Renault SA (RNO.PA) Earnings Call Transcript & Summary

Hello, everyone. We are pleased to welcome you for Renault Group H1 results. These results are very special for us as it is the first day of our CEO, François Provost. That's why we have the pleasure to be here with all the team our Chairman, Jean-Dominique Senard; Francois Provost, our brand-new CEO; Duncan Minto, our CFO; Fabrice Cambolive, Renault Brand CEO; Denis Le Vot, Dacia CEO and Philippe Krief, CTO and Alpine CEO. This presentation will be followed by a Q&A session. I'm now happy to turn over to Jean-Dominique Senard.

Good morning, everybody. Thank you for being all with us. It's a special day, of course, today. And for me, it's an extreme strong pleasure to introduce our new CEO, Francois Provost. As you probably know, we went through a very intense and comprehensive selection process. Under the leadership of the Governance and Compensation Committee led by Pierre Florio with the help of an enlarged jewelry, I would say, compiled with the Chairman and Chairman of women of the different committees of the Board, we were able to work, I would say, quite swiftly during more than small months to achieve what is, I think, a very strong result for the group. We conducted that process, I think, very professionally, hearing, of course, external candidates and internal candidates. And I have to say that the group was lucky enough to have inside very strong internal candidates. And our choice came to Francois lero. During that period with the help of Duncan here, our CFO, I was happy to work closely with the team and make sure that this short transition period would be as swift quiet and peso, I would say, as could be, which has been the case. And I have to say that I'm extremely grateful for the professionalism of the team during that period. So of course, I could give you a list of skills that are needed for our CEO to achieve his job. I will avoid that. But just me tell me and let me just give you a few items, which I think are important that would characterize Francois. First of all, I think we have been very, very impressed by his maneuverability in terms of strategy. because this strategy maneuverability is absolutely essential for Renault in the coming months and years. There is another scale, of course, which is important that he is reflecting some sort of continuity with what we have lived in the past 5 years. This continuity, of course, comes with open eyes -- open eyes to understand what has to be changed and what has to be maintained. And last but not least, because there are many others. He also is able, certainly to make sure that Renault keeps a very strong standard in terms of performance, which I think is absolutely essential at the point where we have come today. at a very strong company with very good results. We have to be able and he will make sure with the team and with my help to create value. for all the stakeholders of the Renault Group. Of course, I could spend hours mentioning his career. At least, as you know, 23 years in Renault Group, serving the group and making sure that Renault Group was first, and he came second. And that was absolutely essential. He has lived an international career in places where we're not the most easy to live in, Korea, China, Russia, you name it. He has gone through all sorts of task in that company. So he's extremely well prepared for the task in front of him now. I'm absolutely sure I'm absolutely sure that I have no doubt that Francois will be able to bring Renal in the future in a bright, bright future. I make sure that not only will he be able to create with the team and with the help of the Board a very strong plan for the coming years, but we will also be able to make sure that it will be executed. And I think that is absolutely essential. So Francois, the word is yours. But I want not only to congratulate you. But to tell you that you will have the full support of the Board and my personal support, as you know, I look forward really to working closely with you. Thank you, Francois. The word is yours.

Thank you -- thank very much, Jean-Dominique. And good morning, good afternoon, everyone. Very pleased to be with you and honored to take on the role of CEO for Renault Group today. First of all, please allow me to thank Jean-Dominique and the Renault Board of Directors for their trust. I will put all my energy and passion into contributing with our 100,000 employees, our dealers suppliers, partners to the development and the transformation of our group, one of the flagship of the French industry for 127 years. Thanks to the 23 years I have spent at Renault Group have been able to forge the vision that I am pursuing today for our group. It is a product-led vision shaped by more than 10 years in sales and marketing division. A vision that is not only European, but multicultural nurtured by 10 years spent managing our activities in Portugal, Russia, South Korea and China. A vision also basing cooperation through strategic partnerships with Nissan, Mitsubishi, [indiscernible] i, Aramco and our major suppliers. And finally, a vision that dose on the Renault Group's outstanding human capital. This vision is supported by 3 strong conviction. Firstly, about strategy, product is at the heart. We'll keep our top priority to invest in products to deliver a second successful lineup in [indiscernible] , both for Europe and international markets. will stay the course value over volume. Every vehicle we sell must contribute to strengthening our brands' profitability and the bottom line as a group. Regarding competitiveness, we know how our strongest competitors are doing, and we are capable to do so. For instance, Twingo develop in only 21 months. This is the right pace to apply this in all our projects, all places and especially with our French and European ecosystem of R&D, production and supplier ecosystem. This is about acceleration of our transformation. My third condition, based on my experience managing large end-to-end operation in highly uncertain environment relies on strong engagement from employees. In France, we say [Foreign Language] , having the diamond instead of the hub. This is the most important success factor, combined with enhancement of management. Customers, the improvement of our quality's one of the strong assets delivered over the past 5 years. Suppliers as Chief Procurement, I change the traditional transactional way to engage with suppliers. Our suppliers should be involved much more upstream to define together the most effective solutions to reach expected features and cost. Dealers, unlike other OEMs, we have always considered our dealers as key for sustainable commercial results and long-term partners. We will continue to do so. And for our shareholders, our duty is to create sustainable value, we are committed to increase shareholder return as a reward for their trust. Of course, the objective of this strategy is clear: deliver financial performance that places us among the best in the industry, and we'll deliver it in a real way, taking into account sustainable opportune for all our stakeholders, starting with our employees. We do so based on 3 fundamental pillars: sustainably high level of profitability, strong and consistent cash generation and high ROCE, which proves that every euro we invest is used efficiently. This require iron discipline in our investment included in the choices we'll make as part of our diversification strategy. Thanks to the [indiscernible] , we have very solid fundamentals. And I would like to take the opportunity to thank Luca for leaving this unprecedented turnaround. We now have committed teams, strong brands, robust product plan and agile, flexible organizational model supported by on par and ours. Relying on those strong fundamentals, Renault Group needs continuity, as you mentioned Jean-Dominique, strategy, but also acceleration in transformation by focusing on flawless execution, remaining agile and being obsessed by competitiveness. In a highly disruptive environment, we need to focus on what we can control, motivating our teams, setting and executing best level of performance and enhancing our unique network of partners. Be assured that we are already hard at work and that the next few months are going to be busy, and I hand over to Duncan.

Thank you, Francois. Hello, everyone, and thank you for joining the call this morning and the introductions. As announced 2 weeks ago, our results fell short of what was anticipated because of the gap between our numbers and sell-side estimates, we had to publish our key figures with an operating margin at 6% of group revenue and a free cash flow of EUR 47 million including a negative change in working capital of approximately EUR 900 million. This miss versus market expectations is explained by a weaker-than-expected performance in June, driven by slightly lower group volumes than expected, meaning we missed a few thousand invoices in the last few days of June and increased commercial pressure in the market due to the continued decline in retail segments in some of our key markets, the underperformance of the LCV business, which was then 29% in H1 and in June in a sharply contracting European market, which was down 13% in H1 and 19% in June. And lastly, a receivables level impacted by the billing timing differences in the final days of the month. As you can imagine, this outcome and our new financial outlook for 2025 are not aligned with our initial ambitions. This is why, as Francois just mentioned, we rolled out a targeted action plan to get back on track and ensure consistent delivery of our financial targets. Despite today's figures, we are confident that we have all the assets to make it happen and to deliver an H2 performance higher than H1. We strongly believe Renault Group remains in a solid position to face upcoming challenges and seize future opportunities. Why? Because despite the one shop miss, I want to stress that we continue to build on solid fundamentals with a clear focus on continuous improvement. Since 2020, we've laid solid foundations and built a robust operational model. Our processes structural enablers and a healthy go-to-market strategy firmly in place. The facts and figures speak for themselves. We operate and operate an agile business model running on 2 legs. EVs on 1 side, [indiscernible] is an hybrids on the other. I'll come back to this shortly. Our product focus remains unchanged, as Francis stated, in 2025 alone, we are launching 7 new models and 2 facelifts, this coming off the back of 2024, with 10 models in the previous period. This guaranteeing by the end of the year, we'll be the mass market OEM with the freshest product lineup. We also continue to focus on our value over volume policy. It's a core fundamental embodied by our exposure to retail channels, we send 15 points above the market average and aim at preserving a significant buffer to protect our business profile. This leads to residual values. Here, we maintain a strong competitive edge, thanks to this commercial policy as we stand 4 to 13 points above direct competitors in Europe. Our order book remains solid at 2 months. Our inventories are healthy with 530,000 units compared to 560,000 at the end of March. And finally, we've already rightsized our industrial capacity. Today, we display a best-in-class utilization rate of our facilities. As I just said, one of the key strengths lies in the agility of our business model. It's built on 2 solid pillars and allows us to navigate the ever-changing dynamics of the energy transition. With Ampere, we have an EVM software champion designed to outpace the EV pure players in the race towards EV ICE price parity. Over the past few months, we've confirmed our leadership in EV democratization in Europe on the PC market. Renault brand pure EV sales rose by 57% in H1 compared to a market growth of 25%. EV mix continued to progress, reaching 16% of sales for the Reverend and 12% for the group and our EV market share in Europe Forenanow stands at 5.5%. Renault 5 is the perfect embodiment of this strategy. It was [indiscernible] car of the year just 1 year after the senior can since then customer feedback and sales figures have been outstanding. It leads the European EV segment with nearly 36,000 units sold in H1. And we'll continue the offensive with the EUR 25,000 version of [indiscernible] , which is now available. And we're just as strong on the hybrid front. With Power and Horse, we have an asset that generates cash, mitigates risks and reinvent icon hybrid technologies. It's clearly reflected in the performance in the HEV segment in H1 and Renault Group sales in Europe are up 59%. That's including 36% increase for the Renal brand, while the market grew by 12%. And EV mix reached 41% for Renerand and 31% for the group. All in all, Renault ranked second in HEV sales in Europe, with a 25% market share -- that was coming off 20% at the end of '24 and only 2% back in 2020. So the machine is clearly set in motion. Sandias illustrates our HCV ambition even if it is a new nameplate, it's now our most sold full hybrid bottle within the Renault brand. It ranked second in the European C segment HEV category with more than 42,000 units sold in the first half of the year. As you can see, with EV and software on 1 side, ICE and hybrid on the other renter is able to adapt to every pathway towards decarbonization. That fully demonstrates the benefits provided by the agility of the business model. In fact, whatever the motorization we have the right offer for our customers. By the end of this year, we will benefit from the most competitive and appealing product lineup Renault Group has probably seen over the last 30 years. In 2024 alone, we launched 10 models and introduced 2 facelifts across all brands, or categories all powertrains, from passenger cars to light commercial vehicles from electric to hybrid for both European and international markets. And precisely, when it comes to international markets, we're pursuing our product expansion aiming to rebalance our presence between European and other key international markets. In the first half of the year, Renault brand sales outside Europe grew by 16% compared to the same period last year. driven by the commercial success of the first models of the international game plan. With Model like [indiscernible] and Cardium, we have demonstrated our ability to design vehicles perfectly suited to high potential markets and our product offensive is far from over. We're continuing our offensive in 2025 across all our brands and all types of powertrains. On the EV side on the left, -- in Europe, we have Renault 4, which is probably underestimated because of the buzz surrounding Renault 5 at the moment. In May, we revealed Alpine 390. It's a symbol of the brand's reinvention and will further boost momentum. Jo and Bento to redefine connected and smart urban mobility. We're not forgetting our international road map with the new Renault quid. But as I said earlier, we're running on 2 legs. So alongside EV on the left, we are strengthening our ICE and hybrid offer on the right. The launch of [indiscernible] Bigster is a major milestone in the brand's expansion into the C segment. The deployment of new Renault Brill scheduled for the end of this year will mark another key milestone. This elegant, comfortable and high-end tech C-SUV will be crucial in reinforcing our offer for the global market with a deployment in more than 70 countries. The face list for spas and Oscar will also mark a new chapter for 2 important cars, and we reserve a little surprise in the store that will be revealed in a few weeks in Munich. With 7 launches and 2 facelifts, 2025 is clearly a busy year, but '26 will be just as exciting. Among the highlights, 2 launches will support our ambition to provide affordable and decarbonized mobility for all. The future Twingo will embody our commitment to accelerated EV in Europe. Developed in 21 months, just as Francois said, it will be one of the most affordable EVs in the market, priced below EUR 20,000 and produced in Europe. A few months later, Dacia will follow with its new electric A segment model, also made in Europe and priced under 18,000. On the LCV side, 2026, we'll see a major year for Flexi-Van with the launch of new traffic as well as Goleta Estee Three vehicles designed to meet the needs of modern urban logistics. These launches will be essential to support our ambition of becoming the #1 electric LCV brand. With these solid foundations in place, we are confident in our ability to deliver a stronger second half. Let's now take a look at the financial results for H1. Starting with group revenues increasing compared to H1 '24 at EUR 27.6 billion at a constant exchange rate, it was up 3.6%. And Automotive revenue stood at EUR 24.5 billion, up 0.5% at constant exchange rates, it increased by 1.6%. The mobility services contribution amounted to EUR 44 million up EUR 13 million compared to last year. And last but not least, Mobilize Financial Services revenue increased 21.6% to EUR 3.1 billion, mainly driven by higher interest rates and the increase in average ticket price. Drilling down on automotive revenue. It included 1.1 points of negative exchange rates, mainly driven by the devaluation of the Turkish lira, Brazilian real and Argentinian peso. At constant exchange rates have increased by 1.6% as previously mentioned. After a negative volume impact recorded in Q1, volume switched positive in Q2 and represented a total positive impact over the semester. It's explained by increasing registrations, partly offset by the higher destocking within the dealership network in H1 '25 compared to H1 '24. Registrations, as you see, increased by 1.3% to 1,170,000 units at group level. As already mentioned, Renault Group is pursuing its strict commercial policy, prioritizing value creation of a volume to protect [indiscernible] values of our vehicles. Let's have a look at the different brands, starting with the Renault showed a growth in its total global sales of 2.7% versus H1 '24. Renault Brand was once again the best-selling French car brand in the world. and continued its progression with 36% of its sales now made outside Europe. On international markets, the brand increased by 16% in a market up 4.7, thanks to the commercial success of products from our international game plan, notably Con Colis in South Korea and Cardium in LatAm and Morocco. In Europe, the brand progressed and became #2 in PC and LCV market with Clio, the best-selling model across all channels. On passenger cars, Renault Brand registered the strongest sales growth among the top 15 REMs with an 8.4% increase in a market down 1%. Renault Brand pursued its electrification in Europe, representing 59% of its mix. Nearly 1 in 2 vehicles sold by the brand is a hybrid. The sales figures were boosted by the very strong performance of hybrid cars with 36% increase year-on-year. The brand is now ranked #2 in the hybrid market. 100% electric vehicles represented 16% of its European PC sales, driven notably by Renault 5, the leader in Europe in the B segment EV. Renault pursued conquest of the Sea and above segment, representing 40.1% of its mix supported by Astral, and spas, of course, and [indiscernible] . On LCV in Europe, the brand sales decreased by 29% because of a market down 13% and our transition product plan. We particularly suffered in the month of June, as I stated, although orders in the month were up 12% year-on-year. Worldwide, Dacia recorded total sales down 0.7%, mainly due to the end of Duster in Turkey which is now sold under the Renault brand in line with the Renault International game plan. In Europe, Dacia PC sales were up 1.1% and confirmed its place on the podium of the PC retail market with its 5 key models. Dacia Sandero is again the best-selling private car across all channels in Europe in H1 and #2 best in car all channels combined in passenger car and light commercial vehicles. Dacia Duster remains the best-selling SUV for retail and Dacia Spring recorded more than 19,000 vehicles sold in H1, plus 62.5% versus the previous period. In total, we have more than 180,000 customers who have become spring owners since its launch, and it still remains the most accessible 100% electric offering on the European market. With Bigster, we have strong contender in the C segment profit pool. This was illustrated by a very positive momentum and good penetration in traditional SUV markets such as France, Germany, but also Austria, Poland and Switzerland. We can already measure a significant public interest in Bigster with more than 38,000 orders registered since launch. The order intake was solid and the order book healthy. Registrations were ramping up and will accelerate in H2. These figures are very encouraging for a vehicle allows us to maximize margins, thanks to its development on the CMF-B platform. and a higher proportion of high trims or 88% to be precise, based on the orders so far. Bigster is also a true conquest product for us with about 80% conquest rate to date, which is strong for a brand-new plate while staying true to brand positioning, it's enabled Dacia to access new profiles wealthier customer profiles who are not looking at Dacia before. Alpine continued its progression with 5,015 units sold. It delivered 85% volume increase versus last year, benefiting from the A110 and the 290. A390 was elected Car of the Year 2025, find success with 3,700 registrations worldwide, and we're still in the process of launching the car in Japan and the Nordics. On the 2-seater sport Kupe market, AlpAlpineine confirmed its leading position in Europe with 1,181 A110 registrations. Alpin orders are ramping up prior to the arrival of the A90, which will hit the road starting at the very end of this year. Turning to inventories. The destocking within the dealership network was higher in H1 '25 compared to H1 '24, which impacted negatively the volume effect. At the end of June, total inventories were down by 30,000 versus March and represented 530,000 vehicles, which is a healthy level. Renault Group continued to proactively manage distribution inventory. The level of inventories is fully supported by a strong order take fueling a sound order book standing at 2 months of forward-looking sales. Then the sales to partners effect was negative 1.9 points due to a high comparison base for 3 main reasons, all of them which we had expected. As you know, a positive R&D billing one-off was recorded in H1 '24 and -- the revenues from horse powertrain sold partners was deconsolidated at the end of May 24, and the decrease of vehicle sales to partners ahead of the forthcoming launches of new models. These will be Nissan Micra, a CSUV for Mitsubishi and Polestar for Gili in South Korea. Let's now have a look at our price, product mix and geo-mix effects. In H1, the price effect was neutral due to a challenging environment in Europe marked by the decline in the retail market and a sharply declining LCV market, which led to an increase in commercial pressure. Outside Europe, most of the negative currency impact was offset by price increases. The positive product mix effect of 3.3 points was supported by the group's recent launches, Big Star Duster, Samios, the Reno 5, the A29, from Alpine, GenCos and Rafale, and this effect should continue to improve in the coming semester. The geographical mix impacted negatively for 1.1 points, mainly explained by the increasing sales outside of Europe with 28.9% of its mix compared to 26.6 million in the first half of 2024. Now let's switch to the operating margin analysis. This half, we posted an operating profit of EUR 1.65 billion, down EUR 522 million, representing 6% of revenue. Excluding the horse impact, the group reached EUR 1.7 billion, down EUR 243 million, representing 6.3% of revenue, down 1.1 points versus H1 '24. The Automotive segment operating margin stood at EUR 1 billion or 4% of auto revenue. Mobilized Financial Services operating profit increased by EUR 75 million to reach EUR 0.7 billion. Deep diving on the group's operating margin evolution. The impact of currencies was slightly negative at EUR 25 million, reflecting mainly the positive impact of the Turkish lira on production costs offsetting the negative impact that you saw in the devaluation on revenue. The positive volume impact of our invoices was partially impacted by the decrease of sales to partners, leading to EUR 48 million. Price mix enrichment effect was a negative EUR 444 million, mainly due to the combination of a negative mix effect with a lower share of LCVs and a higher share of EVs alongside the commercial pressure. Costs improved by EUR 287 million, mainly thanks to a strong purchasing performance of EUR 234 million and a raw material tailwind of EUR 182 million. We continue to reduce our costs in order to pass part of it to the customers, and we manage the combination of the price mix enrichment effect plus the cost effect to boost their competitiveness. This combined effect should be positive in H2 and for the full year. The EUR 166 million negative impact on R&D was mainly due to the high comparison in H1 2024 with the nonrecurring R&D build to partners last year, as mentioned in the revenues. SG&A expenses improved by EUR 16 million and others effect stood at EUR 34 million. The last bucket highlights the impact of horse deconsolidation since horse was deconsolidated, invoices paid to horse by Renault Group include the cost of amortization again as well as Horses markup. These 2 accumulated effects represented a negative impact of EUR 279 million in H1 '25 compared to H1 '24. Mobilized Financial Services generated EUR 11.1 billion of new financing, up 3.8%, thanks to the growth in registrations and in average finance amount. Average performing assets amounted to GBP 58.9 billion, up EUR 4 billion versus H1 2024, driven mainly by a strong commercial activity on the customer finance building business since 2023 and following the end of the electronic component shortage and, of course, thanks to the success of our range. Net banking income as a percentage of average performing assets improved by 10 basis points, highlighting the robust margin policy of the bank. Cost of risk at 0.39% remains in line with the same period last year and with our historical levels. Operating costs in percentage of average performing assets remained stable versus last year. It's worth noting that in 2024, operating cost level in absolute value was impacted by a positive one-off of EUR 23 million. Excluding this one-off, operating costs and absolute value would be almost stable versus EUR 24 million. Overall, Mobilized Financial Services posted an operating profit of EUR 668 million, up EUR 75 million year-on-year. Moving to key items from our group P&L below the operating margin line. Other operating income and expenses were negative at EUR 10.1 billion, it mainly included the loss linked to the change of the accounting treatment of Renault Group's stake in Nissan for EUR 9.3 million, corresponding to the difference between the present carrying value of the investment, and the fair value based on Nissan stock price as of June 30, 2025, plus notably the impact of the recycling of conversion reserves and net investment hedges related to Nissan's equity accounting securities. This loss is noncash and no has no impact on the calculation of the dividend we will pay. The benefits of this evolution is that from now on, any change in the fair value of the stake in Nissan, based on Nissan stock price will be directly recognized in equity with no impact on the net income. We will continue to benefit from any dividends that Nissan may pay in the future. The improvement of our net financial expenses was mainly explained by a negative impact of hyperinflation in Argentina in the first half of 2024. Profit from associated companies at minus EUR 2.3 billion compared to 195 million in the first half of 2024. This is primarily driven by Nissan's contribution, which stood at 2.3 -- negative EUR 2.3 billion with a Q1 negative EUR 2.2 billion, and a Q2 at EUR 0.1 billion. Current and deferred taxes represented a charge of EUR 324 million, including EUR 24 million related to the French exceptional surtax compared to a charge of EUR 328 million in H1 2024. All in all, and excluding Nissan's impacts, net income reached EUR 461 million. Let's turn to NSM. As you know, since 2023, the group has embraced a pragmatic business-driven approach to our partnership, focusing on projects that are meaningful and create tangible value. In Europe, this translates into the upcoming launch of the new Nissan Micra in September and a future A segment electric vehicle plan for 2026. They will both be produced in our European plants, leveraging the assembly lines and EV architecture developed for the RNF and Twingo. We remain also partners for the LCV related projects leveraging the existing range -- but there is more. As you know, India is a strategic priority for Renault Group, it's set to become one of the most dynamic automotive markets. That's why we have joined forces with Nissan on the co-development and production agreement in this country, with a B segment NPV set for 2026 and a C segment SUV by the end of crossing over between 2026 and '27. As you can see, whether in the familiar territory of Europe or in the high potential market of India, we can count on our renewed alliance to deliver. This new approach to our partnership with this and is also reflected in the evolution of our governance scheme, a matter treated separately from the operational projects. As you know, we've changed our accounting treatment from now on, it will no longer impact Renault Group's net income and the impact of this change will be excluded from dividend calculation. We also increased our flexibility regarding the cross shareholdings. The new alliance agreement between Renault Group and Nissan was amended to increase the flexibility of each party regarding their cross shareholdings by setting the lockup undertaking at 10% and instead of the 15% previously. And finally, there is no need for an investment from Nissan in Ampere. This agile governance allows us to focus on what truly matters between us, the new business opportunities we can generate. So now let's move to free cash flow generation. Starting from the top line, the cash flow included a EUR 150 million dividend from MFS versus EUR 600 million dividend in H1 2024. Net CapEx and R&D expenses included asset sales improved by more than EUR 200 million and accounted for 6.8% of revenue. The change in working capital requirement was a headwind of EUR 897 million, mainly related to the level of production at the end of 2024, higher than that at the end of June 2025, higher group inventories levels compared to the end of 2024, which was at a particularly low level. All in all, Renault Group generated EUR 47 million of free cash flow in H1 2025. The automotive net cash financial position stood at EUR 5.89 billion on June 30, 2025, compared to EUR 7,096 billion on December 31, 2024. This evolution was driven by the dividends we paid to shareholders for EUR 693 million, net financial investments for EUR 173 million, mainly in free weeks a subsidiary of [ Autostrad ] Pletalia, operating a fast charge network in Italy. ForEx, IFRI, IFRS 16 impact and others for EUR 387 million, partly related to our Renaultlution employee share plan. The liquidity reserves at a comfortable level of EUR 15.8 billion. So thank you for your attention. And I hand back to Francois for the financial outlook and your conclusion.

Thank you, Duncan. Looking now at our outlook. Taking into account the deterioration of the automotive market trends with increasing commercial pressure from competitors and the anticipation of the continuation of the retail market decline. We are aiming to achieve for full year 2025, group operating margin around 6.5% free cash flow between EUR 1 billion and EUR 1.5 billion. We benefit from clear levers to drive superior performance in H2 against H1. This will be notably by higher volume on the second half of the year. It will be driven by 3 factors: so strong level of orders in June, they were up 6% in total in the month of June. The effect of the ramp-up of our launches. We mentioned Bikte as an example, in our presentation today. And thirdly, we expect increased sales to partners with, for example, San Micra, Mitsubishi CSU in Europe and Polystar 4 in Pusan in South Korea. On top, and I will come back to this in a minute, but we are reinforcing our discipline and strict control on both variable and fixed cost. The combined effect of price mix enrichment and cost should be positive for H2 and full year operating margin. Coming back to the cost measures, we made significant improvement over the last quarters. But obviously, our recent miss has led us to reinforce these measures with 3 main areas, which are variable cost, productivity and smart spending. On variable costs, we have set multiyear targets to improve with the first effects expected in 2025. In 2025, we target EUR 400 cost COGS reduction per vehicle mainly driven by purchasing performance and logistic optimization. This will be a plan via figure, which does not include nor ForEx nor raw mat effects. We did improve in H1, and it will accelerate in H2. And the purchasing will benefit as an example, from the competitiveness of ours to buy power trains. The productivity focus has been enlarged significantly to spread across all functions within the group. This come along with our speed of lightness program aiming to shrink the cycle time on the key processes of the company. Less time means less money spent. The most obvious and the most important example being the development time of our vehicles coming down to 2 years or even less. Beyond variable costs, we set targets on all fixed costs than can being responsible overall and with our CHL in support for labor cost. To conclude, allow me to share my agenda as CEO for the coming weeks. First, engage with the teams in all functions and countries as well as our partners. Second, to focus on operational efficiency to deliver H2 and solve a few complexity road blocks. And third, together with the leadership team and with all our teams, work on our midterm plan targeting Q1 2026 for our Capital Market Day. We have one ambition to deliver sustainable, best-in-class value for the years to come. Thank you for your attention. We are now open -- we will now open the Q&A session led by Philippine.

Thank you, Francois. So we'll start with the first question from Michael until do Michael, the floor is yours.

And first, welcome Francois and congratulations and all the best obviously for in your new role. I have 3 quick questions. First one, you postponed the I would not say that it's a total surprise following the recent weeks. But is it a sign that we could expect a more in-depth strategic review? Or should we still expect some kind of, let's say, strategic continuity as you hinted that during your initial remarks? Second question, could you give us more color regarding the specific impact of the light commercial vehicles weakness within your results in H1 and the improvement that you foresee? And maybe last, a very quick one as new CEO. Do you have initial comments to share with us on your formula on strategy and involvement? And if we should expect any change on that in the near future?

Thank you. Regarding the CMD, I intend to release in Q1 2026 for 3 reasons. The first one is continuity, as mentioned by Jean-Dominique. So you will not be surprised, but our strategy will be within continuity because it is a successful strategy and in the sharing with the Board of Directors. This is also something about completely support. The second reason is regarding the dialysis. Of course, I have my deans, but it is important at this point of time to share openly widely, especially internally our situation. And the third reason, and you know this, is that we are facing unprecedented disruption in our industry. So it is also important to assets called all external factors and to embed this in our next midterm plan. Maybe for LCV, I will let Fabrice to answer, but for Formula One. Formula One is part of our core strategy for IP. And this, I do not intend to change the unique priority for Formula One team is performance. improved performance this year and of course, moreover to succeed 2026 with the new car. So this is a unique priority given to Formula One. Regarding LCV, Fabrice?

LCV has always been our Formula 1 in terms of profitability and performance. And of course, this first semester was a transition period. And to come back on the numbers you asked. Of course, I think LCV in the first semester, will present nearly half of the decrease in MOP, you can see on the numbers we presented now. Why? For 2 main reasons. First of all, the market was bearish with a double-digit decrease, more than 13% in Europe. And the second point is that master we are facing a transition period with a very good product, but just a partial diversity, we will fulfill in the coming months. It means H2 should be at the level minimum of the market. with a much better diversity, especially with the launch of the wheel drive version. And of course, also a complement in terms of diversity with traffic. This should allow us not only to be at market level, which still be very difficult but also to keep our momentum in terms of residual value because, of course, we play on LCV with very high residual value, and we never damage that 2026 should be better with a good momentum, especially with the full complete master range, which is very important. And of course, we plan also to launch additional electric models especially with the new traffic eTech to reinforce also our presence on this subsegment.

We now have a question from Tom Besson.

Thank you, Philippine. I have 3 questions as well, please. The first for Francois and Jean-Dominique probably. Could you please talk about your view on the size of Renault and the need for partners and also provide us with an update on your large partnerships that you've just mentioned quickly, horse and taxis and tell that's why you stand on this. The second and third question, probably more for Duncan. Duncan, could you please talk about the targeted level of inventory at year-end in the second half of last year, you increased inventories quite a bit, which I think posted to some extent, the performance of H2, but the performance of H1. Do you intend to increase inventory the same way you did in the second half of last year? Or I mean, ideally, could you provide us with a lending number in terms of absolute level of inventories at your end? And talk about the level of retail share you think you're going to be able to get in H2 versus [indiscernible] And the last question is very, very simple. CapEx declined substantially in H1. Do you expect that to be the level for the full year in terms of percentage of sales? Or should we expect CapEx in absolute terms and percentage of sales to eventually increase?

Yes. Thomas, thank you for the question, and Francis will pick it up. Just to mention that, of course, the issue about the size of the company is clearly, a point that we have in mind as far as the future is concerned. But by the way, size has not been a problem in the past few years. It has actually helped the company to be quite flexible, rather fast in decision making. And honestly, from my point of view, it has not been a bad period. Now certainly, when you look at the geopolitics of the car industry in the coming years, the issue about size is on the table. We just have to be very cautious about this issue because we can't be wrong. Actually, so far, we have been through with the [indiscernible] strategy and the team through a partnership strategy, which honestly so far has been quite good. When it comes to Nissan, for example, everybody mentions that the Nissan relationship with Renault is diluted. But as a paradox, I would say, we have never had as many industrial projects since I've been here in the group. In the past 6 years, I mean, we have never had as many operational projects. And Francois mentioned in his speech, in India, in Europe, with Mitsubishi and Nissan, I think this is very profitable, and this has to be continued. We are friends of Nissan. Nissan is going through a very difficult period of restructuring. It has to do it. That is happening. The program is good. It's just had to be executed. So we are following that very closely. It's important for us just because at least we could say Nissan holds 15% of Renault. So I think on that part, when it comes to Nissan to Gili to Qualcomm, to all these partners, it has enriched the group in the past years. And I think that was good. Now when it comes to the future, we have strong reflection about all these partnerships, and I'm sure that Francois and the team will not only reflect on that, but come with proposals in the coming weeks and months to see how we can maneuver in that new environment. I hope that answers your question, Thomas. I mean just to be sure that we have not been wrong in the past years in the management of our size and partnership. I think it was good for the group.

Thank you, Jean-Dominique. Maybe complement about size. We have to grow by ourselves. And in Europe, I'm convinced that we have the potential to do more, but also thanks to our competitiveness and innovation to be attractive also to support some other OEM, as we showed with Nissan and Mitsubishi. We have to grow outside Europe. But my opinion is that we have to do it based on clear priorities, and this will be part of our next midterm plan. Regarding partnerships, as mentioned by Jean-Dominique, and I know this because I palleted most of the partnership agreement we have done over the past years. the smart way we are doing partnership is good. I think as well as that, as Renault, are capable to do partnership. And this is probably also a benefit of the alliance over the past 25 years. And we feel this in all the relationship and partnership we have. More specifically to your questions, [indiscernible] is a super successful project. Of course, I am a big fan of [indiscernible] because initiated this project in 2021. The management of ours is doing very well, led by Matthias Janine. The operation are smooth. We'll start to see some cost reduction for us -- but moreover, I'm very confident that ours will be capable very soon to show capabilities to sell to third parties. So I'm very, very confident with ours. Regarding Flexis, the development of the Flexi-Van is doing well. and this is a priority for Plexus. I think we covered some size and partnerships and for especially CapEx and [indiscernible]

Yes. Thanks, Thomas. So I'll take the question. The first question was on inventory for me. So last year, we did see inventory rise in H1, and it actually rose in H2 as well. So we rose across the full year. We've decreased so far in H1 compared to 31st of December. And we might still decrease slightly towards the end of the year, but something around the level we have or slightly below would be the guidance I would give -- on CapEx, the question was, maybe you could remind me, Thomas?

Yes. The question was, do you intend to have such a low level of CapEx in absolute terms and as a proportion of sales? Or should we expect this to rise in H2?

No. Due to the seasonality of rollouts of launches will have a higher CapEx in H2.

We now have a question from Pushkar [indiscernible]

Thanks, Philippine, and good morning, everyone. My first question is just on bridge or the EV development within that. You mentioned the higher bar mix was a dilutive effect on the operating profit. In your previous guidance, you had sort of a 1% dilution effect due to bars. Was it around that ballpark level in H1? And then more importantly, how do you see that for H2 given the CO2 relaxation that the EU has offered. That's the first one. And the second one, slightly longer term, is. You've had strong margin development in the last 3, 4 years, now 7% implied in H2 exit rate. I saw one of the slides, you talked about maintaining good margins and not improving margins. So I just wanted to like what do you view as margins going forward from year end 2016, 217, especially with costs now, as you say, they can come down.

Yes. Thanks, Kris. So EV mix obviously does as it ramps up in the volume of sales ramp-up. -- because of the higher costs that we have on the EV side at this point in the cycle because obviously, we have a huge cost reduction plan that's well implemented on par and we'll bring things down. But at this point in the cycle, it does impact negatively on the operating margin bridge, as you correctly stated. I'd probably dissociate that to the guidance from the beginning of the year of the one point impact of Cafe because that was both mix and price outlook expectations to be able to be in line as we are today in trajectory for the passenger car part of the cafe with the 3-year [ Bank and Borough. ] I'd say that negative parts you saw -- I mean, as Cedric said, 1 of it's on the price mix in Richmond, the large part came from LCV. The second is the ramp-up of EV and then also the more difficult pricing situation that we have in Europe. And that is also felt on the EV side of things.

Yes, maybe to answer to your second question about long-term margin I think we should have 2 principles. The first one is value versus volume. And this, we will continue. At the same time, we have to be lucid that we expect some additional pressure and we have to stay in the market. So we expect pressure from competitors. So it's why the second principle is to be best-in-class in competitiveness. Because competitiveness, it is what we can control, the less we cannot control. So on one side, value versus volume. On the other side, best-in-class in performance and competitiveness. This is, I think, a good way to set a principle in order to keep the high margin we intend to keep.

Thank you, Francois. We now have a question from Renato Gargiulo from Intesa Renato, the floor is yours

My first question is on your performance in international markets. Despite the challenging environment, you are continuing to perform well. maybe it's part of the next plan strategy update, but what's your strategy there? Where do you see the highest opportunities and how are you seeing any rise in competitive pressure from Chinese OEMs in any market outside of Europe? Do you expect any further potential partnership with [indiscernible] as a potential way to face this kind of competition? Then the second question is on the commercial pressure you have been exciting. Could you give any further indication even qualitative on what are currently the most impacted segment market from this competitive pressure? -- are used posing a value-over-volume strategy also for like commercial vehicles? Or are you seeing any rising pressure also there?

Thank you for the question. Regarding international markets. We are getting stronger in Europe. Now it's time to move to international. It is international game plan, and I support, of course, this direction. My view about growing outside Europe is that we have to make choices. And for me, the obvious priorities of First South America, because we are strong there. As you mentioned, Chinese OEMs are super aggressive there, but it is also why how smart way to partner and the partnership with [indiscernible] a very innovative way to manage our growth in South America, and this is a very, I think, win-win and innovative agreement. And the second priority is India. India is a tough market, but at the same time, will represent the main growth driver for the TIV by 2030. So it's tough, but I'm really confident about India. And as you know, we already done some release about the way we intend to move in India. Regarding the commercial pressure, maybe Denis Fabric, you want to answer to give a [indiscernible]

Well, I will give a first highlight. Yes, the commercial pressure is there. We already mentioned, right? So what we try to do is to continue value over volume, which is what you saw in the H1 because in the H1, we just have a very light growth because we stepped back on the volume of the Sandero, which is down 7% like the retail market. Lucky we are, in a way, it was not lucky because we prepared it that the new cars are coming. And of course, the conquest that we are making with [indiscernible] , which is totally new segment for us, will permit growth in the H2. So this will permit to resist in a way to this commercial pressure by strictly continuing the value of the value of a volume, sorry, for Dacia, for sure.

Fabrice for Renault and LCP.

I would say, except of LCV, our new lineup for Renault based on those 2 legs hybrid and electric is enabling us to manage the commercial pressure at a level where we never destroy our residual value, which is the most important thing for the future. It means we are gaining share of market on PC in Europe, as you can see and we are gaining share of market without additional commercial pressure. We are just following the market, looking carefully channel by channel, the right level of net pricing we have to do. But frankly speaking, we are quite stable versus last year, and we are focused on value before volumes, even though we can see that our lineup is giving growth, not only in Europe on PC but also in international markets as Francois said, I think the best way to answer to the commercial pressure is with the quality of our products and the launch we made, for instance, on international market with Cardium, with Duster, with Coles in Korea and with Boral now in Brazil is the best lever to offset this commercial pressure.

We now have a question from Stephen Reitman.

Yes, thank you very much, first of all, again, regulations Francois on the new position. I guess you are very uniquely qualified to comment on part of the program you were talking about, which is improving cost of goods sold. And maybe you could comment on how has been achieved already this target in 2025. You said it's accelerating in the second half of the year. Maybe you could also say sort of areas which -- where you constrain particularly? And secondly, a question on Vans. We -- the vans have always got the phase in as well as well as the passenger cars. But there's no concern that not enough commercial customers are switching to the BEV. And so we're not -- it's harder for them to reduce the average fleet CO2 emissions. Where do you think the commission is and where are you in terms of your lobbying in terms of trying to get the standards for vans move together with the cars or rather to get that to allow the project as credits can be achieved by cars and allows to help offset the sort of like the tough performance on vans?

Yes. Now you're in the CEO, I'm sure will continue to support me, but a couple of months ago, it was challenging you on the purchasing side. So I can confirm that we're slightly below the EUR 400 per unit in H1. I mean you probably expect plus or minus 10% switch in terms of acceleration in H2. And those plans don't come out of nowhere. They're already well in place. And so I'm quite confident they are mainly in the purchasing area, Stephen, but we do have some additional support from the logistics.

Regarding the second question for LCV cafe compliance issue. I confirm the situation is tough for us. The situation is tough for all OEMs. So it's why, of course, we are vocal to share reality with governments and EU. And yes, I can tell you that it is important topic that we are discussing and I expect progress within the next month. As a new CEO and regarding EU regulation, be sure that each time Renault interest is at stake, I will be very vocal.

So we now have a question from [indiscernible] , Barclays inning. Please could you open your mic.

I have 2 questions, please, I don't know. The first one was to also understand a little bit better the relationship of orders and results or visibility of results, right? Because it appears that there was quite a bit of deterioration in performance quite late in the month, last few days, weeks -- and so I wanted to understand again what -- how the concept of this 2 months order backlog, how that holds in these sort of scenarios, not given that you referenced the order book and the strong orders in June also as a key contributor for the confidence that we have in the second half. So that's really the first question. If you could elaborate on that a bit more, please? And the second question, if you could make a comment on dividends, maybe -- is it fair to assume that the dividend will go up year-over-year in euro terms? And yes, we could confirm that by any chance you can give us sort of quantification considering that we've now reported the Nissan results and how that's going to be adjusted. Thank you very much.

Maybe if it's okay. Just the line is not super clear. So I'll just repeat the question to make sure we got -- We're going to answer it for you. The first part was on orders in June and then linked to the missing invoicing at the end of June. That was correct on the first one and the confidence in the second half of the year? Yes. If it is, I can't hear anything, but we'll go for that one. So yes, unfortunately, the logistics -- the supply, the invoicing flow was quite highly concentrated at the end of June, and we did miss a few thousand units. This sort of reflects the flows that we had over the period. Not only did it missed in terms of volumes, but also some of the volumes came in the very latter days of the month. This meant we hadn't actually received all of the cash for those. Obviously, those 2 impacts will have washed out in July because those vehicles have may have been delivered. And we've also been fully paid for those. So I think it's more of a sort of onetime miss impact on that landing at 30th of June. The orders in the month of June continued to be strong. So we saw an increase in orders compared to previous period in May, in June and particularly, I'd say, for the first time on LCV, Orders were up at 12%. In June, we haven't seen -- May was the first month we've seen order take lift for LCVs. Obviously, there's a time lag with that. Some of these are converted vehicles they take time to come through. But the dynamic was strong, and that continued through July as well. So maybe that's -- if that answers your question on the difference between the order book, which remains strong at 2 months and actually accelerated in June and the miss on the timing of deliveries and therefore, invoicing at the end of the year. At the end of the period.

Thank you, Duncan. Regarding dividends, I confirm that there will be no change in our intention to increase the return to shareholders through dividends.

Thank you, Francois. We now have a question from Horst Sneider, Bank of America.

Yes, ,and I hope you can hear me. The first question that I have -- the first question that I have is related or a little bit more color for -- with regard to your bridge, just to be clear, on volumes, you're aiming for higher volumes year-over-year, but also sequentially. And could you maybe provide any color about the magnitude of the increase that is needed to meet the guidance? Then I see on this mix and net enrichment of course, in H1, the comp base was still high. In H2, I think the comp base is getting more favorable but will mix net enrichment stay negative also in H2 then the more strategic question that I have for Fosters,maybe on the software-defined vehicle. You mentioned also in one of your comments, the Flexivan. I think the Flexivan is your first software-defined vehicle I have not found or have not seen that you are already developing a software-defined truly software-defined vehicle, this solar domain architecture in the passenger car area. So am I right that you still need for this particular project a new partner, and then you aim to have such a software-defined vehicle in the passenger car area.

Okay. So before the second question, then can you take the first one?

Yes. I'll refrain from giving Horse the Pacific volume increase. But yes, I confirm we've got a volume increase planned for H2. We do have, obviously, as I said, order book was up. So year-on-year, and that's the second one now as well. So good confidence level on that. We will be sequentially, obviously, H1 to H2 higher volumes in H2. I'm not forgetting, I think, some of the comments Francois made on the additional boost that will come from partner volumes as well because we start to see the launch of some of these vehicles in H2. The mix price evolution. So we've given guidance to say that the net of the 2 will be positive. So that's net of the mix price enrichment with the costs we've been positive in H2 and I think positive full year as well. I still expect some mix negative compared to -- if we just look at that bucket alone compared to the previous year. As you rightly point out the comparison base is better.

Regarding your second question, SDV, but moreover, electronic architecture, first stable -- we have already succeeded to have a good architecture on all our resolution costs, and this is acknowledged by the market, by the customers. And we, of course, extend this to all the lineup in Europe, but also outside Europe, meaning that we have the scale with our current architecture, which will remain high mix, of course, in the coming years. I would like to share with you that -- we have also the capability to improve this existing architecture along the life cycle which is something we see in -- as a strong point of our Asian competitor. And this now we renew and there we are capable to do. On the LCV, it's true. Our decision was to start with the Flexivan [indiscernible] in order to start with LCV. But as you can imagine, such an investment is not only for LCV and we have already embedded in our long-term plan to use this LCV also for passenger cars. Please be a bit patient and wait our next midterm plan in Q1 2026.

So we now have a last question from Jose Asemendi.

Jose from JPMorgan and Francois very welcome, and congratulations on the new all -- maybe just let's ask you with your background in purchasing amongst other roles, how do you think about protecting the profitability of Tasia and when we look at the commonality across components between Dacia and Renault, how do you ensure that going forward, particularly in the light of Dave transition into -- the second question, as we think about the financial token. Just a follow-up on this. Did I understand right that price mix enrichment and cost will be a positive bucket in the second half and the full year? And if you could just remind us again what is the biggest improvement sequentially second half versus the first half. And then finally, [indiscernible] , I would love to key to take please when I -- maybe this was a question for Francois. But as I think about transparency, creating that trust with investors, -- and financial transparency, which I think is linked to both elements. We are seeing one common denominator growth most of the OEMs, a lot of the OEMs really which is the quarterly reporting of earnings and cash flow. Do you think this is something you would encourage Renault to change? We've seen other car companies like Stellantis now. I don't think this business model I think it will be -- I think really helpful for Renault going forward.

Regarding your first question regarding commonalities and especially commonalities, if I understood well, between Renault and Dacia. Yes, of course, we will continue this. I think our strategy is -- on one side, we have BEV-dedicated platform and the one we have now with Air 5 air force show the capability of Renault or ampere to do this. And on the other side, we have this very successful CMD platform, which is the basis of the success of Dacia in Europe and of Renault outside Europe, for sure, will continue. The electrification, we know more or less the past because we monitor carefully what the best-in-class competitors, basically the Chinese competitors are doing. So we know what we have to do. And this is what now we have to prepare in the course of the next midterm plan. Regarding the second question, Duncan?

Yes. Jose. So the question was on mixed price and what's the biggest driver, I think. Yes. So pro question was...

Yes, price mix enrichment cost. I think that's a positive bucket in the second half of the year. It was in the full year. So what is the biggest part?

Yes. So yes, I confirm that's what we stated was that the -- we turned positive the sum of the 2 and the full year and the obviously turn positive in the second half and then the sum that included in the first half of the full year positive for the 2 combined. So product mix is probably one of the biggest things -- you know very well the Bigster is a very strong profitability driver on the Dacia side. And having that full speed for both quarters is going to make, I guess, a very significant difference. And the very strong order book we have today gives us a lot of comfort behind that. But there's also other supporters. We've got the Renault 4 coming in. As you know, we've got the Grand Colas. We have -- even if we went to look to pick up better orders on the CMIC, ETEC. And I guess, they're the biggest, if I had to cite just 1 and not get confused in detail, the biggest would be those. Obviously, the cost reduction accelerates in H2 compared to H1 in the plain vanilla format that Francois told us about. So excluding FX and raw [indiscernible] tailwind

Yes. And I confirm, as Chief Procurement, I confirm that the trend for cost reduction is good, even very good, better than what we said at the beginning of the year, which is, of course, very useful to offset the additional commercial pressure. So I confirm this fully. Regarding the third question, transparency quarterly release, maybe Jean-Dominique, your views?

Well, thank you for the question. I have to, I would say, conclude this presentation on this point. But I don't want to disappoint you, I mean, another point, but I've had this question many times in my life. I'm not absolutely sure that the quarterly reporting helps much in the transparency and the management of a company because it only adds up some sort of stress to make sure that the figures are what they should be. And I think, honestly, notably in the automotive business, the cycles are so complex that I would say, quarterly report is probably not the right solution to assess probably the performance of the company. So I probably can to disappoint you, but I think we're not going to move there on that point. But I have to really mention -- I mean, I hope you acknowledge the fact that transparency communication from Renault in the past few years, and as it is today, is really dramatically improving, if I may say so. And I can assess that from my point of view as the Chairman of the Board. I mean it's incredible transparency. Actually, we're telling you everything. All our days are pains, et cetera, you've got everything. And I think on the half year basis, results is the good pace. By the way, on the quarterly basis, you have all the comments on sales and all the rest, commercial performance, et cetera, which I think helps you to understand what's going on in this company. So sorry to disappoint you on this last question, but you should feel comfortable with the way this company is be transparent with the market.

And maybe to complement regarding transparency, my personal experience is that the more you face uncertain, complex, disruptive environment, the more you have to be transparent with your stakeholders. Of course, employees, but also partners, I will share to the suppliers. So it's why no worry will continue to be better than average, and better than peers for transparency also to financial markets and our shareholders.

Thank you, Francois. This concludes our H1 results presentation. We are very happy to be with you this morning. As usual, the team is fully available to answer all your questions. and we will be more than happy with Francois, Duncan and the team to meet you today and in the coming days. Happy summer to all of you.