HELLA GmbH & Co. KGaA

Yes, good morning to all of you and very warm welcome to our call related to our preliminary results of the fiscal year 2024. Today's agenda on page two is on the results and also on the outlook for 2025. Please let me start on page four to give you an overall view on our key results. So overall, we surpassed first time 8 billion euros in 2024. If we look at the sales development, especially in Q4, we have seen a decent development for our business in the electronics. We have grown in electronics by around 3%. So a good acceleration, especially for our radar business, but as well for energy management and our body electronics business. Also, our business in aftermarket has grown in the fourth quarter quite decently. We had overall in the aftermarket a good year with an outperformance against the market, overall a growth of 4.4%. Negatively, within the lifecycle business, our business in SOE but as well workshop products declined so that overall lifecycle was shrinking. Negatively, we have seen in lighting that the fourth quarter was lower because of changes within bigger programs where we have seen ramp downs and we are actually in preparation for ramp ups. This is something which we will also continue to see now starting into the year for lighting overall, but more to that also when I come to the guidance overall. So the full year in total, it has been a year where we have been much impacted by delays on several programs. So overall, this has had an impact of around 2% on our growth. And as well, we have been impacted by slower volumes and much lower volumes in terms of electric cars, which also had an impact which was quite significant against our original planning, around 1.5% overall. If we look at our operating income, we are at 5.6% to the end of the year. The biggest impact on our profitability also against prior year was the underutilization of our production sites overall and the high volatility in the market we have seen. We have accelerated our cost reduction measures and our structural measures overall. We will later see that we have overall reduced globally by 2,100 headcounts to the end of the year, and we have accelerated on structural reduction measures overall in different countries. Specifically on Germany, we have achieved an agreement now with the Workers Council and the unions on the reduction of our lighting plant in Lippstadt, which is now in execution and where we are very close now to reach the last signatures we want to reach to come to the reduction of around 400 headcounts within our lighting plant in Lippstadt. On top of that, we have announced early this year the closure of our engineering hub in Berlin and as well as reduction of our engineering in Berlin. What also we will announce today is an additional voluntary program for Liebstadt where we will have a reduction of around 200 head counts which were Whereas this will be split between the electronics and also positions in lifecycle and as well in the holding. So overall, the message is we accelerate in terms of reduction on our fixed costs. And in terms of the structural measures, also Philippe will will highlight we continue on reducing the fixed cost base continuously. We aim to be below the level of last year's fixed cost by around 3%. And overall, against the original plan, what we have of more than 400 million euros of reduction, we are actually at a level which is around 15% higher in comparison to what we communicated last time. If we look at the net cash flow performance, we closed the year at 189 million. If we compare the numbers to prior year excluding the factoring, we are at a similar level to the previous year, this is a ratio to sales of 2.4%. And lastly, in terms of order intake, we again reached an order intake of around 10 billion. We are very pleased about this result, not only because of the significant amount. It's three years in a row that we reached 10 billion or more. It's also about the regional mix, the diversification in terms of customers and also important new product generations and innovations we have been able to position in the market. And this for us assures for the upcoming years that we will be able to grow and be much better balanced in the future. Now I would ask Philippe to comment also on more details in terms of our results.

Thank you, Bernard. Good morning to all of you. So looking at the results per business group, So we have a sales growth in lighting where, as it was said, electronic and lifecycle are showing more slight decrease versus 23. So if we start with lighting, lighting posted 4 billion of sales, operating income of 126 million and 3.2% of operating margin versus 3.4 last year. So in terms of growth for lighting, we have a growth in Americas. thanks to the new headlamp and new businesses also, which have been started mostly with, I would say, GM on the Chevrolet and Cadillac. But we have less sales in Europe with a ramp-down project in Europe. I would probably quote here the Tesla Model Y and the Mercedes V-Class also, which are ramping down. And in China, we have booked the full consolidation of HBBL, which is representing 271 million, but we also have a negative impact on the rest of the products or the sales, again, mostly on the Tesla, which is ramping down in China. So operating margin for lighting has been impacted by a positive mix, and the gross profit is doing pretty well. And we, again, have also the consolidation of HPBL. But on the other side, in Europe, we have underutilization of capacities, as it was said. And some measures are underway to continue to cut the cost in the structures. For electronics, 3.3 billion of sales. So it's around 2.3% sales decrease versus 23, with an operating margin at 226, which is in line with 23 level. So here we also have a strong growth in North America, in Americas, mostly on the radar business and mostly with GM. But on the other side, in Europe, as it was said, we are facing the electric market which is going down and some postponement of the programs. So we are declining a little bit in Europe, although we still have good sales on the radar business in Europe. And in China, we are also impacted by a negative mix on our electronic products with the good margin that we had on these products. So overall, the margin for electronic was stable versus 23. And the denative volume that we are facing compensated by lower R&D costs where we have been able to cut and save costs versus 23. On the life cycle, so here we have 1 billion of sales, which is minus 3.6% versus 23 with an operating margin of 99 million at 9.6 versus 11.9. So here we have two effects. We have on aftermarket, relatively good sales and solid sales versus 23. But on the special application, we are down versus 23, especially due to the commercial vehicle segment where we have faced lower volumes. So here it was also more difficult to flex on this part, on the industrial part. So the profit margin was a little bit showing a decline versus 23. And on your side, we are also having a good level of awards, and we are spending R&D costs to be able to develop this product for the future years. Now, if we go to the order intake with some example, So first, the good news, I think, is what was highlighted by Bernard. We are aligned with our strategy, which is basically rebalancing our portfolio ourselves a little bit more equally around the world. So the order intake is distributed equally between Europe, APAC and NSA. which is a good news again versus our strategy so if we look at some example in lighting so we are progressing in lighting with some nomination with the very high technologies content so for example on the carbody lighting we had some good award with illuminated grills and logos and panels for Chinese and European OEMs we also had a very good order intake with the SSLI technology for the lighting, again here with Chinese OEMs in the US and Europe. If we look at electronics here, we have major awards on the radar, Generation 5, again for Europe, also in the US. And we have also a very good momentum on the energy management and sensor from the Japanese OEM. And we can also quote here a very good award as well on the digital smart car access in North America, mostly in 2024. Lifecycle, we are also increasing our momentum, and we are doing a pretty good level of award in order intake in 2024, which is for German manufacturers on the agricultural side. We have also headlamps. We have intelligent battery sensors. So the order intake for lifecycle was pretty good for 24, and we sustained the sales level that we are having in our coming years. We continue and we accelerate our measure to cut the cost and improve our business performance. We have increased our target for 25 to 200 million versus the 150 million which was communicated earlier. We are targeting both 400 million by the end of 28. Here we are accelerating and increasing also the restructuring actions. Some of them have been done already in 24 and some others are already announced, as already mentioned. So in terms of headcount, we have been able to reduce by 1,100 headcount in Europe in 24 and 2,700 in the world, globally excluding HPVL. We have closed some locations in Germany, in Romania with R&D centers, and in Slovenia as well. And we have also downsized some locations, like Austria for lifecycle, Czech Republic, and France, Germany, and Romania, and Slovenia. In parallel, we are continuing to work on the digitalization, artificial intelligence to continue to reduce bureaucracy, increase efficiency, and be able to cope with the new measures which are also coming and which will be implemented in 2025. So again, we are accelerating and increasing our target to face the new reality and to be more competitive in the future.

Thank you, Philippe. So coming to the outlook for 2025 on page 10. So we expect our sales to be in the range of 7.6 to 8 billion. So this would be at the midpoint, it would be 7.8 billion of sales. The range reflects still the high uncertainty about volumes and the high volatility we continue to see. We also see a risk in terms of delays and how quick and fast and successful will be several ramp-ups which are planned in this year and where a part of our products are integrated and somehow there is also some uncertainty about volumes on electrified cars and we reflect basically the experience we had last year and what I commented within our range. The order book is giving us the opportunity also to be on the upper level but it's very difficult to predict. Within the different business groups we see quite a a good opportunity in terms of electronics and and also a life cycle overall so we we we have seen now in electronics a good momentum especially in the in the fourth quarter and we continue to see a good trend also towards some of our products like radar what i mentioned where we have quite a decent growth. We would also expect to continue now into 2025. In terms of lifecycle, we continue to see a good momentum in our aftermarket business. We think that we are at the low point in terms of our business and special application and where we expect in the following quarters that we should see some improvements, especially into the second half of the year. Lighting is in the process of significant program changes actually, so we have a slower start in lighting in the first quarter and we expect to pick up then in the second quarter and into the second half of the year overall. we think that we will have a decline in sales in lighting against prior years. So overall, again, we see 7.8 billion at the midpoint. And again, with the opportunity, depending on the ramp-ups and the further volume developments an opportunity to grow. In terms of operating income margin, we see us in the range of 5.3 to 6%. At the midpoint, it would be 5.65, which would be the same level in comparison to 2024. As mentioned, Our major activities are related to a reduction within our fixed cost. We target to be within the overall fixed cost ratio to be at least minus 3% in comparison to prior year. We accelerate different structural measures. We have mentioned We work on improvement in terms of our quality costs and expenses, which we see a positive trend, but we see also a good improvement potential in that area. And we are working on several initiatives in terms of higher operations efficiency, where the high volatility comes and came with extra cost, where we are working on higher flexibilization rates going forward. On top of that, we are working on improvements on our material cost base. We have a much higher ambition in terms of material cost savings in comparison to the prior year, and all that should support the quality of our operating income in this year. On the net cash flow, we expect to be at least at a level of 200 million. This 200 million reflects as well restructuring cost of around 120 million, which are in that number. It means 100 million higher restructuring cost in comparison to 2024. That means a significant improvement in terms of our operational cash flow, which we are targeting. This comes on one hand side with the quality of our earnings and the reduction on the fixed cost side and overall on the cost side, but as well on further improvements, especially on the capex side where we will invest a significant lower amount in capex in comparison to prior year. We estimate to be below 100% in comparison to depreciation for this year and we also anticipate further improvements in working capital where we are working continuously on a reduction, especially in the area of our inventories. And this should lead to this improvement overall. So summing it up on page 12, overall 24, a solid performance. a sales level of above 8% with the comments I made, especially the reduction of the fixed cost, the acceleration of our structural measures and the increase of additional measures makes us more robust and competitive also going forward and especially also on the order intake and important acquisitions we could we could win. This makes me very positive in terms of our midterm outlook. The year 2025 remains for us challenging in a way that we continue to see a high volatility, but we prepare on the structural and we execute the structural measures we need to do to reduce our break-even point, to reduce significantly our cost base and improve the quality of our earnings and also of our cash flow asset. Overall, we continue to see that there is a significant demand on our products. We are very optimistic that this trend on new orders we are able to win especially on our full product scope that this will continue also in 2025. We have significant acquisitions we are actually working on globally with many different OEMs in all relevant countries, which makes us very positive or let us be very positive in terms of our positioning in the market. We continue on working on the diversification. So to get stronger position within the Americas, but as well, in the Asian markets overall, not only China, but as well Japan and India especially. And last but not least, we remain committed in terms of all our sustainability targets. We have set ourselves, we have made very good progress, scope one and two. We expect to be emission free until end of 2025, and we are intensively working on our scope-free roadmap to work towards our targets. We have set ourselves for 2030 and 2045. Having said that, we are happy to take your questions.