Porsche Automobil Holding SE

Good morning, everyone. Welcome to our press call on the half-year figures of Porsche AG. This is Sebastian and with me are Oliver and Lutz. Already mentioned, glad to have you here and glad to have you all in the call. Today, we would like to give you a brief insight to our business performance so far this year. Olli will start with a quick look at the most recent developments, challenges that we are currently facing. Afterwards, Lutz will explain our figures for the first half year to you in detail. And he will also give you an outlook for the second half of the year. After that, we will be happy to take any questions. And with this introduction, the floor is yours.

Oliver. Thank you very much, Sebastian. Good morning and welcome everyone also from my side. Thank you for being with us today. As you all know, we are celebrating 75 years of Porsche sports cars this year. And we continue to inspire our customers, not only with the current product lineup, but also with exciting new additions. The past quarter saw the launch of the new Cayenne. Furthermore, we successfully held our first NGO general meeting since the IPO only a few weeks ago. However, the global economic situation remains challenging with an impact on us too, of course. But we can also say we are showing a very solid performance under these difficult and challenging conditions. Financial results turned out accordingly. Group revenue in the first half year was 20.4 billion euros. This is an increase of 14% compared to the previous year. Group operating profit was 3.9 billion euros. This is an increase of 11%, reflecting higher group sales with a stable price penetration, but also the challenges from the supply chain. Group operating return on sales in the first half of this year was 18.9% and 19.5% in the second quarter. Lutz will give you more details on the financials later. Given the economic situation and the ongoing supply chain challenges, these are strong results that give us strong foundation for the full year. We are therefore confirming our full year 2023 outlook statements. At the same time, we're expecting the macroeconomic and supply chain challenges to persist in the second half of the year. Our deliveries on customers in the first six months of 2023 were up by 15% compared to the previous year, despite model cycle changes and ongoing supply restrictions. This is a very pleasant result so far. We posted gains in every sales region, which is proof that our products are in high demand around the world. We are benefiting from a well-balanced share between the regions, 95% in North America, 32% in Europe, 26% in China, and 17% overseas. The launch of the new Cayenne has been very satisfying so far. We have posted over 30,000 orders since its presentation in April, even though the car has not even reached the showrooms of our worldwide Porsche centers yet. And the order mix demonstrates that our customers are making good use of the opportunity to individualize their vehicles. Deliveries to customers have started in several markets. The introduction to China is planned for September. We are benefiting from a recovery of the supply chain for commodities, chips and commodity parts. Major challenges remain in terms of availability and price inflation for many of the components that are differentiating our product and parts that are in high demand for our customers. Therefore, we still have to be very flexible in our day-to-day business and production planning. This is reflected accordingly in waiting times, unit sales, and costs. And we expect these challenges to persist in the future. Once again, to be clear, it's about the special parts that are differentiating our product, not the commodity side of the supply chain. Regardless of these challenges, we keep investing extensively in our development, in innovations, and in our Porsche ecosystems. so that we can continue to offer our customers the products and services they expect from us. We have taken the next step on the way to tailor-made high-performance battery cells. Since May, we have been the sole shareholder of CellForce Group. The aim is to scale up the cell manufacturing process in the medium term, if necessary, also at other locations. And we are prepared for the entry of new investors. So let me summarize. The situation is challenging, but we have a clear plan for the future of Porsche. And we keep putting it into action consistently. For further details, I now hand over to Lutz Meschke.

Thank you, Olli. Good morning and welcome also from my side, everyone. In the next couple of minutes, I will share the major milestones we've achieved in the first half of 2023 with you. Overall demand for personalized, well-equipped Porsche cars remains satisfying and cancellations are low. This is reflected in the number and the mix of incoming customer orders in the first half of the year. Unchanged, the 911 has the largest order book, strong mix, and longest waiting time around a year, the average across all derivatives. The first two quarters, Of 2023, we posted very satisfying wholesales and deliveries to customers. This success is a great team accomplishment of procurement, production, and sales. All of them are dealing with significant challenges on a continuous basis. Deliveries to customers increased by 15%. Germany, Europe, as well as the area overseas and emerging markets are growing over proportionally, making our regional mix more balanced. The sales increase was led by all product lines at Taycan, where we continuously face significant supply disruptions. In consequence, the BEV share was 10.8% in the first half year. From now on, we expect Taycan sales to benefit from improving parts availability and higher supply. However, achieving our best target of more than 12% for 2023 will be challenging. In the first half of 2023, at the group level, we achieved a revenue of 20.4 billion euros. This represents an increase of 14% compared to the same period last year and is mainly due to higher group sales with a stable price penetration. The group operating profit increased by 372 million euros to 3.9 billion euros in the first half of 2023. This translated into an operating return on sales of 18.9%. The first half, we had to digest higher costs compared to last year, resulting from an inflationary environment, as well as intensified sales activities, digitalization and increased motorsport engagement. The earnings per preferred share amounted to 3.04 euros. At 3.7 billion euros, the automotive segment's operating profit in the first half of 2023 exceeded the prior year figure by 392 million euros. This accomplishment was a result of higher sales, stable pricing, and continued beneficial product rates, slightly upset by higher costs, as well as spending and investments into our product and innovation portfolios. With automotive sales revenue of 18.9 billion euros, the operating return on sales for automotive was 19.3%. Automotive EBITDA rose by 480 million euros to 4.8 billion euros, corresponding to an automotive EBITDA margin of 25.6%. In the first six months, we were able to produce more vehicles than in the same period of last year. In this context, let me comment on our balance sheet and the increase in inventories and finished cars. At Porsche, this is a normal course of business as our production shuts down for the summer holidays. Furthermore, the vehicles and transfer of the new Cayenne to our dealers also had an impact. Despite our high level of investment activity into product, innovation, plants and our ecosystem, we achieved a net cash flow in our automotive business of 2.2 billion euros in the first half of 2023. The net cash flow margin for automotive was 11.7%. Please note that we also had seasonally higher cash outflows in the second quarter for bonus payments and a pro rata delayed tax payment in addition to the increased inventory and investments. Revenue from the financial services segment increased to 1.7 billion euros. The operating profit in the financial services segment amounted to 174 million euros in the first half of 2023. The result was impacted by evaluation of interest rate hatches and derivatives outside of hedge accounting. This is a part of regular refinancing activities. Our financial services penetration in the first six months was 40.8%, which was more than 200 basis points lower than at the end of 2022. This development reflects that we pass on the market terms in our offers. As of June 30, our automotive net liquidity decreased by 1.9 billion euros to 6.4 billion euros compared to the end of the fiscal year. This is the result of the positive contribution of net cash flow and, on the other hand, of the cash outflow of the last payment in context of the profit and loss agreement and domination agreement with VW, which were terminated in the meantime. Investing in product innovation to better serve our customers is one of our key priorities. Thus, in the first half of 2023, we spent 1.5 billion euros on research and development, 18% more compared to last year. Most R&D expenses in the reporting period were due to the conversion of the product range towards electromobility. The R&D ratio was 8.2%. Own work capitalized amounted to 1.2 billion euros in the first six months of 2023. The increase is due to the rising expenditure for ongoing projects which are close to being ready for series production. Depreciation and amortization of capitalized development costs amounted to 427 million euros. Let's move on to the outlook for 2023. Porsche AG Group continues to be confronted with a challenging macroeconomic environment. challenges in securing supply chains and parts supply, as well as generally rising cost levels and various geopolitical tensions. At the same time, the Porsche AG Group is investing extensively in its development, innovations, and the entire Porsche ecosystem of future products and services. Despite a challenging overall global situation, the Porsche AG Group confirms its forecast for the full year 2023, published in the Combined Management Report, also regarding the conditions, provided that the global and supply situation does not deteriorate significantly. Based on these above-mentioned assumptions, the Porsche AG Group expects an operating return on sales for 2023 in the range of 17% to 19%. This forecast includes assumed group sales revenues in the corridor of around 40 to 42 billion euros. Our forecast for the automotive segment is a net cash flow margin between 10 and 12 percent and an automotive EBITDA margin between 25 and 27 percent. As part of the 2023 sales forecast, the company expects fully electrified vehicles to account for up to 12 to 14% of total new vehicles delivered to customers. However, this target requires a far better supply situation for Taycan in the second half of 2023. Thank you very much for your attention. We are very much looking forward to answering your questions now.

Ladies and gentlemen, at this time we will begin the question and answer session for media. Anyone who wishes to ask a question may press star followed by 1 on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by 2. If you are using a speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press star and 1 at this time.

Okay, ladies and gentlemen, we have now about 30 minutes and we'll start right away into the questions. And we start with the FAZ, Christian Musken, please.

Yeah, good morning. I hope you can hear me. Hello. Hi, good morning. Hi. Good morning. I have two questions. You talked a lot about the macroeconomic environment and the question is if we've seen quite some effects in the volume segment of the Volkswagen Group. Do you see orders go down in the Porsche business too or do you see effects on your order income? from the economic situation. And the second is you have ongoing problems with differentiating parts in the supply chain. Could you please give some examples? What were those differentiating parts that you don't have enough from? I guess it's mainly about the Taycans.

Okay, Christian, may I start with the macroeconomic situation? And that's different in between the regions. In short term, especially in Europe, we see a slowdown growth dynamic. And when we look to China, China is still very volatile and the recovering of the market isn't still there as expected. And so we are balancing in our regions and the positive aspect for Porsche is that our business is based on four pillars in North America, Europe, China and overseas. We were able to develop our market regions during the last 10 years to strengthen China and overseas. And this gives us a well-balanced situation. To your second question, it's about differentiating parts, especially when it comes to the Taycan. We have, for example, the high-voltage heater is one of these components. But also when it comes to very special items from small suppliers, there we come to a limit because of the high demand of our specialized licensed cars. And there are several parts of this. But main important for us, especially in the ramp-up of electrification, is a high-voltage heater.

Okay, then we go to Reuters.

Victoria Valdez, please.

Now we can hear you.

Sorry. I was just saying, because you expand on your plans for Salesforce, you said you were looking for new investors. What kind of investors are you looking for and what kind of timeline are you expecting there? And is it correct that you took over as sole shareholder in mid-May? Thank you.

Thank you for this question. We have a clear plan for the cell force group in the upcoming years. We want to accelerate towards a real gigafactory. We plan capacity for 10 to 20 gigawatts in the upcoming years. And therefore, we are looking for strategic and finance investors in order to support our strategy in this direction. We have to take into account that 20 gigawatts factory will require an investment between 2 and 3 billion euros. And therefore, it's necessary to have strong partners on board. We are in very good and promising talks with finance and strategic investors with regard to this development. And we are quite confident that we can give you further details at the end of this year.

And adding, for example, to the location criteria, when we will go there, it will be very important for us, for example, the energy pricing. And now currently we have very positive experiences from North America. and um that will be important um we are sticking um to germany very clearly um most of our cars are produced in germany most of our people working um work in germany and uh we invested for our 1.3 um gigawatts um ours um factory in baden-wurttemberg but for location it is important um to have a um positive calculation for our factory. And so energy costs play a role in North America. We see good efforts with tax credits, for example, low bureaucracy in the decision processes. And so that will be important for our decision process where we will locate it in future this factory. It isn't decided yet, but

It's a competition in between the different locations. We will have a beauty contest between the European countries and the US and maybe also Canada. And at the end, it's very important to get a very promising energy cost guaranteed. A difference of one cent energy cost makes a difference in cost by 100 million per year. And that's a very important argument for the location decisions.

Now we go to DPR AFX, Marco Ingermann. Marco, please.

Yes, good morning. Thank you very much for taking my question. It regards a possible guidance upgrade for the margin. As I understand, there are price increases that will really kick in the second half of the year. And in the first six months, you already have been at the upper end of the margin guidance. So will cost increases erase the effect from the higher prices in the second half? What's stopping you from upgrading the guidance?

Thanks. A very challenging macroeconomic environment. You mentioned it, first of all. In China, the market is quite weak at this point in time. We have inflationary impacts due to the entire range of raw materials, components, and so on. We see cost increases regarding... We will have the new labor tariff in place in Germany starting in June with an effect of 5.3%. And, of course, we still have supply issues. We have already mentioned the problems in the supply chain, for instance, with the high-voltage heater for the Taycan. And, of course, we have to invest heavily in new models in our development and on our innovation process and in our entire ecosystem also around the car. And, therefore, yeah, we have to be careful with that. with an adaption of our targets and therefore we feel quite confident with our corridor of 17 to 19% also for the entire year 2023.

Now we go to Bloomberg, Monika Raymond. Monika, the floor is yours.

Yes, thank you so much. I was wondering if you could provide a little more insight, first of all, on the supply chain issues, not just specifically on the Taycan, but also more broadly. And the bigger question, sort of more broadly on the macroeconomic situation in Germany, if you could offer your insights into how you see the current economic climate specifically in Germany. Thank you.

May I start, Monika, with the supply chain situation? As you know, we struggled heavily with the supply of semis during the last years. And there we have a more stable situation right now. But we see still a lot of uncertainties, also because of geopolitical crisis or economic crisis around the world. And there's no week where we have no supply chain issue. And therefore, we have to be very flexible in terms of production planning. And I think we will see this situation also in the future. Therefore, we have a very close contact to our partners, but we have to be aware. And especially as we mentioned before, in different aging parts, where we have generally smaller, smaller partners or suppliers, and on the other side, having a high demand. And that's positive for Porsche, that our customers are going more and more to individualization, what brings us to better profit margins. But on the other side, there we talk about thousands or millions of different parts we have to steer, and therefore we need high flexibility. Coming to the second part of your question in terms of the German market, and we have had a very strong growth in Germany in terms of sales, but we are expecting slowdown in the market. We already can mention it in the volume segment. For example, we are convinced that the luxury market are less affected and more resilient against these economic downturns in general. But we have to watch it deeply, how the market will develop. There are inflation trends.

um effects um and um so um we are still in a very strong situation especially while we are positioned in in the luxury market um but we have to be aware thank you we still have a very high order intake across all model lines in in germany and therefore we are very confident to reach our targets uh in germany for the entire year 2023.

Now we go to Max Segler, not for Süddeutsch anymore, but still in the game. Hi, Max.

Hey, Sebastian. Thanks for taking my questions. Good morning from Hamburg now. What could you say regarding the margin of bad vehicles, especially the Taycan, compared to your traditional ICE cars? The ongoing questions since years, and what's the update? The second question is... We have an ongoing discussion in Germany, especially in Germany, about how to stimulate the demand of baths. As you mentioned, the demand is in plan, but you have to be aware. But is there anything you suggest we would say how Germany, how the European Union could stimulate the market, the whole market at all? And a third short question. You mentioned the effects of a new labour regulation starting in June had some effects to Porsche. I didn't get this point properly. Please, could you repeat?

Thanks. Let me start with your first question regarding the margin of the Taycan. compared to our combustion engine cars. As I've already mentioned in our last call, we still have a gap between combustion engine cars and the Taycan, but we expect to close the gap with our upcoming platform synergies. And I have already mentioned that we rely in future when it comes to path transition just on two platforms, one for the two-door cars starting with the new E718, then later on followed by the 911. And the other platform will be for all the four-door cars starting with the K1 and then also used by Cayenne. Panamera and also Taycan. And that will help a lot to generate synergies within the Porsche group. And we can also benefit from synergies with the VW brands. And that gives us huge potential in future to close the gap between combustion engine cars and the BEV cars. And we have, yeah, a certain proof of concept in place with Taycan that our customers accept an even higher price premium for the BEV cars compared to the combustion engine cars. And it gives us the confidence that we will have a good approach also for the further transition towards electromobility.

Max, maybe I will come to the second part of your question about stimulation of the dev market. And let me approach from two sides. First of all, there are three criteria important for a strong dev ramp up. The first is the right product. It's our responsibility to excite our customers. And there we have a very good feeling at Porsche with a very successful Taycan. Now with the upcoming Marcan, then the fully electric 718, a Cayenne, which is planned, and a luxurious SUV in the upcoming years. Then the charging infrastructure. And that's a shared responsibility. between the automotive industry, energy suppliers, for example, the mineral industry, but also the communities to to invest and build the charging infrastructure, especially in towns and cities. There, I think we have to speed up heavily. We can see the positive example in China, where they invested during the last years very heavily, and that you can mention as a strong example F demand in the market. Last year, 25% of new sales. This year, already one-third. And certainly, renewable energy. The electrification only makes sense when you have the right energy mix. And there, I think, we still have to invest heavily, especially in Germany and Europe. Second part is to support industrial investments in Germany, for example, with models like tax credits. We talked before about energy pricing and also the processes releasing projects. So the support can come from different sides. But from our side, important is charging infrastructure and supporting industrial investments.

We have an additional comment regarding stimulus from the political side. I think it's absolutely necessary. If Germany wants to have a climate change, a clear climate change and it's necessary to change also the subsidy politics. We have to cut the subsidies for diesel and we have to count on the electrified business. That means we need to have a stimulus regarding the acquisition of baths And we have to support also green energy solutions. That means also our activities regarding e-fuels should be supported by a clear political support. And this is necessary. We have to mention it very often. Otherwise, it will not work. We still rely on subsidies for the old... combustion engine cars, and it doesn't make sense. If you want to have a change towards electrification, then you need also to change your politics regarding subsidies. It's not only an issue for Germany, but especially in Germany, you have to address it heavily. And your third question regarding the labor tariff increase. We will see a labor tariff increase in June, or we have already seen it in June, started in June, by 5.2%. The unions agreed with the employees' increase of 5.2% due to the inflationary environment. And we will see a further increase in the first half of 2024. And the impact of the first increase is about 100 million euros per year proportionally.

I would close the list having three journalists on the agenda. We start with Patricia Nielsen, then go to Lutz Meyer and finally close with Michael Gerster. Patricia is right away gone. Thank you. Good morning. Go ahead, please. Financial Times.

Thank you. Good morning. Thanks for taking questions. Two quick ones. One, again, on it being slightly difficult to reach BEV targets for this year. Can you give a little bit more detail as to what pertains to issues in the supply chain and lack of parts, and what are you seeing in terms of demand for these vehicles? Is that also dropping? And the second question is on your battery company, and I am wondering What is the future potential synergies between Powercup and your own battery company? And are you not doubling up a little bit there? Thank you.

As you know, the Taycan is very successful in the market and we are still in a strong, strong demand. And we are struggling still with supply chain issues, as I mentioned before. For example, the high voltage heater. And so our expectation is to be in between 12 and 13 percent this year. Currently, we are in a situation of 11 percent F and 11 percent African hybrids. So in total, 22 percent electrified cars. And then for the next years with a very strong product offensive with Macan 718 Cayenne and the luxury SUV, our ramp up curve is based on this product strategy. So it will lead us to our expectation to sell over 80% by 2020-30. So for the upcoming months, everything depends a bit on the supply chain, but we think that we can achieve at the end. This range we have announced in between 12% and 14% BEV. Okay.

And regarding the battery cell development and production, yeah, maybe I should... take you a little bit in our strategy regarding battery cell development and production. We have a three pillar strategy for Porsche. We will rely in future on suppliers like LG or also CLTL, as we did in the past. And we have the possibility to work together with the Salesforce group and work together with our core, sorry, and the other joint venture partners of the VW. And for our performance sales, we will rely on our own development and production within the CellForce group. That means we will have a wide range of battery cell production within the Porsche group, and we will have synergies between the CellForce group and the PowerCo when it comes to raw material sourcing, and also when it comes to the know-how regarding the industrialization, that means the entire factory process. It's very important to have a wide range of opportunities when it comes to battery cells, since due to the heavy ramp up towards electrification for all OEMs, we need to be very flexible in order to get the right capacity in place when we need this capacity within Porsche. And therefore, a clear strategy to rely on external suppliers, to rely also on PowerCo, VW Group, and to have our own cell force battery cell development production within the Porsche-owned cell force group.

In terms of raw material, we are benefiting from our industrial cooperation we do have with Volkswagen Group when it comes, for example, to cobalt, lithium, and nickel. There you need strong investments which are able – with the Volkswagen Group and so we are sharing these raw materials together with them.

The second last question goes to Lutz Mayer, Capital.

Hello, good morning and thank you also for taking my question. It's a more general one, if I may. I'd like to ask you to elaborate a little bit on the luxury strategy and also on its development as far as i understood maybe 10 years ago you would have heavily refused to be called luxury and even more stated being performance or sports cars manufacturer so how was it development and how it's developing currently Oliver just mentioned that the luxury market was less affected by economic slowdown than other markets. So maybe you can also give a little outlook on what you expect from the luxury market and what does it mean for your product range and product offer in general. Thank you.

First of all, we are positioned in a unique positioning in the worldwide automotive market. On the one hand side, a very high pricing level like luxury niche manufacturers. On the other side, with scale effects in between our group by selling over 300,000 units or benefiting from the industrial cooperation from Volkswagen. That brings us in a very positive cost positioning while we are able to to get the pricing level as others in the luxury segment. And on the other side, building our luxury strategy even more is to build our customer touchpoints, especially in big cities of the world, where we have special concepts to get them, where we have also digital concepts. And on the other side, what is very important, the level of individualization of our products, our special items we are offering. And there we are expanding heavily, especially with our exclusive manufacturer we do have into Porsche, or a special program we call Sonderwunsch program, where we fulfill every dream of our customers. And that brings us in this unique positioning in the luxury segment.

very important aspect that luxury means not only having a luxurious product, it's also beyond the car. It's a customer experience beyond the car. You have to take with us the customer experience regarding their entire life journey. And as Oliver mentioned, it's important to offer unique experiences around the car, special customer events when it comes to cultural or sportive activities, for instance. then we have to offer and we do offer the activities across all our Porsche Experience Centers. That makes us unique. We are the only OEM which can offer this special experience. And it's also very important to offer a digital product in the future which delivers unique experiences and also very important is the convenience regarding charging services beyond our activities within Ionity we decided to have our own fast charging infrastructure starting now in germany we see is the first location and that will give us uh what i'll give will give our customers a completely luxurious experience also around the car and um yeah it's it's important not just to count on the car itself we have to improve the awareness for our brands that our brand stands for luxury activities in all different customer segments. And therefore we have to invest heavily in this direction. And you mentioned 10 years ago, Porsche, internally at least, was more a sports car manufacturer very down to earth. But of course, our customers have seen Porsche always as a luxurious product. And it's more an internal issue to develop all these activities and skills in this direction that we cover all the necessary segments in order to deliver the best experience for our customers. And that's the point. And we are a luxury company. But it's not necessary to talk about this from our side. It's important that the customer has the perception that Porsche is luxury. And that's exactly the point. That's important.

The last question for this media call goes to Automobilwoche. Michael Gerster. Michael, please.

Yeah, good morning. I've got two questions concerning the electric Macan you're introducing next year. The first one is, are you still on schedule and how confident are you to have a stable and running software when the car will hit the markets next year? And the second one, it's the first model to really replace an ICE model. and there are more to come. With BEV numbers slowing down, especially in Europe, and costs for batteries still remaining high, how long will the ICE Macan run alongside the BEV and do you have plans to extend the lifecycle of the ICE Macan beyond your initial plans if customer demand is still high for this version of the car.

Yeah, Mr. Gesser, two quick answers. First of all, we confirm the market introduction next year, and we are in the final testing phase. I'm very passionate being able to test the car, especially its driving abilities and the infotainment we will offer. We will bring the car to our customers when we are 100% clear that the car, in terms of quality, is perfect. In terms of overlapping between ICE and BEV, we are calculating between two years, depends on the regions. And that's our strategy for the future, having this flexibility for all the other new fully electric cars, where we'll have a overlapping between the existing ICE and the new BEV, because the different regions of the world are developing with a different speed, and therefore we need this flexibility.

And with this, I say thank you to Oliver and Lutz and to all of you for asking your questions and the fruitful exchange. We will make a very short break and come back after you with my colleague Bjorn Scheib and then the investors call. Thanks. Take care. Bye-bye. Thanks.

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the analyst and investor call regarding the Porsche AG H1 2022 results. This call will be hosted by Oliver Blume, Chairman of the Board, and Lutz Meschke, Deputy Chairman and Member of the Executive Board for Finance and IT. All materials, such as the Investor Deck or Interim Report, are available in the Investor section on the Porsche website. Before we begin, let me remind you that all forward-looking statements to be made during today's call are subject to the risk and uncertainty mentioned in the Safe Harbor Statement, including the Porsche materials. This call will be governed in this language. During the intro statement of the beginning of the call, all participants have been listened on remote. After the intro, we will jump to the question and answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance in case of any technical difficulties. And now, I would like to hand over to Bjorn Scheib, Head of Investor Relations. Please go ahead, sir.

Hi, good morning to all of you. And we fully understand you all have a quite busy morning here in Europe with the reporting of a couple of other companies, including ours. So from that point of view, we try to make this now to be as efficient as possible so that you have the chance also to join the other conference calls thereafter. I'm Bjorn. I'm the head of Investor Relations here at Porsche, and I'm being accompanied by our CEO, Oliver, and our CFO, Lutz, who will be very happy to answer your questions thereafter. We will quickly start with an intro summarizing the operating performance this quarter to give you better insight. And last but not least, then we will continue with the Q&A session that will follow then. Olli, the floor is yours.

Thank you very much, Björn. Good morning and welcome everyone, also from my side. Thank you for being with us today. As you all know, we are celebrating 75 years of Porsche sports cars this year. And we continue to inspire our customers, not only with the current product lineup, but also with exciting new additions. Last quarter saw the launch of the new Cayenne, Furthermore, we successfully held our first annual general meeting since the IPO only a few weeks ago. However, the global economic situation remains challenging with an impact on us too, of course. But we can also say we are showing a very solid performance under these difficult and challenging conditions. Financial results turned out accordingly. Group revenue in the first half year was 20.4 billion euros. This is an increase of 14% compared to the previous year. Group operating profit was 3.9 billion euros. This is an increase of 11%, reflecting higher group sales, a stable pricing penetration, but also the challenges from the supply chain. Group operating return on sales in the first half of this year was 18.9% and 19.5% in the second quarter. Lutz will give you more details on the financials later. Given the economic situation and the ongoing supply chain challenges, these are strong results that give us a strong foundation for the full year. We are therefore confirming our full year 2023 outlook statements. At the same time, we are expecting the macroeconomic and supply chain challenges to persist in the second half of the year. Our deliveries to customers in the first six months of 2023 were up by 15% compared to the previous year, despite model cycle changes and ongoing supply restrictions. This is a very pleasing result so far. We posted gains in every sales region, which is proof that our products are in high demand around the world. We are benefiting from a well-balanced share between the regions. 25% in North America, 32% in Europe, 26% in China, and 17% in overseas. The launch of the new Cayenne has been very satisfying so far. We have posted over 30,000 orders since its presentation in April, even though the car has not even reached the showrooms of our worldwide Porsche centers yet. And the order mix demonstrates that our customers are making good use of the opportunity to individualize their vehicles. Deliveries to customers have started in several markets. Introduction to China is planned for September. We are benefiting from a recovery of the supply chain for commodities, chips and commodity parts. Major challenges remain in terms of availability and price inflation for many of the components that are differentiating our products and parts that are in high demand from our customers. Therefore, we still have to be very flexible in our day-to-day business and production planning. This is reflected accordingly in waiting times, unit sales, and costs. And we expect these challenges to persist in the future. Once again, to be clear, it's about the special parts that are differentiating our products, not the commodity side of the supply chain. Regardless of these challenges, We keep investing intensively in our development, in innovations and in our Porsche ecosystem so that we can continue to offer our customers the products and services they expect from us. We have taken the next step on the way to tailor-made high-performance battery cells. Since May, we have been the sole shareholder of CellForce Group. The aim is to scale up the cell manufacturing process in the medium term, if necessary, also at other locations. And we are prepared for the entry of new investors. So let me summarize. The situation is challenging, but we have a clear plan for the future of Porsche and we keep putting it into action consistently. For further details, I now hand over to my colleague, Lutz Meschke.

Thank you, Olli. Good morning and welcome also from my side, everyone. In the next couple of minutes, I will share the major milestones we have achieved in the first half of 2023 with you. Overall demand for personalized, well-equipped Porsche cars remains satisfying and cancellations are low. This is reflected in the number and the mix of incoming customer orders in the first half of the year. Unchanged, the 911 has the largest order book, strong mix, and longest waiting time, around a year by average across all derivatives. The first two quarters of 2023 posted very satisfying wholesales and deliveries to customers. The success is a great team accomplishment of procurement, production, and sales. All of them are dealing with significant challenges on a continuous basis. Deliveries to customers increased by 15%. Germany, Europe, as well as the area overseas and emerging markets are growing over proportionally, making our regional mix more balanced. The sales increase was led by all product lines at Taycan, where we continuously face significant supply disruptions. In consequence, the BEV share was 10.8% in the first half year. From now on, we expect Taycan sales to benefit from improving parts availability and higher supply. However, achieving our best target of more than 12% for 2023 will be challenging. In the first half of 2023, at the group level, we achieved a revenue of 20.4 billion euros. This represents an increase of 14% compared to the same period last year and is mainly due to higher group sales with a stable price penetration. The group operating profit increased by 372 million euros to 3.9 billion euros in the first half of 2023. This translated into an operating return on sales of 18.9%. In the first half, we had to digest higher costs compared to last year, resulting from an inflationary environment, as well as intensified sales activities, digitalization, and increased motorsport engagement. The earnings per preferred share amounted to 3.04 euros. At 3.7 billion euros, the automotive segment's operating profit in the first half of 2023 exceeded the prior year figure by 392 million euros. This accomplishment was a result of higher sales, a stable pricing, and continued beneficial product mix. Slightly upset by higher costs as well as spending and investments into our product and innovation portfolio. With automotive sales revenue of 18.9 billion euros, the operating return on sales for automotive was 19.3%. Automotive EBITDA rose by 488 million euros to 4.8 billion euros, corresponding to an automotive EBITDA margin of 25.6%. In the first six months, we were able to produce more vehicles than in the same period of last year. In this context, let me comment on our balance sheet and the increase in inventories and finished cars. At Porsche, this is the normal course of business as our production shuts down for the summer holidays. Furthermore, the vehicles and transfer of the new Cayenne to our dealers also had an impact. Despite our high level of investment activity into product, innovation, plants, and our ecosystem, we achieved a net cash flow in our automotive business of 2.2 billion euros in the first half of 2023. Net cash flow margin for automotive was 11.7%. Please note that we also had seasonally higher cash outflows in the second quarter for bonus payments and a pro rata delayed tax payment in addition to the increased inventory and investments. Revenue from the financial services segment increased to 1.7 billion euros. The operating profit in the financial services segment amounted to 174 million euros in the first half of 2023. The result was impacted by valuation of interest rate hatches and derivatives outside of hedge accounting. This is a part of regular refinancing activities. Our financial services penetration in the first six months was 40.8%, which was more than 200 basis points lower than at the end of 2022. This development reflects that we pass on the market terms in our offers. As of June 30, our automotive net liquidity decreased by 1.9 billion euros to 6.4 billion euros compared to the end of the fiscal year. This is the result of the positive contribution of net cash flow and, on the other hand, of the cash outflow of the last payment in context of the profit and loss agreement and domination agreement with VW, which were terminated in the meantime. Investing in product innovation to better serve our customers is one of our key priorities. Thus, in the first half of 2023, we spent 1.5 billion euros on research and development. 18% more compared to last year. Most R&D expenses in the reporting period were due to the conversion of the product range towards electromobility. The R&D ratio was 8.2%. Own work capitalized amounted to 1.2 billion euros in the first six months of 2023. The increase is due to the rising expenditure for ongoing projects which are close to being ready for series production. Depreciation and amortization of capitalized development costs amounted to 427 million euros. Let's move on to the outlook for 2023. the Porsche AG Group continues to be confronted with a challenging macroeconomic environment. Challenges in securing supply chains and parts supply, as well as generally rising cost levels and various geopolitical tensions. At the same time, the Porsche AG Group is investing extensively in its development, innovations, and the entire Porsche ecosystem for future products and services. Despite a challenging overall global situation, the Porsche AG Group confirms its forecast for the full year 2023, published in the combined management report also regarding the conditions, provided that the global end supply situation does not deteriorate significantly. Based on these above-mentioned assumptions, the Porsche AG Group expects an operating return on sales for 2023 in the range of 17% to 19%. This forecast includes assumed group sales revenues in the corridor of around 40 to 42 billion euros. Our forecast for the automotive segment is a net cash flow margin between 10% and 12% and an automotive EBITDA margin between 25% and 27%. As part of the 2023 sales forecast, the company expects fully electrified vehicles to account for up to 12% to 14% of total new vehicles delivered to customers. However, this target requires a far better supply situation for Taycan in the second half of 2023. Thank you very much for your attention. We are very much looking forward to answering your questions now.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. In the interest of time, please limit yourself to two questions only. If you're using a speaker equipment today, please lift the handset before making your selection. Anyone with a question may press star and one at this time.

So, thank you very much for the introduction. Thank you very much for the intro. As I can see that we have quite strong interest on the call and we have quite limited time this morning. As said by the operator, please be so kind to limit yourself to one question in order to give everybody the chance to be part of this Q&A session. And with this, we start then with Tim of Deutsche Bank. Then we take George of Goldman's. And thereafter, it's Jose of JP Morgan.

It's probably then for Olli.

You emphasize a lot on the luxury element of your story, rightfully so, when we look at the ASP subcast. But listening to the press call just now and also your remarks at the beginning, you talk a lot about negative points. There's cost headwinds, supply chain, macro challenges. Some of the luxury names that are already presented, like LVMH, for example, reported great numbers. They didn't talk about macro challenges at all. Can you contextualize this for us a bit? Why are you making it such a key pillar of your communication today? Given you just made 20% margin, you could also just be happy with that. Do you indeed see softer demands from your clients on pricing and orders and also on the logistic and supply chain side? Can you help us understand just how these supply chain issues are bothering you? Is that limiting your growth or is it just costing you more money? Thank you.

Yeah, Tim, I think our figures represent how strong we are. And so the luxury segment isn't affected so strong. But we see, for example, a volatile Chinese market where the recuperation still isn't yet expected. And so we mentioned these points that we have to watch the situation in the different regions of the world. But by now, with the strong figures we are presenting, we are not so affected for being so strongly positioned in the luxury market. But we are not alone. And so that is being aware of what's happening there and then taking the right decisions, having the right flexibility in terms of product. And we are still in a very strong demand from our customer side, to be very clear.

Absolutely. And I think it's also more a proactive reaction on a potential question from your side. Is it not possible to increase our forecast figures? This is a potential question and therefore we addressed very clearly that despite a very promising order bank situation and satisfying order intakes, we have also some aspects we have to consider regarding our forecast figures. And we already mentioned that we will increase our prices for the new model year. I started now in June by about 5%. And of course, this is not reflected now in the first half year figures. But on the other hand, we will have these inflationary effects. And therefore, we... feel quite comfortable with our existing forecast and therefore we will stay with our forecast figures when it comes to revenue and when it comes to operating income.

Okay, thank you. That's very interesting. If I may just follow up on that then, sorry Bjorn, but judging from the comments that I got from investors during your press call already, This is more to your point. You're explaining why you're not increasing your guidance because a lot of investors actually interpreted your very negative remarks earlier today as a preparation for a very weak Q3. You were suffering from an inventory problem, potentially dealer compensation payments in Q4. There's a few discussions about that in China. Quarter on quarter margins being down in the second half and these type of things. It's more explaining why it's not much better rather than preparing us for it getting substantially worse.

Absolutely. You know it very well. We are very clear in our positioning and we are very confident to see also a very strong second half year in 2020. We can be very confident because we have a very strong order bank. We see very satisfying order intakes and therefore there is no need to to have fear regarding the second half of the year. But nevertheless, we are a very conservative company when it comes to our forecast regarding income sales and also net cash flow. And therefore, besides all the opportunities we have, we have to address also the negative aspects when it comes to the inflationary environment.

And Porsche has always been to deliver. And we will keep this position in future.

Thank you, Olli.

So the next one in the row then would be George, thereafter we have José, and thereafter it's Henning of Barclays.

Thank you. And thank you for taking my questions. The first question I had was just with respect to the supply chain constraints and how much that's holding you back. So I think you've been clear in your communication that you haven't been able to fulfill the orders with respect to paint to sample, some high-end models due to carbon fiber shortages, and are also seeing other constraints around lighting options, et cetera. How much higher could the revenue per unit have been and also the auto return on sales if you had not faced these disruptions? Can you give us any kind of indication of the magnitude of what is being left on the table at this point? The second question I had was just with respect to the news flow around Audi leveraging a psych platform, which perhaps we'll learn more about tomorrow, but it does suggest that there's potentially a delay to one of the Volkswagen Group developed battery electric vehicle platforms. Does this pose any risk to Porsche's product plans and the timing of the introduction of Porsche's vehicles based off SSP in coming years? Thank you.

Starting maybe with your first question, George. Unfortunately, it's just a theoretical question, but it shows the huge potential we have in the upcoming months since we will be able to to catch up when it comes to our supply chain constraints. And that gives us the potential to further increase our product mix in the upcoming months. And please understand that we cannot give any more information about the additional potential. It's theoretical, but we can deliver more if we catch up regarding our supply chain constraints. That gives us the confidence also for the upcoming months and the next year.

And may I come to the second part of your question? The product cooperation from Audi with Sykes, that's one part of the China for China strategy of Volkswagen Group. And that does not affect any product development we are doing together in the group. It does not affect any... time faction. And so it's a single issue Audi is doing in China, which does not interfere in the Porsche business. Great.

Thank you for the clarification. Thank you. So the next one then will be Jose, then it's Henning, and thereafter it's Stephen of Societation Arrive.

Good morning, Jose. Good morning. Hi, Audi and Luce. Just one question, please. Capitalized R&D, can you comment what happened in the second quarter and how should we think about this for the remaining of the year? Thank you.

Thank you, Jose, for this question. The expensed R&D and the depreciation on capitalized R&D combined remained with about 3.9% of revenue. And that's comparable to quarter one, as well as first half of 2022. That means it's a very stable situation when it comes to the impact for our profit and loss statements.

which should remain stable into the second half of the year. I'm guessing. Thank you.

It will also in the second half of this year. Thank you so much. Thank you. Very good. So the next one and we'll be Henning and it's Stephen and thereafter it will be Michael of Kepler.

Yeah, thanks and good morning. Can we please talk about the composition of further revenue growth between specifically volume, price and mix and I very much appreciate you're looking at this 4% to 8% price increase coming through in the second half now. But so far, revenue has still been quite volume-driven. And I'm not so much interested in the second half, but perhaps more conceptually. I think at the IPO stage, we talked more about a pivot approach. of revenue growth more towards price and mix of course you had a very tough comp in q2 last year so we weren't maybe expecting so much for this quarter alone but but just going forward also in the context of this luxury company proposition can you give us a bit of comfort that we're about to see this pivot now towards price mix and you're perhaps consolidating volumes more at the at the current level, if we were to annualize the H1 volume, for example, could you talk a bit in that direction? Thank you very much.

Yeah. No, it's absolutely right that volume is not our target, but at the end, the volume growth is at the end, is the consequence of our brand strength, of our product range, and of our unique customer experience. And, of course, we also plan to moderate volume growth for the upcoming years. And what's more important, We will exploit further price potential. We are striving for a better product mix and higher individualization rates. That's very important. It's in the focus of our strategy. And we will have a lot of additional growth drivers in future. We see very strong new markets, first of all. in the overseas and emerging markets region, Asia, Middle East, and also South America. And we have, of course, also new target groups. It's a driven use, and it's a higher share of females we have to strive for, and that gives us a huge potential for the future to grow not only volume-wise, but first of all, grow significantly when it comes to our operating profit margin. And I have to underline that we have seen already a very strong second quarter this year. We reached an operating margin above 19%, and I think these are excellent figures and That means we are very good on the path towards our road to a 20% operating margin.

And our product strategy is core of our luxury strategy. And we see a very high demand, especially for our special editions like the 911 Dakar or the GT3. RS, and we can mention it with a strong increased mix of the Tudor sports cars. We have a very strong pillar in the SUV segment, and the Panamera accounted for 10% of sales volume, so especially in the higher segments. And we are preparing ourselves with our exclusive manufacturer or program, Sanderwunsch, where we fulfill all the dreams of our customers and on the other side with a very high profit margin.

Thank you. Just to reconfirm, when we think of that midterm 7% to 8% revenue growth that we talked about at the IPO stage, it's still true that clearly less than half of that is meant to come from volume and the bulk of it is meant to come from price mix, right? Within the 7% to 8% midterm revenue growth.

The major part will come from price and a better product makes entire individualization rates. Very good.

So the next one then will be Stephen. Then it's Michael. And thereafter, it's host of Bank of America. And by the way, please note that we unfortunately have to close now the list. So after Horst, it will be Michael of HSBC, Daniel of Bernstein and Daniel of Stiefel. And after this, we are unable to accept any further questions.

Yes, thank you. Steve Reitman here from Société Générale. I understand that you introduced the paint sample option on the Cayenne with a price under 10,000 euros. And I understand that the response has been very, very strong on this. Could you talk more a little bit about this? And do you think it's been underpriced relative to the demand you're seeing on this? And because obviously this speaks to the ability to personalize more and customization, which is obviously part of the whole luxury story. Thank you.

Paint-to-sample was a very important initiative during the last years. And we see a very, very strong, strong demand in all our model ranges and also in the Cayenne, what we established in Bratislava. And I think that there might be still some potential for pricing in the future. But we see this paint-to-sample as one important part of our individualization strategy. Because with paint to sample, there are coming more individualization issues to the cars. And so we have potential for pricing in the future.

Thank you.

Very good. In order to give everybody the chance for questions, so let's speed up. Next, Michael, then Horst, and then Michael of HSBC.

Yeah, thanks. Morning, everyone. Mike from Kepler Chevrolet here. I have a very simple and quick question. To which extent is the supply of componentry for the forthcoming Macan BEV subject to constraints? And if so, do they endanger the planned timing of the ramp-up of the model the way you can foresee it right now? Thank you.

No very, very quick answer to your question. We are in the final testing phase of the Macan. I am personally very passionate driving the car. and i'm very convinced what we will offer in terms of driving abilities and infotainment for for example so um we can confirm that uh we will be in the market in 2024 as we promised um before now 24 consists of 12 months as any year does so you can still shift in inside that year on the timeline if you wanted to so back to my question are you currently seeing

any concrete signs of a supply shortage of key componentry for the McCann BEV, please?

There are no specific supply chain issues for the McCann. It's a software issue, as you know, and we want to be 100% perfect when we come into the market. And so to do the market introduction, it's a process. It's not only one date. We will start with our dealer partner, partner events, and then going step-by-step in the regions. And that will happen in 2024, as we said during the last year.

All right. Thank you.

It's crucial to solve all the software bugs before the cost goes to the customer.

So then it's Horst, Michael of HSBC, Daniel of Bernstein, and then Daniel of Stiefel.

Yeah, good morning. Can you hear me?

Yeah.

Yeah, okay. Hey, thank you. Just one brief one for Lutz, maybe it's on foreign exchange effects. I remember at the IPO, you were saying that operating margin gets boosted by FX effect by something like 2%. We have seen a quite strong depreciation of the renminbi in H1. I want to understand what is now the impact to of the FX effects going forward, but also what has there been in H1? So is there potentially a negative margin effect from that? Has there been already a potential negative effect? And maybe you can explain on that. The last one, if I can sneak that in, it's for Oliver. Just want to understand your view on Formula One. You still think Formula One belongs to Audi or it should be better placed at Porsche? Thank you.

Thank you, Ross, for this question. You are right. Last year was affected by about 200 basis points due to the strong FX situation. Unfortunately, we see a similar situation also in 2023. And we see also, or we forecast also a similar impact or effect for 2024 due to our long-term oriented FX hedging policy. And therefore, we will be not seriously affected by the weakening, remember, because we have the long-term oriented hedging policy in place also for the entire year 2023. And therefore, we expect a similar impact. That means also a boost of about 200 basis points in our margin, same situation as last year.

Okay, thank you. Coming to your F1 question, as you know, we checked opportunities to get into the Formula One together with a Red Bull corporation. And for us, it was very important not being only engine supplier, but also having an important part of shares of the racing team. In the later process, Red Bull decided not to sell shares, which is totally okay for us, up to them. But that was important for our deal. And so we decided not to get into. And up to now, there are no further activities in F1. And the Audi engagement together with Southwest totally separated from the activities we have had in Porsche.

Okay, thank you.

Now let's rush on in order to get this finished that you can jump on the other call. This is now Michael of HSBC, Daniel of Bernstein, and Daniel of Stiefel, and then we finish.

Morning, folks. Quick one from me. I just want to go back to R&D capitalization because I'm not sure I understood the answer. I've got R&D capitalization sitting at around about 84% in Q2. versus 71 and Q3, and you state in the report that it was related to the launch of new models or the new models going into production phase. I just wonder if you could elaborate. I mean, we've got a fair idea on what's in the pipeline. Is it related to products we know? Is it different products? Any color you could give on that front would be helpful.

Thanks. Michael, it's very important to know that the capitalization rate is highly depending on the life cycle of our products. And now we have a lot of products in place which are very close to a serious production. And therefore, we will see a higher capitalization rate. But what's very important for us is that we have a stable situation when it comes to expense R&D and depreciation as a sum. Because it's very important that we have a stable situation when it comes to our P&L impact. And that's about 3.9% of revenue. And that's absolutely comparable to the first quarter as well. as the first half of 2022. And as I've mentioned before, we will see also a stable situation in the upcoming months. That means in the second half of this year and also in the upcoming year. And therefore, yeah, it's a stable situation.

Can I just, I know I'm fond of the essence, but is the delay of the McCann an impact? Because effectively, somewhat concatenated the launch schedule. It's put everything together a bit more than it would have been normally.

No, the overall situation is not heavily infected or affected by the Macan delay because all the hardware issues are already so far beyond the final testing phase and therefore there's no significant impact on this side.

Okay, thank you very much.

Daniel? Thanks, Daniel from Bernstein. Thanks for taking my question. Could you give us some details on the exciting Taycan refresh that's coming up? Just wondering about the changes to drivetrain technology, battery, software. Maybe specifically, will the next Taycan kind of benefit from the Macan's 1.2 software? And on the range in the Taycan, will you kind of be able to get close to or match your key competitors' range on that refresh?

Okay, Daniel, I think you have to be a bit patient before we open all the details for the new Taycan. But it's clearly that we will improve the car in terms of driving abilities, in terms of range, in terms of charging. There's a lot to come, but quite too early to talk in detail about it.

So the last one then will be of Daniel.

from Stiefel. Daniel, you're still there?

Okay, so thank you very much to all of you. Thank you very much for joining. We fully understand that we kept you today with all the disclosures pretty busy. Still, Investor Relations stays at your disposal. For all of you who are already on holidays or about to travel on holidays, take the time off, recharge the batteries, and we all look forward to see you after the summer break. And for the ones of you waiting for our cast, also to make you very happy Porsche owners. Thank you and bye-bye.

Thank you to all. Thank you.