Volkswagen (ETR:VOWG_p) Group (VOW.DE) has reported a steady start to 2024, with global deliveries climbing 3% year-over-year to 2.1 million vehicles in the first quarter. Despite a challenging environment, the company's operating results for its Passenger Cars and Commercial Vehicles divisions were robust, although the Financial Services division saw a 24% decline year-over-year. The automotive giant also announced a shift to quarterly reporting for deliveries, aiming to reduce distortions in monthly figures. Volkswagen remains confident in its outlook for the year, with a focus on new product ramp-ups and performance programs to enhance results.
Key Takeaways
- Volkswagen's Q1 2024 global deliveries increased by 3% to 2.1 million vehicles.
- The company will report deliveries quarterly instead of monthly from Q2 2024 to avoid distortions.
- Operating results for Passenger Cars and Commercial Vehicles divisions were solid, with €2.6 billion and €1 billion, respectively.
- The Financial Services division's operating result declined by 24% YoY to €0.9 billion.
- Volkswagen is optimistic about its 2024 outlook, expecting a sales revenue increase of up to 5% and an operating margin between 7% and 7.5%.
Company Outlook
- Sales revenue is projected to grow by up to 5% for the full year.
- Operating margin is expected to fall within the 7% to 7.5% range.
- Automotive net cash flow is anticipated to be between €4.5 billion and €6.5 billion.
- The company plans to focus on new product launches and efficiency programs to improve performance.
Bearish Highlights
- The Financial Services division experienced a 24% YoY decrease in operating results due to the normalization of the used car business.
- The Passenger Cars division's operating result decreased by roughly a third compared to the prior year, with a margin drop of 1.7 percentage points.
Bullish Highlights
- Commercial Vehicles division showed a strong performance with a 9% return on sales.
- The company is confident in improving margins in the second half of the year due to positive factors such as improved supply, material cost improvements, and efficiency measures.
- Strong order intake for BEVs in February and March signals confidence in achieving market share targets.
Misses
- Net cash flow in the Automotive Division was negative at -€3 billion, primarily due to a buildup of working capital.
- A provision of €900 million will result in a cash outflow mainly in the third quarter.
Q&A Highlights
- Volkswagen achieved its expected operating result in China for Q1, despite challenges in the BEV segment due to competitive pricing.
- The company is focusing on improving the cost position of BEVs in China and implementing cost and competitive measures.
- Residual values are stable but under slight pressure, particularly in the BEV segment.
- The company is preparing for model launches at Audi and Porsche, which contributed to a buildup of inventory and negative free cash flow in Q1.
- Volkswagen is investing an additional €2 billion in securing raw materials for their value chain to support CO2 compliance and EV production.
Volkswagen Group is navigating through a period of transition, balancing the scales between traditional combustion engine vehicles and a growing portfolio of electric vehicles. With strategic investments in raw materials and production capabilities, alongside a clear focus on efficiency and product momentum, Volkswagen is steering towards a future that promises both sustainability and profitability. The company's next major updates will be shared at the Annual Shareholder Meeting on May 29th and the presentation of half-year results on August 1st.
InvestingPro Insights
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Investors will find VWAGY's dividend yield of 4.54% particularly attractive, as it highlights the company's commitment to returning value to shareholders. VWAGY has maintained dividend payments for 33 consecutive years, underscoring its stable financial position and the potential for income generation through dividends.
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Full transcript - Volkswagen ADR Ord Shs (VWAGY) Q1 2024:
Operator: Ladies and gentlemen, welcome to the Volkswagen AG (OTC:VWAGY) Investor, Analyst and Media Call Q1 2024. I am Shari, the Chorus Call operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Pietro Zollino, Head of Corporate Communications. Please go ahead.
Pietro Zollino: Good morning, everyone, and a warm welcome to the first quarter results call of Volkswagen Group. It's a joint call for both media as well as investors and analysts, which is moderated by Rolf Woller, our Head of Treasury and IR; and myself, Peter Zollino, I'm heading Corporate Communications. With us today is Arno Antlitz, our CFO and COO. Let me provide a few remarks before we start. You should have received the press release, the interim financial report and all the other related materials, all of which were published this morning. If you do not have them yet, you can find them or the documents -- can find all the documents in our group website. In case of any issue, give us a call or drop us an email and we will send them straight to you. Before I hand over to Rolf, I would like to inform you about a change in our reporting. Volkswagen Group has decided to change the reporting frequency for deliveries from a monthly to a quarterly rhythm, starting from Q2 2024. The main reason is that comparisons of monthly figures are often distorted due to, for example, differing numbers of working days. With that, let me now hand over to Rolf, who will give you a brief run-through of the next 1.5 hours.
Rolf Woller: Thank you, Pietro, and a very good morning to everyone on the call also from my side. Thanks for joining us today at this beautiful morning here in Vosburg. Let us have a look at the agenda, yes. Arno will first present the key highlights of the first quarter. And after that, we will take a closer look at the underlying financials of quarter 1 and thereafter to the full-year outlook 2024. Following the presentation, we will first host a Q&A session for the investor and analyst community moderated by myself. And after this session, we will have a short break before we continue with the media Q&A, which will be hosted by Pietro. As a reminder, and as always, the safe harbor language and other cautionary statements on Page 2 of our presentation will govern today's presentation. I would like to encourage you to read the disclaimer carefully since all forward-looking statements are qualified by this language. As you know, I won't read it to you. With that, I hand over to Arno. Arno, please go ahead.
Arno Antlitz: Yes. Thank you, Rolf, and good morning to all of you from my side as well. Let's dive straight into the presentation with the highlights of the first three months. Starting with an icon that is celebrating its fifth birthday. The eighth generation of the Golf was just launched and the full lineup from entry level to TTI will hit the market this year. Taigo is our global bestseller, 7.5 million customers have opted for the compact SUV since its debut in 2007. It is currently in the rollout this new model variants to be added over the course of the year. Same holds true for the all new Passat, an important model for our fleet customers. All three models: Passat, Taigo and the Golf will also come with a PAG option offering up to 120-kilometer fully electrical range. For all these models, we see an encouraging order intake. Skoda just revealed the EPIC first entry-level BEV, the model will be delivered to customers from 2026 onwards at an attractive price point starting at around €25,000. Most important, the first quarter has seen the very successful launch of the first portion Audi models based on the PPE, the Premium Platform Electric, a great progress in our group's transformation towards electric mobility. Our Capital Markets Day in China last week was another milestone in our building block strategy of the Volkswagen story. About 170 guests joined the event at the [indiscernible] Center in Beijing, one day before the Beijing Auto Show opened its stores. Let me highlight my main takeaways of the day. Despite challenges such as fierce competition and evolving market dynamics, we pursue a clear plan to strengthen our position as a market-leading international manufacturer. Our target is to increase the proportionate operating result to around €3 billion by 2030, including the fully consolidated joint venture in Anhui and to achieve a 15% market share by 2030 in China. We expect the market to grow to 28 million vehicles by then. NV penetration in our vehicle sales should reach 50% in 2030. To reach our goals, we have taken decisive action. Together with strong partners, we enhance our technological competitiveness with a locally developed tonal electric and electronic architecture, local advanced driving assistance functions, or sophisticated infotainment solutions in our smart cockpit. The introduction of LFP battery technology is expected to reduce battery costs by one-third. In total, we expect to reduce material costs by 40% with our China main platform and achieve cost parity with local BEV leaders in the price-sensitive compact and minor segment by 2026. Thanks to the new local independent structure with the Volkswagen Group China technology company, VCTC in Hefei, we will shorten time to market for new products by 30%. And over the next three years, the group's brands plan to launch 40 new models in China, half of which will be electrified. With these actions and our highly profitable combustion engine car business, we are well prepared to continue to play a leading role in China. Back to the first quarter results. Global deliveries in the first three months of 2024 increased to 2.1 million vehicles, 3% above prior year quarter. Despite the geopolitical tensions, global supply chains continue to be robust. However, our deliveries were held back by temporary supply shortages, in particular, affecting Audi vehicles with V6 and V8 engines. Incoming orders continue their encouraging positive trend in the past months in both BEV and combustion engine car segments. The brands of the Volkswagen Group collected in total 730,000 new orders in Western Europe in the first quarter. BEV order intake was particularly strong, more than doubling compared to the same period last year. As a result, the order book in Western Europe improved to a solid level of about 1.1 million vehicles by the end of March, including 160,000 battery electric vehicles. Growth was primarily driven by a strong increase in China, totaling 8% as well in North America, where deliveries increased by 5% year-on-year. Our South American operations recorded even double-digit growth with a particularly strong increase in Brazil from a relatively low basis. In our home market, Europe, deliveries were slightly down year-on-year to about 907,000 vehicles, largely due to weaker BEV deliveries. Demand for battery electric vehicles was muted at the beginning of the year in Europe and North America. Substantial growth in China could not fully compensate for this. And as a result, BEV deliveries declined slightly by 3%. BEV deliveries reached 136,000 units corresponding to about 7% of group deliveries. BEV deliveries were down in Europe and U.S. by 24% and 16%, respectively, while BEV volumes in China almost doubled. BEV incoming orders on the other hand has doubled versus the first quarter 2023. The BEV share target of 9% to 11% is confirmed. Performance in the coming quarters should be supported by the most recent and upcoming launches such as all new ID.7 Tourer, Macan Electric and the Q6 e-tron, resulting in an increasingly competitive product offering. Let me now give you a summary of Q1 financials. All in all, there are no big surprises in the sense that Q1 was never going to be our best quarter. As planned, we are preparing for exciting product launches later in 2024 at Porsche and Audi. During this ramp-up phase, costs and consumer behavior was affected, especially Porsche what held by well-flagged cost increases ahead of their model changeover. As previously indicated, we have had supply shortages relating to six and eight-cylinder engines at Audi. However, we are now in the process of ramping up supply and the situation should improve already in Q2. And it will take a while for the efficiency program at Brand Volkswagen to show its full impact, not least because of the wage increases initiated in 2023, which are unfolding the full impact now in 2024. And as also previously guided, 2024 will be the peak year for R&D spend and we can see this effect in the Q1 numbers. This has all been flagged previously and factored into our 2024 forecast, which is why we remain confident about our 2024 outlook. With that, let's move on to the financials and the operating performance of the Volkswagen Group. Vehicle sales came in at 2.1 million units in the first three months, slightly down year-on-year at minus 2%. Excluding our joint venture operations in China, vehicle sales were down by 5% to 1.4 million vehicles year-to-date. These vehicle sales are the driver of our automotive sales revenue. Group sales revenue were slightly lower year-on-year at €75.5 billion, which is down minus 1% versus last year. Strongly improved sales revenue in the Financial Services business could almost compensate for the decline in automotive sales revenue of minus 4%. Operating result came in at €4.6 billion, corresponding to a margin of 6.1%, 1.4 percentage points below the prior year period. Net cash flow in the Automotive Division totaled minus €3 billion in the first three months, about €5 billion below the prior year level. This is largely related to a significant buildup of working capital of in total €4.6 billion after we managed down our inventories at the end of last year. As indicated in our full-year results call in March already, we had already anticipated a reversal of the exceptionally strong release of working capital at year-end 2023, which contributed to the strong full-year cash flow of €10.7 billion in 2023. In total, we recorded a cash outflow of €5.9 billion from the buildup of inventories in the quarter under review. To our automotive net liquidity, which recorded a corresponding decline of about €3 billion compared to the year-end 2023. Overall, at €37.2 billion, net liquidity continues to stay at a very solid level. Coming to our divisional performance. Passenger Cars recorded an operating result of €2.6 billion, about a third below the prior year period. The margin amounted to 5.3%, down by 1.7 percentage points. Commercial vehicles continued their strong earnings trajectory also in the first quarter, results advanced further to €1 billion, return on €1 billion. Return on sales stood at a strong 9%, confirming that the group is well on track towards delivering on the full-year targets. Financial Services division recorded an operating result of €0.9 billion corresponding to a decline of 24% year-over-year, in line with our expectations due to the normalization of the used car business. Let's have a look at the drivers behind the operating result development in the Passenger Car segment. Volume price/mix contributed a negative €0.5 billion. As already mentioned, vehicle sales, including China JVs were 5% lower. Mix was adversely affected by weaker model mix, in particular, due to the V6 and V8 engines at Audi, a negative regional mix due to the negative relatively weaker performance in Europe and not least, brand mix. However, model and brand mix should clearly improve in the coming months. Pricing continued to be slightly supportive, benefiting from rollover effect from last year's price increases but burdened by higher temporary sales promotions for our electric vehicles. Compared the prior year period -- operating result in Q1 benefited from a swing of fair value effects outside hedge accounting, amounting to about €900 million. Product costs were a slight headwind year-on-year, mainly due to the one-offs, but we continue to expect product costs to provide tailwind for the remainder of the year. Fixed costs and other costs increased considerably as a result of higher R&D costs, higher depreciation and amortization and the ramp-up of new business like PowerCo, like Scout or our fully consolidated joint venture, Anhui, as well as continued general inflationary trends. Let's have a more detailed look at overhead cost development. Our group has demonstrated remarkable overhead cost discipline in recent years, which has led to a significant improved overhead cost ratio and a much more robust cost structure. In Q1 2024, we were not able to continue this trend. Higher overhead costs driven by the carryover effect of wage increases from 2023 and lower sales revenue resulted in a strong increase of the overhead cost ratio in the first quarter. This development clearly shows the need for speeding up the implementation of our efficiency programs in the coming months. And it's our clear target to improve our position here throughout the remainder of the year. Moving on to automotive investments into R&D and CapEx. As already flagged at the full-year results conference in March, automotive investments are expected to peak this year. The currently high investment levels, particularly in R&D are reflecting the accelerated transformation of the Volkswagen Group's brand, total electrification and digitalization. As a result, R&D expenses increased by almost €1 billion to €6 billion in the first quarter. CapEx is at elevated levels due to currently high upfront investments in battery and software as well as execution of our regional strategies. Relative to automotive sales revenue, the investment ratio stood at 14.4%, up on the prior year level due to higher investment as well as lower automotive sales revenue in the quarter. This is clearly a level that needs to be significantly reduced going forward, even stronger focus on group synergies and more efficient R&D processes and the reduction of this year's peak of ICE investments will drive the reduction in expenditures. Moving onto the performance of our brand groups, platforms and financial services business. Brand Group Core recorded flat sales volume in Q1 sales revenue declined slightly by 1% year-on-year, supported by continued positive price/mix, but held back by higher temporary tacticals for our BEVs. The operating results grew by 20% to €2.1 billion and a margin of 6.4%, 120 basis points above prior year quarter. Each brand contributed to this performance expanding operating margins year-over-year with significant contributions from the smaller brands. Skoda and [indiscernible] stood at about 8% and 6% return on sales, respectively, Volkswagen Commercial Vehicles achieved even a 9.6% margin. Also, Volkswagen Brand recorded a step-up in performance to 4%. Nevertheless, there is still some way to go to achieve the target of up to 5% this year. Brand Group Progressive recorded sales revenue significantly below last year's level, mainly due to the constraints of V6 and V8 engines. Operating result came in at €0.5 billion, corresponding to a margin of 3.4% and 740 basis points below prior year quarter. In addition, operating profit was burdened by valuation effects in the magnitude of about €0.3 billion in particular, resulting from order residual value model. Adjusted for valuation effects of the underlying margin at Brand Group Progressive came in at about 6%, clearly below the full-year target range of 8% to 10%. Brand Group sport luxury achieved a 14.8% operating margin in its automotive business despite lower sales volume and higher ramp-up costs due to a record number of new model launches this year. In addition, cost recorded an increase in development costs and depreciation on capitalized development costs as already flagged in the full-year results call. Coming to carrier, operating results continued to be negative and came in at €552 million loss, slightly up from prior year number, but down versus the first quarter 2023. Reported net cash flow stood at a positive €0.5 billion, as carrier benefited like last year from a €1.1 billion intra-group income tax refund. The underlying cash out total to minus €0.6 billion. Our battery business continues to make fast progress in the ramp-up of the organization as well as the construction of Salzgitter plant, which is developing according to plan. Despite the continuous buildup of the organization and higher CapEx operating loss at €79 million was kept largely unchanged compared to Q1 2023. Needless to say that we review the global BEV sales expectations continuously and are prepared to adjust the capacity and CapEx planning in Power per unit accordingly, if necessary. TRATON continued its positive top line and earnings trajectory and delivered another strong performance in the first quarter. Unit sales normalized and decreased by 4% year-to-date. The lower volume was compensated by favorable product mix, better average revenue per unit and a continued higher demand for vehicle services, driving sales revenue up by 5%. Operating margin came in at a strong 9.0% and with that, confirming the stronger profitability levels achieved in 2023. The increase in profitability was driven by sales revenue growth and improved cost structure. In the period under review, TRATON delivered a net cash flow of €0.4 billion and was able to reduce net indebtedness in its industrial business further. Volkswagen Group Mobility kept the overall contract volume stable, a slightly lower number of financing contracts was compensated by an increase in the number of both leasing and insurance contracts. The credit loss ratio continued to be stable. Operating results in the Financial Services division in the first three months 2024 fell by about a quarter to €881 million or a 6% margin. Operating profits were sequentially up compared to Q3 and Q4 2023. The expected decline reflects the continued normalization of used car prices and provisioning for residual value risk as well as a significantly increased interest rates. And as you know, we take a conservative stance when it comes to residual value risks. Moving onto our performance in our China joint ventures. From a volume point of view, we saw a strong start to the year with deliveries increasing almost 8% to 694,000 vehicles. This was also driven by growth in BEV sales, which nearly doubled year-on-year. As a result, the BEV share in China advanced from 3% in Q1 2023 to now 6% in the quarter under review. The proportionate operating result of our China JVs amounted to €0.4 billion after three months in 2024, down 31% on the prior year number and in line with our expectations of €1.5 billion to €2 billion proportionate operating results this year. The decrease is reflecting the margin dilutive effects of the ramp-up of our BEV business in a very competitive market environment. Finally, on to the full-year. We confirm our outlook for 2024. We continue to expect sales revenue to advance by up to 5%, the operating margin in the bandwidth of 7% and 7.5% and automotive net cash flow in the range of €4.5 billion to €6.5 billion. As already anticipated back in March, the Volkswagen Group recorded a muted start to the year, with a slight decrease in sales revenue and operating margin of 6.1% below the full-year corridor and recorded negative net cash flow. We expect an improvement underlying operating and financial performance already in the second quarter and stronger earnings trajectory during the remainder of 2024. In order to deliver on our full-year outlook, we factor in a significant step up of sales and earnings momentum at both Porsche and Audi based on the ramp-up of new models, a much stronger product mix at Audi due to a better availability of six and eight cylinder models, decisive implementation of the performance programs at Brand Group Core to achieve a margin well in the range of the guidance corridor of 6% to 7% and the rigid cost work and overall disciplined investment spending across the entire Volkswagen Group. Additional confidence for the quarters to come is that we can count on a solid order book. and improving order intake, the gradual materialization of effects from numerous strong product launches and a very solid truck business. To further support our efforts to reduce personnel costs in the administrative function of Volkswagen AG, Board of Management in April resolved the offering of selective severance payments. It is important to know for the severance pay program that we, as an employer, must also accept the severance pay request. This ensures that we do not lose key employees. We expect this to result in expenses of total €900 million and will accordingly book a provision in the second quarter. We aim to compensate for those effects in the full-year. Ladies and gentlemen, in the coming months, we will focus on the ramp-up of our great new products and the decisive execution of the performance programs across the Volkswagen Group. We continue to have a very solid balance sheet and financials. We continue to transform our company towards electrification and digitalization, our great product substance and flexibility between BEVs and combustion engine vehicles will help to master the current challenges. That said, we remain fully focused on stringent execution, capturing synergies within the group and delivery on net cash flow. Thank you very much so far. And let me now hand back to Rolf.
Rolf Woller: Thank you, Arno, for that comprehensive and detailed presentation on the Q1 financials, we will now proceed with a question-and-answer session.
A - Rolf Woller: [Operator Instructions] And we start right away with the first question, which comes from Jose Asumendi from JPMorgan. Jose, please go ahead.
Jose Asumendi: Thank you, Rolf. Thank you very much. Just a couple of questions, please. Arno, can you please comment a little bit more on the dynamics of the result in China a little bit what you saw in the first quarter in terms of volume, in terms of maybe pricing and any elements around the incremental fixed costs. And second, can you comment on procedure values? How is this impacting some of the brands across the Fastline Group. Is this a onetime that you expect to see in the first quarter? Or do you expect any recurring items in the coming quarters? Thank you.
Arno Antlitz: Yes, Jose. Thanks very much for your questions. I think you have also participated from our perspective, for a successful Capital Markets Day in China, where we laid out a lot of details already. First and foremost, I must say that the proportional operating result we achieved in the first quarter is fully in line with our expectations for the full-year of €1.2 billion. If you look at the market dynamics, we clearly have to decide between ICE and BEV business, as always flagged and as late already, we have a very strong ICE business with very solid margins and cash flow delivery. And on the BEV side, you see -- I would say, let's call it, a very challenging pricing environment. And we always said also that we will make sound compromises between prices, pricing and volume in order to have a balanced approach in line with our value over volume approach. So -- and having said that, we will in the -- yes, I would say, quarters going forward, benefit continuously from our ICE business, which has -- I think we jumped over 20% market share in China and in our BEV business, we will make as said, compromises between ramping up the volume, staying in the market, at the same time, improving the cost position of our BEVs in China. And with the cost measures and the competitive measures kicking in our platform, for example, then bringing the LFP battery, bringing a more enhanced advanced driving system functions, improving income entertainment, we will then continuously to participate in the growing BEV segment. And we already gave you the indications also for 2027 more than €2 billion proportion opportunity result in China. Residual value. Residual values, I would say, overall, residual values are still stable, also slightly differentiated between BEVs and ICE. If you remember, they were very high in the last two to three years after COVID. So we always said, we see a normalization that means residual values came down slightly. But over time, but it's more like a normalization with a little bit more pressure on the BEV side, but we must also take into account that due to the subsidy schemes in the markets the proportionate residual value is also influenced. And if you take out that effect, then we see, I would say, yes a normalization of the residual value situation. They are still strong, but yes, slightly under pressure in the BEV side.
Rolf Woller: Thank you, Arno. Thanks, Jose. And we move over to the next question. which comes from Tim Rokossa at Deutsche Bank, Tim?
Tim Rokossa: Thank you very much gentlemen. It's Tim from Deutsche Bank. I have two questions, please. The first one is in Evergreen. You and I discussed about it many times. There's no doubt, less complexity would do very well for you guys. Trading had a very good Q1 shuttle that the CMD now. The free float is an issue for investors. When do we finally see you guys making use of the higher stock price when there's something happening on that side? And then secondly, I thought that your comments on the order intake were actually quite encouraging. Now I've heard over the 16 years that I look at auto, all OEMs always saying that car launches were a great success and that the order intake really does surprise them to the upside. Can you put a bit more flesh to the bone here? We're hearing very good comments about the order intake for BEVs. Is that developing year-to-date? Or did it just happen in March? And for the new models, does the order intake that you record currently suggests double-digit growth? Or is there any other quantification that you can give us? Thank you.
Arno Antlitz: Yes, Tim, first and foremost, to the first question, TRATON. Let me add a little bit from more grower perspective. First and foremost, we are very pleased with TRATON operating performance. over the past 18 months and pursuing the strategy and has achieved a turnaround and presented impressive figures for 2023. Scania has regained its former strength, operating at double-digit margin. Volkswagen Truck & Bus continues to deliver solid results. Now we start not fully integrated. So initially, they are well on track. There's still a lot of self-help potential, and they are looking confidently into the remainder of 2024. And you're right, we have been frequently told by analysts and investors that the liquidity and free float in the shares are holding them back and to unfold their full potential in the stock and we've always said we are open for a next step at the right time and has not changed. This is what I can say at the moment, Tim. And in terms of order intake. Look, it is specifically encouraging for us that the order intake was really up in the BEVs, it was specifically up in February and March. We had still a rather weak January, but February and March was strong. And it was more than doubled to the prior year period. And so we still have some more chances if you take into account that Q6 e-tron, a very important car is the Tourer, the ID.7 Tourer. For the time being, we have only Limousine in the market. So they will specifically continue to drive order intake even further. And with this order intake, we are confident to achieve our 6% to 8% -- it's 8% to 10% market proportion operative share of BEVs this year. And more important, that will give us momentum within -- yes, for example in E6 to the 2025 web share targets. So let me precisely -- the target for this is 9% to 11% BEV share, and we are well on track on that, on that target term.
Rolf Woller: Thank you, Tim. Thank you, Arno. The next question comes from Michael Punzet from DZ Bank. Michael, please.
Michael Punzet: Good morning. I have two questions. First one is on the negative effect of €400 million related to hedge accounting because as you mentioned also that this effect was related to the residual value provisions at Audi. Maybe you can explain a bit more in detail, what is the key driver for that? And what should we expect for the full-year? And the second question is with regard to your guidance for the industrial cash flow. In the presentation, you mentioned €4.5 million to €6.5 million. And in the footnote, you mentioned possible investments of up to €4 billion in battery. But if I remember correctly in the full-year conference, you mentioned a figure of €6 billion. So what is the right figure to take into account for the forecast for the full-year industrial free cash flow.
Arno Antlitz: Yes, I'll start with the second question. So the target for the net cash flow or the outlook for the cash flow is €4.5 billion to €6.5 billion. And that hasn't changed. So -- but what we have into what we factored in the €4.5 billion to €6.5 billion is we foresee in terms of cash flow, about €6 billion for the ramp up of our battery business. And then this is what we indicated in last year's conference call and €4 billion out of that is R&D and CapEx and about €2 billion in additional M&A. These were like the differentiation between €4 billion and the €6 billion. M&A, specifically for -- we kept getting more control over the value chain, as we always said, it doesn't make sense to just invest in the battery capacity in terms of factories. We have a threefold approach. It's development of a unified cell. It's ramping up our own battery capacity in Europe with two factories and in U.S., in Ontario and Canada. And the third pillar is having more control over the value chain for raw materials, specifically cobalt, nickel and lithium. And this leads to the difference of the €4 billion and €6 billion, again, €4 billion in total, I would say, reserved for cash out for Pedro this year and €6 billion and €4 million of that is CapEx. Yes, Audi residual value model, I'm sure my colleague, will go into more detail on Friday. I think he has a call on Friday. It's kind of a -- it's a -- it's a model for the financed vehicle in the German market. And it's basically accounted as valuation effect on site hedge accounting. It's a derivate and since it is derivate, we book it like a derivate and there was, yes, a burden of about €300 million for the change in residual values this year, and this is why we booked that. If you add that back to the performance of the Audi, which is 3.4% EBIT margin in Q1, you end up at 6% closer to the performance of 8% to 10%. What you could expect from them and the difference between the 6% and 8% to 10%, which they indicated is basically the impact of constraints of the six to eight cylinder -- at six and eight cylinder models, which hold the impact both in terms of volume and in terms of margins.
Michael Punzet: Okay, thank you.
Rolf Woller: Thank you, Michael. Important to note here, when you look at the year-end presentation from March, there is no change in guidance for the net cash flow. The footnote still stays the same, €4 billion. But I think the clarification from Arno was precise and very good. So next question comes from Horst Schneider from Bank of America. Horst?
Horst Schneider: Yes, good morning. Thanks for taking my question. The first one was I have that relates more to the outlook basically until the rest of the year. So if I could right basically, you say that Q2 is going to be back in the 7% to 7.5% range. And then you need to achieve a higher margin in H2. Just want to understand what makes you confident really that H2 then is better than H1, given that the price pressure in the market is probably rather increasing. So in other words, what is the level of visibility that you have for H2, given that your order book probably just reaches until September now. And then I'll ask the next question thereafter.
Arno Antlitz: Okay, Horst, thanks. Yes, first and foremost, let me start with that we fully confirm our outlook for 2024 in total. To be a little bit more precise in -- for Q2 before the booking of the restructuring of the severance package, we expect to be clearly in line -- this is our margin guidance for the full-year also in Q2. And now on top of the book, that €900 million in Q2, which might lead to a burden in that respect. But we promised to catch up on the remainder of the year. So what makes us confident? If you go through EBIT bridge, there's basically in a lot of elements, that's confident, first and foremost, Audi was really held back by a supply constraint of V6 and V8 engines, both in terms of volume but much more important in terms of margins specifically at the eight cylinder model. So that will improve already in Q2 with a significant improvement then in Q3, Q4 going on with that will both improve by volume, but also by mix. Then from the material cost topic, we had a slight burden in Q1 due to a one-off effect at product cost, but we still have at least €1 billion positive in that bucket. And then we have the product momentum, both at Porsche and Audi going forward, specifically Porsche, with a huge number of model launches in very important model lines, which will drive their profitability. And last but not least, from, I would say, fixed cost burden versus efficiency measures effect. We saw the wage increase in mid of 2023 and the full-year effect we have now in 2024, specifically first quarter, where we compare with the first quarter of 2023, where the wages were not increased. And so on the other hand, the efficiency measures specifically at Brand Group Core and Volkswagen Brand of the efficiency program, they will kick in throughout the remainder of the year. So the net effect of the burden of increases last year and the efficiency measures will also give us confident for the remainder of the year. So these are some of ingredients for us. Hopefully, you can factor them in, in the bridge, which gives us confidence specifically for the second half of the year.
Horst Schneider: But again, to my question regarding the visibility on the order book. So am I right in assuming that the order book currently reaches kind of till September, and what we're also going to see in H2 is then a significant increase in the BEV share, but that is all within your planning that does not make you any worried about the H2 outlook at the moment.
Arno Antlitz: No, this is in our planning. And we even expect an increase in incoming orders. So key models were not available to order in the first quarter passed out a very important model for brand Volkswagen Tiguan. Not all the engine models are Tiguan were open to order and others -- at other brands. So we expect the order intake to even increase throughout the year due to availability of the models. And yes, the BEVs will share will increase throughout the year. Yes, they are margin dilutive, but that is all factored in our outlook.
Horst Schneider: Okay. That's great. The last one I'd add just more housekeeping item in the trade off, PowerCo versus CARIAD. Is it fair to assume that from now on, basically, the CARIAD losses will get smaller in terms of quarterly run rate and the PowerCo losses will increase since you ramp up the capacity for 2025.
Arno Antlitz: Yes. The PowerCo losses will increase with the ramp-up. This is clear until 2025. And they carry it, we don't want to obviously give you a quarterly outlook for the CARIAD business. But what will happen at CARIAD business, I mean, do you have the spending on the one hand. On the other hand, as you know, the sales revenues of CARIAD and the top line of CARIAD depends on the number of models that are sold basically CARIAD is paid in -- by a license model car by car by the brands. So with the ramp-up of the MAB, for example, ID.7 Tourer with the ramp-up of E Macan, Q6 e-tron, then the first 1.2 based cars. So a significant ramp-up of sales is expected at CARIAD and that should improve the situation further.
Horst Schneider: Okay. Great. Thank you.
Rolf Woller: Thank you, Horst. And we are moving on to the next question, which comes from Henning Cosman from Barclays. Henning?
Henning Cosman: Thanks for taking the question. I just had a very small clarification on how you're going to be reporting the provision in the second quarter. So in the line item that corresponds to your full-year guidance, you were fully included, right? It will not be somehow adjusted out as a one-off. So just to clarify on what we said the Q2 margin as you show it could again be outside the bottom end of the full-year range. And then you're saying you have enough tools at your disposal in the second half to offset that, which effectively means that's on top of what you would previously have expected in the second half when you weren't yet anticipating the €900 million provision.
Arno Antlitz: Yes, that's exactly right. When we say we aim to compensate for that additional effect is that we really try to -- we aim for compensating that. That means we won't deduct it or won't adjust for that. We confirm our guidance, including the €900 million. But as also said, it might be not fully compensate it in the first quarter alone. So the second quarter -- sorry, in the second quarter alone -- we will book it now in the second quarter. So we might not be able to fully comment it in the second quarter, but we aim for compensating it through the remainder of the year.
Rolf Woller: Thank you, Henning. And we are moving on to the next question, which comes from Daniel Schwarz from Stifel.
Daniel Schwarz: Thank you. I had one question regarding the management compensation. The new free cash flow component that you introduced this year, could you say what the target corridor is in '24, so the minimum -- maximum target. And are the targets adjusted for M&A, for example, what you're spending on the battery side? Or if you would decide to sell TRATON or Porsche shares, would that be adjusted for? And the second question also clarification, the €900 million provision, will that lead to a cash outflow in '24? Or is it stretched over a longer time period?
Arno Antlitz: Daniel, it's an absolute cash flow figure. And of course, we have bandwidth. But I don't think that we disclose the actual mechanism behind it. And it's basically all in. So it's based on the €4.5 billion to €6.5 billion guidance, including the cash out of -- yes, investments, for example, in battery but also including now the additional cash out for the severance payments. And it's basically up to the Supervisory Board to decide on that. And Rolf, can you add? Yes. And maybe to add that because you explicitly asked for it, I mean, a potential sale in TRATON shares would obviously not be net cash flow, yes, because this would be accounted as cash flow from financing.
Rolf Woller: No, you're right. That is -- yes.
Arno Antlitz: And the €900 million, it will be booked in the second quarter. And the cash out is obviously then once like -- each like personnel accepted. We expect then the cash out, I would say, Q2 mainly Q3. And the -- so this is how you could model it in the Q flash or I would say the majority can be expected in Q3.
Daniel Schwarz: Thank you.
Rolf Woller: Thank you, Daniel. And we are moving on to the next question, which comes from George Galliers from Goldman.
George Galliers: Good morning. And thank you for taking my question. Obviously, the restructuring development expenditure was very high in Q1. I was wondering if you could give us some insight to how do you see the absolute expenditure on R&D trend in Q2 in the second half relative to the €6 billion in Q1? Second question I had was just with respect to the overall net liquidity. Obviously, it is below the €39 billion to €41 billion that you're targeting for the full-year in Q1, but maybe revisiting a broader question. When we think about what is the targeted level of automotive net liquidity in the long-term, can you remind us what you are looking for. Obviously, some of your peers are at close to 20% of the top line. Is that an appropriate level for Volkswagen or do you not need that much? Thank you.
Arno Antlitz: Yes, thanks for the two questions. In terms of R&D, I mean we gave a guidance in terms of the top line, our sales revenue and the guidance of R&D and CapEx. So -- and this would be like proportionately in the first, second, and third quarter ideally. And then in the fourth quarter, we have a higher outflow in the CapEx, because this is typically where the big investment projects are basically are cleared. And the outlook for investment ratio combined is confirmed between 13.5% and 14.5% for the full-year 2024. This is what we can say. But clearly, with the majority of that will be R&D and the smaller proportion of that will be -- or the smaller proportion of that will be CapEx. We are aware of the number, both in terms of overall number, both in terms of yes, I would say, benchmark to our peers. We know where volume competitors stand. We know where premium competitors stand also in different regions of the world. We clearly indicated where the benchmark is for us. We always said it's like 8% for volume, 10% for premium. So we long-term shoot for 9%. And this we indicated on the Capital Markets Day last year in summer. So let we target for 11% in 2027 and eventually 9% in 2030. And the levels are also clear. We have to work on more synergies, the runout of the combustion engine upfront investments will help us. And this is the way we want to go forward there. In terms of net liquidity, target is what we indicated is more than 10% of group sales. But we also see that some of the competitors who have much more net liquidity compared to sales, they have also a stronger rating. So this is -- there's also a trade-off between holding more cash and the rating with in turn leads to a better refinancing costs, less cash out for interest, which then leads to better cash flow. So this is where we -- what we're looking at also depending on the cycle of the business. But for the time being, our target is clearly indicated it's more than 10% of sales.
George Galliers: Thank you.
Rolf Woller: Thank you, George. So I can see no further questions here on my list. And yes, thank you for the vivid Q&A. The very good questions we had. If anything is left unanswered, yes, please contact the team in Vosburg. The next time to meet with us is at one of our numerous conferences we will attend. Our Annual Shareholder Meeting will take place virtually and is scheduled for May 29th. Half year results are to be presented on the first of August. And the respective pre-close call will be hosted -- not hosted -- sorry, hosted on July 10th, after the market closed. So we will now continue with a short break, yes, about five to 10 minutes before we then start with a Q&A session for the journalists. Thank you again for your numerous participation. Take care. All the best and speak soon. Thank you. [Break]
Pietro Zollino: Hello, and welcome back to our Q&A session now for media. And on my list, I see [indiscernible]. Frank, do you want to kick it off? Frank, we can't hear you. I don't know if it's on our end or it's your end. [Operator Instructions]. And Frank, we still can't hear you. I would suggest to circle back and try to figure this out. Christian from [indiscernible] do you want to kick in, please? Unfortunately, it doesn't work either. So let's give us a couple of minutes to find out -- try to find out what's happening here. Because of the analysts and investors, it worked. So give us five minutes, please. [Technical Difficulty]
Rolf Woller: Operator?
Operator: The line is open.
Rolf Woller: The line is open. Okay. So should work right now.
Pietro Zollino: Okay. Christian, do you want to try again? Thanks.
Unidentified Analyst: Yes. Thank you for taking my question. Can you hear me now?
Pietro Zollino: Perfect, loud and clear.
Unidentified Analyst: Okay. Perfect. So just a question on the engine topic. Just could you give us some more details why the -- why you have some trouble with V6 and V8 engines at Audi? And another question on the severance program. You will make -- sorry, I don't have the work of €900 million in the second quarter, is that right?
Arno Antlitz: Yes, I'll start with the easy one, the provision will be €900 million in the second quarter, that's right. But as I explained, the provision will be in the second quarter, and the cash out then will be then eventually second and third quarter. On the V6 and V8 engine, there's a certain specific part that it's -- we don't have enough capacity. Audi is in the process of adding capacity, adding a second supplier. What I would like to ask you, Friday is a call at Audi [indiscernible] and he will really do really in-depth explanation of that effect also how it's resolved and how it affects then basically a more positive mix effect and volume effect going forward. And I would rather refer you to earnings call on Friday, because it's a very specific Audi topic. But as I said before, we expect an improvement in the second quarter already? And then specifically also in Q3, Q4.
Pietro Zollino: Okay. Thank you.
Unidentified Analyst: Can I add in one more question.
Pietro Zollino: Yes, go ahead.
Unidentified Analyst: Looking on the European BEV PV business, it doesn't look very good at the moment. What's your perspective looking ahead on the European BEV market, do you see upside? Or will there be a prominent problem in that segment for the next months and maybe years to come?
Arno Antlitz: That's a very valid question. Let me start from 2030 backwards, our plans and our forecasts haven't really changed due to the ramp-up of BEVs. And eventually, the future will be electric, this is our conviction for various reasons, CO2 emissions and others. And so we still plan until 2030 to have 50% BEV share. But the way from, let's call it, today until 2030 will be not linear. It's really -- will be different speeds of development in different regions, China will develop very fast. U.S. and Europe will develop also, but not as fast as we have originally planned and expected, that's part of the truth. On the other hand, you have to also take into account that we don't have electric cars in all models. Look, we add a great models this year E MacanQ6 e-tron, eventually E6. This will open a whole BEV model range in the premium segment. Then 2026, I must say only by 2026, we bring in the ID.2 and the ID.2 family, €25,000 car basically in the segment of T-Roc and T-Cross. So it also takes a little bit of time until all the segments will electrify, first and foremost. Second, charging infrastructure will evolve. Then we work on also implementing LFP battery technology in ID.2, which will bring down the cost and eventually also the prices. So it will take a while until the BEV penetration will increase. It will increase quarter-by-quarter, year-over-year, but not as fast as we have expected. And secondly, what I also must say in terms of specifically our situation. Look, we are in a situation that we spend considerable amount of energy, time and resources to keep our -- let's call it, last generation of combustion engine cars competitive. We bring great combustion engine and plug-in hybrids, Passat, Tiguan, T-Roc, also new cars at Audi. So in between, we are rather flexible and this -- we have great BEVs. We ramp up all BEVs. Don't get me wrong. We are fully committed to ramp up all BEVs, but we're also flexible and have great combustion engine and PV and PHEV. So -- and this flexibility is also a strength of the Volkswagen Group.
Unidentified Analyst: Thank you.
Pietro Zollino: Thank you, Arno. [Indiscernible], do you want to try again?
Unidentified Analyst: Yes, can you hear me now?
Pietro Zollino: Yes, perfect.
Unidentified Analyst: Perfect. Thank you. So just a couple now, only three questions. First question. Just to make it clear, did I understand you right that, Mr. Arno, you told that you had another order intake of 730,000 in Western Europe in quarter one? That's -- if I correct the 60,000 less than your deliveries in the same time. So your order book shrink by 60. So if I heard correctly. Second question, you said €2 billion of the €6 billion investment in PowerCo will go into M&A. Can you tell any more details? What's planned? Is it all for this year? Are there already plans, what you -- that you can state what to buy our companies, which may state now? And this one, picking up the last question to the best share. Next year, in Europe, the fleet target for CO2 emissions will increase or will decrease. So your plan was to reach a target by a higher share of best, so -- have you already a plan B now? What to do if you sense will not work due to those test sales in this year lower than you expected before. Will you increase prices for the ICEs? Or what will you do to solve the problem? Thank you.
Arno Antlitz: Okay. This is very comprehensive questions. I try to come up with solid answers to all of them. Look, our order book is stand at 1.1 million cars which is basically on prior year level, but it's on last quarter's level, but it's very healthy. And specifically, since we increased the order intake of BEVs by more than 100%. So why are we'll be more confident going forward. Our order intake was 730,000 cars, although a lot of very exciting cars and very popular cars, you could note at the beginning of the year because of the model changeover. Look, the new Passat, new Tiguan, they had a model changeover. And we were not able to open basically the model book or the configurator for all of the variants. And despite of this situation, we increased -- we achieved the 730,000 order intake. So this is why we are confident that both the order intake for combustion engine cars and BEVs will further increase. At the BEVs, as said before, E Macan, Q6 e-tron and Tourer will hit the basically order book and the showrooms, which will drive then also the incoming orders further. And 1.1 billion cars is a rather healthy order book. It's still above pre-COVID levels. This is important to note. Yes, to the PowerCo. I think there's a lot of -- yes, I would like to clarify that again. In -- what we said, in our cash flow guidance for this year of €4.5 billion to €6.5 billion, we foresee -- let's call it foresee about €6 billion cash outflow for the ramp-up of our battery business. We explained that specifically, because it is ramping up a business where we don't have business today, so no turnover, no sales. It's really on top so that you can also reflect a little bit what our real cash performance is. It's a cash flow of €4.5 billion to €6.5 billion, plus an additional €6 billion we foresee for PowerCo. That €6 billion is in total for PowerCo and if you divide that roughly, it's about €4 billion for the ramp-up of our business in terms of CapEx throughout the world. We are ramping up in now three plants in Europe -- two plants in Europe, we have the ramp-up of Salzgitter plant. In parallel, we ramp up in Valencia plant. And in parallel, we ramp up on Ontario, Canada. And we foresee about additional €2 billion for strengthening our value chain in terms of having more control of the value chain, lithium, nickel, cobalt. And here, I must ask for understanding it's too early we can't really tell you specific transactions here But rest assured, we will move onto that topic as well because it will always only make sense if you ramp up a capacity of battery that you have also secured our raw materials. We don't want to run into the situation that we have a better capacity on hand and have not competitive supply of raw materials, specifically lithium in order to have a safe and secure and also cost competitive supply, you need both. You need capacity, but also you need to have the raw materials secured. This is the story behind PowerCo. And in terms of, I think the first -- the third -- for 2020 going forward. 2025 onwards, yes. Look, we expect to be 100% compliant 2024. The compliance in 2025 will be more challenging due to the new like targets. From today's perspective, we strive also for being compliant in 2025. What gives us confidence is the new cars that hit the road. I talked about the Tourer. I talked about E Macan, Q6 e-tron, also E6 is then hitting the road. But on the other hand, we see a very challenging pricing environment in the BEVs specifically in Europe. And we also embarked on our strategy that we say value over volume, we want to find sound compromises between pricing basically margins and volume. And this is -- we have to also take into account. So it's too early to give you specific guidance for 2025, because we don't know how the market conditions will be by 2025. We work on the cost side. But what I can say from today's perspective, we -- basically, we work on achieving the target for 2025, and we strive for achieving the targets also for 2025.
Pietro Zollino: Okay. I can see on my list next would be Christina Amann from Thomson Reuters (NYSE:TRI).
Christina Amann: I hope you can hear me?
Pietro Zollino: Yes. Perfect. Wonderful.
Christina Amann: Fantastic. Well, the first question, I guess Mr. Antlitz you've just answered what's the outlook on 2025. That's two issues on the -- one, on the CO2 regulations and the other question was on the overall market. You're expecting a better market in the second half. Will that last into '25 or not? The other question was on the best orders, you said they were more than double in Q1. How do you think -- where do you think you'll end up at the end of the year? How is that going to keep on? And can you say also something on Audi and Porsche who are both having issues this quarter. Is that approach on the -- is the luxury market or the high-end market is still intact? And what does that mean for your value over volume approach? Thank you.
Arno Antlitz: Yes. Thank you, Christina, for your two questions. For the BEV orders, we have a very good order intake. Right now, we expect the level of order intake per month to basically more or less stay on that level until summer. And then summer, the models kick in. As I said, Q6 e-tron, the Tourer is also fully available and with the new models, we expect then also then even stronger order increase then from there going forward. The question on Audi and Porsche it's really this the situation that led to the margin of Audi and Porsche in the first quarter are really explainable by technical factors. First and foremost, I referred to the availability of six and eight cylinder models that at Audi, this is a specific part that it's -- we can't have not enough supply, Audi worked on it. And we are confident as soon as the supply is ramping up, starting with the second quarter, but specifically done in the second half of the year, availability will increase, and then Audi will come back to all strengths. And Porsche also well flagged already in the year-end result call. They have a huge number of model changeovers in 2024, which gives us more strength, even more strength in 2025, if I remember it right, Oliver Blume talked about the transition year 2024. And it's not unusual that if you have model changeovers, that both in terms of costs that are incurred due to the ramp-up costs, preparing of the new production and also in customer behavior. This -- the period where you ramp up the new models, they are slightly under pressure, but then you could expect after the new models all in place, it could be even a more positive momentum then. This is why we are -- both for Porsche and Audi, we are still very confident about their future trajectory and success.
Pietro Zollino: Okay. So from what I can see, I have one more caller. It's Lazar Backovic from Handelsblatt. Lazar you want to kick in, please.
Lazar Backovic: Yes, thank you. I hope you can hear me.
Pietro Zollino: Very good.
Lazar Backovic: Okay. Thank you. Yes, thank you for taking the questions. One quick on the V8 and the V6 models. There was a similar problem at Mercedes in the first quarter, which had problems with turbochargers. It was due to one of the supplier called [indiscernible] that also supplying other premium OEMs. Yes, the question would be, yes, is [indiscernible] the reason for the specific for this specific situation that Audi is currently in. I think as they filed bankruptcy last autumn. So yes, it would be interesting to know if it's the specific company? And the other question would be on the free cash flow, which was negative. So maybe you can give me a bit more details which were the biggest tickets that really put the cash flow down? And what makes you confident that you are in line with your goals for your cash flow this year?
Arno Antlitz: Yes, Lazar, thanks for the question. Although I said I would like really to leave the technical details to my colleague. It's not the same case you just mentioned. It's a different situation. And it's not that [indiscernible]. And in terms of free cash flow, let me explain it a little bit more in detail. Look, kind of -- we are kind of a victim of our own success. Last year, we had supply constraints in the delivery of our finished goods throughout the year. If you remember, we were missing trucks, trains, people at the ports. And so we really set up a comprehensive team on that. And this team was very successful. It was so successful that we debottlenecked the whole situation. In Q4, we achieved a very good cash flow. But that was due to that basically, most of the inventory was sold to the customer. And our inventory pipeline was rather empty. But which also led in terms to a free cash flow of, I think, €10.7 billion -- €10.8 billion last year, so very successful. So -- and now we started this year with our pipelines, basically -- sorry to say, not of course, not empty, but with a much lower inventory. So -- and now we have two effects. First and foremost, we are increasing the inventory throughout the whole world. Look, we produce cars. We have to get the parts for it and then we ship them to U.S. to Japan, even Australia. So there is a lot of pipeline. And second, since we prepare for a huge model launch at Audi and at Porsche, it's also not unusual that in -- before this new model launch, you have more -- you build these cars already. They sit already on the yards and on the books and you deliver them to the customer. So these two factors were planned and anticipated. But in total, that led to a buildup of -- finish of inventory of about €6 billion. So basically €6 billion more inventory. Two-third of that are finished goods and one-third of that unfinished goods. And so if you reflect then now our negative free cash flow of €3 billion, so €6 billion of -- minus €3 billion minus €6 billion of that is due to the inventory. And so part of it, that will some be reserved throughout the year. Because at the end of the year 2024, we again, we ramped down the pipelines, use all the parts we have. So this is why we are confident that we achieve our free cash flow target in 2024.
Pietro Zollino: Okay. So if I'm not mistaken, we -- I think we digitally work through the question queue. Leaves me only to thank you for your participation in this joint call for both media as well as investors and analysts. I want to thank you, Arno, for hosting this call and Rolf. I'm looking forward -- we are looking forward to get in touch with you again maybe during or around the Annual Shareholder Meeting. We wish you a wonderful week and stay safe. Thank you.
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