Contl Ag S/Adr

Thank you operator and welcome everyone to our Q4 and full year 24 results presentation. Today's call is hosted by our CEO Nikolai Zetzer and our CFO Olaf Schick. A small reminder that both the press release and presentation of today's calls are available for download on our website as per usual. The annual report of Continental AG will be published on March 18 and before starting I'd like to remind everyone that this conference call is for investors and analysts only. So 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 sell-side analysts. To provide a chance for all to ask the questions, we would like you to ask to limit yourselves to no more than three questions. This will help us to conclude on time. And with this, let me now hand you over to Nico.

Yeah, welcome from my side. So 2024 was a year characterized by a challenged top line on the one hand. On the other hand, progress on the bottom line, which is an even more important part from where we are coming from. 2.6% down organically in consistently markets on the automotive side, but as well in particular second half on the industry side for Contitech. As I said, this challenging market, we've been able to increase EBIT. So 150, 70 million in absolute terms on top, or 0.7 in return on sales, so from 6.1. So 22, we have been at 5.0, by the way, just to remind. 6.1, now we are at 6.8. So substantially improved, mainly by the measures which we implemented, as I said, because we haven't seen, particularly in automotive and quantitech, any good tailwinds. So, on automotive, we progressed with our pricing. For 2024, negotiations are finalized with a high share of sustainable agreements. I come to this then later on the automotive group from plan. And the self-help measures are fully on track. This cost saving of 400 million for this year already safeguards with more than 200 million last year, which gets us on track. And as I said, I come to those measures then later. Tires ended with, again, solid performance, which we have seen as well in the quarters before. Healthy winter tire business helped. And the PLT replacement markets sell-in has been better than we've seen them before, particularly then at the end, as well on the US side, we could see better PLT markets. And truck tire finally stabilized, yes, on a lower level, but stabilization is seen, first of all, as positive. And Contitech, both markets, down, persistently down, weighing on the performance, so full focus on strict cost disciplines. and measures which we've introduced. So, you see the 7.8% margin in Q4. We had a solid Q4 leading us then into 2025, and we have already announced further measures on the quantity tax side. So, this led as well in only slightly up to a million. You will see them on the next slide as well. This has been burdened by one-offs such as tax efforts for spin-off preparation, so dividends within the group, which led to non-cash effective tax expenses, around 100 million. So if you add those, we would be, as well on the NEOT side, 110 million up versus prior year, so which lets us then on the ROC to 11.4. So given that 10% is our work or our threshold to generate value, we have generated in 24. Again, value fell slim by 1.4%. But we generated this. And looking on the adjusted free cash flow, we have been at the upper or slightly above the guidance, which we had going into Q4 that was driven by a positive improvement, substantial positive improvement on the oil and water side. So as I mentioned before, healthy winter tire season helps in Europe. And this is even stronger given the fact that we had negative impacts by one-offs. So finally, last line, you see that this draws as well our net indebtedness down from about 4 billion to 3.7. So 3 million we've been able to deleverage on the debt side, net debt side. So that translates into our dividend proposal. So you see we foresee a slight uptick to 2.5 euro. Where has this driven from? As said, higher NEAT than the year before, positive free cash flow development for the full year, decrease in net debt. We have achieved on a group level our financial results, annual results, which we are giving. So we have all reasons to let the shareholders as well participate in the positive development, which we've seen in 2024. If you now, from our net income or to our net income at the 100 million non-cash effective expenses, you end at slightly below 40%. So, we are with that within the corridor on the upper end, as we have been in the last years as well. However, given the positive development, we strongly believe that this is the right decision leads as well to a 4% dividend yield overall, which seems to be from our point of view reasonable. So looking now, as I mentioned, into automotive, I mentioned before, it was a year clearly challenged top line. However, we made strong progress on our self-help measures, which are leading as well into 2025 as the price negotiations at number one. So much higher sustainable price agreements than we had last year getting into the first quarter. That makes us go with confidence as well into Q1 2025, much higher confidence than we had last year. And for this year, besides the fact that there are still some pricing to close, we are focusing on redesigned to cost activities in order to really manage our BOM and generate further cost savings in order to improve the bottom line. Operational excellence year-on-year inventory. We had reduced our inventory by 255 million. That supported the free cash flow with 2024. And as well for this year, not at the end, we continue our inventory reduction and we are targeting a turn rate increase by one year over year. Coming to the strong progress, you know our FG&A measures which we have implemented, the greater 200 million savings are effective in 24 already. All agreements are in place. It's just further execution of the rest which is still open order to achieve the 400 million. And as we are already that far, we are investigating further potential given the market environment which I said which is still not providing table in particular for Europe and for North America. On the R&D side, 200 million overall improvement in absolute terms. In those 200 million, it's important that 150 are restructuring expenses which we take out, so to say. In absolute numbers, you just see 50, but the restructuring costs are shown here as one-offs. If you take those out, we are 200 million down, which gets our net R&D rate from 11.8% last year to 11.4. So, as well, relative, so our top line was that much stressed. we improved on our R&D share. Just to give, again, 2022, we have been at 12.4, so one percentage point which we improved. In particular, Q4, we reached an 8.5% net R&D, even though the reimbursements have been lower than the year before strong improvement here. As we have announced, we have the targets to get below 10% in 2027. With the current market environment, we took the decision to reduce our R&D headcounts by additional 3,000 until the end of 2026. It should, on the one hand, increase our efficiency and clearly our cost base. On the other hand, as we mentioned with our R&D initiative, by consolidating R&D hubs, by bringing the project teams together, by optimizing our footprint, which is relatively fragmented still of today, we are fully convinced that this will even increase our effectiveness So stronger R&D output by reduced input in terms of cost. So last but not least, I mentioned the 255 on the inventory reduction hub. But overall, we have achieved as well, operatively, a positive cash flow. And this cash flow on automotive is without tax and interest because we are paying this on a group level. So you see about 350 positive. This is a turnaround, and we expect this Going further, as it is from utmost importance to establish a capital market-ready company for automotive for the spin-off, which is planned for the second half of the year. Looking into Contitech, as well, burdened in this case by the double dips, so auto weak, as we have seen in auto, but as well the industry markets, particularly in the second half, in Q3, have been quite weak, so strong focus on self-help measures here as well. So for our OESL business area, which is heavily exposed to auto, we have successfully worked on pricing parts last year, which we completed as well as self-help measures, which has driven OESL 400 base points into positive territory of profitability, and we have contributed with positive cash flow here. So we continue our measures. We have further initiated measures for variable and for fixed, and for variable in particular, Bill of materials, standardization, harmonization. So, we've given clear targets of the team. Central team is steering this. And we target 50 million euro variable cost reduction program. And this is on top of the programs which we have anyhow by improvement measures implemented. So, this is a major activity which we are driving forward in order to improve and secure the results. On the fixed cost reduction, you could see focus 2025 that we took, again, January measures on the footprint. So, we have announced planned closures, five additional sites in January, in Germany over 580 headcounts. So, those are closures and right-sizing, and as I said, particularly the right-sizing part in particular on the German side. So, last but not least, complexity reduction. OESL Carford is on track. We are progressing, and market sounding takes place as we speak. So, as we said in the first quarter, we are moving forward, and progress is made. With that, I hand over for the detailed results to Olaf.

Thank you, Nico. Yeah, if you look at page seven and we look at the quarterly development, you can see two overarching trends. As Nico said, sales remained under pressure, with only tiles being able to grow organically at 2.6% at the same time, though we managed to increase our profitability in each sector In Q4, both in relative and in absolute terms, that means our strategic focus on value creation pays off. Now, let's go more into details for each sector. Start with automotive on page eight. As I mentioned, we had to face organically declining sales of minus 3.2%, so basically in line with the market, but the picture was very differentiated. business area, as you can see. Architectural networking developed well with 7% organic growth, benefiting from customer mix and slightly positive effects from new product launches in 2024. SAM and UX continue to be burdened from lower-than-expected take rates of our products and vehicles, as well as delayed launches of new platforms. Furthermore, the customer mix in the markets was not in favor of our product portfolio. Particularly in UX, These effects also had a significant impact on profitability, while SEM did a very good job in managing costs. Nevertheless, we were able to improve our adjusted EBIT by €75 million. This was mainly due to cost-saving programs, self-help measures, which overcompensated for the lower volume effects. We realized savings in both SFG&A as well as in R&D. This is particularly worth mentioning since our R&D reimbursements came in slightly below the level of Q4 2023. With the 6.6 margin in Q4, we realized an adjusted EBIT margin of 2.3 for the full year. This is marginally below the low end of our target. We have set ourselves for the full year. But if we look at the sales headwind we faced throughout the year, I think we can actually be proud of the achievements of the automotive organization. If we look at the breakdown of the sales on slide 9, you can see the familiar picture of the previous quarters. While we performed well in Europe, outperforming the market by 4%, we lost compared to the markets both in North America and China. Again, this was attributable to an unfavorable customer mix, phasing out products and low take rates. All this resulted in a worldwide sales performance in line with the sales-weighted market for the quarter. Also, for the full year, we came in just in line with our weighted market. With page 10, order intake, even though a lot of sourcing decisions of our customers have been pushed out into this year, so 2025, we came in at a book-to-bill ratio of one. For the single quarter, this means an order intake of 5.1 billion euro, of which Safety in Motion realized almost half of it. A good portion of that came from our latest generation of brake systems. I think this is a good message. that we're continuing to win orders with our MKC2 brake systems, and our customers trust in our leading technology capabilities for one-box solutions also in Asia. Besides them, also architectural networking contributed well to the order intake, mainly with awards for body and zone controllers, as well as for passive start and entry applications. Now, let's continue and look at tires. Even though the comparison base was quite solid, tires managed to outperform Q4 of 2023, we realized sales of €3.7 billion, which is corresponding to 2.6% organic growth. Within this, both volume and price mix were positive. On the volume side, we benefited from overall good replacement markets, particularly from healthy winter tire seasons in Europe. And also on the European truck side, we saw at least a stabilization in volume. In terms of price mix, Immuted OE volumes combined with good replacement market contributed to a good channel and product mix. And as you know, a good replacement business is also margin accretive, which you can see in the 13.9% adjusted EBIT margin that we realized in Q4 for tires. And this was predominantly driven by European replacement volumes and a good mix effect from ultra-high performance and winter tires growth. But also an APEC is a good sales environment This helps us to overcompensate the negative material costs we face in Q4, as well as the ongoing negative year-over-year effects from labor costs that we see. On the next page, we actually want to provide you some additional information around the status quo of our tire business. If you look at the channel mix, you can see that the replacement markets, which make up around 80% of our sales in 2024, is by far the most important revenue contributor. Region by region, this differs a bit, but the main message stays the same. The EPEC region, which is certainly also attributable to some purchasing incentives, has the largest OE share with 27% of sales, while our main market, Europe, only has 15% OE share. Segment-wise, passenger car tires with more than three-quarters of overall sales clearly make up for the largest portion of our revenues. And if you look at the percentage of premium tires which means Continental branded tires in our portfolio, it also stands at 77%. Out of these, 60% are ultra high performance tires, which is an increase of 300 basis points compared to last year. And if you only look at the share of sales of our passenger car tires excluding van, we even reached a share of 66% in 2024. Now let's look at ContiTech. As you saw at the beginning of the presentation, ContiTech had to deal with declining revenues in Q4. On the back of weekend markets in both industry and automotive, we lost more than 100 million euros of sales, which equals an organic decline of 5%. Particularly, the off-highway and commercial vehicle markets continued to burden our sales volume, whereas we saw some stabilization in the construction and home market, while aftermarket performed well. In that environment, self-help became even more important, and you can see in our results that we were able to execute the necessary measures. As a result of this stronger quarter, we came in at the upper corridor of the profitability guides, which we issued with the Q3 reporting. An important contributor was the ongoing improvement of our original equipment solutions business. OSL came in not only EBIT positive, but also cash flow positive in 2021. And we are also continuing making good progress with the carve-out of that business and starting the M&A process. Now, on page 14, let's look at cash flow. Looking at the operating cash flow, you can clearly identify improved earnings as well as continuous inventory management as some of the key levers. They helped us to compensate one-offs, such as reacquisition of shares in Quantitech AG. We mentioned that before. At the beginning of the year, as well as costs for both restructuring and carve-out measures in automotive and Quantitech. On the positive side, we saw a low to mid triple-digit million-euro cash inflow from changes in working capital, more precisely in receivables, in our contract manufacturing business. On the investing side, we were very disciplined regarding capex, mainly because of the high market uncertainty, delayed product launches, as well as efficiency measures. That wraps up my Q4 commentary. Now let's look at 2025, starting on page 15. Beginning with our expectations for the worldwide light vehicle production, we're currently expecting that the existing trends of last year will continue. We are seeing Europe down 3% to 5%, and North America also down at low single digits. We expect a slightly positive development in China. We're expecting worldwide light vehicle production to be flat overall. There's a continued negative geomix for us. For commercial vehicle production, though, we could see slight increases on the very weak comparison base of 2024. On the replacement, Tire side, we are currently expecting slight growth potential in all major markets leading to an expected zero to 2% growth rate worldwide overall for passenger car tires. That is also quite in line with our expectations for the commercial vehicle replacement markets. If we look at the industrial production, then we expect China to remain the growth driver of the industry where Europe and North America could be flat or slightly up. Let's look at our 2025 guidance in this challenging environment. For the group overall, we're expecting revenues of around 38 billion to 41 billion euro at an adjusted EBIT margin of 6.5 to 7.5 and an adjusted free cash flow of 800 million to 1.2 billion euro. This includes capex of around 6% of sales. Looking at the sectors, we're currently expecting the automotive sales to remain under pressure and to come in between 18 to 20 billion euro at an adjusted EBIT margin of 2.5 to 4%. That means we will see further improvements on the back of our self-tax measures despite the very challenging sales dynamics. For tires, we're expecting to come in between 13.5 and 14.5 billion euro sales at an adjusted EBIT margin of 13.3 to 14.3%, giving we are facing a lot of uncertainties in 2025. combined with a headwind on the raw materials. And for ContiTech, we're currently anticipating sales between 6.3 and 6.8 billion euro, with an adjusted EBIT margin ranging between 6 and 7%. Contact manufacturing, we are phasing out, and we will continue, so it will continue to decline in 2025. Sales will presumably be between 100 and 200 million euro at a zero margin as planned. To make the bridge from adjusted EBIT to net income, we're expecting PPA amortization of around minus 100 million euros as in the prior year, as well as special effects of around minus 700 million euros. They will mainly be driven by restructuring on the one hand and spin-off effects both roughly in the same magnitude. The financial result should once more come in at around minus 150 million euros despite the lower level of net debt. Since we will have to pay slightly higher interest in the current environment, the tax rate finally is expected to normalize again and will be around 27%. Please keep in mind that both our market outlook and our guidance do not include any potential significant changes to global tariffs. And then maybe final statement from my side before I head back to Max. We are on track with the spinoff preparations. We have achieved so far all milestones that we have set ourselves, and the plan is to go to the AGM in April, have then capital market days, mid of the year, and then execute the spin the second half of this year, everything on track as planned. And with that, I hand back to Max.