Valeo SE
PAR:FR
Earnings Call Analysis
Q4-2023 Analysis
Valeo SE
As Valeo presented its annual results for 2023, the company's new CFO, Edouard de Pirey, joined CEO Christophe Perillat-Piratoine in detailing a year marked by success and setting the stage for future endeavors. Valeo met all of its financial targets for the year, evidencing robust management and a clear strategic vision. The company's revenue soared to EUR 22 billion, with a notable 12% in EBITDA and a 3.8% operating margin, enhanced by a substantial free cash flow of EUR 379 million.
Valeo's 2023 journey was characterized by consistency and effective execution, adhering to established priorities. The company's Thermal business witnessed a significant recovery, with EBITDA improving by two percentage points in the second half of the year compared to the first. Strategic efficiency efforts paid off, placing Valeo ahead of its operational plans. Moreover, negotiations with customers yielded successful outcomes, mitigating inflationary pressures. In a testament to its capital stewardship, Valeo actively managed working capital, contributing positively to free cash flow with EUR 278 million, and progressed with an asset disposal program that already secured EUR 400 million.
Valeo set a new record for order intake in 2023, with nearly EUR 35 billion in new orders that provide a solid backlog. This achievement symbolizes the market's strong confidence in Valeo's innovative technologies. Notably, more than half of these orders are in the high-growth sectors of driving assistance and software, placing Valeo in an advantageous market position. An additional EUR 6 billion was captured in High Voltage electrification orders, boding well for future margin enhancement as these orders have higher embedded margins compared to previous years. This bright outlook sets the company on a path to continually improve profitability margins past 2025.
Valeo's commitment to ESG principles illustrated progress in 2023. The company's environmental efforts are in line with its CAP 50 plan goals, which involve carbon neutrality targets accepted by the SBTi. Since the plan's initiation, CO2 emissions were reduced by both absolute and relative measures, falling by 9% and 20% respectively from the benchmark of 2019. Socially, Valeo is facing the industry's challenge of gender diversity head-on while maintaining a prioritization of employee safety, evidenced by reductions in workplace accidents. Governance remains stringent with ongoing training and the incorporation of CSR incentives tied to the annual compensation of top management and key group managers, solidifying a culture of ethical business conduct.
In 2023, Valeo surpassed EUR 22 billion in sales, 85% of which stemmed from OEM sales, marking this as double-digit growth with an 11% increase on an adjusted basis. This growth was achieved despite unfavorable currency exchange movements, particularly the euro's appreciation against major currencies. The company showed resilience against the broader automotive production, with a 3-point outperformance globally—double-digit growth in Europe and Asia (excluding China) and a slight underperformance in North America due to a UAW strike, which marginally affected sales by $45 million. In China, although performance was down for the year, measures are being taken to improve customer mix and align better with the market, with anticipations of positive impacts by the second half of 2024. The operating margin climbed by 1.4 points to 3.8%, signaling efficiency gains, recovery from inflation, and the benefits of the Thermal business turnaround.
Valeo's commitment to R&D is evident, but with a mindful approach towards efficiency and cost effectiveness. By standardizing across platforms and leveraging global engineering and software competencies, R&D gross expenditure escalated by 30% over the last two years, outpaced by a 60% hike in order intake, underscoring improved productivity. In 2023, the capitalization rate for R&D expenses increased, which correlates with the robust intake of orders and their embedded margin improvements, suggesting an approaching peak in R&D capitalization, which will be monitored going forward. The operating margin reflected an uptick in the second half of 2023, reaching 4.4% of sales, a testament to the strategic focus on profitable growth.
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Good evening to all, and thank you for joining the presentation of our 2023 annual results. So this will be a joint presentation with Edouard de Pirey, the group's new CFO. And let me first take the opportunity to express my sincere gratitude to Robert Charvier, who is retiring after 24 years at Valeo. Most of you have known Robert for a long time as he has been our CFO during the last 14 years. So thank you, Robert, for your dedication to our company.
Today's presentation will be slightly longer than usual, lasting around 45 minutes. As announced, we'll first go back over the 2023 highlights, then we'll go into detail about the results and the performance for 2023. We will then detail our strategic and financial road map for '24 and '25 as we are at the halfway point in our Move Up strategic plan. You'll see our growth, you'll see our improvement trajectory over this period and how we're going to get there. And this presentation will be followed by a Q&A session for another 45 minutes that I will handle with Edouard.
So let's start. Let's start with the highlights of 2023. We achieved 100% of our 2023 guidance. Sales of EUR 22 billion, an EBITDA of 12%, and operating margin of 3.8%, and a free cash flow of EUR 379 million. Last July, we were together, and we explained our priorities for H2 '23. And you can see that they have -- we have stuck to them. We delivered on the first step of Thermals recovery with 2 points improvement in EBITDA in H2 compared with H1. We have completed a new phase of our synergy and efficiency program, we are ahead of our plan. And we have completed the negotiations with our customers on inflation, and we have received the cash accordingly.
Supported by the growth, the working capital made a positive contribution to free cash flow of EUR 278 million over the period. And finally, out of our EUR 500 million asset disposal program, 6 transactions have been signed as of today for a total amount of EUR 400 million. We see working actively on additional contemplated disposals of EUR 100 million, ensuring our assets are properly valued.
2023 was another year of progress as was 2021 and 2022. And in this presentation for purpose of comparison with prior periods, this presentation has been prepared based on adjusted figures. So you are now familiar with this notion. It means that the full year '21 and the full year '22 figures have been adjusted as though the High Voltage business had been consolidated in the group's financial statements as of January 1, 2021.
As you can see on the slide, the group is on the continuous path of growth and improvement from 2021. Since 2021, our sales have increased by more than EUR 4 billion. The operating margin has improved by more than 2 points. The EBIT in euros has more than doubled. And the free cash flow generation has improved by close to EUR 500 million. We have finally digested the integration of Valeo Siemens into Valeo.
As you will see in a few moments, this trajectory of growth and improved profitability and cash generation will continue beyond 2023. We have set a record for order intake in 2023 at almost EUR 35 billion. This testifies to the very strong confidence our customers have in Valeo's technologies. More than half of these orders relates to driving assistance system technologies, interior experience software-defined vehicle and software, where it is confirmed that we are building a very strong market position. We have also booked orders worth EUR 6 billion in High Voltage electrification. And all these orders were taken at margins higher than in 2022, which were already higher than in 2021. They will enable us to achieve a continuous improvement in our margins beyond 2025.
Now from an ESG perspective, 2023 was also a year of progress. We're fully on track with our mid and our long-term targets on every pillar, environment, social and governance. First, on the environmental pillar. You remember that in 2021, we set up our CAP 50 plant to contribute to carbon neutrality validated by SBTi, including reduction targets for all scopes in 2030. And since the plan was initiated, we have met our reduction targets every year, and it was the case in 2023. From 2029 (sic) [ 2019 ], we have achieved a decrease of 9% in absolute terms and 20% in relative terms of CO2 emissions.
On the social pillar now, as you can see, we pursue our efforts to tackle the difficult challenge of gender diversity in our sector. The safety of our employees is, of course, a top priority for Valeo. And here as well, we succeeded in reducing our main indicator for working accidents.
And last but not least, on governance. We permanently upgrade and train our teams to the highest standards relative to ethics. I remind you that by being a responsible group, we implement CSR incentives based on coherent KPIs to determine the annual variable compensation of top management and of more than 1,700 key group managers.
I now hand over to Edouard to give you more details on our '23 results.
Good evening, everyone, and thank you very much, Christophe. I'm very pleased and honored to present Valeo's 2023 full year results in my new role as CFO. It is a real privilege for me to succeed Robert Charvier. May I here extend my warmest thanks to Robert for his full support over the last 6 months and for his continuous availability during Q1 this year. He is patient, eager to transfer his knowledge, and amazing by being supportive at every moment.
As far as 2023 is concerned, let's review first the sales. For the first time in group's history, Valeo sales exceeded EUR 22 billion, 85% of which coming from OEM sales. This represents a double-digit growth, reaching plus 11% like-for-like on an adjusted basis, with OEM sales increasing by 13% and Aftermarket, plus 4% on a high basis comparison. ForEx had a negative impact of 3 points, mainly due to the appreciation of the euro against the dollar, yuan and yen.
Moving to our performance versus the automotive production. We have grown in each of our production regions in '23, recording even double-digit growth in Europe and in Asia, excluding China. Our '23 performance reached plus 3 points on an adjusted basis, worldwide speaking, in the context of automotive production at plus 10% growth as of S&P Global Mobility latest estimates. This outperformance is mainly driven by Europe at plus 3 points even after taking into account the lower High Voltage volumes on certain electric vehicle platforms in Q3. In North America, the group underperformed by 1 point. The impact of the UAW strike on '23 sales was limited to $45 million. We should benefit from additional orders from an important lighting business with a North American EV OEM from the end of Q1 '24.
In China, as already explained in previous releases, our performance was negative for the full year. As you know, we are working hard on improving our customers' mix in China in order to reposition our local customers' portfolio and to be more aligned with the market. We do expect to see the first benefits of this repositioning in the second half of '24.
Valeo full year operating margin reached 3.8% of sales, showing an improvement of 1.4 points on an adjusted basis, standing above the middle of the range of the guidance we committed to 1 year ago. As you can see on this slide, this increase of 1.4 points was driven by: first, efficiency, inflation recovery and activity for 0.8 points; two, by R&D expenses for 0.5 points; and three, by the recovery of the Thermal business, 0.1 points, with a better profitability in the second half as expected.
Let me comment further on R&D, which is an important topic. First, we have increased R&D efficiency by standardizing throughout all the platforms and by adding skills in engineering and software in cost-competitive countries. Consequently, gross R&D increased by 30% over the last 2 years, while order intake has increased by around 60% over the same period, 30% on one hand, 60% on the other hand, efficiency is improving.
Second, capitalization of R&D expenses has increased up to 2.1 points in '23. This is the result of the strong order intake momentum since 2022, as described earlier by Christophe. This is also the result of the significant improvement in the embedded margin of these orders. This is a good news for Valeo. It's also worth noting that we are close to the peak of R&D capitalization. I will come back to it in a moment.
Let's finally focus 1 minute on the second half of '23. Operating margin was at 4.4% of sales, a sequential improvement of 1.2 points. IFRS impact on each site increased by 0.8 points. Therefore, our margin improvement was larger than the increase of the R&D IFRS impact, and that's what we had guided for.
Taking now a closer look at the bottom of the P&L, starting from operating margin at EUR 838 million. Contribution of JV and associates decreased strongly due to the onetime item last year related to the integration of VSeA in July '22. Other incomes and expenses are roughly flat at minus EUR 111 million, including 2 first programs of restructuring in the Powertrain field, Amiens in France and Bad Neustadt in Germany. Cost of net debt needs a point of attention. It has significantly increased due to higher interest rates. So in '23, we incurred EUR 97 million more in cost than in '22. This should stabilize in '24. Income tax of minus EUR 154 million, implying an effective tax rate at 35%. Nothing special on minority. So at the end of the day, Valeo's net attributable income reached EUR 221 million, an increase of almost 50% compared to '22 on an adjusted basis.
On the EBITDA profitability evolution by business groups from one year to another, Powertrain first. With a 9% outperformance, recorded the strongest improvement EBITDA margin, plus 2.9 points. This is thanks to the very good progress of implementing the synergy plan arising from the integration of the High Voltage electrical business and the positive contribution from the traditional population businesses.
Comfort and Driving Assistance on its sites with 4 points outperformance. EBITDA margin is still the highest margin within the group, is slightly lower compared to '22 as we are preparing for future growth after the amazing order intake recorded in the last 2 years. Visibility performed in line with the market. EBITDA margin was sustained by the good momentum of its Aftermarket business and the acceleration of its OEM business in the fourth quarter.
Thermal, finally, saw an improvement of its EBITDA margin, despite an underperformance of 1 point. Thanks to the finalization of negotiations with customers, the strict control of costs and the ramping up of production of new projects in the second half, the EBITDA margin recorded 2 points of incremental improvement as expected. As you can see, we are making our strong points even stronger by preparing them for faster growth, and we are addressing our weaker points.
The free cash flow came at EUR 379 million above the guidance. I will not go through all these slides and all these details. But free cash flow benefited in particular from the positive contribution of EBITDA, up by EUR 324 million compared with the same period in '22 on a restated basis. Working capital valuation was a positive resource of EUR 278 million, despite the need to maintain normal levels of semiconductors' inventories and despite the volatility of customers' programs this year. Strict control of capital expenditures at EUR 964 million. EUR 1 billion in capital expenditures on intangible assets, including R&D capitalization at 4.5% of sales against 3.2% last year, directly linked to the strong momentum in orders at a significant higher margin, as I had explained earlier. And finally, restructuring cost with a limited impact on the free cash flow in '23.
As far as the financial structure is concerned, at the end of December '23, financial net debt stood at EUR 4 billion, stable compared with December '22. Leverage ratio at 1.5x, an improvement versus 1.7x last year. You will find the detailed information on the debt structure in the back-end slides.
Valeo has a sound financial structure based on the balanced debt profile and a solid liquidity situation. Valeo has available cash of EUR 3 billion and undrawn credit lines totaling EUR 1.7 billion. And at the end of December '23, the average maturity of gross long-term financial debt was stable at 3 years. So Valeo has a sound financial structure. Nevertheless, deleveraging remains our top priority.
Finally, to conclude on my financial part, a dividend of EUR 0.40 per share will be proposed at our next shareholders meeting on May 23 (sic) [ May 24 ]. This is a progressive increase year after year. Thank you for your attention. I now give back the floor to Christophe to update you on our 2025 strategic Move Up plan.
Well, thank you very much, Edouard. As I said at the beginning of my presentation, I would now like to take a moment to share in detail our road map for '24 and '25 until the end of our Move Up strategic plan. And you'll see our growth, and you see our improvement trajectory over this period and how we're going to get there. The first half of our strategic plan during the last 2 years fully confirms our unique positioning on the market. We benefit from the fastest-growing industry trends, thanks to our 4 pillars. You remember, electrification acceleration, you remember ADAS acceleration, you remember interior expense reinvention, and lighting everywhere. And the relevance of this strategy is validated the best way possible.
Our customers. Our customers trusted us with EUR 67.5 billion of new orders over the last 2 years. And thanks to our pricing power, we achieved this with average margins in incremental improvement each year. In the last 2 years we have demonstrated that we bring value to our customers and that our technologies can be priced differently. So we are accelerating Valeo's transformation. And to do that, we intend to use 3 main levers to improve our performance: A transformation driven by order intake; driven by cost reduction; and driven by a strong cash culture.
First, the transformation driven by order intake. Sales are growing. In particular, thanks to the orders taken since 2022, which will start to contribute to the 2025 sales. And on top, these new businesses are accretive to the group's margin as they embed higher margin. Second, a transformation driven by cost reduction initiatives. As we are going to see the market is not where we had expected, so we are introducing one-off exceptional self-help measures by allocating EUR 300 million of our '24 and '25 free cash flow into it. We will, therefore, keep improving our Thermal and our Powertrain operations, and we will further accelerate the efficiency of R&D. Third, a transformation driven by a strong cash culture. We will be even more selective in order intake to pilot our investments in PP&E and R&D, and it will also contribute to decreasing the R&D capitalization impact.
You can see on this slide, our guidance for '24 and our new guidance for '25. And please note that we have chosen to establish this guidance based on cautious market assumptions to give us greater comfort. Edouard will come back on this later on.
So in 2024, we're targeting sales of between EUR 22.5 billion and EUR 23.5 billion, and EBITDA between 12.1% and 13.1%, and an operating margin between 4.0% and 5.0%. And finally, the improvement in our operations will generate around EUR 500 million of cash, of which EUR 150 million will be allocated to finance one-off exceptional self-help measures. Hence, a free cash flow of around EUR 350 million after one-off exceptional actions. Similarly to '22 and '23, the seasonality of our business is likely to be repeated in '24 with expected gradual improvements throughout the year, leading to H2 margins and cash generation, which would be higher than H1.
Now 2025. At the end of the Move Up plan, we are targeting sales of between EUR 24.5 billion to EUR 25.5 billion and EBITDA of between 13.5% to 14.5% and an operating margin of between 5.5% to 6.5% and a free cash flow of around EUR 800 million, of which around EUR 150 million will be allocated to one-off exceptional self-help initiatives, leading to around EUR 650 million free cash flow after these one-off exceptional actions.
The Move Up plan that are initiated in February '22 is a trajectory of growth of operating margin improvement and of cash duration. And as you can see, we are doing it. Between '21 and '25, our operating margin is expected to be multiplied by 5, and our cash generation is expected to increase by EUR 950 million before the EUR 150 million allocation to one-off exceptional self-help measures.
And regarding growth, we're doing it, thanks to the position of the company on the structural trends of the market. And let's look deeper into our different pillars, starting with ADAS. One key characteristic of it, which, as you know, is managed by our business group Comfort and Driving Assistance is that they are totally powertrain-agnostic. So let me very clear because I'm hearing it from time to time, SDV is not equal to EV. These pillars generated more than half of the group's orders in '23 with higher embedded margins and why? Because they benefit from the tremendous acceleration of Level 2 and Level 2+ features supported by regulation, but as well supported by the pool from the end customers.
In '23, we registered several multibillion SDV orders demonstrating Valeo's competitive advantage in this field, among which I want to highlight our software products. Here, our customers ask for help, they ask for support. And we have the expertise and the offer to do it.
I also want to highlight our Thermal expertise as Valeo is able to better dissipate the heat generated by the high-performance chips, the key advantage for high-performance computing units. And we are continuing to increase our offer with our lineup in software, which is very strong and matches the needs of our customers with our LiDAR Generation 3 with a new order recently won from a European premium OEM with our high definition radar, with our new infrared camera.
Now electrification. We confirm that the electrification market is expected to grow. We see 19% CAGR by 2030, including e-thermal with still cautious assumptions on the outsourcing to suppliers. In this market, we are selective and we are cautious in our order intake to protect our margins.
Integrating Valeo Siemens in '22 within a Low Voltage Valeo business unit was the right choice in terms of organization because we have derived all the expected synergies from this operation. Because thanks to this organization, we are able to accelerate High Voltage and Low Voltage applications in a very efficient and very reactive mode depending on the market evolution. But we don't stop here. We're still working hard to improve our operations, which are not yet at the expected level. And this is why we have launched the project to merge together our Powertrain and our Thermal business groups in order to get additional synergies and to provide an even better offer to our customers.
We still believe that electrification will prevail over the medium term as it's the only way to make personal mobility decarbonized. However, we are also extremely cautious -- conscious, sorry, that it's a bumpy road. Therefore, we are cautious. We are cautious on the level of order intake we secure and we are implementing the right organization to be able to permanently adjust to the market. Well, here, the good thing is that our products for ICE and for hybrids generate high cash return and they represent a natural hedge for profitability in case of slower growth of EV. So we are organizing Valeo so that when the EV growth accelerates, it's good for Valeo. And when the EV growth slows down, it's good as well for Valeo. I believe we found the right approach.
And let me now go a little bit more in detail on the reasons why we combine our Powertrain and our Thermal business groups. The objective is clear. It's to strengthen our product offering and to improve our system approach. On an electric car, the full view of the system is extremely important. Each watt saved in the powertrain system or in the cooling or heating of the car and the battery means an increase in range or a decrease in the size of the battery. So having Powertrain and Thermal activities under one roof is our solution to build a better and a more affordable EV and to provide to our customers a comprehensive, a competitive and a coherent offer.
Now a few words on Lighting. I told you in '22 that lighting was everywhere. Well, we love lighting. We love its technology, we love its financial stability, we love its cash generation. Lighting is literally everywhere inside, outside the car. And this, whatever the powertrain would be. Valeo's technologies help OEMs to sell cars, they contribute to making the car desirable. And look on the slide, at the Zeekr 007 from the company Geely in the middle of the chart, for example. This car was just released in China with a full 1,700 LEDs display in the front. It's provided by Valeo, and it makes this Zeekr Geely car more desirable. This is the reason why we observed a high take rate for all advanced lighting solutions. And here as well, we see increased software content and increased technology content. So you see that we are ideally positioned on the growing trends of the auto industry. And at the same time, we are accelerating Valeo's transformation.
You can see our guidance for '24, our new guidance for '25. Please note that we have chosen to establish this guidance based on cautious market assumptions to give us clear comfort.
Maybe a detail now on the business group sales and EBITDA. I think we are now on the right slide, sorry for that. Here, you see the different business group, and they all show profit improvement. More than 1 point improvement for Visibility and Powertrain. 3 points for Comfort and Driving Assistance, which is driven by the acceleration in ADAS since software-defined vehicle and software. More than 3 points for Thermal systems, for which we expect the business to recover strongly, thanks to all the action plan that we are currently putting in place, especially what I explained to you, the planned merger between Powertrain and Thermal systems. Please note that based on this merger project, Powertrain and Thermal would become one single business unit.
So I will now hand over to Edouard to show you more in detail how this new guidance has been built.
Thank you, Christophe. So let's take now a closer look on the next slide, please. Yes, the details on how this guidance is built and why it is solid. As Christophe explained, we'll accelerate the transformation of Valeo with 3 levers to expand operating margin over the period '23 to '25 from 3.8% of sales to between 5.5% and 6.5%. The first lever of our transformation will be driven by the strong increase of our recent orders, which is expected to fuel our business and contribute to the improvement of our margins by around 0.9 points. The second lever is the transformation driven by our cost reduction initiatives and other operational efficiency improvements, including notably the merger of Powertrain and Thermal systems business groups. It is expected to contribute positively to our margins by around 0.8 points. The third lever is the transformation driven by strong cash culture, which is expected to add 0.5 additional points to our margins.
Let's now have a look at the tangible contribution of each of those 3 levers. And start with the first one, the transformation driven by our order intake. Our plan has been adjusted to new macroeconomic environment. As you know, S&P estimates are now showing much lower volumes than what they did in early '22, 7% less actually. On top of this, we decided to apply a discount of 3% on our volume assumptions for greater comfort. We also decided on top of this to apply a rather cautious view on our High Voltage sales, considering that they could remain stable over the period, '23, '24 and '25. Based on these new hypothesis, we expect to reach sales between EUR 24.5 billion and EUR 25.5 billion in 2025. As you can see, we still expect strong growth over the next 2 years in all the regions, including in Europe, and our industrial capacities are aligned already with this growth scenario.
In the environment that we know today, we consider these assumptions as cautious enough in the achievement of our targets. On this basis, these additional sales gives us 0.9 points additional margin, out of which 0.6 points come from the increase which would have resulted in these sales were taken at the current margin level and 0.3 points on incremental margins related to higher margins embedded in new order intake. We had told you in 2022 about the higher margins embedded in our new order intake. We now see this coming a reality in our operations starting next year.
So now on the transformation driven by our cost reduction initiatives. We will allocate EUR 300 million over the 2 years period, '24-'25, in one-off exceptional self-help measures, including a specific cost reduction plan and other operational efficiency improvements. We expect this plan to generate run rate cost savings of more than EUR 200 million with a positive impact starting from '24. Of course, the planned merger of Powertrain and Thermal is at the heart of our cost reduction initiatives. It will notably result in a leaner, more efficient organization, as Christophe explained earlier.
Let's now take a look at the third lever of margin improvement. Our transformation driven by the reinforcement of our cash culture. Cash is our top priority. Let me affirm here with you today, the cash culture at Valeo will be highly reinforced at each level of the organization. We will manage our operations by the cash. This is my mandate. We will be highly selective in businesses offering higher margins and/or greater contribution from our customers. We have a strong wind coming from behind, coming from the almost EUR 70 billion orders we have taken in the last 2 years. We have what it takes to ensure that we will continue to grow in the future and also by containing the orders in the next 2 years.
On the next slide, I would like to insist on R&D. How will we reduce R&D expenses in '24 and '25 despite the -- sorry -- we aim to decrease gross R&D expenses by almost 2 points of sales from '23 to '25 from 11.8% to 10%. This will be, thanks to platformization, meaning more economies of scales with the use of bricks of technologies in our product development, meaning also the growing use of artificial intelligence and information system tools. We'll also decrease R&D by hyper selectivity in new order intake, leading to less R&D, as explained before.
In the same time, on IFRS impact perspective, after reaching a peak in H1 2024, the impact of R&D capitalization should start to decrease from H2 2024, and then decrease by around 1 point in '25. This is the result of piloting our order intake with more efficient R&D and with higher amortization given by the start of production.
Finally, on cash flow trajectory. The increase in EBITDA and the strict control of R&D and CapEx will drive a much higher cash generation by our operations, around EUR 500 million in '24 and around EUR 800 million in '25. As mentioned by Christophe, we will reallocate a cumulative amount of EUR 300 million into one-off self-help initiatives in these 2 years. This will lead to, respectively, around EUR 350 million and EUR 650 million of free cash flow after one-off exceptional self-help initiatives. We will maintain a clear approach to capital allocations, and we continue to prioritize deleveraging, expecting to lower our leverage ratio from 1.5x the EBITDA in 2023 to 1x in '25.
Let me now hand back over to Christophe for the conclusion.
Well, thank you very much, Edouard. To conclude, we have a clear strategy and clear priorities. The evolution of our organization will make us even more agile and more competitive. And our teams, and you know that, are fully mobilized and fully committed. So at the end of our strategic plan Move Up in 2025, Valeo will be technologically stronger. It will be operationally more efficient, it will be financially more solid and it will be perfectly positioned to take full advantage of the acceleration of its markets.
By 2025, our sales will increase by 11% as compared to '23 to reach around EUR 25 billion. Our EBIT will increase more than 60% over the same period and our free cash flow will also increase more than 60%. So at the end of our strategic plan Move Up in '25, Valeo will have reach a first step of its recovery, and we will not stop there because we are strong of our EUR 67.5 billion of order intake secured in '22 and '23 with superior margin because now we only accept orders with good margins and because our technologies create value for us and for our customers. But today is not yet the right time to talk about it. We will talk about it in due time. Today, we are fully concentrated, fully concentrated in delivering the second half of Move Up. So you see that we are on a clear value-creation trajectory.
Well, thank you very much for listening to this presentation. And Edouard and I are now fully available to answer your questions.
[Operator Instructions] The first question is from Thomas Besson of Kepler Cheuvreux.
Thomas from Kepler Cheuvreux. Two topics, please. The first one, on the compensations for the contracts you're exposed to, where automakers have produced a much, much, much lower number of vehicles than you assumed. I'm talking about the number of BEV programs. Could you confirm whether you had some ability to reprice some of these contracts, all of these contracts or whether there were some one-off conversations in 2023? That's my first question.
My second question is related to the free cash flow. So I'd like to just understand better the assumptions you've taken. So firstly, could you confirm whether the EUR 300 million one-off exceptional elements that you're talking about for '24-'25 are incremental to an existing amount of money that was initially planned to be spent or whether this EUR 300 million are going to be all of these exceptional items? Second, can you please tell us what you have assumed in terms of tangible and intangible CapEx for '24-'25? And thirdly and lastly, for the -- to understand the free cash flow guide. Could you help us understanding what you have assumed for working capital benefits or no benefit in '24-'25?
Well, thank you very much, Thomas, for your questions. I will take the first question and hand over to Edouard for the second question. Well, I mean, you said it, the volumes on EV are extremely volatile. They are volatile and they are quite different or in some cases, extremely different from what was planned in the contract. Therefore, whenever the volumes are lower, significantly lower than what it is on the contract, we go for compensation. And we negotiate any kind of compensation, compensation for the fixed cost, compensation for the R&D we spent, compensation for the CapEx that we spend.
Our experience from 2023 is that we get this compensation because this compensation are normal because it's fair business to compensate your supplier when the volumes are significantly lower than what is planned in the contract. So we received compensation in 2023, and we're going to receive compensation in the years to come based on the real volumes that will be seen at that time. I hope I answered your question. Edouard?
Thank you for your question. So as far as free cash flow is concerned for the next 2 years, first, on this specific exceptional one-off self-help operation, the EUR 300 million are on top of the normal traditional, let's say, EUR 50 million of other income and expenses that we usually have every year.
As far as the assumptions behind the free cash flow tangible and intangible are a bit higher in '24, a bit lower in '25 as per the curve of order intake that we plan. We plan to be a bit lower in order intake in '24 and '25, as you have seen, just to manage exactly the cash, as we explained earlier. And working cap benefit would be a bit higher in '24 compared to '23 or '25 because you may have seen in our report that, actually, we did not decrease our inventories in '23 compared to '22 because of the strong volatility of volumes of some of our customers, and you are mentioning actually BEV programs in particular, and also because of high inventories of electronic components. And therefore, we have not decreased so much inventories in '23, and this is an opportunity for '24.
The next question is from José Asumendi of JPMorgan.
Two questions, please. On China, can you speak a little bit around the efforts taken to rebalance the customer mix and repossessing your customer portfolio? I think this is going to be one of the keys for you to accelerate the growth in the region?
And second question around Thermal, the profitability on an EBIT level is still not very profitable business despite being one of the key pillars of Valeo for many years. So can you comment on please on what are the key levers to improve the profitability of the Thermal division in '24 and '25?
Well, thank you, José, for your excellent questions. Maybe on the first one, received to China. Well, I mean, what's going on in China is actually a strong rebalance of the customers and there's deep changes in the market share. As you know, of two groups. One is what we call the JVs and the other one is the non-JVs. And we've seen over the quarters -- over the semesters, continuous market share transition from the JVs to the non-JVs. So of course, Valeo is reacting to this situation.
And we have, I think, some pretty good news to share with you. When I look at first the order intake that we have in China in '23, it's a good order intake. Overall, it means that our technologies are appreciated by our customers. In this case, it's mainly Lighting, it's mainly Thermal, and it's mainly ADAS. These 3 technologies are very much appreciated by our customers and we are competitive on the Chinese market with these 3 technologies.
Now when we look more in detail, which customers are the ones that trusted us in '23 in China? We find out that in '23, more than 50% of our order intake has been with non-JV customers. And this match much better to the share that these customers have today on the market. And if now I look at what's going to happen in '24, we believe that from H2 because, as you know, the lead times are much shorter to develop new projects and to put them into start of production in China than what they are in the rest of the world. So we see the impact of all our progress and our actions much sooner.
So when we look into 2024 and we look into H2 of 2024, we believe that already in H2 we'll have more than 50% of our sales in China that will be with these non-JV customers. So that give you a sign of the dynamic that we have in China of the repositioning that we have and the fact that our teams are absolutely convinced that the technologies that we have in China specifically and I want to insist Lighting, ADAS and Thermal for EVs are at this point of time, areas of strong traction with our Chinese customers.
I think your second question is on the Thermal business. We are not satisfied at all with the profitability of our Thermal business. There's one commitment I took in front of the financial community, in front of our investors. It's to have the first significant step of improvement of profitability in the second half of 2023 versus the first half of 2023. And I told you that I was expecting H1 profitability to be the low point and that we would grow from there step by step. And I said 2 points improvement in H2. Well, this is what we did. We're not super proud of that because we are still at a low level. But that was a first step, and that demonstrated that we achieved the low point of the profitability of this important activity for Valeo. We did it through pricing, we did it through cost control, we did it through control of a lot of start-up costs that we had on many different projects around the world.
Now what's the next step? The next step is that we see further improvements step by step of our Thermal activities. And this is one of the reasons why we decided to merge Powertrain and Thermal into one entity because we're going to go after synergies, we're going to go after cost decreases, we're going to go after operational efficiency and better operations, and therefore, we see improvements step by step of our Thermal activity according to the plan I showed, and I gave you the EBITDA that we expect from Thermal in 2025. It's not there. It's not yet the average of the group, but it's going to be much better than what we have seen as the low point in H1 '23.
The next question is from Christoph Laskawi of Deutsche Bank.
Could we please discuss the bridge to the '24 balance on the margin. What do you assume for inflation, both on wages and materials, for example, that is baked in? Is there any comments on pass-throughs, et cetera? That will be my first question, and I'll follow up for the second.
Well, we showed you the bridge for '25. And the bridge for '23 is showing a significant step-up of our profitability linked to efficiency and self-help measures. This is worth around 0.4 points. Consider -- if I take the midpoint, if I take -- I think this -- if I take the midpoint of the guidance of '24, it's 4.5%. So it's a 0.7 point improvement versus what we posted in '23. 0.4 points out of this 0.7 points is linked to our own cost initiatives, cost reductions, better efficiency synergies. And this is the way we are going to do in '24. On top of that, we see 0.15 points of improvement coming from higher volumes, higher sales, so let's say, operational leverage. And we see another 0.15 points coming from R&D, 0.4, 0.15, 0.15, that's the bridge from the 3.8% to the midpoint of our '24 guidance. So this was your first question, and I think you have a second one.
Indeed. And that will be on R&D capitalization, which you guide to come down, obviously, in '25. If we assume order intake after that picks up again, should we expect the capitalization to go up again as we've seen in the past or because of the efficiencies that you implement the run rate that you have in '25 to stand relatively stable?
We've been trying to show an extremely transparent way what we expect for capitalization because we know it's important for our investors and extremely important for us to have you understand exactly what's behind. We have, as you saw, a peak -- an exceptional peak -- a positive peak of our order intake in '22 and '23. I just give the number again, it's close to EUR 70 billion of order intake that we secured in '22 and '23 with, I would say, very good margins, very good margins because it's made for 50% of it from ADAS. This created more R&D needs when you have order intakes and new orders, you need to put engineers to develop these projects. So we have higher R&D. But you have seen that it's not one to one where we've been adding EUR 2 in a certain way of order intake. We have added much less in terms of R&D because we are much more efficient than we used to be in R&D having this new order intake. This is the first point.
The second point I would like to mention, if we have had less order intake, we would have had less R&D spend, we would have had less capitalization, at the end of the day, we would have had the same operating margin, the same operating margin. We would have had more cash probably. And that's because it's about cash, it's not about operating margin, it's about cash that we want to pilot the coming order intake in order to manage and in order to get to the objective that we set for Move Up in terms of free cash flow, and we want to give priority to the deleveraging of the group and the cash duration.
Therefore, we plan for less order intake in '24 and in '25. Don't be worried. It's going to be excellent level of order intakes. It's not going back to the levels we had before '22. It's a good, solid order intake that we plan in '24 and '25. And we have the luxury to select our orders because we have a lot of market opportunities. So we're going to take the best orders. The best orders in terms of margin and the best orders in terms of cash profile because we can have some contribution from our customers on some orders. And this is the way we're going to manage the company in the next 2 years. Edouard, do you want to follow up?
Yes. May I add a specific point. As of 2025, some of our businesses that we have taken in '22 will also stop production. So at that point of time, we'll start amortizing all what we have capitalized in the past. So the IFRS impact will decrease from 2 points: first, what Christophe just explained that actually the capitalization will be lower. But on the other hand, also amortization will grow and this will make the IFRS impact much lower.
The next question is from Pierre-Yves Quemener of Stifel.
And thanks for preempting the addressing the R&D capitalization topic, the big debate among investors. Two questions left on my side. Your LVP assumption in '25 is based on the current AHS assumption with a 3-point additional cushion, is this right? But what's about the assumption for '24? So if you addressed that earlier, I didn't get that. And more directly, what is the implied outperformance that you target versus LVP in '24 and '25?
My second question would be regarding the credibility of your margin target of '25 ranging from between 5.5% and 6.5%. How confident you are to deliver on this with the current level of feasibility in the macro? And how much more upside to that number could it be for the years beyond '25? The typical pushback we get from investors, is that medium-term target keep being eroded as we move forward? It used to be, as you remember, about 7% was -- from an early 2022 standpoint, 6.5% for the medium term. Now it's ranging between 5.5% to 6.5%. So what is the target of confidence?
On the first one, that's going to be quite easy to explain and to answer. We have decided to take cautious assumptions. And you know we're not trying to guess what the market is going to be. We take S&P Global Mobility numbers. This is what we have taken for '24 and '25, but we apply the cut. We applied a cut of 3% to these numbers to their forecast in '24. And we applied the same cut in '25. Just to be on the safe side and to give our investors and to give all the financial community comfort about our guidance. What is the outperformance that we expect to have in '24 and in '25 based on the numbers we have released. In '24, we're talking about around 5 points of outperformance. And when it comes to '25, we're talking about an outperformance that's going to be significantly higher than 5 points.
Now coming to your second question, yes, there is volatility on the market. I remind you that when we created and communicated the Move Up plan, that was in February 2022, S&P Global Mobility forecast for the market in '25 was 98.5 million cars. And now we're talking about 91 million cars on which we apply a cut of 3%. So yes, there is volatility. And this is the reason why we have decided to create a guidance based on what we believe are cautious assumptions at 3% lower than the current estimate or forecast of S&P.
I just want to remind you that there has been a lot of different crisis, a lot of different things that happened in '22 and '23. There has been the semiconductor crisis, there has been a lot of volatility everywhere, including on electrification. So we had a significant amount of headwinds in '22 and in '23. But in '22, we could hold our guidance throughout the year. And in '23, again, we have stick to our guidance on all points. And I think that what we want to build for '24 and '25 is the trust that Valeo is a resilient enough company and agile enough company that in this volatile market we can achieve to continue to improve step by step the financial performance and the cash generation of Valeo. This is what we did going from '21 to '22, '22 to '23. And this is what we intend to do going from '23 to '24 and '24 to '25. And again, there will be a time after '25, but we will discuss this in due time.
So just to wrap up. Any upside above the margin range guidance for '25 at this stage would be linked to a better light vehicle production, which help your operating leverage, right?
Well, there is operating leverage for sure when the volumes are up. So we'll see where the volumes -- real volumes are in '25. If the volumes in '25 are significantly higher than our assumptions, there's room for a profitability increase.
The next question is from Michael Jacks of Bank of America.
I have a few more than 2, but they're all related to the same topic. It would appear that provision reversals contributed again in H2 to EBIT by around EUR 116 million, if my calculation is correct. I understand this relating part underperforming contracts acquired together with the Valeo Siemens JV. I would ordinarily associate the reversal of provisions with a situation that is better than what we feared at acquisition. However, the situation in High Voltage has deteriorated somewhat. So can you please help us to understand, as my first question, conceptually, the justification for the reversals? Secondly, should we expect this to contribute again in 2024? And if so, how much of this is included in the '24 guidance?
And finally, I would imagine that at some point, this then becomes a headwind in the bridge, which suggests that an even larger step-up changes required from the current underlying profitability levels to get to your 2025 EBIT target. So how should we think about this dynamic in relation to that target?
And my very final question. High Voltage production by your key customers was rather strong in the first half of '23, creating quite a high comparative base. You mentioned, Edouard, that you plan for flat High Voltage sales in 2024. Does that also apply to the first half? Or could we potentially see a decline year-on-year in H1?
Well, thank you for your question, Michael. I will let Edouard answer most of the different points of your question, but we are not confirming at all what you described as a release of provision in the second half of '23. This has not happened. But Edouard, please answer the questions.
So actually, I don't find your [ EUR 160 billion ] provision reversal actually in my numbers. In fact, we had some provision reversals, especially in H1, but it's much lower in H2. It's half of what we did in H1. And on top of that, we had some additional provisions in H2 because of retirement provisions. So basically, it's EUR 23 million provision reversal in H2 2023. So I'm happy to discuss further one-to-one session, if you want to discuss exactly the numbers here.
It's EUR 23 million.
It's EUR 23 million in the second half, exactly 2023. As far as '24 is concerned, so we do not plan to have important unperforming contracts provision reversals, while the guidance is not based on this. There is -- it is our job to make it happen. But let me please also focus on one specific point. The reversal of provision is naturally an accounting point, but it's also the real result of a very strong and very good job of our teams, of our operations. When you reverse provision, it means that you have been able to increase your prices, you have been able to decrease your cost and therefore, recognize that you will earn more money in the future. So I would really like to emphasize on that point because this is not only magic from accounting. This is the real results of our operations.
So as far as 2024 High Voltage production is concerned, in fact, you are right. They may be basis impact for the first half of '24 because we considered in hypothesis, as we said, that we would have a flat sales during the full year of '24 of between EUR 1.4 billion and EUR 1.5 billion. And as 2023 was very unbalanced between H1 and H2, we may have a negative impact for H1 and a positive impact on H2.
The next question is from Sanjay Bhagwani of Citi.
I also have two questions, and they're mostly the follow-ups from my colleagues. So my first one is on the organic growth outperformance. So as you mentioned, for '24, at midpoint, we are talking about organic growth outperformance baked in somewhere around 500 basis points. And then for '25, the midpoint of the guidance is baking in more than 10 percentage point of organic growth outperformance. If you keep in mind the 3% haircut you are taking on the auto production. So maybe could you please clarify what is going to be the key driver in '24 in particularly? And this is more H2 loaded? Or do you start to see organic growth outperformance 500 basis points from quarter 1 itself. The reason why I'm asking this question is because in '23, it's nearly close to 0% if we account for the geographical tailwind, and there can also be some sort of pricing in that. So what gives you confidence on this organic growth outperformance? And more importantly, what should be the timing of this? That is my first question. And I'll just follow up with the next one.
Thank you -- analyzed already our numbers quite thoroughly. So yes, it's about 5 points in '24. It's significantly higher than 5 points outperformance in '25. Coming into '24, you're right. It's going to be mostly in H2. And this is linked to a lot of start of collection of new projects coming in, in the second half of '24. So you're going to see more and more quarter after quarter all these big orders from '22 and obviously from '23, but mainly from '22 starting to hit the plans to hit positively, I mean, to increase the growth of Valeo in '24 and '25. And of course, this is coming months after months as -- and there will be more in '25 than what we have in the second half of '24. And this is why the growth of Valeo accelerates as the massive orders that we could secure in '22 and in '23 will materialize and transfer from their project status to production status.
It's pretty significant. And just coming into '25, it's about 20% of our sales that will be linked to these different orders that were secured in '22 and '23. So you see, I mean, there was a lot of discussion relative to the cost, the cash cost, the cash impact from these orders in '22 and '23 because we have to develop them, we have to tool our plants, but there's going to be a time and this time is coming soon where these orders are now getting from the project status where there is cash consumption to a status of production where we are generating cash. And we're seeing this transition happening definitely in '25, and that starts at the very end of '24. So I hope I answered your question.
Yes. That's very, very helpful, actually. And my second question is on -- Edouard, you touched on the point of software-defined vehicle. So if I understand it correctly, given electronic cost is a significant part of our fuel cost, presumably a part of, let's say, the ADAS and visibility include the smaller computer -- the decentralized computer. So given that the market is now moving to a bigger centralized high-performance computer, would you be able to provide some color on what your exposure is to these smaller computers and more importantly, how is the transition towards the bigger computers looking? I understand that's probably not relevant for '24. But in '25, this can become important for the growth.
I believe I understood your question. But if I did not, please ask it again. Our sales in SDV or orders in SDV are not cannibalizing our sales or our orders in Lighting or in ADAS. In Lighting, the main electronic part of lighting is what we call driver. This driver is today in the headlamps and will remain in the headlamps tomorrow. I have not seen any architecture, electronic or electrical architecture of cars where the driver will be moving from the light -- from the lighting into the main computer.
When it comes to ADAS, some of the small ECUs, electronic control units, that are part of the Valeo offer -- of the Valeo product are going to be moved into this main computing units that you are describing. But it's not a risk for Valeo. It's not a risk for ADAS business. It's a massive opportunity because in this SDV architecture with some pretty large computers, these computers are accumulating our merging tens of ECUs, out of which Valeo was doing 1 or 2 of them.
So when you think content per car, when you think about the opportunity of growth coming from SDV, we're seeing it as a massive opportunity for Valeo and not as a risk of cannibalization of our existing products. And this is demonstrated by the order intake. If we had cannibalization of our products, we would not have the order intake that we could secure in '24 -- in '22 and in '23. So the level of order intake that we could secure in '22 and '23 is a clear evidence that the SDV architecture is a massive opportunity for Valeo. And I tried to explain because the question is quite often asked to me why are we successful on SDV? Why have we been able to secure the level of orders that we have been able to secure in SDV?
And I try to answer because we are good on software because we are a software company. And because as well, our Thermal business is helping us tremendously. Our Thermal business is able to cool battery, while it's able to cool these large computing units in a better way than what some of our competitors can do because they don't have a Thermal business. So this is one of the reasons why we could get multibillion orders for SDV. So SDV is a massive opportunity for Valeo, not a threat, and it's not cannibalizing our own sales.
The next question is from Stephen Reitman of Societe Generale.
I have two questions, please. First of all, could you comment on the moving of your High Voltage business to Poland and how you see that plant being filled with future orders? And secondly, a more general comment. I think since the semiconductor crisis, we've seen the OEMs looking deeper into their value chains and then maybe even -- and negotiating directly with some of the semiconductor suppliers directly.
We've also heard over the last few months as well as some automakers even saying that they were actually also looking at just going and talking directly to some of the sub-suppliers, which previously were managed by the larger component groups. Have you seen any -- what evidence have we seen of this? Do you think this is actually just a short-term trend? Or do you think there's something more going on here?
On the second question, frankly speaking, no, we're not seeing it. We're not seeing it at all. We're buying 50 billion electronic components per year. We're managing [ 20,000 part ] numbers of electronic components. We're not seeing our customers taking charge of that. They're not doing that. So it's not a short-term trend. It's not a trend at all. It's not something that we see as a long-term trend. It's not something that we see as a short-term trend. So you see an announcement here or there, but they are -- I mean they are not presentative of what's going on, on the market.
And I think that Valeo has demonstrated during the semiconductor crisis that we have, the supply chain organization, we have the pursuing organization, we have management organization to deal with this kind of crisis. And believe me, I don't know a lot of customers that want to do it on our behalf because it's complex. So no, it's not a trend.
Receipt to the first point. Well, I mean, we are obviously working on our footprint when it comes to EV Powertrain or High Voltage Powertrain. And we decided to shut down the plants that we have in Germany, that's the Bad Neustadt plant, and the production is now done. It's over. So we are concentrating on 2 other plants that we have, 1 in Hungary, 1 in Poland. And these plants have the characteristics -- I think you're asking me a question on the Polish plant. This plant has the characteristic to have High Voltage parts and Low Voltage parts. And exactly what I tried to explain, integrating Valeo Siemens, the way we have done it, it means, you take the Valeo Siemens business and you put it inside a business that's already existing with existing sales on ICE on the hybrids. This is giving you the flexibility that you need to manage any kind of situation.
The plan that we had in Germany, Bad Neustadt, was fully dedicated to EV. So when the growth of EV is down or in a program, speed program works or doesn't work, you have immediate consequences on the activity of the plant. When we integrate Valeo Siemens into a plant of Valeo in Poland, where we have low-voltage activities, and you now have high-voltage activities, you are creating a lot of synergies, and you're creating a lot of flexibility in the sense that, as I said, when the EV growth is there, it's good news. But when the EV growth is not there as expected, it's good news as well. And this is a key characteristic of the way we have decided to integrate Valeo Siemens into Valeo that will reinforce the competitiveness, the flexibility, the agility of Valeo, and we're extracting synergies from that.
The next question is from Edoardo Spina of HSBC.
Two questions, please. First on the order intake. I wanted to clarify if you meant that half of the orders came from the ADAS division or if you meant a broader scope than just the ADAS division itself has defined? I ask it because the orders eventually become revenue. So I would also ask if you expected this trend in order to continue? And secondly, on the cost saving plan, just to clarify, what proportion of the EUR 200 million savings and EUR 300 million cost you expect to come from the merger of the Thermal and Powertrain, or if that's like on top, basically, I do not understand that part?
Well, I would take the first question. Edouard, you will take the second one. Well, on order intake, half of the 2023 order intake and the 2023 order intake is EUR 34.9 billion. Half or more than half of this order intake is within CDA. And CDA is about ADAS. It's about software-defined vehicle. It's about software and some interior experience products. So you can very well track the growth or the growth that will come from these orders because, as you know, we report the CDA sales. So you're going to see this order intake booked at the level of CDA translating into sales of CDA in the years to come.
So as far as the cost-saving programs is concerned, so -- I'm sorry, Edoardo, I have difficulties to answer directly to your questions because we are currently negotiating with our social partners about the exact package that is offered to the people that we'd have to leave. Basically, among these EUR 300 million global one-off program, naturally, it's part of it -- it's an important part of it. And the same ratio of it is into the EUR 200 million annual savings that we are planning. The EUR 200 million annual savings is planned as of 2026, the full impact. But the impact will start in '24, then increase in '25 and then will be full speed in '26.
Sorry, if I can -- a very quick follow-up on the first question on the CDA. If you couldn't comment on the trend, I understand what you said about the cost of the orders. But just should we expect in 10 years' time to have half of Valeo will be in CDA?
Well, it's a good question. Obviously, we want to allocate our money on the most profitable parts of Valeo. So it's not that we like or we don't like this or that or the part of Valeo. What we like is margins. This is what is driving us. We want to bring back Valeo's profitability where it needs to be. And this is about margin. So the businesses of Valeo that will drive the highest margin will be allocated more cash. This is the way we manage. So if CDA is in a position to continue to promise and deliver higher margin than the rest of Valeo, then they will have the opportunity to grow at a faster pace. But if some other parts of Valeo, Visibility, Powertrain, Thermal, are able to secure very good businesses, they will be given the opportunity to book these orders. This is the way we want to do. We don't like technologies, we like margins.
This was the last question. Mr. Perillat, back to you for the conclusion.
Well, thank you very much for attending this call. That was longer than usual because we had more to say. Move Up is a 4 years plan. We are halfway. We could secure and deliver '22 and '23. We could demonstrate that we have positioned Valeo as a company focused on electrification, focused on advanced driving assistance system, focused on software, focused on the trends of the industry. And thanks to that. We could secure a lot of orders and deliver financial improvement in '22 and '23. We are absolutely determined to deliver the second half of Move Up and bring back Valeo where it needs to be in terms of profitability and cash generation. Thank you very much for listening, and we're going to see us again in April. Thank you.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.