OPmobility SE (OPM) Earnings Call Transcript & Summary

Good morning, everybody, and a warm welcome to the presentation of our 2021 results and 2022 perspective. I'm here today with Felicie Burelle, Managing Director; and Kathleen Wantz-O'Rourke, our CFO. We'll first talk about the main highlights of 2021, and then present in detail our financial performance before presenting our perspective for 2022 and handing over to you for the Q&A session. If we start with 2021 and shortly to reflect how the year was, the year was again the special year in 2021 after the strong rebound of the volumes in the second half of 2020, after the COVID crisis. We had to face in 2021, the semiconductor shortage, which did impact mainly the second semester. We had to manage that with the team. And in total, the growth of the market was much lower than expected at the beginning of the year. In this context, we are very proud of the performance we have been able to deliver. The team of Plastic Omnium has been able to deliver, to adapt and flex permanently to the situation, to the shortage of semiconductor and to the stop and goes from our customers, but also to reinforce our position in key markets like in China. And we'll come back to that later on. To achieve a record order intake in the PO story, which is for sure, very important for the future growth of the company, but also to generate a very high level of free cash flow, which was clearly our priority for last year and a very good number in term of net results as well. We have been also able to work on long-term topics like to continue our road map regarding innovation and mainly hydrogen with a lot of commercial successes, but also to show our carbon neutrality road map and to start to implement it and to be here again, having a very strong position on the market. All in all, we did achieve our financial guidance for 2021, again with a very strong level of free cash flow. And later this year, in May, we will present to you how we do see the market developing on middle term and long term and how we want to position PO to benefit from this market transformation because we will have a CMD on the 12th of May 2022. Some key highlights, we will develop later on in the presentation. First of all, the record order intake in all the division, in all the businesses, in all the region, which is giving us a lot of confidence in our capacity to outperform the market in the coming years. The increased content by vehicle as well, especially in strategic market like in Asia, and you know that it is the base of our growth, increasing the content by vehicle. A strong penetration in BEVs, meaning that last year, we had 8% of our sales in BEV segment. And again, here it is an outperformance of the market, and that is a growing segment. Therefore, a high level of confidence that we will be able to grow very fast and faster than the market in the coming years. 165 start up production last year in the PO factories. All were smooth, again, showing the performance of the team and a lot of confidence as well for the future growth of the company. A very strong performance in China, where we have a double-digit growth in China, where we do outperform the market strongly. And we did achieve the greater turnaround, even more than Korea turnaround because Korea was generating positive result last year. Here as well, we are ahead of our plan, meaning that the job was done in 2021, and we are ready to attack 2022. If we come back shortly on the market for last year, you can see in light blue, the numbers of IHS, which were the base at the beginning of last year in Jan 2021. And in that blue, the reality of 2021. And as you can see, the market was much lower than expected last year mainly because of semiconductor. I will come back to that later on. And the perspective for the coming years are still showing a lot of growth, and we believe in the growth in the market. We will show you later on our perspective and our assumption for 2022 in term of market development. 2021 in more details. On the left side, the IHS from January 2021. And on the right side, the reality of 2021. You see 9% less than expected. Again, mainly because of the semiconductor, the demand is very high, the stock level of vehicles is very low in all the countries. But semiconductor shortage last year did bring the market to only 74 million vehicles, which is only 3% growth compared to the year before. The situation is pretty different by region. I think it's really important to mention that. In North America, it was stable between 2021 and 2020, while Europe was decreasing by 5%, Europe, which is a very important market for PO for sure. And China and Asia in total, we are growing very fast, and therefore, we want to continue our development in those regions, which are much more dynamic than Europe right now. But in total, a pretty weak market last year, again, not because of the demand, but because of the shortage of semiconductor. Our guidance was achieved. You can see the key numbers and the guidance we had for last year. We wanted to grow. We did grow by 4.6% which is an outperformance of the market, and Kathleen will show you later that we did outperform the market in all the many regions. We achieved a 4.2% operating margin. And the guidance was between 4 and 5, 4.2 to be mentioned, that in the industry was about 5.2% of our sales in operating margin, and the free cash flow of EUR 251 million, which is much more than the 20 -- EUR 220 million, which was our guidance last year. Again, a very strong performance in this volatile environment. A very strong performance because as well, we didn't compromise on the long-term topics I was mentioning before, hydrogen, innovation, digitalization, carbon neutrality roadmap, where the clear focus on preparing the company for the future while managing the cash and the performance in this volatile environment. That is more or less on this slide, the summary of our activities in 2021. First of all, to work on reacting or adapting to the market condition with increased agility using the flex we have, and you know that we have a pretty flex cost structure that we have more than 20% of our employees in our factories, which are temporary workers, therefore, to use that, to work on the efficiency with our Omega program, and we will come back to the results here as well later on in the presentation. To have a very intensive, I would say, follow-up of our spends, mainly investment because cash was king, and free cash flow was our main focus last year. To protect the margin mainly because of inflation, and here as well productivity actions, active commercial negotiations with our customers, with our suppliers to mitigate the impact of the inflation of our P&L or for balance sheet. And then to maximize the free cash flow, I was mentioning before the work we have been doing on the CapEx, only 4.1% of our sales, but also the work we have been doing with the complete team on overdues and on inventory management, which was, for sure, a challenge in this very volatile market environment. At the same time, working on the long term, meaning investing in electrification, mainly in auto chain, but also in other fields of electrification. Working on our teams as well because keeping the people motivated, keeping the team available for the rebound of the market is a key topic for all of us and for PO, especially and the record order book last year, again, in the history of PO, which is very important for the future growth of the company. On the right side, the key numbers. You see a growth of 4.6% like-for-like compared to 2020, which is a outperformance of the market. But even more important, the fact that we have been able to multiply by 2.6%, the operating margin and by more than 7% the free cash flow generation of the company, again demonstrating our capacity to adapt to a volatile environment while continuing to invest for the future. Kathleen will come back to much more details regarding the financial performance in a couple of minutes. Now we deep dive some key highlights of 2021, and you know that we are willing to continue to grow like the company did grow in the last decade. And our growth strategy is based on 3 pillars: operational excellence, innovation and sustainability. And that's the way we are going to present to you our key highlights for 2021. I will start with operational excellence and Felicie will take over for innovation and sustainability. Regarding operational excellence and starting with China. China being the biggest market in the world, as you know. China, where we have, as PO already a very strong positioning. We are #1 in China for exterior parts with a joint venture there with a very important market share of 22%, sorry. We are #2 in fuel system, and we are accelerating in our module business with HBPO in China. And last year, in China, we had double-digit growth, 10.7%, a strong outperformance and also a very strong penetration in the BEV segment because 17% of our sales in China last year were made with the BEV segment. As you know that the BEV segment is the segment growing the fastest in China. That means that for the coming years as well, we are confident to be able to continue this pace in China to outperform the market and to grow in this very important region, which is becoming more and more important for PO because it did represent 12% of our sales last year versus 9% in 2019. Regarding the footprint in China, we have right now 34 factories and 2 R&D centers. And we are planning to build 4 new factories in the coming years until 2024, again, demonstrating our capacity to support the growth of the market, mainly BEV players, like, for example, a very known American player investing a lot in China. We are building a factory for them, a second factory for them, and we will continue to support them and to gain market share in China, which again is a key market for PO and for the complete industry, not only in term of volumes but also in term of innovation. After China, another highlight. It's our penetration in BEV. BEV being, for sure, a megatrend in many countries. BEV segment is growing in the complete automotive industry from 2% penetration in 2019, as you can see on the left side of the slide, up to 7% last year. And we are following the pace or leading the pace as well because we had last year 8% of our sales in the BEV segment. If you take out the fuel system business of PO, we talk about 12% of our sales for exterior systems of our modules, which are linked to BEV, which means that we are present in all BEV platforms, which confirms again that we have the right technologies for the players in those platforms, meaning light weighting aerodynamics integration of function because that is key for them to achieve the range they need to achieve in order to be competitive on this market. Therefore, the growth of BEV is clearly an opportunity for us as we are outperforming this market. We had many launches in all the regions. I was saying 165 launches in total, 21% were for BEV platforms or BEV class and showing again that we are continuing to outperform this market. Launches in other countries and other regions, but a big part in China, 58 launches, again, demonstrating or confirming that China will be a very important role for PO in our future growth strategy. Some examples of launches or major launches in 2021, not the 165, but some of them which are very important. You see some BEV examples. Audi platform. We are in all the Audi platform for BEV. We launched as well some exterior parts, bumpers, and tailgates for Lucid Air we are producing in Mexico. And that's by the way, the car of the year. We launched as well modules for Rivian for the first vehicle. But we had as well some more traditional products like fuel system for the 308 of PSA. And the first plastic tailgate for Mahindra in India. It's the first plastic tailgate in India showing as well that we have still opportunities to continue to grow and to gain market share in our traditional business. Last but not least, I'd like to mention as well a new SCR business for Toyota in Thailand showing as well that also this technology are still a future in some regions of the world, and we are for sure working on that. Besides the launches, the order book. Again, I was saying before that we had a record year in term of order book for PO. Our order book was much higher than our total order last year. And here has with some examples. First of all, on BEVs. Rivian for new vehicles, the bumpers we booked last year on GM as well for their SUVs, the BEV SUV, the Renault 5 Eco. You know this vehicle, which is very important for the future strategy of Renault, and that is PO inside. But also for new Audi platform, you saw before that we launched the eQ4, but we booked as well the eQ5. Therefore, again, we are presenting all the platform for BEV. Also beside BEV ,for traditional technology, you see here some examples. I want to mention the first business for us for Jeep in Poland. That is, I would say, we are benefiting from the Stellantis group. You know that we have a very strong positioning with Peugeot and Citroen. And now that Stellantis is a group, it gives us opportunity as well to penetrate Jeep in Europe, meaning Poland by using existing capacity and by being present for Jeep for the bumpers. We gained as well new customers last year, like Lotus. Lotus being part of JV and being focused on EV, and we are producing for them different kind of modules. We becomes the Mitsubishi partner, preferred partner. Mitsubishi is moving its metal to plastic fuel systems, basically. And here, it shows again that even in fuel system, we have still opportunity for growth because there is a big move from steel to plastic, and we are benefiting from that. For the first time as well, we booked a module business for GM in North America, and we are happy as well for exterior business to have now Honda as a customer as well in North America. Therefore, new customers for PO or new customers for some of our divisions, showing again that we have the right technology and the right approach and the right customer intimacy to continue to serve our customers and to grow with them in the coming years. Last but not least, when we talk about operational excellence, we have to talk as well about efficiency. We have launched 2 years ago our Omega transformation plan, which is about simplifying the processes, which is about becoming more digital, which is about also having a transversal approach of some topics. We were -- we have been -- we decided to start on indirect purchasing design and development. Our target was to achieve EUR 100 million savings in 2021. The job is done because we did achieve EUR 100 million savings in 2021. And our targets middle term was to achieve the EUR 200 million savings by the beginning of 2023, and we are well on track right now, and we are continuing to speed up the activities on that. It is helping us a lot to mitigate, for example, the inflation effect we are all facing today. Because it is successful, we are launching now the third stream of Omega with Kathleen and the complete team, which is our FIT project, which does concern finance and the IT, always with some approach becoming more agile, becoming more digital, faster, leaner, basically and also being able to answer to the new market expectation, therefore, we are launching that because, again, we are very successful with the first 2 streams and achieving the targets and the commitments we did comment to you some months ago. That was about the operational excellence of 2021 and some highlights. I now hand over to Felicie and Felicie will talk about innovation first and then sustainability.

Thank you, Laurent, and good morning, everybody. So indeed, innovation is key, despite the hectic market situation we are in today. Indeed, we focus on containing CapEx, but we took great care not to entail, but really to preserve investment that are attached to innovation, which is key for our development in the future. And when we talk about innovation, we talk about electrification and also connected autonomous car. Those are the 2 main trends that today we are focusing on in terms of innovation development. First of all, so on electrification. 2021 was a very important year for hydrogen in terms of us moving to this great ambition that we have in being a leader in the hydrogen mobility. So when we talk about hydrogen, as you know, we are willing to address be an leader, obviously, on the full system, but being able to provide either the fuel cell stack with the joint venture we have with ElringKlinger, so EKPO, but also being able to provide separately or as part of the system, the hydrogen vessel. So today, we are able to meet the customer needs really depending on how they want to address this market, and we have this flexibility, which is quite unique. And we also have new partnerships, and I'll come back later to that, like partnership with McPhy that are also enabling us to open to the full hydrogen ecosystem. So today, in terms of hydrogen vessel, we offer hydrogen-pressurized tank, 350 to 700 bar, so offering the complete chain. And for fuel cell stack, we develop small power, so 20 to 30 kilowatts, but we are willing to go up to more than 200 kilowatts, so being able to offer high-power stack for the heavy mobility in the field of hydrogen. So being a leader on those components, and today, we are definitely on a good track. The order book that we have will -- I can confirm that we are on this path of achieving the EUR 300 million mark for 2025 and the EUR 3 billion for 2030. No later than yesterday, we have had some very good news. Unfortunately, we cannot communicate yet on those, but we will be able to do so in the weeks, months to come. And we are very confident in our capacity to achieve those ambitious targets. So 2021, we have taken a new important step in materializing this ambition. It was the year we decided to separate the new energy business as a whole. It was before incubated as part of our Clean Energy Systems' division. And today, it's now a fully stand-alone dedicated division, and we believe it's important to have been able to do so to provide the means, the agility and really the investment. Time is of the essence on this market to seize the opportunities and to take this leadership ambition. So we believe it will help. It won't be sufficient, obviously, but it will help a lot on this path. 2021 was also important. I mentioned earlier the fuel cell stack. It was the year we validated the full implementation of our joint venture with ElringKlinger. So today, we are in a unique position, clearly, to have those footprint capacities either on fuel stack but also on storage system, so 10,000 units each year for each of those projects, which makes it quite unique in the market today. So important development on the development and our operational product offer, but also a lot of important commercial milestone in 2021. So here, you have here the main highlights. So we secured one of the biggest project in high pressure vessels for Hyundai, and for that, we will build a dedicated footprint in Korea to be able to serve this OEM. With Alstom, we have signed memorandum of understanding, a partnership so that we can provide them with hydrogen storage solutions. And we have now a dedicated team with Alstom NPO team members in place to develop jointly so that we can provide them for the regional train, which are today in diesel to shift them to hydrogen, so for France and Italy. Through our EKPO JV, we are now supplying -- developing a fuel cell stack for Airbus, which will be key for them in their ambition to convert to hydrogen part of their fleet. And I mentioned earlier the McPhy partnership. Today, we are still very much focused on developing a technical solution, but really the idea is to be able to go together to make emerge this ecosystem, which will be the mobile part that also address the stationary part. In terms of developing our product offer for the fuel cell system, we signed with AVL, which is also a family owned business, engineering company based in Austria, a joint partnership to go faster in terms of development, so we can bring both of the company expertise really to build together the full system approach and to be quicker on the market. So the next 18 months will be key for us to come up with this product offer. So a lot on electrification, but not only connected and autonomous driving is also very important. We also presented to you few months ago, what we are currently doing with Greenerwave, which is a startup, a spin-off on the Institut Langevin specializing in waves physics. And with this new system, we really aim at coming up with a quite disruptive new product. So integrating this radar within our bumper and really decomposing the radar as it is today and to integrate that directly within the full surface of the bumper. So it will be better -- that was a bit fast. It will be better in terms of perceived -- sorry, design. It will be fully integrated in the bumper. And obviously, it has too much from an economical standpoint. Any solution that today is within the market. So that was for bringing new systems to our current product line. Sustainability, our third pillar is very important for us. It was the year that was back in December, where we presented to you our carbon reduction neutrality road map, very important, very pragmatic. So as you know, we have a road map that is decomposed in 2 steps. The first step is to be neutral in 2025 on scope 1 and scope 2. And for that, we have built a fully comprehensive plan with our partner, Schneider Electric. And we are building that around 3 levers. The three, you can see on this slide. So first is to reduce, reduce our energy consumption by an average of 12%. Then replace, the way we consume energy today going to certified renewables. Currently, it's 32% of what we consume within the group, and we have willing really to make a huge step in that direction, and getting more solar panels throughout the group, 5 today and 20 in each year in the years to come. And finally, but obviously, that should be the very last lever, compensate any reduction we cannot achieve. But we really focus on 1 and 2. So that's for 2025. Scope 3, that will be our target for 2030, reducing the emissions by 30%. And here, as you know, scope 3, you really have to embark all of our stakeholders and our suppliers, our customers to be able to do so because scope 3 is really about how you can have a positive contribution impact to your industry. So regarding suppliers, we are about to benchmark, challenge our supplier panel to progressively ask them to also reduce their CO2 emission. And we are in the process of doing that by sharing the tools and best practices that we have throughout the group. We will also innovate in circular economy by adding more and more recycled material. And to do so, we have signed a few months ago, our partnership with TotalEnergies, which we believe will be critical. First, to have access to this material and second, to have a stronger impact on our capacity to improve, increase the percentage of recycled resin that we can have in all of our product. So key partnership with TotalEnergies, but also with OEMs. With OEMs, the eco-conception is more and more important. We continue to innovate and lightweight, and aerodynamics part are key to be able to reduce more of those emissions. And to do so, we have -- we are developing [ POCs ] with specific OEMs either to increase this share of recycled materials, but also, in general, take a very strong position in those fields and on electrification models with our customers. So our Act For All program is a lot about sustainability, but not only talking about your contribution to our environment, it's also about how we care for our people and how we do business. So here on this slide, you have some of the main achievements of 2021. At the beginning on everything, there is safety. Safety has always been and remains critical for all of the PO employees as we believe it's key that our employees are in a safer environment. And we have been able to divide again by 2 versus 2020, the number of accidents, which is really an impressive achievement. And all in all, over 5 years, it's minus 70%. So we always think it's hard to go to the next milestone, but indeed, we still managed to reduce that. Gender diversity. Obviously, it's an important topic in the executive management. So as part of the Executive Committee, we are now almost at 40% of women representation. And at the Board of Directors, more than 50% with 54%, both indicators in improvement. So that's at executive level. But when you look at the group altogether, also in senior position, obviously, it's a bit harder as you look at the group as a whole, but still, we have improved by 1 point compared to 2020. And we have set up, we have increased our ambition for 2030 with the willingness to have 40% for senior executive and 30% when you look at the managers and engineers throughout the group. Youth for us was a very important action. We believe that after the COVID crisis, it was a population that had to come up with quite some challenges. So we take the decision. And under your leadership, it was your idea to promote those actions. And we have increased the number of apprentices and the youth for the group. And hopefully, it will be also a good way to retain and attract youngsters within the company. And last but not least, we have opened, we have enlarged our committee, which is today about a nomination to sustainability to really fully embedded. We had the first important milestone with David Meneses joining us at the Executive Committee level. But now we also consider this topic as key and important and it's part of the Board of Directors Committee. So that was it for sustainability. And now I hand over to Kathleen for the financial results.

Thank you very much, Felicie, and good morning to all of you. As a bit of a summary of the key messages that we'd like to pass through today. As you can see, group sales are up 4.6% on a like-for-like basis in 2021 with 2 very different profiles between the first semester and the second semester. Just to recall and perhaps to situate things in context, H1 revenues were up 31.9% on a like-for-like basis against 2020, outperforming the market by close to 30%. Thanks to the recovery from the COVID year in 2020. The second semester, as you well know, was an unexpected challenge with automobile production down 15.8% due to the supply chain issues associated with the chip shortage. And in this context, revenue came in at minus 14.3% on a like-for-like basis against Stage 2 2020. Thanks to the considerable efforts made by the group to continue to adapt and flex to the maximum level. The operational margin stands at EUR 303 million versus EUR 118 million in 2020. On consolidated sales, this comes to 4.2% against 1.7% in 2020, up, therefore, EUR 184 million against 2020. And this is perfectly in line with our adjusted guidance range of between 4% and 5%. The operating margin in the second semester was down compared to the first half of the year in relative terms. We went from 6.2% in the first semester to 2% in the second semester from July to December 2020. And as you can see here, net income group share has significantly rebounded in 2020 and is a positive EUR 126 million, 1.7% of sales. So we managed to overachieve or do better than in 2020 by EUR 377 million, which is quite a significant achievement in our view. In 2021, economic sales amounted to EUR 8 billion, increasing as I just mentioned, by 4.6% on a like-for-like basis and showing an outperformance of 1 point above the market in which automotive production increased by 3.6% over the same period. Consolidated sales, as you can see on this slide are stable and aligned with the market overall. And this illustrates the heterogeneous nature of the stop-and-go phenomena that we experienced in the second quarter of 2021, where growth was significantly dependent on the mix in geography and in models and in programs that each OEM decided to allocate their share of chips too. And we've been saying for some time now that the notion of outperformance during these 2 to 3 years of crisis has probably less value than when one is normally functioning in a market environment and where trends are in actual fact good leading indicators on competitive performance in the market. But that having been said, I do appreciate that currently, the industry has no better indicator. And so we continue to measure performance on this basis. Coming back to the slide. The performance indicator for both industries and modules is fairly relatively balanced with modules or things being equal, slightly outperforming industries on a like-for-like basis. And this is a testimony to the appetite of the OEMs for requirements in core competencies surrounding assembly, logistics and the capacity to adapt and innovate. As mentioned earlier by Laurent, our progress in the BEV contribution to PO sales is also thanks to the modules business in 2021. Moving on to the next slide. As you can see, the group has, nevertheless, shown strong outperformance in this very complicated environment in each of its major geographies when analyzed on a stand-alone basis. The stronger sale performance is in Asia, excluding China, up 17.9% year-on-year versus an auto production, which was up by 7.5%. The region now represents 7% of group economic sales, so it's up 1% compared to 2020. As you can see here, Europe has outperformed the market by 5.3 points in a market which is declined overall by 4.8%. PO's growth was better than the market, and that's been driven by Germany and France. The share of the region in the group sales has decreased by 2 points and now weighs only 53% in the group's total revenues. Chinese sales, as you can see, are up 10.7%. Thanks to our leadership position in the region in both industries and modules. The share of the region is up 1% or 1 point in 2021, with sales in China now representing 12% of the group overall in terms of sales. And lastly, North America. Our business has outperformed the market as well by 2.9 points in a generally stable auto production market. And this is thanks in particular to the ramp-up of the factories that we've put in place since 2018. If I now move on to the next page -- here we go. Premium brands, as you can see, represent now 39% of PO sales, up 1 point versus 2020. And this client portfolio component is a central part of our strategy as premium brands push us to drive innovation and operational excellence across the group. And as you can see, the VW Group remains our first client and represents 26% of sales, outdistancing Stellantis, which makes up 17% in 2021. And as Laurent mentioned, we see the merger between PSA and Fiat is an opportunity for us to increase our positioning in some brands of the Stellantis group. And I think Laurent mentioned quite extensively our first success in Poland with Jeep. If we go a little bit further into the accounts, as you can see, through these figures that the important impact of the semiconductor crisis on our business has been well compensated in our view, by the hard work by our teams to lower the breakeven point and increase productivity in the second year of unprecedented disruption. It's important to recall that PO rebounded very successfully in the first semester. And so the only way to really clearly express what has happened in the second semester and to appreciate the incredible job that's being done is to share with you in all transparency, the impact of the crisis on both revenues and costs. On the left-hand side of the screen, you can see that the estimated net impact on revenues has been in the magnitude of EUR 810 million, and let me take you through the figures now. On the bottom of this left-hand histogram, you can see the sum of EUR 8.827 billion in economic sales. And this is what we projected to do in 2021 based on our assumptions of the market and the rebound following the COVID-19 assumptions. So our 2021 guidance in terms of growth was based on this figure. A quick sanity check coming back to the first half of 2021. The first semester in economic sales came to EUR 4.138 billion. That's about 47% of this estimated figure that our guidance was based on. And that demonstrates that all things being equal, the global sales objectives that we had for 2021 was totally in reach at the end of H1. Unfortunately, not all things were equal in H2 with the acceleration of the semiconductor crisis in the summer of 2021. And here, you can see that the stop-and-go phenomenon negatively impacted sales for the year by EUR 1.370 million. But thanks to the commercial efforts by our teams. This effect was mitigated by approximately EUR 590 million. On the right-hand side of the slide, you can see the gross impact before pass-through of the additional costs associated with the stop and goes with inflation and to a very limited extent to the COVID. The gross impact is estimated at EUR 230 million, of which the stop and go represents 67%. So it's by far the largest proportion of the impact in 2021. And I think it's really important to point out that we've had to walk a very fine line in 2021 between flexing our labor costs and maintaining our workforce in order to be in a position to benefit from the future rebound and to secure the execution of the record order book that Laurent mentioned just before. Inflationary factors on raw materials, energy and logistics represented approximately 30% of the gross impact with COVID coming in at circa 3%. Our teams managed to successfully apply contractual arrangements and negotiate with OEMs pass-throughs of approximately 30% of these additional costs and the net impact on our accounts in 2021 comes to an estimated EUR 160 million. Profit and loss. Firstly, as you can see here, the cost of parts and materials are down by 2.1 points in 2021 versus 2020 for higher revenues. And this is an important message as this feeds directly into the material margin, which has held its own and has even slightly improved year-on-year despite inflationary pressures. And the combination of our procurement efficiencies through Omega and the careful management of directed parts from our OEMs has contributed to this result. Production costs remained relatively stable in 2021 overall compared to the full year 2020. The relative increase, as you can see here in H2 of 4.4 points needs to be appreciated under the consideration of, firstly, the government support schemes that we received in 2020 and the stop and goes and inflationary pressures, as mentioned previously for 2021. Net R&D costs were almost stable at 3.6% of sales. As Laurent mentioned previously, our objective in 2021 has been to reduce costs as low as possible without compromising the future. Selling and admin expenses are deceptively higher at a first glance in 2021 compared to 2020, plus EUR 28 million. And the absolute increase is attributable to our buildup of the New Energies activity for approximately EUR 30 million. And this amounts then, as we mentioned, to an operating margin of EUR 303 million, as previously addressed. Our 2 businesses, industries and modules, both considerably improved their operating margins in 2021. PO Industries increased from 1.9% to 5.2% and modules from 1% to 1.6%, demonstrating the strength of PO's adapt in a flex approach despite the very challenging second semester. The financial year EBITDA margin stands at EUR 771 million, representing 10.7% of sales. There again, both divisions contributed significantly to an overall rebound against 2020 with PO Industries contributing to an improvement of EUR 109 million at 12.9% of sales, and modules also managed to improve operational efficiency by improving relative EBITDA by 0.7 points, which is considerable for this type of business. On the next slide, you can see that the reduction in other operating expenses in 2021 by approximately EUR 280 million can be essentially attributed to the absence of any significant impairments on assets contrary to 2020, and EUR 13 million less restructuring charges compared to 2020. Financial expenses were also reduced by EUR 18 million in 2021. Thanks to essentially a EUR 27 million reduction in the cost of financing. As you can recall, in 2020, we reimbursed a tranche of EUR 500 million in bonds. And this, in addition to the fact that contrary to 2020, we won't oblige to draw on any of our credit lines to secure funds for a crisis has really contributed to reducing that expense. Income tax, as you can see here, has been reinstated as an expense in 2021 on the back of a positive net result before tax compared to 2020. And the net result group share, and I think that's really a significant point comes in at EUR 126 million at 1.7% of consolidated sales against a loss of EUR 251 million in the previous year. A word on cash and debt. 2021 cash flow generation comes in at EUR 251 million and is much higher than our guidance of EUR 220 million. And this is supported by, first of all, a better cash conversion of net operating cash flows to EBITDA, passing from 70% in 2020 to 80% in 2021. The tightly managed investments over the period, as Laurent mentioned, down $80 million compared to 2020, coming in at 4.1% in lieu of 5.3% in 2020 and slightly offset, but only very slightly offset by a positive change, but nevertheless, very limited change in working capital requirements of plus EUR 26 million compared to 2020, which under the circumstances is quite remarkable. And I'd like to underline that absolute working capital in operations was stable at EUR 300 million compared to EUR 303 million in 2020. So a fantastic job is being done on inventories in the group in 2021. This free cash flow also includes, as mentioned previously, the New Energies activity considered as an investment for the future with both OpEx that I mentioned earlier, the $30 million and CapEx totaling EUR 54 million in these free cash flow and debt figures. Net debt has been contained at EUR 854 million, slightly higher by EUR 47 million compared to 2020 and includes the M&A investments in EKPO and negative foreign exchange impacts. Just very quickly, if it will come -- here it is. Just a key -- an overview of our key financial metrics. Net debt, I just mentioned, leverage net debt to EBITDA has improved by 0.1 turns coming in at 1.1. Shareholders' equity has gone up by 5.5% and gearing has remained stable at 41%. To finish off with a word on liquidity. Liquidity has increased by EUR 100 million, thanks to greater cash and cash equivalents with undrawn and confirmed credit lines stable year-on-year. Maturity, as you can see on these undrawn lines stands at 3.9 years, slightly down against 2020. And I'd like to underline that the group has no covenants. And one last word on our debt maturity wall. No major repayment is expected before June 2023. And I'll pass over now to Laurent to conclude on the outlook.

Thank you very much, Kathleen. And now talking about the outlook and starting with the market for 2022. You can see on the slide the numbers of IHS on the left side, which is in a way the reference if we need to have some guidance or market assumption for 2022. IHS is forecasting 81 million cars being produced this year, which would be a growth of more than 9% compared to the EUR 74 million from last year. We believe the market will remain volatile this year. Therefore, we prefer to have a more conservative approach. It's not a forecast. It is a management assumption. And our assumption is that the market could be 5% below the IHS numbers. Therefore, we are discounting 5% to the IHS numbers, which would mean about 76 million cars being produced this year. Again, not a forecast, an assumption. The way we are managing the company, we are managing our cost, our cost structure, our investment as well because we believe that the semiconductor shortage, the issues on the supply chain will probably continue in the first quarter, what we are experiencing right now, and we stabilize not before the beginning of the second semester. Therefore, not a forecast. I repeat that, but a market assumption, meaning 76 million cars could be produced this year. We expect a pretty, I would say, weak first semester and the stronger second semester, which would be more or less in line with the capacity increase being put in place for the semiconductor worldwide. For us, this year, it will be, again, about managing both the short term and the long term as we did last year. The short term meaning to continue to adapt to the volatility of the market, to continue to increase, to improve our efficiency. I was talking about Omega. I was talking about digitalization, about simplification of our internal processes. It is about facing, I would say, the market volatility. It's also the order intake. Last year, it was a record year in term of order intake. We want to continue this year, and the first weeks are confirming this trend. Therefore, again to, I would say, to beat last year and to have again an order intake record in 2022, which is, for sure, very important for the future growth of the company, which is, again, the confirmation that we have the right product offering for all the technologies our customer are needing for their transformation. Inflation will be, for sure, a very important topic for all of us for the complete industry. And our clear target is to mitigate it by working on productivity actions internally by working with our suppliers, by working with our customers on all the items of the P&L because we are facing an inflation which we never had in the last 30 years and therefore, a key topic for all of us this year in PO. And continue to work on attractivity because for the complete automotive industry, for PO as well, remaining attractive is key. There is also a shortage of labor, of skills of competencies. And therefore, we are putting a lot of effort to remain attractive and to differentiate also with the attractivity of the company. That was about the short term, but the long term as well needs to be prepared. You know that the industry is transforming much faster than expected, therefore, to accelerate on innovation on the topics Felicie showed before, but also to add more content by car, to diversify our technology portfolio, which is a clear target for us, again, to benefit from the market transformation, to execute our plan in term of carbon neutrality, which was, again, presented by Felicie today with a clear target to be carbon neutral in our factories, scope 1 and 2 in 2025 already. To continue to address some regions where the growth is more dynamic than in Europe and especially Asia, China, but also the other countries of Asia, where we were very successful in 2021 and where we are building capacities in China, Indonesia, Korea and so on for the coming years because those markets will lead the pace in term of growth of the market. And for sure, to pursue to accelerate in hydrogen. We have now a very important product offering in term of technology. We are developing the footprint. We will pretty -- we will announce pretty soon a new footprint in North America for an American customer. We had a very good news yesterday evening for additional capacity increase. And therefore, this year will be also the year of confirmation of our EUR 300-odd million sales in 2025 and EUR 3 billion in 2030 with more product, but also more capacity worldwide to continue to grow in hydrogen because we believe hydrogen will play a very important role in the electrification of the mobility. In this context, our guidance for 2022, again, with the assumption that the market will be 5% below the forecast of IHS. We want to outperform the market in term of growth. We want to outperform the market in all the main regions like we did last year. We are targeting an operating margin between 5% and 6%, which would be an improvement compared to last year. And we are targeting a free cash flow higher than EUR 260 million. We will again have a lot of attention on free cash flow because free cash flow is our freedom to act, our freedom to invest our freedom as well to benefit from the transformation of the market and the consolidation of the market, and the consolidation of the market will speed up in the coming months. Therefore, that is our guidance for 2022. Again, without any compromise on preparing the future of the company, meaning investing in new technologies, investing in hydro chain, digitalization, carbon neutrality. We won't compromise on that, but we are committed to achieve at least those numbers you can see on the screen. It's now time to conclude without repeating what we said before. But in nutshell, we are very happy with our performance of 2021. We are very proud of the team, what they have been able to do, again, to adapt permanently to the Stop-&-Go, to face the inflation, to maintain the supply chain. We did fulfill all our commitments with our customers, with our employees. And at the end of the year to have very good results, especially regarding the free cash flow generation. I think we are benchmark on that, but also on the net result, which is giving us a lot of opportunity for the coming years to benefit from the consolidation of the market, to continue to grow and to invest in some very important geographies for us, like, for example, in Asia, but also to diversify our technology road map to benefit even more from the electrification, which is transforming for sure the market. Therefore, we are starting 2022 with a very sound financial structure and with a very high ambition to continue to lead the pace and to play a very important role in the mobility of tomorrow. Before finishing, talking about the dividend. We will have our shareholders' meeting on the 21st of April 2022, and we will propose a dividend of EUR 0.28 per share, which would represent 32% payout and which will be paid, sorry, on the 2nd of May 2022. That is what we will propose to the shareholder meeting on the 21st of April. The calendar for this year. The shareholder meeting I was mentioning before, the first quarter revenue on the 27th of April. And a very important date for us, which is the 12th of May because on the 12th of May, we will have a Capital Market Day. And we hope to see you in person because we want to take time to reflect about the market, the transformation of the market since some years and how we do see the market in the coming years, middle and long term and to show you how we are willing to develop PO in the coming years in term of technology, in term of geography, to benefit from the market transformation and to give you some flavor of about what we are targeting in term of growth, in term of profitability and in term of technology road map in the coming years. I thank you for your attention. We hand over now to you for the Q&A session. And we start with the people who are in the room here in our headquarter.

Pierre-Yves Quemener, Stifel. I would have 2 questions, please. The first one would be taking a long view on the Clean Energy Systems. Do you see an inflection point for this business, implying a negative growth somewhere in the decade? And at what point in time, if it is the case? And since the new hydrogen business has been separated is, let's say, a spin-off a reasonable option for Clean Energy System at some point. That will be my first question. The second would be on free cash flow. I should right now or I say it for later.

No, no, do it. Kathleen is writing down. Therefore we will remember.

Okay. So how should we think about your 2022 free cash flow guidance? The CapEx has been cut in 2021 to 4% plus of revenues. What are the assumption for CapEx for '22 and for the next 3 years? And have you baked in any working cap tailwind in that guide? Last but not least, I guess, regarding capital allocation, you have slashed your dividend this year, at least the one that's going to be proposed. How should we think about your future distribution strategy?

Okay. Then we start with the fuel system business. I mean, for sure, there is electrification speeding up and electrifications for BEVs, it means less fuel system in total. But we believe that we will be able to grow at least in the 4 to 5 next years in the fuel system business. Why to grow? First of all because we are intending to gain market share. We had last year, 21% market share worldwide. We are targeting 29% market share in 2026. How do we want to achieve that? First of all, the market is going to consolidate. There will be less players in the coming years and the customers are organizing this consolidation. And because we are the market leader, we are benefiting from this consolidation. We have the critical mass for that. There will be less players in 5 years than today and therefore, we will continue to gain market share. And as we showed in the presentation with Mitsubishi, there are still some customers moving from steel to plastic. Therefore, also for us the opportunity to gain new market. Therefore, in volumes in the coming 5 years, we will see the number of fuel system growing for PO, even if the electrification is speeding up. In SCR system, it won't be the case. SCR system will stabilize and start to go down. And we are forecasting a kind of a price erosion because there will be a cost pressure on that. And that's part of the way we are assessing the fuel system business, which is very important for us because it is also helping to finance the other topics like hydrogen. But for the 5 coming years, we are very confident. It could be that in 2028, 2029, we achieve the top and then it will start to decrease. The way we are managing that is to generate the highest level of cash as possible to gain market share and not to be exposed in term of balance sheet. We won't be exposed to SCR from now, I would say, and we have a very low exposure for this business basically. And we do see a shift from capacities from some region like Western Europe to other regions like Southeast Asia, where the market is still very dynamic for fuel system. Therefore, we are very confident with this business. Hydrogen, we are mentioning. We had the target, as Felicie mentioned before in the presentation, to carve out the hydrogen business from the other businesses of PO. First of all, because we need to have a dedicated team to make it happen. The strong growth ambition we have been talking about before, EUR 300 million sales in 2025 and EUR 3 billion in 2030. Therefore, to have the agility for that. Also because we are not only addressing the mobility we are addressing in the rest of the business of PO. On that chain, we are working with Alstom, Airbus, train, buses -- sorry, trucks, captive fleets and so on. That means all the kind of customers and mobility. And therefore, we wanted to have a dedicated team for that. And because it gives us also opportunities to be agile to find partners in the coming years to develop this business as fast as possible. Therefore, it was a question of being focused, having the right agility and also the strategic opportunities we may have to develop faster this business being carved out from the rest of the business. Regarding the free cash flow. Last year, we made a lot of effort on CapEx and inventory management. We will continue on inventory management this year. That means we do intend to reduce inventories this year, and we have a strong commitment on that. On CapEx, we will probably increase the CapEx this year because innovating is also investing. Hydrogen is an investment for us, but also other fees. Therefore, we will increase the CapEx probably by 1 point this year. That is part of our guidance and continue to work on the working capital, inventory management, which is part of our DNA as well.

And perhaps I'd just like to underline that we already have a very good installed base. So there's not -- we can really flesh our -- we can flesh out our investments more into the innovation space today because we have this installed base. So we can stay within the range of 5% to 6% of sales in CapEx, and that's fully integrated into our guidance and into our business model.

And on the dividend, I think you know PO since many years. We were very, I would say, conservative in the payout, and that's a decision we will take each year with the shareholder to evaluate how to continue to develop the company, to invest in growth of the company but also for sure, to honor our shareholders. And therefore, no clear policy on that like we did in the past, and we will adapt to the market condition.

Michael Foundoukidis, ODDO BHF. 2 questions. First one on your 2022 margin guidance. Could you help us -- could you give us more color on the headwinds? I mean you had a slide which was interesting with the stop and goes, raw material and marginal inflation. Could you give us more color on that? What kind of pass-through you could expect in 2022? What kind of repricing with OEMs and what it would mean in terms of operating leverage? And second question on M&A. You've seen much less vocal as you have been in the past few months on this topic. Clearly, more focusing on organic growth than an external opportunity. Is it a reflection of you didn't find anything suitable for Plastic Omnium or anything else? And does it have any consequences in terms of midterm, let's say, CapEx spending for Plastic Omnium? Would it been replaced M&A external spending by internal spending?

We start with inflation. I start and Kathleen, you can for sure complete. For inflation, we have the inflation on raw material, which is, for sure, a very important part and especially in plastic for us. And here for, I would say, a big part of our business, we have pass-through agreements with our customers with a certain delay in term of timing, one quarter, one semester. But normally, we are able to pass through close to 100% of the raw material. Therefore, that's always a topic for the team because negotiating with the customers and so on, but we are not too concerned about that. It's hard work. We have been used to do that. And then there is the inflation of energy and logistic and labor, which is not part of the contracts with our customers because it's a new situation since 30 years. And here clearly, the target is to mitigate that, working on productivity on the actions we have on Omega in term of purchasing, but also addressing that to our customers because the amounts are too important to be swallowed in a way. Therefore, a clear target for us this year, mitigating, meaning we are targeting to have, if possible, no impact from inflation on our P&L. Maybe a certain delay in timing because there is always a delay between the timing we are paying and the timing we are getting the money from the customers. But it's a challenge for the team. It's a challenge for the complete industry basically. Don't know Kathleen, if you want to say a word on that.

I mean, in terms of labor, I think that's where we probably see the most significant, I'd say, challenge in 2021. As Laurent just mentioned, in terms of raw material, I mean we do have contractual arrangements that enable us to have a -- sit down and have a discussion with our customers on that topic. Labor is a very varied topic. And obviously, we have in built into our guidance, a certain inflation. And anything that goes beyond that, as I have had the occasion to mention at other moments that we've spoken together, our intention is to increase productivity once again and to compensate for that. But clearly, that will be a challenge for everybody. So depending on the geography, we have in built between 2% to 5% into that guidance of inflation. Now I mean, how it plays out will depend on the coming months and probably the second semester, I would say, of 2022, where most of the negotiations, the enterprise bargaining agreements and whatever will be conducted between PO and the local entities in the field. So that's our plan of action at the moment.

A clear target is mitigate it because otherwise, you deteriorate your margin on a sustainable manner what we cannot afford. Therefore, we are working hard on that with our customers, with our suppliers and sometimes fighting a bit, but that's part of our job. But it's for sure, an important challenge for all of us this year. Regarding to M&A, we -- I think we never said that our target is M&A. Our target is to continue to grow, to outperform the market. We do see the transformation of the market as an opportunity for us because transformation means opportunities, challenges for sure, but opportunities. And after a year like 2021, with a strong liquidity, with low debt, with a high level of free cash flow generation. That means we are capable to generate a high level of free cash flow even in crisis situation, even in inflation situation, which is kind of unique. We are well positioned if some opportunities would pop up. Therefore, we don't feel forced to do certain things tomorrow, but we are, for sure, assessing the opportunities in the market. And when we do assess the opportunities in the market, we always consider what would make sense for us in term of technology, to reinforce our positioning today. Therefore, we have in all of our businesses and market leadership and everything we will do should help us to reinforce this leadership. And therefore, to add content in what we are doing in term of technology, but also to invest in technologies, which are being benefiting from the transformation of the market in synergies plus growth of those technologies. That is what we do assess. We are pretty -- yes, we are. We don't feel under pressure. But we see that opportunities are popping up because the market is consolidating and because many companies are not so healthy than PO and therefore, it may be that some opportunities could come in the coming months, but we don't have the pressure of doing something in the coming weeks. And that's the way we are addressing the M&A topics.

Thomas Besson, Kepler Cheuvreux. I have a few questions as well, please. First, a short-term question on the trading activity. I mean everybody, IHS, yourself and your competitors assume a week H1. But some of your peers suggest the first 6, 7 weeks of the year have actually been much better than expected, mainly in Asia. Can you give us your view on that and whether you think there is upside potential to this disastrous H1 scenario? If that's not the case, what should we assume in terms of ponderation of seasonality H1, H2, something like a very back end loaded again, I guess, for the year? Second question, a lot more general. Can you talk about the evolution of your relationship with automakers with Stellantis in particular? Every automaker seems to want to get more profitable, while they have become more profitable than suppliers, which is unusual. What have you assumed in '22 for potential cost recovery for either stop and go or for the various costs you may have incurred? And then I have 2 very simple questions. One, what should we assume for depreciation and tax rate '22? And last one in purely on presentation. Felicie, you showed us that you're separating the new energy business. Is there a plan to eventually have as you carve out this business, modules, industry and new energy? Or are you going to keep it within one of the large groups as -- is it going to be a full carve out or not? And should we anticipate the negative impact in the short term to increase further in '22? I think the plan is to have a breakeven in '25. When is the maximum hit on the group accounts?

I'll start with the market short term. Today, if we have a look on Q1 and Q2, the volumes seem to be higher than what we did expect. But nevertheless, we have every day some news from some customers. I won't mention them, suffering from chip shortage and stopping their operation from day to another day. Therefore, we are pretty cautious, I would say. If we consider only the forecast of our customers, Q1, Q2 should be better than what we did envisage. If we do see the reality, there are still some issues in the supply chain. And I believe our customers, they even don't know what they may produce in the coming weeks. But as of today, we see more opportunities than risk compared to our assumption for the first semester. Yes. It's impossible to give you numbers. Last year, it was 35 million cars or 36 million cars being produced in the second semester. We believe it could be a bit more. That's the way we are building up our budget basically. That means a pretty weak first semester, in line a bit higher than the second semester of last year and then the second semester showing progress. And as mentioned before, as of today, it seems to be a bit better than that we did expect for Q1 and Q2. But again, we remain cautious because it can be from one day to the other that we have a bad news like we have in some countries in France or in Spain, where customers are shutting down their operation for some shift. But as of today, more opportunities than risks for the first semester. That was the first question. The second question was the relationship with our customers. There is -- there are different ways to see it. Record order intake means basically, they trust us. And the relationship is good in term of intimacy. We have a lot of innovation project with them, and we are booking a lot of orders. And many customers, they are working with us on their long-term strategy, also outsourcing strategy because they want to invest in different fees and maybe to outsource current activities, which may represent an opportunity for us. Now for those strategic topics and order intake, relationship is good, basically, and that is what we have been able to achieve last year. On the day-to-day business, it is tense because they have very high expectation in term of cost cutting from our side. That's the way they do address as well the electrification because they have to reduce the cost by car, if they want to sell the cars. And at the same time, the volumes are low. The production is being stopped sometime because of chip shortage and the inflation is impacting all of us. Therefore, on the day-to-day is pretty tense Stellantis, but not only with Stellantis and with the other one. Therefore, in total, I would say, a good relationship because we are booking orders and we are growing, but I would say, a very intensive discussion with them because their expectation don't fit to the market situation today, and therefore, we need to find a way. You mentioned before that last year, they all had very good results because they had the pricing power. That's -- if you analyze their result, it's not efficiency. It's pricing. The way they did achieve the good results of last year. They did have a pricing power we didn't have. And I think it will be balanced in the coming years because the suppliers, they have to have also a part of the cake of the pricing power if the customers want them to continue to invest and to support them in the transformation of the mobility. Therefore, it will be a fight, but I'm pretty confident that we will find a solution with them because they need us. Yes. That's the way we -- I'm seeing that. Next question for you, Kathleen, maybe depreciation.

Just to underline that in 2021, we managed to pass through about 30% of the total additional costs that we had. And so there's no reason to think that, that will be any different discussions with the customers in 2022.

30% was also for the shortage of chips and stop of production.

Yes, the full additional costs. The tax rate for 2022, you should include in your models between 25% and 26%. New Energies.

Depreciation. I think it was a question as well, Thomas.

Is there an appreciation -- sorry, depreciation?

I think, Thomas, you had a question on the depreciation as well?

Yes. Yes, I also asked the depreciation which is issued for…

Sorry, okay. Yes. Depreciation in 2021 was EUR 469 million down from 2020 EUR 529 million. So that will be the sort of magnitude, a little bit more in 2022.

It's going to be stable? It's going to decline or it's going to be stable in '22?

It should be relatively stable because we will have some additional investment in New Energies.

And then the last question, Felicie will answer.

So on New Energies, so to be clear, so now New Energy is a new division of Plastic Omnium, so along Clean Energy System, Intelligent Exterior System, New Energies and HBPO. So a totally independent division. And actually, as a matter of fact, the CEO of this business has joined the Executive Committee of the group as an associated member. So clearly separated from the rest to be able to gain in agility, as we said, to be faster. And really, it's also a different market application and customer. So a totally different way of approaching customers in the market. So that's why we needed to have this agility. And in terms of development, I mean all of our cost investments, OpEx, CapEx attached to the ambition of EUR 303 billion in 2030 is already incorporated into our strategic planning. So no deviation anticipated on that.

And if your question was, are we going to spend more this year than last year? The answer is yes on New Energy, we will invest more because when we book a lot of orders, which is the current situation, it means the pipeline is pretty full. We need to invest in more capacity to make it happen, which is -- which we are very happy about. And that's part of the guidance we showed today. That means we will have more spends in OpEx and more spends as well in CapEx in cash this year than what we had last year.

So maybe I expressed myself incorrectly. My questions were, one, do you intend to separate in the presentation, Clean Energy, having industries, modules and clean energy because as you say, it's not the same customers, it's very different from the rest. So are we going to see it separated? And second, should we assume that we have seen the peak of the headwinds in terms of your P&L? Or is the headwind growing further in '22 or in '23? Or when is the peak of the headwind from -- before it turns and it becomes…

For New Energy?

Yes.

For New Energy, in term of operating margin is stable in the coming years. In term of cash, it will be more this year, cash consumption investment because it's about capacity. We are bringing up. It's about also innovation road map. It will be the -- I would say, the highest number will be this year and next year, and then it will stabilize. Are we going to disclose the new energy numbers separately from industry? I don't believe this year, but probably we'll start next year to do that. I think questions now in the -- not in the room anymore.

[Operator Instructions] We do have a question coming through from the line of Akshat Kacker coming from JPMorgan.

Akshat from JPMorgan. 3 questions, please. The first one on the medium-term margin profile for the industrial business. I can understand all the different moving parts that we have in the short term. But going into 2023, probably, how do you think about the margins at PO Industries? Should we think that the business should get back to the 8.5% 9% margin level? Or are there any structural reasons why it should be lower? That's the first one. The second question is coming back on CapEx. I guess your comments that the CapEx will increase by 1 percentage point in 2022, and you are well invested globally. But how should we think about the next 2 to 3 years? Should we be thinking about that EUR 400 million level in terms of total CapEx? Or should we think about some catch-up in terms of loss investments in 2020 and that level going up to EUR 500 million probably? The third question is on the R&D capitalization ratio. Obviously, it is lower than what you have done historically this year. How should we expect this to evolve with more investments coming up in Clean Energy and hydrogen?

Okay. The -- to start with your first question regarding the industry target in term of operating margin, historically, we were at 8%, as you mentioned. Before, it was a different market condition, I would say, much higher volumes. Are we happy with the 5.2% we had last year? Yes, given -- considering the market condition, no in absolute value because we are aiming for much more. You know that. Are we targeting to come back to the numbers we had in the past in the coming years? Yes, for sure. Probably not already in 2023. It will depend strongly on the market, on the market rebound on the volumes. But for sure, the target is on middle term. That's what will be -- we will explain that to you in the coming CMD in May. We want to come back to the numbers we had in the past. But again, it will depend on the market development. This year, industry will be again higher than the 6 points. And then we will be coming sooner and sooner. I mean, closer and closer to the numbers we had in the past, if we for sure isolate the new energy business, which is a different business. But that will be a part of our CMD. Regarding CapEx, we said before that last year, it was 4%. This year, we have budgeted 5%, which is, I believe, what we need on long term to continue to develop the company, meaning to develop New Energy, hydrogen activities, but also other activities linked to electrification or autonomous driving and so on. Therefore, we are trying to maintain the 5 points of CapEx in the coming years. We have existing capacity from [ Warrington ] in the business like for exterior, for fuel system and so on. We can use and we can grow without adding investment, but we need for sure investment for new technologies. Therefore, the 5 point is the range we are targeting for the coming years to continue to grow the business in PO and to develop topics like hydrogen, for example. And the last question was related to R&D. Maybe you can repeat it, please?

Yes, sure. The last question was on R&D capitalization. This year, I saw the capitalization ratio was at 52% versus 62% previously. So how should we expect this to evolve going forward given that you are making more investments in Clean Energy and hydrogen. So should we expect this capitalization ratio to go higher in the future?

Kathleen?

Sorry, Akshat. I didn't quite get -- I didn't get quite good the ratio that you were talking about. So the gap? Can you please repeat?

It is basically capitalized R&D as a percentage of your gross R&D investment, the capitalization ratio.

Okay. Yes. This year, we're at 3.6% of sales in net R&D, and that was including everything in there. We'll still -- we are continuing on our plan considers roughly 4% per year in the coming years. So at the same level, basically. And that includes our New Energies investments as well. So once again, we have a very mature business in the fuel tank arena, which doesn't necessitate a lot of additional investment in CapEx and research and development. And -- so that envelope in itself will be used more to the innovation topics.

And when we talk about Omega, you know that we have a stream which is the DNG, which is developing new digital tools. We are investing in to become more efficient. But we are also working on moving, I would say, the capacities from high-cost country to best cost countries. And we have now more cost or more people, sorry, in best cost countries and in high-cost country. Therefore, for the traditional business, we are working hard on efficiency, not doing less, but doing better, basically being more digital and using more the global footprint we have and moving people to best cost countries. And that will help us to finance the additional need we have for hydrogen or other topics and to remain in a decent range in term of R&D spendings.

The next question comes in from the line of Antoine Bregeaut calling from BNP Paribas.

The first one would be on the guidance. And maybe if you could give us some more color if you -- and obviously, you're saying it's management assumption, but could we consider that if light vehicle production comes at current IHS expected levels, then you could -- your operating margins could come at the high end of the range or even higher? And also, could you please give us maybe some color on the outperformance you're expecting? Should we expect the usual 5% or mid-single digit? Or could the regional mix actually be a good tailwind and maybe drive more high single-digit performance? And the second question was on the BEV exposure. You're talking about 8% at the group level. Is it still considering only the dedicated platforms? Or is it the total BEV sales?

I'll start with the last question. It concerns only the dedicated platforms of BEV when we talk about 8% on group level. Therefore, the platforms where they have a mix between combustion engine and BEVs, we are not considering those -- in these numbers, only the dedicated platform. Regarding our guidance, operating margin, if HIS is right, and there would be 81 million cars being produced, we would be very disappointed to be not better than our guidance because our guidance is based on a more conservative approach. Therefore, if IHS is right, and we hope they are right on basically, then we will be, for sure, better than the guidance we have announced today because with this level of -- you can remember that in the first semester of last year, we had a 6.2% operating margin. And therefore, you can imagine what we would target is the market will be at 81 million cars being produced this year, which would be better than the guidance. But the guidance is, again, based on the assumption we explained before because markets remains volatile, and it's really difficult at the beginning of the year to know how it will happen. And we believe it's better to be a bit more conservative in the approach because it's the way we are also defining the CapEx. We want to invest and the way we want to develop our cost structure. But for a clear answer, yes, it will be better if IHS is right. The other question. That is…

On the outperformance.

On the outperformance, sorry. The outperformance is really difficult because you saw before in the presentation what Kathleen showed. We are outperforming Europe 5 -- by 5 points. China by 4, Asia by 7 and so on. And in total, it makes only 1 point just because the mix of geography is not favorable, and we cannot influence that. And therefore, we are -- it's difficult for us to give the numbers for outperformance. It will depend on which region we'll suffer the more of the lest from the chip shortage and the allocation of the ships by the customers. And if we take a customer like BMW, you may know that they didn't lose 1 SUV last year. That means we allocate all their ships to their big SUVs where they have a high margin, and they lost some other cars. And depending on which platform you are, you suffer more or less in term of volumes. And therefore, it's something we cannot influence. We target outperformance in other regions. And even more important, the record order intake we had last year should or will bring us outperformance globally in the coming years. Maybe a last question?

That was the final question on the telephone line. So we shall now turn over to the web questions. Thank you.

So I think we should finish because we -- the time is over. We really thank you for your attention for the questions as well. I hope we could convince you that we have the right approach to the market. We are, again, very happy about the performance in 2021, and I want to use the opportunity to thank the team of PO, which did a fantastic job, and we are attacking 2022 with a lot of confidence in the future. Thank you again for your attention, and see you soon.