Renault SA (OTCPK:RNSDF) H1 2024 Earnings Conference Call July 25, 2024 2:00 AM ET
Company Participants
Philippine de Schonen – Director-Investor Relations
Luca de Meo – Chief Executive Officer
Thierry Pieton – Chief Financial Officer
François Provost – Chief Procurement, Partnerships & Public Affairs Officer
Gilles Le Borgne – Chief Technology Officer
Conference Call Participants
Thomas Besson – Kepler Cheuvreux
Michael Jacks – Bank of America
George Galliers – Goldman Sachs
Renato Gargiulo – Intesa
Stephen Reitman – Bernstein
Pushkar Tendolkar – HSBC
José Asumendi – JPMorgan
Philippine de Schonen
Good morning, everyone, and welcome to Renault Group H1 Results. This presentation will be made by Luca de Meo, CEO; Thierry Pieton, CFO; and the management team of Renault Group. Luca, the floor is yours.
Luca de Meo
All right. [Technical Difficulty] H1 results. And also, it will be an opportunity for us to update you in – with the in-depth transformation that we keep developing in this company. In the first semester of 2024, Renault Group achieved 8.1% operating margin. This is actually the highest operating margin this company has ever achieved. We generated €1.3 billion of free cash flow, and we reached a very strong net financial position at almost €5 billion. I want to take the opportunity to thank all those who are supporting us and have supported us also in challenging times: our employees, of course, our clients, our distribution partners, our suppliers and, of course, our shareholders and investors.
These results confirm the, I would say, constantly improving operational performance of Renault. This is the consequence of the passionate job done by women and men of this company for almost four years now in depth at every level of the organization to put it back at the highest standards in the automotive industry. €2.7 billion of cash fixed cost reduction since the first half of 2019, over 90% utilization rate of our industrial footprint and a straight commercial policy focused on value. All this allowed us to reduce our breakeven point by 50% since 2020 and is reflected in our H1 results.
And these ingredients are going to support the financial profitability of our all-new lineup that is just beginning its ramp up in Europe and also globally. In H1, less than 5% of our invoices came from vehicle launched in 2024. It gives you an idea of what we have in the store. For us, putting Renault back at the top of the classical game that OEMs have been playing for 150 years was only the appetizer. We know that when it comes to the main course, the good hold receipts are not going to be enough. Everything is moving incredibly fast and crisis turn out to be the new normal.
So carmakers need something more, and they need something new. This is why we're working to transform Renault Group into one of the most progressive European companies. Setting up a new breed of organization designed for an environment that has turned radically volatile and unpredictable tech landscape. It means something very simple, putting flexibility, strategic agility and speed at the core of our model, injecting this mindset at every level of the organization. Probably, no other OEM, and we have proved that can pretend today to be so flexible as Renault Group when it comes to absorbing the shocks on the bumpy roads toward, for example, the old electric mobility.
On the EV side, we have Ampere, our EV and software champion. It's on track to cut its cost by 40% and to reduce prices while improving its margins. Every day we measure the benefits of having a dedicated entity. On the ICE side, we have power with highly cash generating businesses; Renault and Dacia are ICE and hybrid cars, as well as our LCV business. On top of making money, this team works as a safety net for the group in front of the aliveness of the EV shift. It is supported by Horse, the global ICE and hybrid powertrain leader that we have set up with Geely and Aramco. Horse is not only a supplier for Renault Group and Geely; it's a platform for the entire auto industry. It has the mission to reinvent the ICE technology and our core business to give it a future.
Concretely, this means developing smart hybridization, but also alternatives or why not renewable fuels, developing innovative, low-emission ICE and hybrid vehicles. Aramco's joining has given new evidence that setting up had been, I would say, the right move, establishing the value of the thing at €7.4 billion. I know that many suppliers, competitors are looking at this figure. Maybe this is also the reason why we receive so much interest from partners. On top Horse also allows us to gain in productivity, reduce fixed cost, gain scale. We improved our balance sheet significantly and keep a substantial stake in a growing and cash generating business.
The open ecosystemic approach that we have put at the core of our game plays a key role to boost the strategic agility of Renault Group. Since the start of the Renaulution, we have struck over 20 strategic partnership with the best players on all the new automotive value chains from Google and Qualcomm to ASC, Verkor, LG, CATL for the batteries, to STMicroelectronics for power electronics. We go open because pretending to keep cultivating alone your small piece of land when all the boundaries are falling around you, just makes no sense, especially when you have to deal with the challenge that cut across the sectors like the energy transition or the digital revolution.
On the contrary, this ecosystemic approach allows us to smartly address the new automotive value chains, including businesses with margins that are higher than in our traditional activity while nurturing innovation by exposing our people to the best in every sector, boosting our ability to switch quickly to a new technology, for example, when it comes to batteries, accelerating our time to market, sharing the risk and the investments. All of this ensures efficient capital allocation. We achieved 28.5% ROCE in 2023 while we started from 0 in 2021. Now I will leave it to a person – very important in the organization that you rarely see. This is François Provost, our procurement and partnership and Public Affairs CVP. And François is going to tell you about what he has been doing for two years to strengthen our value chain. François?
François Provost
Thank you. Thank you, Luca. Over the last two years, we have reshuffled our relationship with our suppliers. We are pivoting from a pretty transactional and short term to a more strategic approach, considering our suppliers like business partners, boosts agility, speed and innovation of our entire ecosystem. We have already seen the power of this approach against inflation. Assuming transparency on cost, we accepted to take into account inflation figures together with the roadmap to offset cost increase within a reasonable time frame. As an example, as Renault Group, we already reduced by over 25%, the energy consumption per unit and we expect our suppliers to do the same.
In fact, we are onboarding our whole ecosystem in our struggle against inflation. And we have started in H1 2024, to bring down the cost of our costs again by several hundreds of euros not accounting for the regulatory impacts. Besides, we are increasing our control on our value chains. As a traditional OEM, we used to buy parts and systems to Tier 1 suppliers. Now we go to Tier N, and we aim to develop when it makes sense, parts and system by ourselves. The best example is software. In the past, we used to buy software system within Black Box. Now we want to develop partially by ourselves, to co-develop with Tier 1, but also to co-develop directly with tech companies such as Google and Qualcomm.
As another example we can also point out the strategic partnership and contracts signed with our electronic components producers as well as contracts with raw material producers to secure battery supplies. We are also looking at all options to increase the speed of execution. It means involving our suppliers much earlier in sourcing phase. For instance, we are reducing our detailed technical specification relying more on creativity of suppliers to propose optimized solution in terms of value and cost, including on the shelf solutions. This is a key lever to develop cars within two years and to reduce costs and the new Twingo is for us, a kind of proof of concept we can develop European cars within two years. Another example is to move from traditional one-size-fits-all processes to tailor-made solutions for each entities of the group like Ampere or Power. We do not manage EV and software technologies for Ampere at the same way we supply traditional technologies such as seats or chassis. Within 1.5 years, we already reviewed our supplier panels for over 70% of our purchase amount, and we engaged with key suppliers, joint strategic and technological road map reviewed on a quarterly basis.
Thank you for your listening and I give back the floor to Luca.
Luca de Meo
Thanks, François. So as François said, we go deeper and faster and actually we're not stopping there. We are putting now a focus on two topics that are kind of linked. One is speed and the other one is AI. So when it comes to speed, we have launched the speed of lightness program. It means doubling the speed of around 10 key process in the company and sparing 30% of their cost. This is already happening. So as François said, the new Twingo that will produce in Slovenia will be developed in two years, while this kind of thing traditionally took three or four years or even more in the past. We do that, thanks to a series of breakthroughs all along the process. For example, we reduced the development phase by 40% and the industrial phase by 30%. We dramatically reduced diversity and complexity. When it comes to diversity, we have already reduced it by over 40% on our car lineup, as you know, and we shoot for more.
In 2019, our cars had an average 2,200 parts in average. In the new Twingo, will have 750. Just to give you an idea. We push for systematic reuse of on-the-shelf and off-cycle parts. Before the Renaulution, our carryover, carry across never exceeded 50%, and now we achieved up to 80%. We anticipate by 15 weeks, the design convergence, thanks to early suppliers’ involvement and common development with engineering and styling and of course, suppliers.
All of this leads to a 30% entry ticket reduction between, for example, the Renault 5 which is already a new generation product and the Twingo. In all the story, we owe a lot to Gilles Le Borgne, as you know. Gilles stepping back from his position as Renault Group CTO. And I don’t want to miss the occasion to pay him a tribute that he deserves after all what he has done for this company and the stunning result he has achieved. So, thank you for all, Gill. Thank you. And now good luck, of course, to Philippe Krief, who takes up the torch. Philippe is another top engineer with 35 years of experience in the industry ranging from volume brands like Kia to luxury brands so lately in Ferrari. So, he knows what a car is all about.
So, let’s now move to what is the new frontier of Renault Group, artificial intelligence. Our ambition is to make Renault Group the first AI-powered automobile manufacturer. We don’t do AI for the show. We do it to impact the core processes. AI at Renault means augmented intelligence. It’s like when you put a turbine to a Formula One engine, which we did in way back in 1978 for the first time. So, it’s an accelerator. So, we are developing first through strategic partners, six digital platforms, since four years now to manage the company major processes from development, to manufacturing, to after sales, to customer experience, to support function. And we are connecting them this altogether to harmonize data and circulate it seamlessly throughout the group, improve the speed, of course, of decision-making, productivity, simplicity, transparency, we break silos and have all the data about everything this company is doing and about its environment converge actually into one data lake. This is very important because this is the bedrock on which you can build the enabler. You can build a digital Twingo of the company. And we are already well underway. By 2026, almost 100% of Renault Group will be in the cloud. This is, in fact, the condition to make seriously AI a structural technology for the business. I can tell you that no other OEM is as advanced as we are when it comes to the staff.
At the level of our industrial, let’s say, of our industrial metaverse alone, for example, we are collecting and analyzing three billion data every day. Thanks to over 15,000 robots and connected machines. All this opens a huge field of opportunities for Renault Group when it comes to leveraging the AI revolution because AI is nothing if you don’t have well-structured data. On this side, Renault, I have to say, has done its own work. And don’t think AI is, for us, the usual kind of a magic buzzword. We already have 20 macro use cases validated at the group level and that are already generating value. AI is already transforming Renault across all our value chain.
From development, for example, with AI automatically generating code and increasing our developers’ productivity by 10% to 15% to industrial operation notably with predictive maintenance that allows us to repair the machines at the most convenient moment to prevent operation interruptions and to contribute, for example, with more than €400 million savings in 2023 and 2024.
To logistics. For example, when we optimize in real time our trucks filling and routes, enabling us to use 8,000 less trucks and to avoid 21,000 tons of CO2. To customer experience when AI digs into all the company’s document to draft answers to our people that they can check and then customize reducing issue resolution time.
AI will be on the product also transforming into intelligent evolution in a hyperconnected vehicle. Our mantra is to humanize text, thanks to AI, hyper personalizing our cars, having them learn every day from their users, evolving with them to better accompany them. Renault, the avatar of Renault 5 symbolizes this approach. It’s a small character with the generative AI that talks about wide range of subject, explains the cars reaction, and offers a new service and will offer more in the future.
To give you just one more example of how AI is already turning the table. We have managed to accelerate the area dynamic testing process of our cars from 15 hours to 10 minutes. Thanks to AI-powered simulation using the data of the previous vehicle simulation. This solution allows us to make six times more loops than before. Today, this is a presentation of half year results. So, the idea is not to be comprehensive, but I think we’ll have time to dig into the topic in the month to come together.
This team is on its way to transform Renault into the most progressive European OEM. We’re getting faster, more agile and better every day. And I can guarantee you that we’re not going to stop here.
And also, our dear CFO, Thierry Pieton, is getting better every day, and I am going to give him the floor to present our financials.
Thierry Pieton
Like good French wine. Thank you, Luca. Good morning to all. Once more, I’m very pleased to comment today our half year results, which as Luca has already mentioned, reach record levels of profitability.
Let’s start with the Group revenue. It was pretty stable compared to H1 2023 at €27 billion. At constant exchange rates, it was up 3.7%. Automotive revenue stood at €24.4 billion, down 1.9% at constant exchange rates and increased by 1.2 points.
The Mobility Services contribution amounted to €31 million, up €10 million compared to last year.
And last but not least, Mobilized Financial Services revenue increased by 29.2% to €2.6 billion, mainly driven by higher interest rates, the increase in average ticket per vehicle and higher average performing assets.
Let’s drill down into the automotive revenue. It included 3.1 points of negative exchange rates, mainly related to the Argentinian peso and to a lesser extent, the Turkish lira devaluations. At constant exchange rates, it increased by 1.2%, as previously mentioned.
Volume effect was negative 4.7 points in the semester, following the same trend as in Q1, higher registrations but tight distribution inventory management. So, I’ll take you through each part. Registrations increased by 1.9% at 1,155,000 units at group level despite a high comparison basis. In Europe, Renault Group consolidated its third position, outperforming the market with sales up 6.7%. Each of our three brands, Renault, Dacia and Alpine contributed to this growth. Renault brand was once again the best-selling French car brand in the world and continued its progression with global sales up 2%.
It recorded a strong 8.2% increase in Europe, outperforming the market by 2.7 points. Renault brand remains on the podium of passenger cars and LCV market and number one in France. On passenger cars, the sales figures were boosted by the very strong performance of hybrid cars with a 45% increase year-on-year. The brand is now ranked number two in hybrid market with a 17% market share. Renault pursues its conquest on the C and above segments. It’s now mainly driven by Rafale and Espace, which have been added to Arkana and Austral and pending the imminent arrival of [indiscernible]. By the way, on these models, we continue to experience very favorable trim mix.
On LCVs, Renault brand enjoyed an impressive growth of 19.2% in a market of 13%, thanks to the successes of Kangoo, Express and Master all leaders in their segments, while traffic now ranks number three. Renault confirmed its first placed in the European LCV market, excluding pickups.
In H1, Renault started to roll out its product offensive in the overseas markets. Following the launch of the Renault brands in Korea last April, Renault has just reviewed Grand Koleos in the Busan International Motor Show. This vehicle will be commercialized this autumn. In Brazil, we just launched Kardian. The car will also be launched in other Latin American markets and in Morocco in the second half of 2024. This offensive will continue in H2 with the launch of Renault Duster. Dacia sales were up 3.8% worldwide. In Europe, Dacia confirmed its place on the podium of the PC retail market, thanks to its four-pillar models, unique business model and its strong brand identity.
As illustrated during the Dacia Days organized a few weeks ago, Dacia truly stands out with a very high new customer conquest and loyalty rates. Sandero is the best-selling vehicle to retail since 2017 and the best-selling model in Europe across all customer channels in H1.
Dacia Duster maintained its position on the podium of SUV retail sales in Europe. It includes Duster’s second generation and the third generation, which arrived lately during Q2 and which is off to a very good start. There is more to come. New Spring will arrive in the showrooms in the summer. In H2, Dacia will present Bigster, its future C segment SUV to be launched in H1 of 2025.
Switching gears to Alpine. Alpine continued its double-digit growth after three years of consecutive kind of progression with 2,700 units sold. It delivered a 47% volume increase versus last year benefiting from the very strong success of the A110 R and S models, in particular.
In June, Alpine began its electric offensive, with a reveal of A290, the brand’s sporty electric, five-seater, hot hatch. Orders are scheduled to open this summer for first deliveries towards the end of the year. Fingers crossed, one of them will be for me.
All-in-all, Renault Group continued its commercial policy focused on value. First, retail channel represented 62% of passenger cars group sales, almost 20 points above the European market average. Second, top-of-the-range versions represented a significant share of our mix.
Finally, our electrified sales at group level represented nearly 30% of our European PC sales, up 4.3 points compared to last year, thanks to a 60% increase in HEV sales. As mentioned previously, Renault Group continued to proactively manage distribution inventory. The 1.9% growth in registrations was more than offset by the evolution of inventories.
While there was a stock increase in the dealership network of 69k units in the first half of 2023. In H1 2024, we recorded a 6k units stock decrease. At the end of June, total inventories represented 0.5 million vehicles, which is a very healthy level. And this level continues to be fully supported by a strong order intake, fueling a very sound order book, which stood at 2.6 months of forward sales.
The sales to partners effect was positive 0.2 points. New vehicle sales to partners decreased in the transition year before the launch of new products as anticipated. This was offset by R&D billings in line with the ramp-up of the group's partnerships. As already mentioned, after several years of price increases, Renault Group has entered a phase of price stabilization.
In H1, the 1.8 points of price effect was mostly related to the offset of currency devaluations, mainly in Argentina and Turkey. The positive product mix of 1 point reflects a gradual improvement versus a muted effect over the last two quarters, driven by our recent launches, mainly Scenic, Rafale and Duster. This trend will continue in the next quarters. The geographic mix impacted positively from 1.1 points, driven by higher relative contribution of Europe.
To finish, the other bucket posted a positive 1.8 points mainly thanks to the strong activity in parts and accessories as well as used car sales. Now let's switch to the operating margin analysis. This semester, again, we posted a record operating profit, delivering €2.2 billion, up €135 million versus last year. It represented 8.1% of revenue, up 0.5 points versus the first half of 2023. The Automotive segment operating margin also reached a record level at €1.6 billion or 6.6% of Auto revenue up 0.4 points. MFS' operating profit increased by €75 million to reach €593 million.
This slide illustrates the huge work that was made by the team over the last years. We're continuing to progress on the group and automotive operating margins, both in percentage and in absolute value. Let's deep dive on the group's operating margin evolution. First, currencies impacted positively by €93 million, reflecting mainly the positive impact of the Turkish lira on production costs.
The negative volume impact is in line with the evolution of invoices of new vehicles and sales to partners, which I commented previously. In H1 2024, price mix enrichment effect was positive €51 million and cost decreased by €262 million. Together, these represented a positive impact of €313 million.
After two years of strong headwinds, costs have turned positive this semester, as Francois mentioned, mainly thanks to the strong purchasing performance of €165 million and supported by a raw material tailwind of €117 million.
As explained before, Renault Group is able to pass part of these gains to its customers while continuing to improve margins. We offer increasingly attractive vehicles in terms of price and content while offsetting regulatory requirements, especially on new models and facelifts. For example, we were able to launch Clio Phase 2, Captur Phase 2 on this pass, cheaper than previous versions, but with improved margins.
R&D costs decreased by €153 million, higher R&D spend in H1 of about €150 million and the effect of lower capitalization rate were more than offset by lower amortization and R&D billings to our partners. The capitalization rate has decreased 6.2 points versus H1 of 2023 to 44.5%, mainly due to the non-capitalization of the R&D spend on the software-defined vehicle program. SG&A expenses were up €109 million, mainly driven by higher marketing costs related to the brands offensive and to the current performance of motorsport activities.
The last bucket highlights the impact of Horse deconsolidation. Since November of 2022, Horse was under IFRS 5 assets held for sale accounting treatment. And therefore, as you know, amortization of its assets had been suspended. Since Horse was deconsolidated on May 1, 2024, invoices paid to Horse by Renault Group include the cost of amortization again as well as Horse's markup. The cumulative effect of these two elements represented a €55 million headwind for the month of June, which means that the 0.5 points improvement that you see here is actually 0.7 points on an apple-to-apple basis.
As a reminder, the synergies generated by Horse powertrain joint venture will more than offset Horse's markup in the second year of operation. We'll actually pay for the engines less than when we were manufacturing them ourselves. I'll come back to the details of the impacts of Horse just before the Q&A session.
Mobilize Financial Services generated €10.7 billion of new financing, up 2.5%, thanks to the growth in registrations. In average, average performing assets amounted to €54.9 billion, up €5 billion versus H1 of 2023 driven mainly by a strong commercial activity on the customer financing business since early 2023, following the end of the electronic component shortage, but of course, thanks to the success of our range.
Net banking income as a percentage of average performing assets was stable. It's worth noting that in H1 2023, it was impacted by negative swaps revaluation to the tune of €37 million. This effect did not reoccur in H1 of 2024.
Cost of risk at 0.41% remained broadly in line with the same period last year and with our historical levels. Operating cost in absolute value remain well contained and improved by 10 basis points as a percentage of average performing assets. Overall, Mobilize Financial Services posted an operating profit of €593 million, up €75 million year-over-year.
Moving to the items below our – in the group P&L below the operating margin line. Other operating income and expenses were negative €277 million and included the €440 million capital loss on the Nissan shares disposal carried out in March 2024 and restructuring expenses for €123 million.
These effects were partially offset by a €286 million capital gain on the deconsolidation of Horse. The deterioration in our net financial expenses is entirely explained by the impact of hyperinflation in Argentina. Profit from associated companies at €195 million, dropped €371 million. This is primarily driven by Nissan's contribution, which stood at €264 million compared to €582 million posted in H1 2023.
Current and deferred taxes represented a charge of €328 million compared to €278 million last year. The effective tax rate amounted to 17% at the end of June 2024, up 2 points versus last year primarily due to the first year of implementation of Pillar 2 and other deferred tax impact. All-in-all, and including €440 million of capital loss on the disposal of Nissan shares, net income reached €1.4 billion.
Now let's switch to free cash flow. Renault Group generated €1.3 billion of free cash flow in the first half of 2024. Cash flow was €3.1 billion, including a €600 million dividend inflow from MFS, same as in H1 of 2023.
Group CapEx and R&D rate, excluding the impact of asset disposals, amounted to 7.9% of revenue in H1, up 1 point year-on-year due to our product cycle, but it remains below 8% of revenue guidance. Assets disposals amounted only to €28 million compared to €197 million in H1 of 2023.
Change in working capital requirements was a headwind of €209 million. Finally, our restructuring cash out amounted to €167 million compared to €219 million in H1 of 2023. This free cash flow contributed to a significant improval in our net cash financial position, which improved by €1.1 billion and reached a record level of €4.9 billion, never in Renault's history has this position been so favorable.
Net financial investments and dividends paid include around €200 million of investment in Flexis. Dividends paid to our shareholders strongly increased in 2024 at €1.85 per share, representing €540 million, while we benefited from €142 million of dividends received from Nissan.
The net debt of Horse was deconsolidated for €420 million. And to finish, the disposal of more than 99 million shares in March of Nissan represented an inflow of €358 million. With these two transactions on Nissan shares in December 2023 and March 2024, we've already sold 7.5% of our ownership for €1.1 billion of cash, but decreased our stake by only 4.5% due to the Renaulution effect of the cancellation of the shares bought back by Nissan. And this is not over, as already mentioned, we’ll continue to monetize Nissan shares, which represents a potential cash of around €3 billion at the current Nissan stock price.
As you know, we can sell to Nissan or to any other investors. This future cash inflow will allow us to accelerate our deleveraging while developing our activities and returning cash to our shareholders. Until the effective disposal of those shares, Renault Group continues to receive Nissan’s dividends.
I’ll end the presentation with the liquidity of the Automotive division, which stood at a very comfortable level of €17.6 billion at the end of June 2024. Regarding our credit ratings, Moody’s has upgraded as you know, its outlook to positive in May. I confirm that returning to investment-grade rating remains our first priority, and then to increase our payout ratio to 35% of net result group share.
And with that, I’ll hand over back to Luca for the financial outlook. Thank you.
Luca de Meo
Good. Thanks, Thierry. So when it comes to the – our financial outlook for 2024, we confirm that we will achieve at least a 7.5% operating margin and at least €2.5 billion of free cash flow for this year. So if you exclude the impact of Horse, we confirm an operating margin in H2 above H1. All in all, Renault Group continues, therefore, to improve its operational performance.
We are fully concentrated on boosting the performance of the compact teams that we have set up. This new organization is already bearing fruit because it allows this team to be 100% focus on their respective discipline, shooting for excellence on each of the new automotive value chains and having compact teams allows us to spot more easily where the value is and how we can post it business by business, being sure that we do it with people doing that and nothing else.
Speaking about value creation, we already see the results. With Ampere and Power, of course, with Horse, Renault Group holds 45% of the business now with an enterprise value of €7.4 billion in an activity that some saw is just a legacy. Alpine brand reaches €700 million value, 14 times more than in 2019 and by selling a minority stake in Alpine Racing Limited to Otro Capital and RedBird we have achieved to value this business more than € 800 million.
Mobilize Financial Services as a book value of above €6 billion. And on this solid asset, we build tomorrow’s mobility. So the key ingredients of Renault’s new secret sauce are clear: five focus businesses, horizontal and ecosystemic approach, the strengthening of our supply chain, key process optimization, AI deployment at all levels and across all value chains, flexibility, agility and innovation continue to drive performance improvement and efficient capital allocation.
And the most important is that Renault Group’s people are fully committed to achieve this transformation. This is passion for this industry, fueling sustainable value for all our stakeholders. All this shows that Renault Group, I think is on the right way. So I have no doubt. Focus, discipline and execution will remain our key words in the coming months.
And now, I’d like to open to your questions with – together with Thierry and other member of the team.
Philippine de Schonen
Thank you, Luca. So before starting to open the Q&A session, we’ll just do a short recap on all Horse impacts to be sure that everyone understands them correctly. Thierry?
Thierry Pieton
Yes. Thanks, Philippine. So coming back to the impact of Horse and to make sure that we’re absolutely clear. So as you know, there’s two periods before we deconsolidated Horse and after. Before we deconsolidated, as you all know, it was treated as IFRS 5. And therefore, we stopped the amortization, right? This was bringing a benefit of roughly €40 million per month.
After the deconsolidation, we basically transact with Horse as we would any other supplier, which means that we start paying the amortization again, and we pay a slight margin so that Horse can fund itself. So if you look at the H1 numbers, you can see the €55 million there that we had, which corresponds to the impact of one month of deconsolidation of Horse, the way to analyze that in a simple fashion is roughly €40 million of amortization that we start paying again and €15 million of margin that we give to Horse, okay?
So if you look at H1 stand-alone, we got €190 million of amortization tailwind in the first five months compared to as if we hadn’t done Horse. And we got a €15 million headwind in the last month, corresponding to the fact that we pay a margin to Horse. So net-net, it’s €175 million, okay? So it’s about a 0.6 points tailwind in H1, but 0.2 points headwind on a year-over-year basis.
If you project yourself in the second half of the year, this €55 million headwind that we got in the last month, we’re actually going to have it over each one of the six months, right, of the second half. So on the stand-alone, on a year-over-year basis, it means 6 times €55 million year-over-year.
If you compare H2 to H1, it means five months with an incremental headwind of €55 million, which means €330 million. And if you take H2 stand-alone, so you compare H2 to what it is compared to if we hadn’t done a Horse, it’s €15 million times 6, so about a €90 million headwind, right? So hopefully, that’s clear.
I want to make sure as well that it’s understood that despite, if you exclude the impact of Horse, the margin rate in the second half will be better than in the first half. And I also want to let you know that in absolute value, the margin that we will generate in the second half will be better than the first half, regardless of the impact of Horse, which means that you can count on an H2 performance, which continues to improve in absolute value versus H1 regardless of deconsolidation treatment of Horse.
Two quick last items, so below the line in operating profit. We generated around €290 million of profit from basically replacing the assets that we owned in the Renault portion of Horse by the 50% stake that we now own in the consolidated entity. So that’s €290 million between operating profit and net income.
And the final impact that you saw in the bridge to the net financial position is Horse actually had net debt to the tune of €420 million. We deconsolidated that. So it helped us reach the €4.9 billion level that we talked about previously.
Hopefully, that’s clear. If it’s not, we’ll be happy to respond to any questions that you might have. Thanks very much.
Question-and-Answer Session
A - Philippine de Schonen
Thank you, Thierry. Very clear. So we’ll start the Q&A session with Thomas Besson from Kepler Cheuvreux. Hello, Thomas.
Thomas Besson
Hello, thank you very much. Congratulations on the performance in H1. I have two questions, please. The first is to do with European regulation. Luca, you made some comments in the press in multiple papers about the fact that apparently, also have an delay seems to want to maintain the regulation as it is for 2025, 2030 and more pressingly, 2025. Can you help us understand the whole automakers role and Renault in particular, are going to handle that, give us an idea of the benefits of the 60% increase in HEV on your average CO2 emissions in Europe.
Do you have an estimate of where you are in Europe in terms of CO2 in H1 2024 versus the objective in 2025? And so how are you going to make an arbitrage between eventually having to turn prices on EVs or sell fewer ICE products. That’s the first question.
The second – I’m sorry, I’m staying on my negative tone, you still have a great 2.6 months of the bank and you’re clearly launching lots of very nice products. But European demand seems to be slowing and the competitive landscape seems to be accelerating. Can you comment on the level of industry inventories and pricing you see by powertrain in the third quarter during the summer?
I know you have a remarkable 62 points share in retail, but even for you, it has declined a little bit. And can you finally comment on what you see as potentially a risk on financial services, the cost of risk is still very low. But with economic backdrop that is deteriorating, do you see that as a headwind in H2? Thank you.
Luca de Meo
Look, I think my call for was – although I did it is – let’s say, as a CEO of Renault for what I see in the industry, right? The reality is that – we are – we have an EV market that is stuck at 15%. In fact, when you analyze the thing, it’s actually growing relatively fast in most of the market, the big impact coming from Germany. So Germany is actually pulling down the whole thing right now because they actually took off subsidies.
So I think the – let’s say, the EV market surprisingly dynamic in the last few years. I mean there’s been very few technology that in a matter of four, five-year, they came from zero to relevant market share. If you remember, maybe, I don't know, common in the rail in the 1980s, 1990s, et cetera. So it's very dynamic. But the thing doesn't match the speed that is required to hit what they are asking us to do, which is to have an average fleet of – average, let's say, impact of 95 grams for each one of the fleet of each manufacturer. So I think that to hit the target, we need to be way above 20%, maybe 22%, 23%. That's our estimation. And we are at 15%. No, this is the average, right?
So my call is that it's not going fast enough. But the problem is on the shoulder of the manufacturer because we are the only ones supposed to pay fines. There are no fines for people not putting infrastructure. They're not fine for energy industry that provide to provide or not renewable energy at the competitive price, et cetera, et cetera. So that's the reality we are facing. Right? And we estimate that all in all, we'll not make it. If it goes like this.
Now if there is an OEM that can reach the target that is us. We sell small cars. We are a top two in hybrid. So we basically replaced the old diesel thing with hybrid. So we have a very, very high mix, up to 60%, 80% on some models. And we have an array of new EV products coming right now from Dacia, from Renault, from Alpine, et cetera, et cetera. of cars that are supposed to do volume because these are affordable cars. There's more cars. So there's someone that can do it, but so my call is from the industry. And this could have a huge impact for the thing, because if you make the math and it stays there, is more than €10 billion fines theoretically for the industry from passenger car. And on commercial vehicle, you are there's no way you can do it because EV technology is not adapted to that kind of user. So the mix is even the half of what is in passenger car.
So I think we are calling for a level of flexibility. As it happened, for example, in 2020. Because a lot of things are not going in the dream. We are not saying, I mean I'm not saying that we should renounced to the target because I – we are fully committed to that. Now it will be a day-by-day management of the thing. We will decide where we are depending on the success of hybrid, especially EV because one EV basically accounts for four ICE cars. So the EV is key in this calculation. So we will try to do the job. We are relatively, let's say, well positioned, but it's a problem for the whole sector.
On the, let's say, 2.6 months, actually, we are seeing orders. We don't communicate orders, but we are seeing orders compared to last year growing because of, of course, also the new products are coming in. So we feel all the KPIs are right? It's a bit slower on the EVs, because of the general situation of the market uncertainty. Subsidy are going in and out, et cetera, et cetera. The retail part is – you pointed out that we are going down. I think it's a technical, let's say, it's a technical thing on movement of some Renault cars, et cetera.
So I think we are keeping the pace. But when you are 20 points above the average, it may be time to also with the new product that we have maybe C segment cars to go back a little bit to do good fleet, but we can define the condition ourselves. So we're not going to go in fleets to discount cars. So we're going to go in fleets if there is a good opportunity because – let's say, because the companies want our product. So I think you can see it actually is an opportunity because being so high on retail, maybe it's not a totally natural thing.
It is, for sure, for Dacia because it's a pure retail brand. But I think we have some opportunity that we didn't took to do volumes. But as you know, inventory are down, production is – capacity is filled order book we have. So there is no reason to push. We are also in the market relatively well positioned in terms of market share. So for us, focus is to generate cash to make money and to continue to serve our customer and doing a go-to-market study that is oriented to the value and quality more than volume.
Thierry Pieton
Yes. And just 62% versus an average 40%. This means that we're more than 50% above the market average. So it's still a pretty good result, I think and also to Luca's point, the profitability on the fleet side is very good. So the differential on the fleet sales that we're taking today is minimal compared to retail. So it's a good position. But as Luca said, it's a volume opportunity. for the future. You had small questions on cost of risk of Mobilized Financial Services. It's obviously something that we track very, very closely. It was up a few basis points versus last year on retail, but mostly outside of Europe. So, so far, no real trends in terms of evolution of cost of risk. And obviously, we'll keep monitoring the situation very closely.
Thomas Besson
Thank you very much
Philippine de Schonen
Thank you. We will now take a question from Michael Jacks, Bank of America. Michael, please could you open your mic.
Michael Jacks
Good morning for the team Thierry, Luca, thank you for taking my questions as well and congrats on the strong set of numbers in what's been a tough half, I guess, for a number of your competitors. Staying on the topic of EVs and tariffs, Europe has implemented tariffs now on Chinese BEVs, but not on PHEVs. And it would appear that one or two of your Chinese competitors are pivoting shipments in response to that. Is this an oversight by the EU? And do you see that as a potential threat, especially given the increase in your own HEV mix? That's my first question.
My second question is just on Nissan share sales. You had planned to sell up to 7.5% by the end of September. Do you still think this is feasible in light of Nissan's guide cut this morning? And what is your latest thinking on disposal time line to get down to the 15% stake?
And one small additional question, if I may. Luca, Thierry, you confirmed the outlook for an H2 margin above H1, even including the Horse effect. Why not raise the margin guide then for the full year? Thank you.
Luca de Meo
Look, Michael, I think the PHEV, we also work on that technology, as you know. We have seen recently the thing – actually, the mix in Europe going down. It's a technology more adapted to premium cars to high-end cars because it's only [ph] very expensive. Actually, you have two – basically two powertrains in the same thing. Of course, any push from any competitor coming from East or West are a challenge, but we are used to challenges. So we have this technology, which is actually pretty efficient. If the market goes up for plug-in hybrid, I think we can follow.
But I don't think that plug-in hybrid will become a dominant technology in Europe. I think we have to bet on mild hybridization and especially EVs because the rules of the game are even more clear. I mean we have seen also a revision of let's say, the regulation on plug-in hybrid and make them even less attractive. So you've seen trains in – for example, in Germany, where PHEV has been kind of taken out of – in a way penalized as a technology. They are revising what is the cycle, the consumption cycle of the thing or trying to raise that from the 20 grams, 30 grams that is now to above UC demand for plug-in hybrid with batteries above 100 kilometers, which makes the thing even more expensive.
So I think it's a good technology personally. I think I'm for technology neutrality. So I think we have to have any kind of technology to really hit the target of CO2. But I suppose that it will be a technology more for the high-end thing and not a core technology for Europe, considering how the regulation and defined and what is the, let's say, customer demands.
Thierry Pieton
On the Nissan shares, yes, it's obviously still possible. And by the way, it's not limited to the 7.5%. So the 7.5% is the offer that we put forward in March, but we can put down another offer if we deem appropriate for a larger amount if we think it's the right timing. When we did the new alliance agreements, and we put the 28% in the trust, clearly, the intent is to go down in terms of ownership and we'll continue to do so. It needs to be the right timing, but we're going to continue to redeploy capital, depending on our perception of Nissan's performance and the way it's going to evolve. And also depending on our capital needs as we keep the Nissan share as we get the dividend. So there's not much point in just selling and keeping the cash in the bank. So one element is the use of proceeds. But to be clear, we will continue to go down in terms of ownership of Nissan. That was always the intent, and we'll continue to do so.
On H2 versus H1. So first to be clear, in terms of rate, the H2 margin will be better than H1, excluding the Horse impact. And again, as a reminder, there's going to be a lot of horsing today, but five months of €55 million is €330 million of adverse impact in H2 versus H1. But this – if you exclude this impact, margin rate will improve. The margin will improve in terms of absolute value, regardless of Horse, so in mass it will be higher. But if you take this effect of the 55 times 5, that's more than 1 point of margin that explains why at this stage, we're not changing the guidance.
Michael Jacks
That's okay. Thank you.
Philippine de Schonen
We'll now take a question from George Galliers, Goldman Sachs. George, please could you open your mic.
George Galliers
Yes. Thank you. Sorry to be an absolute bore on this. But just because you used the term margin, which I think people associate with the percentage, just to be clear, what you're saying is the absolute profit should be higher than the €2.18 billion that you just reported for the first half. Is that correct?
Thierry Pieton
Correct.
George Galliers
Yes. Great. Thank you. Very interesting presentation at the start. I just wanted to follow-up on one of the points. You mentioned the opportunity for productivity gains of 15% on R&D from AI. Can you give any indication by when this might be achievable? And how should we think about this? Should we think about this as being your absolute spend being potentially 15% lower in the future than it is today? Or is this an efficiency that will allow you to invest more in other areas?
And on the topic of R&D, clearly, we also had a nice tailwind in the income statement. Just with respect to the billings, could you help us understand how those were? Did the billings normally relate to R&D expense during the same period? Or are there also instances where the billings are for work, which Renault may have incurred in prior periods? Thank you.
Luca de Meo
Maybe you can – let's say, you can...
Thierry Pieton
Yes. On the R&D billings, it's – they're relative to the R&D that we do on behalf of some of the partners that we have in the ecosystem. They typically would be within the period. In the case of the first quarter, there was a catch-up on some of the R&D billings that had occurred in prior periods. In any case, this R&D billing phenomenon was a bit of a one-off in the first half. So you shouldn't expect anything very material from an R&D billing perspective in the second half of the year. So we'll be back to a sort of a normal type of situation within the guidance of less than 8% of turnover.
Luca de Meo
Maybe I'll leave it to Gill to answer to – for the question on productivity. I think it will be both, George.
George Galliers
Yes.
Luca de Meo
I think there will be savings, and on the other side we actually bring that productivity to a new technology, but...
Gilles Le Borgne
Yes. So a few words swing on which we are working on. First of all is to get AI is all about that data. So as explained by Luca, we are gathering all our data in six digital work streams. And of course, for the upstream one, it's called RVT Renaulution Virtual Twin that we developed with together with Dassault Système. And that's very simile we gather all the data, car, cost or the purchasing data or the logistics or the industry in one area with a single point of truth for each data. Based on that, we can, of course, optimize and use AI.
And two examples, very simple: first, we work on having direct CAD generation through AI, generative AI based on existing, I would say CAD from all the RVT program and all the cars that have already been engineered. So automatic CAD generation that you can imagine is very – is helping a lot regarding timing. Second example, of course, is well known, but it's automatic generation of code for software, automatic coding that we are using also. And that's cutting the timing and the cost by between 30% to 50%.
So just those two examples, but of course, we have plenty, for example, automatic costing also based on a large number of data that we have is helping us in costing and of course, reaching our cost target for each. So these are a few examples.
Luca de Meo
George, I mean, to make it clear, you can't make AI a structural driver of your day-by-day performance if you don't set up a data lake, okay? And this data lake has to be let's say, connected with few systems that run the different divisions of the company. We started this work four years ago. If you talk to the Dassault Système guys, they will probably tell you that we have a few years of advantage because we started at the beginning with the vision of putting a layer of IT architecture and creating a virtual twin of Renault on top of the company, to manage what you call the complexity of the different units division with Dacia, Alpine, Horse, et cetera, et cetera.
This is the outcome of the work that started a long time ago now. And that's why we think we have something special. We don't do AI just for the fun or for the show. We do it, and we embed it in the real core process of the company. The ones that started this thing, actually, even before I came was manufacturing. And we got the inspiration from that example and then we went downstream and upstream to the engineering, downstream to the logistics, to the customer, I think. So that's a very – I think we have something pretty special.
Philippine de Schonen
Thank you, Luca. We now have a question from Renato Gargiulo from Intesa. Renato, please could you open your mic.
Renato Gargiulo
Yes. Yes. Good morning and thanks for taking my questions. The first one is on pricing. You were citing a price stabilization if we exclude the prices to offset ForEx and devaluation in some markets and that you are using your lower cost base to have a competitive offering in the next months. So I was wondering what are you seeing in terms of price environment going forward in the second half of the year.
The second question is on light commercial vehicles. You achieved another good performance in the first half. I can assume with good margins. Even in this case, if you can give us an indication and outlook about the remaining part of the year? Thank you.
Luca de Meo
Look, the pricing depends on what you want to do, right? So I think we have – in general, I think there is more pressure in the market, that's for sure, especially for the people that have a lot of stock, which is not our case. But you see the position of Renault we are maybe Number 2, Number 3 in the match with the Renault brand. We are in the top 10 with Dacia. Sandero is a more sold car in Europe. Clio is must be Number 2 or 3, something – Number 3 or Number 4 exactly, sorry 3, okay.
So I think we don't have to stretch the thing. So we don't need to necessarily push. We'll continue in this direction. We'll try maybe to get in two channels, but the right condition without discounting. So in general, I think there will be pressure on price, as you anticipate as we actually even see. But you – price stabilization and giving that back to the customer is good because it makes our offer more attractive at the condition that we keep the margin. And as we said at the beginning, our priority is to keep the margin in generating cash. So that's the condition. So – but if we have some room, we will do it.
If we have to adjust, we will do it. But as I said, we are relatively let's say, relaxed on that because we – I'm not here to push metal that the market doesn't want. On the LCV, I think we'll continue on that trend. Don't forget that we just launched the New Master. And this is probably right now the best car in the market. And normally, I mean, this model has always been the cash cow of commercial vehicle. This is where really the big money is. And so I think we will have there a product effect into the thing that makes me also pretty relaxed about the performance of commercial vehicle.
Renato Gargiulo
Thank you.
Philippine de Schonen
Thank you. We now have a question from Stephen Reitman from Bernstein. Stephen, please could you open your mic.
Stephen Reitman
Yes. Thank you. Good morning and congratulations on the results.
Obviously, we'll talk about tariffs on Chinese BEVs coming into Europe. But obviously, but on the other hand, maybe less discussion about how probably you have now probably the most coherent response to the threat from cheaper Chinese BEVs with the EV strategy. So I was wondering when are you going to give us some more detail about first customer deliveries and when will we actually get a chance to actually to drive the Renault 5? And could you give us some more information may be about the order intake and any other data you want to share with us?
Luca de Meo
I think it's a bit early because we launched Scenic, let's say, I think it came into the dealers in April, May in France and then maybe later in June in other countries. So I think we'll have to wait for end of the year. We'll also have to see next year because I think that – next year, we'll see an acceleration of the EV market, okay? So because of the whole story of – hopefully, it's healthy, okay. And Renault 5 will be – we will start to deliver in October, okay. From a production point of view, the thing is the ramp-up is going, okay. We – a couple of weeks ago we started to really get into really good production rhythm.
So probably, we will be able to see the potential of Renault 5, I would say, maybe mid-2025, okay? We have a lot of let's say, interest for the cars for sure. We haven't, let's say, open – or we have very recently opened the order book in the ordering, I think, in France.
So I think it's too early right now to say. I can tell you I drive a yellow Renault 5 in Paris, one of the first one. I can tell you that people stop me at every red light, and they make selfies with me. So I think that car is really a magnet for people. Now we have to see if this converts into order, but it seems good.
And it's a very unique proposition because new generation car at that level of price, new – completely new platform. So you see that we don't have a lot of competition, to be honest at that level.
Philippine de Schonen
Thank you, Stephen. And we now have a last question from Pushkar Tendolkar from HSBC. Pushkar, please could you open your mic.
Pushkar Tendolkar
Sure. Thanks, Philippine. Thanks, Luca and Thierry as well, for taking my questions. I think a couple of clarifications actually that I have. One is on your EBIT operating profit bridge. The price mix enrichment bucket is a lot lower compared to that same price bucket, which was €450 million almost in the revenue bridge. Just a bit confused because this hasn't been the case in the past. Is it because of enrichment being a lot more negative than it used to be or you're offsetting price in the FX bucket? Just on that bridge.
And then you mentioned earlier on inventories that the current 500,000 level is a healthy level. Think that was we were close level by year-end 2023 as well. So going forward, would we see the wholesale and retail kind of tracking each other? Or there is still some sort of effect left in that? Thanks.
Thierry Pieton
Hi. Pushkar, thanks for the questions. I'll take those. So on the price mix enrichment, yes, it's the enrichment bucket that is negative. Price is positive. As an offset, our foreign exchange mix is positive from a margin perspective, both model mix and country mix.
The thing that makes it less higher than usual is the enrichment bucket. And in line with what we've said previously, we're using the strong traction that we're getting from a cost perspective to put some content in the car. So it's actually better sometimes to put some content in the car to improve the margins than to give price away.
And I think that's something that you'll continue to see in the second half. I think the thing that you should have in mind is that if you take the €93 million that we've got in FX and then the effect of price mix enrichment and cost together, that's €400 million of margin improvement in the marginal profit at the vehicle. So that's how we drive the profitability forward. So give a little back to the customers, but while improving the margins, if that makes sense.
And then your second question on inventories, yes, so the 500,000 is a good level for us. I don't – we don't foresee massive changes between now and the end of the year, maybe 5,000 or 10,000 depending on the launch cycle, et cetera. Whereas last year, we had a big ramp-up of inventory in the first half and a ramp down in the second half.
We don't have to do that in the second half. So you should see registrations and wholesale pretty much evolving together in the future. There's always going to be some timing, but generally speaking, there's not going to be any massive inventory movements like there has been 2023.
Pushkar Tendolkar
Thank you.
Philippine de Schonen
Thank you, Thierry. We finally have a last question from José Asumendi from JPMorgan. José, please could you open your mic.
José Asumendi
Good morning. Can you hear me?
Philippine de Schonen
Yes.
José Asumendi
Perfect. Thank you very much. Congratulations on the results. And a few questions, please, Thierry, maybe just to kick it up with financials. Do you expect – just a few of them, do you expect volume to be a positive contribution on the bridge in the second half of the year? There is a second – there's a large acceleration of product mix and geomix [ph] in the second quarter. Do you expect this momentum to continue into the second half of the year?
Three housekeeping. Horse, how much is the negative impact year-on-year in the second half? I know you mentioned the number, but if you could just repeat, please, how much is Horse year-on-year on the bridge in H2?
And then please on that – If you could just comment again on pricing. I mean one of your peers just is showing sort of 6.5% margins in Europe is taking a 2.5% margin hit on pricing. Are you seeing anything exceptional happening in the European market in terms of pricing power?
And then, Luca, a couple of that for you, please. On emissions, do you think this should be a bit more coordinated approach from European countries to provide incentives to some electric vehicles in 2025 to help European car become emission targets. I mean this is becoming very obvious as we go into 2025.
And then second, can you comment tactically whether you could consider giving back some of the money you're getting from the sale of the shares in Nissan, would you think – do you think you could actually give back some of the cash back to shareholders? The 50% back to shareholders and 50% to be reinvested back into the business? Thank you.
Luca de Meo
Now from the last one, I'll answer. I mean, on behalf under the control of Thierry, but I mean, we have always said that our priority is to get back to investment grade. And starting from that, we will have a dividend policy which is transparent and gets up to 35%. So this is – we'll continue and confirm our, let's say, our position on that.
You were asking me on the coordination of the European car. I mean, this is exactly what we wish. We need really a strategy. We don't need a set of deadlines and fines to get the thing done. We need a kind of a 360 approach and coordinated. I mean it's a bit worrying that for example, there was a proposition lately from the Hungarian presidency to have exactly that kind of coordination in subsidies across Europe, et cetera, but the thing was refused.
But I think that we will soon – I think that we will create soon a certain understanding that if it continues like this, the plan doesn't work, right because we have to see EVs going very quickly above 20%. And then, of course, each one of the OEMs will try to do is best. As I said before, Renault is probably well positioned because of the mix we have, et cetera, also the support in France because it's one of the country that didn't pull off from that.
But yes, so that's what I'm screaming for since months is European strategy for energy transition in the automotive. Yes. So I think if not, then we have to call for flexibility. That means a little bit what happened in 2020 where you had I don't know, super credits for EVs or for some technologies that will allow us not to be all involved in fine payments, which are not an efficient way of developing, I think, even the business itself and the technology.
Thierry Pieton
On your – Hi, José, by the way, on your questions, volume, yes, will be a positive year-over-year, especially since last year, we had to destock in H2 to get back to the 500 mark. We no longer have to do that. So it will be positive year-over-year, and it will also be positive sequentially in particular, thanks to the launches that you mentioned.
On the impact of Horse year-over-year on H2, basically take the €55 million that we had in the month of June, and multiply that by six, right? So it's €330 million adverse impact profit and cash embedded in the numbers that – in the forecast that I gave you. I hope that's clear.
José Asumendi
And then on pricing, are you seeing anything exceptional? We just have one of your peer reports...
Thierry Pieton
So on pricing, yes, Yes, I missed that one. I think Luca answered on pricing. It's definitely a more intense environment. But again, we have over 90% utilization on plants. We've got 2.6 months of order book. We're launching a whole bunch of new models. So we're going to do some stuff in content like we've done in the first half, but we're going to stick to our guns.
And I want to take the opportunity because you're kind of asking the profitability in Europe. And I'd like to say that Europe is above average in group's profitability. So if you take the 8.1% that we're reporting for this semester, the European margin is actually higher than that.
José Asumendi
I’ll leave it there. Thank you so much.
Philippine de Schonen
It's a good way to conclude.
Luca de Meo
It's a good way to conclude, guys. So I can only wish you a fantastic summer and I thank you all for your support. Thank you very much.