OPmobility SE (OPM) Earnings Call Transcript

Ladies and gentlemen, a very good morning. As Chairman of the Board of company Plastic Omnium, I have the pleasure to introduce to you the results of Plastic Omnium for the second -- for the first half of the year 2020. It's a real pleasure for me to hand over the lead to the new leadership team built by Laurent Favre and Félicie Burelle. They have worked under very extreme conditions during the first half year and the last 3 months through this COVID-19 epidemic, pandemic situation. And they have reached an impressive result with the closure and the reinitialization and the opening of 130 plants without putting our customer base, our supplier base in jeopardy and delivering quantity and quality at the restart on a worldwide basis. And I think that is an achievement. And they will now present to you our results for the first half of the year. And thank you for what you have done. Laurent and Félicie, the floor is yours.

Thank you, Mr. Burelle. Good morning, ladies and gentlemen, from my side as well and welcome then to the presentation of our 2020 half year results. Here in the room, Laurent Burelle, Félicie Burelle, but also Adeline Mickeler, Rodolphe Lapillonne, and we have as well the 3 division CEO. They may step in, in case of question after the presentation because we will have the traditional Q&A session later on after the presentation. As you know, as mentioned also by Mr. Burelle before, the first semester was mainly impacted by the COVID-19 crisis and by the effect on the market with a drop of 35%, and we will comment the drop by region. But for PO, the first semester was a semester of actions. Actions to react to the crisis, to shut down, to reopen our factories, to protect our cash, to protect our employees, to protect our customers. Action as well to anticipate the next steps. And the next steps are what we believe a slow market recovery because of the dimension of the crisis. That means to adapt our cost structure and to work on that. And action as well to speed up all the transformation initiatives we had already started before the crisis, meaning becoming more digital, more agile but also becoming even better in terms of innovation mainly in idle China. That is what we will present to you today during this 1 hour. First of all, coming back to the market. In a very challenging market, we have been able to confirm outperformance, 4 points. Even more important, outperformance also in the main region where the automotive production has an important role, meaning 12% -- 12 points in Europe, 10 points in China, 5 points in North America. That means confirming, again, our strong order book and our capacity to outperform the market in the coming years. We have also been able to reinforce our fundamentals. We have a strong liquidity at the end of the first semester, EUR 1.9 billion. The teams are highly motivated, highly committed, and they have done a great job during this first semester. The agility in execution, which is part of the DNA of Plastic Omnium did allow us to reduce our costs massively to adapt to the crisis, to cut the CapEx furthermore by 27%, and again, that to adapt to the COVID situation. We are working, as I was mentioning before, on further transformation of the company, on accelerating all the initiatives we have taken before mainly on electrification, hydrogen, on CSR and digitalization. Coming to the market and to show you what you know, and this is the Page 5 (sic) [ 4 ], meaning how deep the crisis is -- the crisis we are experiencing is. You see the numbers. What we do expect this year from the market, that means 64 million cars. That is our forecast for the year. That means 25% below last year. That means around 15% in the second semester below the second semester of 2019. It is a unique crisis because it comes after also 2 years of volume drop already in 2018 and 2019. That means the transformation in the market, in transformation. It is a unique crisis because it's much deeper, much stronger, much faster than the one we had 10 years ago. And you see the numbers to be compared. That means that this time, we were losing 8 million cars. And this year, we are losing more than 20 million cars. That means 2x, 2x bigger. That is the reason why we don't believe that the recovery will be as fast as in 2010. That is why we are pretty cautious for the coming years, and we are further adapting our cost structure to this new reality. We will come back to that later on. Moving now to some key figures, to some numbers, highlighting our performance in the first semester. First of all, with a turnover, economic sales dropping 29.5% like-for-like, that means EUR 3.2 billion. Outperformance of the market, I was mentioning before 12 points in Europe, 5 points in North America, 10 points in China. I would say strong EBITDA in this situation, close to 6%, EUR 171 million. A negative operating result by 3.9%. A net result of EUR 400 million negative with 2 effects. The first effect is the low volumes. The market drop in the first semester having an impact on our net result for sure. But also the fact that, as I was mentioning before, we don't anticipate the market to come back to the previous situation. That means before COVID-19. We don't expect the market to come back to this level before 2024, 2025, meaning we have overcapacity. There is overcapacity in the market. And that is why we have made some impairment. It's about EUR 267 million, and that is more than 60% of the net results we have in the first semester. And this assumption of a slow market recovery is also the assumption we are taking to further adapt the cost structure of Plastic Omnium. In terms of free cash flow, negative free cash flow of EUR 572 million with a big impact of the negative working capital -- sorry, big impact of EUR 415 million of working capital variation. That means, I would say, only EUR 157 million negative operational free cash flow. And a positive net operating cash flow of EUR 69 million, I think it's important to mention it in this kind of market situation. Net debt coming to EUR 1.4 billion. Strong liquidity, EUR 1.9 billion at the end of the first semester. That means all in all, in a nutshell, for sure, weaker numbers than what we had experienced in the previous years. But nevertheless, I'm very proud of the job which has been done by the team of Plastic Omnium to be able to mitigate the impact of the crisis or the numbers and even more to prepare the next steps and to further transform the group and to become stronger after the crisis. That means with the strong fundamentals we have been able to reinforce, we do confirm our long-term growth strategy, which is based on 3 pillars. The 3 pillars, as you know, and you can see again on the Page 7: (sic) [ 6 ] operation excellence, operational excellence to become more agile, to become leaner, and that is mainly what we want to do with more digital features; innovation, innovation to increase the content by car and to be able to outperform the market in the future as we have done in the past with a strong focus on electrification and hydrogen; and CSR, to position Plastic Omnium as a leader in the industry in this manner as well, which will contribute as well to our performance in the future. Now coming back to what we have done in H1 really to face the crisis, to mitigate the impact of the crisis on the P&L of Plastic Omnium. With the Slide 9 (sic) [ 8 ], I want to remind you that, first of all, we are coming from 2019 situation. 86 million cars produced, which was already weak because it was after the first 2 years of drop in '17 and '18. Also to remind you that already at the beginning of the year, and it was in January 7, when we had an Investor Day, we were anticipating a further market decline. That means at this time, we were anticipating 84 million cars for the year, meaning that we were already working on additional cost reduction program, which did help us a lot to face the crisis as well to speed up those initiatives. As we met in February 19, where we did present our '19 results, we had the first impact of the COVID crisis in China. And at this time, we said the impact could be also a global one, and we were preparing to shut down factories in Europe, in America in case of, which also did help us a lot to be very agile, very fast in execution as the crisis came to Europe and to North America. As of today, we see the market being down at 64 million level this year, which is lower than we expect. We are talking about 67 million, meaning 15% lower in the second semester than in the second semester 2019. That is what we are considering for our cost structure, our cost reduction program. Now with -- showing you what was our journey in term of internal footprint, in term of factories during the first semester on this slide. You can see the 131 factories of Plastic Omnium, they're split by region, and also the evolution by month, meaning green, all the factories open like in January. And then in February, the COVID crisis did start in China, where we were forced to shut down the 29 factories of Plastic Omnium and some factories in Asia as well. In March, it was improving in China. In April, all the factories were open again in China, but we had the full impact of the crisis in Europe and in Americas, crisis which just did start in Europe already middle of March. In April, all our factories were shut down in Europe and in Americas. And then in May, we did start to reopen factories in Europe, and in Americas. In June, all the factories are open. And I will show you the level of activity we had in June. But that is the journey, what we had to deal with to shut down and to reopen 131 factories worldwide, starting with China and impacting the Europe and Americas. In terms of sales and in terms of volumes, that is what you can see on the Page 11 (sic) [ 10 ]. You see the dark blue line, which is the sales by month of Plastic Omnium in 2020, compared to the light blue one, which is the sales by month 2019. And as you can see, we had a very strong start in terms of sales because in January, February, we were above last year, 5% and 14%. That means we are largely outperforming the market, which was already declining. And then in March, we had the first huge impact of the plant closure in Europe because of the COVID crisis. That means the first quarter which was profitable at Plastic Omnium, which was much higher than the market but where we had the first impact of the COVID crisis. The weakest month in terms of activity was April because in April, we were 86% below last year in terms of sales. And then we did start to recover with reopening of some factories in Europe and America. And in June, all the factories were open again. We were 15% below last year in terms of sales. And you see on the right side of the slide, the split by region. That means in China, we were 16% above last year in June, which is good news, showing that the market is recovering and that we are strongly outperforming this market. In Europe, we were minus 12% below 2019. And in North America, minus 25% below last year mainly driven by Mexico. That means you see here the impact of the crisis on our sales compared to last year and the fact that in June we were back to, I would say, correct level of activity, minus 15% compared to last year, and also back to positive results and to a strong generation of free cash flow. For sure, managing the crisis was about cost reduction, was about cash management, but it was about as well, safe restart of the operation. And I will show you now what we have been doing and what will be in the impact as well of those measures in the coming months. Regarding cost reduction, we have organized our cost reduction program in 3 waves. The first one was about crisis management, flex, reacting fast, cutting the cost, where we had a positive impact of EUR 117 million compared to the first semester of last year. The second wave was about working on rationalization, adaptation of our footprint. That means to adapt to the new reality, to reduce our capacity with a EUR 40 million saving on an annual basis. And the third wave is the long-term one that is about the transformation of the company, EUR 200 million savings end of 2020. I will comment to you in detail right now the first 2 items. And Félicie Burelle will talk about the transformation program later on and where this EUR 200 million are coming from. First wave, I was mentioning fixing the cost, cutting the cost. EUR 117 million savings in the first semester compared to last year. One big item is, for sure, the personnel expenses. Personnel expenses, which were EUR 1.3 billion last year at Plastic Omnium. And with all the actions we have put in place, first of all, stopping the contractors, the temp contracts. You know that we have around about 20% of our staff which are flexible because temps are our contractors. Additionally, working on short-term work in all the countries where it was possible plus reducing the headcount did allow us to reduce the personnel expenses by EUR 94 million compared to the previous year. The second topic was about the other costs, other production costs, SG&A, where we have been able to reduce by EUR 23 million compared to last year. That means also to adapt our cost structure on a sustainable manner with the actions we have put in place this first semester, which did help us a lot to mitigate the impact of the COVID crisis on Plastic Omnium. The second topic I was mentioning is -- the second wave is about adapting our footprint, adapting our capacity to the new reality. You see here some examples. That means actions we have been already taking, we have launched, which will have an effect of EUR 40 million in full year in 2022. One part, 50% will come already in 2021, the other one in 2022. Some plant closures we have announced and we are working on. Some rationalization of footprint in R&D mainly in Germany, where we also offer capacity. But also the fact that we have decided to shut down some paint lines for the activity of IES to concentrate the production on less, I would say, paint lines to reduce the production cost as well. We have been working as well on regional synergies of our headquarters. You see here an example of what we are doing in Asia. That means EUR 40 million savings. That is the first step. And we will, for sure, continue to adapt our footprint, our capacity to the market situation, to the speed of the market recovery. Beside the cost reduction program, we have been working a lot as well on preserving the cash and the liquidity. You have seen that we had negative free cash flow of EUR 570 million, a negative working capital variation as well because our main priority in the first semester was to preserve the supply chain. We wanted to be sure to be able to restart on the safe manner of the operation for our customers as well, to have no issue with the customers, and we have been able to do that. That means we had no stoppage, no delivery issue with our customers, which was important for us. Nevertheless, we have been working as well on improving our working capital management, meaning reducing the inventories, reducing the overdues, EUR 23 million in total, but also to adapt the CapEx spending to the volumes. That means by reducing the CapEx by 27%. That means EUR 82 million compared to last year. That means a saving of EUR 400 million compared to last year. We have also refinanced the company Plastic Omnium even if we didn't need that, but we have refinanced it for the next for the next years. And Adeline will comment that much more in detail with new credit lines, with credit lines which have been renewed as well. And we have been able as well, which was important for us, to stick to our commitments to our stakeholders, meaning to pay dividends, reduced by 34% compared to 2019, but also to reimburse the bond of EUR 500 million in May 2020. By doing that, by honoring as well our commitments, we have a very strong liquidity situation of EUR 1.9 billion at the end of June. And we can look forward the next steps with determination and serenity. Restarting the crisis was not about -- managing, sorry, the crisis was not only about financials. It was also about taking care of our people. And as you know, we have put in place a very, very strict protocol in terms of sanitary actions. One unique protocol for all our factories, all our sites worldwide at Plastic Omnium. And the protocol is still in place right now because we are still monitoring very closely the situation. And as you know, the situation is at risk in some countries. But it did help us to reinsure our employees and also to mitigate the COVID-19 of the situation of our employees. On top of that, working on the supply chain, as I was mentioning before, very closely with our suppliers. Supporting them for the ones being in troubles and making sure that we were able to restart the operation, on the safe manner of our customers, which was the case. That means we are very proud about that. And the last topic is also quality. We know that when we restart operation after some shutdown, there is a risk of quality. And we have been also able to mitigate those risks. That means no problem with our customers. That means a great job done by the team to restart the operation in a safe manner both for the employees, for our customers and for our suppliers. We have not also forgotten what is part of our DNA in Plastic Omnium. That means being a responsible entrepreneur. We have created a fund dedicated to the COVID-19 victims, where we have been able to support a lot of local initiatives. That was important for us to have a local impact on the people needing support in this difficult situation. That means with this fund, we have been able to support 113 projects worldwide in 23 countries, supporting hospitals, supporting schools, supporting universities, and showing, again, our strong engagement to act, to behave as a responsible entrepreneur. That is what we have been doing in the first semester. And now I will hand over to Adeline Mickeler, who will present the financial results.

Good morning. As already mentioned, we had a good start of the year. You see here our Q1 sales, quite comparable to 2019 at EUR 2.1 billion. This was a strong outperformance to an automotive production already declining by 22%. And this decline was mainly driven by China, which represents 9% of our total sales. We were very much and more affected in Q2, as you can see on this slide for 2 reasons: First, because the drop was 2x bigger in Q2 than in Q1, minus 46% for the automotive production compared to minus 22% in Q1. Second, because this minus 46% drop was driven by Europe and Americas, which represent 84% of our total sales. As a consequence, Plastic Omnium economic sales decreased by 53% in Q2 2020 compared to Q2 2019. This is a drop of EUR 1 billion. We lost EUR 1 billion compared to Q1 -- or compared to Q2 2029 (sic) [ 2019 ]. All in all, in H1, our economic sales amount to EUR 3.2 billion in sales, and this is a drop of 30% compared to the last year. This is also an outperformance of 4 points to an automotive production decreasing 34% on the period and a strong outperformance in 3 regions: Europe first, 12 points outperformance. This outperformance is the result of the increase of content per car we are able to sell to our customers. Increase in the content, thanks to the continuous success of SCR, the depleting system for diesel engine, and increase per content at HBPO in our PO module business, where on top of the front end module where HBPO is a worldwide leader, we began added new modules such as cockpit, center console and DC-DC converter for electrified vehicles. China, 10 points outperformance. This outperformance is mainly driven by market share gains in our traditional activities, bumpers, fuel systems and a bit front end module. North America, 5 points outperformance. This outperformance is driven by the fact that we have been investing a lot over the last 3 years in that region with 5 new plants that we progressively ramped up. This outperformance is also an outperformance per business. As you can see, Page -- Slide 22 (sic) [ 20 ], we outperformed 3 points our production business, Plastic Omnium Industries, and 8 points for Plastic Omnium Modules. Again, confirming in that business the growth potential of this HBPO business we took control of in July 2018. Per region, the evolution of our sales in H1 and the outperformance we generated in Europe and in Asia reinforced, first, the weight of Asia in our total sales from the 16% in 2019 to 18% in H1 2020. China represents now 10% of our total sales. And this is also an increase in Europe from 1 point to 54%. The majority of the growth and especially at HBPO is driven by Germany. Germany, which is our first contributor in terms of sales, 18% of our total sales, followed by U.S., 11%; Mexico, 10%; China, 10%; and Spain with 9%. In terms of customer breakdown and customer contribution, we saw in H1 2020 an increase in the contribution of our German OEMs mainly from Porsche. We delivered to the Porsche Taycan the front-end module and the cockpit module. We also increased our share with Daimler in Germany and in Mexico. The second contributor is the French customer. With PSA, we used to supply on the successful 208 and 2008 the rear bumper on the former model. For the new models, we deliver the rear bumper plus the front bumper. Again, an example of additional content that we are able to sell to our customer, and that contributes to the outperformance of Plastic Omnium. Profitability per business now, and on Slide 20 -- 22. I remind you the cost structure of Plastic Omnium in 2019. The material margin we have is around 30%, meaning we buy 70% of what we sell. To reach the 6% operating margin we generated in 2019, we have therefore 24% of cost. That can be splitted into 15% of personnel cost, 6% of other costs, production cost and SG&A, and 3% for the amortization of our industrial assets. As already mentioned by Laurent Favre, we were able to reduce all those costs by EUR 117 million. And with that cost savings, with -- we generated an operating loss of EUR 116 million, minus 3.9% of our total sales. That is made with a minus 4.8% for production businesses through Plastic Omnium Industries and minus 1.4% for the assembly business of Plastic Omnium Modules. The EBITDA we generated in that difficult environment in H1 2020 is significantly positive at EUR 171 million, 5.8% of our sales. And again, this is a mix of 6.8% for Plastic Omnium Industries and 2.7% for Plastic Omnium Modules. Now I will hand over to Laurent Favre to give you an update of what is part of our operating margin and EBITDA of H1 2020, our Greer situation.

Thank you, Adeline. Because we did assume that you wanted to know, you want to know how it is running in South Carolina, we wanted to inform you for sure about the situation there. Like in the other factories of the world, we have been also impacted by the COVID-19 crisis in South Carolina because we had to shut down the factories of Greer and Anderson for the complete month of April. That means about a bit more than 4 weeks because our customers did the same as well. Nevertheless, we have been able to further improve all the industrial KPIs. That means we are online with the targets we had set to ourselves in terms of quality, in terms of delivery situation, in terms of productivity. Customer satisfaction is improving. That means we are on track with all of KPIs, industrial KPIs concerning the operation in Greer. Even more, we have used the shutdown in April to prepone some activities we were targeting, we were preparing to be done in -- during the summer shutdown, meaning to adapt to improve the layout of the factory of Greer. And that has been partially due -- partially done, sorry, to 70% during the April shutdown, the first shutdown because of the COVID-19 crisis. We have been able to restart the operation on the safe manner with the local team, which shows that we have now the right local management, which is very important regarding the future of the factory. By doing all these actions, we have today 500 less people in Greer and Anderson than last year in October. That means about 1/3 less employees in both factories compared to last year in October with a similar level of volumes, showing again that all the actions we have been working on are paying off and are progressing regarding the recovery of Greer. That is the reason why we do confirm -- excluding, for sure, the COVID-19 impact. That means the fact that we had to shut down the factories for 2 weeks. We do confirm our target of an improvement of EUR 45 million this year compared to last year. And we do confirm as well our target to achieve the breakeven by 2021. That means by next year with all the actions we have been doing and all the actions we are still working on for the coming months. The activity with BMW for the second semester looks promising. We -- as we know as well, we were working on different scenarios for our footprint in South Carolina. Now the main scenario we are working on is to keep both Anderson and Greer because we believe we will be able to load both factories properly with additional contracts from other OEMs, which is important for us in terms of growth, outperforming the market, but also to be sustainably profitable in this region in the long term. Therefore, main scenario, Greer and Anderson should be kept, and we will be able to increase -- to improve the loading of those 2 factories in the coming months. Adeline?

So coming back to the P&L and below, the operating margin, we registered in H1 2020 net operating charges of EUR 313 million, majority of it being impairment. I will comment it on the next slide. Our financial expenses decreased EUR 2 million to reach EUR 35 million. We had a positive income tax, which is the result of deferred tax effects. And all in all, our net results without the exceptional depreciation, the impairment net of taxes of EUR 267 million, amounted to EUR 179 million in H1, EUR 404 million with this impairment. So what about this impairment? According to accounting rules, we have reviewed the value of our assets in light of, first, the 25 drop of the automotive production that we expect for 2020. And second, midterm, taking into account the forecast for the automotive production, being significantly lower to what we expected pre-COVID crisis. Félicie Burelle will show you a slide in a few minutes showing that, again, we won't come back to 2019 volumes, which is to say, 86 million cars produced before '24, '25. So again, we've made impairment tests, taking into account those assumptions. We reviewed around EUR 4 billion in assets, EUR 1 billion for the goodwill, EUR 0.7 billion for intangible assets and EUR 1.7 billion for our tangible assets. And the result of those tests was that we impaired, as you can see here, EUR 177 million of industrial assets, EUR 53 million of development contracts and EUR 32 million of customer contracts. Those impairments are made globally, they concern all the countries, all the regions and all the contracts. And they represent a total of 6.5% of our total noncurrent assets. Coming to the cash flow statement now. First, despite the 30% drop of the automotive production in H1, we generated a positive net operating cash flow of EUR 69 million in H1. Second, we managed decreasing the CapEx by EUR 82 million. As a result, the net cash consumption, taking into account EUR 226 million of investment over the period, amounted to EUR 157 million. We also suffered from a temporary outflow of working capital requirement, a very significant one, as you can see, of EUR 415 million. I remind you that the working capital requirement for Plastic Omnium is negative. At the end of December 2019, the difference between receivables and payables amounted to minus EUR 0.7 billion. Due to the drop of activity mainly in Q2, this difference was reduced to EUR 0.2 billion at the end of June 2020. This takes into account a decrease of a factoring which amounted to EUR 315 million at the end of December and reached EUR 220 million at the end of June. So all in all, the free cash flow of the semester was negative EUR 572 million. And again, 70% of this amount is related to the working capital requirement outflow that will be partially compensated in H2 in relation to the pace of a recovery of the market. We distributed in H1 a dividend of EUR 71 million in reduction of -- reduced by 34% compared to last year and compared to the amount that was initially announced. We also made buyback shares in Q1 of EUR 13 million. And all in all, our net debt amounted to EUR 1.4 billion in H1 2020 compared to EUR 1 billion in H1 2019. This net debt represents 78% of our shareholders' equity of EUR 1.8 billion and 2.1x our EBITDA. Last but not least, in that difficult environment in H1, again, our liquidity position is very strong at EUR 1.9 billion, composed with EUR 0.6 billion of cash and EUR 1.25 billion of undrawn and confirmed credit line, exactly the same amount that we had end of December 2019. In H1 2020, we paid down the bond of EUR 500 million and added almost the same amount of new credit line. I remind you that we have no covenant on our financial debt. And I also remind you, as you can see on this slide, that we have no major repayment before June 2023. So our financial structure is very strong, our liquidity is strong. And that really enables us to accelerate the strategy, the mid and long-term strategy, that Félicie Burelle is going to present to you.

Thank you, Adeline, and good morning to all of you. So as Laurent Favre explained to you, we've been really focusing on dealing with the crisis on the short term. But we have also made sure to really push our strategic initiatives, not to impact the development plans of the company over the long run. Why? Because the COVID situation has not put on hold all the transformation of the industry. And it was really essential for us to preserve our capacity to adapt to those profound change and really not to jeopardize our future. And the temptation to do so would have, was and still is important, as you can see on this slide, so Slide 31 (sic) [ 30 ], which really highlights the complex situation in which we are today. So you have here, in blue, what market forecasters are showing in terms of volume production forecast. As we already mentioned, we were already over the last 2 years in a decreasing market. And this year, assumptions are that it should go down to 67 million and, as Laurent Favre explained to you, recover to the last year level over the 3 years to come. In that context, we have taken a more conservative assumption for 2020. You can see on the red dot point our assumption for 2020 of 64 million vehicles to be produced around the world, which will be minus 25% versus last year. On top of the magnitude of the decrease, which is really important, if you compare that with what happened, the decrease -- market decrease that happened 12 years ago, there is a big difference. The big difference is how will be the recovery. 12 years ago, it was a V-shape recovery with a strong rebound. And here, clearly, we envisage that it will not be the case. Why? Because one of the biggest difference is that 12 years ago, China was growing a lot, which was not the case still last year. And on top of that, there was already a lot of change that you all know in terms of powertrain mix evolution, trade wars and all kind of outside events that were impacting the market. And here, on top of that, we have clear uncertainty in terms of consumer spending. So all in all, that is why we have a very low visibility for what will happen in the years to come. And that is why we have taken the assumption, management assumption that the market for 2021 will be at 70 million vehicles to be produced. I say management assumption because we are taking that as an assumption to measure, to pilot the business but also to structure our cost reduction program and also our transformation plan. So if the market is doing better, then we'll be in a position to do better because we will have capacity to do so. So fast-changing market already before the COVID crisis. But clearly, we believe that this crisis will intensify, is already intensifying some of the preexisting trends, and we have identified 3 dimensions. The first one, which is around your organization, your business model, impacted by what we see, regionalization and digitalization. Clearly, we see that at the beginning of the COVID crisis. The supply chain in the automotive industry was put under a lot of pressure because, as you know, OEMs and suppliers are very interdependent with many just-in-time order. And it was critical to make sure that we were not stopping the whole supply chain. So we believe this will have an impact over the long term. And our regions are structuring themselves but also attached to geopolitical risk and also technology leaderships that regions want to preserve. In this aspect, we believe it should not impact us too much as we have more produce where you sell approach. So our products are made, produced to supply our customers over a small range in terms of kilometer range. So that should not impact us too much. Digitalization will be key, has been key in the way to manage this crisis, not only for people being able to work remotely but also how to make our organization leaner and more efficient and also impacting the way consumer is buying. So we will have to take those 2 dimensions very importantly in the way we drive the business in the years to come. Second dimension really important, which is the CSR. The CSR dimension was really important already before the COVID crisis. But somehow, it has been a stress test in the last month as it really put a strong emphasis on what was the compartment, behavior, corporate responsibility of companies. And finally, electrification. Most of the plans that -- stimulus plans that were put in place in different countries were highly attached to the powertrain mix evolution of each given countries. And also, we have seen that hydrogen has been gaining momentum with high investments deployed throughout the Europe mainly but also China. So let's see how we've been incorporating those 3 dimensions in our long-term strategy. So on the first part, which is around adapting our business model, we have put in place, we have launched just before the lockdown our transformation plan, which is called Omega. Omega is really about how to find solution to rethink all of our organization, our processes, the way we work in order to gain agility, but obviously competitiveness, which will be key in a market that will decrease in the years to come and to adapt to the market industry changes. Digitalization will be really at the heart of this transformation plan because it will be an enabler to change, adapt the business model of Plastic Omnium. So Omega, at the end of the day, is really how to adapt the tools, the organization to lift up our performance, and then consequently, to be able to invest in the innovations and the road -- innovation road maps that we have for the years to come. So we have big -- we have 7 important streams. We have decided to tackle first, procurement. So indirect procurement, to be more specific, and design and development, which is the way we develop our product before they get into production because we really identified those 2 as key in terms of our capacity to capture value and savings and also because of the importance of that in the years to come. Those 2 streams will generate EUR 200 million savings by the end of 2022. We have identified different levers, organization, tools, footprint, the way the teams are working together, more streaming of organization. All of that will pay and produce savings by the end of 2020, full year impact. On top of that, we have other streams, organization, which is design, which is touching more other meter and support function within the organization. We have the Industry 4.0. We already talked to you about -- in the past about the importance of moving the operational excellence to the next step. And this will occur, thanks to Industry 4.0. Employer of choice. Here, we talk about purpose of the company. We talk about talent management. We talk about attractiveness in the market and in a sector that today can raise some question. And so we need to work on that to show the real potential of the industry. And last but not least, carbon-neutral strategy, which is really important as it is 1 of the 3 pillars in terms of strategy that Laurent Favre told you about just earlier. So moving to that CSR strategy on Slide 34 (sic) [ 33 ]. Here, in this field, we have a very strong policy, Act For All, which I think is really part of the DNA of Plastic Omnium. It's really embedded in the way we work. And this is why we believe it's a key priority, and this is why we put that at the top level of the strategy. And we will change and adapt our organization in that sense. Today, we have achieved a lot, but we have identified 3 key levers of improvement. So the first one, which is carbon-neutral strategy. Obviously, we are committed as part of the green deal to achieve carbon neutrality by 2050. But we are also working on a methodology and a budget to, in a more midterm period, be able to be carbon neutral on what is called scope 1,2 and 3. So 3, upstream, meaning what enters into the production of our product. Second, we are working on the life cycle analysis and the greater use of recycling plastic within our product. Obviously, this dimension is not new for Plastic Omnium as we have always believed the plastic properties offer a great deal of opportunities in terms of weight production but also in recyclability. And we have innovation projects to be able to have a greater use, so 25%, as you can see on this slide versus the average of 6% of today. So that would be a major way to move forward. And finally, diversity in general, but with a specific focus obviously on gender diversity. And in that field, we have been rewarded by 2 important nomination. The first one, the best progression over the period of 2017 to 2020. That was given to us by the association WAVE, so Women and Vehicles in Europe. It was a great recognition for the team that worked hard on pushing this progression over the last years. And finally, we won the first place in 2019 within the Top Management feminization in the SBF 120 for the automotive industry, 25th in general but first for the automotive industry. So great achievements, but it's not enough. We need to do more. We need to do more to push more women to be in directing -- in directors' position in plants, we are too low on that, and across the whole organization. So at CSR, what's the second important dimension? And last but not least, technology and more specifically, electrification. So as you know, we have been in a changing industry for a while now for many years, around what is called the CASE, connected, autonomous and shared and electrified trends that are pushing the transformation of the industry. This trend is obviously still ongoing, but we have seen that the COVID situation has been impacting negatively and positively very short term on some of those trends. Negatively in general on the autonomous driving segment. Why? Because even the most -- sorry, optimistic players recognize that the efforts and the timing to push such technology would take a bit more time and also because obviously, some investment arbitrage were to be made given the current situation. It's not the same everywhere. We see that more on what we call traditional OEM, while new players in this field has been keeping the momentum in China also. Not surprisingly, the shared dimension of the CASE was hardly impacted because of the lockdown situation. And here, we will see most likely, there will be some consolidation in that field. And last but very importantly, positive impact on the electrification trend. Why? I said that earlier. Most of the stimulus plan were attached to decarbonization plan of the powertrain mix. So in France, we see that just for the month of June, the increase in sales was very important, almost 15% versus less than 5% last year. So we see that it has impacted positively the spending of the consumers. The question will be, will that last over the medium to long term? And hydrogen, great momentum, and we are happy to see that taking as many countries will invest heavily in putting the infrastructure around putting the grid on hydrogen. On that topic, so electrification, as you can see, we are ready to take the opportunity of this segment picking up. On 2 segments, the traditional OEMs that have been investing hard in that field to catch up and commit with the engagement in terms of regulation and avoid fines. So we will be there. We will supply all of the main key flagship cars in that field but also for pure EV players such as Tesla, Polestar, Lucid Air and Rivian. So clearly, our current order book enables us to see the opportunity of the momentum the pure electric vehicles are gaining. In terms of hydrogen, so great momentum and which is in line with our -- the view that we have on this segment. We are very pleased to see that it will pick up. We've been believing in that technology for a while now because we are sure it will play a very important role in the way powertrain mix evolution will change and will adapt. It is very complementary, in our view, to the pure EV vehicle because it will unlock some pain points that we have today for the use of greener vehicle outside big cities, thanks to better charging -- quicker charging time than EVs and thanks to better range and longer distance, which is problematic once you are outside big cities and which is problematic when -- for commercial purposes. So to develop that strategy, we have our efficient ecosystem that you can see on Slide 37 (sic) [ 36 ], starting with our membership as a steering member of the Hydrogen Council, but also with 2 research centers that we have, one in Deltatech, Belgium, and one in China, which is key for this market with Omegatech. We invested back in September EUR 30 million in a venture capital fund called AP Ventures. So not only it gives us the view on how the technology is evolving in that field, but also it enables us to have access to those many start-ups that are popping in that field and to understand the full implication of the whole industry of hydrogen. And finally, very important, our 3 strategic acquisition that we have made in the past, Optimum CPV and Swiss Hydrogen that we use as a basis, as a platform to grow our capabilities and deploy our strategy. And we hope to do more in the months to come. That strategy, that ecosystem has proven to be successful because 2 aspects. First, we have now 2 certification for the 350-bar and 700-bar certification in terms of pressure for high-pressure vessels. And with that, we've been unable to have predevelopment. And we won also an RFQ on trucks and buses segments. And we are very active in submitting bids for passenger cars but also for train application in hydrogen. So many ongoing -- commercial ongoing activities, which lead us to really believe that we will be capable in 2030 to reach significant market share out of the 2 million vehicle that we see as a market. So here, we have a double ambition. First, to be a leader in high-pressure vessel, which is, I would say, our normal development, the extension of what we do today in our clean energy system business. And here, we ambition, so 25% market share. And also as we want to capture the value of the full hydrogen segment for mobility, we also ambition to seize 10% market share in the fuel cell system, which is based on the capability building that we have based on Swiss Hydrogen. So with that a strategy, we really ambition, and we are positioning ourselves to be a leader in onboard hydrogen storage energy. And with that, I think we can move on to the outlook.

[Foreign Language] Thank you, Félicie. And as you have seen, even if we had to face the crisis during -- the COVID crisis during the first semester, we have been working a lot also on middle-term and long-term strategy topics, which would allow us to be even stronger after the COVID crisis. And the -- after the COVID crisis, it's starting now with the second semester, and I remind you what I was saying before. That means we do anticipate the market going down to 64 million cars this year, 25% drop compared to last year. H1 was minus 34%. We believe H2 should be around minus 15%. These are the management assumption we are taking. And you see as well the split by region, the main regions. China for the full year, around minus 20%; Europe, minus 30%; North America, around minus 30%. As Félicie mentioned before, for 2021, we don't do any forecast right now because it is too early. But we have a very strong management assumption, saying that we evaluate the market as kind of worst case being a EUR 70 million next year. And that is the assumption we are taking to adapt our cost structure to a EUR 70 million market worldwide, knowing that we have anyway the capacity in our factories to produce much more. That means management assumption, which is pretty aggressive but which is helping us to further adapt our cost structure. Regarding the second semester with the assumption I was mentioning before, that means the market being at 64 million vehicles in 2020 with about minus 15% in the second semester. We will come back to much more better numbers in terms of profitability. That means the EBITDA will be higher than 10%. The operating margin will be higher than 4% in the second semester. And we will be able to generate more than EUR 250 million free cash flow in the second semester. I believe these numbers really do demonstrate that everything we have been able to do in the first semester will pay off -- is already paying off because, as mentioned before, already in June, we were able to come back to a profitable situation. That means for the full year of 2020, adding the first semester results you have seen before but also our targets or expectations for the second half of the year, we confirm the outperformance of the market of at least 5 points of the global market. We will achieve an EBITDA which will be higher than 8%, and the operating margin of Plastic Omnium will be positive in 2020. Again, even if we are facing a 25% volume drop compared to last year with the speed we have been experienced in the first semester, again, a very strong performance. To summarize, to conclude what we have been saying before and what you have seen as well, our long-term strategy is unchanged. We are even speeding up in many items. We have teams which are very committed, and they have shown that, they have demonstrated that to manage the crisis. We are speeding up our transformation program. We have been demonstrating as well our strengths to anticipate the market, to adapt fast to the market situation. And the sound financial structure we have, and we have been able also to keep even if we had to face this huge crisis, will allow us to invest in the future, in the long-term strategy of Plastic Omnium to be able to consolidate or to further improve our leadership position. I want to thank again the Plastic Omnium team for the job which has been done in the first semester because it's a great job. And now we are very pleased to answer your question.

[Operator Instructions] We have a first question over the phone from Thomas Besson, Kepler Cheuvreux.

It's Thomas Besson, Kepler Cheuvreux. I'll have 3 questions, please. First, I'd like to come back to your relatively bleak scenario in a bleak environment for global light vehicle production. Can you explain where your management assumptions deviate most from IHS in terms of regions or segments and help us reconcile these management assumptions with your Slide 10 that shows that in June actually, the situation was getting closer to normal? So that's the first question. Second question. When we look at some industries' margins in H1 and, I think, about H2, is it reasonable to assume that the bulk of the negative effect from Greer has already taken place, namely that we can think about a more normal operating leverage without such kind of one-off effect that probably have largely been sold? And third and last question. Your modules business has, of course, also suffered a lot from the decline in production mainly in Europe. When -- what kind of revenue growth can we expect for modules versus your initial plan that you had shown during the Investor Day for 2020, 2021? And when do we get back to more normal margins? Because I must say we don't have much experience of the evolution of profitability for this business, which is theoretically more stable.

Thank you for your question. I will start with the first one, which is logic as well. Regarding the market, we discount basically the forecast of our customers, depending on the country, depending on the vehicle, depending on the customer. That means it's not a 5% discount for all the customers, for all the countries, all the vehicles. We do believe that is what we do see as well, that the premium segment will suffer less than the other segment in the second semester. We do believe that there is a momentum, which is also supported by the different grants on electrification. That means hybrid, electrical cars and so on, and that is something we are considering positively. From the other side, we see other segments of the market, middle-class segment, mainly in Europe, being stronger impacted by the COVID-19. Also in the second semester, that -- what the experts are saying, that is what we are discounting the most. That is more or less the same also in the other regions. We believe the less risky market for the second semester should be China because China is showing a recovery during the last months, which is pretty positive. The stock situation, inventory situation in China is also pretty low. Therefore, we believe China will be less impacted by the economical crisis. And therefore, that is what we discount the less compared to the expert. North America is at risk. It is at risk because, as you know, the sanitary situation is still an issue. And therefore, we discount the volumes for some American OEMs in North America. And as I was mentioning before, in Europe, it really depends on the -- it depends on the customer. It depends on the segment. But we believe, in a nutshell, German customers, premium OEMs should outperform the market while middle class should suffer more than what the experts are seeing right now. That is the way where we come to the 64 million for this year, by discounting some forecast from our OEMs as well. Regarding 2021, I was mentioning before, it's not a forecast of 70 million cars. 2021 is just a management assumption because we want to further adapt our cost structure to any kind of situation. And therefore, we are planning or we are managing the company with these 70 million cars, knowing that we have anyway the capacity to produce much more. June was at minus 15% compared to last year. June, I think, was also pushed in many countries to close the semester. It was also pushed by some grants, which may not have a long-term effect in the second semester. That is why we are pretty cautious for the second semester. Regarding the second question on the industries and Greer, I was mentioning that regarding Greer, we do confirm our target to come back to a breakeven situation in 2021. We have already said always in the past that the second semester will be better than the first semester because we are progressing from day-to-day with the operational KPIs. That is also what we do see today. We have achieved a lot with the reduction of, for example, 1/3 of the staff in Greer and Anderson, 500 people less than in October last year. We have achieved a lot with reducing the nonquality costs, being very, very competitive in terms of delivery performance and so on. But for sure, at the same time, we had to suffer also from the shutdown of the factory for more than 4 weeks. Therefore, yes, the second semester in Greer, South Carolina, will be much better than the first semester, both because of the COVID-19 situation should be behind us but also because we are progressing in the operations. The module business, I will let Adeline answer regarding the top line. I just want to answer regarding the profitability situation, the normal profitability situation. Adeline was talking about our cost structure in Plastic Omnium. In the module business, it's different, as you know. In the module business, the material margin is 10%. That means we do buy 90% from what we sell. And by definition, the operating margin is lower. Therefore, module is a different kind of business, where the ROCE is more important than the operating margin. Nevertheless, we will come back to, I would say, normal situation for module business, meaning between 2.5% and 3% operating margin already in the second semester. That is what we are targeting. And we will further improve that in the coming years. But 3% is what we believe being already a good performance in this kind of business for the operating margin. Regarding the top line, I'll let Adeline answer your question.

Regarding the top line of HBPO, again, we confirm the growth potential of this business, and that's really what, again, we took control of in July 2018. I mentioned that the outperformance of HBPO in H1 was 8 points. HBPO will continue to strongly contribute to the outperformance of Plastic Omnium as a whole in H2 2020, meaning that if you consider that the market will decrease 15% in H2 2020, HBPO will be able to compensate significantly this decrease with this -- with its order book. What I mean is that the sales of HBPO in H2 2020 will be quite similar to the sales of H2 2019. And again, the growth potential in the years to come in 2021 is still there with market share gains in front-end modules. I remind you that this business is #1 worldwide with 18% market share in the front-end module business. And on top of that, HBPO has the ability to add content with the new models, I already mentioned, center console, cockpit and modules for the electrification of the car.

And what we see as well -- I want to explain again why it is so important for us, the module part. It's because we do see a strong trend from the OEMs to move to more and more complex modules. And we have a lot of opportunities also for new modules which are linked to electrical vehicles we are working on, on top to the front end modules, showing again that it is a market need and showing again that we have the right position on that. The operating margin is different, for sure. It's by definition. The cash generation we are targeting for module is about 3%, which is our target, our commitment, and which is also a good contributor to Plastic Omnium performance in terms of free cash flow. It's bringing a lot also customer intimacy to understand the trend to support them. And that's why the module business is an important pillar of our strategy as well.

We'll have a next question from Michael Foundoukidis from ODDO.

This is Michael from ODDO BHF. So I have 3 questions as well. The first one is, could you give us more concrete color, let's say, on the EUR 200 million transformation projects and the savings? And then what does it mean concretely? And what second -- should we expect around that? Second and still on both, I would say, cost savings initiatives, what does it mean in terms of cash out? What should we expect for both? And the last one still on the free cash flow this time and on the EUR 250 million minimum that you would expect in H2. Could you give us an idea of what should we expect from the working cap part? And is it all coming from the working cap? Or have you taken more cautious assumptions?