak as well. Therefore, we anticipate. And then we are extremely fast to act and to react. That is something which is, I believe, different. That means within some days, we have shut down 90 factories or more. We have put 90% of our staff in short-term work because we had prepared that, because we had anticipated and because we have a very decentralized organization with divisions acting as an entrepreneur. And that is what makes Plastic Omnium extremely strong and agile in this kind of situation.

We now move on to our next questioner, which is Gaetan Toulemonde from Deutsche Bank.

It's Gaetan speaking from Deutsche Bank. I'm not sure that I fully follow the arithmetic of Adeline on the cost saving this year. If I do my arithmetic correct, I end up with approximately EUR 500 million cost saving reduction this year. Is it a fair number?

This is 1/3 of 24% of turnover that you put at the level you want.

Okay. Second question linked to that point is that part of that fixed cost reduction is probably structural and the other one is momentary. If the market recover in 2021, what proportion of that fixed cost reduction will be structurally maintained in 2021? And what is lost because of those momentary measures?

That is exactly what we are working on. As you know, and as I said before, I mean, before the COVID-19, we were thinking about minus 5% market drop this year, and therefore, we are adapting to this new reality. Now the COVID-19, for sure, it's a different situation. We have a lot of actions we are putting in place, we have put in place, we have explained before, which are temporary actions. That means short-term work. It's not something which we can extend for the next year. Therefore, we are able to cut the cost massively right now with all the actions we have put in place. But I would say it's not what we need to do in order to face a slow market, a 70 million market for next year. We need to work on additional structural action. That means action which are sustainable, I would say. Not meaning that these are not sustainable, but they are short term action. And now we are working on long-term action to adapt our structural cost to 70 million, 70 million instead of 90-plus. Therefore, you can imagine, you can do the math about what we need to adapt to have a similar profitability to adapt our cost structure, to adapt as well our footprint, if needed, because there will be some overcapacity in some countries, but also to find new ways of savings. I was mentioning in our previous meeting that we are working on raw purchasing, for example, which represent EUR 1 billion spending in Plastic Omnium. These are all the topics we are attacking right now, again, to adapt to this new reality, to this new market and to cut the cost on a sustainable basis.

We now move on to a question from Pierre Quemener from MainFirst.

Pierre-Yves from MainFirst. Just one simple one to start with. What is the first feedback you have from China? I mean not on the production side only but from the sales side. Are people actually buying cars or are they just going to showrooms? What is the situation on the car sales you got from your local teams would be appreciated to have that one.

Yes. It's important because it is the base for our assumption for this year. What we have seen in China, first of all, is that the inventory level was extremely high. That means before the OEMs had to produce cars, they have to sell their inventories. It was the highest level since 26 months, if I can remember, some weeks ago. And now it did drop. That means we have good signal that it will catch up again. It did drop to, I would say, a normal level, similar to last year, which is a positive point. What we do see as well in China is what I was mentioning before. Last week, the sales went up by 14%. There is, I would say, mixed feeling what we get from China because from one side, the first priority of the people after this kind of crisis is not to go to buy a car, to be honest. And therefore, it takes time. Many people were impacted also in their salaries, which is the case in other countries right now. That is also to consider. And the first priority is not to buy a car. That is why it is catching up. It's not an issue of production or supply chain. It's really an issue of the demand. It is catching up, but pretty slowly. First of all, to reduce the inventories and then for the demand, I would say, to be again at a normal level. The government is supporting that with some actions, as you may know, again, to support the demand. There is an interesting topic popping up in China right now is that the people, they do prefer apparently to have a car than to be in the public transport for sanitary reason. And that is what we could hope to, I would say, to increase the demand dramatically. That means there are more and more people in China apparently who are willing to buy cars because they are not feeling comfortable in the public transportation. But again, it takes time because the economic crisis, because inventory level and the demand need to be supported. But the positive point in that, it is catching up, and we see people willing again to buy cars instead of being in public transportation. That is the assumption we are doing as well in Europe, in North America that is based on that, that we have commented, that we have explained the numbers before for H2 but also for Q3 and Q4 this year.

Okay. Very helpful. I've got 2 quick ones, very simple, I hope you might address them. The first one, if the first semester's car production is dropping, according to your assumptions, minus 35%, will you be above breakeven?

It's a very simple question, and it's a very difficult answer I won't give. We were saying before that it's not a 35% drop in sales with the similar number of cars produced each month. For us, fantastic first 2 months, fantastic first 2 weeks of March. And then everything being shut down within some days that means 90 factories. And for April, most of the factories are shut down. And we are recovering right now, as you have seen in Europe, with 14 factories open but very, very slow activity. Therefore, April will be at close to 0 in Europe and 0 in Americas, and it's difficult or it's different to compensate that than to compensate if you have a drop in sales which is equal many months. And therefore, I won't comment the numbers, but you have to consider that it is not a normal drop in sales. It is extremely brutal basically what we are experiencing right now. And regarding how it will catch up, it is impossible to predict. You have heard that some customers were willing to restart their production already some weeks ago, and they have been forced to postpone. Therefore, we cannot predict which one, in which country, at which speed because it is changing on a daily basis. Some customers are facing as well some issues with their supply chain. Therefore, they have to postpone their restart or they have to reorganize themselves. And therefore, any kind of prediction today wouldn't be serious. But please consider that it is not a normal mode. It's not a normal slowdown. It is a high volume going immediately to no production and then very slow start again.

Okay. And the last one for me, please. You mentioned that last 4 weeks have been almost closed in many of your regions. We all make assumptions regarding your potential cash burn. If all things go wrong, I mean, absence of revenues and total lockdown, is it fair to assume that before any working capital moves, which is quite hard to estimate from an outside perspective, it's fair to assume that your maximum cash burn per month would be around EUR 50 million?

I didn't get the number, but you said 50?

50. 50. 5-0.

5-0. I mean, you should please remember what Adeline said before, and I that will let you do the math because you are much better than we are. I'm sure that we have 15% of our costs which are personnel expenses, 15. 1-5. We are able to flex between 40% to 50%. We have cut our investment by 30%, meaning that we'll be able to invest less than, what, EUR 360 million. And then we have other expenses, as you know, we are able to cut by 30%. You do the math and you come to a number. And that will be your number.

And then additional comment probably on this cash burn. You read and we confirm that the stress test we performed, taking the assumption of no production for a long period of time, makes us very confident in our ability to go through a long crisis. So this liquidity is more than sufficient to resist to a crisis, which could last long months.

We move on to a question from Akshat Kacker from JPMorgan.

I just have 2 follow-ups, the first one very simply on personnel costs. You've said that globally the number is down 40%. Are you specifically referring to Q2 where you've been able to benefit from short-time work or is that a number for the first half? That's the first question. And the second one is a follow-up on working capital. Not asking specific numbers, but are you seeing any changes in your agreements with factoring of receivables? And do you see a reversal of that impacting the first half?

I will answer the first question and Adeline the second one. Regarding the first question, the 15% of our turnover is personnel expenses, as I said. You'll be pleased, as I said as well, we have 20% of our employees which are basically temps with a different cost, but 20%, which is a flex we can always use, which is very important in this kind of uncertain market situation. And the short-term work I was mentioning before because more than 90% of our employees are in short-term work with a different system depending on the countries in Europe and in North America. The short-term work will give us as well a lot of flexibility in terms of cost. In total, we are talking about more than 50% of the personnel costs for the impacted countries, meaning in Europe, in North America, South America, because in Asia, we are working. Which means 40% of the global payroll, around about, that is the saving we are achieving with these kind of measures. These are the savings we are achieving since the last week of March because we have put everything in place last week of March or even a bit earlier in some countries. And that will be the savings we will see in April and in the coming months, depending on the activity for sure. Because if we have to produce again, then the savings will be a bit less, but then we will have some revenues. But that is what we have put in place basically since the last week of March, and that is what we are benefiting from in April, what we need because in April it would be a very weak month with almost no revenues in Europe and no revenue in North America. That was for the first question. Regarding the second one, Adeline?

Factoring, I remind you that the level of factoring end of 2019 was around EUR 300 million, EUR 314 million, to be very precise. This factoring is mainly made in Europe and North America. And thanks to the good level of activity in the first quarter, this is roughly the level of factoring we have today. And obviously, as we don't invoice anymore in Europe and in North America, this level of factoring will go down in Q2 and affect the free cash flow generation.

[Operator Instructions] And we move on to Sabrina Reeh from UBS for our next question.

I have 2, if I may, so just some follow-ups. The first one would be on the outperformance. I mean you obviously were supported by Europe and Americas not being shut down entirely in Q1, but how do you feel about the outperformance number in Q2? I mean I would still assume a positive outperformance, but would you still be comfortable with 2-digit outperformance rate given the higher exposure to the Americas and Europe which is more impacted in Q2? And on the second one, I know you said you're working on strict working capital control. But just for clarification, in Q2, would it be fair to assume a certain inventory buildup in order to prepare for a restart in production? Please correct me if that assumption is wrong.

Okay. Regarding the first question regarding the outperformance, I was mentioning at the beginning, what is important in the outperformance of Q1 is that we have performed in all the markets. You know that we don't depend so much on China compared to some competitors, but we have outperformed the Chinese market by 15 points. We have outperformed the European market by close to 19 points. And we have outperformed the North American market by 17 points as well. And we are outperforming all of our 3 divisions, which is also important. That means we are pretty well balanced. Do we intend to outperform the market again in Q2? We will benefit a bit less than others from China, but the outperformance again was 15 points in China, which is great. There is no reason that we don't outperform the market in Q2. To which extent, again, because the market is so volatile, nobody can say today, which is the OEM who is able to restart faster their production and to ramp up. And that will be an impact on us as well. For the full year, our guidance was outperformance of 5 points at least. And for sure, we confirm the guidance for 5 points at least for the full year. And Q1 is showing that we are right to plan an important outperformance this year. But again, the mix of the customers in the coming weeks will be very important for us, and that is something we are monitoring, but we do expect to outperform the market in Q2. But the market will be so weak that it will be an outperformance of not a lot, basically. That means if you don't produce, it's difficult to outperform, by the way. But yes, the expectation is an outperformance in Q2 in line with our guidance and because we have outperformed all the markets in Q1. Regarding the working capital for the restart of the operation because the restart is pretty slow, we don't see important working capital effect to be able to be ready for the restart. It's not like after the summer shutdown where you need to put everything in place and you are starting from 0 to 100% within a week. What we see in China is it will take many weeks and more than many weeks, many months, to come back to, I would say, an acceptable situation in terms of capacity utilization. That is why we are predicting H2 being very weak in Europe and North America. And therefore, we don't anticipate an important working capital effort to be able to restart the operation.

And short term, technically speaking, it will be compensated by the increase in payables.

We have a follow-up from Thomas Besson from Kepler Cheuvreux.

I actually have 2 quick follow-ups, please. First, we haven't seen your module business getting in a downturn. So I'd like you to help us understanding whether it's effectively going to remain a stable business, like can we believe that we are still going to be between 2% and 3% margin in 2020 or is it going to be affected as well by the brutality of the decline? And the second question, I'd just like you to help us understanding which of your clients helped you achieve the 20 points outperformance this year? Is it linked with one specific or is it a group of new orders?

I mean for the first question, the module business is outperforming a bit more the market than the industries as you have seen, but that is not a huge difference. It's being impacted as the rest. And that means as of today, all the module factories are shut down in Europe and North America. That means we have not started again in Europe and in North America in module. It should start again this week for Volkswagen and its recall, to be precise. We have a different cost structure in module, as you know, because 90% is material cost. Therefore, the fixed costs are much less than what we have in industries. Therefore, we are a bit less sensitive to volume changes. But nevertheless, if you don't produce, you cannot earn money. Therefore, the margin will be impacted as well in module. But we have, I would say, much, much less fixed cost compared to the turnover than what we have in industries. But the impact will be also coming on module because as I was saying before, there is no production right now in our module factories in Europe and in North America, but with a different cost structure. That is for the first question. Regarding the second question, regarding the outperformance, it was, I mean, we were outperforming, first of all, because we have increased our capacity. You know that we have started new factories for modules, for example, for cockpit modules. The SCR system were booming for us in the first quarter. That means much more than expected, which is great. Our first customer is PSA, which was also in a good shape in the first quarter. And then, as you know, 41% of our sales last year were with German OEMs, BMW, Daimler had as well a pretty good quarter in terms of production. And in North America, we have started Greer, which was helping for the outperformance because the SUVs were at high level in terms of production. And we have as well in North America a new factory in Mexico for Daimler which we were also using for outperformance. Therefore, it's customer mix, I would say, with the PSA, the German OEMs I was mentioning before, but also product with new products like SCR and new modules.

Thank you. At this time, we have no further questions in the queue, sir.

Good, which is good because we had scheduled 1 hour. It's exactly 1 hour. Therefore, I want to thank all of you for attending this call and to thank you as well for your question. And again, I repeat, we are extremely happy about our outperformance in terms of turnover in Q1. We are facing a unique crisis which is extremely brutal. We all need to understand that. I repeat that we have to shut down factories, 90 factories within some days, which is unique, basically. Fortunately, we were ready to act rapidly, what we have done. We were anticipating what is the strength of PO. We are now working on additional actions because the market will need time to recover. And we can base that on a very solid financial situation and a very motivated management team. Therefore, thank you again for the call, and we will talk you again in some months. Thank you.

This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.