Stellantis N.V.

Good afternoon and good evening.

Hello and welcome to Stellantis first half 2022 results. I'll now hand over to our host Andrea Bandinelli, Head of Investor Relations, to begin today's conference. Thank you.

Hello everyone joining us today as we review Stellantis' first half 2022 results. Earlier today the presentation material for this call as well the related press release was posted under the investor section of the Stellantis Group website. Today, our call is hosted by Carlos Tavares, the company's chief executive officer, and Richard Palmer, the company's chief financial officer. After both Mr. Tavares and Mr. Palmer present, they will be available to answer questions. Before we begin, I want to point out that any forward-looking statement we might make during today's call are subject to the risk and Thank you very much.

Thank you, good morning, good afternoon, good evening to all of you. Welcome to this 2022 H1 Stellantis Financial Results Announcement Session. We know that you are busy people and therefore we value our time and we thank you for your interest in Stellantis. Let's get started then. It is an understatement to say that the automotive industry has been operating in a chaotic environment for some years now. But we should say today that we are moving from a chaotic world to a fragmented, if not a wild world. In this context, the most important thing I would like to do this afternoon, before we look at any single number, is to express my sincere appreciation, my warm thanks to all and each employee of Stellantis. I would like to extend that appreciation to our union partners, to our management team The record results that we are presenting this afternoon represent their work and their success. Therefore, I would like to express to all of them again my warm congratulations, my warm thanks. They have done a stellar job in a very wild, fragmented and chaotic environment. This is demonstrating that Stellantis is resilient, all-weather electrified tech automotive company. Let's start now with some of the numbers that we are going to comment to you with Richard, our CFO. First of all, a record operating income margin of 14.1%, with five regions posting double-digit margins. which demonstrates that the full business footprint of the company is now sound and highly profitable generating 5.3 billion euros of positive industrial free cash flow which includes no less than 3.1 billion euros of net cash synergies which is to say that we are well in advance on our committed plan in terms of delivering the synergies that have been committed when we made the merger between FCA and PSA. More important, we are now demonstrating that our electrification strategy that was presented to you in July 2021 is delivering very strong results. All over the world, our BV sales rate is now growing significantly. The growth rate of our BV sales is now nearly 50% year over year. 50% BV sales growth rate is demonstrating that our electrification strategy is working. As the example of Europe is showing, we are now breathing in the neck of our most respected competitors. We are head-on fighting for the top spot in terms of BEV sales in the European market, demonstrating that our products are competitive, and many more. We are also the number three in the U.S. for the LEV sales and you will soon see in the U.S. the same success as the one we can demonstrate to you today for the European market. We are also very proud to continue to lead the commercial vehicle market. We lead by far almost 15 points of gap in market share in Europe with 33%. and in Latin America with 30.7% market share. More importantly, when we have 33%, Thank you very much. We are now strengthening our lithium supply as we understand we need to control and we want to control our supply chain in a deeper way learning from the disruptions that we have been victim of and we have increased our shareholding in Vulcan to make sure that our lithium is strengthened if not secured. We will continue to take strategic decisions on this matter and you will know more of that very very soon. Last but not least We have now completed the ShareNow acquisition that was completed in July. We are now the number one mobility service provider in Europe with Free2Move, which is now controlling ShareNow. And we enter now live in the turnaround of this loss-making entity. to continue to be a strong leader with approximately 50% market share making black numbers in terms of profitability. Those are some of the highlights I would like to share with you. If we move now to the regions it is fair to start with the most profitable region of Stellantis which is North America. North America delivered a record profitability with 18.1% Thank you very much. So profit up, market share up, which is a very clear demonstration of value creation. Great job done in North America with an increase in the average transaction price, which is now the highest among our peers in terms of driving the net revenue up. We also have a very good result in LEV sales. We are number three in the U.S. and Grand Cherokee PHEV version is now going to help us to expand this performance across the North American markets as we are launching this new product. The all new Wagoneer and Grand Wagoneer are also now being delivered by the end of this year and they will continue to help us to expand our profitable business in a wide level segment. If we continue, we also concluded that we would introduce in Canada, in the Windsor Assembly Plant, our first applications of the Stellar Large Platform, and this will happen from 2024. As you know, Stellar Large Platform is one of our four BEV-dedicated platforms. It has been engineered in North America, specifically in Auburn Hills. A great job that is being done right now by our engineers with a very competitive platform to take a strong position in the North American electrified market. That's for North America. Let's move now to Europe. In Europe, we are taking off on the BEV sales, as I explained to you. Our market share in the LEV market is 19.2%, getting very, very close from our total market share in Europe, which is 21.2%. Our clear goal is to have an LEV market share that is as soon as possible above the total market share that we have in this market. And as I was explaining to you, in terms of pure BEV sales, we are now in the leading pack, a few thousands away from the number one competitor and competing with that number one competitor for the top spot. We have done this job while improving our profitability as we have now an AOI margin of 10.4% which compares to last year's margin of 9.2%. So profitability is improved in Europe and electrified sales are taking off with an improved market share on LEV sales at 19.2%. We have some very good examples that demonstrate the competitiveness, the appeal, and the wide acceptance of our products. We see that the Fiat 500e is the number one BV selling car in Italy, and you would say that's normal. but you would perhaps not anticipate the fact that the Fiat 500e is number one BEV sales in Germany also and this is demonstrating the competitiveness of this product. At the same time our electric version of the Peugeot 208 is also the number one in France so this again demonstrates that our EV technology is totally competitive. In the European market we have five vehicles among the top 10 selling vehicles in the market which demonstrates again the competitiveness of our brands, the competitiveness of our technology and the appealing of our models. We have the Peugeot 208, the Opel Corsa, the Citroën C3, the Fiat Panda and the Fiat 500 within the top 10 selling models in Europe. Last but not least, we continuously improve The technology that we have developed and we will soon introduce by the end of this year in our plants and by the beginning of next year in our showrooms are B segment hatchbacks and SUVs with a larger range above 400 kilometers WLTP. which then will demonstrate the full competitiveness of our technology. This continuous improvement will continue to improve the acceptance of our models in this future great technology and we see that this is now working and this is perhaps the major message for today is that we have all over the world a 50% growth rate on BEV cells which I think is one of the best if not the best among our peers. And we see that the European market performance is now demonstrating the competitiveness of our technology. Let's move from Europe to the rest of the world to express the fact that we have a very strong profitability on all of our what we call the overseas regions. Starting with Middle East and Africa, again a strong improvement on profitability at 15.5% of the UAE margin, up against last year significantly, and we have at the same time an improvement of market share all over the region by 0.2 points, with a leading position in Algeria, in Egypt, in France, French overseas territories and in Turkey. It's important that we recognize that profit up, market share up means value creation with a significant leading position in some key markets in this region. So big potential to continue to grow in this region. In South America, same thing, strong leadership in the region in some very important markets like Argentina, Brazil and Chile. The Stellantis Group is leading the pack and the Fiat brand is leading the brands. So we are number one in all those metrics, most probably also number one in terms of profitability with no less than 13.9% of AOA margin. And as you can see, Jeep is the number one selling SUV brand in Brazil and Fiat is the number one selling brand all over the region. So a very strong performance with no less overall than 23.5% market share in the region. So strong leadership in South America and strong profitability significantly improved. On the first six months in South America, we have delivered more profit than in the full year of 2021, which is an amazing result and congratulations to our Latin American teammates. Then in Asia, China and in the Asia Pacific, also a very strong profitability with 13.4%. and some very exciting new events that are linked to the launch of the Citroën C3 and the launch of the Jeep Meridian model in India. We are now leveraging the monozukuri footprint that we have in this big market and we believe that we have the right products and the right setup to generate profitable growth in India. It's starting now. as we are shipping our Citroën C3 to the dealerships right now. So it's a very nice cornerstone for our business development. In China, we recognize that the binding MOU that we had with our partner GAC could not be implemented by our partner, which then means that trust is not there, and we decided to unwind that JV, which was a loss-making JV, and therefore we are fixing the red ink and we are moving forward with a very significant change in our strategy which comes with the asset light strategy that was presented to you back in March when we presented the Therefore 2030 plan and we now focus on CBU sales, highly profitable We cleaned the red ink and we just recognized that the binding MOU that have been signed by our partner was not implemented as it was committed and therefore we take the conclusion from that event in a calm orderly but clear way. We go CBU with the national sales company and we are going to make our profit out of the very profitable CBU sales with Jeep, Alfa Romeo and other brands. This is what we can say about the overseas regions. Let's now look at the brands, starting with Jeep, global SUV brand of Stellantis. We have a very strong success with Jeep on the deployment of the 4xe PHEV technology. From next year, early 2023, Jeep goes electric. and purely electric. It will start next year from Europe, early 2023. And this is going to be a cornerstone as Jeep is the global number one electrified brand in the market. We start now and this is going to be a cornerstone and some very interesting prospects for the future. The pricing is fine. Wrangler is still the number one selling PHEV in the U.S., which says a lot about the competitiveness of the 4xe technology. Compass and Renegade are number one and number two selling LEVs in Italy which is showing that this Jeep brand positioning is outstanding and accepted all over the world. The Grand Cherokee is doing fine with a significant global sales performance, the best since and we see also that the Gladiator is now being expanded globally, finding new areas for profitable growth in Brazil, China, Japan and South Africa. So great achievement also in profit for Jeep, one of the big pillars of the profitability of the company. Jeep now going electric means we have the brand, the global SUV brand that will be the number one in pure EVs very soon and it will start next year. If we move to the other American brands, we can see that Chrysler is a very strong number two selling PHEV in the US. Pricing power is fine. We have now finalized the concept that will represent the rebound of the Chrysler brand. The concept in terms of design and positioning is now decided. We move into the execution of this new concept, which is inspired by our Chrysler airflow graphite concept. We move from there and we are now ready for preparing the final step of the rebound of this American brand. RAM is a big success with the highest U.S. average transaction price for the RAM 1500. Thank you very much. Thank you very much. and we will soon adjust the capacity to meet that demand and make sure that we can grow profitably this very important business for RAM. Great results from RAM and congratulations to the US teams on that matter. If we look at Dodge, Dodge continues to be a very strong niche Brand, best ever U.S. average transaction prices for Challenger and Charger, very profitable, fine on the pricing power, and record Challenger and Charger share. with a US full-size sedan segment share of 52.9%. So a very nice niche business that is now being prepared for full electrification with some amazing innovations that will bring even more passion from the fans of this brand in the near future. Let's move now to the upper mainstream brands. And we can see that the electrification is now gaining momentum with those brands. Opel is delivering fantastic results with the Opel Corsa being the number one selling car in Germany for the B segment. But overall, the best-selling car in the UK, which means that the Opel Corsa, the first car that was launched after the acquisition of Opel-Vauxhall company from GM, is now a big success. We see that the BEV sales of Opel are up 52%. Thank you very much. and we see that this is going to be also a very important profitable pillar for the brand. We will launch next year the BV version after we launch the PHEV one very soon. On the Peugeot side, Peugeot 208 is the number one selling vehicle in the European market which is absolutely a rewarding performance for the Peugeot team and congratulations to the team. We are with Peugeot the number one LEV brand in France. It's important and Peugeot is the number one brand in France for each one. So Peugeot is taking a leading position not only on LEV in France but also as a brand and as a model with the 208 all over the European market which is a significant achievement. The market share is up in South America. The pricing power is just fine. And we just unveiled the all-new 408. This is a new concept, somewhere in between a sedan and a crossover, which will start deliveries late 2022. So as you see, Peugeot has the strongest. model brand portfolio in Europe, significant potential to grow and significant potential to lead in the pure BEV sales as we have many models which are now going to be purely EVs in this brand. Let me now move to the core brands with the affordable and aspirational brands. Let me start with Citroën with a market share up in South America. We see that The new C3 production has now started in India and Brazil, which is a very important step in the right direction to support affordable mobility for the middle classes of the world. and with this product we believe that we have a very nice proposal in a world that possibly will see an economic slowdown in the near future. This product will bring a lot of performance, a lot of functionalities for a very reasonable price and production has now started from India and from Brazil, which means we are in the right path on the right timing to address the mobility needs of the middle classes. The pricing power is fine and the electric version of the Citroën C4 is demonstrating its full potential by being the number three selling C-hatch BEV in Europe, which then again means that we see that our technology and our iconic brands are doing the job. On the Fiat side, it's even more exciting. Fiat is the market leader in Brazil, market leader in Italy, market leader in Turkey, the number one brand in Latin America. We see that the brand has a lot of potential and we can continue to unleash the potential of the brand. As I said, the Fiat 500e is the number one BEV selling car in Germany and in Italy. The pricing power is fine. The Strada is number one in Brazil. The Kronos is number one in Argentina. So a lot of potential coming. We will have next year two new Fiat products to unveil. And that means that the product planning of Fiat is now on the way. We have put the right resources with the right passion and the right rigor in terms of executing high quality affordable fiats. It's going to represent the right offer in many markets starting with Europe on the right timing as we see some clouds coming on the overall economic context. So that's for the core brands. Let me now go for the commercial vehicles. As you see, we are leading in Europe and South America with respectively 32.2% market share and 30.7% market share. In the BEV sales, we have a 50%, nearly 50% market share in Europe, which again means that we are dominating the BEV, LCV market in this region. We have done the best ever market share in Middle East and Africa. There is a significant potential to grow LCV share, profitable share in this region and I should add also in Latin America. Ram is doing a stellar job with a record H1 Ram brand sales outside North America, which means the Ram brand and our pickup trucks have a huge acceptance We have signed a partnership with Engie, a French energy company to demonstrate that we can sell fuel cell vans as you know our mid-size van has a fuel cell version as much as a EV version and we can sell those fuel cell versions in combination with charging stations to demonstrate how convenient a fuel cell van usage can be and we are doing this in partnership with N.V. I think it's a very nice way to demonstrate to corporations that they can have a fuel cell We are also accelerating our synergies by bringing the Fiat LCVs to the same platforms as the rest of 70s, much more profitable than in the past, with the right quality and high functionality, so giving Fiat even more power to progress in our different markets. If we move to the premium, the best way to express is that we are gaining momentum. Comparing the Stellantis group to other groups, we see that the potential to increase the share of profitable net revenues of the premium brands against the total of the company, that potential is very big. and I would like to start by emphasizing a very simple fact. Even before we launched successfully the new Tonale, the new Alfa Romeo Tonale, the turnaround of the Alfa Romeo business model was completed, concluded, and we have now in Alfa Romeo a very profitable brand with per unit margins which are exactly the ones we expect from a premium brand. So the turnaround of Alfa Romeo in terms of profitability is now achieved and the job has been done even before we launched the Tonale. So the Tonale is going to come on top of a highly profitable business model as it should be for a premium brand and we are now going to grow the brand from there by electrifying all the Alfa Romeo models to come and as you see we have a 100% BV portfolio from 2027. We are putting the best of our technology in this iconic brand and we are very confident that the profitable growth as a premium brand the unique Stellantis premium brand present all over the world, present in the US, present in Europe and present in China will continue to deliver its full potential. Lancia is now preparing for its own future, still fantastic sales performance with the Epsilon, which is the number one selling vehicle in Italy for the B segment. and that's a remarkable sales performance. Pricing power is demonstrating that we have a lot of potential to improve. We will be electrified from 2024 as we launch the next model for the rebound of Lancia. It is already decided. It has been frozen in terms of design. It's under execution for the engineering and for the manufacturing and it's going to be, I believe, a very big success. DS is also DS Automobile, a big success, as we have not only market share growth, per unit margin growth, total profitability growth. So market share up, total profit up, per unit margins up, perfect description of value creations. We are moving to full electric. We already have a very strong market share in the PHEV and the LEV world. The LEV sales mix is above 30%. We are growing fast in electrification. We are protecting the profitability and we see that we are creating real value with this unique, sophisticated premium French brand. Let's now move to luxury, last but not least, our fantastic Maserati brand with a strong brand equity. The AOI margin is growing by the day. We could bring it to 6.6% on H1. There is much more potential than this. We believe that ultimately Maserati should be and will be somewhere between 15% and 20% AOI margin. That's the potential. The market share is up, except in China with the lockdown impact, but it's up all over the world. We see the pricing power is just fine against the benchmark. The new MC20 Cielo does not need any comment. Just enjoy the fantastic, appealing model that you have on the screen. The all-new Grey Cali was finally launched after we postponed the launch until we are sure that the quality was meeting our very demanding standards. It has been done successfully. The cars are now in the dealerships and the profitability is coming because the car is highly profitable and will contribute to delivering, hopefully this year, a double-digit AOI margin for this brand. We are also bringing back Maserati to its motorsports roots. Not only next year, Maserati will be attending the Formula E electric single-seater worldwide championship as a brand, but we will also bring back Maserati to the GT world with the GT2 racing version of MC20 that will attend the relevant championships, mostly European. So we bring back Maserati to its iconic motorsports roots. and we support the profitable growth of this fantastic brand while we put a very significant pressure on quality. Quality comes always first all over Stellantis and specifically in Maserati. Let me now move to the affiliates. A very big profitable business growing by the day. We are on track to deliver our U.S. captive Finco. That is going to be a very important tool for our profitable development in the U.S. market. We are on track. Our pure dedicated leaser is also on track to be live next year. We are already number one in France with free-to-move leases and number one in Italy with leases. but we want ultimately to become the number one in Europe and then we will go live with a dedicated organization by next year. The profitability on sales finance is quite stellar and hopefully on track to beat record profitability in 2022. Circular economy business model has been set. The leadership team is in place. We see growth on the remand parts. We continue to make acquisitions on dedicated companies for the reconditioning of used vehicles. And we will soon, most probably in September, announce where we are going to position our European circular economy hub. and then we'll make the same decision for North America and communicate it to you. On the P1 vehicles, business model is very solid, significant profit. Our affiliate Aramis is still growing profitably with the acquisition of online cars. We continue to grasp opportunities here in Austrian market leader that we could control to refurbish used vehicles. So this is a very exciting growing and profitably growing affiliate. We also have the opportunity to expand our pre-owned vehicle dedicated brand called Spoticar and step by step we are deploying that unique brand across the regions and across the different brands of Stellantis. Let me now conclude this part by sharing with you an overview on one single slide of our electrification strategy. I just have to remind you that our global BV cells were up nearly 50% on H1, so we are growing fast on the BV cells. Absolutely in line with what we presented to you back in July 2021. We are breathing in the neck of our biggest competitor on the BV sales in Europe by a few thousands in the European market. We are breathing in their neck. It's going to be an exciting race. and we are number three in U.S. for the LEV cells and we will continue to expand as fast as we can our 4xE technology for Jeep. We will introduce next year the ProMaster EV and then from 2024 our stellar large electrified platform that will support many many new models in the U.S. market. I would like just to tell you that As I speak, Stellantis has 20 BV models on sale, and by the end of 24, we will have no less than 48 models, BEV models on sale. That means half of the total model portfolio of the company. So we are on our way and we are on the right pace as it has been committed on the Therefore 2030 plan. You see the different components of this strategy. The five gigafactories have been confirmed, two in Europe, One in France, one in Germany, one in Italy, which is three, sorry, not two, but three in Europe. One in France, one in Germany, one in Italy. Two in North America, one with Samsung and the other with LG. LG in Canada and Samsung in the U.S. And also we are now starting a very impressive manufacturing of electric motors in France with our e-motor JV. We are now also strengthening our supply of raw materials starting with lithium but we will take care of a few other materials very soon and make the appropriate announcements. We have also electrified our dual-clutch transmissions which will start in production for next year to support I would say the middle-class affordable vehicles on mild hybrids that will come to the market by early next year. So all of this is just demonstrating that our electrification strategy is now delivering results and we are very impatient to unleash the full potential of the company in terms of electrified technology in other markets than just European one starting with the US. From here I would like to hand over to our CFO Richard Palmer for the detailed financial results. Richard, the floor is yours.

Thank you very much, Carlos. Good day to everybody. So moving forward, just the usual highlight on presentation where we're still comparing the 22 numbers to a 21 pro forma. Thank you very much. That is split between 12% down in Q1 and 3% down in Q2, so we're seeing some improvement in the trend. The result of that is that our net revenues for the half, despite the minus 7% on shipments, was a plus 17% improvement to $88 billion. and that commercial and mixed performance on revenues drove the adjusted operating income up 44%. That also clearly translated into a very strong performance on industrial free cash flows as mentioned to plus 5.3 billion and that took our industrial available liquidity Thank you for watching. Thank you for watching. They were restructuring charges for 0.8 billion, campaign costs for the extension of the campaign on Takata airbags into some new geographies and that should be a completion of that activity and that was for 0.6 billion. and then an adjustment to the CAFE penalty rates for our U.S. business following the new regulations during H1 which were finalized and that amounted to 0.7 billion for the half. Our net financial expenses were up 200 million and driven by the macro environment due to hyperinflation in Turkey and hedging and devaluation costs in Argentina and then in the equity method, InvestEase Profit, despite a strong performance from the Fincos as mentioned, we had a negative impact of just short of 0.3 billion for the impairment of the equity and shareholder loans that we had outstanding with our Gax Delantis JV following the announcements we made recently. and then lastly our tax rate slightly down from 24% last time to 20% this time due to the non-repeat of deferred tax asset adjustments as a result of the merger in H1 last year. So the result of all of those items took us to a net profit for H1 of $8 billion up 34% compared to last year. Moving to page 20. you can see it here the walk across from net revenues 21 to net revenues 22 up 17% as I mentioned earlier to 88 billion and you can see the volume and market mix was negative for 2 billion as a result of the 7% reduction in shipments but that was more than offset by 8.8 billion of positive impact from net price and content and vehicle line mix for a total amount of about 12% of revenues, which drove the growth for the half, plus a positive impact of FX translation, principally due to the U.S. dollar strengthening against the euro in Q2 for 4.6 million. And then the other items is mainly driven by a reduction in sales with buybacks in our European region to fleet customers, driving the 1.3 billion there. So a very strong Thank you very much. and 0.7 billion of vehicle line mix and that more than offset the negative impact on industrial costs driven mainly by raw material inflation and other inflation, offsetting some productivity and synergy savings for minus 3.8 billion in total impact. We had a positive impact on SG&A which was largely due to synergy activities in our structural costs for positive 0.5 billion and then you can see on the far right Thank you very much. and many, many more. to the regions we can start with North America so as mentioned 18.1% margins accounting for around 60% of our group AOI. We were up in terms of shipments in North America which was less affected by semiconductor constraints. and also benefited from the launches of the new Wagoneer, Grand Wagoneer, and refreshes of Jeep Compass and the new Grand Cherokee L as well. So strong demand, up 10% in terms of shipments. This drove, together with strong pricing and vehicle line mix, our net revenues up 31%. and our AOI up to $7.7 billion, up 47%. Again, on the walk-across you can see it's the same story as for the group, driven by strong price and strong mix. Offset by raw materials impacts and some positive synergies in the industrial number but also impacted by inflation on our other cost categories and then you can see the change in dealer stock again which was the mainly impacting North America which basically got us to a flat number in terms of shipments and sales and a 7.7 billion performance for AOI. Next page, page 23, you can see enlarged Europe. Here we hit double-digit margins for the half at 10.4%, up 15%, despite our shipments being down 18% due to unfilled semiconductor orders impacting more the European region. And so we were down 300,000 units from last year. Our revenues despite that were slightly up by 2% and again with positive pricing and mix for around 8% of revenues, offsetting raw materials impacts for 1.2 billion of the 1.5 billion negative industrial costs. We had positive synergies again in SG&A and overall strong performance in terms of sales helped us to offset last year's reduction in inventory and get us to 10.4% margins for the half. Moving to Middle East and Africa on page 24, we can see here a very strong performance in AOI, basically doubling the AOI up 91% to 472 million. Despite the fact that shipments were flat, we had positive impacts in demand with new vehicles like the Grand Cherokee L, the Citroen C4, Opel Mokka. Peugeot 3008 and 208 but they were offset by continued problems with semiconductor orders particularly for the European region from which a number of these vehicles are sourced and that meant that we had a flat shipments performance but revenues were up 19% which was a very strong performance given also the devaluation of the Turkish Lira and the team managed to price for that and also improve the price positions for an overall impact of 700 million euros offsetting the negative impact on exchange on the far right of the walk-across. Moving to page 24, South America. So South America had a threefold increase in its performance in H1, going from 326 million to over 1 billion. And that means that in the first half of the year, our South America business has already exceeded its results for the full year last year. and that was despite shipments being down 5% but we have strong demand from some new products like the Fiat Pulse and the Peugeot 208 and Jeep Compass Refresh and those allowed us to increase our revenues through strong pricing and mix of over a billion euros by 47% to 7.2 billion. That offset, again, negative industrial costs because of raw materials inflation for just short of half a billion euros. Moving to the last page on the regions and Maserati. So China and Asia Pacific had some impacts of the lockdowns in China, which impacted the business. Notwithstanding that, we still had shipments were flat at about 62,000 units. Revenues were up 14%, which was a result of strong pricing on Jeep. and mix from a high around 1,500 sales, particularly in India and Asia Pacific. And that allows it to increase the adjusted operating margin by 40%, with margins reaching 13.4% for the half. and then Maserati as mentioned is on the move with margins up to 6.6% from 3.3% last year and that was despite the fact that shipments were slightly down due to shipments to China being down by over 2,000 units offset partially by improved shipments for the newly launching Grecale model.

Moving to

Page 27, you can see our industrial free cash flow, which was up 6.5 billion compared to last year, and was driven largely by the very strong operating performance, where you can see the EBITDA number was at 17.6% margins, and that was up over two points compared to last year. that offset, sorry that was nearly 4 billion higher year over year and that drove the improvement together with slightly lower level of capex and R&D than last year we're at 4.4 billion which was 900 million lower than last year also as a result of the strong synergies for the half which reached 3.1 billion and about 2 billion of that number relates to lower capex and R&D through the synergies achievement. working capital was negative because of lower factoring and higher inventories due to price inflation for raw materials and other components and some higher safety stock also to protect production and then you can see 400 million negative for restructuring cash in the half and financial charges and taxes reached 2 billion higher than last year by 900 million mainly due to timing of of tax payments. Moving to page 28, you can see that our dealer inventory was at 704,000 units at the end of June, which compares to 695,000 at the end of December. So for the half, we're up just 9,000. So going back to the comment on the Delta stock, there was basically no restocking in the half, and that impact on AOI was just a non-repeat of last year's destocking. and within the increase, we had some increase in North America, up 20,000 units, but Europe was down, offsetting most of that. And then moving to page 29, final page from me, in terms of the industry outlook, you can see that we've revised North America and enlarged Europe based on H1 numbers. North America was down 17% for H1, where H1 was a lot stronger last year than the run rate for also H2 of last year so we're basically projecting into the second half a year a similar level of market overall activity and that will mean that we'll have a stable H2 and a total year number of about minus 8% down and this is largely driven by semiconductor availability and lack of visibility to a significant increase in the half. similar logic for enlarged Europe where the first half we were down 20% of which EU30 was down 15% so we expect a stable situation in the second half compared to the first half which means that that number becomes minus 12 for the year so we're looking at a stable second half market outlook and therefore we think based on the very strong H1 performance that we had both in terms of AOI margin and industrial free cash flows that we're confirming our guidance for the full year. And with that I'll hand back to Carlos. Thank you.

Thank you. Thank you, Richard. So as we are finalizing this presentation, what are the takeaways? The takeaways are quite simple. Number one, Stellantis is a resilient all-weather company which is now totally focused on EV leadership. That's the major takeaway. We have three pillars here to support this. First, on any possible metric, Our long-term strategic plan, the Therefore 2030, seems to be the appropriate and relevant plan in the current environment in which we are operating. Therefore, this is the right plan, so we are totally focused in the rigorous execution of this plan. Point number two, our company is profitable. It is a sustainable company. We have committed to you that we would keep the breakeven point below 50%. Actually, with the H1 numbers, the breakeven point of Stellantis is 40%, which means we have a very sound situation. We have a clear strategy. We have iconic brands. We are developing an even more competitive technology, and we are improving by the day, which means we are sustainable. We have a very low breakeven point at 40%. We'll keep it below 50%, and that is going to give us a significant sustainability to face any unpredictable crisis that we would be facing in the near future. We see that we are gaining momentum on the BEV sales business. We see that in Europe we are now in the leading pack. We have some leading models in different markets. We are bringing the EV technology to the U.S. and the U.S. represents for us in terms of developing our EV technologies a very significant profitable opportunity. We see also that through the next few months We are going to have some significant electrification events that will reinforce our EV momentum. As you can see, we already have 20 EVs on sale. By the end of 2024, we'll have 48 BEVs on sale, which means roughly half of our total model portfolio for the company worldwide. That represents a very significant push, a very significant presence that we intend to leverage to improve the earnings of our company. What are the three major events coming up? One for Dodge that will be held in August 16th and 17th. A very important event for the Jeep 4xe day in September which is all about how fast we deploy the 4xe technology not only on PHEV which is ongoing but also the pure EV technology of Jeep which is going to start from next year and Jeep is the most electrified off-road SUV brand in the world. and last but not least we'll have in November a very important RAM event which we call Revolution where you will have the opportunity to see our exciting BV pickup truck and you will be able to appreciate to which extent this pickup truck is competitive as we have been spending hours and days Thank you very much. For the future, we think we have all the right attributes from a sustainability standpoint, from a technology standpoint, and from a passion standpoint to drive Stellantis to a successful outcome. And we consider the unpredictable events and the crisis as opportunities to be even better and of course to keep on being competitive. As you know, our DNA is to be racing. This is our DNA. I would like to stop here and hand over to you for the Q&A. Thank you for your attention.

Thank you. Good afternoon, everybody. My first question goes to Richard. Very simply for the short term, a double-digit margin after having achieved 14 in the first half doesn't seem very challenging. So I would appreciate if you can just give an update on the puts and takes in the second half of the year. I remember from the last earnings call or for the Q1 revenues call, you said basically you think the net Thank you very much. and many more. Would you confirm to us that even in a recession environment, this company will generate a double-digit margin also in 2023, or any other additional color you may have regarding the outlook for next year? Thank you.

Two exciting questions, and as your second question is quite challenging, I will leave the first one to Richard. He will start. That will give me more time to answer to your challenging question later. Richard, please.

Should I pay for time?

No, just the necessary one. We have 30 minutes.

Hi, Patrick. Look, I mean, honestly, the H1 performance was clearly very strong. And, you know, absent any... Thank you very much. Apart from the fact that everyone's working very hard within the business to obviously execute on the top line and continue to make our cost structure more efficient. So there are a lot of moving parts and a lot of activity to get to 14.1%. I think the team will continue to apply itself in the same way. And absent any shocks, I think we have a good chance of having a similar performance in H2.

Thank you Richard. Your second question is really a great one. I think that what your question is demonstrating first is that there is a significant opportunity for investors to consider the fact that currently Stellantis is very cheap. and that is absolutely correct. Given what we have in our plan, given our execution capability, given our focus, given the support that we have from our employees to this merger, which is a very strong bottom-up support, it is fair to say that our market cap is very cheap and that our stock is very cheap. So for investors that would be willing to invest in an all-weather company that has demonstrated the strong resilience that is now demonstrating its strong competitiveness on the electrification path, there is indeed a big opportunity. As you know, we used to make the difference with a transparent strategy that we present to you. We used to make the difference in the execution. That's where we make the difference. And our team has been demonstrating a stronger efficiency and effectiveness, especially in turmoil. The more challenging the conditions are, the better we express a competitive execution capability compared to our peers. So at the end of the day, then it's up to you. You believe or you don't believe, you want to invest or you don't want to invest. What we can offer is what we can do. What we can offer is more agility, more focus, more execution capability with a sound strategy that is now delivering results. It's true that there is a big opportunity now because the stock is very cheap and therefore there is upside. As you know, we are not very good at making predictions. but we are reasonably okay to extract from the market conditions the best that anybody could extract for the market. And I think the H1 results are demonstrating exactly that. The fact that in a very volatile environment on pricing, on raw materials, on semiconductors, on energy, you name it, We are extracting from the market possibly one of the best values that we can imagine with a north of 5 billion euros of positive free cash flow and north of 14% of IOI margin. This is a quite unique combination in the automotive industry right now and the numbers are there and you know the numbers better than I do. That's what I can answer to you. Hopefully, you will not be the only one to believe that there is opportunity, but hopefully you will be one of them. Thank you. Thank you for your great question. Let's move on.

Our next question comes from the line of Martino Dimbrogi from Ecuador. You're now unmuted. Please go ahead.

Thank you. Good evening. Good morning. Good afternoon, everybody. My first question is on the free cash flow. I don't know if you agree with me but networking capital was better than expected so if you could elaborate on this and explain if there is a significant impact of factoring and also capex were lower than what I had expected so just to understand what could be the projection I understand that 900 million of synergies but what's the expectation for the full year and Connecting to the previous question, so you have a huge amount of cash. You recognize you are undervalued. Why not buying back some shares, which the buyback is a part of your business plan and seems to be the right moment? And I have a follow-up on another issue.

So you have three questions here. I will leave the working cap question for Richard to answer. I will answer on the capex and the first element on buyback and then back to Richard also. On the capex, it's quite simple. What you see is that we are confirming every day what we told you in the dare forward presentation plan, which is we believe we have a 30% Thank you very much. Once we have all the results and every time again we consider and we conclude that we have a 30% efficiency edge, effectiveness edge against our competitors. So it's normal that on a recurrent basis you see capex numbers which may be much lower than some of our competitors and as you know it is not in our skills To throw capex headline numbers at the media, we prefer to use our money in a wise and very demanding and frugal way so that your money is being taken care of in a most efficient, effective way. So we confirm that we have a 30% hedge, positive hedge against our competitors on that front. On the buyback, as you know, we already said in our dividend policy presentation in the therefore plan that we have a 5% capital buyback potential that could be eventually used. We have already communicated to you that there may be an opportunity with Dongfang Motors and we'll see if that opportunity materializes. But for more details on working cap and the buyback I would like to hand over to Richard. Richard, please.

Thank you, Carlos. So on working capital, I mean, we were negative 3.2 billion, Martino. So, you know, I think it wasn't particularly positive performance, very similar to last year. And despite that, you know, we got to 5.3 billion of cash flow. Within that number, there was lower factoring, as I said, partly because factoring is becoming more expensive and partly because I think that's Thank you very much. So I don't think it was a particularly positive performance. I think going into the second half, normally you would expect working capital to improve slightly. That will depend a lot, obviously, on the shipment conditions and supply conditions. But I don't think there was anything particularly surprising from a positive point of view in the net working capital. On the buyback, as Carlos mentioned, Dong Feng has 3.1% of our shares, so now we have this arrangement with them whereby we should be able to work together with them to ensure that if and when they decide to sell further tranches, that doesn't continue to be an overhang on our stock price. So I think that's a good step forward, and then we'll see for the rest of the 5% that we mentioned in the dare forward plan.

Thank you, Richard. Next question, please.

Our next question comes from the line of Thomas Besson from Kepler-Chevreux. You're now unmuted. Please go ahead.

Thank you very much. I'll have three questions, please. First, I'd like to come back to Thomas' comments on the fact that shares are inexpensive and a great opportunity for investors. I think it's been true for a while, so I concur with the previous questions and basically I think maybe we need more details on a few topics. You've mentioned that the breakeven point today is at 40% of your current volumes. Can you maybe help us understanding or giving us more granularity on the linearity of margin decline depending on the volume decline in the different regions? I think the market is particularly worried that your North American margins, which are today fantastic, could Thank you very much. Thank you very much. European and Latin platforms. And lastly, on the buyback, is it fair to say that you would control shares if you were to buy them, whether it's from Dongfeng or from someone else? And is it also fair to say that with your 60 billion liquidity, a 5% buyback looks quite shy? Thank you very much.

Those are great questions, thank you. And I will try to answer a few. I will hand over to Richard for the opportunity on the share, also about the buyback and the cash synergies versus the P&L synergies. I would like to comment on the margins in the U.S. That's a very important comment that you have made, Thierry. And one of the things I would like to say is, if our margins... At 18.1%, if my memory is correct, 18.1% AUI margin in the North American market seem at risk. We, of course, recognize that 18.1% is very high, a stellar result. Then what should we say about our American peers where we see where their margins are? So if you are looking at the North American market and you say, well, guys, Stellantis, great job, and you have 18, so it's a big risk because it can go down. Perhaps yes, perhaps not. We'll see. But in a relative competitive term, if we compare our North American margins... To our peers in North America, I think we would conclude, the two of us, that we are in a much better position. Whatever the outcome of external factors may be, our position is in any case much better than our peers. And that should play to our benefit and not to our detriment. That's what I would say. Of course, you know us well and I'm sure you will probably trust us in the fact that we will fight as much as we can to protect those margins, but of course external factors are external factors, but we are starting from a point which is much more robust than any of our peers, which means the level of protection of our earnings through the North American business It's much higher. And I was telling you that our potential in terms of bringing the EV technology to the G brand, already ongoing on an accelerated deployment of the 4xE technology, and what we are going to bring in terms of electrification to our fantastic Ram BV pickup truck, All of this should give us the mid-term visibility that we are going to gain profitable share with those products that we are now fine-tuning. So I'm not at all afraid of what may happen in North America because I know that our agility, our creativity in North America is obviously through the numbers stronger Thank you very much. and peaceful social environment. As you know well, right now in the Western world there is a risk of social unrest, as you know well, as a consequence of inflation and the way we are mitigating the inflation, interest rates hike and what that may bring to the cost of living of people. It is important that we keep that in mind because For this big and highly sustainable company to be continuously operating in a proper way for the big benefit of our stakeholders, starting with the investors, we need to protect this stable environment. And of course, buyback shares is something that has a sensitivity in terms of social perception that is not nil. and we will have also to take that into consideration to protect your interest as an investor and keep our company as smooth, as focused as possible. So that's just a general comment I would like to share with you in full transparency because I think it's important that we understand The societies and the communities in which we are operating and the continuous improvement of the company needs the strong support of every and single employee of the company. Thank you. Let me hand over to Richard for the other questions.

Thanks, Carlos. So on synergies, the amount, the $3.1 billion of cash synergies translates into about $1.1 billion of P&L synergies because the other $2 billion are CapEx R&D, which is basically all capitalized. So we'll come through the P&L as those projects go into production. So that's the split. And the 1.1 billion in the PL is about 50% in industrial costs from purchasing and manufacturing and 50% in SG&A category. And then, yeah, if we, well, I hope when, when we purchase shares as Dong Feng sells down its stock, when they decide to, we would cancel those shares, obviously.

That's a clear answer. Thank you, Richard. Thank you for that. Let's go to the next question.

Next question comes from Michael Foundukidis from Oddo. You're now unmuted. Please go ahead.

Yes, hi everybody. Two follow-ups, please. First one, you described your company as always well. You highlighted the breaking point, which is even now lower at 40%. You have robust order books, more synergies to come. So based on this, what could drive margins back to a single digit next year or in 2024, even in a negative macroeconomic environment, in a recession, for instance, in Europe or in the U.S.? And then second question, on follow-up on the inflation comments that you just highlighted, what could be the impact in terms of wages probably in 2023, and how would you absorb that potentially?

Those are two great questions. Thank you for asking. As you know, in the therefore 2030 plan, we have committed to you that we would keep the company on a double-digit AOI margin and that we would double the net revenue of the company from 150 to 300 billion euros by 2030. By the way, the step that we are seeing on the first half of 2022 is quite consistent with that roadmap. So we stick to our commitment. This is how we work. You don't always consider that our commitments are bold enough, which is your view, which we respect. But generally speaking, we stick to our commitments and we make sure that we deliver. This is in our DNA. You have a management team at your service that delivers on its commitments. So we stick to the double digit. Now, many things can happen, of course, and disruptions, crises, unrests. There are crises that, of course, would represent a major problem. Thank you very much. We do not consider that it is a credible scenario to think that we would be below double digits in 2024. We don't consider that as a credible scenario. We think it's unlikely, and with a breakeven point at 40%, there is enough room, enough protection to the sustainability of the company to keep it above 10%. That's where we are. talking about the wages the best way to protect the stability the social stability of our company is to make sure that every year through the performance bonus in the different forms of the performance bonus that are variable against the different countries where we are operating that we keep some return for the employees which is totally linked to the performance of the company which means we align the interest of the shareholders with the interest of the employees. and that means that if our results improve, their returns and your returns need to improve at the same time. What we see across the different years is that we have the capability to have an overall policy where investors and employees win at the same time, in some cases in former PSA in the same magnitudes. and our employees and our union partners, they started from a position a few years ago where they only wanted base salary because they didn't trust that the recurrent profits would happen. So they only wanted base salary increases. Now they understand that through the level of demand and the way we are managing the company, there are recurrent profits. and they start trusting that performance bonus are as good money as pure base salary increases. And of course we have to take into consideration what is going on in the inflation right now and there will be there some wage increase most probably. But the most efficient way, the safest way to keep the balance, keep social stability in the company is to make sure that the performance bonus policy is bringing to the employees a fair share of our success. as much as it should bring to our investors the right return that you are expecting from us. So I trust that we will be able to keep this balance. This is also the reason why I was starting this presentation by expressing my full appreciation and warm thanks to our employees and to our union partners. because in the biggest number of cases, in fact there are very limited exceptions, they have been behaving in a stellar way. And hats off to their maturity, hats off for their understanding of the environment in which we are. They also understand that it's better to be on the same side of the line to protect the sustainability of the company because most of the risks that we are facing right now are external risks. They are not risks which are generated from inside. They are risks which are coming on us from outside. And therefore, there is a much more natural alignment between their position and ours, which is, let's protect the company. Let's continue to generate wealth that then we can redistribute, perhaps with some arguments. but first let's create the wealth and then let's redistribute. I think we have a proper bonus performance scheme that protects that balance and we intend to continue to refine that scheme to make sure that in every country we have specific allocation rules that protect the fairness of the allocation of those performance bonus and I think we have a specific skill with our HR teams on that matter. Richard, do you want to add something to this?

You're okay?

Fine. Another question, please. We still have a few minutes.

Our next question comes from the line of Charles Caldicott from Redburn. You're now unmuted. Please go ahead.

Hi, thanks for taking my question, guys. I've got two, please. Firstly, on the inventory, so new vehicle inventory is up slightly to 850,000 units. Do you still think, in a steady state, that inventory of about 1 million units is the right level for Stellantis? and given the economic backdrop, do you expect or do you intend to keep it lower than that for maybe the next few years? And then my second question was going to be on the China plan. So as you mentioned, obviously, there's been a change in the joint venture there for Jeep. So does that alter your 2030 goal of €20 billion of revenue and 8% margin in China or is that still achievable? And I guess more broadly, given the difficulties you've had in China, Do you still think it is important for Stellantis to have a presence there? Thank you.

Those are two great questions and as a matter of respect to my peers from Volkswagen, I would like to finish this Q&A session with this question because I know that their earnings session is going to start very soon. So let me answer these two great questions. I consider that the 1 million mark on the total inventory is a red line for our internal management to understand that there is a moment where we don't want to consider anymore any kind of supply shortage talk. And what we have said to our management is that as soon as we are at 1 million, We consider that we should manage the business with a very dynamic flow of products with a 1 million inventory that is going to be enough for us to make the right earnings. So internally, we consider the 1 million is the right number to stop talking about supply shortage. Which means as soon as you are above 1 million, supply is fine. Now we have seen in the past that the companies could operate with much more than 1 million which then is creating another vulnerability which is what happens if you have a significant higher number than 1 million and at some time there is a downturn. Well what happens is that it costs you a lot of money to get rid of your inventory, a lot of variable marketing expenses. So there is no interest in a very volatile environment to have a very high level of inventory because in terms of sales expenses it becomes immediately very costly Thank you very much. focus on the flows, focus on the dynamics of the distribution, focus on the efficiency of distribution, and possibly because we have a very diverse business footprint, we can have ups and downs and we can be at 1.10, 1.2 million, which would be okay from my perspective. So that's how we see it. It's not rocket science. It's more the result of our experience in this automotive world. Thank you very much. Thank you very much. This has been growing over the last five years. On the specific case of GAC, we had a binding MOU that our partner decided not to execute. As a consequence, we just said, well, then if you don't execute the binding MOU, then we consider that there is a breach of trust and therefore we are going to unwind. Thank you for watching. On mid-long term, your question about the 20 billion is the right one. I don't think this is going to have a major impact because, in fact, where the highest profitability is, is on the CBU business. That's where we make huge money, is on the CBU business, and we have already reorganized our national sales company to group all the national sales company, make sure that we address the CBU business Thank you very much. so far we are just cleaning the red ink and strategically speaking please remember that when we presented their forward plan for China the title was asset light strategy and this is a meaningful title why do I think we should be asset light because with geopolitical tensions each time you have the risk of cross-sanctions You have to choose. You have to choose between one of the two contenders. And of course, in our case, we are a Western company leading Latin America, strong presence in North America, number two in Europe. We are a Western company. So if we were in a cross-sanctioned environment, Thank you very much. We have learned this with Iran and we have learned this with Russia and I think that you will see that some of our competitors being very vulnerable to the Chinese operations will be somewhere challenged in the near future because of this growing geopolitical tensions. Thank you again for your great questions, your thoughtful questions. They are always exciting because they make us think better. I hope that we could clarify everything you needed from us today and wish you a very good day for all of you. Thank you. See you soon.