Stellantis NV (STLA) 2010 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to today's Fiat 2010 Third Quarter Results Conference Call. For your information, today's conference is being recorded. At this time, I would like to turn the call over to Marco Auriemma, Head of Fiat's Investor Relations. Mr. Auriemma, please go ahead sir.

Thank you Monica. Good afternoon to you all or good morning as the case may be and welcome to Fiat's 2010 Third Quarter Results Webcast and Conference Call. Chief Executive, Sergio Marchionne and the Group Treasurer, Camillo Rossotto, will host today's call as usual. We'll use the material you should have downloaded from our website fiatgroup.com. And after the introductory remarks, we'll be available to answer all the question you may have.

Before moving ahead, let me just remind you that any forward-looking statements we might be making during today's call are subject to the risk and uncertainties mentioned in the Safe Harbor statement included in the presentation material. So, now I will turn the call over to Mr. Sergio Marchionne.

Thank you, Marco. Good afternoon. I would just like to apologize upfront. I have a bad cold that I picked up in China, so my voice is going to -- may crack up during this call, so I do promise I'll be disciplined and then get off the microphone, but fundamentally we've had an outstanding third quarter.

As I've seen from some of the remarks that have come out from the analysts after the release of the numbers earlier this morning, most of you were surprised by the size and the shift in performance across the Group. The fact that we've been able to raise guidance in a significant a manner as we have, is an indication of our assessment of what we consider to be a permanent change in trading conditions in a market in which we function.

I know that there are some concerns out there about the performance of the car business, especially in Western Europe, and I think we'll deal with this when we get to it, but fundamentally we are happy. I think the Group has performed well, and certainly it has set the stage for the proper completion of the de-merger by the end of the share as we've previously announced in April.

In terms of the numbers, and I'm on page two, and I'm going to be speaking about some of these numbers, but not all. Obviously, group revenues were up significantly over the prior year. A large portion of this was driven by exchange, mainly on the car side in CNH with Latin America being probably the most significant contributor in the top line growth.

The automobile slide, as expected, was only up 1.3% to EUR7.1 billion, and this is due to the fact that FGA, the car side -- outside of the luxury brands was effectively flat year-over-year with volumes being down in Europe offset by a pick-up in both light commercial vehicles and our Latin American activities. The luxury brands continue to perform well, both Ferrari and Maserati and certainly inline with a market which is fundamentally recovering on a global scale.

CNH was and always sort of a surprise result up 32% with the AG business performing exceptionally strong during the quarter, and with a second consecutive recovery in terms of operating performance for construction equipment, which has been in positive territory now at trading profit level for two quarters in a row, and most of you have been able to see the Caterpillar numbers that were just released a few hours ago, and you've seen that this is the -- that CNH is not the only beneficiary over recovery in the market. I think it is something which has aligned most of the construction equipment manufacturers to benefit across the world.

Iveco was up 15% or about EUR2 billion with activity up across all of its regions and continue strong performance in Latin America. And obviously the components and the production systems businesses did well in tandem with both the increased activity at Fiat and the increased activities of their other customers, our competitors and a lot of the market segments in which we're present.

Trading profit was nearly doubled and nearly EUR600 million for the quarter. The auto side was in at EUR210 million. The only one that was down quarter-over-quarter was the Fiat Group Automobiles, which was down from a EUR155 million to EUR130 million and we'll talk about this in a moment. But obviously the luxury brands have performed well, especially Ferrari which keeps on moving up as margin performance is now 17% and getting closer to the 18% mark that it set itself as a target.

CNH obviously at EUR215 million, benefiting from the substantial volume uplift that it's received in AG, especially in the heavy equipment side, and from the recovery of the construction equipment sector. Iveco again performed well at EUR80 million from incredibly low levels in 2009, but we do see a steady performance and an improvement on the order book, which we'll talk about in a few minutes.

Components and again, Production Systems up EUR102 million with FPT, which is single largest contributor to that number, having probably the best third quarter in its history, as short lived as that history is, but it certainly will last three or four years. It's had the best third quarter in the last four years. Group trading margins are now 4.3%, nearly double where they were in Q3 of 2009. As importantly we posted a net profit of EUR193 million against the EUR25 million number in 2009.

Moving onto page three, obviously we've continued with this sort of rigorous discipline of cost, and that is going to -- unfortunately I think it's going to represent the way in which we run these businesses going forward. I think that there is a maniacal attention in this cost structure, mainly because of the period that we lived through in 2009, which has been somewhat painful, and so I think we've learned how to be a lot more careful in terms of extending ourselves, in terms of certainly long to medium term commitments and expenditures that cannot be shut off.

On the net industrial slide, we're below EUR4 billion now. This is unusual for Fiat, at least in the third quarter, because of the summer shutdown mainly in the European side. We end up absorbing a substantial amount of cash. The fact that we were able to hold it at EUR4 billion and below, I think the number is EUR3.966 billion for the quarter. Is it a good indication of sound cash management practices? We end up having almost EUR13 billion worth of cash. That's after we repaid US$0.5 billion bond that is CNH.

And consistent with what we told you in April and following the approval of our shareholders of the de-merger plan on September 16th, we are continuing to execute on the de-merger plan. We have -- there are no obstacles that we can see today into the completion of this project, and on the January 3rd, we should have two separately listed stocks, one representing Fiat Industrial and the other one fundamentally representing the car side.

We've also taken the opportunity, as I mentioned to you on the call on Q2 to offer a guidance for the year. We are now forecasting revenues in the minimum of EUR55 billion, a trading profit of EUR2 billion as a minimum, and net income number as a minimum of about US$400 million, and debt levels in total to be less than EUR4 billion, which is in excess -- which is a substantial reduction from the target that we have set for ourselves, all the minimum of EUR5 billion at the end of 2010.

We can just move onto slide number four, which deals with the car side, actually with the composition of both revenue and trading profit. There is not much I can add. I've mentioned most of these items in my discussion. If there's an issue that needs to be addressed, then we'll spend some time during this call dealing with it, as the performance of the Western European car business and how we see the closing of 2010 and what our forecast is for 2011, I think, just as a general comment. We're not going to give you any indication of 2011.

I think our views have not changed since April in terms of what 2011 will look like, but we will give you an updated view of those numbers, and of the expected performance of the two businesses, when we get on the call in January of 2011.

We want to move onto slide number five, again nothing exceptional in the completion of the P&L from trading profit down to net result. The financial charges line obviously includes the gain on the equity swap. Somebody had asked a question about what happens to the equity swap. It will stay with Fiat S.p.A, but whatever volatility is associated with that position will continue until the position is unwound.

There's roughly a EUR100 million in the quarter. I'm looking at Mr. Rossotto here to give me confirmation. It's roughly a EUR100 million, what we call the cost of carrier, the liquidity, which is now, as I said, about EUR13 billion, and then suddenly we considered -- we consider it necessary given the de-merger activities that were going on, and given the fact that until that process was completed, we wanted to make sure we have adequate cash reserves to try and deal with our obligations going forward.

This issue was reviewed with the board this morning, and I think Mr. Rossotto generously volunteered information that we have enough liquidity now to repay all maturities up to 2012. So, it gives us a level of comfort that is required to try and move the industrial machine on for the next two or three years.

On page six, which deals with the cash flow statement, there were some questions that were raised on the comments after the release of the earnings on the size of the capital expenditure profile, and I think that bullet makes clear of reference to the fact that we think we spent about 60% of the yearly tab. The number is expected to be slightly below EUR4 billion, around EUR3.9 billion for the year. That's our assessment, and whether we're able to actually book and spend the remainder over the next 90 days is really something that we're looking at.

It may come in slightly below the EUR3.9 billion number, but it's not far off that target. Notwithstanding this, I think we've had a good operating performance, and we've had the working capital side, which is usually the bad side of the coin, and Q3 has had a limited impact on the overall cash generation of the business, and we feel comfortable that EUR4 billion is a number that can be maintained until the end of this year. It's just going to form the basis for the split between industrial and Fiat.

I think there is a slide in here which we might as well deal with now, that suggested that -- suggested the actual split between the two businesses may not be totally inline with the 50-50 allocation, and then be more like a 60% in favor of industrial and 40% in favor of Fiat S.p.A. That's the way in which the numbers are backing up right now. So, obviously we will not know this until the process is completed at the end of December.

Page eight, which deals with our industry outlook on cars. We have revised upward, if that's the right term, the Western European expected performance in 2010. We were a lot more negative in terms of absolute volumes year-over-year. That number is now expected to be about 7% down against 2009. Obviously the single largest culprit of that decline is Italy, which is the one that it was the most heavily influenced in terms of eco-incentives.

Offsetting that is a strong performance in Brazil in terms of volumes, since obviously the strengthening of the light commercial vehicle business, which is not only a Western European issue, but is also having a significant impact in terms of Latin American production and volumes.

Total expected sales for the year will be in excess of 2 million cars. Our view was that we were going to be below that number. Certainly at the end of Q2, we've revised -- we have revised the number. I think the 2 million is an achievable number, but obviously it is based on a significantly declining Western European market, which in our view will continue well into the first quarter of 2011.

If we can just deal with the issue of inventories and whether we think we're managing the distribution channels properly, between dealer inventory and company inventory, we've got less than two months worth of inventory on the car side. That's a slight increase against Q2 positions, and certainly it's well below the historical norm.

We have been as disciplined as we can possibly be in terms of matching production and demand. We do not have any obsolescence issues on the car side to speak of, and I think we will continue to manage this by invoking temporary shutdowns, especially on the Italian car side, to make sure that we don't create a distribution issue going forward.

The light commercial vehicle is recovering well. As you can see, we have been able to hold position in Italy in a market which is fundamentally stable, but it's providing significant recovery both in Germany and the rest of Europe. Latin America continues to be the star performer, and it has achieved again an increase of market share in the third quarter of 2010. It is expected to continue at those levels for the fourth quarter of this year.

And when you look at the overall FGA business, the car side, all of the profit that we have registered in the quarter came out of Brazil and the Western European side now is in a loss position. This is something which has been -- which was predictable given the level of activity -- of industrial activity that's going on in the European side. It is an issue that will continue to plague us certainly in the fourth quarter of 2010, and in all likelihood for a portion of the first quarter of 2011.

If we move onto slide number nine, it's a sort of a comfort chart, and we use it as a blanket, but fundamentally we have had an opportunity to improve market share in a number of European countries. These obviously because of their size and because of the relevance of those markets to SGA have not had a significant shift in overall volumes.

The big problem for us has been the performance in the Italian market, in which we have gone down 3.5%. The chart clearly indicates that that drop is attributable to the lack of demand for CNG and LPG powered vehicles which were heavily incentivized during 2009, and which have gone missing in 2010, and we think that as I mentioned, I've been public on this before. I think it's a healthy thing to do to try and disengage from an incentivized system going forward.

We have to pay the price for this non-renewal of the incentives at some point in time in the history of Fiat, and I think that given the strength of the group today, it is as good a time as any to be able to live through the detox process associated with three years of heavily incentivized sales. We are -- and obviously because of the fact that our emphasis has always been historically in the A-B segments, the combination of bad -- the lack of CNG and LPG related incentives has driven a drop in market share in Italy, which is the single largest contributor to European volumes.

You can see that by brand actually Alfa Romeo is up slightly, and this is due to the introduction of Giulietta which was done in the second quarter of this year. And I know that a lot of you guys have been speculating about what happens to Alfa. Well, Alfa is in a process of transition.

If you move onto slide number 10, you can see the second element of the product lineup of Alfa Romeo, which started with the Mito about two years ago and which has now been augmented by what we consider to be the most technologically advanced mass volume car that we produce today, which is the Giulietta, and is the architecture on which most, if not all, of the CNG exposure of Chrysler in the United States will be driven.

That architecture has been transferred, it is now being engineered. It will be industrialized in 2011 with the introduction of the first C segment car for Dodge. And I think that the important thing for us is that the expansion of the architecture that covers C and D segments in the United States and the associated volumes with that build will allow Alfa to complete its product range and therefore become a fully fledged brand, which has been our ambition now for a number of years.

We continue to work on emissions, and on consumption we have been again recognized as being the lowest CO2 emitter of European mass producers. We have just launched the twin air, a two-cylinder engine, which will go into all the -- well, probably most of the A segment products that Fiat is involved in, in the large transport of D segment. It is the greenest engine that we have produced so far, as you can see from the chart. It has 92 grams of CO2 if it's combined with a robotized transmission.

It does provide a 30% reduction in equivalent power trains from a four cylinder. I think we're delighted that we were able to do this. This is something that we've worked on now for a number of years and it's becoming -- it has become an industrial reality, and it's being pushed into the Fiat 500 as a first means of introduction.

We're having discussions in the US about making this engine now available for Chrysler and the introduction of the Fiat 500 in the North American market. And although they will not be significant volumes, but it will be certainly a recognition of the commitment that this group has made to maintaining its leadership role in terms of low CO2 emissions.

Slide 11, which deals with light commercial vehicles. As I said, we are quite satisfied with the performance of this part of the business. When you look at FGA in its totality, there are two strong points to support its performance. One is the light commercial vehicle side, not just in Europe, but also in Latin America, and obviously the Latin American passenger car business, with the black sheep of the family being the European passenger car side, which continues to require a larger amount of intervention and on which I think our Fabrica Italia project was directed in terms of curing its anomalies and its economic inefficient.

I'll give you an update on where we are on that issue at the end of this presentation. We've won van of the year with Doblo. I think we're proud of that achievement, I think it's a continuation of a 10 year history of a product which has been incredibly successful, and I think it will go far in complimenting the product range the light commercial vehicles has through the Fiat brand, and which has got now the most current, the most renewed, the most recently renewed product portfolio of any producer in the business.

Slide number 12 deals with the agricultural equipment side. This is fundamentally a good slide. I think that our forecast for the full 2010 have been probably crafted on a conservative basis when we were assuming the combines will be five year-over-year, and that tractors will be up slightly.

I think we've done well in all the regions in which we have been participating. Obviously the Western European side, which shows a significant decline, both in tractors and combine in the third quarter and for the whole year, suggest that we are going to suffer through weak market conditions in this jurisdiction for perhaps a bit longer than 2010. The expectation though is that in 2011, it may be that Western Europe supported by strong commodity prices will probably rebound and join the rest of the world in the AG recovery cycle.

Slide number 13, which deals with construction equipment, again significant recovery against 2009 volumes. 30% up on light equipment, 55% to 60% on the heavy side, but we're talking about the recoveries off an incredibly low base. And so, although from a percentage point there are significant improvements. Talking in absolute unit volumes, we still have a long way to go.

It will not be until 2014 that we'll see similar volumes to what we saw in 2007 in this business. Having said this, all the restructuring actions that we're undertaking, starting in the second half of 2008 and throughout 2009 have begun to pay-off. We're actually making some money and generating some cash out of these businesses, out of construction equipment.

It's not been a significant amount in 2010 so far, at least on an operating profit basis, but we've been able to deal with inventory overhangs in an effective way. I think most of that process will be over by the end of this year.

Slide 14, which deals with the new product introductions, obviously we're all diligently working on making sure that we have tier four emission compliant engines in our vehicles. Most of that work will be completed by 2011. The other significant part is that we have carried out a substantial overhaul of our product portfolio and construction and the tractor loader backhoe which you see on the slide is a very significant product introduction for the brand.

It's a first significant product renewal of this equipment in the last 50 years, and so I think it will be available for distribution in the fourth quarter of this year, and we're looking forward to a continued success of this vehicle, which has been at the heart of the Case brand now for the last x number of years.

Iveco, on slide number 15, continues to perform well. Latin America is up 50% and Brazil, Argentina is up 40%. Western Europe is up, as you can see from the slide, in terms of light, medium and heavy, but we're still below the 2007, 2008 average. The order book for this business is strong. We're up 50% roughly for Q3 of this year compared to last year in total, and I think that we're relatively satisfied with the progress that has been made.

We are -- we remain a bit skeptical about the performance of the Italian business, which obviously is the one that you compared it to the others has not performed as well, does not perform as well. So, in terms of industry expectations for 2010, we do expect an improvement over 2009. I'm not -- although the slide says there were some uncertainties about Eastern Europe, I think that those numbers will actually come home, but -- and certainly we've been overly conservative on the performance of Latin America in the fourth quarter.

So, I think we'll do well. What -- the untold story about Iveco is on slide 16. I just came back from a review of our business operations of CNH -- actually of Iveco and FPT when I was in China last week. We have made significant progress in terms of positioning Iveco as being the largest foreign truck manufacturer in China.

The numbers that I saw when I was there are incredibly encouraging in terms of performance. We do expect that our volumes will be up 30% versus 2009 and although the market is growing, we're outpacing the growth for that market. I think that the combination of the Iveco technology and the positioning of the brands that we inherited as a result of the joint venture are going to ensure that we remain market leader in China and that we build on that position going forward.

The other significant part of that joint venture is the ability to provide products for distribution for the rest of the network. Brazil is going to be the first recipient of that product offering by receiving a medium sized truck hopefully within 2011.

Group purchasing on page 17 deals with the achievements to-date. We're about almost EUR3 -- almost EUR400 million in savings to the end of the third quarter. We expect the fourth quarter performance to be about flat as a result of certain raw materials headwinds. Whatever has been achieved has been achieved. To-date, I think we will see no significant improvement going forward. We're now examining 2011 expectations. I think that we have targeted a number like EUR400 million for 2011. Our best read of that number today is roughly half of that is going to be achievable.

So, going onto page 18, which deals with the outlook and the upgraded guidance, EUR55 billion in revenues for the group, and we do expect the CapEx programs to pick up speed in the fourth quarter of this year and to hit close to the EUR3.9 billion mark for the year. And obviously trading profit of EUR2 billion, net income of above EUR400 million and net debts of about EUR4 billion or less.

Slide 19 deals on a pro-forma basis with what the two entities that will be resulting for the de-merger would have looked like in Q3, and certainly for the nine months of 2010, you can see clearly a couple of things. One, that apart from the -- our near equality of operating performance between these two businesses, it's total untrue from a margin basis, but more importantly what is phenomenally different between these two businesses is the involvement of capital in the running of these businesses.

We're talking about the Fiat business, the car side burning up almost four times as much cash in terms of capital in the first nine months to the industrial side. So, I think it just reinforces our view that the de-merger is based on sound strategic reason and purely on an operating performance and that the -- the level of strategic flexibility that will be available to these two businesses going forward, has been significantly increased. It certainly will be so as of January 3rd.

Page 20 just confirms what I mentioned to you earlier. The 50-50 split may not be 50-50, maybe 60% in favor of industrial, and 40% in favor of car. Slide 21 gives you a very brief pictorial update on where we are on the de-merger process. The only thing that's really expected to -- to be completed, which I think we're well on our way, is to receive notification from the Italian stock exchange of the admission to -- for listing of the two companies. We're going to execute the deed of de-merger and by the middle of December, and as of the 3rd January we will be looking at two companies trading on the Italian stock exchange.

Page 22 which deals with -- is fundamentally continuation of a slide that deals with our commitment to the environment. Not only are we the lowest CO2 emitters of any car producer, but the commitment to sustainability which goes beyond emissions is something which we've worn as an ambition across the group and across all factors.

And so we were delighted that we were able -- that we were assigned a score of 93, which is the second largest -- the second highest score given to anybody in the automotive sector, I think the only people that beat us were BMW with a point difference and the average was only 70. It just -- it's something that we will continue to do both in Fiat and Fiat Industrial, and I think it's just the reinforcement of the efforts that have gone on here in terms of building a sustainable business. I'm pretty well done. I'm going to pass it back to Mr. Auriemma to arrange for calls, but that's pretty well it.

Thank you Mr. Marchionne. Now, we are ready to start the Q&A session. Monica, please retrieve the first question.

Thank you. (Operator Instructions). And we take our first question from Monica Bosio from Banca IMI. Please go ahead, your line is open.

Yes, good afternoon everyone. I would have three questions. The first one is regarding the first half of 2011. According to the recent statements, the first quarter of 2011 would be -- could be weaker than the first quarter of 2010. I could imagine that this statement refers to the automotive segment. I would like to have a confirm of this.

And I would like to know if the company believes that automotive segment, the performance from Brazil could continue to upset the weakness in Western Europe. And in relation to this, I was wondering if you -- if the company is going to rescheduling the CapEx expected for 2011 in the automotive segment. And if you wish I can [fax] to the second question or -- hello?

Yes, let me try and answer your question. I think it is clear that the first quarter of 2011 -- the first quarter of 2010 for the European car business --.

Yes.

-- was an anomalous quarter, because it included the tail end of the incentive scheme. All cars that were registered by March 31st of 2010 benefited from the incentive scheme that was put in place for the whole of 2009.

Yes.

So, you are going to end up with the first quarter of 2011, which is going to be substantially different and lower than the performance of -- that we have achieved for the first quarter of this year. But whatever confirmation you need there, I just gave you, what is unclear to us and I think we need to go through the numbers, is to find out what possible benefit a strong Latin America market could have on the overall pictorial performance.

And so, we're not ready to make the call now as to where certainly first half of 2011 will be. I think we're going to reserve those comments for the conference call that we'll hold in Germany in connection with the 2010 results.

Okay.

Now, can I just -- let me answer your questions. And the other question that you've asked me was about Latin America upsetting Europe, and the answer is obviously that's the issue that we need to examine. I think the sector in Latin America is doing incredibly well. We do expect that the Latin American market will continue to outperform Europe by a long stretch for a long period of time. I think our forecast for 2014 suggests that our Latin American operations will be able to sell in excess of a million cars in that market by that time. And obviously that will have a significant impact on profitability of Fiat Group Automobiles.

Okay.

In terms of -- can I just finish?

Yes, sorry.

And then in terms of your third question on the rescheduling of the CapEx, this is a slightly more complicated question, because there has been no willful act on our part to try and postpone CapEx on the Fiat Group Automobile side, certainly not in 2010, although I think that position was certainly implemented and executed in 2009.

We have taken a distance from some of the projects because of the uncertainty associated with market performance, and so there has been no formal rescheduling of CapEx. I think there have been some projects that have been called into questions, because of the performance of the European markets, and we were unsure as to whether some of these projects were wise or desirable in these market conditions.

We have not stopped and we certainly have not postponed a single CapEx. In terms of our Latin American operations, there has been a rescheduling of a particular model in Latin America, which was driven by market needs and not by cash requirements. So, overall although there has been a movement in the CapEx schedule for car, none of it has been driven by a desire to slow down the business.

What has slowed down the business intentionally, I think, and not as a result of our involvement is the uncertainty that certainly -- currently surrounds our project of Fabrica Italia, which involves the Italian plant. We have been able, after the signature of the Pomigliano agreement, we've been able to initiate an investment program. That program is now sealed, it is being executed. We will be training people during 2010 for these cars to go into production in 2011.

So, we may have lost some time because of the delay involved in the approval by the workforce of the new agreement, but I think it was time worth waiting, because I think it will significantly change the operating performance of that plant.

We have remaining issues on Fabrica Italia, vis-a-vis the remaining plants. Until those issues get resolved and until we find a way in which we can achieve our desire to be able to run these plants, to effectively ensure our right and our ability to govern these plants effectively and to turn them into competitive tools, I think we will continue to wait and sit on these investments until clarity is achieved.

How long that will take is unclear. I think that we're running against the clock on this one. I think that -- it is my sincere hope and it is my expectation that all these issues will be resolved by the completion of Q4 of this year.

Okay.

(inaudible) answered your questions.

Okay. And did you believe that maybe -- given the current situation, especially in Italy, the company could begin to accelerate on potential alliances with another partner in the automotive segment in order to try to compensate the situation or to do something, because the Italian situation is very difficult so.

Well, I think -- I'm going to try and answer you -- I'm not sure that finding an alliance with another partner is going to address the structural issues of the industrial framework. Fiat already has a strategic partner in Chrysler. It has made the determination last year, and it has effectively committed to jointly develop the car business on a global scale together with them.

I am not sure that the Chrysler industrial presence know-how, architectural knowledge and presence in particular car segments, in and by themselves, and given the fact that most of the production asset that they have are NAFTA related. That those would be very, very helpful in trying to resolve an Italian issue which is so structural to this country.

And I think that the big problem -- the bigger problem that I have is that as a result of these opportunities that have opened up, as a result of Chrysler in both directions, between Chrysler and Fiat here in Europe and in Latin America, and certainly in terms of Fiat being able to access the North American market, that all these delays that we're encountering in achieving consensus on how to move the industrial machine forward, made the -- these opportunities maybe lost, and if they're lost, I think then Fiat would have to look at alternative ways of accomplishing the same end. So, I prefer not to deal with that issue until I have certainty of the fact that our efforts here won't go in vain, and I'm not sure I'm at that point today.

Okay, I understand. Just two quick questions. The first one is related to pension funds. Is it possible to have a breakdown of pension funds between Fiat Industrial and Fiat S.p.A post the merger?

Yes, you can do this with Mr. Auriemma offline. I don't think there's anything nefarious on those numbers, and I don't have them here with me, but he'll give them to you.

Okay, and the second one, is it's regarding Ferrari. Are you going to maintain --?

You would like to buy one?

I would like, but I cannot afford.

Well, we can do this offline too.

Ferrari, do you believe that this target could be maintained?

Which target?

The trading profit.

No, I have every faith in Mr. Montezemolo to achieve 18% margin out of this business, not a single doubt.

Okay, thank you very much.

Thank you.

Thank you. We will take our next question from Martino De Ambroggi from Equita. Please go ahead.

Yes, good afternoon, good morning everybody, first question on results. You will likely approach this year, your trading profit guidance for next year, year approach or achieve, but we will see. But is there any major non-recurring events that we should be aware of, which positively influenced this year performance? In my mind I have the currency impact from Brazil.

By the way, that will happen this year, as it will happen next year.

Okay, could you quantify it?

I can tell you. Yes, the total impact is about EUR50 million.

Year-to-date.

In the quarter.

And year-to-date?

EUR190 million.

Okay, perfect. And I also remember another non-recurrent event, which is the fiscal credit cash-in. Did you already cashed in?

I'm sorry?

The fiscal credit concerning the strategy incentives and so on.

There's roughly EUR100 million of uncollected receivables at the end of the third quarter, most of which are expected to be drawn down by the end of this year.

Okay and the follow-up question is on the strategy, because you many times mentioned -- you many times -- the strategic flexibility of the new structure, group structure. I know there are too many options to describe, but what are your ideas, scenarios and what absolutely not?

That's a very difficult question to answer. I can give you a sort of a vanilla, apple pie motherhood answer that says that we will do everything that is designed to reinforce the business, and therefore there is nothing on the restricted list that will prevent us from acting. And so, I think that the extent that we can create conditions or solutions that are value accretive to the business, in the sense that they expand us their strategic capabilities, then I think we will look at them, right?

Some of them are -- if anything which is purely designed to achieve a mass -- indiscriminate mass with no reason is of no interest. If we can see a project that has got industrial validity in terms of improving the operating efficiency and performance of the business, we will look at it. But I have nothing on my list that is verboten, everything is doable.

Okay, perfect. Thank you.

Thierry Huon from Exane has the next question. Please go ahead.

Yes, good afternoon, it's Thierry Huon, speaking from Exane. A quick question on the debt situation. According to what you showed, it seems that Iveco is carrying a really significant debt since the industrial part is free of debt on the CNH side. So, could you explain why Iveco has such a high debt? And second question is about the inventories. You said that we are in a good position. Could you clarify what would be ideal situation in terms of inventories? Thank you. On the auto side of course.

And by the way, as a general rule, anything that drives numbers below two months worth of supply, I'd be happy with. I think the bells will go off if I hit that number, and so we're well within limits. This includes dealer and company inventory. On the other issue about Iveco, I can give you my answer, then Mr. Rossotto can give you his, and hopefully they coincide or at least are concurrent.

But I -- one of the things that's happened when you run a group of this size is you end up paying distributable reserves and dividends out of a 100% owned entities. And then the question of what fits this leverage within one of the 100% entities is something which is determined by whatever cash requirements set up at group level.

So, the debt that sits in Iveco is not a reflectable, historical performance and the fact that it burns cash, it's the fact that we have depleted the reserves, the statutory reserves that are housed that try and create the conditions ultimately of more or less a 50-50 split. CNH is an independent entity. It is 90% owned by Fiat, and therefore it is not a 100% owned entity, and therefore the ability to repatriate earnings or to distribute reserves back up to the parent is severely restricted. We don't have the same degree of latitude that we have with Iveco, and that's why there is a difference. And it's not because of the difference in cash performances between the two sides. You want to add something to that?

Yes, the only thing I would like to add is the fact that these results are reflective of the fact that Iveco is being run under a centralized treasury operations under Fiat, and now that you see this part of Fiat Industrial, I think you should focus more on the Fiat Industrial credit metrics, as opposed to some of the parts of the operating entities underneath Fiat Industrial. And that's why I think slide 19 is a good place to start, where you look at the EBITDA to net industrial debt above Fiat Industrial and Fiat pro-forma to be very much self-independently and self-supporting.

Yes, I understand, but if I have a bit more than EUR2 billion debt on the industrial side, and with about EUR1 billion cash in terms of euro on CNH side, it means that Iveco is carrying something like EUR3 billion net debt. So, is not this a big burden to be flexible if you want to do anything regarding the truck?

Not really. To begin -- to begin with -- I'm going to cut you off at the past before you start meandering through strategic options on the truck side. Whatever it is that you're thinking about Thierry, at the end of the day it's going to be an easy calculation and that is going to be irrelevant, whatever you maybe thinking about, right that's all. Let me get you off that nickel and we'll move onto something else, but there's nothing that prevents Fiat Industrial from being able to support that debt level.

Okay, so very last question about Iveco.

Yes.

Would it make sense to go further with your Chinese partner? Instead of just having JV with SAIC for trucks in China, to have a complete motor of Iveco in SAIC?

Well, SAIC, as you well know, is a large automotive conglomerate that has a variety of interest including a significant interest with both Volkswagen and with General Motors on the car side. So, I'm not sure you're talking about the whole of SAIC or just the industrial part of SAIC.

No, no, just the industrial, to have Iveco merged with the industrial part of SAIC to have a fully integrated truck maker.

Well, I think the answer to your question is that I think we're getting to the same results by keeping the joint venture and operating in the way we are. I don't think we will be benefiting very much, because the activities of SAIC in the industrial side are pretty well concentrated and the relationship that they have with Iveco. I think that there's a piece of this, which is outside of Iveco's influence, which is on the bus side.

And those are discussions that we have had on and off with SAIC about how it is that we could possibly interface and provide some additional strategic strength to their business. But once you remove buses, I'm not sure there's much else left. So, the question will really be one of selling Iveco to the Chinese, and if that's true then I think -- I don't know why you would limit that question to just the Chinese? I think it becomes a much wider question, and I think the Chinese may become an option, but certainly not the only one.

But just to be clear, we're not in selling mode for the truck business. I'm interested in looking at projects that would increase the operating performance of Iveco by giving it additional scale, intelligent scale. I think the joint venture in China was a first step in extending that reach, there's fundamentally only one market which is excluded from the reach of Iveco today and that's NAFTA. In NAFTA, we have not been present in.

And so that's the only one that fundamentally remains as a geographic hole. So, how this -- how the Iveco story evolves is something that we need to stay close to. I think that we intend on growing the business and to strengthen it, but I have no preconceived notions about how that's going to happen.

And Chrysler, could Chrysler could be an answer to this issue?

I'm Sorry?

Chrysler could be the answer for this issue?

That's a difficult question. I think we've toyed with the idea inside Chrysler about to what extent we could extend the Ram, the coverage of the Ram brand with a product that comes out of Iveco. I think it's an interesting idea. I just do not know, to be perfectly honest, how far the distribution network of Chrysler would be able -- to what extent the distribution network that Chrysler has, would be able to deal with this customer base, which is fundamentally different, than a pure automotive distribution mechanism.

There are some products that sit within Iveco, that would make sense, especially at the light end, and perhaps some of the medium trucks out of Iveco would make sense to the Ram -- but these are very initial thoughts. We need to spend much more time to find out what the real size of the opportunity is. And to be honest with you, I'm not sure that we need -- that the US needs another truck manufacturer. But having said this, and certainly not with sort of a different product lineup that currently exists. I think we continue to work on the American option, but I have no immediate solution for it today.

Okay, thank you for the straightforward answer.

Thanks.

Brian Johnson from Barclays Capital has the next question. Please go ahead.

Yes, Sergio, I would like to dive in again to the relative contribution of Brazil, European autos and European LCVs. If we look in the appendix at page 25 at the price mix, can you give us a sense of what the negative was from price versus the pos in Western Europe versus the positive contribution from LCVs contained within that EUR15 million?

Let them look for the numbers. I don't have it here, but they're going to look at it.

And maybe while you're looking, a second one is just could you remind us where you make your LCVs serving Europe and how those fit or don't fit into the Fabrica Italia plans?

The LCVs for the most part are being made -- the largest portion of that offering is being manufactured in a plant which is jointly owned with Peugeot, Citroen and which runs in Italy. That plant has been performing well. I think we have had fundamentally no operational issues over the running of that plant that would require special intervention.

I think the Fabrica Italia, as a project was designed to deal in -- for the large part with the automotive plants, but not light commercial vehicle side. So, I issue vis-a-vis that business is fundamentally -- we don't have an issue and we don't have an issue in terms of being able to provide a product of both acceptable qualities and in terms of dealing with demand peaks as we've been having in 2007 and 2008.

So, it's a business that's excluded and we feel relatively comfortable that it's running well and there are no threatening issues on the -- on that side. The other parts of the business is being manufactured out of Turkey, and that's being run for the joint venture that we have in Tofas, and again there are no issues, operational issues that would put in jeopardy the ability to produce. So, I'm -- we're fine and it's not a big issue. Now, I'm being given a number here just to make sure that the LCV contribution to these sales that is mixed and volume story is about EUR15 million.

Positive?

But obviously.

Right, and so that means (inaudible - multiple speakers).

So you understand this, this is the most profitable business that we run, the light commercial vehicle side.

So, when you made your comments about Brazil contributes all the profitability, Western Europe unprofitable. Were you -- did you just mean Western European passenger cars or do you mean Western European including the proper contribution of LCV and buying the passenger cars are even worse?

There are two passengers -- there are two contributors to the number which offset the negative performance of car. LCV in Brazil are both positive.

Okay, thanks. Thank you.

Yes.

We will take our next question from Ranjit Unnithan from JPMorgan. Please go ahead.

Hi, thanks for taking my question, it's Ranjit Unnithan from JPMorgan. I just wanted to clarify some of the comments you made earlier on CapEx. So, you originally set out to spend about EUR4.7 billion this year. Looks like you'll end up a little under EUR4 million, and you're saying that some projects are delayed or not being looked at again, but it doesn't sort of impact your product investment plans.

Now, how does this impact your 2011, 2012 to the CapEx, because it's going to be a significant step up in the CapEx investment that you outlined in your five-year plan. So, if I remember right it's about 5 point -- well, at least on the auto side, it's about EUR4.6 billion in 2011, EUR4.2 billion in 2012. So, if you could help us think about those numbers in the context of how much you spent this year that would be great. And second --.

-- let me deal with that question upfront.

Okay.

and yes -- I have a very short answer for you. I don't have an answer for you in the sense that to begin with I think we should reserve any judgment or any update on 2011 and 2012 for the January call. Now, just to be clear, it is highly unlikely that whatever it is that we have rescheduled, either as a decision to not engage in a particular product development or to postpone the product development that those two things will combine to create an unmanageable bump in 2011 and 2012.

If you're going to see anything at all, you're going to see a shift in the CapEx schedule on a permanent basis going forward, but it's just going to be a rescheduling of the product interventions that will effectively take care of themselves by the end of 2014, but it will not be in 2011 and 2012 for (inaudible).

Okay, so again just to clarify that point and I think the numbers you put out for 2011, 2012 still stand?

As I mentioned in my opening remarks, I have no indication today that will suggest that we're moving those numbers.

Okay, very clear.

I reserve the right to watch fourth quarter and to make the call in January of 2011.

Very clear. On Chrysler, can you remind us in terms of -- or at least your expectation on when you expect to stake up from 20% to 35%? So, there were three sort of quantifiable metrics in terms of what you needed to achieve to get a 35%? Can you sort of help us, now that sort of we're at the -- close to the end of 2010 in terms of thinking when you're likely to hit that 35%?

And the follow-up to that is, in terms if your incremental option where you can take an additional 16% in addition to the 35% stake. How should we think about that? Is that even necessary in terms of the industrial alliances and partnerships you're doing today? How do you think about that especially once a de-merger is complete?

Just in terms of the three events. The three events will remind everybody this is public information anyway. One is in connection with the launch of the Fiat 500 and the introduction of a particular engine in that car, which is going to be accomplished by the end of this year, but the car will be in market in January 2011. So, we will have the first 5% of the 15% turnout within Q4 or Q1 of 2000 -- in the Q4 of 2010 or the first quarter of 2011.

The second event was the production of a 40 miles per gallon car. We're going to be in a position to homologate that vehicle within 2011 and we expect to be able to accomplish the second portion of the earn out by the end of next year.

The third one is something which relates to the international distribution of Chrysler products, which are fundamentally related to the Latin American operations that we have. Fiat is technically in compliance with that requirement. The execution of that obligation is something which has fought with difficulties because of particular rules and regulations that govern the maintenance and the management of a dealer distribution network in Brazil.

We're now working with the parties, including the United States treasury to find a suitable solution or a replacement to that condition, and in all likelihood that condition will be, at least in terms of certainty, of detail, will be resolved within the end of this year, and it's my expectation that we'll be able to trigger with, and probably inline with the 40 miles per gallon car. So, within 2011, we should get to the 35% number. Unless there are sort of a bar -- barring unforeseen circumstances.

The question about the 51% target, and the 16% -- the right to acquire 16%, I tend to agree with you that it doesn't really make -- from an operational standpoint there is no added value from us acquiring the 16% and getting to a 51% position operationally. It may very well be that Fiat on the basis of its assessment of the ongoing profitability and prospects for Chrysler may consider that to be a wise investment, and therefore it will make the investment, because of the inherent value generation associated with Chrysler.

I can tell you right now that I'm not at that stage. I'm not -- I'm not even playing with that notion today, and I think that we need to be -- we need to distance ourselves from that option until we get better clarity about A, what the capital structure of Chrysler is going to be on a permanent long term basis going forward, including the refinancing of the UST and EDC positions, which are lenders to the organization, and secondly, the timing of a potential public offering of equity into the market. These are things that are being examined by the board of directors at Chrysler. Until those final determinations are made, I think Fiat is in no position to respond to the options that would be offered.

Very clear. And if I can add just one question about the quarter, I think I know the answer to this, but just to confirm. Iveco did better in a margin perspective in Q3 despite slightly weaker revenues on a quarter-on-quarter basis. What was the reason for that? Europe was sequentially weaker, and lastly CNH, the guidance seems to suggest that margins and profits will be weaker in Q4 than in Q3, at least the CNH guidance suggests that. Is that just seasonal? Thank you.

And just to deal with the last question, to be perfectly honest, I'm hard pressed to give you a straight answer on the seasonality in Q4, because historically that's not the case. The fourth quarter of CNH usually is a very strong quarter, and so I think the way to read that statement in terms of guidance is to read the right level of prudence and the estimate going forward. And I think we should leave it at that, then we'll see what happens at the end of the fourth quarter.

In terms of the Iveco performance, I think there was [biasing] the numbers is the phenomenal experience -- phenomenal performance of our Latin American business, which has offset what you refer to as a not so stellar performance of Western Europe, but I think certainly the margins that we're obtaining from both the special vehicle side of the business and from the Latin American side are maybe distorting the margin performance that you're talking about.

Thank you very much.

You're welcome.

We will take our next question from Stuart Pearson from Morgan Stanley. Please go ahead.

Yes, good afternoon, just wanted to come back quickly to the first question on the Chrysler stake. If you were to decide within the next 12 to 18 months, you've wanted to exercise that option for any reason. Is there any possibility to exercise that? I seem to recall that there are the master plan meant that that option was exercised with 13?

That's correct. I am not in a position to exercise that option in 2011, unless there's an amendment to the agreement.

But presumably there could be a discussion you have with the counter party there, that would enable that to happen?

Absolutely. I think that one of the things that remains fundamental to the Chrysler structure is that Fiat could never actually take control of Chrysler in the 50% plus environment, unless the indebtedness to United States treasury and EDC is paid off. So, it becomes -- it's pretty well of a sort of an empty achievement in the absence of an ability to exercise those voting rights and until the debt position of USD and EDC is resolved. So, that's why the story is somewhat complicated.

Yes.

It's more complicated than it appears. And legally we're not even entitled to exercise the acquisition option. So, let's wait until we finish, until the board of directors finishes looking at this whole issue of capital structure, the right level of indebtedness, the source of funding for that indebtedness, the timing of a potential IPO and then in the context of that assessment, I think the parties will certainly do whatever is required to ensure that Chrysler has both stability in terms of a point of reference as a shareholder and has access to capital markets and funding to ensure its long term viability. That remains my first and foremost objective.

Okay, but if -- and I'm not sure if it will ever be relevant, but if you did exercise that option before Chrysler had an IPO, am I right to presume that it'd still be capped by the EV to EBITDA (inaudible) Fiat S.p.A, which would be effectively the new Fiat Auto as of next year.

I think that to the extent -- the answer to your question is that I guess it's technically yes, except to the extent that you're moving the date. I think that even that multiple maybe up for grab. So, I don't want to comment on that issue. I think that this is part of a more complex set of negotiations, which need to go on after the board makes its determination of what it wants Chrysler to be in terms of capital structure, and I think we need to wait until that process is over. The board is actively engaged in that process today.

Okay. My second question was on Fiat Industrial. Just going back to the discussion earlier between the debt on Iveco and CNH, but I guess while CNH is a publicly listed company, where we're seeing balance sheets, that debt is -- all that cash position is still going to remain at CNH. Is there any plan, that we should think about the near term to take away that minority listing or is that something that's -- isn't something we should consider for the next 12 months or so?

I'm going to tell you nothing that's going you to incite you to go out there and buy minority shares in CNH. This issue has been festering for a long period of time. Every time I'm asked the question, the answer is no. If it does happen, there must be a real reason why we would want to take out the minorities.

We're not doing this for aesthetic reasons. I think that we have established a proper mechanism of dealing with non-arms length transactions in terms of providing mainly engine services to CNH. That continues to work well, and so it's not as if we've got a -- we have impediments to the transfer goods and services between one side in the house and the other. And so in the absence of a real need, I think that this becomes a much less important issue going forward than it may have been historically. The important thing for us was to group the industrial activities under one umbrella, and Fiat Industrial accomplishes that end.

Okay. And my last question was just to do with inevitably pricing I guess, both in Europe and Brazil. Just in Brazil, I wonder if you can comment on the behavior of both the Korean parties, given the lack of local capacity and currency benefit there, and also GM, who we understand are being a little bit more aggressive in Brazil. And then on the European side, given the importance of product to pricing right now, perhaps you could just elaborate some of the decisions to delay price -- serve new product into 2012 for Fiat out there.

Just in terms of Latin American pricing behavior from the competitors, I think -- generally speaking, I think the market is relatively disciplined and whatever you may have heard in terms of aggressiveness by some of the players maybe slightly overstated. I think the -- and so although we do see occasional aberrations and discipline, I think that the overall market performs well.

It is untrue on the Western European side, where I think that people, some people have taken a much more aggressive view of pricing, given the softening of demand and the desire to utilize infrastructure. We have resisted, I think, in both cases, both in Latin America, and in Europe to engage in what we consider to be value destroying initiatives in terms of pricing, but it is a lot more frequent in Europe than it is anywhere else.

Strangely enough, our experience with Chrysler is that for the main part, especially in passenger cars, we have seen discipline, and we have seen rigor, and I wish that that level of discipline and rigor were available in the European market, but it isn't. So, we're watching this very carefully.

Okay, and on the decision to delay product, is that just taking a very bearish view on Europe next year, which I don't recall was the case in April, but --.

I think that the European market, regardless of what you may hear from some of our competitors, is going to be fraught with difficulties because of a demand supply mismatch. And so, I think that those issues need to somehow be addressed. Our attempt at instituting the Fabrica Italia project was designed to deal with those anomalies by opening up these production assets to a relatively potentially strong export function.

So, in the absence of that agreement, I think that we're going to be left with managing a rump, industrial assets on the Italian side, which has got a relatively limited degrees of freedom going forward. So, it is my sincere hope that the Fabrica Italia project does go to completion, otherwise I think the fate of the industrial network here in Italy is threatened, and something I sincerely wish we never have to face, but we need to work through the mechanics with this process, with all the antics associated with the dialog, if you can call it dialog, it is difficult.

And so we're playing this -- we're playing this out very, very carefully. I think that timing is an issue. I don't think we can wait forever for this system to unblock, and in the absence of an ability to resolve those issues, certainly those cars and those vehicles that are required for Western European consumption would have to find a production home, and we have others that are available to try and take their place.

Okay, thank you.

Thanks.

Our final question comes from Max Warburton from Bernstein. Please go ahead.

Yes, hi, good afternoon everybody, just two quick questions from my side, the first one, a [concur] productivity, Alfa Romeo. Sergio, you were on record I think at Paris saying, look, it's not for sale. Could you just walk us through what this sort of financial logic would be? Is it right to assume -- is it fair to assume that everything has a price, and with Volkswagen obviously having cash in their pockets burning holes, this is a discussion about price and not discussion about pride or national champions or logic on that side.

Second question, maybe this is strange to ask you this, but we've all had a go at thinking about what industrial is going to be worth and what auto is going to be worth post de-merger. What's your view, what's your view -- what's the view of your bankers? How do you think the value splits when these two things list in January? Thanks.

Thanks for the last question Max. Just to deal with the first part, I never want to sound like a mercenary nor somebody who is a hopeless romantic attached to running businesses that have a better use elsewhere in the world. But I think we need to start off with a very clear assumption that we think we can run Alfa Romeo, and that as a result of the sharing of architectures with Chrysler, we will be in a position to provide the right product offering to the Alfa Romeo brand and then truly make it into as much as we can call it a premium brand, but a more than just a mass marketing vehicle for distribution across the world.

So, that's our objective, that's our intent. The answer to your question, is everything for sale? If somebody were to show up with a number, which is by definition outside of the boundaries or will be considered to be the achievable set of outcomes and successfully wind their business, I think that Fiat would have to take a very hard look at it. But the view is that it's not for sale. I've been offered nothing. I think everything that you've read and what people have said, has been purely speculation, right.

So, that's not -- I can't answer speculative comments. But as a matter of principle, I think that there may be views, there maybe a particular point in time, which may make it impossible to refuse an answer. I'm not at that stage, so until I do, the answer is no, it's not there.

The answer to your second question, it's a much more difficult question because we've had a number of sort of what I call religious ex -- sorry, financial experts in here who have expressed the religious view of the intrinsic value of Fiat and Fiat Industrial. I'm not going to bore you with the litany of -- declinations of those values that I've seen.

I think it is fair to say that the -- there are two things that are -- and without telling you what the relative split to the values would be, I still think and I'm -- this is my own personal view, it does not reflect sort of -- don't read this is as sort of a Fiat assertion of the truth going forward, but there's still unexploited value in the current valuation of Fiat S.p.A, which will eventually materialize as a result of the de-merger.

And secondly, that the extent to which the additional value gets expressed, also depends in part, not in total, but in part on the performance of Chrysler as an entity in the United States and our ability to turn that business around. So far and subject to us advising the markets in November hence to what third quarter performance has been and what our expectations for the year are, we are -- as I've said, we are conforming guidance that we've given up to now and we reserve the right to upgrade guidance in the third quarter of this year.

Based on the numbers that I've seen, I think -- and I mentioned this on the second quarter call, that it's almost -- I think it's highly unlikely that we will not have to revise guidance upwards. And if that's true, I think it's the confirmation of the viability or the efforts that have been put at play here in terms of Chrysler. And therefore it's ultimate valuation, and the impact on the valuation of Fiat is something that needs to be taken into account.

So far there are markets for the large part -- for the largest part that were assigned a zero value to that enterprise, and I can tell you based -- since I'm running the business, that it's not true. It is a value, which is significantly greater than zero.

Okay, thanks very much.

Sure, I'm not sure that I gave you a buying recommendation, but certainly there is -- there are things that need to be analyzed in a lot more detail. I know you were a skeptic at one point in time. I sincerely hope you're not anymore, but you were a skeptic about the value of the Chrysler option.

I think that whatever doubts you may have had, and that -- and that all of us who were involved in the Chrysler venture, may have had at the beginning of the process, anticipated, and I think that we're looking at a much stronger future for Chrysler going forward, and something that hopefully will find recognition in the valuation of the IPO.

Okay, am I still online? Just a follow-up on that, I think it was Ranjit's question about -- or Stuart's question about going to 51%. To value auto properly, the market needs to be guided a little bit about how that might happen and what the cash flow from Chrysler might be. Is that something you would be able to layout for us in 2011 or is it really Fiat [S.p.A.] Auto, let's wait till 2013 to really think about cash flow coming from Chrysler to Fiat shareholders?

I think it's a 2011 event in (inaudible). And how that event gets articulated, Max is -- it may not be totally inline with what you just said, but I think by 2011 we should achieve clarity.

Okay, thanks again.

Yes.

That will conclude the question and answer session. I would now like to turn the call back over to Marco Auriemma for any additional or closing remarks.

Thank you Monica. We would like to thank everyone for attending the call with us. We look forward to following up any questions. Have a good evening. Bye.

Thank you. That will conclude today's conference call. Thank you for your participation ladies and gentlemen, you may now disconnect.