Contl Ag S/Adr

Good afternoon, ladies and gentlemen, and welcome to the Continental AG analyst and investor call regarding the results of the fiscal year 2023. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Anna Maria Fischer. Please go ahead.

Thank you, operator, and welcome, everyone, to our fourth quarter and full year end 2023 results presentation. Today's call is hosted by both our CEO, Niklas Etzer, and our CFO, Katja Garcia-Vila. A small reminder that both the press release and presentation of today's call are available for download on our investor relations website. Before starting, I'd like to remind everyone that this conference call is for investors and analysts only. If you do not belong to either of these groups, please kindly disconnect now. Following the presentation, we will conduct a Q&A session for sales site analysts. To provide a chance for all to ask questions, we would kindly ask you to limit yourself to no more than three questions. This will help us conclude the call on time. With that, let me now hand over firstly to you, Nico.

Thank you, Anna. It's a pleasure for me to wrap up 2023, so to say, which was a very exciting year again, and it was exciting as well for our touchpoints with the capital market as we had in-person meetings first at the tech show, in order to show what, in our era of calibration, as we called it at our Capital Markets Day, what we have developed in those three years, which have been some COVID-difficult years as well for technology, but we showcased, and that was as well the feedback which we got, that we did a lot, that we brought great technologies forward, and on the Capital Markets Day, we explained how to turn those technologies into value and how to help via technological steps outperform the market and increasing our profitability going forward towards our mid-term targets and we announce key decisions, which we have taken and we refer further to that. So looking on the KPIs, how did the year ended? Say it's 41.4 billion euro, which is an organic growth of 6.9%, so roughly 7%, with FX burden of 1.9, so reported is 2% lower. And the 7% organic growth was highly supported by the volumes in OE, automotive organically at about 12% growth, so 2% higher than the light vehicle production on a global scale, which was latest figures at a 2%. And the two rubber sectors, tires and Contitech, have performed as well positively in terms of sales, despite weak replacement markets still until the end and industrial markets which were as well in the second half and the fourth quarter still muted and going forward. So therefore, we are happy that with a 6.1% adjusted EBIT margin, we have been slightly above the midpoint of our guidance. So as sales as well as the adjusted EBIT margin improvements were strongly supported by solid pricing management in all sectors. In automotive, we see the results in the the highest probability which we had quarter over quarter in that year, so we reached 4.7%, close to 5%. In the fourth one, still this facing high inflation. Once it comes to pricing, we have to say that some of those, a substantial part of those pricings which we achieved agreements last year, are not fully sustainable, so we have to re-discuss certain parts and discussions already started as we speak. On the tire side, so that's stable, strong results, which we've seen that in the environment, so we did good in terms of supply in the short-order fill. And Quantitech has finished solidly stable as well. The year, as Biden said, the industry demands from 4.7% yearly, adjusted average margin 22%, 2% up in 6.7%. So this helped the adjusted free cash flow. Coming to the last item, which I want to pick out of the chart, 1.3 billion euro, which is slightly above the upper range of our guidance. Why did that happen? There's strong operational performances, as I mentioned, out of the three sectors. On the one hand, inventory turned into, as well, lower cash or supported the cash flow, and we achieved our targets over there with smart management and in-time payments of our customers helped us in order to get there. So overall, As a board, we deem those results as satisfactory. They're the right step towards our mid-term targets. However, there is more to be done, as you know, and we started this already in 2024. As you know, and as I mentioned before, our era of execution, we have lots on our agenda. First of all, for all sectors, you see underneath operations of excellence and cost control is the scheme. As we announced Capital Markets Day, we have to further improve that base. There are lots of reasons. and lots of costs in particular premium freight on automotive where we see improvements going forward and we have to tackle those first of all the left up the bullet points drive portfolio measures in a dynamic environment as we have announced on the capital markets day we have made substantial decisions to adjust our portfolio you might remember the 1.4 billion euro bucket which is under review on the automotive side as well as making the business area ux independent, and by the way, as well, on Quantitech, on the right bottom, we have a path out, which we drive farther. This is as well a portfolio measure. So all of those, this is our priority going forward, and we have started executing on it, or we are successful in our plan. And of course, we do not stop here, but we continuously review the entire portfolio, which is always our responsibility. The market is dynamic as we say here, and we have to be dynamic as well. Dynamic we have to be as well on the cost reduction measures, fixed cost reduction. You might remember the bucket, which we have announced capital markets pay 400 million euro savings from 2025 onwards. So 5,400 positions have been identified to be reduced. Program is set, countries are selected, and is now executed. Same what's true for the R&D efficiency. A step of 1,750 individuals have been announced. Same story here. We go ahead with that part in order to achieve the single-digit R&D percentage of sales in 2028, which we are targeting. In the middle, improved operating leverage. Already mentioned the operational excellence measures, commercial as well as operationally. Value per car, we have to increase in order to outperform the market with the new products which we are bringing in and with the higher value coming along with that. So this will be executed here. The entire side, tapping new profit pools, as in our electrification, digital services, UHP growth is, as well as for 2024, on our radar screen, and we will further focus here. The investments will be predominantly strengthened to set up in Asia-Pacific, as well as in the Americas, where we are still, where Europe is underexposed. So, Contitech, just to add, industrial markets, as I said, still a bit muted coming into the year. However, we work strongly on our outperformance there, outperformance in the market, and the key focus on improving operational excellence is clearly on the ContiTech side with the automotive business, OESL, where we're working on operational and commercial excellence, and whereas at the same time, we're working on the CAFA, as mentioned at the beginning. Which gets me to the last point of our capital market, my last chart and the last update from the capital markets there. You remember, we have announced that we increased the payroll ratio from 15 to 30 of the past to 20 to 40. So increasing it upwards, which confirms as well our commitment to the shareholder community. And as you see, our payout ratio, we proposed to the AGM to Euro 20 per share, which is the same amount as we had in 2021. thereby the upper end of our bandwidth with 38%. However, as I indicated before, we met our targets on cash. We have been a bit up, so we deem this as appropriate. And of course, this is subject to the approval at the AGM, which is, by the way, this year in person again in Hanover. So you're well invited for April 26 to participate. And with that, I hand over for further details, information to Katja.