Forvia Se

Good morning, ladies and gentlemen. Welcome to our H1 2026 results call, which I'm as usual presenting together with our CFO, Olivier Durand. Good morning. Before we start, let me remind you that our 2026 and also the 2025 H1 results are presented excluding exteriors, excluding interiors, since we plan to divest from it by year-end. So here's a brief look on today's agenda. I will start with our key highlights for the first half before handing over to Olivier, who will present our financial results. I will then come back to discuss our outlook for 2026, and we will conclude the program with a Q&A session. So let's start with key takeaways from the first half. Our activities have been fully focused on the execution of the Ignite plan that we presented at our Capital Markets Day in February. Over the first half, we delivered tangible progress across all three strategic priorities. So let me start with performance. We improved our operating margin through disciplined fixed cost reduction, greater cost flexibility, and effective management of inflationary pressures. We also delivered an 18% increase in net cash flow with improved quality again. So this enabled us to reduce net debt by half a billion euro, which marks the largest semester of organic debt reduction since the Heller acquisition in 2022. Order intake was equally strong, increasing by 15% year over year. Transformation Several important milestones have already been achieved, including US, European, French antitrust clearances and the completion of the consultation process with the European Works Council. So we remain on track to complete the transaction in the fourth quarter of 2026 on metrics that are fully consistent with those presented at signing. Under transformation, innovation also remained a key focus. We held dedicated technology sessions organized across businesses and regions. These events are great motivators for our teams to accelerate innovation and strengthen cross-functional collaboration. As a result, we advance our technology roadmap with many market-relevant innovations across the entire portfolio. Let's talk about the lighting business next. All of our business groups improved their performance in H1 except for lighting. Heller Management pushes the lighting transformation program really hard with determination and has taken decisive actions to improve both profitability and growth. And last not least, we have started leveraging our industrial know-how and advanced technologies to pursue selected defense-related activities. I'll be getting back to those in a minute. Finally, the third pillar, our culture. This is one of the topics that I am personally paying close attention to, since culture drives ultimate performance orientation into the group. We continue to roll out our guide, empower and recognize principles across the organization. Project Simplify is delivering results right now. In the first step, the organizational structures were streamlined, and now the focus is on process optimization. Through our business transformation studio, we automate processes and deploy AI, particularly in engineering, in purchasing, and in supply chain management. So in summary, we create less bureaucracy, faster execution, and much better ownership with the leaders and the teams. So here comes the resulting performance from H1. In fact, the results from half one mark our third consecutive half year of improved performance. And with this, we are firmly on track to deliver our full year guidance. Sales reached €10.8 billion at constant exchange rate, placing us in the upper half of the guidance range. Margin improved by 30 basis points to 6%. And net cash flow is also increased, now reaching 4.1% of sales, while leverage continued to decrease organically to 1.6 times. Automotive production declined by 1% globally, and we mitigated rising inflation under increasing geopolitical tensions. Here, I would really like to thank the Global4via team who delivered, despite a challenging environment. Thank you very much for that. So what's driving the performance? Actually, we continue to benefit from improvements across our operations. And this is reflected both in our operational metrics and in recognitions which we received from our customers. We made significant progress in deploying the 4VR excellence system across our industrial footprint and also by increasing the convergence with HeLa. The number of FES focus plants was reduced by 18% in six months. Those are the plants that we want to uplift in performance and FES performance very consciously. And these remaining plants are being closely monitored and expected to improve rapidly. The progress becomes particularly visible in North America, a region that caused concern in prior years, and you remember that. So right now, launches are being delivered flawlessly. and General Motors alone rewarded eight of our sites in North America with quality excellence awards. All global efforts contributed to a 33% reduction in customer acclaims versus prior year. That's a significant improvement in our delivered quality. So I'm happy to share that our operational excellence and innovation capabilities were recognized by a number of key customer awards. General Motors recognized the creativity of our electronics team. Ford, our excellent collaboration. And China, Geely and Cherry, both appreciated 4VR's outstanding innovations. These recognitions underline 4VR's strong positioning for further growth. We're now getting to the lighting transformation program. So, Hela Lighting continues to rely on its tech leadership and a full product range. However, the financial results in H1 mark the bottom with an operating income of 0.3%. This is driven by an organic sales decline of 4.7% in H1, which continued the trend that we have seen since H2 2024. So the transformation program is key, and it is currently being accelerated with a clear priority on improving the bottom line while building sales momentum. So we enhance competitiveness by adjusting our R&D and manufacturing capacities, by an enhanced implementation of the FES, and capex and working capital both follow new targets. Last not least, to simplify, SG&A will be driven based on a benchmark. The actions currently underway will begin to deliver tangible benefits in the second half of 2026. Looking ahead, our committed goal is to progressively recover our 2025 operating margin by 2028. This, by the way, is fully consistent with the overall 7% margin ambition for the value cluster that we outlined at our Capital Markets Day. In parallel, we are step-by-step rebuilding a stronger pipeline of business by being more present in the mass market and diversifying our regional reach. Our efforts have started paying off with an order intake in H1 twice as large as in H1 last year. So there is significant share with volume customers as well as with customers outside of Europe. The expected acceleration in sales from 2028 onwards should provide a strong operating leverage effect supporting a further improvement in operating margin. So the challenges are very well understood. The action plans are underway and I can assure you that the turnaround of lighting is at the very top of my priorities. Let me now turn to order intake, one of the very good results of the first half and a strong indicator of the growth opportunities ahead of us. Order intake reached €13.4 billion, and that's without the interior orders. It is up 15% versus the first half of last year. This performance reflects the strength of our position in the growth areas identified at our capital markets day. In fact, our growth cluster accounted for 60% of total order intake and delivered a strong book-to-bill ratio of globally 1.5 times. In seeding, the most notable highlight is that half of order intake comes from conquest business. This reflects the strength of our offering and our ability to win market share. We also continued to make significant progress with Chinese OEMs, which accounted for 27% of the seeding awards. In electronics, we secured significant awards in fast-growing technologies, including around €1 billion in energy management, software-defined vehicles and in-cabin experience solutions. A major European contract for our interior monitoring systems is worthwhile mentioning. At group level, we progress well on diversification. 30% of total order intake during the first half is with Chinese customers, Japanese customers, Korean customers, commercial vehicle, and specifically also India. In India, our order intake reached €600 billion, compared with H126 sales of €235 million. So you can see the growth. Most notably, we secured our first complete seed business, which will support the construction of a new just-in-time seeding plant in India. The start of production is planned for 2027. This will bring our industrial footprint in the country to 10 plants. And with about 2,500 engineers based in India, we are dedicating part of this talent pool to support the further strong growth expected in the country. So let's go to China. Beyond the seeding wins that I already mentioned, we continued to make strong progress with Chinese OEMs. They represented 17% of total order intake, corresponding to a three times book-to-bill ratio. More than 70% of our Chinese order intake came from Chinese OEMs. That's fully reflecting the shift of the Chinese market, where they now account for a similar share of vehicle production. Notable wins were attained with Cherry, Shangan, Leap Motor, a new fast-growing EV tech player, and our long-standing partner BYD. So you can see how we further diversify our Chinese customer base. Overall, the quantity and quality of our order intake gives us confidence in the future growth of our business. Building on additional wins already secured in July, we are confident in our ability to sustain strong order intake momentum across the year. What's driving the growth? Let me turn to innovation, and that remains at the heart of our strategy, and again, that's a key growth driver. Across our pursued trends of electrification, in cabin experience and safety and comfort, we continue to develop technologies that address major transformations shaping the industry. In electrification, we will start production of our first integrated 12-volt lithium-ion battery pack next year. This solution reduces weight, simplifies vehicle integration and has already won significant businesses with several international OEMs. We are also expanding our portfolio for extended range electric vehicles and plug-in hybrid vehicles with a new adaptive valve. So this valve in the exhaust system reduces the weight of the entire system. It creates space for additional battery capacity and it particularly reduces the muffler volume and therefore also the cost of the system. Moving to the next column here. In our in-cabin experience, Appening, our apps market that combines third-party apps, vehicle functions, and location-based services, now provides drivers the benefits of an AI assistant for seamless interaction with that infotainment system and the vehicle in general. In safety and comfort, we will soon launch our transformer seat for Chinese OEMs. Remember, that's our AI-powered adjustment where, Olivier, you get your setting when you enter the car, I get mine. They're slightly different. And also the seat adjusts during driving situations, depending if you are more sporty or more relaxed in using the vehicles. Last but not least in lighting, we successfully launched our highly adaptive high-definition lighting solutions in China. The product's performance and the cost have both been tailored to the fast-moving Chinese market. Altogether, these innovations demonstrate our ability to anticipate market trends, and we clearly bring differentiating technologies to production which will support our future growth. So in general, our strategy remains unchanged. First, we focus on strengthening our core businesses. Second, we selectively expand into adjacent markets. Defense is one of these opportunities for FORVIA. Through FORVIA Hela, we already have long-term experience in delivering lighting and electronics products into the defense market. And this gives us a deep understanding of the ecosystem and its processes. So now we can create value in two dimensions. On the one hand, through our industrial know-how and available capacities, and on the other hand, through our technology and products. So on the industrial side, we benefit from a strong Franco-German footprint, which is fully aligned with European sovereignty, ambitions, and two strong marketplaces. On the technology side, you can easily see how actuators, sensors, energy management systems qualify for emerging applications just as drones. Just think about the low voltage battery pack we've discussed before. This is a lithium voltage pack up to 50 volts. And these will be produced in volume for automotive and can then power drones in the same good way. Therefore, our recently announced drone partnership marks an important step. From assembling first drones now, we are exploring the entire opportunity. Next to the assembly and component supply, the defense sector also offers opportunities to adjust our capacities. The Augsburg plant in Germany is being transferred to General Dynamics, which is a good illustration of that adjustment of capacities. We can offer 300 employees a new perspective. So this preserves employment, it avoids restructuring costs and supports long-term industrial activity. So you can see how we take a disciplined approach to diversification. It is about new markets, it's about new customers and the same for VR capabilities. Moving on to culture. As I said at our Capital Markets Day, delivering Ignite is not only about strategy. It is also about culture, leadership, and the way we work. During the first half, we continued to build momentum. We engaged more than 6,000 managers worldwide behind our Ignite ambitions and priorities. That was a massive communications and leadership task. Also, we trained our managers on GER, Guide, Empower and Recognize. This is our new leadership framework that represents a significant departure from our previous top-down management approach. We are building a culture of performance through empowerment and accountability. A very good example for that is our CELINE facility in Michigan. You know about that place, because in prior years, the plan had caused significant losses when launching new products. The plan has now returned to decent profitability. Certainly, the group provided support to that recovery. However, in the end, it was not all the help we parachuted in that created the turnaround. It was the strengthened and empowered local leadership team that managed the breakthrough. Another area of continued focus has been safety. I am pleased to report further very significant progress. Our accident rate decreased by 37% to reach 0.89 in FR1T, our metric. We are now already in line with our mid-term target of an accident rate below 1 as presented at our capital market stay. And last not least on culture, we also took a very strong start into the year giving back to our communities. Through the 4via solidarity days, more than 16,000 employees engaged in over 560 local initiatives around the world. So I have to say, 18 months into building a new 4via culture, I'm truly encouraged by the progress and the engagement I see across the organization and across the globe. So to sum it up, in the first half, we made solid progress in executing in our Ignite roadmap, which is a build around two consecutive phases, focus and strengthen, and lead and grow. Being in the middle of phase one, we delivered further improvement of our financial performance. The interiors divestiture is on track for Q4, and our cultural transformation is gaining momentum across the group. At the same time, some of these results already prepare us well for Phase 2. Order intake increased significantly, supporting our ambition to accelerate growth in the years ahead. Our innovation roadmap continues to differentiate for WEA in the most attractive market segments. We have opened up new growth opportunities also in the defense sector for several of our activities. So overall, these achievements reinforce our confidence and our ability to deliver on our 2026 objectives and to create long-term value. With that, Olivier, I would like to hand over to you for more detail on the H1 results.

Thank you, Martin, and good morning, everyone. As communicated at our Capital Market Day at the beginning of the year, our segment reporting is now built around six activities which are structured on growth clusters and value clusters. In this context, electronics is now reported separately with ELA electronics included in the growth cluster, while Clarion is part of the value cluster. Let me remind you the principle of the two clusters. Growth cluster is focusing on accelerating growth, strengthening technological leadership, diversifying customers and partnerships, and supporting discipline investment. The value cluster is focused on operational performance, cash generation, and value creation. Let me start the financial presentation with the sales and the operating margin. Once again, we delivered a meaningful step up in profitability despite a challenging market environment. The reported sales amounted to 10.5 billion euros, down 4.3% versus H1-25. On an organic basis, i.e. excluding foreign exchange variances, sales declined by 1.9%, slightly below global automotive production which was down 1% in the period. In this context of soft sales, we increased operating income to 632 million euros and delivered an operating margin of 6% up 30 basic points year on year. And this is fully in line with our guidance range for the year. This performance reflects, first of all, strong operational execution. It shows also that the productivity initiative and disciplined fixed cost management from EU Forward and the rapid rollout of our simplified programs are paying off. The residual impact of inflationary pressures related to Middle East conflict was limited in the period. So in short, in a challenging market context, we maintain our strong cost discipline to further improve our operating profit performance. Let me go now on the regional performance for more details in sales and margin results. Overall, we delivered solid performances in the Americas and in Europe. While we continue to demonstrate resilience in China despite a reduced level of activity. As in the first quarter, North America and Europe continued to outperform underlying automotive production and delivered growth despite a soft demand environment. This was driven by electronics, Clarion and clean mobility. In China, performance remains impacted by customer mix effect, particularly with BYD. In the rest of Asia, however, we continue to deliver strong growth and we have significantly outperformed the markets in those countries. If I turn to profitability, the regional picture is encouraging. In North America, operating margins increased sharply to 7.1%, up 170 basis points year-on-year. This improvement was driven by stronger operational performance and by clean mobility activity. In Europe, the margin improved to 3.7%. It reflects the continued benefit of EU Forward rollout, as well as the ongoing challenges in lighting. In Asia, margins remain at a very robust level of 9.8%, which is up 20 basis points year on year. This reflects the continued improvement in the rest of Asia, combined with highly effective cost-flexibilization measures in China. As a result, the group regional profit contribution has become more balanced compared to the past. We have a resilient model in China, further upside in Europe and sustainable improvement in North America. Let me turn now to the performance by the respective clusters. I will start with the growth clusters. Their sales were down 4.8% organically to 5.5 billion euros, with strong growth in electronics, more than offset by softer sales in seating. Electronics continued to benefit from solid demand in radar and energy management. while Seating was impacted by the significant unfavorable customer mix in China that we mentioned before. When we look ahead, commercial momentum is remaining strong. Order intake is reaching 8 billion in this cluster and it represents a book-to-bill ratio of 1.5 times which provides good visibility on the future growth. Operating margin in the cluster improved by 20 basis points to 6.1%. This was driven by disciplinary spending in electronics on the one hand, and stronger operational execution in Europe and in North America, as well as the continued cost flexibility measures in China in sitting on the other hand. Overall, the growth cluster demonstrated its ability to improve profitability while building the solid foundation for the future growth. Now I turn to the value cluster where we are pleased to report another solid performance both in terms of sales and in terms of profitability. The sales grew 1.5% organically, driven by strong momentum at Clarion, particularly with Japanese OEM, and a mid-single digital growth at Lifecycle Solutions. Clean mobility was roughly stable, building on our strong momentum in North America. These positive trends have been partly compensated by the expected evolution in lighting, which reflects the program phase-out in this business. The cluster also delivered a strong profitability performance with operating margin improving by 60 basis points to 6%. Expansion was primarily driven by clean mobility supported by cost reduction initiatives while lifecycle solutions and Clarion benefited from favorable volumes and mix. Lighting remains a key area of attention and we are fully focused on executing the transformation plan that Martin presented earlier. Overall, the value cluster demonstrates its capacity to combine resilient growth with improving profitability. Let me cover now the rest of the income statement. The net income group share is reaching breakeven at 3 million euros in H1-26. This is a significant improvement compared to the loss of 269 million euros that we recorded a year ago. This progress is driven by solid operating income, lower restructuring costs that peaked in 25, lower financing costs reflecting the reduction in gross debt. It is also worth recalling that last year's first half result was heavily impacted by the non-recurring charge of 136 million related to Symbio. When I look forward to H2, as communicated during our presentation of the 25 results, the divested share of Interior is expected to trigger a one-off charge at closing of around 150 million in H2. This is related to taxes at closing on capital gains in certain jurisdictions and the recycling of cumulative currency translation reserves to the P&L. Let me highlight that the cash-out of this charge are already priced in the matrix of the transaction that we previously communicated and that we confirmed. While reported net income is expected to be negative in the second half, including due to the one-off item that just mentioned, the underlying trajectory continues to improve. Let me cover now the net cash flow. We delivered a strong and high-quality net cash flow in the period. It is up 18% year-on-year to 432 million euros, representing 4.1% of sales. Important to mention, working capital and factoring had a limited impact in those results. Actually, the recurring net cash flow, which excludes working capital movement, excludes factoring and other operating items, stood at 403 million euros, 3.8% of sales, up 70 basis points year on year. This performance was supported by strong underlying profitability, EBITDA increasing by 40 basic points, and low level of investment. Related to investment ratio, it was at a low level of 4.8% of sales. We expect some catch-up in the second half. This is reflecting both the normal phasing of our investment and one specific transaction that I will comment in a minute. We anyway expect that the full year investment ratio to be between 6% and 6.5% of sales, i.e. broadly in line with last year. Net cash flow also reflects a 62 million increase in restructuring cash out. We mentioned before the restructuring cash out is expected to peak in 26 at around 300 million before progressively declining thereafter, and we confirm that. Overall, this is a robust and sustainable cash flow performance, demonstrating stronger cash conversion and a growing quality of our earnings. For the second half, we expect the net cash flow to remain of good quality, but I would like to mention two clearly identified one-off cash outflow. The first one is the exercise of a purchase option on a major manufacturing facility in Mexico, which will temporarily increase the capex, but vice versa reduce our early liabilities. and the second one is the settlement of some past historical tax litigation which will increase temporarily the cash tax payments. Together, those two non-recurring items are expected to represent approximately 150 million of cash outflows in the second half 26. Those one-offs are fully reflected and integrated in our confirmed net cash flow guidance of at least 3% of sales for the year 26. I will comment now the net debt and leverage on a pre-IFRS 5 basis since the interiors transaction is not yet closed. During the first half, we reduced the net debt by €503 million. The net debt went down from €6 billion to €5.5 billion. As already highlighted by Martin, this represents the strongest semester of organic net debt reduction since the acquisition of ELA. The reduction was driven by 579 million euros of net cash flow generation when we combine continuing operations and the interior business. As a consequence, the leverage continued to improve and we went down from 1.7 times to 1.6 times, keeping us firmly on track to achieve our year-end guidance of 1.5 times at the end of 26. Looking ahead, we expect the interiors transaction to close during the fourth quarter and upon completion, we confirm that the transaction should generate more than 1 billion of additional net debt reduction, providing a further step change in our balance sheet strengthening. In other words, we are already delivering meaningful deleveraging organically and the closing of interior divestiture will provide an additional and significant net debt reduction in the second half. Let me conclude this financial presentation with our debt profile. Financial flexibility continued to improve across the board. Forvia has reimbursed around 850 million debt maturities since the start of the year, including the repayment of the 428 million shul shine in July. Having now cleared virtually all 26 maturities, our stronger cash flow generation profile and the expected proceeds from the interior divestiture give strong visibility on our debt management. Liquidity has also been significantly strengthened through the successful renewal of the four-via revolving credit facility of 1.5 billion, which is now maturing in 31, with the extension option of up to two additional years. On a pro forma basis, end of July, gross cash amounted to 4 billion euros. and on the credit side, let me recall that those recent progressors as well as the announcement of the sale of interiors have led to both Fitch and S&P to improve their rating outlook in the course of the first half. So overall, the first half demonstrated Forvia's ability to improve profitability, strengthen cash generation, and continue deleveraging and debt reduction, even in a challenging market backdrop. With that, I hand over to Martin for the Outlook 26.

Olivier, thanks a lot. So let's go over that outlook. The market environment is expected to remain challenging, with global automotive production projected to decline by around 3% in H2 compared with the second half of last year. And that's happening across all major regions. Based on our H1 sales performance and our current assumptions for the second half, we expect full-year sales to be in the upper half of our guidance range. That said, we remain cautious given the uncertainty that continue to affect the market, including geopolitical tensions, developments in China, and the broader inflationary environment. In this context, our priorities are very clear. First, we will continue to maintain strict cost discipline and ensure that inflation is offset through operational actions and commercial recoveries. Second, we will remain focused on cash generation. And third, we are fully mobilized to close the interiors transaction in the fourth quarter. Finally, we intend to build on the strong commercial momentum achieved in the first half and maintain a robust order intake pipeline to support future growth. Overall, while the market backdrop remains challenging, we are confident in our ability to continue executing with discipline and to deliver to our commitments. So therefore, our 2026 guidance is fully confirmed. Sales is expected to be between 20 and 21 billion euro at concert exchange rate, operating margin between 6 and 6.5%, Net cash flow at at least 3% and the leverage ratio down to 1.5 times. With this I would like to thank you for your attention and now we are happy to take your questions.