Good day, and thank you for standing by. Welcome to the Faurecia 2021 guidance adjustment call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michel Favre. Please go ahead. Thank you very much. Good morning, ladies and gentlemen. Thank you for attending this conference call. I am, as usual, with our investor relations team, Marc and Mathieu, and we have organized this conference call in order to comment on the press release that we issued this morning at 7 A.M. Paris time, and that is also available on our website. Then we will answer all your questions. This press release was issued to announce an adjustment of our 2021 guidance. This is the second adjustment this year, which is completely unusual in the recent history of Faurecia, and we do apologize for this announcement. I insist we do apologize for that. As indicated in the press release, it is caused by three main factors. The latest forecast for automotive production in Europe, which has been recently further revised downwards. The cost generated by the multiple stop and goes decided by our customers and difficult to compensate, and cost revision, I can say, is getting more and more difficult to offset this impact. We met operational issues in launching a new seating program in Michigan that was already flagged in our Q3 sales release, but the latest estimate of one-off costs related to these difficulties in our 2021 accounts is higher than initially expected. Let me quickly comment on these three factors. Firstly, as regards volumes in Europe, as indicated in the press release, IHS Markit revised by circa 1 million units or -13% its forecast for European production in H2 between September and November. It was reduced by 700,000 in October and further 300,000 in November. Now, European production in H2 2021 should be 6.8 million units versus 9.6 million units in H2 2020, or if you prefer, down 30%. These downward revisions are all the most important for Faurecia, as Europe represents 45% of our sales, and the two most affected customers are Volkswagen and Stellantis, which are our two main customers in Europe and worldwide. We now expect our sales in Europe in H2 to be down in the region by circa 20%. Consequently, we have revised our sales for the group from circa EUR 15.5 billion to between EUR 15 billion and EUR 15.5 billion to take into consideration the latest automotive production forecast. Secondly, as regards stop and goes, we continuously experience multiple and violent stop and go decided by our customers, and that strongly impacted our operational efficiency. In September, the actual number of plant closures made by our OEMs during the months was multiplied by 2.8x in Europe and by 6.5x in North America versus the number announced at the beginning of the month. In October, these figures were circa 2.5x. In November so far, it seems that these figures continue to improve. In December, there is still uncertainty about OEM year-end closure, mainly for the third week of December. We are not sure that the last announcement of the COVID will improve the situation. In such a context, it is impossible to fully compensate all the overcost related to this stop and goes and last-minute changes. We speak of circa EUR 20 million. Cost flexibility to adapt to such a long period of disruption that could not be anticipated as estimates, we have to work at a reduced capacity that we cannot not plan or anticipate when we have our people at full capacity. Thirdly, as regards the Seating program in the U.S., since we started this program, which is an important growth field launch with two plants, we face major difficulties related to workforce in terms of qualified people and turnover. As you know, this region, Detroit region, is a difficult one in terms of recruitment, with high and growing attrition rates, and all these concerns were heightened by the COVID-related context. Turnover reached 10% per week at its peak. Stable and qualified managers were difficult to recruit in the region, in the country. We confirm that this issue will be fixed by the end of this year. Solutions are including recruiting qualified labor people from other plants and other U.S. implementation areas, recruiting technicians and engineers even in Europe, which is now possible since borders have reopened, and we hope that the COVID will not threaten this. Implementing alternative production capabilities. Nevertheless, we face all kinds of difficulties on overcosts, including the use of temporary replacement people or recourse to subcontractors under production, non-quality. All these overcosts have recently been reviewed, and our estimated impact on operating income for Q4 2021 is much above what was initially expected. Now we are adding in our forecast circa EUR 330 million. Lastly, let me add that at Faurecia group level, we shortly appoint an EVP in charge of North America, who will have the same responsibility as our EVP in charge of China, and who will be fully responsible for our P&L for the region. As a consequence of these three elements, our operating margin is revised from 6%- 6.2% in our September guidance to circa 5.5% now. This includes the impact of lower sales with a flow-through of circa 25%, which as you know, is our usual metrics. This also includes all the other costs related to the erratic stop and goes we had to undergo. Lastly, this includes a new estimate of the overcost related to the Michigan plant. Conversely, we succeeded in offsetting most of the inflationary effects. Of course, as you can think, we have to be cautious. It will not come a third time to you. Our net cash flow for the year is now expected at more than EUR 300 million versus circa EUR 500 million in our September guidance. Of course, it mainly reflects a drop in operating income, first in EBITDA, but we have two other impacts. One is about inventories that could not be fully optimized in the context of the multiple erratic stop and goes that I have already mentioned. I speak here of something like EUR 80 million of cash impact by the end of the year, and due to this level of stocks. The other one is the impact of the lower sales for the last three months of September, October and November, that mechanically reduces the cash collection at December 31, and also threatening as well, the level of factoring of receivables at end of December. We are doing all we can to mitigate these impacts. As you know, we have strictly reduced CapEx on flow that will be below EUR 500 million this year. Of course, this guidance assume no major lockdown in any automotive region before the end of this year and no expected closure of production plants by our customers. We have integrated the most likely scenario of circa 71 million units produced in the world in 2021, in line with IHS Markit's latest forecast, a figure that unfortunately is the same as the one in 2020. I want to make clear that we made this guidance as conservative as possible, as I mentioned before, to give you the most reliable update of our 2021 performance. As regards to 2022, of course is not the right timing to disclose any guidance for next year. We'll do that as every year on February 21st, when we release our 2021 results. This guidance will be a guidance for Faurecia standalone, as it will be impossible for different reasons to give any 2022 guidance for the consolidated Faurecia and HELLA combination. It will be done as soon as possible, probably in April. What we indicated in today's press release is that our current assumption is that worldwide automotive production should rebound by around 10% next year to circa 79 million vehicles. We expect production to be broadly flat year-over-year in H1 as shortage of semiconductors should persist during this period. It should grow by strong double digits year-over-year in H2. After two difficult years for the industry, volume growth will help resuming our profitable growth and cash generation trajectory will continue to post strong organic sales performance, and we will significantly improve profitability and cash generation. We keep committed to strictly control our leverage ratio. We confirm our objective to be at or below 2x at year-end 2022. That will include, of course, the impact of the acquisition of HELLA, and to return to 1.5x or below at year-end 2023, in line with what we released on August 14th when the acquisition was announced. Thank you for your attention, and now it's time to answer to your questions. Thank you. Operator, can you launch the Q&A process? Thank you. We will now begin the question-and-answer session. To ask a question, you will need to press star one on your telephone and wait for your name to be announced. Should you wish to cancel the request, please press the hash key. Star and one to ask a question. Your first question comes from the line of Thomas Besson of Kepler. Please ask your question. Thank you very much. Hello. Hello. I'd like to concentrate on your third issue because I think the first and second issue are clear and I think industry-linked. Correct me if I'm wrong. Could you remind us what exactly this greenfield is related to? You said two plants. Could you say the programs, either one program, several programs, and is it just the beginning of the ramp-up or is that, or are there more orders coming in 2022 or 2023? And how can you be sure that you'll have circumvented the issue by year-end? Very good question. Thank you, Thomas. Good morning. Good morning. When we speak of two plants, it is the same program as the Jeep Grand Wagoneer. Two plants, because we have one plant of complete seat and one plant which is making the frames. Metal plant, making the second row and the third row, which are individual seats. It is really two plants and two different processes, huh? That's why we mentioned two plants. Somewhere, the biggest difficulty at one time was the middle plant with a lot of scraps, huh? After that, now it's more the complete seat and where we have to continue the ramp up. It is two, I would say, different trends, huh? The ramp up, which is, if you remember, was postponed because usually it was forecasted, and this was a problem also, that this program should have started in H2 2020. There were different postponement and different as well, we say, erratic things because this program was stopped in June in order that the customer will upgrade his parts. Whatever. Today, early October, 200, I will say cars per day, currently upgraded to 200 to 250, 300. Normally, end of the year, it will be close to 400. I will say the customer forecast a further step up for the summer. Not confirmed, but it could happen, because it is a very flagship car. The story is clearly how to secure, that means how to recruit the people, to train the people, to make the people loyal, to eliminate all the variabilities, or reduce the variabilities, and of course, to secure the ramp up. We have made some good step forwards. We have still to secure the ramp up between, I will say 250-450, I will say end of December. How we think that we are securing, we have recruited a lot of people, we have sent a lot of people. We hope that the people will be surprised to stay for the non-American. As you have understood, a lot of people are coming from the different plants, including Europe. It is a way to be sure that we will have the right people to address the problem. Until mid-October, it was impossible to send anybody to the States, which was. I don't want to look for, I will say, excuse for the problem, but until mid-October, it was impossible for the group to support this U.S. activity. Okay. Can I do two follow-up, please, Michel? Usually, frames are done more in local countries and next to the plant. Why in this case have you decided to do the frames next to the other plant? Second, is there going to be another client or program for these two factories? I think I can say that it was a mistake. It was due to the Trump decision about tax. To avoid, I will say, taxation, et cetera. We think that it was a mistake and what I can say today. Frames have the vocation to be made in Mexico, and we are currently building a new plant in Monterrey for frames. Mexico. Thank you. Thank you. The next question comes from the line of Tom Narayan of RBC. Please ask your question. Hi, Michel. Yes, Tom Narayan with RBC. Good morning. Morning. Thanks for taking the questions. Could you? I know you probably can't quantify each of the three factors or maybe you can. There are a lot of numbers in there. Just curious in terms of the three factors, in terms of order of magnitude of their impact on operating income margin, the guidance change, you know, which have the biggest impact and smallest impact and, you know, any kind of order of magnitude there. Then just to confirm, it sounds like, you know, as Thomas was saying, the first two are just macro stuff that everybody is impacted by, the auto production and stop and go. Then Seating, you're saying this is gonna be resolved by year-end. Any visibility on those first two kind of market forces, as far as how long they could persist or is it just, you know, a function of macro, you know, COVID, you know, OEM decision-making that we can't really predict? Thanks. Thank you for your question. It's not an easy one, Tom, huh? Yeah. Because you're very right. We decided to make this profit warning late Thursday. Why late Thursday? Because I have the forecast. We have a weekly forecast. I was seeing the different risk factors. Unfortunately, we have only risk. What I will mention as figures is not sure. We are speaking of risk. Risk on the sales, no comment. You understand, we on one side, we have a good and positive trend in November. EDIs are good. But on the other side, what our logistic guys say, we have no clue that we will not have some early closure in the fourth week of December. So what can we do? What can we anticipate? Things are going better. That is what I want to mention. We have risk on Highland Park because of course, we are creating. We cannot be sure that things will be as smooth as we would like. In many respects to this new COVID situation. We have big, as you know, customer discussion around stop and go, et cetera, and inflation. Everything is not automatic, so we have a risk. I have a lot of risk in this, I would say guidance. At least the announcement of the variant was not there to help us. On opportunities. You understand my answer? Yeah, my answer. Yeah. Yeah. We have a board which was convened Friday, not for that, to be clear, not for that. We have a choice to make with Patrick, and we decided with respect to all the risk factors to make this profit warning because we consider that we cannot take a too high risk to say something mid-December. I insist, things will happen. Seeing that what we have seen so far is more or less EUR 200 million on sales, EUR 50 million of profit. On Highland Park, EUR 20 million additional, which means that we will be over EUR 60 million, I will say, with respect to our budget. And here we have a big uncertainty with these negotiations with our customer on the penalties. Last, I will say penalties, the stop and go, as I mentioned, is minimum EUR 20 million and very difficult to be compensated by customers. What we are doing currently, we are adjusting our capacity to 80% of the volume. When volumes will be back, then we'll have a nice negotiation because with customer. Sorry to say that, but one moment, it's contractual. Big factor of risk, difficult to say what we will be able to compensate, not compensate. Sorry for that, and it is why we are going to you, and I apologize again. For the big trend, semiconductors, no commitment from the suppliers currently. As you know, we are buying directly. They have a limited view. Why? Because, as I say, the market, the car automotive market will double next year. You understand why. All the industries are doing the same. Their volumes is what they can, I will say, forecast. They have no help from the customers. They are ramping up CapEx. That's true. It is why currently we see a better trend. We see even some restocking in some industries like consumer electronics. We see some, I would say, restocking probably in China. We can be more positive, but not clear when we will see the real impact of automotive. It is why we prefer to say that there will be two quarters still at the level of the last one, and probably the second half will be much better due to the big extension of capacity on one end, and probably as well to the optimization of the, of the use of semiconductors by the different customers. It is our view. My conviction is that demand is there. Inventories are very low, probably, if I listen to some consultants who are speaking of 4 million-5 million cars missing. On top of that, you have the waiting time. If it is true that waiting time has increased by some months, insist on some months, one month is minimum 6 million cars. We can say that before going back to a normal level, I will say, of production, 10 million must be clean. It is why no problem on the demand, on the demand side. The clear problem remains the availability of components, semiconductors, et cetera. As you have understood, we will be cautious on the first half, much more optimistic on the second half. I see. Thank you very much. Thank you. If I could just do a quick follow-up just to confirm, did you say on the U.S. Greenfield Seating program that there may be a penalty that you would have to pay? Did I hear that right? Or did I just not hear that right to the OEM? No. We have made some incomplete. I don't think that the customers have lost cars, because they have stopped different times, so they have not lost cars, but we have made some incompletes. If you know that, every time you make an incomplete, you have some penalties, contractual. Okay. It is something that we have to negotiate, because it's normally not the price of a lost car, but the price of an incomplete, which means some hours lost by the customer. It's not at all the same value, but of course, this is a part of the uncertainty. Yeah. Okay. Thank you. Thank you. Just as a reminder, it's star and one if you wish to ask a question. That's star and one to ask a question. Your next question comes from the line of Christoph Laskawi of Deutsche Bank. Please ask your question. Hey, good morning. It's Christoph from Deutsche. Hey. Thank you for taking my question. Most of the stuff has actually been asked, so it's more follow-up on a comment that you made on the uncertainty on week three in December. Would you say that mostly for- The two customers you already mentioned in your remarks. Second question will be: Do you fear a delayed start in January as well? Or is that currently not really a concern that you have? Thank you. Thank you. Thank you, Christoph. There are two questions. Some customers are closing earlier, and some customers, mainly the German, are restarting later. It's normal in Germany that the first week of January is not work. It's not something new? This will very probably happen this year again. January is one of the lowest months of the year due to that. This I will not comment per customer. We said today we are seeing, I will say AGIs coming back to its normal level. The topic was the same in September, so I don't want to be too optimistic. Probably the semiconductor crisis is smoothing, but it is too early to be positive on that. Second, we don't know what are the decisions of customers. I insist this is a risk, not more than a risk. Sure. Understood. I was also more referring to delayed start versus the usual that you know from the customers, being well aware that, especially in Southern Germany, the plants start very late. Doesn't seem to be a discussion that you have currently. No, we're so sorry for that. We have no discussion with customers. We are informed by them. Usually, we were informed with two months' notice. Two months, two weeks' notice. We have seen in September, October, one-day notice. Even in one case I was mentioning, it was one hour notice. So, we are, I would say, puzzled by the difficulty of our customers to forecast and to run the production. It is the first time in the industry that we are seeing this combination of complete loss, I will say, of control and big variability. In second, you have a big drop of production and a big inflation of material. Usually it was the opposite. Today, we are, as our peers, penalized by everything. It is why 2021 is a very special year. What I would like to mention is that with -20%, which was a kind of break-even in the past, for Faurecia, we are still able to make, I will say, a reasonable profitability. This is showing as well the big step forward we have done. Again, I apologize for this correction because we should have been probably more conservative late September. Thank you. Thank you. Your next question comes from the line of Edoardo Spina of HSBC. Please ask your question. Good morning. Yes, it's Edoardo Spina. Morning. From HSBC. Morning, Edoardo. Hi, Michel. I have a couple of questions. The first is about how these disruptions in light vehicle production are affecting the integration with HELLA, and in particular, on the microchip bottlenecks. Is there a specific impact that you are seeing for Clarion and HELLA Electronics integration? Secondly, on the CapEx and working capital, of course you have specific synergies on that. Due to the changes in the investment plans, do you foresee changes to the synergies on the free cash flow side? Very finally, is there a silver lining in this situation? The profit warnings affecting the auto suppliers, some people would assume that the share price of the auto suppliers may suffer as a consequence. Is that something that you can see as a positive, you know, in one way? Because I wanted to ask if you are still interested in taking higher share in HELLA. Thank you. Thank you, Edoardo. As you know, we are still in the period of antitrust, so I cannot comment on HELLA. Secondly, I don't know, moreover, I have no information about the trend of sales and the profitability, whatever. Sorry for that, but I am restricted until the closing. Second, about your questions about integration. What we are doing is to prepare the integration, to prepare the organization, to prepare to work on the synergies. So of course, this has no impact, because as we have said, we are working on the synergies on the basis of our business plan, mainly 2023. On CapEx side, of course, we are cutting CapEx. If I take, and I am convinced moreover, 2023 will have very big volumes. We need to be prepared anyway to these volumes. We have to cut CapEx, but we have to be smart. Same thing for the cost. My conviction is that we will face next year the same situation as that year. That means in one month, 20%+, for example, in the summer, 20%+ volumes. It could be a further step in 2023. We have to be prepared on one side to be as lean as possible, but to be prepared to make, I will say this, a big ramp-up of production. For the share price, HELLA is done. We have made a tender offer. We have today 79.5%. We have such a chance that we have bought the rest. It's done. HELLA, no use for ourselves. I don't know how the market will react, but of course it is a normal reaction. I cannot comment on the reaction respect to Faurecia. The only thing I can tell you is that we are working and we will significantly improve our figures next year and the year after. Okay. Thank you very much. Sorry, a very, very quick follow-up on this HELLA point. Thanks a lot for your feedback, as well. I just want to ask if you can share with us then whether you could buy more shares in HELLA if you wanted to at the moment. I know that you don't have to say whether you will, but if you can share whether you could or you can't. Thank you. I can buy shares, but we say I am restricted because if I buy shares above 60, I have to pay everybody above 60. Clearly, I am restricted, so we know no use to do it. Understood. Thank you very much. Thank you. Your next question comes from Martino De Ambroggi of Equita. Please ask your question. Good morning, Michel. Morning, Martino. The first is a follow-up on the free cash flow guidance, because you mentioned CapEx are going to be reduced, but what's the amount? At the same time, you said we cannot slow down too much because we need to be prepared for the recovery of the market. If you can, I don't know if you can elaborate something on next year guidance and on this year. In your initial remarks, you mentioned something about factoring. Sorry, but I miss it. Just to understand if it's always at the same level, so it's not impacting the free cash flow. The second question is, I clearly understand that you do not provide any guidance for next year, but if I take the second half of this year, you are generating a return on sales roughly 4.5%, let's say 5%. If you project a similar market volumes for first half next year, should we take this range as, let's say, indication for the first half next year, expecting a recovery in the second half? Maybe there is something different. Thank you. Thank you. Thank you, Martino. Yeah. First question, sorry, was? CapEx. CapEx. The quantification of CapEx. Yeah, CapEx. Now, we are in the second part of November, so of course we cannot adjust a lot the CapEx. It was already done. We are adjusting the final EUR 10 million, but I will say anyway, the fact to be below EUR 500 million, where I was giving at the beginning of the year a figure much higher, is I will say the progressive restrictions we have put on CapEx. Next year, we will be probably at EUR 550 million, not more, respect to the context, and we will accelerate in 2023. For the second one, which was, sorry. Factoring. Yeah, yeah. I will say it's a little provocative, Martino, because we have a big, I will say, shock with Highland Park. Of course, sorry, I have some difficulty breathing, but Highland Park, the cost is something like 100 basis points on the second half, so we hope to have eliminated almost a big part of it. It is why I expect from Highland Park a significant improvement. Okay. Factoring, sorry, I missed. Sorry? On factoring that I missed your initial remarks on factoring. No factoring, it was a risk. That means that, respect to December, et cetera, we do know that we have EUR 1 billion of factoring receivables. If November is okay, but if December is lower than expected, I will have, of course, less, lower factoring, and this will have an impact as well on the net cash flow. It was Okay. It is a further risk. My problem is I have only risk currently. I have no opportunities with respect to this current situation. I have factored this risk in my guidance. Okay. Thank you, Michel. Thank you. Your final question comes from the line of Michael Foundoukidis of ODDO. Please ask your question. Hello, Michael. Yes. Hi, Michel. A couple of questions. First one, on the supply issues, and you just said to Martino that you would expect a significant improvement next year. Any chance you would quantify a bit the headwind that we should have in mind for next year, if there's any? Uh- That's the first question. No, no, you're very right, Michael. Of course, things will not change completely the night of the thirty-first of December. That is an expression that I like to use, because everything in industry is always how you build, we say improvement, profitability, et cetera. We will be still in a loss in the first quarter. Second quarter will be normally breakeven, and second half in positive, and the full year slightly positive. It is our budget and what we expect as an improvement. I will not completely eliminate the EUR 60 million plus between H2 that this year and H1 we say next year. Clearly a big part, very big part, should be eliminated. This will contribute to, I don't know, 60-70 basis point improvement from one semester to another. Okay, thanks. More largely, do you see any other red flag or any risk in the next 12, 18 months regarding new SOPs or launch? Would it be in the U.S. or elsewhere at Faurecia? A big launch like this one, no, because this one was two new activities in Detroit which is not, I would say. As a big risk we have not identified. The main risk we have identified is a number, the big number of startup of production in Clarion. While knowing that a part is up today, with a touch wood, no big impact, and second part will be in the first half. It is here, this I will say at Clarion, that we will have the measure with the challenges. If I could continue on this side, probably in electronics, both in HELLA and here I can comment because HELLA you know that they will almost double the electronics activity. Same thing for Clarion. It is in the electronics field that we will have the biggest challenge on the SOP due to the numerous, I will say projects, and key projects that we will launch. Okay, thanks. One last one regarding 2022, and I even understand that you will not give guidance, but what should we assume in terms of operating leverage? Is it normal or given the inflation headwinds that you may have, which would be higher than usual, we should take into account a lower operating leverage than usual at Faurecia. I cannot escape on the inflation. Probably inflation will be over 50 basis points. You, on one side on to the pass-through of raw materials, you know that we have passing through more than 80%, but small part is remaining. We have some inflation on transport, energy, difficult to pass through with customers. On the other hand, what I see is the only good news, it is that steel prices and oil prices are coming back. If it is confirmed, this will give us, I will say, some fresh air. I don't want to anticipate too much, but I will say that inflation will have an impact. I should prefer that you will take, I will say, 40%-50%, 15%, 15%. Okay, thank you very much. Very clear. Thank you. There are no further questions coming through on the line, sir. Please continue. Firstly, thank you. Again, I apologize. We have though I will say normally no opportunity to meet except some conference, and so the next rendezvous is the full year results in February. Thank you and have a good day. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.