Porsche Automobil Holding SE

Hello and welcome to our analysts and investors call on the Q3 2024 results. My name is Björn Scheib and with me is our CFO and Deputy Chairman of the Executive Board Lutz Meschke. Today we would like to give you a brief insight of our business performance in the first nine months of 2024. All materials, such as the Investor Stack, are available in the Investor section of the Porsche website. Before we begin, let me remind you that any forward-looking statements we will make during this call are subject to the risks and uncertainties mentioned in the safe-hafter statement included in the Porsche materials. This intro will also be governed by this language. With that said, I'd like to hand it over to Lutz.

Thank you Björn. Thank you for joining us for our Q3 disclosure call. Today we want to inform you about our performance in the first three quarters of 2024 and the rest of the year that lies ahead of us. Porsche has a strong foundation with an exclusive and individual brand. We attract and inspire people from all over the world and across generations. Our customers, our product portfolio and our services are and will be our key assets, with a wide range of emotional drivetrains, attractive design and service offerings. Reflecting the changing demand in China and the slower WEF transformation, we are reviewing our product offering, our ecosystem, as well as budgets and cost position to even further increase our flexibility and resilience. Porsche is starting to recalibrate and reprioritize projects and products. And we also have a clear vision for software. With first-class hardware, software and digital services, we create exciting experiences for our customers. As my colleague Sajjad outlined at our Silverstone event last week, this will not happen overnight. It will happen steady and incrementally. In 12 months you will already see the first advances and momentum will build. Before we take a look at our 2024 performance so far, let me say. Like any racetrack, each year has slower and faster sections. In the third quarter we were slowed down and were a little slower. Now we can accelerate again and start the final sprint. Our business year to date, and in particular in the last three months, has been characterized by primarily three effects. First, our four product changeovers and ramp-ups, which have caused temporary gaps in individual markets and model series. From a quality and timing perspective, these are fully on track. And second, the disciplined management of demand and supply in the Chinese market according to our value over volume strategy. And third, the relatively lower parts availability from our supply chain. This year, we have had to manage many supply chain disruptions due to the volatile environment. Our team have been working continuously to mitigate potential supply shortage risks. For example, as one of many difficulties in our supply chain, the bottlenecks resulting from the flooding of a production facility of an important European aluminum supplier as of now have been largely compensated. However, other risks in the supply chain still exist and need to be managed accordingly. All of this significantly impacted our results. But as we have previously mentioned, with Q3 behind us, our performance is expected to improve from here. As already communicated, we delivered slightly above 226,000 vehicles to customers in the first nine months. On wholesale level, this resulted in more than 221,000 units sold, a decline of 12% to previous year. With a share of 18% from China sales year to date, more than 80% of our global sales were from Europe, North America and overseas and emerging markets. We have a more balanced sales footprint than ever. Let's now turn to the financial results. Group revenue in the first nine months was 28.6 billion euros, a decline of 5%. As mentioned earlier, this development is mainly reflecting the lower wholesales, also resulting from fewer vehicle availability. On the other hand, we benefited from a better product mix. Pricing again was also positive, benefiting from the price increases last year as well as the higher degree of individualization. Thus, we accounted for an underproportional decline of group revenues compared to our vehicle sales. Group operating profit was 4 billion euros at a margin of 14.1%. The earnings per preferred share for the first nine months amounted to 3.04 euros. Let's now talk about our customer demand. This shows that we are very much satisfying our customers' expectations with our new models. Overall, in all regions, with exception of China, order intake stays encouraging, with a strong mix and pricing. This trend is very much supporting our strategy of value-oriented growth. Not to forget, the demand for the new 911 is as expected quite satisfying even above expectations, especially for the GTS. Also, the demand for the new Macan remains robust. Overall, our global order book stays strong, already reaching out well into 2025. The mix and quality of our order book nicely illustrates that our customers appreciate our exclusive product offering and very much make use of the opportunity to personalize their vehicle. This we also recognize with the incoming orders for the new Macan. Here we see an increase in the revenues per vehicle from individualization. Those of you who are more interested in our individualization strategy or our Sonderwunsch and exclusive manufacturing program can find more details in the deck from our Silverstone event on our website. The average sales price on retails at the end of Q3 2024 was 115,000 euros. The average sales price on wholesales amounted to 117,000 euros. These numbers reflect our value over volume strategy and long-term trend. Automotive revenues amounted to 25.9 billion euros year-to-date. The operating return on sales for automotive was 14.6%. The automotive segment's operating profit in the first nine months of 2024 was at 3.8 billion euros. We have outlined in our Q2 call we had to deal with limited product availability after the summer break. This was a function of the product changeovers and ramp-ups, the relatively lower parts availability from the supply chain and the production summer break in Suffenhausen and Leipzig in August. On the cost side, we still faced higher material costs from the inflationary environment in our supply chain, the regular quality and customer satisfaction as well as CO2 initiatives, plus the inflated startup costs in connection with the renewal of the model range resulting from higher DNA on capitalized R&D and CapEx. We also accounted for higher sales and marketing expenses resulting from our digitalization strategy, motorsports, as well as higher costs for strengthening our customer-oriented services. The seasonal lower product availability triggered in Q3 a very unfavorable fixed cost coverage. As discussed earlier, we will continue to inspire our customers with a very young and attractive product portfolio as well as with iconic and emotional sports cars. In order to further achieve even more in the exclusive segment and to further advance our strategy of value creating growth, we stay committed to a combination of three types of powertrains. efficient ICEs, exciting plug-in hybrids and innovative all-electric models. Thus, we spent more than 3.8 billion euros on CAPEX and research and development year to date. Capitalized R&D amounted to around 1.6 billion euros this year so far. DNA of capitalized development costs amounted to more than 800 million euros. Thus, the expense of R&D was half a billion higher than last year, equaling around 6% of automotive revenues. Last year it was 3.9%. Automotive EBITDA year-to-date was 5.95 billion euros corresponding to an automotive EBITDA margin of 23.0%. This year we have earned an automotive net cash flow of 1.2 billion so far. The net cash flow is mainly the result of the following four factors. First, the cash flow from our operating business, which we outlined before. Second, higher working capital resulting from temporary effects, mainly in connection with the launch of the new Macan and other vehicles. Third, the continued disruptions in our supply chain and elevated cash flow from investing activities, which reflects our continuous spending on the development of our brand and ecosystem. Fourth, the cash flow also includes our investments in partnerships for the digitalization of our vehicles from Q1 2024. Here we invested a mid-three-digit million amount in digital and software partnerships. You can find more information on the automotive net cash flow in our quarterly reporting. Financial services revenue amounted to around 2.9 billion euros in the first three quarters. The operating profit of the financial services segment was 210 million euros. As in the last two quarters, the result is mainly driven by the valuation of interest rate, hedging transactions, and derivatives outside hedge accounting in the context of regular refinancing activities. Overall, the credit quality of our financial services book is unchanged and very strong. At the end of September, our automotive net liquidity was at 6.2 billion euros. Let's move on to the outlook for 2024. As already discussed in the Q2 call, reflecting our robust order book, an improved availability of our product offering and the expected drivers supporting the sequential improvement in Q4, we confirm our full year 24 return on sales outlook of 14-15%. Our forecast for the automotive segment is an EBITDA margin between 23% and 24% and a net cash flow margin in the range of 7 to 8.5%. This range includes our continued investments in the upcoming product portfolio, digitalization, brand and other strategic projects and partnerships. In the remainder of the year, we will also continue with the stringent but flexible execution of our strategy. We will continue our investments in our ecosystem to boost the quality of customer service and ultimately the Porsche brand. Since the beginning of the year, we have been boldly forging ahead with our product offensive. With the new Panamera, Taycan, Macan and 911, we are putting ourselves in a strong position for the years ahead to exploit our structural growth potential. At the same time, as outlined earlier, we have to deal with many supply chain disruptions. The current environment also shows that we have to be prepared for supply risk beyond our influence. Stringent to our value over volume strategy, we will consistently focus on aligning demand and supply, specifically in the Chinese market where challenges persist. Based on the most recent global developments, we have to remain attentive to tariff, regulatory and macro risks on our business, which are outside of our control. We expect to have more clarity on these factors when we publish our full year 24 results. Here we will also communicate our full year 25 outlook. At Porsche, we take challenges as an opportunity to excel. Porsche is switching to Sport mode to further boost our resilience and to be able to better counter global uncertainties. This will provide us with a strong foundation for the years to come. Before we come to the end, one more statement on our capital allocation strategy. Based on our strong industrial net liquidity and the generated cash, we intend to strengthen our balance sheet by partly funding our pension plan. Our commitment for a dividend payout ratio of 50% of net profit mid-term stays unchanged. Thank you very much for your attention.