Contl Ag S/Adr

Thank you very much. And welcome to all of you to our Q3 2025 results presentation. Today's call is hosted by our CEO, Nicola Setzer, and our CFO, Roland Welsbacher. Both the press release and the presentation of today's call are available for download on our investor relations website. And I'd like to remind everyone that this conference calls for investors and analysts only. So if you do not belong to either of these groups, Please disconnect now. Following the presentation, we will conduct a Q&A session for cell site analysts. To provide a chance for all to ask questions, we would like to ask you to limit yourselves to no more than three questions. This will help us to conclude in time. And before handing over, I want to briefly highlight some extraordinary effects that impacted our Q3 figures. As you're already used to it from the formal Movio reporting, The signing of the sale of our original equipment solutions business within Contitech has resulted in some accounting technicalities. Here, too, Ivers 5 applies, and the assets and liabilities attributable to OSL were reclassified to assets and liabilities held for sale. Furthermore, the sale has resulted in a write-down of the assets, which reduced the basis for depreciation. The depreciation of the new book values of the OSL assets has stopped. Without the signing, there would have been no impairment trigger, and the depreciation would have been roughly 6.5 million euros higher in Q3. With this up front, let me now hand you over to Nico.

Thanks, Max. Very welcome to the call of an, again, eventful third quarter. Our quarters have been in the last time always eventful, but this time with two major events and two major milestones. As already mentioned, on the one hand, Theo Movio spin-offs, with a fantastic ring the bell event on September 18th. So, this was very impressive going forward for sure. And you could see already that it started quite well as well in terms of market cap. So, just in that day, 700 million Euro market cap was additionally created. And as the story continues, I should say as of today or better yesterday, it's in the meantime greater than 2 billion, 2.4 roughly. or 15% in seven weeks, and if you look, the underlying indices, they are definitely not 15% up, so we clearly outperformed. With that measure, the market, not just that this measure has been greatly, but looking as well how it was executed, speed and precision from announcement, August, we started last year, December decision, and September 18th, then the listing, and with the final transaction, I should say, So that shows how focused and determined the Conti team was and is once we decide on strategic realignment and all hands on deck. And I'm really grateful that the team has achieved this on time and on budget, I should say. In particular, or even more, because the OASL sale has been signed basically in parallel. So it was August 27th when the signing took place with the industrial holding company regions. which is, and that's why we were pursuing this strategic move from our point of view, clear, better strategic owner for that asset to develop its value accretive going forward. And on the one hand, on the other hand, we see for Quantitech, this is a clear strategic move to focus even more on the industry business, on industry customers, getting now to an 80% industry business. And therefore, our strategy, which we announced three plus one champions, three sectors plus the one, the one is OSL, We see us following suit with those two, focusing now on the last two, which are within the group. And just to finalize this one, expected closing is until first quarter 2026. And then OSL is done. And at the same time, we fully focus then on the Contitech independence. So with those strategic milestones coming out to our performance, and it's a good operational performance, but first of all, those strategic moves have had as well strong impacts in particular on the near base. You see under special effects on the right side that combined both had an impact of greater than 1 billion, 1.1. Negative impact, Roland will give more details in his part. However, I want to highlight right now already, those have been all non-cash effect of one of means as we did it as well in previous years. We, our dividend policy allows for adjusting such events means they would be out of the dividend base, which we will then look into for next year's dividend. Secondly, leverage ratio. So, now on a pro forma base means we have excluded out of the 12 months every day the automotive deconsolidation effects, 680 million, so very substantial, which is getting us right now to a 2.2. We said we believe to be at around two-ish. This is now September until the end. We're working farther with our cash as well to deliver it. So, we are on target, and we have expected such a ratio. So, from the more strategic part now to the operational part, you see organic growth 2.6%, which is a decent growth given that the last quarters have been more shy. Very strongly driven by tires. Tires 3.7, which we'll see on the next chart, but I mentioned it already that tells you immediately that the growth was very much driven or all driven by tires. ContiTech's been slightly improving, but slightly negative organically with 0.6 and responsible replacement tire business, and there the regions, North America and APEC and PLT helped. Helped as well overall good operational performance, and you could see that channel mix, regional mix, our measures all contributed to a strong price mix on the sales part, and you see that, The negative impacts, which we had lower volumes in line with the year-to-date, so at the minus one percentage points roughly. Strong change rate effects with drop-throughs and the tariffs effects. They have been almost completely offset by all the mitigation measures which we took in place, which we started more or less at the beginning of the year and which are now unfolding. So, the adjusted debit margin is with a strong comp of last year. basically close to be stable. On Contitech, as mentioned before, slide sales down. However, earnings are significantly up. That is a proof that our measures, our safeguarding measures, which we've initiated, they clearly pay off. And the environment, in an environment which is still weak on the industry as well as on the OE side, however, we can admit that the third quarter already shown some signs, in particular, September of improvement for industry business Our business areas have been in at least a positive territory with regard to growth, whereas OE is still down. I already mentioned OESL results in a stop of depreciation, $6.5 million. Already now I can mention Quantitech would be as well up in terms of earnings even without that effect, and we have excluded it, which you see in the middle from the group result, where it has only a minor effect. Looking on the adjusted free cash flow, here's slight operational improvement, 157 to 169, so 12 million. But you have to consider that last year we had the one-off payment from VITASCO, 125. If you adjust for that, you see that operationally we are going in the right direction. And this holds as well true for the adjusted EBIT of the group, which you see on the upper here. If you deduct the 125, you see that our EBIT has improved there as well, based on the two stronger sectors, two strong sectors. And looking on the group, operational holding costs, you see that we are trending, if you do the math, you see that we are trending as well downwards on those costs, and we have elaborated on that. This is expected, and we are further working in order to get further to the pure play of tires, now combined with Quantitech to lower holding costs, which are in line with our businesses. So, looking into the figures, All in all, you see a challenging quarter, but with the strong September ending, so the second half of September was on the stronger upper side. It helped with solid performances. On tires, you see 3.6%, which I already mentioned. Again, sales and replacement PIT are up, whereas DOE part and in parts as well, truck tire was down. Still gives overall with a strong price mix. as an organic sales growth. And the results you see on the right side, 14.6 to 14.3. Flattish, again, strong comp last year. It was a strong quarter with the 5.08, only slightly down with the 5.01 based on our mitigation measures, which took place. Quantitech, again, 0.6. Industry up, OE down. Both trending, as well as the OE side trending a bit better in the year-to-date trend. So, that is a positive. And you see on the right side, Even if you deduct from the 97, the 6.5 Mark mentioned gets you to 91. You see we are up from 4.4 to 6.1. So, in a difficult environment with organic sales slightly down, particularly the industry business contributed and the safeguarding measures we managed quite well on the quantity side to mitigate the impacts. And with that, I hand over to Roland.

Thank you, Nico, and a warm welcome also from my side. My pleasure today to join my first earnings call as a speaker, not just for Q&A, as last time. Before we start looking at the entire Q3 figures, let me start with a brief look at the Q3 developments in our key markets and regions based on the latest available information. Due to some delay in the data on imports, you will see some retroactive changes in the database moving forward. On this page, you see the market dynamics in which we operate with our passenger and light truck tires business. Light vehicle production overall improved, but we're coming from a very low level, so rather easy to come year over year. The strong performance of the Chinese market continues, also driven by government subsidies and exports. And Europe, while being slightly positive, flagging compared to the other markets dynamics due to weaker demand and declining vehicle exports. while North America seems to normalize a little bit in a still difficult macroeconomic environment. Now over to the tires market. PLG replacement selling was slightly down in Europe and North America. However, you have to consider the solid comparison base Q3 24. And looking at the single quarters, it can be clearly seen that the impact of imports to Europe that were partly driven by the anticipation of potential anti-dumping measures by the European Commission is normalizing. On chart seven, coming down to the trends for our truck tires business, as far as commercial vehicle protection is concerned, There are still only slight signs of recovery in Europe, even though we're coming from a very low level already in Q3-24. The North American volume trend is even worsening sequentially. Crack tire replacement business continues to show modest positive momentum. In EMEA, demand remained muted due to ongoing economic uncertainty, while North America has been lately fueled by pre-tariff import activity. However, this trend is already slowing down. And how these market dynamics translate now into the performance of the tariffs group sector, you can see on the next slide, number eight. Tariffs is significantly impacted by the highly volatile environment. Once more, we had to deal with substantial headwinds from FX and tariffs. Overall, as Nico said, volume slightly declined on the same level as in the first half, mainly due to the continuing weak PLT-OE market and software truck tires replacement demand on local manufacturers' business. However, demand for our tires in PLT replacement was healthy in North America and APEC during Q3. The sell-in for the winter tire season was also comparatively strong with a promising order book, also from Nick's perspective. And despite all challenges, we managed to perform in line with the market or even slightly better in our key region. The strong price mix of plus 4.8%, predominantly driven by product, channel, and country mix, more than compensated for the negative impact from FX and lower volumes in the top line. We benefited from regional trends, positive effects in sales channels, and the continuing trend towards premium and ultra-high performance tires in our broad portfolio. In terms of profitability, price mix helped us to almost completely compensate for lower volumes to drop through on FX and the mid-double-digit million euro cross-burden steal from Terrace. Raw material cost provided a slight tailwind versus prior year in Q3, with more positive effects now expected in Q4. And while we're talking about tariffs, the timing for the tariff reimbursements from the U.S. government and whether we still receive it in 2025 or in 2026 is still unclear. However, this will not have any impact on our ability to reach our cash flow guidance for the full year. This brings us to chart number nine. We shed some more light on our regional performance. Let's take a look at the trends and drivers in Americas, EMEA, and APEC. Starting with the Americas, we achieved strong organic sales growth of plus 5.1%. While we faced a slightly negative volume effect due to a very weak truck tires or wheel market, robust performance in both PLT and truck tires replacement volumes helped us to offset this. Favorable price mix largely compensated for effects and volume effects, whereby mix was also strongly influenced by channel lease effect. Moving on to EMEA, we saw an organic growth of plus 2.7%. The negative volume effects were mainly driven by weak PLT-OE and truck tire replacement business. Truck OE, however, that's the difference to the Americas, recovered strongly. And the PLT replacement business was supported by a healthy start into the winter business. In addition to that, sequentially improved price mix, fully compensated for FX and volume headwinds. Finally, on the right side, APEC. On the sales side, we delivered plus 3.2% organic growth. Our POC business showed solid growth in both channels, OE and replacement. On the truck side, however, Q3 was impacted by the closure of the APEC truck tires business in Moti Puram, India. Price-to-performance was largely flat sequentially. So all in all, we demonstrated healthy organic growth across all regions despite the challenging market conditions. This brings us now to chart 10 over to Contitech. Despite continuing weak volumes in the automotive and industry sectors, there are slight signs of improvement as evidenced by sequentially increasing volumes in our industry business, and the automotive business showed a slightly positive development in September, too. FX effects on sales were again negative, though with limited drop through to earnings for Contitech. Other than tires, raw material impact overall was still slightly negative in Q3 due to some offsetting effects caused by some Contitech specific materials. However, the negative effects of lower volumes and exchange rate losses were more than offset by price mix. Safeguarding measures we implemented, such as our measures to compensate for the impact of tariffs, and by positive effects related to our transformation, resulting in adjusted EBIT significantly above the prior year level. Those are one-time effects associated with a planned separation between OMOVIO and Computech and technical, as we stopped depreciation in OESL, which increased the adjusted EBIT, as Nico said, from a pro forma 6.1 to 6.6%. Excluding OESL, the Contitech margin in Q3 would have been at 8.5% if sales amounted to 1 billion euro. With that healthy underlying performance and an expected sequential improvement in Q4, mainly because of a seasonally stronger industrial business, as well as continuous cost-saving measures, we're confident to achieve the lower end of the guidance corridor for Contitech. With that, let's talk about cash flow on page 11. Q3 free cash flow generation operationally slightly improved compared to Q3 2024. For prior year, however, you need to consider that Q3 2024 was positively affected by a one-off effect from the reimbursement from Bitesco that Nico already touched upon earlier. The other changes in the operating free cash flow mainly relate to changes in employee benefits and some other changes in other assets and liabilities. Capital expenditures increased compared to the previous year, mainly due to our continued investment in respective extension projects, such as our plant in Raiyong, Thailand, ongoing construction of our new tile distribution center in Texas, for example, as well as a more balanced quarterly facing of our cap expense compared to the last year. So much to the operational part. Let's move on to slide 12. briefly address the more technical implications concerning our balance sheet resulting from the spin-off of Omuvium. The left side shows how our net debt has developed over the last few quarters. You can see the influence of the spin-off in Q325. All figures up to June 30, 25 are presented as reported for the entire group as it existed back then. That means for continuing and discontinued operations, The figures as of September 30, 2025, refer only to continuing operations. EBITDA for the pro forma leverage ratio was adjusted for the deconflidation effect resulting from the spinoff. As expected, we came in at around two times leverage, which is a level that we will now continuously drive downwards in the upcoming quarters. On the right side, you can see how the total equity, as well as the net debt, was particularly affected by the cash contribution to Omovium. At the same time, the total assets were reduced by the disposal of the associated net assets. All in all, this led to an improvement of the equity ratio from 14.6% as per the end of June to 22.2% as per the end of September, just as we already expected in H1. All KPI targets mentioned on our CMD do, of course, remain valid. That means we will continue to operationally strengthen our balance sheet. With that being said, let's move on to our market outlook in page 13. After a very negative picture of light vehicle production expectations, especially in Europe and North America, S&P Global has raised their expectations for financial year 25. However, we see in this forecast certain risk related to supply chain disruptions, such as the situation around Nixperia, for example, so we remain cautious. The latest S&P global figures on commercial vehicle production show that the situation has further deteriorated. Although the negative trend in Europe is gradually reversing, it is still far from sufficient to achieve growth for the year as a whole, and the outlook for North America has also deteriorated significantly once again. Our assumptions regarding the passenger car tire replacement markets did not change materially, while we increased the outlook for the commercial vehicle replacement business on the back of a healthy year-to-date performance. And for the Eurozone, we slightly increased our assumptions for overall industrial production following the latest developments in this area. However, this is a very broad picture of industrial activities for the Eurozone. Unfortunately, we have not yet seen that positive momentum in the important areas for the counter-tech industrial business. Let's now turn to our guidance. As already announced in our pre-release in October, we are confirming the guidance for sales, EBIT, and cash flow. However, some changes had to be made because of the impact of Continental's transformation. The non-cash one-offs are affecting our earnings before tax, which leads to a distortion of our regular tax rate, since we, of course, still have to pay taxes in the countries where we are doing business. This is leading to an expectation of a low triple-digit percentage tax rate for the full year. Without the spinoff, without the transformation, there would have been no adjustment for the tax rate, meaning it would have still been at around 27%. In addition, we've also adjusted the value for expected special effects on 350 million to 1.5 billion for the same reasons. Meaning, this adjustment is solely attributable to the transformation related special effects that we have already explained. Please keep in mind, we're mainly giving you the guidance for special effects and tax rates that you can model a net income. Our dividend policy does, however, as mentioned in the introduction by Nico and previously done in the past, allow us to exclude those non-cash one-offs for the basis of our dividend proposal in 2026. Or in other words, the changes in the guidance will presumably not impact the dividend this year. Furthermore, we've also adjusted our CapEx guidance from 6% to 6.5%, mainly due to the ongoing plant expansion in Asia. With this, We come to the end of our presentation. I would like to hand over the rest of the time to you now. Operator, could you please open the line for the Q&A?